High Court · 2012

Heard Mr. KK Nandi, learned counsel appearing for the appellant corporat

5. The pleaded facts of the respondent establishment has been objected to b y filing the written statement contending inter alia that the firm/establishment /factory is engaged in the processing, manufacturing and marketing of tea throug hout the year as confirmed from the certificate bearing No. 060101038 dated 30.1 0.1996 issued by the Superintendent, Customs and Central Excise Department, Di bugarh which certificate is in possession of the management of the factory a nd may be asked to produce the same in the court in order to adjudicate the c ase finally. The Corporation has further contended that on preliminary inspectio n made on 26.05.1998, it was found that the factory was carrying on manufacturin g process with the aid of power since 30.10.1996 engaging more than ten (10) per sons with effect from 01.04.1997 and accordingly coverage letter No. 43-3126-09 dated 19.06.1998 was issued requesting the employer to comply with the provision s of the Act. Thereafter, C-18 letter was issued to the employer on 31.03.1999 d emanding contribution of Rs. 94,804/- for the period from 01.04.1997 to 31.03.19 99, which, however, did not yield any result which caused issuance of a show cau se notice on 04.11.1999 for payment of contribution and hence denied the allegat ions that no notice was issued prior to 21.12.1999. Finally the demand of Rs. 1, 05,089/- including interest due to the tune of Rs.10,285/- was made. It was furt her contended that during the inspection, the employer did not produce necessary records, viz., Salary/Wage Register, Cash Book, Ledger, etc. save and except th e Attendance Register from 01.04.1997 to May 1998 and the employer firm having f ound covered on the basis of available records the demands were made in accordan ce with law and thus prayed for dismissal of the case.

6. The learned court below while deciding the case has framed the following issue: - Whether the factory exclusively engaged to manufacture of tea and working throug hout the year ceases to be seasonal factory? In deciding the issue, the learned court referred the decision reported 7. in 1977 Lab IC 770 which was subsequently upheld by the Apex Court reported in 1 992 Lab. I.C. 68 (SC) = (1991) 3 SCC 617, wherein the Apex Court dealt with unam ended provisions of Section 2(12) of the Act relating to seasonal factory vis-à- vis the expression manufacturing process as defined in Section 2(k) of the Facto ries Act, 1948. The learned trial court, therefore, has held that unamended prov isions of the Act would not change the character of seasonal factory even after the amendment of the provisions, though the period of its operation exceeded sev en months in a year and accordingly answered that the employer factory does not cease to be seasonal factory which would not come within the purview of the Act, thereby set aside the demands made by the corporation which is under challenge under Section 82 of the Act.

8. The ground of attack as contended by Mr. Nandi, learned counsel appea ring for the corporation is that the employer factory is engaged in the process ing, manufacturing and marketing of tea throughout the year which has been conf irmed from the certificate issued by the Superintendent, Customs and Central Exc ise Department, Dibrugarh on 30.10.1996 and the factory is carrying on manufact uring process with the aid of power since 30.10.1996 wherein more than 10(ten) w orkers are working with effect from 01.04.1997 which amply demonstrate that the employer factory is not a seasonal factory as has been held by the learned court below, rather it would be covered under the provisions of the Act which require interference under appellate jurisdiction. In support of his contentions, Mr. Nandi has referred the following deci

9. sions, viz.: - (i) 1994 Lab IC 1593 (M/s Siva Trading Co. and Others -vs- Secretary to the Government of India, Mi nistry of Labour and Employment and Others), and Civil Appeal No. 8335 of 2004 (ii) (Employees’ State Insurance Corporation -vs- Bhakra Beas Management Board and An other).

10. Supporting the judgment of the learned trial court, Mr. Murarka, learned counsel appearing for the respondent would contend that the employer factory is a seasonal factory which was excluded from the operation of the Act since the f actory was declared to be a seasonal factory within the meaning of Section 2(12) prior to its amendment by Act 44 of 1966, will not cease to have the benefit of exclusion from the Act by reason of amendment of the definition of seasonal fac tory under Section 2(12) of the Act, inasmuch as, the amendment does not restric t the original definition of seasonal factory and is not covered under the provi sions of the Act, hence, the demand so made has been rightly set aside. The judg ment under challenge, therefore, do not require to be interfered with in the int erest of justice. In support of his contention, Mr. Murarka has referred the following dec

11. isions: - (I) The Regional Director, Employees’ State Insurance Corporation -Vs- High Land Cof fee Works of P.F.X Saldanha and Sons and Another, (1991) 3 SCC 617 1978 Lab IC 1074, (II) The Regional Director, Employees’ State Insurance Corporation and others -Vs- M/ s Brooke Bond India Ltd. and Another and 1980 Lab IC 1078, (III) Employees’ State Insurance Corporation, Hyderabad -Vs- M/s Jaya Lakshmi Cotton a nd Oil Products (P) Ltd., Perecherla. After hearing the learned counsel appearing for the parties and upon per 12. usal of the materials available on record, this Court has formulated the followi ng substantial questions of law:- (i) ons of the Employees’ State Insurance Act, 1948? (ii) Whether the establishment of the respondent is covered under the provisi Whether the power as defined under the Act is used in the processing and manufacturing of tea in the factory of the respondent?

13. The learned counsel for both the parties were heard on these substantial questions of law.

14. The Act is made applicable to all factories including factories belongin g to the Government other than seasonal factories. Proviso appended to Section 1 (4) of the Act carves out an exception. Proviso to Sub-section (4) of Section (1 ) of the Act shall not apply to a factory or establishment belonging to or under control of the Government whose employees are otherwise in receipt of benefits substantially similar or superior to the benefits provided under the Act.

15. Section 2 of the Act defines the meaning of certain expressions for the purpose of the Act. Section 2(12) of the Act defines the meaning of the expressi on ’factory’ to mean any premises including the precincts thereof:- (cid:28)(a) ny 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 Whereon ten or more persons are employed or were employed for wages on a or, Whereon twenty or more persons are employed or were employed for wages o (b) n any day of the preceding twelve months and in any part of which a manufacturin g process is being carried on without the aid of power, or is ordinarily so carr ied on. & & & & & & & & & & & & & & &.. (cid:29)

16. Section 2(15-C) of the Act is inserted by amendment Act 29 of 1989 with effect from 20.10.1989. The sub-section defines the meaning of the expression ’p ower’ as under: (cid:28)(15-C) - Power shall have the meaning assigned to it in the Factories Act, 1948 (cid:29). Section 2(g) of the Factories Act, 1948 defines the meaning of the expre

17. ssion ’power’ as follows: (cid:28)Section 2(g): power means electrical energy or any other form of energy which i s mechanically transmitted and is not generated by human or animal agency. (cid:29)

18. ng conditions are required to be satisfied: - To cover up the respondent factory under the Act as factory, the followi (i) (ii) out; Manufacturing process is being carried out in the establishment; There is power being used to aid the manufacturing process being carried (iii) Ten (10) or more persons were working in the establishment on any day in the preceding twelve months with the aid of power in the manufacturing process; (iv) Twenty (20) or more persons are employed for wages in the establishment on any day of the preceding twelve (12) months, if power is not being used to ai d the manufacturing process. Therefore, first it needs to be proved as to whether there is manufacturing proc ess carried on in the establishment of the respondent. (cid:28)Manufacturing process (cid:29) is defined under Section 2(k) of the Factories A

19. ct which reads as follows: - (cid:28) Section 2(k) : - (cid:28)manufacturing process (cid:29) means any process for- (i) making, altering, repairing, ornamenting, finishing packing, oiling, washing , cleaning, breaking up, demolishing, or otherwise treating or adapting any arti cle or substance with a view to its use, sale, transport, delivery or disposal, (ii) pumping oil, water, sewage or any other substance, or; (iii) generating, transforming or transmitting power, or (iv) composing types for printing, printing by letter press, lithography, photog ravure or other similar process or book binding; or (v) constructing, reconstructing, repairing, refitting, finishing or breaking up ships or vessels; or (vi) preserving or storing any article in cold storage. (cid:29)

20. Admittedly the respondent factory dealt with the manufacturing process o f tea. However, for holding an establishment to be a (cid:28)factory (cid:29) within the meanin g of Section 2(12) of the Act, it must first be established that some work or pr ocess is carried on in any part of the establishment which amounts to ’manufactu ring process’ as defined under Section 2(k) of the Factories Act, 1948. In case the number of persons employed in the establishment is less than twenty but more than ten, then it must further be established that the manufacturing process in the establishment is being carried on with the aid of power which should be dir ect and proximate.

21. From the pleaded facts of the contesting parties along with the definiti ons clause of Section 2(k) of the Factories Act and Section 2(12) of the Act, it would reveal that the links have been established that some process or work is carried on in the establishment of the respondent which qualifies as ’manufact uring process’ within the meaning of Section 2(k) of the Factories Act and the m anufacturing process is carried on with the aid of power as defined under Sectio n 2(g) of the Factories Act which has been elaborately dealt with in the earlie r paragraphs. Therefore, this Court has no hesitation to hold that the establish ment of the respondent would not come under the heading of seasonal factory as h as been held by the learned trial court.

22. It would not, however, be inappropriate to refer to the aim and objects of the Act which is a beneficial legislation. The main purpose of the enactment as the preamble suggests, is to provide for certain benefits to employees of a factory in case of sickness, maternity and employment injury and to make pr ovision for certain other matters in relation thereto. The Act is a social secur ity legislation and in order to achieve the purpose, it must receive a liberal c onstruction so as to promote its objects. The decision cited by the learned trial court while setting aside the cl 23. aim made by the Corporation rests on 1977 LabIC 770 followed by 1992 LabIC 68 (S C) = (1991) 3 SCC 617 whereby the Apex Court upheld the decision of the Karnata ka High Court holding that the factories of the respondents were excluded from the operation of the Act since they were declared to be seasonal factories with in the meaning of Section 1(4) read with Section 2(12) of the Act; whereas in t he present case the factory of the respondent was/is not declared as a seasonal factory as claimed by any authority competent to declare the factory run by the respondent is a seasonal factory. Therefore the decision cited and relied on b y the learned trial court reported in 1977 LabIC 770 and 1992 LabIC 68 (Supra) w ent on a wrong footing, Similarly the decision cited by the learned counsel repr esenting the respondent and reported in 1978 LabIC 1074 (Supra) and 1980 LabIC 1 078(Supra) do not come in aid of the respondent factory. Moreover, the Court in 1980 LabIC 1078 in the concluding paragraph of the judgment while holding the fa ctories are seasonal factory has observed as follows:- (cid:28)Paragraph 13: Before parting with the case, it would be pertinent to po int out that the most important criterion for evaluating the efficacy and merit of a social insurance legislation is its universality. But by Section 1 (4) of t he Act the applicability is limited to perennial factories and seasonal factorie s are exempted; thereby a number of employees in the country are denied the bene fits conferred by the Act. The employees in seasonal factories need as much care and protection against risks as those in factories now within the purview of th e Act. Time has now come to widen the scope of the Act and extend its operation to seasonal factories also. In respect of seasonal factories, depending upon the duration for which they function in a year, the rate of contribution may propor tionately be fixed under the Act. (cid:29)

24. In view of the finding arrived at by the court on the law point alongwit h the pleaded facts of the case including the evidence on record, this court has no option but to hold that the factory of the respondent would never be a seaso nal factory as claimed, rather the factory of the respondent would come under th e provisions of the Act and would cover under the Act. The learned ESI Court com mitted an error in holding that the respondent company is a seasonal factory wit hout examining or scrutinising the relevant materials on record.

25. That being the position, I have no hesitation to set aside the impugned judgment dated 26.12.2001 rendered by the learned ESI Court, Dibrugarh in ESI Ca se No. 5 of 2000 by declaring that the respondent establishment is covered under the ESI Act.

26. In the result, the appeal is allowed. The parties are left to bear their own costs.

27. Send down the lower court records.