Citation Codes

Equivalent Citations

citation codes

Case Number

A.A.O No. 112 of 1971 and 113 of 1971.

Attorney(S)

Mr. M.S Umapathy for Raj and Raj for Applts.
Mr. T. Vadivelu for Central Govt. Standing Counsel for Respts.

Judges

Krishnaswamy Reddy, J.

Acts

EMPLOYEES STATE INSURANCE ACT 1948
Factories Act, 1948. Section 2 '(k) of the Factories Act, 1948
Indian Mines Act, 1923 (IV of 1923)
Section 2 (g) of the Factories Act
Section 2 (k) of the Factories Act.

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Smart Summary

Concise Analytical Summary of the Opinion

Factual and Procedural Background

Two appeals arise from a common judgment of the Court of the Employees' State Insurance and the District Judge of Coimbatore. The parties and proceedings are:

The Employees' State Insurance Corporation (the "Corporation") filed an application for recovery of employees' contribution of Rs. 2,316 for the period 1 July 1962 to 30 June 1963 against Coimbatore Co-operative Milk Supply Union Limited (the "Union"), contending the Union was a "factory" within the meaning of the Employees' State Insurance Act, 1948 (the "Act").
The petitioner in proceeding No. 3 of 1966 (an employee of the Union) sought a declaration that the Act did not apply to the Union and that the Corporation was not entitled to claim contributions.
The learned Judge below held that the Union was a "factory" within the meaning of the Act, granted the Corporation's claim for contribution, and dismissed the employee's application. These appeals challenge that decision; one appeal (C.M.A. No. 112 of 1971) is by P. Natarajan (Business Manager) who was respondent in proceeding No. 12 of 1965 and the other (C.M.A. No. 113 of 1971) is by the employee who filed proceeding No. 3 of 1966. The Union is respondent in both appeals.

Factual features of the Union (as recited in the opinion):

The Union has existed since 1937 and procures milk from persons owning milch cattle and distributes it to the public.
Operational components described within the compound on Sambandham Road include: an office (Manager, Superintendent, Accountant, clerks), a sales depot (retail sales), a pasteurisation plant, and a by-products section (conversion of surplus milk into ice-cream, gova, butter). There is also a workshop opposite Rand Street where vans are repaired, and a cattle-feed section near the workshop (two employees) grinding cotton seeds and oil cakes with a mechanised grinder.
Transport and distribution are effected by milk vans and employees who carry milk in pails fitted to cycles; some vans are used for distribution.
Numbers of employees (according to the Corporation): 31 in office, 75 in distribution, 7 in by-products, 16 in workshop, 2 in cattle-feed, 32 in pasteurisation unit (13 operators, 19 attenders). The Union disputed the pasteurisation unit figure, contending there were only 17 employees in that unit.

Legal Issues Presented

Whether the Union's premises (in particular the pasteurisation unit) constitute a "factory" within the meaning of Section 2(12) of the Employees' State Insurance Act, 1948.
Whether pasteurisation of milk is a "manufacturing process" (as the term is to be understood by reference to the Factories Act, 1948) carried on with the aid of "power".
Whether various categories of persons working in the Union's compound (office clerks and administrative staff, sales depot staff, by-products employees, drivers and distribution staff, workshop employees) are "employees" within Section 2(9)(i) of the Employees' State Insurance Act because their work is "of, incidental or preliminary to or connected with the work of" the factory.
Whether the statutory threshold of twenty or more persons (on any day of the preceding twelve months) is satisfied so as to bring the premises within the definition of "factory".

Arguments of the Parties

Union's Arguments

The pasteurisation unit and other units are not "factories" within the meaning of the Act because pasteurisation of milk is not a "manufacturing process".
Even if pasteurisation is a manufacturing process, the Union had not employed the minimum statutory number of twenty persons in that unit (the Union claimed only 17 employees in the pasteurisation unit).
The other units (clerical, distribution, etc.) are not connected with the pasteurisation unit so as to aggregate employees and thereby bring all units within the definition of "factory".

Corporation's Position

The Union is a "factory" under the Act and the Corporation is entitled to recover employees' contribution for the stated period.
The Corporation's pleaded numbers and characterization indicated that more than twenty persons were employed in the premises and that pasteurisation was a manufacturing process carried on with the aid of power.

Employee (Applicant in proceeding No. 3 of 1966)

The employee/applicant sought a declaration that the Act did not apply to the Union and that the Corporation was not entitled to claim contributions under the Act.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Nagpur Electric Light and Power Company v. E.S.I. Corporation	The Supreme Court held that all workers including clerks and administrative staff engaged in connection with the work of the factory, and employees working outside the factory whose duties are connected with the work of the factory, are "employees" within the meaning of Section 2(9)(i) of the Employees' State Insurance Act.	The court cited this authority to support the conclusion that various categories of workers (clerical, administrative, sales, by-products, drivers, workshop personnel working on repair of vans) are "employees" within Section 2(9)(i) because their duties are connected with the work of the factory.
Thiagarajan v. E.S.I. Corporation (Division Bench of this Court)	The Division Bench held that gardeners, building workers, office attenders, watchmen, etc., of a textile mill are "employees" for the purposes of the Employees' State Insurance Act.	The court relied on this decision to reinforce the view that non-manual and ancillary staff connected with the factory's operations fall within the statutory definition of "employee".
Mahalakshmi Oil Mills v. E.S.I. Corporation (1970) 2 L.L.J. 528 (Maharajan, J.)	The decision held that mere employment in the same premises did not automatically render persons "employees" within the Act where, for example, persons in the sales depot were also engaged in buying and selling oil not manufactured by the company—such persons would not be within Section 2(9)(i) as their work was not directly connected with the factory.	The court considered this authority but expressly distinguished it on the facts, stating that the facts in Mahalakshmi Oil Mills were different and that the decision was "of no use to the appellants" in the present case.

Court's Reasoning and Analysis

The court's analysis proceeded in identifiable steps, applying the statutory definitions and the facts before it:

Identification of statutory ingredients for "factory": The opinion reproduces Section 2(12) of the Employees' State Insurance Act and extracts the required elements: (1) premises where work is carried on; (2) twenty or more persons working on any day of the preceding twelve months; (3) a manufacturing process being carried on in any part of the premises; and (4) such manufacturing process being carried on with the aid of power.
Understanding "manufacturing process" and "power": The court noted that the Act imports the meanings of these expressions from the Factories Act, 1948. It recited Section 2(k) of the Factories Act's broad description of "manufacturing process" (including processes that treat or adapt any article or substance with a view to its use, sale, transport, delivery or disposal) and Section 2(g)'s definition of "power" (electrical energy or any other mechanically transmitted energy not generated by human or animal agency).
Application to pasteurisation: The court described the pasteurisation process (heating milk up to 72°C and then chilling to destroy harmful germs) and observed that this was a treatment of an article (milk) carried on with the aid of power (the Union used electrical energy for pasteurisation). Given the statutory definition of "manufacturing process" that includes "treating", the court concluded that the pasteurisation activity "will undoubtedly come within the definition of 'factory' as the milk originally purchased from various persons is treated by a particular process with the aid of power for the purpose of sale and distribution to the customers."
Aggregation and connectedness of employees: Turning to Section 2(9)(i) of the Employees' State Insurance Act, the court observed that any person employed "for wages in or in connection with the work of a factory" and "directly employed by the principal employer on any work of, or incidental or preliminary to or connected with the work of, the factory" is an "employee" under the Act. The court applied the precedent authorities (Nagpur Electric Light and Power Company and Thiagarajan) to hold that clerical, administrative, sales depot, by-products, distribution (drivers and carriers) and workshop employees—whose functions are directly connected with the work of the pasteurisation plant—are employees within the meaning of the Act.
Determination as to numbers and exclusions: The court accepted that more than twenty persons were employed in the factory of the Union when considering all relevant sections together. However, the court expressly excluded the employees engaged in preparation of cattle-feed "opposite to the premises" from the definition of employees under the Act in this context (the opinion states that the employees engaged in preparation of cattle-feed opposite to the premises where the pasteurisation plant and other offices are accommodated are excluded).
Treatment of contrary authority: The court considered the Mahalakshmi Oil Mills decision (which held that certain sales employees might not be within the Act when their work was not connected with the factory's manufacture) but distinguished it on the facts and found it inapplicable to the Union's circumstances.

Holding and Implications

Core Ruling: The court affirmed the judgment of the lower court: the Union's premises (including the pasteurisation plant and the other sections housed in the same compound) constitute a "factory" within the meaning of the Employees' State Insurance Act, and the relevant employees are "employees" within Section 2(9)(i) of the Act.

Consequences and direct effects on the parties:

The Corporation's claim for recovery of employees' contribution (the subject claim in the proceedings) is sustained by the court's confirmation of the lower court's orders.
The application filed by the employee contesting applicability of the Act was dismissed by the lower court and that dismissal was affirmed.
The appeals were dismissed and the lower court orders were confirmed. The opinion records "No costs."

Broader implications: The opinion does not undertake to lay down any novel legal principle beyond applying existing statutory definitions and the cited authorities to the facts. The decision operates to confirm that pasteurisation (as described) is a "manufacturing process" and that persons employed in various connected functions within the same compound fall within the Act; no broader precedent-setting discussion is contained in the text.

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P. Natarajan, Business Manager, Coimbatore Co-Operative Milk Supply Union Ltd., And Others v. Employees State Insurance Corporation Through The Insurance Inspector, Coimbatore And Others

1. These two appeals arise out of a common judgment of the Court of the Employees' State Insurance and the District Judge of Coimbatore. P. Natarajan, Business Manager, Coimbatore, Co-operative Milk Supply Union Limited the respondent in proceedings No. 12 of 1965 before that Court is the appellant in C.M.A. No. 112 of 1971. The petitioner in proceeding" No. 3 of 1966 who is an employee of the Coimbatore Co-operative Milk Supply Union Limited is the appellant in C.M.A. No. 113 of 1971. The Coimbatore Co-operative Milk Supply Union Limited is the respondent in both the proceedings.

2. The Employees' State Insurance Corporation (hereinafter called the 'Corporation') filed an application for recovery of employees' contribution of Rs. 2,316 for the period from 1st July, 1962 to 30th June, 1963, against the Coimbatore Cooperative Milk Supply Union Limited (hereinafter called 'the Union') on the ground that the Union was a factory within the meaning of the Employees' State Insurance Act, 1948 (hereinafter called 'the Act'). The appellant in CM. A. No. 113 of 1971 filed an application for a declaration that the Act does not have any application to the Union and the Corporation was not entitled to claim any contribution under the Act.

3. The case of the Union is substantially the same as that of the appellant in C.M.A. No. 113 of 1971.

4. The learned Judge held that the Union is a 'factory' within the meaning of the Act and, therefore, the Corporation would be entitled for contribution and decreed the claim made by the Corporation for contribution and dismissed the application filed by the employee.

5. The Union has been in existence from 1937 onwards. The object of the Union is to procure milk from people owning milch cattle and distribute milk to the members of the public. For the purpose of collecting milk from various places, the Union has got milk vans and the vans are driven by its employees. For the purpose of distributing the milk, there are 75 employees who carry the milk in pails fitted to cycles. Some of the vans are also used for the purpose of distribution. The Union has got an office with a Manager, Superintendent, Accountant and some Clerks.

6. The business and office premises of the Union is situate in Sambandham Road. There are two other roads adjoining the premises of the Union, viz., Thadagam Road on the one side and Rand Street on another side. Three gates are provided, which give access to the premises from all the three roads. In the compound, the office, the sales depot, the milk pastemisation plant and the by-product section are housed in separate buildings. Retail sales of milk are effected in the sales depot. In the pasteurisation plant, the milk is pasteurised. In the by-products section, excess milk is converted into ice cream, gova, butter etc. In the office building, the clerical and administrative staff of the Union carry on their functions. On the other side of the Rand Street, there is a workshop. In this workshop, the vans of the Union are repaired and serviced. Near the workshop, there is a cattle feed section wherein two employees are working. They grind with a mechanised grinder cotton seeds, oil cakes etc., and supply it to some of the cattle owners who regularly supply milk to the Union. Though separate door numbers are given to the pasteurisation unit and the office and though they are in separate buildings, all the four buildings, viz., the office, the pasteurisation plant building, the sales depot and the by-products section are all situated within the same compound and there is no partition wall between any of these building.

7. According to the Corporation, there are 31 employees in the office section attending to the maintenance of accounts, registers, correspondence, etc. and also to the collection and disbursement of amounts. There are 75 employees in the distribution department and their duty is to carry the milk and distribute it to the customers. In the by-products section, there are seven employees for manufacturing ice cream, gova etc., There are 16 employees in the workshop section and two employees in the cattle feed section. In the pasteurisation unit, there are 32 employees, Viz., 13 persons designated as operators of the plant and 19 persons designated as attenders in the milk plant section. The Union would contend that there are only 17 employees working in the pasteurisation unit.

8. It was contended by the Union that the pasteurisation Unit or any other unit of the Union is not a 'factory' within the meaning of the Act as the pasteurisation of milk is not a manufacturing process and even assuming that it was a manufacturing process, the Union has not employed the minimum number of persons, namely '20' to bring it within the definition of factory'. It was also contended that the other units, namely, clerical, distribution etc., are not connected to the pasteurisation unit, so as to bring all units within the definition .

9. The contention of the Union were negatived by the lower Court. The Union has reiterated the same contentions before me.

10. It is, therefore, necessary to note the relevant provisions in the Act. "Factory' is defined in Section 2 (12) of the Act as follows:

'Factory' means any premises including the precincts thereof whereon twenty or more persons are working or were working on any 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 but does not include a mine subject to the operation of the Indian Mines Act, 1923 (IV of 1923) (or a railway running shed).

From this definition, it is clear that the following ingredients are required to bring the premises under the definition of 'factory': (1) there must be a premises where the work is carried on; (2) 20 or more persons must be working; (3) 20 or more persons were working on any day of the preceding twelve months; (4) a manufacturing process must be carried on in the premises or any part of the premises; and (5) such manufacturing process must be carried on or so ordinarily carried on with the aid of power.

11. "Manufacturing process" is not defined specifically under the Act; but it is stated under Section 2 (12) of the Act that the expressions "manufacturing process" and "power" shall have the meanings respectively assigned to them in the Factories Act, 1948. Section 2 '(k) of the Factories Act, 1948 defines "'manufacturing process". According to this section, "manufacturing process" means any process for making, altering, repairing, ornamenting, finishing, packing, oiling, washing, cleaning, breaking up, demolishing, or otherwise treating or adapting any article or substance with a view to its use, sale, transport, delivery or disposal etc. Thus, this definition of 'manufacturing process' is so wide as to include the various acts performed on any article or substance with a view to its use, sale, transport, delivery or disposal. This definition takes in all acts enumerated therein and similar other acts which bring in not only some change in the article or substance but also the acts done for the protection and maintenance of such article by packing, oiling washing, cleaning etc.

12. "Power" is defined in Section 2 (g) of the Factories Act as follows:

"Power" means electrical energy or any other form of energy which is mechanically transmitted and is not generated by human or animal agency.

There is no dispute that electrical energy is used for pasteurisation of milk by the Union in the premises. The question now is whether pasteurisation of milk comes within the definiton of 'factory'.

13. In pasteurisation of milk, the process consists of heating the milk upto 72°C to bring it under particular temperature and then chilling it to destroy germs harmful to the health of the community. The word "pasteurisation" has been defined in the Shorter Oxford English Dictionary a? follows:

To sterilize by Pasteur's method, to prevent or arrest fermentation in milk, wine etc., by exposure to a high temperature so as to destroy microbes or germs, to treat by the Method of Pasteurism, 1886.

The process employed by the Union will undoubtedly come within the definition of 'factory' as the milk originally purchased from various persons is treated by a particular process with the aid of power for the purpose of sale and distribution to the customers. The milk is treated by heating it to high temperature and then bringing it to the low temperature, for the purpose of destroying harmful microbes. Treating an article or substance is a manufacturing process under the definition of Section 2 (k) of the Factories Act. It is not in dispute that the milk so treated by power is transported, sold and delivered to the customers. The premises where the pasteurisation of milk is carried on is, therefore, a' factory' within the meaning of the provisions of the Act.

14. The next question is whether the persons employed in the sales depot where sales of milk are effected and the by-products section where the milk is converted into ice-cream, gova, butter etc. are employees within the meaning of Section 2 (9) of the Employees' State Insurance Act.

15. Section 2 (9) (i) of the Act, so far as it is relevant for this case, is 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 is done by the employee in the factory or establishment or elsewhere....

The other clauses of this section are omitted as not relevant. The above-said clause makes it clear that any person employed by the 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, will be an employee within the meaning of the Act. It is not in dispute that the office where the administrative and clerical staff work, the sales depot where the milk after pasteurisation is sold and the byproducts section where such pasteurised milk is converted into gova, ice-cream etc., are housed within the same compound where the pasteurisation plant is located for the purpose of treating the milk. All those categories are connected with the work of the factory and they are directly employed by the Union. Some of them work in the manufacturing process, some in the sales depot, some in the office, some in the by-products plant and some are employed as drivers for transporting the treated milk in lorries and vans for distribution and sale. The work is done by the employees in all these sections and their work irrespective of the fact whether it is clerical or non-manual, is connected with the work of the factory as such work is carried on by all to achieve the object of the Union in running the factory. The duties of every one employed in various sections housed in the same compound are directly connected with the work of the factory. Even those persons who are working in the workshop, though situate separately opposite to the factory will also come under the definition of 'employee' within the meaning of the Act as their work in repairing the lorries, vans etc. is connected with the work of the factory.

16. In Nagpur Electric Light and Power Com-party v. E.S.I. Corporation , the Supreme Court held that all the workers including the Clerks and the administrative staff engaged in connection with the work of the factory and the employees working outside the factory, but whose duties are connected with the work of the factory are all employees within the meaning of Section 2 (9) (i) of the Act.

17. A Division Bench of this Court consisting of S. Ramachandra Iyer, C.J. and Venkataraman J. in Thiagarajan v. E.S.I. Corporation held that the gardeners, building workers, office attenders, watchmen etc. of a textile mill are "employees" within the meaning of the Employees' State Insurance Act.

18. The learned Counsel for the appellants brought to my notice a decision in Mahalakshmi Oil Mills v. E.S.I. Corporation (1970) 2 L.L.J. 528, where Maharajan, J., held that the fact that all the persons were employed in the same premises would not make all of them employees and certain persons who were engaged in selling oil would not come within the definition of 'employees' under the Act. In that case the persons employed in the sales depot of the Company which was running the oil mills were engaged not only for selling oil manufactured in the premises belonging to the company but also for buying the oil from others and selling the same. Those employees while buying and selling oil, not manufactured by the Company, would not come within the meaning of Section 2 (9) (?) of the Act as their work is not directly connected with the factory.... The said decision is of no use to the appellants as the facts in that case are different.

19. Therefore, I find, concurring with the lower Court, that more than 20 persons are employed in the factory of the Union and all the employees in all the sections of the factory including the employees working in the workshop excluding the employees, engaged in preparation of cattle-feed opposite to the premises where the pasteurisation plant and other offices are accommodated are 'employees' within the meaning of the Act.

20. In the result, the orders of the lower Court in both the proceedings are confirmed and these appeals are dismissed. No costs.

P. Natarajan, Busine... v. Employees State Insu...