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The Employees' State Insurance Corporation v. Balaji Weaving Mills And Others
Factual and Procedural Background
These were appeals by certificate against a judgment of a Division Bench of the High Court at Madras dated 15-12-1977. An officer of the Employees' State Insurance Corporation (the appellants) inspected the respondents' premises on 30-5-1966 and found that on 9-4-1966 the respondents had employed 20 workmen or more. The respondents were served with a notice requiring contribution under the Employees' State Insurance Act, 1948 for the period 9-4-1966 to 8-4-1967.
The respondents took the matter to the court under the Act, contending that they had not employed 20 persons and that the demanded period was erroneously calculated. The ESI court allowed the demand only for a very small sum. The matter then went to the High Court. A learned Single Judge held the demand could validly be made only for the period 9-4-1966 to 8-10-1966. The authorities under the Act appealed to the Division Bench, which concluded that since 20 or more persons were employed on 9-4-1966 (falling within the period 1-12-1965 to 30-11-1966), the factory would be covered for that one-year period, but there could be no liability for any period subsequent to 30-11-1966.
Legal Issues Presented
- How the phrase “on any day of the preceding twelve months” in the definition of “factory” under Section 2(12)(a) of the Employees' State Insurance Act, 1948 is to be applied for determining coverage when the relevant employment strength is found with reference to a date prior to inspection.
- Whether, on the facts and statutory provisions relied upon (including Sections 1(4), 38, 39, and 2(12)), the respondents’ factory was liable to contribute for the full 12 months from 9-4-1966 to 8-4-1967 (as contended by the appellants) or whether liability was limited as held by the High Court.
Arguments of the Parties
Appellants' (Employees' State Insurance Corporation) Arguments
- The Act applied to the respondents’ factory for the full period of 12 months commencing on 9-4-1966 and ending on 8-4-1967.
- Reliance was placed on the definition of “factory” in Section 2(12) and the provisions of Section 39.
Respondents' Arguments
- They had not employed 20 persons.
- The period for which the demand was issued was erroneously calculated.
Table of Precedents Cited
No precedents were cited in the provided opinion.
Court's Reasoning and Analysis
The Court noted the submission that there was no judgment of the Supreme Court deciding the question. It referred to Section 1(4), providing that the Act applies, in the first instance, to all factories, and to the definition of “factory” in Section 2(12)(a), which includes premises where ten or more persons are employed or were employed for wages “on any day of the preceding twelve months.” It also noted Sections 38 (insurance of employees in factories/establishments to which the Act applies) and 39 (contributions, rates, and wage-period computation).
The Court emphasized that, on the facts, the inspector’s finding was not that ten or more persons were employed on the inspection day (30-5-1966), but that 20 persons had been employed on an earlier day (9-4-1966). Therefore, the words “on any day of the preceding 12 months” became central. The Court stated that no provision in the Act was pointed out to indicate the date by reference to which “the preceding 12 months” must be calculated.
The Court reasoned that the phrase appeared intended to operate with reference to the date on which the Act came into force, so that, at commencement, the Act would apply to factories where ten or more persons were employed on that day or had been employed on any day in the preceding twelve months—thus preventing evasion. However, the Court held this did not resolve the specific question before it, namely the statutory basis for applying the Act to factories found, after the Act’s commencement, to have employed more than ten workers on days prior to inspection. The Court noted that counsel could not point out any such provision or advance a submission in that behalf.
In that state of affairs, the Court declined to “lay down the law” as suggested by the appellants’ counsel and declined to interfere with the High Court’s judgment and order.
Holding and Implications
DISMISSED: The appeals were dismissed, with no order as to costs.
The direct effect was that the judgment and order under appeal (the Division Bench decision of the Madras High Court) remained undisturbed. The Court expressly declined to lay down the law on the broader interpretive question; accordingly, the opinion did not set out any new precedent beyond affirming (by non-interference) the outcome reached in the appealed judgment.
Order
1. These are appeals by certificate. The judgment under appeal was delivered by a Division Bench of the High Court at Madras on 15-12-1977.
2. The respondents' premises were inspected by an officer of the appellants, the Employees' State Insurance Corporation, on 30-5-1966 and he found that on 9-4-1966 the respondents had employed 20 workmen or more. Thereupon the respondents were served with a notice which required them to contribute under the provisions of the Employees' State Insurance Act, 1948, (the Act) for the period 9-4-1966 till 8-4-1967. This was taken to the court under the Act. It was contended on behalf of the respondents that they had not employed 20 persons. They also contended that the period for which the demand was issued was erroneously calculated. The ESI court allowed the demand for only a very small sum, whereupon the matter was taken to the High Court. A learned Single Judge held that the demand could validly be made only for the period 9-4-1966 to 8-10-1966. The authorities under the Act thereupon appealed to the Division Bench. On behalf of the appellants it was contended that the Act would apply to the respondents' factory for the full period of 12 months commencing on 9-4-1966 and ending on 8-4-1967 and reliance was placed upon the definition of “factory” in Section 2(12) and the provisions of Section 39. Having regard to the phraseology thereof, the Division Bench came to the conclusion that the respondents having employed 20 or more persons on 9-4-1966, which was the date falling within the period 1-12-1965 to 30-11-1966, the factory would be covered for that period of one year. This was upon the basis that the Act had come into force on 1-12-1958. The claim having been made for the period 9-4-1966 to 8-12-1967, the Division Bench held that there could be no liability for the period subsequent to 30-11-1966.
3. It has been submitted to us that there is no judgment of this Court which decides the question. Reference has been made to Section 1(4) of the Act, by reason of which the Act shall apply, in the first instance, to all factories. “Factory” is defined in Section 2(12)(a) thus:
“2. (12) ‘factory’ means any premises including the precincts thereof —
(a) whereon ten or more persons are employed or were employed for wages 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,”
[Clause (b) is not relevant for our purpose.]
4. Section 38 requires that all employees in a factory or establishment to which the Act applies shall be insured in the manner provided by it. Section 39 deals with contributions and sets out what contribution should be paid and at what rate it should be paid; it also sets out how the wage period in relation to an employee is to be calculated.
5. Section 2(12) defines a “factory” to mean any premises whereupon 10 or more persons are employed or were employed for wages on any day “of the preceding 12 months”. In the present case, the finding of the inspector was not that 10 or more persons were employed on the day on which he inspected it, but that on an earlier day, namely, 9-4-1966, 20 persons had been employed. It was therefore that the words “on any day of the preceding 12 months” assumed importance. There is no provision in the Act to which our attention is drawn relating to the date upon the basis of which “the preceding 12 months” have to be calculated. It seems to us that the only possible answer to the question why this phrase was used is that it was intended to apply upon the date upon which the Act came into force. The Act when it came into force was intended to apply to those factories in which 10 or more persons were employed on that day or had been employed on any day in the preceding 12 months. By making such provision, the legislature meant to prevent escapement from the provisions of the Act. But this does not answer the question that is before us. The counsel has not been able to point out what the provision is in regard to the application of the statute to factories which are found, after the commencement of the Act, to have employed more than 10 workers on any day or days prior to the date of inspection or advance any submission in that behalf.
6. In this state of affairs, we are unable to lay down the law, as is suggested by the learned counsel for the appellants, and decline to interfere with the judgment and order under appeal.
7. The appeals are dismissed. There shall be no order as to costs.
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