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E.K Haj Mohammadmeer... v. Regional Director, E...
Factual and Procedural Background
The employer (appellant) filed an appeal against a decision of the learned Single Judge. The core factual dispute concerns casual labourers engaged in unloading raw hides and skins brought by transporters to the employer's factory premises. The employer contended that the payments to those casual labourers formed part of transportation charges paid to the lorry driver and that those labourers were hired by the driver (and not by the employer), meaning the employer was not liable to pay contributions on those wages under the Employees' State Insurance Act, 1948 ("the Act").
The Single Judge disbelieved the appellant's claim that the casual labourers were in fact hired by the lorry driver, and held that the unloading work constituted a continuing requirement of the factory; hence the wages paid to such persons formed part of the total wages on which contribution was payable by the employer. The employer appealed from that decision. The appellate court dismissed the employer's appeal and consequentially dismissed the connected miscellaneous petition.
Legal Issues Presented
- Whether wages paid to casual labourers employed in unloading raw hides and skins brought to the employer's factory premises are wages on which the employer is liable to pay contributions under the Employees' State Insurance Act, 1948.
- Whether the fact that the driver or transporter collected and disbursed payment to the casual labourers (i.e., an immediate employer or intermediary) absolves the principal employer of liability to pay contribution under the Act.
Arguments of the Parties
Appellant's Arguments
- The wages for unloading raw hides and skins are part of transportation charges paid to the lorry driver; the driver hires the labourers and disburses their wages.
- Because the driver engaged and paid those casual labourers, those labourers were not employed by the appellant and therefore the appellant is not liable to pay contributions on such wages.
- Learned counsel for the appellant also sought to rely on authorities (including a Supreme Court short order) to argue that where work is sporadic and coolies work for several others, they cannot be treated as casual workmen for employer liability purposes.
Corporation / Respondent's Arguments
- The Corporation (respondent) relied on precedent establishing that persons employed by or through an immediate employer on the premises, or on work incidental or preliminary to the factory's work, are employees under S.2(9) and thus attract contribution liability on the principal employer.
- Counsel for the Corporation referred to the Supreme Court's decision in Employees' State Insurance Corpn. v. Harrison Malayalam Pvt. Ltd., which rejected the argument that inability of a workman to avail benefits relieves the principal employer of the obligation to pay contributions, and also emphasized the principal employer's duty to procure identity certificates and pay contributions under S.40 and the Regulations.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Rajakamal Transport v. Employees' State Insurance Transporter, Hyderabad, 1996 (2) L.L.N 275 | Consideration of whether loaders engaged by a transporter were working "in connection with the work of the establishment" for purposes of contribution liability. | The court noted that even if the transporter collected wages from those entrusting goods, the key test is whether the loaders worked in connection with the establishment's work; this supports the view that such loaders may attract contribution liability. |
| Royal Talkies, Hyderabad v. Employees' State Insurance Corporation, 1978 (1) L.L.N 556 | Interpretation of "employee" in light of statute's object; coverage of employees of ancillary services on premises (cycle stand, canteen) under the Act. | The court cited this authority for the proposition that a narrow construction should not defeat the statutory object, and that the principal employer is primarily liable for insurance of persons on the premises or in connection with the work. |
| Employees' State Insurance Corporation v. South India Flour Mills (Private) Ltd., 1986 (2) L.L.N 358 | Held that casual employees are covered by the definition in S.2(9) of the Act. | The court relied on this decision to support that casual/labourers fall within the statutory definition of "employee" attracting contribution liability. |
| Kirloskar Brothers Ltd. v. Employees' State Insurance Corpn., 1996 (2) L.L.N 22 | Referenced as earlier authority considered along with Rajakamal Transport in determining coverage of certain labourers. | Used as part of the body of precedent that informs whether persons engaged by transporters/contractors fall within the Act's ambit. |
| Employees' State Insurance Corpn. v. Premier Clay Products, 1995 SCC (L&S) 162 | Short order holding that where work is sporadic and coolies worked for several others, such coolies were not to be treated as casual workmen entitled to benefits and thus no contribution payable. | The appellant relied on this decision; the court acknowledged it but contrasted sporadic work with the continuous requirement in the present case. |
| Parle Bottling Company (Pvt.) Ltd. v. Employees' State Insurance Corporation, Bombay, 1989 (2) L.L.N 494 | Held that coolies are self-employed, act in their own responsibility, and fleeting labourers may not have master-servant relationship with those who engage them. | The employer relied on this High Court decision; the appellate court noted the decision but treated the facts (fleeting/self-employed coolies) as distinguishable from continuous, factory-related unloading work in the present case. |
| Employees' State Insurance Corpn. v. Harrison Malayalam Pvt. Ltd., 1993 (2) L.L.N 675 | Rejection of the contention that inability of the workman to avail benefits relieves the employer of contribution obligation; duty of principal employer to secure temporary identity certificates and pay contributions under S.40 and relevant regulations. | The court relied on this authority to hold that even if the casual labourers cannot presently avail benefits, the employer's obligation to pay contributions remains and the contribution forms part of the fund for the benefit of eligible workmen. |
Court's Reasoning and Analysis
The court undertook a statutory and factual analysis grounded in the definitions and precedents set out in the Employees' State Insurance Act, 1948 and relevant case law:
- Statutory definitions: The court examined S.2(9) (definition of "employee") and S.2(13) (definition of "immediate employer") of the Act. The opinion emphasizes that S.2(9) includes persons "employed by or through an immediate employer on the premises of the factory" and those employed "on work which is ordinarily part of the work of the factory ... or which is preliminary to the work carried on in or incidental to the purposes of the factory or establishment." The court stated that S.2(13) is in wide terms and covers persons engaged in work preliminary to or incidental to factory operations, including contractors.
- Factual application: The court accepted the Single Judge's finding disbelieving the appellant's assertion that the lorry driver in fact hired and employed the casual labourers. Even if the driver had disbursed wages, the court held that such a circumstance would at most make the driver the immediate employer; it would not absolve the principal employer of liability under the Act.
- Continuity and character of the work: The court reasoned that unloading raw hides and skins is a continuing and necessary requirement of the appellant's factory because the raw material is essential for the factory's functioning. The activity is not sporadic; it is continuous and therefore falls within the type of work contemplated by the statutory definitions as attracting employer liability.
- Precedent synthesis: The court relied on Rajakamal Transport and other authorities to underscore that the relevant inquiry is whether the loaders/unloaders worked "in connection with the work of the establishment." It also cited Royal Talkies and South India Flour Mills for the propositions that statutory definitions must be interpreted in light of the statute's object and that casual employees fall within S.2(9). The court considered but distinguished authorities relied upon by the appellant (e.g., Premier Clay Products and Parle Bottling) which dealt with sporadic or fleeting labour and self-employed coolies, as the present facts indicated a continuous requirement tied to the factory's operations.
- Policy and fund rationale: The court invoked the reasoning in Harrison Malayalam that the statutory scheme creates a group insurance-like fund; the employer's obligation to pay contribution commences once the Act applies, and an employer cannot avoid the obligation simply because particular workmen may not be presently able to avail benefits.
Holding and Implications
Holding: The appeal is dismissed. The court held that the wages paid to the casual labourers engaged in unloading raw hides and skins brought to the appellant's factory premises are wages on which the employer is liable to pay contributions under the Employees' State Insurance Act, 1948. Consequently, the connected miscellaneous petition is also dismissed.
Implications:
- Direct effect on the parties: The appellant (employer) remains liable to pay contribution on the wages of the casual labourers engaged in unloading, whether those labourers were engaged directly by the employer or "through" an immediate employer/driver; the appellant cannot avoid liability on the ground that the driver disbursed wages.
- Scope of precedent and broader effect: The opinion relies on existing statutory definitions and case law to apply established principles to the facts; the decision enforces the employer's statutory obligation to pay contributions where the work is continuous and integral or preliminary/incidental to factory operations. The opinion does not state that it establishes a new legal principle beyond applying those precedents to the present facts.
The Judgment of the Court was delivered by
Jayasimha Babu, J.:— The employer is in appeal. The employer contends that the wages paid to casual labour employed in unloading raw hides and skins brought to its factory premises by the transporter is not an expenditure on which an employer is liable to pay any contribution. The employer claims that it is the driver of the lorry who brings workmen required for unloading the raw hides and skins, such unloading being done within the premises of the factory and that the transportation charges which includes the payments to be made to those labourers is paid to the driver who in turn disburses the wages to the casual labourers employed for the purpose of unloading.
2. The learned Single Judge has disbelieved the claim of the appellant that the casual labourer engaged for unloading were infact hired by the driver of the lorry. The learned Judge has taken the view that the bringing of raw hides and skins to the appellant's factory premises is a continuing requirement in order to keep the appellant's factory functioning. The business of the appellant being that of processing of raw hides and skins, the engagement of workmen for unloading the raw hides and skins brought to its premises by lorries is a continuous requirement and the wages paid to such persons is part of the total wages paid out by the employer on which contribution is payable.
3. Learned counsel for the appellant submitted that the evidence of the witness who claimed that the money was paid to those workmen by the driver and not by the appellant should have been believed and on that basis the claim for contribution should have been rejected. Even if we were to agree with the said submission that the driver had disbursed the wages to those persons who did the unloading work, that would only make him the immediate employer and the liability for payment of wages would still remain on the principal employer.
4. Section 2(9) of the Employees' State Insurance Act, 1948, hereinafter referred to as the “Act,” defines “employee” as meaning any person employed for wages in or in connection with the work of a factory or establishment to which this Act applies and—
“(i) ……
(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)….”
This definition makes it abundantly clear that the persons engaged through an immediate employer are also employees for the purpose of the Act and therefore the liability for payment of contribution on the wages paid to such employees is on the employer.
5. We may also, in this context, notice the definition of the immediate employer in S. 2(13) of the Act which reads as under:
“2(13) ‘immediate employer’ in relation to employees employed by or through him, means employer in relation to employees employed by or premises of a factory or an establishment to which this Act applies or under the supervision of the principal employer or his agent, of the whole or any part of any work which is ordinarily part of the work of the factory or establishment of the principal employer or is preliminary to the work carried on in, or incidental to the purposes of, any such factory or establishment and includes a person by whom the services of an employee who has entered into a contract of service with him are temporarily lent or let on hire to the principal employer [and includes a contractor].”
That definition is in wide terms and includes persons who are engaged in doing any work which is even preliminary to the work carried or incidental to the performance of the factory or establishment.
6. The Supreme Court considered this definition in the case of Rajakamal Transport v. Employees' State Insurance Transporter, Hyderabad, [1996 (2) L.L.N 275]. That was a case of a transporter who had engaged casual labourers for the purposes of loading the lorries. The Court after referring to the earlier decision of the Royal Talkies, Hyderabad v. Employees' State Insurance Corporation, [1978 (1) L.L.N 556], Employees' State Insurance Corporation v. South India Flour Mills (Private), Ltd., [1986 (2) L.L.N 358] and Kirloskar Brothers Ltd. v. Employees' State Insurance Corpn.., [1996 (2) L.L.N 22], held that even though the transporter collected the wages paid to the labourers from those who had entrusted the goods for the purposes of transport, what was important for deciding as to whether contribution was payable on such payment was as to whether the loaders had worked “in connection with the work of the establishment”.
7. In the case of Royal Talkies, Hyderabad v. Employees' State Insurance Corporation, [1978 (1) L.L.N 556] (vide supra), the Court held that the employees of a cycle stand and in a canteen of the Court held that the employees covered by the Act. While so holding the Court took note of the fact that narrow construction of the definition of the employee was possible but the definition had to be interpreted having regard to the object of the statute and that object was to make the principal employer primarily liable for the insurance of all kinds of employees on the premises where they are there in the work or are merely in connection with the work of the establishment.
8. In the case of South India Flour Mills [, 1986 (2) L.L.N 358] (vide supra), it was held that casual employees are covered by the definition in S. 2(9) of the Act.
9. Learned counsel for the appellant/employer sought to rely on the decision of the Supreme Court in the case of Employees' Employees' State Insurance Corpn. v. Premier Clay Products., [1995 SCC (L&S) 162], wherein by a short order the Court held that where the work itself was of a sporadic nature and the coolies engaged in performing that work worked for several others, such coolies could not even be called casual workmen and hence no contribution would be payable on the wages paid to such persons. Counsel also relied on a judgment of the High Court at Bombay in the case of Parle Bottling Company (Private), Ltd. v. Employees' State Insurance Corporation, Bombay, [1989 (2) L.L.N 494]. It was held therein that coolies are self employed labourers acting in their own responsibility, that there is no master and servant relationship between such coolies and the persons who engage them, and that such fleeting labourers can never avail themselves of the benefits under the Act. It was observed by the Court by Sawant, J., in that case, in Para. 4, at page 496 that:
“…It will be ridiculous to expect that every time has salesman engage coolies, they require them to fill in the declaration form for the issue of temporary identification certificate which would ultimately be converted into an identity card entitling them to the benefits under the Act.”
10. Learned counsel for the Corporation invited our attention in this context to the judgment of the Supreme Court rendered by the very same learned Judge, in the case of Employees' Employees' State Insurance Corpn. v. Harrison Malayalam Pvt. Ltd..), Ltd, [1993 (2) L.L.N 675]. The Court in that decision rejected the argument of the employer that the obligation to make contribution cannot be enforced when the person in respect of whose wages the contribution is made is not able to avail the benefits provided under the E.S.I Act. The Court observed, in Para. 3, at page 676, that:
“…On the admitted fact that the respondent-company had engaged the contractor to execute the work, it was also the duty of the respondent-company to get the temporary identity certificate issued to the workmen as per the provisions of regulations 12, 14 and 15 of the Employees' State Insurance (General) Regulations, 1950 and to pay the contribution as required by S. 40 of the Act. Since the respondent-company failed in its obligation, it cannot be heard to say that the workers are unidentifiable…… Since the workmen in fact were engaged by the contractor to execute the work in question and the respondent-company had failed to pay the contribution, the appellant-Corporation was entitled to demand the contribution although both the contribution period and the corresponding benefit period had expired…….”
In the same decision the Court further observed, in Para. 3, at page 676, that:
“…The scheme under the Act for insuring the workmen for conferring on them benefits in case of accidents, disablements, sickness, maternity, etc., is distinct from the contract of insurance in general. Under the Act, the scheme is more akin to group insurance. The contribution paid entitles the workman insured to the benefit under the Act. However, he does not get any part of the contribution back if during the benefit period, he does not qualify for any of the benefits. The contribution paid by him and by his employer is credited to the insurance fund created under the Act and it becomes available for others or for himself, during other benefit periods, if he continues in employment. What is more, there is no relation between the contribution made and the benefit availed of. The contribution is uniform for all workmen and is a percentage of the wages earned by them. It had no relation to the risk against which the workmen stands statutorily insured. It is for this reason that the act envisages automatic obligation to pay the contribution once the factory or the establishment is covered by the Act, and obligation to pay the contribution commences from the date of the application of the Act to such factory or establishment…”
It is thus evident that even in a case where the person to whom wages were paid and on which the contribution is sought, is not in a position to avail the benefits provide under the Act, nevertheless the employer is not relieved from the obligation to pay the contribution. The benefit of the contribution would become part of a fund available for use of the benefit of workmen who are eligible to claim the benefit under the Act.
11. In the case of the appellant, the work of unloading the lorries in which the raw hides and skins are brought is a work which is connected with, incidental to, and is also preliminary to the work carried on the factory. Without raw hides and skins the appellant's factory cannot function at all. The bringing of the raw hides and skins is not a one time affair; is not an event which is sporadic in nature but, is a continuous one as without regular supply of raw material the factory cannot possibly function and manufacture the end product for making of which, the factory itself has been established. It is for the Corporation to work out a proper scheme so as to enable such casual labourers also to secure the benefits scheme so as to enable such casual labourers also to secure the benefits provided under the Act.
12. The employer cannot, on the score that such casual labourers presently do not benefit from the provisions or the Act, gain immunity from paying the contribution on the wages paid to such workmen. The appeal is dismissed. Consequently, connected miscellaneous petition is also dismissed.
Appeal dismissed.
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