1. Both these appeals arising from a common judgment passed by the Court of the Employees' State Insurance, Salem (District Judge, Salem) in E.I.A. Nos. 3 of 1968 and 5 of 1968 have been preferred by the Employees' State Insurance Corporation (hereinafter referred to as the E.S.I. Corporation).
2. Messrs. Balaji Weaving Mills, Salem (hereinafter referred to as the Mills), the respondent in C.M.A. No. 459 of 1971, is a partnership concern having as its partners, five brothers who are respondents 1 to 5 in C.M.A. No. 457 of 1971. The partnership firm was engaged in the manufacture of cloth with the aid of power looms installed in the Mills. An Inspector of the E.S.I. Corporation inspected the Mills on 30-5-1966 and found on a scrutiny of the records, that nineteen persons had worked in the premises of the Mills on 9-4-1966. Besides the nineteen persons whose names had been entered in the registers, the Manager of the Mills had also to be taken into account and on such reckoning, the Inspector found that a total number of twenty persons had worked in the Mils on 8-4-1966. Consequently he sent a report to the Regional Director of the E.S.I. Corporation that the Mills was covered by the Employees' State Insurance Act (hereinafter referred to as the Act) and was, therefore, liable to pay employees' contribution as well as the employer's special contribution. Demands by the Corporation to the Mills to pay both the contributions were ineffective and hence the E.S.I. Corporation filed E.I.A. No. 3/68 under Section 75(2) of the Act for recovery of employees' contribution for the contribution periods ending with 24/9/1966, 26/11/1966, 28/1/1967, 25/3/1967, 27/5/ 1967, 29/7/1967 and 30/9/1967 at such rate as may be determined by the Court on scrutiny of the records, or in the alternative, for a decree for the sum of Rs 812 arrived at on an ad hoc basis, together with interest thereon at 6 per cent per annum. For its part, the Mills took up the stand that it was not a factory within the meaning of the Act and, therefore, filed E.I.A. No. 5 of 1968 under Section 75(g) and Section 76 of the Act for a declaration that it is not a factory within the meaning of the Act and for cancellation of the demand of Rs. 663 made by the E.S.I. Corporation towards employer's special contribution.
3. The lower Court heard both the petitions together and held that inasmuch as twenty persons had worked in the premises of the Mills on 9-4-1966, the Mills was a factory within the meaning of the Act and that, therefore, the Mills had to pay contributions to the E.S.I. Corporation. With respect to the period for which the Mills had to pay the contribution, the lower Court did not accept the contention of the E.S.I. Corporation that the Mills was liable to pay contributions for a period of one year. Therefore, it held that the Mills was liable to pay employees' contribution only for the period ending with 24-9-1966 and employer's special contribution only for the quarter ending with 30-6-1966. Consequently, it gave a decree in favour of the E.S.I. Corporation for a sum of Rs. 107 towards employees' contribution and Rs. 161 towards employer's special contribution. It is as against the disallowed part of the contributions that the E.S.I. Corporation has come forward with these two appeals.
4. Admittedly, P.W. 1, the Inspector of the E.S.I. Corporation, inspected the Mills on 30-5-1966 and his scrutiny of the records on that day revealed that twenty persons including the Manager had worked in the Mills on 9-4-1966. Having regard to the definition of a 'factory' under Section 2(12) of the Act, it has to be necessarily held that the Mills is a factory within the meaning of the Act and as such, the Mills have to pay employees' contribution and employer's special contribution as provided for under the Act. The question, however, for consideration is the period for which the Mills has to pay the contributions. This situation has arisen because of the peculiar circumstances of the case, viz., that subsequent to 9-4-1966 P.W. 1 was not able to find twenty persons having worked in the Mills on any day. While it is the contention of the E.S.I. Corporation that the Mills should pay contribution for a minimum period of one year, it is the contention of the Mills that it is not liable to pay employees' contribution beyond the period ending with 24-9-1966 and employer's special contribution beyond the quarter ending with 30-6-1966.
5. As has been rightly pointed out by the lower Court, there is no provision in the Act prescribing specifically the period during which a factory would be covered under the Act. Section 39(3) of the Act states that a week shall be the unit in respect of which all contributions shall be payable under the Act. Section 2(5) defines the 'contribution period' as follows:
Contribution period means such period, being not less than twenty-five but not exceeding twenty-seven consecutive weeks or six consecutive months, as may be specified in the regulations:Provided that in the case of the first contribution period a longer or shorter period may be specified by or under the regulations.
Apart from these provisions, there is no other provision in the Act which gives an indication as to what is the length of the period for which a factory as denned under the Act should pay the employees' and the employer's contributions after it has ceased to be a factory.
6. Before the lower Court the contention advanced on behalf of the E.S.I. Corporation was that by virtune of the instructions issued by the Director General of the Employees' State Insurance Corporation in INS.III.B/1-(3) 54dated 20-1-1955, the period of coverage should be for a minimum of one year. It was also urged before the lower Court that the commentary to paragraph 4 at page 2 of the Employer's Guide issued by the Director-General of Employees' State Insurance Corporation stated that if, on any day, the number of persons working in a factory exceeds nineteen, it would remain covered for a period of one year from that date notwithstanding the fact that the factory may not have twenty or more persons working on subsequent days. The lower Court repelled these contentions on the ground that the instructions issued by the Director-General did not appear to have been issued under Regulation No. 5 or any other Regulation in the Employees' State Insurance (General' Regulations, 1950 and cannot, therefore, have statutory force.
7. The view taken by the lower Court in respect of these contentions is perfectly correct, though the reasoning has got to be somewhat different. Section 97 of the Act empowers the E.S.I. Corporation to make regulations not inconsistent with the Act and the Rules made thereunder for the administration of the affairs of the Corporation and for carrying into effect the provisions of the Act. Clause (iii) of Sub-section (2) of Section 97 empowers the Corporation to make provision about' the manner in which any contribution payable under this Act shall be assessed and collected. The Act itself defines the E.S.I. Corporation under Section 2(6) as follows:
'Corporation' means the Employees' State Insurance Corporation set up under this Act.
It is, therefore, clear that whatever regulations are to be made by resort to Section 97 of the Act can only be made by the E.S.I. Corporation and not by the Director-General. If the Director-General wishes to exercise any of the powers of the Corporation under the Act, he can do so only on being delegated by express authority from the Corporation. This is made clear by Section 94A of the Act which reads as follows:
'Tine Corporation, and, subject to any regulations made by the Corporation in this behalf, the Standing Committee may direct that all or any of the powers and functions which may be exercised or performed by the Corporation or the Standing Committee, as the case may be may in relation to such matters and subject to such conditions, if any, as may be specified, be also exercisable by any officer or authority subordinate to the Corporation.
Inasmuch as the E.S.I. Corporation has not proved delegation of authority to the Director-General by the E.S.I. Corporation to make regulations in respect of contributions as adumbrated in Section 97(2)(iii), the notification in INS.1II.B/ (3) 54 dated 20-1-1955 issued by the Director-General and on which reliance was placed before the lower Court cannot be of any avail to the E.S.I. Corporation. In like fashion, the commentary occurring in the Employer's Guide issued by the Director-General cannot also have statutory force. For these reasons, the action of the lower Court in refusing to give recognition to the notification issued by the Director-General and the, publication in the Employer's Guide has got to be sustained.
8. Having regard to the vulnerability of the contentions raised on behalf of the Corporation before the lower Court. Mr. Ali Mohamed, on behalf of the counsel for the Central Government appearing for the appellant, sought to justify the stand of the E.S.I. Corporation on a new ground, viz., the definition of 'factory' contained in Section 2(12) of the Act. Section 2(12) is to the following effect,
'factory' means any premises including the precincts thereof whereon twenty or more persons are employed or were employed for wages on any day of the preceding twelve months, and in any part of which a manufacturing process is being carried on with the aid of power or is ordinarily so carried on but does not include a mine subject to the operation of of the Mines Act, 1952 or a railway running shed.
The argument of Mr. Ali Mohamed was that when once the statute lays down that a premises where manufacturing process is being carried on would amount to a factory if twenty or more persons are employed or were employed for wages on any day of the preceding twelve months it should necessarily he held that the contribution period also must be co-extensive and that, therefore, the Mills should be called upon to pay contributions for a period of one year from 9-4-1966 on which date the Mills became a factory by reason of twenty persons having worked thereat as employees. I am unable to agree with this contention of the learned Counsel. It is no doubt true that in order to make a premises a factory it would be enough if twenty or more persons had been employed in the premises on any day within the preceding twelve months. On that score, however, it cannot be contended that the premises held a factory must be fastened with liability to pay contributions under the Act for a period of twelve months from that date. If the intention of the Legislature was such, there would have been a specific provision to that effect. On the other hand, as I have already stated above. Section 2(5) of the Act defines a contribution period as one which is not less than twenty-five and not more than twenty-seven consecutive weeks or six consecutive months as may be specified in the regulations. Having regard to this provision, the rational and logical application of the Act would be to hold that any manufacturing centre found to be a factory within the meaning of the Act can be called upon to pay contribution only for one contribution period, unless it is found that the manufacturing centre continues to be a factory in respect of the succeeding contribution period or periods as the case may be. There is nothing in the Act to warrant the contention of the learned Counsel for the appellant that because Section 2(12) provides for a period of twelve months to bring a manufacturing centre within the definition of 'factory', the contribution period also must extend for a similar period irrespective of the fact whether the manufacturing centre ceased to be a factory beyond the first contribution period.
Consequently, the judgment of the lower Court that the Mills is liable to pay employees' contribution for the period ending with 24-9-1966, i.e., six months, is perfectly in accordance with law. As there is no minimum period for the employer's special contribution the judgment of the lower Court in holding that the Mills is liable to pay employer's special contribution only for the quarter ending with 30-6-1966 has also to be upheld.
9. In the result, both the appeals fail and are dismissed with costs. Pleader's fee one set in C.M.A. No. 457 of 1971.