Full Judgment Text
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PETITIONER:
REGIONAL DIRECTOR, EMPLOYEES STATE INSURANCE CORPORATION,MAD
Vs.
RESPONDENT:
SOUTH INDIA FLOUR MILLS (P) LTD. ETC. ETC.
DATE OF JUDGMENT29/04/1986
BENCH:
DUTT, M.M. (J)
BENCH:
DUTT, M.M. (J)
ERADI, V. BALAKRISHNA (J)
CITATION:
1986 AIR 1686 1986 SCR (2) 863
1986 SCC (3) 238 1986 SCALE (1)1315
CITATOR INFO :
RF 1992 SC 573 (36)
ACT:
Employees’ State Insurance Act, 1948 - Section 2(9)
’employee’ - ’work of the factory’ - interpretation of
casual employees - whether fall within purview of Act.
HEADNOTE:
The respondent-company in Civil Appeal No. 801 of 1976
is engaged in milling wheat into wheat products in its flour
mill. It commenced the construction of another building in
the compound of the existing factory for the expansion of
the factory and engaged workmen for such construction on
daily wage basis. The appellant-Corporation called upon the
respondent-company to make contribution in respect of the
workmen employed for the construction work of the factory
building as required by the Employees State Insurance Act,
1948.
The respondent-company disputed its liability and filed
a petition under Art. 226. A Single Judge allowing the
petition took the view that the persons employed in the
construction of a new unit of the factory were not employees
within the meaning of the definition of the term ’employee’
under s. 2(9) of the Act.
On appeal by the appellant-Corporation, a Division
Bench relying upon an earlier decision of that Court in
Employees State Insurance Corporation v. Ghanambikai Mills
Ltd., [1974] 2 LLJ 530 dismissed the appeal and held that
construction workers being causal employees do not come
within the purview of the Act.
The connected appeals and the special leave petitions
are based on similar facts and involve a common question of
law.
864
Allowing the appeals and petitions of the appellant-
Corporation the Court.
^
HELD : 1. The Act is a piece of social security
legislation enacted to provide for certain benefits to
employees in case of sickness, maternity and employment
injury. [871 F]
2. Casual employees are employees within the meaning of
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the term ’employee’ as defined in s. 2(9) of the Act and
accordingly come within the purview of the Act.
Andhra Pradesh State Electricity Board v. Employees’
State Insurance Corporation, Hyderabad, [1977] 1 LLJ 54,
Regional Director, ESIC, Bangalore v. Davangere Cotton
Mills, [1977] 2 LLJ 404 and Employees’ State Insurance
Corporation, Chandigarh v. Oswal Woollen Mills Ltd., [1980]
2 Lab. I.C. 1064, relied upon.
Employees State Insurance Corporation v. Ghanbikai
Mills Ltd., [1974] 2 LLJ 530, overruled.
Royal Talkies, Hyderabad v. Employees’ State Insurance
Corporation, [1978] 4 SCC 204, referred to.
3. The definition of the term "employee" under s. 2(9)
of the Act is very wide. It includes within it any person
employed on any work incidental or preliminary to or
connected with the work of the factory or establishment. It
is difficult to enumerate the different types of work which
may be said to be incidental or preliminary to or connected
with the work of the factory or establishment. [871 B-C]
4. In the instant cases, the additional buildings have
been constructed for the expansion of the factories in
question. It is because of these additional buildings that
the existing factories will be expanded and consequently,
there will be increase in the production that is to say
increase in the work of the factories concerned. So the work
of construction of additional buildings has a link with the
work of the factories. It cannot, therefore be said that the
construction work has no connection with the work or the
purpose of the factories. [871 C-E]
865
5. The expression ’work of the factory’ should also be
understood in the sense of any work necessary for the
expansion of the factory or establishment for augmenting or
increasing the work of the factory or establishment. Such
work is incidental or preliminary to or connected with the
work of the factory or establishment. [873 A-B]
JUDGMENT:
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 801 of
1976 Etc.
From the judgment and Order dated 11.12.1973 of the
Madras High Court in Writ appeal No. 288 of 1970.
V.C. Mahajan, Dr. Y.S. Chitale, Miss Kitty
Kumaramangalam, Girish Chandra, S. Ramasubramaniam, D. N.
Gupta, N.S. Das Bahal, Miss Sushma Ralhan, D.N. Gupta and
C.V. Subba Rao for the appearing parties.
The Judgment of the Court was delivered by
DUTT, J. Civil Appeal No. 801 of 1976 and Civil Appeal
No. 819 (NL) of 1976 have been preferred by Special Leave by
the Employees State Insurance Corporation, hereinafter
referred to as ’ESI Corporation’. The ESI Corporation has
also filed Special Leave Petition Nos. 1134-1145(NL) of
1978. These appeals and the Special Leave Petition raise a
common question of law and, as such, they have been heard
together. Indeed, by an order of this Court the Special
Leave Petitions were directed to be heard along with Civil
Appeal No. 801 of 1976. Before we indicate thhe question of
law we may state a few facts.
In Civil Appeal No. 801 of 1976, the respondent
company, South India Flour Mills (P) Ltd., is engaged in
milling wheat into wheat products in its flour mill. It is
not disputed that the mill of the respondent company is a
factory within the meaning of the Factories Act, 1948. In or
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about the middle of 1964, the respondent company commenced
the construction of another building in the compound of the
existing factory for the expansion of the factory and
engaged workmen for such construction on daily wage basis.
The ESI Corporation called upon the respondent company to
make contribution in respect of
866
the workmen employed for the construction work of the
factory building as required by the Employees’ State
Insurance Act, 1948, hereinafter referred to as ’the Act’.
The respondent company moved the Madras High Court under
Article 226 of the Constitution against the said demand. A
learned Single Judge of the High Court took the view that
the persons employed in the construction of a new unit of
the factory were not employees within the meaning of the
definition of the term ’employee’ under section 2(9) of the
Act. In that view of the matter, the learned Judge allowed
the writ petition of the respondent company. On appeal by
the ESI Corporation to a Division Bench of the High Court,
the Division Bench simply referred to and relied upon an
earlier decision of that Court in Employees State Insurance
Corporation v. Gnanambikai Mills Ltd., [1974] 2 L.L.J. 530.
In that case, it has been held that though casual employees
come within the definition of the term ’employee’ under
section 2(9) of the Act yet, as they may not be entitled to
sickness benefit in case their employment is less than the
benefit period or contribution period, it does not appear to
be the intention of the Act that casual employees should be
brought within its purview. Accordingly, it has been held
that construction workers being casual employees do not come
within the purview of the Act. The appeal preferred by the
ESI Corporation was dismissed.
In Civil Appeal No. 819 (NL) of 1976, the respondent
company, Shri Sakhti Textiles Pvt. Ltd., was granted an
additional spindleage. Accordingly, the respondent company
expanded its mill, that is the factory, by putting up of new
buildings and, for that purpose, the company had to employ a
large number of workers. The ESI Corporation demanded from
the respondent company contributions in respect of the said
workers for the period from July 1, 1963 to September 30,
1967. The respondent company instituted proceedings under
section 75 of the Act in the Employees’ State Insurance
Court, Coimbatore, inter alia, praying for a declaration
that the workers employed for the construction work of the
factory buildings were not employees within the meaning of
section 2(9) of the Act. The Employees’ State Insurance
Court held that the workers engaged by the respondent
company for putting up of additional constructions for the
factory were not employees within the definition of the term
’employee’ under
867
the Act. On appeal by the ESI Corporation against the order
of the Employees’ State Insurance Court a Division Bench of
the Madras High Court took the view that employment of
workers for putting up of additional buildings for the
purpose of commencing manufacturing process would not be
employment incidental or preliminary to or connected with
the work of the factory and, accordingly, the workers
employed for the purpose of construction of additional
buildings were not employees within the meaning of section
2(9) of the Act. In that view of the matter, the Division
Bench dismissed the appeal.
In the Special Leave Petition Nos. 1143-1145 of 1978,
the respondent companies owning the textile mills workers
for the construction of additional factory buildings. The
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Division Bench of the Madras High Court has following its
earlier decisions taken the same view that the workers
employed for the construction of additional factory
buildings of the mills in question are not employed within
the meaning of section 2(9) of the Act. Hence the ESI
Corporation has filed these Special Leave Petitions which,
as aforesaid, have been heard along with the above appeal.
In view of the facts stated above, the only question
that is involved in these appeals and the Special Leave
Petitions is whether the workers employed for the
construction of additional buildings for the expansation of
the factories in question are employees within the meaning
of section 2(9) of the Act. Section 2(9) of the Act before
the same was amended by the Amendment Act 44 of 1966
provided as follows :
"Employee" means any person employed for wages in
or in connection with the work of a factory or
establishment to which this Act applies and -
(i) who is directly employed by the principal
employer on any work of, or incidental or
preliminary to or connected with the work of, the
factory or establishment, whether such work if
done by the employee in the factory or
establishment or elsewhere; or
(ii) who is employed by or through an immediate
employer on the premises of the factory or
868
establishment or under the supervision of the
principal employer or his agent on work which is
ordinarily part of the work of the factory or
establishment or which is preliminary to the work
carried on in or incidental to the purpose of the
factory or establishment; or
(iii) whose services are temporarily lent or let
on hire to the principal employer by the person
with whom the person whose services are so lent or
let on hire has entered into a contract of
service."
It appears from the definition that three categories of
persons as mentioned in clauses (i), (ii) and (iii) of
section 2(9) can be employees. We are, however, concerned
with the category under clause (i) inasmuch as in all the
cases before us the workers concerned were directly employed
by the principal employers, namely, the respondent
companies. Under category (i), in order to be an employee a
person must be employed directly by the employer for wages
in the factory or establishment on any work which should be
incidental or preliminary to or connected with the work of
the factory or establishment. The definition seems to be
very wide and brings within the purview various types of
employees. As soon as the conditions under the definition
are fulfilled, one becomes an employee within the meaning of
the definition.
Before we proceed to consider the principal question,
we may deal with a connected question, namely, whether the
construction workers, who are admittedly casual workers,
come within the purview of the Act. We have already noticed
that in the case of Gnanambikai Mills (Supra) referred to
and relied upon by the Division Bench of the Madras High
Court in Civil Appeal No. 801 of 1976, it has been held that
the casual workers do not come within the purview of the Act
although they are covered by the definition of the term
’employee’ under section 2(9) of the Act. The reason for the
said finding is that in view of their short duration of
employment, they will not be entitled to sickness benefit
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and, as such, it is not the intention of the Act that casual
employees should be brought within its purview. In
expressing that view, it appears that the Madras High Court
has overlooked some other provisions of the Act which will
be referred to presently.
869
Section 39 provides for contributions payable under the
Act. Sub-section (4) of section 39 provides as follows :
"The contributions payable in respect of each week
shall ordinarily fall due on the last day of the
week, and where an employee is employed for part
of the week, or is employed under two or more
employers during the same week, the contributions
shall fall due on such days as may be specified in
the regultion."
Sub-section (4) clearly indicates employment of a
casual employee when it provides "and where an employee is
employed for part of the week". When an employee is employed
for part of a week, he cannot but be a casual employee. We
may also refer to sub-section (3) of section 42 relating to
general provisions as to payment of contributions. Sub-
section (3) reads as follows:
"Where wages are payable to an employee for a
portion of the week, the employer shall be liable
to pay both the employer’s contribution and the
employee’s contribution for the week in full but
shall be entitled to recover from the employee the
employee’s contribution."
Sub-section (3), inter alia, deals with employer’s
liability to pay both employer’s contribution and the
employee’s contribution where wages are payable to an
employee for a portion of the week. One of the circumstances
when wages may be payable to an employee for a portion of
the week is that an employee is employed for less than a
week, that is to say, a casual employee. Thus section 39(4)
and section 42(3) clearly envisage the case of casual
employees. In other words, it is the intention of the
Legislature that the casual employee should also be brought
within the purview of the Act. It is true that a casual
employee may not be entitled to sickness benefit as pointed
out in the case of Gnanambikai Mills (Supra). But, in our
opinion, that cannot be a ground for the view that the
intention of the Act is that casual employees should not be
brought within the purview of the Act. Apart from sickness
benefit there are other benefits under the
870
Act including disablement benefit to which a casual
employee will be entitled under section 51 of the Act.
Section 51 does not lay down any benefit period or
contribution period. There may again be cases when casual
employees are employed over the contribution period and, in
such cases, they will be entitled to even the sickness
benefit. In the circumstances, we hold that casual employees
come within the purview of the Act. In Andhra Pradesh State
Electricity Board v. Employee’s State Insurance Corporation,
Hyderabad, [1977] 1 LLJ 54; Regional Director, ESIC,
Bangalore v. Davangere Cotton Mills, [1977] 2 LLJ 404 and
Employees’ State Insurance Corporation, Chandigarh v. Oswal
Woollen Mills Ltd., [1980] 2 Lab. I.C. 1064, the Andhra
Pradesh High Court, Karnataka High Court and the Punjab and
Haryana High Court have rightly taken the view that casual
employees are employees within the meaning of the term
’employee’ as defined in section 2(9) of the Act and,
accordingly, come within the purview of the Act.
Indeed Dr. Chitale, learned counsel appearing on behalf
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of the respondent company in Civil Appeal No. 819 (NL) 1976,
franckly concedes that it will be difficult for him to
contend that casual workers are not covered by the
definition of the term ’employee’ under section 2(9) of the
Act. He, however, submits that in the instant case the work
in which the casual workers were employed by the respondent
company, namely, Shri Shakthi Textiles Mills Pvt. Ltd., not
being the work of the factory or incidental or preliminary
to or connected with the work of the factory, such workers
cannot be employees within the meaning of section 2(9) of
the Act. The contention of the learned counsel is that the
work of the factory being ’weaving’, an employee within the
meaning of section 2(9) must be employed on any work
incidental or preliminary to or connected with the work of
weaving that is carried on in the mill or factory. Counsel
submits that the work of construction of factory buildings
cannot be said to be an activity or operation incidental to
or connected with the work of the factory, which is weaving.
Mr. D.N. Gupta, learned counsel appearing on behalf of the
respondent companies in the other cases adopts the
contention of Dr. Chitale and submits that the workers
employed for the construction of the factory buildings do
not come within the purview of the definition of ’employee’
under section 2(9) of the Act.
871
Therefore, the investigation under the principal
question A formulated above boils down to this, namely,
whether the construction of factory buildings for the
expansion of the existing factories is incidental or
preliminary to or connected with the work of the factory or
not. It has been already noticed that the definition of the
term ’employee’ under section 2(9) of the Act is very wide.
It includes within it any person employed on any work
incidental or preliminary to or connected with the work af
the factory or establishment. It is difficult to enumerate
the different types of work which may be said to be
incidental or preliminary to or connected with the work of
the factory or establishment. It seems that any work that is
conducive to the work of the factory or establishment or
that is necessary for the augmentation of the work of the
factory or establishment will be incidental or preliminary
to or connected with the work of the factory or
establishment. In the instant cases, the additional
buildings have been constructed for the expansion of the
factories in question. It is because of these additional
buildings that the existing factories will be expanded and,
consequently, there will be increase in the production, that
is to say, increase in the work of the factories concerned.
So the work of construction of these additional buildings
has a link with the work of the factories. It cannot be said
that the construction work has no connection with the work
or the purpose of the factories. So it is difficult to hold
that the work of construction of these additional factory
buildings is not work incidental or preliminary to or
connected with the work of the factories.
The Act is a piece of social security legislation
enacted to provide for certain benefits to employees in case
of sickness, maternity and employment injury. To hold that
the workers employed for the work of construction of
buildings for the expansion of the factory are not employees
within the meaning of section 2(93 of the Act on the ground
that such construction is not incidental or preliminary to
or connected with the work of the factory will be against
the object of the Act. In an enactment of this nature, the
endeavour of the Court should be to interpret the provisions
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liberally in favour of the persons for whose benefit the
enactment has been made.
872
In this connection, we may refer to a decision of this
Court in Royal Talkies, Hyderabad v. Employees’ State
Insurance Corporation, [1978] 4 SCC 204. The question that
came up for consideration by this Court was whether the
workers employed to run the canteen and the cycle stand
situate within the compound of a ’cinema theatre’ were
employees within the meaning of section 2(9) of the Act. It
was held the workers employed to run the canteen and the
cycle stand were employees within the meaning of section
2(9) of the Act. Krishna Iyer, J. speaking for the Court,
observes:
"The expression "in connection with the work of an
establishment" ropes in a wide variety of workmen
who may not be employed in the establishment but
may be engaged only in connection with the work of
the establishment. Some nexus must exist between
the establishment and the work of the employee but
it may be a loose connection. ’In connection with
the work of an establishment’ only postulates some
connection between what the employee does and the
work of the establishment. He may not do anything
directly for the establishment; he may not do
anything statutorily obligatory in the
establishment; he may not even do anything which
is primary or necessary for the survival or smooth
running of the establishment or integral to the
adventure. It is enough if the employee does some
work which is ancillary, incidental or, has
relevance to or link with the object of the
establishment..... Taking the present case, an
establishment like a cinema theatre is not bound
to run a canteen or keep a cycle stand (in Andhra
Pradesh) but no one will deny that a canteen
service, a toilet service, a car park or cycle
stand, a booth for sale of catchy film literature
on actors, song hits and the like, surely have
connection with the cinema theatre and even
further the venture."
In our opinion, the work of construction of additional
buildings required for the expansion of a factory must be
held to be ancillary, incidental or having some relevance to
or link with the object of the factory. It is not correct to
873
say that such work must always have some direct connection
with the manufacturing process that is carried on in the
factory. The expression "work of the factory" should also be
understood in the sense of any work necessary for the
expansion of the factory or establishment or for augmenting
or increasing the work of the factory or establishment. Such
work is incidental or preliminary to or connected with the
work of the factory or establishment.
We are, therefore, unable to accept the view of the
Madras High Court in all these cases that the workers
employed for the construction work of the additional
buildings for the expansion of the factories are not
employees within the meaning of section 2(9) of the Act.
For the reasons aforesaid, we allow Civil Appeals Nos.
801 of 1976 and 819 (NL) of 1976 and set aside the judgments
of the Madras High Court.
So far as Special Leave Petitions Nos. 1143-1145 (NL)
of 1978 are concerned, we grant special leave in all these
matters, set aside the judgment of the Madras High Court and
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Allow the connected appeals.
The parties are directed to bear their own costs in all
these matters.
A.P.J. Appeals allowed.
874