The Regional Director, Regional Office, Employees State Insurance Corporation Ltd. v. Hotel Ganesh (P) Ltd.

IN THE HIGH COURT OF JUDICATURE AT MADRASDATED: 13-02-2009CORAMTHE HONOURABLE MR.JUSTICE S. PALANIVELUC.M.A.No.703 of 2003 The Regional Director,Regional Office,Employees State Insurance Corporation Ltd.,143, Sterling Road,Chennai 600034. ... Appellant/Respondent vs.Hotel Ganesh (P) Ltd.,rep. by its Finance Manager,V. Sundaram103, Nungambakkam High Road,Chennai 600034. ... Respondent/Claimant Civil Miscellaneous Appeal filed under Section 82 of E.S.IAct, 1948, to set aside the fair and decretal order of the I AdditionalJudge, City Civil Court, Chennai, passed in ESIOP.No.24 of 1993 dated16.02.2000 For appellant : Mr. K.C. Ramalingam For Respondent : Mr. S. James JUDGMENT1. The allegations contained in the petition under 75 of theE.S.I. Act, 1948 are as follows: 1. (i) The petitioner(respondent herein) is a cateringestablishment. It is under coverage of Employees State Insurance Act,1948 (in short ESI Act). The respondent Corporation sent a notice tothe petitioner in Form C-18 (No.19943/INS/C-18/INS.III/1428/C-18/93)dated 25.02.93 requiring the petitioner to pay Rs.5,74,670.63 ascontribution, calculated @ 7% for Rs.79,26,491.51 for the period from1985-86 to 1989-90. The petitioner sent a reply denying its liabilityto pay the amount. It was explained that the amount of contributionhas been worked out were paid to certain companies which are separatelegal entities, who carried out certain repair work for thepetitioner's establishment. Expenditure incurred for hire-charges,water charges, linen, cleaning items etc., were not wages and thereforethey had to be excluded and persons who received more than Rs.1600/- https://hcservices.ecourts.gov.in/hcservices/ per mensum, were to be omitted. The petitioner also appeared in personand explained the case. Thereafter for the above said period, on14.5.1993 the respondent issued an order.1.(ii) Excepting certain arithmetical discrepancies, theexpenses incurred for payment of bills preferred by outside companiesfor having carried out certain repair work, does not fall within thedefinition of "wages" under the Act. The claim is also barred bylimitation which is for payment of contribution retrospectively beyonda period of 5 years. Hence the order dated 25.02.1993 has to bedeclared as invalid.2. In the written statement filed by the respondent(appellantherein), the following contentions have been raised:2 (i) Certain omissions on the part of the petitioner came tothe notice of the respondent corporation through the inspection of thepetitioner Hotel. Based on the report of the Inspector, the petitionerwas addressed on 19.7.1991 to segregate the amount of wages and salarypaid. However, the petitioner did not respond to the letter and hencea communication dated 25.02.1993 in standard Form C-18 came to beissued and the petitioner was asked to show cause as to whydetermination of contributions as detailed therein shall not be made asper the provisions of Sec.45-A of the Act. 2.(ii) On 31.3.1993 the petitioner sent a reply stating thatthe contributions have been assessed on the expenditure which are notwages. The claim is not time barred. The contributions that have beenlevied through the order under Section 45-A of the Act were only withrespect to expenditure which was treated as wages and that theauthority under this Section has not solely relied on the report of theInspector while determining contributions by the impugned order. Mostof the items of contribution were waived after consideration of theobjection, both in oral and writing by the petitioner. The employeesemployed on such nature of work including casual employees, areemployees falling within the definition of Sec.2(9) of the Act.E.S.I. Act, 1948, does not lay down any time limit for claimingcontributions. The impugned order is just and reasonable and it hasbeen passed with due authority of law, after application of mind andafter following the principles of natural justice. Hence the petitionhas to be dismissed.3. After hearing both sides and scrutiny of the documentary andoral evidence, the learned I Additional Judge, City Civil Court,Chennai, allowed the application. The said order is under challengebefore this Court.4. The petitioner is a catering establishment engaged in hotelbusiness under coverage of the E.S.I. Act, 1948. On 25.2.1993 impugnednotice in Form C-18 was issued calling upon this respondent to pay https://hcservices.ecourts.gov.in/hcservices/ contribution of Rs.5,74,670.63 calculated @ 7% of total amount ofRs.79,26,491.51 for the period 1985-86 to 189-90, for which therespondent sent a reply stating that for certain work in theestablishment, contractors were engaged and amount was paid to them,who in turn, pay wages to their employees and the payments made to thecontractors could not be taken for consideration for the purpose ofcontribution to the Corporation, as per the contention of therespondent. It is further contended that the payments made for thework were relating to the hotel business and so the respondent is notliable to make to the payment of contribution. One Egambaram inspectedthe establishment and submitted report to the Corporation upon whichthe impugned notice was drafted. Since he was not examined before theCourt below, the learned I Additional Judge has opined that Ex.R-1report given by him remains unproved. One Ramanathan was examined toprove the report.5. However, before this Court, an affidavit was filed by thisappellant stating that the said Ekambaram breathed his last on25.05.1994. Hence the dispute could be set at rest with this. It isto be treated that Ex.R.1 report stands proved.6. It is the quintessence of the respondent that whatever bethe wages paid by the contractors engaged by the establishment couldnot be considered to be wages paid by it to the employees ofcontractors and the said payment of wages to them cannot be consideredfor the purpose of contribution. It is further contended by Mr. S.James, learned counsel for the respondent that the maintenance work ofthe buildings such as painting, plastering etc., was entrusted to thecontractors. P.W.1 in his cross examination also admitted that theworks undertaken by the contractors are also relatable to the hotelbusiness.7. Conversely, Mr. K.C. Ramalingam, learned counsel for theappellant would submit that inasmuch as the above said works areincidental to the business of the respondent, the respondent is liableto pay contribution to the work and that the wages paid by thecontractors to their employees is on behalf of the respondent alone andin this regard, the claim of compensation is sustainable.8. Learned counsel for the appellant draws attention of thisCourt to the Full Bench decision of the Supreme Court in AIR 1964 SCC737 [J.K. Cotton Spinning and Waving Mills Co. Ltd., v. LabourAppellate Tribunal of India and others] in which it is held as follows: "11. ... ... ... In our opinion, anemployee who is engaged in any a work or operation whichis incidentally connected with the main industry of theemployer would be a workman provided the otherrequirements of Section 2(s) are satisfied. https://hcservices.ecourts.gov.in/hcservices/

12. In this connection, it is hardly necessary toemphasise that in the modern world industrial operationshave become complex and complicated and for the efficientand successful functioning of any industry, severalincidental operations are called in aid and it is thetotality of all these operations that ultimatelyconstitutes the industry as a whole. Wherever it is shownthat the industry has employed an employee to assist oneor the other operation incidental to the main industrialoperation, it would be unreasonable to deny such anemployee the status of a workman on the ground that hiswork is not directly concerned with the main work oroperation of the industry. Reverting to the illustrationof the buses owned by the factory for the purposes oftransporting its workmen if the bus drivers canlegitimately be held to assist an operation incidental tothe main work of the industry, we do not see why a Malishould not claim that he is also engaged in an operationwhich is incidental to the main industry."Their Lordships are of the view that several incidental operationscould be undertaken in an establishment and they resultantly constituteindustry and hence the employees employed for such works have to beheld to render their assistance to an operation incidental to the mainwork of the industry.9. In 1986 (II) LLJ 304 [Employees State Insurance Corporationv. South India Flour Mills] the Supreme Court has held that thedefinition of the term "employees" includes within its ambit any personemployed on any work incidental or preliminary to or connected with thefactory or establishment, it is difficult to enumerate different typesof work which may be said to be incidental or preliminary to orconnected with the work of the factory or establishment and that anywork that is conducive to the work of the factory or establishment orthat is necessary for the augmentation of the work of the factory orestablishment will be incidental or preliminary to or connected withthe work of the factory or establishment.10. Learned counsel for the appellant also placed reliance on aDivision Bench Decision of Kerala High Court in 1997 (II) LLJ 839[Regional Director, ESI Corpn. v. Kerala Wheat Flour Roller Mill] inwhich it is opined as follows:"10. What is involved in the present case isthat the casual workers were employed by the Contractorfor the construction of the office building. In view ofwhat is already discussed herein above, the only pointwhich remains to be considered is whether theconstruction of the office building for theestablishment would come within the meaning of Section 2 https://hcservices.ecourts.gov.in/hcservices/ (9) of the Act. The construction of the office buildingor the maintenance or repair of existing building is awork 'incidental to the purpose' of the establishment.The office building is inseparably belonging to,connected with or inherent in establishment."The decision of the Supreme Court in South India Flour Mill's case(supra) has also been followed by the Kerala High Court.11. Following the ratio laid down in the decision of theSupreme Court cited supra, it has to be necessarily held that eventhough the works were undertaken by the contractors, employed by therespondent in their establishment premises, the wages made to theiremployees would also attract the provisions of the E.S.I. Act, inasmuchas the works were for the purpose which are incidental to the businessof the establishment. In order to show that the said works areseparable, necessary materials have to be shown, but they aresignificantly absent in this case even though his employees areunidentifiable by the respondent, still the liability to paycontribution to them by the respondent would in no way disappear inview of the weighty judicial pronouncements and statutory provisions.In this regard, even if the workers were engaged by an independentcontractor who may be the immediate employer since they were engagedfor the purpose of the affairs which constitute integral part of thebusiness, their engagement was incidental the function of theestablishment.12. Yet another limb of argument on behalf of the respondent isthat the claim of the appellant was hopelessly barred by limitation.But there is no provision in the E.S.I. Act prescribing period oflimitation for the corporation to claim contribution. In other words,the Act does not provide for any time limit to claim contribution.Section 77(1)(A) provides a time limit of five years for corporation tomake a claim before the Employees Insurance Court. But the present caseis otherwise. It is the claim by the Corporation and there is no timelimit prescribed in the Act for claiming contribution. In 1994 Suppl.(2) SCC 142 [Nagamani Cotton Mills v. Employees' State InsuranceCorporation] the Supreme Court has held that there could be no timelimit for a claim of contribution. Following the said decision, theKarnataka High Court also held as such in Vol.91, 1997 FJR 135[Siddeshwar and Co. v. Employees State Insurance Corporation andothers]. Hence, the inevitable conclusion is that there is no timelimit for claiming contribution by the Corporation.13. In view of the above said discussions, it could be verywell observed that the appellant can maintain the claim as mentioned inthe notice impugned. Such being the position, the order passed by theCourt below is not sustainable, which deserves to be set aside andaccordingly set aside. https://hcservices.ecourts.gov.in/hcservices/ In fine the Civil Miscellaneous Appeal is allowed. No costs. Sd/-Asst. Registrar./true copy/Sub Asst. Registrar.ggsTo 1. The I Additional Judge, City Civil Court, Chennai.2. The Registrar, City Civil Court, Chennai-104.Copy to : The Section Officer, V.R.section, High Court, Madras.+ 1 CC to Mr.K.C.Ramalingam,Advocate,SR.6105 C.M.A.No.703 of 2003CK(CO)EM/25.2.