ROYAL WESTERN INDIA TURF CLUB LTD. Vs. E.S.I. CORPN.& ORS.
Supreme Court of India (Division Bench (DB)- Two Judge)
Appeal (Civil), 49 of 2006, Judgment Date: Feb 29, 2016
Reportable
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO.49 OF 2006
Royal Western India Turf Club Ltd. … Appellant
Vs.
E.S.I. Corporation & Ors. … Respondents
[With C.A. No.1575/2006, C.A. No.3421/2012, and C.A. No.3422/2012].
J U D G M E N T
ARUN MISHRA, J.
1. The questions involved for decision in these appeals are whether
casual workers are covered under definition of employee as defined in
Section 2(9) of the Employees State Insurance Act, 1948 (hereinafter
referred to as ‘ESI Act’) and pertaining to period for which Turf Club is
liable to pay from 1978-79 or from 1987.
2. The main question involved in the present appeals whether the ESI Act
is applicable to Royal Western India Turf Club Ltd. has been concluded by a
3-Judge Bench decision of this Court vide judgment dated 31.7.2014. It has
been held that the Turf Club would fall within the meaning of the word
‘shop’ as mentioned in the notification issued under the ESI Act.
Therefore, the provisions of ESI Act would extend to the appellant also.
Thereafter the matters have been placed before a Division Bench to consider
other questions on merit.
3. It was submitted on behalf of Royal Western India Turf Club Ltd. that
temporary staff engaged on race-days for issue of tickets, would not be
covered by the definition of the “employee” under Section 2(9) of the
Employees State Insurance Act, 1948. It was also submitted that in view of
the consent terms filed in Application No.16/1976 by the Turf Club before
the ESI Court, Bombay, the casual labour engaged on race track were not to
be covered under the ESI Act. It was further submitted that in view of Rule
2A of the Employees’ State Insurance (Central) Rules, 1950, contribution is
required to be made for a period as may be prescribed in the Regulations
and in view of Regulations 29 and 31 of the Employees’ State Insurance
(General) Regulations, 1950, it would be difficult to calculate the
contribution for the employees who work casually on the racing days. It was
also submitted that the direction issued by the High Court not to recover
the amount before 1987 does not call for any interference in the appeal
filed by ESI Corporation, for which reliance has been placed on a decision
of this Court in Employees State Insurance Corporation v. Hyderabad Race
Club (2004) 6 SCC 191.
4. Whereas it was contended on behalf of the ESI Corporation that in
view of the specific notification dated 18.9.1978 so far as Royal Western
India Turf Club Ltd. is concerned in Maharashtra, position was clear as to
applicability of ESI Act. The consent terms which have been relied upon
related to the earlier period in which other establishments of the Turf
Club were covered. In the notification issued on 18.9.1978, the
departments in question of the Turf Club were also covered. Even the
consent term reflects that there was no doubt that the Turf Club was
covered under provisions of the ESI Act w.e.f. 1968.
5. First we take up the question whether casual employees are covered
within the purview of ESI Act. Section 2(9) defines “employee”, the
provision is extracted hereunder :
“2(9) “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 is 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 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;
and includes any person employed for wages on any work connected with the
administration of the factory or establishment or any part, department or
branch thereof or with the purchase of raw materials for, or the
distribution or sale of the products of, the factory or establishment or
any person engaged as apprentice, not being an apprentice engaged under the
Apprentices Act, 1961 (52 of 1961), and includes such person engaged as
apprentice whose training period is extended to any length of time but does
not include —
any member of [the Indian] naval, military or air forces; or
(b) any person so employed whose wages (excluding remuneration for
overtime work) exceed such wages as may be prescribed by the Central
Government a month:
Provided that an employee whose wages (excluding remuneration for overtime
work) exceed such wages as may be prescribed by the Central Government at
any time after (and not before) the beginning of the contribution period,
shall continue to be an employee until the end of that period;”
The definition of “employee” is very wide. A person who is employed
for wages in the factory or establishment on any work of, or incidental or
preliminary to or connected with the work is covered. The definition brings
various types of employees within its ken. The Act is a welfare legislation
and is required to be interpreted so as to ensure extension of benefits to
the employees and not to deprive them of the same which are available under
the Act.
6. Section 39 deals with the contribution payable under the Act with
respect to the employee in respect of each “wage period” shall ordinarily
fall due on the last day of the wage period, and where an employee is
employed for “part” of the wage period or is employed under two or more
employers during the same wage period, the contributions shall fall due on
such days as may be specified in the Regulations. Section 39 is extracted
hereunder :
“39. Contributions. — (1) The contribution payable under this Act in
respect of an employee shall comprise contribution payable by the employer
(hereinafter referred to as the employer’s contribution) and contribution
payable by the employee (hereinafter referred to as the employee’s
contribution) and shall be paid to the Corporation.
(2) The contribution shall be paid at such rates as may be prescribed by
the Central Government:
Provided that the rates so prescribed shall not be more than the rates
which were in force immediately before the commencement of the Employees’
State Insurance (Amendment) Act, 1989.
(3) The wage period in relation to an employee shall be the unit in respect
of which all contributions shall be payable under this Act.
(4) The contributions payable in respect of each [wage period] shall
ordinarily fall due on the last day of the [wage period], and where an
employee is employed for part of the [wage period], or is employed under
two or more employers during the same [wage period], the contributions
shall fall due on such days as may be specified in the regulations.
(5)(a) If any contribution payable under this Act is not paid by the
principal employer on the date on which such contribution has become due,
he shall be liable to pay simple interest at the rate of twelve per cent
per annum or at such higher rate as may be specified in the regulations
till the date of its actual payment:
Provided that higher interest specified in the regulations shall not
exceed the lending rate of interest charged by any scheduled bank.
(b) Any interest recoverable under clause (a) may be recovered as an arrear
of land revenue or under section 45C to section 45-I.”
It is apparent from section 39 that an employee who is employed for a
part of the wage period is also covered for the purposes of contribution.
The definition of the term “employee” in section 2(9) is also wide enough
to cover casual employees who are employed for part of wage period. It is
also provided in section 39(5) that in case contribution is not paid, it
shall carry 12% interest per annum or such higher rate as may be specified
in the Regulations till the date of actual payment and the amount is
recoverable as arrears of land revenue.
7. Section 42 deals with the general provisions as to payment of
contributions. It is provided in section 42 that no employee’s contribution
shall be payable by or on behalf of an employee whose average daily wages
are below such wages as may be prescribed by the Central Government. Sub-
section (2) of section 42 again provides that contribution of the employer
as well as the employee shall be payable by the principal employer for the
wage period in respect of the whole or part of which wages are payable to
the employee and not otherwise. The provision does not prescribe that
employee has to work for a particular period for availing benefit of the
said provision.
8. Reliance has been placed on behalf of the Turf Club, on the
definitions of wages and wage period. Sections 2(22) and 2(23) dealing with
wages and wage period are as follows :
“2(22). “wages” means all remuneration paid or payable in cash to an
employee, if the terms of the contract of employment, express or implied,
were fulfilled and includes any payment to an employee in respect of any
period of authorised leave, lock-out, strike which is not illegal or layoff
and other additional remuneration, if any, paid at intervals not exceeding
two months, but does not include —
(a) any contribution paid by the employer to any pension fund or
provident fund, or under this Act;
(b) any travelling allowance or the value of any travelling concession;
(c) any sum paid to the person employed to defray special expenses
entailed on him by the nature of his employment; or
(d) any gratuity payable on discharge ;
(23) “wage period” in relation to an employee means the period in respect
of which wages are ordinarily payable to him whether in terms of the
contract of employment, express or implied or otherwise;”
A bare reading of the aforesaid provisions makes it clear that it
would cover the “casual employees” employed for a few days on a work of
perennial nature and wages as defined in section 2(22) and wage period as
defined in section 2(23) does not exclude the wages payable to casual
workers. They cannot be deprived of the beneficial provisions of the Act.
9. Reliance was placed on behalf of the Turf Club on the provisions
contained in Rule 2(2A) which defines contribution period means the period
not exceeding six consecutive months as may be specified in the Rules. The
same is extracted hereunder:
“2(2A) “Contribution period” means the period not exceeding six
consecutive months, as may be specified in the regulations;”
The aforesaid Rule provides period not exceeding six consecutive
months as “contribution period” no minimum period has been prescribed. The
Rule 2(2A) cannot be interpreted to mean that if an employee has worked for
a lesser period he is not entitled for the coverage under the Act.
10. Similarly, reliance upon Regulations 26 to 31 of Regulations of 1950
is also of no avail as the Regulations make it clear that for the wage
period, contribution has to be made by the employer as provided in
Regulation 31 otherwise he is liable to make payment as provided in
Regulation 31A and amount carry interest, which is recoverable as arrears
of land revenue. It is also settled that interest cannot be waived.
Regulation 36 also makes it clear that when an employee is employed by an
employer for a part of the wage period, the contribution in respect of such
wage period shall fall due on the last date of the employment in that wage
period. The intendment of regulation is clear to cover work rendered in
part of wage period.
11. This Court in Regional Director, Employees’ State Insurance
Corporation, Madras v. South India Flour Mills (P) Ltd. [AIR 1986 SC 1686]
has overruled the decision of the Madras High Court in Employees’ State
Insurance Corporation v. Gnanambikai Mills Ltd. (1974) 2 Lab. Law Journal
530 (Mad.) in which the High Court laid down that though casual employee
may come within the definition of the term “employee” under section 2(9) of
the Act, yet they may not be entitled to sickness benefits in case their
employment is less than the benefit period or contribution period and that
it does not appear from the Act that casual employee should be brought
within its purview. This Court while overruling decision of High Court held
thus :
“8. 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 regulations.”
9. 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.”
10. 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 employees 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 (1974
Lab.IC 798)(Mad) (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 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.
Employees’ State Insurance Corporation, Hyderabad, (1977) 1 LabLJ 54,
Regional Director, ESIC, Bangalore v. Davangere Cotton Mills, (1977) 2
LabLJ 404, and Employees’ State Insurance Corporation, Chandigarh. v. Oswal
Woollen Mills Ltd., 1980 LabIC 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.
11. Indeed Dr. Chitaley, learned counsel appearing on behalf of the
respondent company in Civil Appeal No. 819 (NL) of 1976, frankly 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. Chitaley 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.”
In view of the aforesaid decision it is apparent that the submission
raised by Royal Turf Club that casual workers are not covered under the
ambit of ESI Act is too tenuous for its acceptance.
12. Mr. Cama, learned senior counsel has pressed into service a decision
of this Court in Employees’ State Insurance Corpn. v. Premier Clay Products
(1994) Supp. 3 SCC 567. In the said case the work itself was of a sporadic
nature. The coolies were available for work to others and on the very day
worked for several others who also engaged them for loading and unloading
of goods. Thus it was held that coolies could not be said to be casual
workmen under the ESI Act. The said decision has absolutely no application
to the fact situation of the instant case where work is not sporadic in
nature. The employees’ work for the day of racing which is perennial
activity of Royal Turf Club and in view of the provisions of the Act,
Rules, Regulations and notification dated 18.9.1978, there is no doubt that
such employees are covered and consequently are entitled for benefit of the
Act.
13. Coming to the submission that the ESI Corporation should be held
bound by the consent terms, the submission is factually incorrect,
misconceived, legally untenable and otherwise also devoid of the substance.
In Application (ESI) No.16/1976 filed by the Turf Club, the ESI Corporation
agreed on the basis of Inspection Report dated 29.11.1975 and in Memorandum
dated 14.4.1976 it was mentioned that employees of the Turf Club in the
electrical and mechanical workshop, factory division, general department -
motor-garage (factory division), security department, carpentry shop,
personnel department and accounts department would be covered under the ESI
Act with effect from 28.1.1968. It was agreed that such employees of the
Turf Club have already been covered and shall continue to be covered as
before and the employees of Racing Administration Department, casual labour
engaged on race track, temporary staff engaged on race days for issue of
tickets/dividends were not covered. In the aforesaid case the period
involved was as specified in the notification dated 26.2.1976 which was
prior and not related to the period in question 1978-79 to 1982-83 involved
in C.A. No.49/2006 and in other appeals also the period is subsequent
thereto. After issuance of the notification dated 18.9.1978 by the
Government of Maharashtra, the remaining departments of Turf Club which
were left out earlier were specifically covered under the purview of the
ESI Act. Thus, the demand in the instant case is based upon the
notification dated 18.9.1978 which left no room to entertain any doubt that
the establishments of the aforesaid department in question were also
covered under the ESI Act. Thus, no benefit can be derived by the consent
terms which related to the earlier period when notification dated 18.9.1978
had not been issued. Notification has statutory force and agreement cannot
supersede it. It is also clear that several departments of race club were
covered under the notification issued in 1968. Thus, the submission raised
on the basis of consent terms is hereby rejected.
14. Coming to the appeal preferred by the ESI Corporation raising
question that the payment should have been ordered with effect from 1978-79
onwards instead of 1987 as in view of notification dated 18.9.1978, there
was no room to doubt that departments in question of the Turf Club were
also covered under ESI Act. In our opinion, the notification of 1978 is
clear and has to be given full effect, for earlier period also the consent
terms indicated that various other departments of Turf Club were covered
under the notification of 1968. Reliance on the decision of this Court in
Hyderabad Race Club case (supra) so as to waive the contribution from 1975
to 1986, is not available as in the instant case there was no doubt as to
applicability of ESI Act in view of the specific notification issued in
1978. The provisions of ESI Act were applied to various departments of
Turf Club w.e.f. 1968. The decision in Hyderabad Race Club case (supra)
turned on its own different factual matrix. In this case, it was clear from
1968 itself that Turf Club was covered under ESI Act as is apparent from
consent terms. The notification dated 18.9.1978 included other left out
departments of race club. The provisions of ESI Act were complied with by
Turf Club w.e.f. 1968. The High Court on the facts of the case has erred in
quashing the demand for the contribution with effect from 1978 till 1987.
15. In our opinion, the Turf Club is liable to make the contribution as
per notification dated 18.9.1978 along with interest at such rate as
provided in the Act and the Rules till the date of actual payment. Let the
amount be contributed within a period of three months from today.
Consequently, the appeals preferred by ESI Corporation are allowed and the
ones preferred by Turf Club are dismissed with costs of Rs.2 lakhs payable
to the ESI Corporation.
……………………..J.
(V. Gopala Gowda)
New Delhi; …………………….J.
February 29, 2016. (Arun Mishra)
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