P.O.,P.S.- Namkum, District- Ranchi vs M/s Awantika Mistan Bhandar, Deoghar,

3. The brief facts of this case is that the petitioner is a proprietorship firm registered under the provisions of The Bihar Shops and Establishment Act, 1953 and the shop was dealing with sweets, Chenna (Cheese), and Namkin (salted snacks items) etc. It is the case of the petitioner that only 08 employees were / are working in the shop, as mentioned in the licence granted by the Department of Labour, Deoghar under the provisions of the Bihar Shops and Establishment Act, 1953. It is the further case of the petitioner that the Inspector under the ESI Act, inspected the wage register, payment register and other documents of the proprietorship of the petitioner on 12.09.1996 and found only 8 employees in the establishment. The establishment of the petitioner is not using any power for making any sweets and as such the establishment does not come within the provisions of the ESI Act, 1948. The petitioner further pleaded that the demand notice dated 11.08.99 through which a certificate case for recovery of contribution amount, has been started by Recovery Officer (Opposite Party No. 2) is illegal because the petitioner has not been given any opportunity to represent his case before the issuance of notice dated 11.08.1999. The petitioner further pleaded that the provisions of the ESI Act, is not applicable in Deoghar town in view of provisions under section 3(2) of the Santhal Pargana Regulations (III of 1872) but the opposite party did not consider the facts submitted by the petitioner in the petition dated 02.02.1998 and 13.11.1998. The petitioner further challenged that the notice dated

11.08.1998 by filing W.C.J.C. No. 8659 / 1999 which was disposed of by this court on 13.04.2000 with a direction that the petitioner may prefer a case under Section 75 of the ESI Act in the ESI court.

4. The case of the opposite party on the other hand is that the application is barred by limitation under Section 77 of the Act. The Area Inspector under the ESI Act, inspected the establishment of the petitioner on 3 M.A. 04 of 2009

06.09.1996 and 12.09.1996 and informed that the employer has engaged 08 employees in the shop/ showroom and 12 employees in the workshop. Thereafter, C-11 coverage letter dated 23.10.1996 has been issued to the petitioner stating therein that M/s Awantika Misthan Bhandar comes under the purview of the Act. Mr. Sunil Kumar Chourasia, the representative of the petitioner establishment was heard on 06.11.1998. The petitioner was also noticed in Form No. C-18 for depositing the contribution amount of the employees within 15 days and when the contribution amount of the employees was not deposited by the petitioner, then the notice in Form no. C-19 was issued for the period from the month of September 1996 to February 1998. It is also case of the opposite party that employer of M/s Awantika Mishtan Bhandar has 08 employees in the showroom / shop and 12 employees in the workshop but he did not produce the record of workshop though he has produced the evidences of 08 employees of the shop hence, the ESI corporation has determined the amount of contribution of the employees in accordance with the provisions of Section 45A of the Act after giving opportunity of hearing on 06.11.1998. It is the case of the Opposite parties that the provisions of the ESI Act 1948 have been enforced in Deoghar area from 16.09.1995 by issuance of notification on

04.09.1995 by the Government of India.

5. In support his case, the petitioner has examined four witnesses, besides producing documents which have been marked as Exhibit 1 to 6 while the opposite party also examined three witnesses besides producing documents which have been marked Exhibit B to Exhibit I.

6. On the basis of the rival pleadings, the learned ESI Court saddled the following six issues:- (i) Is the case maintainable? (ii) Has the petitioner any cause of action to present this case? (iii) Is M/s Awantika Misthan Bhandar, covered under the Provisions of the Employees State Insurance Act, 1948? Is the case barred by limitation under clause (b) of Section 1(a) of Section 77 of the Employees State Insurance Act, 1948? (iv) (v) Is the demand of recovery, amount to Rs. 93254/- from the month of September 1996 to February 1998, with interest illegal, arbitrary, and whimsical? 4 M.A. 04 of 2009

7. Learned ESI court first took up issue no. (iii) and on the basis of the evidence put forth by both the parties, came to the conclusion that the petitioner – M/s Awantika Mishtan Bhandar, is an establishment (shop) dealing with sweets, chhena (cheese), namkeen (salted snacks items) etc. Learned ESI court observed that in order to cover the petitioner under the ESI Act, 1948, the opposite parties are required to prove that the appropriate government has extended the provision of the ESI Act 1948 to other establishment, industrial, commercial, agricultural etc. in exercise of the power conferred under Section 1(5) of the ESI Act 1948 by issuance of notification in the official Gazette and did not accept Exhibit I and J, which were the relevant notifications purportedly published in official Gazette which were marked with objection and the same has not been duly proved having not been duly certified by the head of the department, as required under Section 78 (1) of the Indian Evidence Act, 1872. Exhibit I was the photocopy of the notification dated 01.09.1995, the number of which is illegible, purportedly issued by the Government of India Ministry of Labour and the same was attested by the Manager of the Branch office of the State Employees Insurance Corporation, Deoghar and the Exhibit ‘J’ is the photocopy of the notification no. 3801/4/77-III dated 05.11.1980 which was attested by the Regional Director, Regional Office, Employees State Insurance Corporation, Namkum, Ranchi even after availing sufficient time either to bring the original notification sent to the Director, Employees State Insurance Corporation, New Delhi as well to the Regional Director, Employees State Insurance Corporation, Patna or to produce its copy attested by competent authority. The ESI court also took note of the fact that earlier the prayer for the Opposite party to admit the Exhibit ‘J’ in the evidence was not allowed since it was not duly attested in accordance with the provisions of Section 78 of the Indian Evidence Act 1872 and relying upon the judgment of Hon’ble Patna High Court in the case reported in 1976 0 BBCJ 500 in the case of JAMSHEDPUR NOTIFIED AREA COMMITTEE V. NIRANJAN PAUL, wherein in the facts of that case the Patna High Court came to the conclusion that as the formalities required to be performed under Rules 7 and 18 of the Prevention of Food Adulteration Rules were of a 5 M.A. 04 of 2009 mandatory character and, therefore, in absence of evidence of due performance of those requirements, the principles embodied in illustration (e) of Section 114 of the Evidence Act will not be available, relying upon the judgment of the Hon’ble Supreme Court of India in the case of Collector of Customs, Baroda v. Digvijoy Sinhji Spinning and Weaving Mills Ltd. Jamnagar (A.I.R 1961 S.C 1549) where in para 8, it was observed by the Hon’ble Supreme Court of India as under : “8. Xxxx The High Court in effect drew a presumption in favour of the regular performance of an official act. But this presumption is only optional. In a case like this where the validity of an order depends upon the fulfilment of a condition, the party relying upon the presumption should at least show that the order on the face of it is regular and is in conformity with the provisions of the Statute xxxxX” It was submitted by the ESI court that as the opposite party no. 1 and 3 were provided with the opportunity to produce the notification attested by the competent authority in accordance with Section 78 of the Indian Evidence Act but they did not do so and the E.S.I. court ultimately held that the opposite party nos. 1 and 3 have not been able to prove by producing the copy of the notification certified by the competent authority as required under Section of 78 (1) of the Indian Evidence Act, 1872 and because of the failure of the opposite party to produce the relevant notification, learned E.S.I. court held that the petitioner is not covered under the provisions of E.S.I. Act, 1948. The E.S.I. court next took up issue no. (v) and after considering the materials in the record, observed that the opposite parties are required to prove that the employer of the petitioner had employed 20 or more employees for wages on any day in preceding 12 months and considered the evidence of AW4 – the proprietor of the petitioner firm, who deposed that the sweets are not prepared with the aid of the electric or generator power. Learned E.S.I. court also took note of the deposition of the O.P.W. No. 3- the E.S.I. Inspector and also Exhibit B and B/1 wherein he has mentioned that at the time of the survey, he found 19 employees present and also found the names of 19 employees and their attendance. Learned E.S.I. court also took note of the cross-examination of O.P.W. No.- 3 wherein he deposed that he cannot say as to how many employees were present on 06.09.1996 and on 12.09.1996 when he inspected the premises of the petitioner. Learned E.S.I. court also relied 6 M.A. 04 of 2009 upon the Exhibit C and H which were the attendance register and payment of wages register, from 01.01.1997 to October, 1998 and on perusal of the register of payment, learned E.S.I. court found that the Insurance Inspector on 12.09.1996 made his endorsement with signature from which, it was evident that from the months of January 1996 to May 1996 , only 18 or 19 employees were working. The contention of the opposite party that the employees shown in the month of June 1996 to August 1996 i.e. 8 employees in the showroom and 12 employees in the workshop were falsified by the payment of wages register because in the payment of wages register, in the months of June 1996, July 1996, August 1996 and September 1996, only 08 employees were shown. Learned E.S.I. court also took note of the fact that the opposite party did not produce the inspection note dated 06.09.1996 and there is no material in the record to show that the cash book was demanded from the employer of the petitioner. Learned E.S.I. court ultimately found that in the month of September 1996, only 19 employees were found and because of this reason also, Section 2 (12) (b) has not been complied with and after considering the evidence of AW1 to AW4, the E.S.I. court observed that it does not find any reason to disbelieve their testimony to show that only 08 employees were employed during the relevant period. Learned E.S.I. court did not rely upon the evidence of OPW3 and the chart of employees, which is Exhibit B/1 where the names of the employees concerned, were not mentioned and went on to hold that the Opposite Party No. 1 and 3 have not been able to prove that the petitioner employed 20 or more employees during the relevant period while on the other hand, the petitioner has proved that only 08 employees have been employed by him and under such circumstances, as per the E.S.I. court, the demand of recovery of contribution amount by the Opposite Party nos. 1 and 3 amounts for the months of September 1996 to February 1998, was illegal, arbitrary and whimsical. Learned E.S.I. court thereafter took up issue no. (iv) and in view of the order dated 13.04.2000 passed in C.W.J.C. No. 8659 of 1999 and that the period of limitation was three years, from which the cause of action arose and cause of action arose after issuance of form C-19 dated 11.08.1999 and the case was filed on 24.07.2000, hence, the ESI Court held that the petition under Section 75 (1) (g) of the E.S.I. Act 1948 was not barred by limitation. 7 M.A. 04 of 2009 Learned E.S.I. court next considered issue no. (ii) and held that the petitioner has got the cause of action, then, learned ESI court took up issue no. (i) and held that the case is maintainable and lastly, leanred E.S.I. court took up issue no. (vi) and held that the petitioner is entitled to relief and allowed the petition and passed the order as already indicated above.

8. At the time of admission of the appeal, vide order dated 05.04.2010, the following substantial questions of law were formulated : (i) As to whether the notification certificate issued by the Regional Director was admissible in evidence or not? (ii) As to whether the instruction of respondent was also covered under the Act or not? And vide order dated 28.09.2022, an additional substantial question of law was formulated : “Whether a hotel comes under the ambit of factory?”

9. Mr. Ashutosh Anand, learned counsel for the appellants submits that the Branch Manager is the head of the branch hence, he is also the head of the department and the Regional Director, is the head of the department in the State of Jharkhand. It is next submitted by Mr. Anand that the term “head of the department” is to be liberally understood so that the documents can be easily proved.

10. So far as 1st substantial question of law is concerned, it is fairly submitted by Mr. Anand that in fact the respondent therein refers to the Opposite Party before the tribunal and the appellants herein. It is further submitted that Exhibit I is not a notification rather it is an instruction issued by the opposite Party. It is further submitted by Mr. Anand that it is not Exhibit I rather it is Exhibit J, which is not a memorandum but an instruction in the form of memorandum and he fairly submits that nowhere in the Act, it has been mentioned that such instructions are also covered under the E.S.I. Act. 1948. It is next submitted by Mr. Anand that in fact, this is a case covered under Section 1 (4) of the E.S.I. Act 1948 as a hotel, where 20 or more persons working prior to the amendment of Section 2 (12) of the Employees Insurance Act, 1948 by the Employees State Insurance (Amendment ) Act, 2010 with effect from 01.06.2010, hence, no notification was required to be proved and learned E.S.I. court proceeded with 8 M.A. 04 of 2009 erroneous consideration that the petitioner’s establishment was brought under the ambit of E.S.I. Act, 1948 as under Section 1 (5) of the E.S.I. Act 1948. In support of his contention, Mr. Anand relied upon the judgment of the Division Bench of Hon’ble Karnataka High Court in the case M/s. East West Hotels Ltd. vs. Regional Director, E.S.I.C reported in 1985 0 ILR(Kar) 373 : 1984 SCC OnLine Kar 217, paragraphs 4, 8, 13, 14, 15, 16 and 22 of which reads as under :-

4. The points that arise for our consideration in this appeal are: (i) Whether the appellant's establishment is a ‘factory’ as defined under Section 2(12) of the Act? (ii) Whether preparation of articles of food in the kitchen, attached to the respondent hotel, involves ‘manufacturing process’ and, (iii) Whether a Notification under Section 1(5) of the Act by the State Government is necessary in order to extend the provisions of the Act to a hotel?

8. The sole test to decide whether any premises is a factory under the Act, therefore, depends on the finding whether any manufacturing ‘process’ is being carried on with the aid of power or is ordinarily so carried on in the premises or precincts thereof employing more than twenty persons on any day of the preceding twelve months. It is, therefore, necessary to find out what is ‘manufacturing process’ as understood with reference to a factory.“

13. Factories Act is enacted to consolidate and amend the law regulating the labour and working conditions of the employees in the factories, whereas, the ESI Act is enacted to provide certain benefits to persons employed for wages or in connection with the work of a factory or an establishment to which the Act applies. The definition ‘manufacturing process’ in the Factories Act is very widely worded and such a comprehensive definition had to be provided, obviously, with the object of including all the processes incidental or ancillary to the completion of a manufacturing product, within the purview of ‘manufacturing process’.

14. So far as the activities that take place in an establishment like a hotel and in its kitchen proper are concerned, several commodities along with other ingredients are subjected to a process or treatment in the preparation of different dishes to cater to its customers.

15. Undoubtedly, the articles of food undergo a change as a result of some operation performed on it or in regard to it and all such transformation or amalgam of different articles of food and ingredients in certain quantities, is nothing but a process for adapting or treating it with a view to its use or sale within the meaning of ‘manufacturing process’ in Section 2(k) of the Act.

16. Though, at the first blush, it might seem incongruous that a culinary process should be regarded as a ‘manufacturing process’, yet the language of Section 2(k) of the Factories Act which defines ‘manufacturing process’ is wide enough to include all the stages or processes or work done in the course of preparing food stuffs and other dishes which are supplied and sold in these establishments. The definition of ‘manufacturing process’ is made wide enough and comprehensive to include all other kinds of processes or works which may be incidental to or connected with the ‘manufacturing process’, conceived as a whole in a hotel which caters to the needs of its customers. In the definition of ‘manufacturing process’ each of the words, has got an independent meaning and which may, by itself, constitute ‘manufacturing process’ in the context it is used, such as, altering, repairing, ornamenting, finishing, packing, oiling, washing, 9 M.A. 04 of 2009 blending, treating or adapting any article or substance with a view to its use, sale, transport, delivery or disposal.

22. We are, therefore, of the considered view that an establishment like a Hotel or a Restaurant, satisfies the definition of a ‘factory’ for the purpose of ESI Act, subject to other conditions being satisfied.” hence, it is submitted that the impugned order passed by learned E.S.I. court be set aside.

11. Having heard the submissions made at the Bar and after going through the materials available in the records, it is pertinent to mention here that what the Regional Director produced was not a notification certificate as referred to in the first substantial question of law formulated at the time of admission of this appeal as already indicated above, rather he appended a certificate in the photocopy which was marked as Exhibit ‘J’ with objection that the same is certified to be true but perusal of the record reveals that though the request of the appellant –opposite party before the E.S.I. court to admit the Exhibit ‘J’ as evidence was turned down by the ESI Court and the opposite parties-appellants were given the opportunity to either produce the original or to produce a copy certified by the head of the department being the competent person. The Exhibit ‘I’ and ‘J’ were marked with objections. Neither the Branch Manager who attested the Exhibit ‘I’ and the Regional Director who certified the Exhibit ‘J’ entered the witness box to depose that they had the opportunity of seeing the original court that they are the Heads of the Department. The witness through whom, the exhibit ‘I’ and ‘J’ were marked with objection, has not stated that either the Branch Manager who attested the Exhibit ‘I’ or the Regional Director, who certified the Exhibit ‘I’ which were marked with objection were the heads of the department.

12. Here the question arises that whether a department can have several heads. As in this case, if the contention of the appellant is to be accepted then the Branch Manager is one of the heads of the department and the Regional Director is another head of the department and there may be several Branch Managers and several Regional Directors and the question is whether all such officers can be said to be the head of the department. The answer in the considered view of this court, is ‘No’. 10 M.A. 04 of 2009 The reason being there cannot be several heads of one department. Under such circumstances, this court finds that learned E.S.I. court has not committed any illegality by holding that Exhibit ‘I’ and ‘J’ were not admissible in evidence. Thus the first substantial question of law as to whether the notification certificate issued by the Regional Director was admissible in evidence or not, is answered in the negative by holding that in the facts of the case the same is not admissible in evidence.

13. So far as the 2nd substantial question of law is concerned, it is fairly submitted by learned counsel for the appellant that there is no provision under the E.S.I. Act 1948 or for that matter in any other Act to show that the instruction of the opposite parties are covered by this Act and in view of this fair submission, this court answers the 2nd substantial question of law as to whether the instruction of respondent was also covered under the Act or not, in negative.

14. So far as the additional substantial question of law as to Whether a hotel comes under the ambit of factory or not, is concerned, it is a settled principle of law as has been held by the Hon’ble Supreme court of India in the case of Bombay Anand Bhavan Restaurant v. Deputy Director, Employees’ State Insurance Corporation and Another reported in (2009) 9 SCC 61, para 27 and 39 of which read as under :- “27. Both the appellants prepare sweets, savouries and other beverages in their establishments. It is a settled position of law that cooking and preparing food items qualifies as manufacturing process. In ESI v. Spencer & Co. Ltd. [1978 Lab IC 1759 (Mad)] the Madras High Court held, while dealing with the case of a hotel run by Spencer and Co., that preparation of coffee, peeling of potatoes, making bread toast, etc. in a hotel, involve “manufacturing process”. Similarly, the Bombay High Court in Poona Industrial Hotel Ltd. v. I.C. Sarin [1980 Lab IC 100 (Bom)] , held that the kitchen attached to Hotel Blue Diamond run by the petitioners therein, should be considered as a “factory” for the purpose of the ESI Act. Hence, it is beyond doubt that there is manufacturing process involved in the establishment of the appellants.

39. In our view, the use of LPG satisfies the definition of power as it is mechanically transmitted and is not something generated by human or animal agency. Since the establishments of the appellants involve a manufacturing process with the aid of LPG, which can now be termed as power, the establishments of the appellants can be termed as factories, and therefore, the ESI Act will apply to these establishments.” and that a hotel will be a factory prior to 01.06.2010 i.e. the date of amendment of Section 2 (12) of the ESI Act 1948 if it employed more than 10 or more person for wages on any day in preceding 12 months and in any part of which manufacturing process being carried with the 11 M.A. 04 of 2009 aid of power and if 20 or more persons are employed for wages on any day in preceding 12 months in case no part of it manufacturing process is being carried with the aid of power.

15. Coming to the facts of the case, as learned E.S.I. court for cogent reasons has held that the opposite parties could not establish the engagement of 20 or more persons in the establishment, this court finds that in the facts of the case, the petitioner’s hotel cannot be termed as factory. The additional substantial of law is answered accordingly.

16. In view of the discussions made above, this court is of the considered view that there is no merit in this appeal, accordingly, the same is dismissed ex-parte but under the circumstances without any costs.

17. Let a copy of this Judgment along with the Lower Court Records be sent back to the Court concerned forthwith. (Anil Kumar Choudhary, J.) High Court of Jharkhand, Ranchi Dated, the 1st November, 2022. Smita /AFR