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M/S. Southern Roadwa... v. Employees State Insu...
Factual and Procedural Background
This Letters Patent Appeal was preferred by Southern Roadways Private Ltd. (the "Employer"), through its Manager at Vijayawada, against the judgment of Chinnappa Reddy, J., which had allowed an appeal by the Employees State Insurance Corporation (the "Corporation"). The Corporation's appeal had been directed against an order of the Employees' State Insurance Court (Case No. 1 of 1969 dated 30 May 1970) that had allowed an application filed by the Employer under Section 75(g) of the Employees' State Insurance Act, 1948 (the "Act").
At the hearing before Obul Reddi, J., counsel for the Employer (Mr. Kannabhiran) urged two main grounds of challenge to the judgment of Chinnappa Reddy, J.: (1) that the Corporation could not levy and collect special contributions or employees' contributions unless it had first covered the Employer's employees for the benefits under the Act; and (2) that there was no warrant for concluding that the Employer's Maintenance Section at Vijayawada was a 'factory' within the meaning of Section 2(12) of the Act even prior to 1 April 1968. Counsel for the Corporation (Mr. I.A. Naidu) relied upon the findings recorded below and raised a preliminary objection that a Letters Patent Appeal did not lie because of the bar under Section 82(2) of the Act.
Legal Issues Presented
- Whether sub-section (2) of Section 82 of the Employees' State Insurance Act bars a Letters Patent Appeal to the High Court (i.e., whether an appeal under clause 15 of the Letters Patent lies).
- Whether the Corporation can levy and collect special contributions or employees' contributions without first covering the Employer's employees for the benefits under the Act.
- Whether the Maintenance Section of the Employer at Vijayawada was a 'factory' within the meaning of Section 2(12) of the Act for the period prior to 1 April 1968 (and specifically whether contributions are recoverable from dates prior to registration).
- Whether special contributions under Section 73-A of the Act could be levied where employees allegedly did not receive any services or benefits under the Act.
Arguments of the Parties
Appellant's (Employer's) Arguments (Mr. Kannabhiran)
- The Corporation is not entitled under the Act to levy and collect special contributions or employees' contributions unless it first covers the employees of the Employer's establishment for the benefits under the Act.
- The Maintenance Section at Vijayawada was not a 'factory' within the meaning of Section 2(12) prior to 1 April 1968; specifically, fewer than 20 workmen were employed there prior to that date, so the Act did not apply for that earlier period.
- The Employer only applied for registration when it had 20 or more workmen; therefore contributions could not be validly demanded for periods prior to registration.
- Reliance on decisions (including a Madras single-judge decision under the Provident Funds legislation and Division Bench authority on special contributions) to support the proposition that recovery for a back period or when no benefits were provided is not permissible.
- A further point advanced was that no amenities/benefits had been provided to the Maintenance Section employees so as to justify levy of special contributions under Section 73-A.
Respondent's (Corporation's) Arguments (Mr. I.A. Naidu)
- Relied upon the findings recorded by the trial/first appellate courts (Employees' Insurance Court and Chinnappa Reddy, J.) that the Maintenance Section was a 'factory' from an earlier date and that contributions were due accordingly.
- Raised a preliminary objection that a Letters Patent Appeal did not lie because Section 82(2) of the Act provided a bar (the Corporation argued that the appeal to the High Court under Section 82(2) is final and thus no further appeal under the Letters Patent was competent).
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Union of India v. Mohindra Supply Co. (Shah, J.) | Illustration that provisions like Section 39(1) of the Arbitration Act expressly limit appeals to specified orders and that statutory bars on further appeals can operate to preclude Letters Patent appeals. | Used to show contrast: where a statute expressly bars further appeals the Letters Patent route may be restricted; but Section 82 of the ESI Act contains no such express bar, so the analogy does not prevent a Letters Patent Appeal here. |
| National Sewing Thread Co. Ltd. v. James Chadwick and Brothers (Mahajan, J.) | Held that where an Act grants an appeal to the High Court without more, the appeal is regulated by the High Court's practice and a single Judge's determination is a judgment within clause 15 of the Letters Patent (i.e., a further appeal may lie by Letters Patent). | Applied as analogous authority: since the ESI Act does not bar further appeals, a Letters Patent Appeal lies against a single Judge's order under Section 82(2). |
| South Asia Industries (P.) Ltd. v. Sarup Singh (Chief Justice Subba Rao) | Explained that where a statute gives a right of appeal to the High Court without limiting it, the appeal is governed by the High Court's practice; the term 'final' if used by statute would indicate conclusive effect and bar further appeals. | Used to support the proposition that the absence of the word 'final' in Section 82 means no statutory finality was intended, so Letters Patent Appeal is not precluded. |
| Collector, Varanasi v. Gauri Shanker (Hegde, J.) | Appeals to a Court already established must be disposed of according to that Court's practice and procedure. | Relied upon to confirm that appeals to the High Court under the Act are regulated by High Court practice and therefore the availability of Letters Patent relief depends on that practice where no statutory bar exists. |
| E.S.I. Corporation v. Sriramulu Naidu (Madras Division Bench) | When determining whether separate premises form part of a single establishment/factory, the question is whether both premises were part of a single establishment or factory. | Referred to in assessing the correctness of treating the Maintenance Section as part of the same 'factory'—the Employees' Insurance Court had considered both premises and the nature of the work. |
| K.R. Subbaier v. The Regional Provident Fund Commissioner (Jagadisan, J.) | Under the Employees' Provident Funds Act, the statute and scheme operate prospectively; demands for back periods are inconsistent with the enactment's prospective operation. | Employer relied on it to argue against recovery for periods prior to registration; the Court distinguished it because in the present case contributions were demanded only from the date when the Maintenance Section was held to be a factory (not before that date). |
| Stonewara Pipes (Madras) Ltd. v. Union of India (Madras Division Bench) | Under the Emergency Risks (Factories) Insurance Act, liability to pay premium evaded arises only upon its determination and a demand being made; proceedings begun after expiry of the Act were not saved. | Distinguished on facts: that case concerned proceedings after expiry of an Act; the present proceedings concern recovery under the ESI Act from the date the Maintenance Section became a factory, so the Stonewara reasoning was not applicable. |
| W.P. Nos. 2382, 2914 and 2564 of 1968 (Division Bench; Gopal Rao Ekbote, J.) | Held that special contribution under Section 73-A could not be validly recovered from factories whose employees did not receive any service or benefit under the Act. | Employer relied upon this authority on the question of special contributions; the Court declined to decide that point because it was not argued or investigated below and raising it for the first time would require further factual inquiry, which Section 82(2) does not permit in this appeal. |
Court's Reasoning and Analysis
The Court proceeded in two main phases: first addressing the procedural objection under Section 82(2) of the Act, and second addressing the substantive questions about the liability to make contributions and the status of the Maintenance Section as a 'factory'.
On the preliminary objection (availability of Letters Patent Appeal):
- The Court read Section 82: sub-section (1) generally bars appeals from an Employees' Insurance Court except as expressly provided; sub-section (2) provides an appeal to the High Court "if it involves a substantial question of law."
- The Court compared Section 82 with provisions in other statutes (e.g., Section 39(2) of the Arbitration Act and Section 47(2) with sub-section (3) of the Jagirdars Debt Settlement Act) where the legislature had expressly barred further appeals. Those statutes were shown to contain explicit prohibitions on a "second appeal" or further appeal against the High Court's decision.
- Relying on precedents (notably National Sewing Thread Co.; South Asia Industries; Collector, Varanasi), the Court held that where a statute confers a right of appeal to the High Court without expressly making that appeal "final" or otherwise barring further appeal, the appellate jurisdiction is to be exercised according to the High Court's practice and procedure. Accordingly, a Letters Patent Appeal under clause 15 lies unless the statute expressly precludes it.
- The Court found no use of the word "final" or any express bar in Section 82 to indicate that the appeal under sub-section (2) is conclusive against further appellate review; therefore the preliminary objection was overruled and a Letters Patent Appeal was held to be competent.
On whether the Maintenance Section was a 'factory' and the employer's liability to contribute:
- The Court examined the statutory definitions relevant to the issue: Section 2(9) (definition of 'employee') and Section 2(12) (definition of 'factory', which requires twenty or more persons employed on any day of the preceding twelve months and a manufacturing process carried on with the aid of power, excluding certain categories).
- The Court noted that the question whether there were 20 or more persons and whether those persons were 'employees' under Section 2(9) are mixed questions of fact and law to be determined by the material placed before the Court.
- The Employees' Insurance Court had examined a representative witness of the Employer (P.W.1) and on that basis held that the Maintenance Section was a 'factory'. That factual finding was affirmed by Chinnappa Reddy, J.
- The Court observed that the Employer's objection — that persons not incidentally connected with the Maintenance Section were counted — was not supported by the order of the Employees' Insurance Court, which had considered the nature of the work as well as the premises. The Court found nothing in the record to show those held to be employees were doing work other than that connected with the Maintenance Section.
- Because an appeal under Section 82(2) lies only when a "substantial question of law" is involved, the Court declined to disturb the findings of fact made by the courts below. It held that no substantial question of law arose from the Employer's contention about the factory finding.
On the recoverability of contributions from dates prior to registration:
- The Court emphasized that liability to make contributions arises from the date an establishment becomes a 'factory' within Section 2(12), not from the date the employer applies for registration. The Employees' Insurance Court and Chinnappa Reddy, J. had found the Maintenance Section to be a factory from 20 April 1966 (as the opinion records).
- The Court held that the Employer's obligation to make contributions is peremptory once it employs twenty or more workmen; it cannot avoid liability by pointing to the absence of deductions from wages, non-receipt of benefits by employees, or delay in registration.
- The Court stressed that the employee's entitlement to benefits under Chapter V is independent of the employer's compliance with contribution obligations; non-payment by the employer does not, by itself, deprive employees of entitlement to benefits.
- The Court examined relevant Regulations (Regulation 10-B, Regulation II, Regulations 13–16) which place on the employer the duty to obtain employee declarations, prepare contribution cards, assist in registration, secure photographs and identity cards, and forward returns. The Court held that if the employer failed in these statutory/regulatory duties, it cannot shift blame to employees for not having identity numbers prior to 1 April 1968.
On special contributions under Section 73-A:
- The Employer relied upon a Division Bench decision (W.P. Nos. 2382, 2914 and 2564 of 1968) to argue that special contributions could not be levied where employees did not receive services or benefits. That Division Bench had held that levy of special contribution under Section 73-A could not be justified where employees received no service/benefit under the Act.
- The Court observed that there was nothing in the orders of the Employees' Insurance Court or Chinnappa Reddy, J. to show that this specific argument (that employees did not get any services/benefits) had been raised below or investigated. The issue was raised for the first time before the High Court.
- Because Section 82(2) permits appeal to the High Court only on a substantial question of law and because resolution of the special-contribution point would require further factual inquiry, the Court declined to entertain this ground and held that no substantial question of law on that point was presented in the appeal.
Disposition based on the analysis: Taking the foregoing together, the Court found no basis to set aside the findings below as to the Maintenance Section being a factory and found that the Corporation's recovery of contributions from the date the Maintenance Section became a factory was permissible. The preliminary objection under Section 82(2) was overruled.
Holding and Implications
Holding: The Court DISMISSED the Letters Patent Appeal and CONFIRMED the judgment of Chinnappa Reddy, J., thereby upholding the decision that the Employer's Maintenance Section was a factory for the relevant earlier period and that the Corporation could recover the contributions it had demanded from the date the Maintenance Section became a factory (the opinion records the date found below as 20 April 1966). The Employer was ordered to pay costs.
Implications:
- Direct effect on the parties: The Employer's appeal was dismissed and the Employer remains liable to the Corporation for contributions for the period determined to be the date from which the Maintenance Section was a factory. The findings of fact of the Employees' Insurance Court and the single Judge were not disturbed.
- On procedure: The Court held that in the absence of an express statutory bar or finality language in Section 82, a Letters Patent Appeal under clause 15 is competent where the High Court's own practice permits, and Section 82(2) does not by itself make the High Court's decision final against further review by Letters Patent.
- No broader or new legal precedent was fashioned by the Court on the merits beyond its application of existing authorities and the statutory definitions; the Court declined to decide the separate question regarding special contributions under Section 73-A because that issue had not been ventilated below and would require further factual inquiry.
Obul Reddi, J.:— This Letters Patent Appeal preferred by the Southern Roadways Private Ltd., by its Manager, Vijayawada, hereinafter referred to as the ‘Employer’, is directed against the judgment of our learned brother, Chinnappa Reddy. J., allowing the appeal preferred by the Employees State Insurance Corporation hereinafter referred to as the ‘Corporation’ against the order of the Employees' State Insurance Court in Case No. 1 of 1969 dated May 30, 1970 allowing the application filed by the Employer under Section 75(g) of the Employees' State Insurance Act, 1948, hereinafter referred to as the ‘Act’.
2. Mr. Kannabhiran, the learned Counsel appearing for the appellant (Employer), assailed the judgment of our learned brother mainly on two grounds: (1) It is not open to the Corporation (respondent) under the provisions of the Act, to levy and collect either special contributions or employees' contributions without the Corporation first covering the employees of the Employer's establishment for the various benefits that they are entitled to under the provisions of the Act, and (2) there is no warrant for the conclusion reached by the learned Judge that the Maintenance Section of the Employer at Vijayawada was a factory within the meaning of that expression even prior to April 1, 1968. Mr. I.A Naidu, appearing for the Corporation while relying upon the findings recorded by our learned brother also raised a preliminary objection that a Letters Patent Appeal does not lie in view of the bar under Section 82(2) of the Act.
3. It may, therefore be convenient, in the first instance, to consider the objection raised by the learned Counsel for the Corporation whether sub-section (2) of Section 82 of the Act bars an appeal under clause 15 of the Letters Patent. Section 82 of the Act may now be read:
“82. (1) Save as expressly provided in this section, no appeal shall lie from an order of an Employees' Insurance Court.
(2) An appeal shall lie to the High Court from an order of an Employees' Insurance Court if it involves a substantial question of law.”
4. There is no prohibition of a further or second appeal in Section 82 of the Act, as we find in Section 39(2) of the Arbitration Act or Section 47(2) of the Jagirdars Debt Settlement Act. We may, therefore, read the relevant provisions of Section 39 of the Arbitration Act and Section 47(2) of the Jagirdars Debt Settlement Act, respectively:
“39(1) An appeal shall lie from the following orders passed under this Act (and from no others) to the Court authorised by law to hear appeals from original decrees of the Court passing the orders:—
An order:—
(i) superseding an arbitration;
(ii) On an award stated in the form of a special case;
(iii) Modifying or correcting an award;
(iv) filing or refusing to file an arbitration agreement;
(v) staying or refusing to stay legal proceedings where there is an arbitration agreement;
(vi) setting aside or refusing to set aside an award:
Provided that the provisions of this section shall not apply to any order passed by a Small Causes Court.
(2) No second appeal shall lie from an order passed in appeal under this section, but nothing in this section shall affect or take away any right to appeal to the Supreme Court.”
“47 (2) Notwithstanding anything contained in any other law, an appeal from the Board shall lie to the High Court.”
5. Sub-section (3) of Section 47 bars a further appeal and it reads:
“No second appeal shall lie against any decision, order or award of the Board under this Act.”
6. A scrutiny of the provisions of the Jagirdars Debt Settlement Act and the provisions of the Arbitration Act would reveal that there is a specific bar in so far as preferring a second appeal not in the sense of a second appeal under Section 100, Civil Procedure Code, but in the sense of a further appeal numerically against the judgment of the High Court which is empowered to hear only an appeal. It is for that reason Shah, J., (as he then was) said in Union Of India v. Mohindra Supply Co. (1), that:
“Under Section 39(1), an appeal lies from the orders specified in that sub-section and from no others. The legislature has plainly expressed itself that the right of appeal against orders passed under the Arbitration Act may be exercised only in respect of certain orders. The right to appeal against other orders is expressly taken away. If by the express provision contained in Section 39(1), a right to appeal from a judgment which may otherwise be available under the Letters Patent is restricted, there is no ground for holding that Clause (2) does not similarly restrict the exercise of appellate power granted by the Letters Patent. If for reasons aforementioned the expression ‘second' appeal’ includes an appeal under the Letters Patent, it would be impossible to hold that notwithstanding the express prohibition, an appeal under the Letters Patent from an order passed in appeal under sub-section (1) is competent.”
7. In National Sewing Thread Co. Ltd. v. James Chadwick and Brothers (2), Mahajan, J. (as he then was), considered the question whether a decision given by a single Judge of the High Court in an appeal preferred under Section 76 of the Trade Marks Act constituted a judgment within the meaning of Clause 15 of the Letters Patent as the competency of an appeal under Clause 15 of the Letters Patent (Bombay) was questioned. Section 76(1) of the Trade Marks Act provides:
“Save as otherwise expressly provided in the Act an appeal shall lie, within the period prescribed by the Central Government from any decision of the Registrar under this Act or the rules made thereunder to the High Court having the jurisdiction.”
8. As in the present case that Act too does not provide for a further or second appeal and there was no bar of a second appeal as in the case of the Arbitration Act and the Jagirdars Debt Settlement Act, the learned Judge repelling the argument advanced that an appeal cannot be filed invoking Clause 15 observed:
“Ordinarily after an appeal reaches the High Court, it has to be determined according to the rules of practice and procedure of that Court and in accordance with the provisions of the Charter under which that Court is constituted and which confers on it power in respect to the method and manner of exercising that jurisdiction. Thus Section 76, Trade Marks Act, confers a rght of appeal to the High Court and says nothing more about it. That being so, the High Court being seized as such of the appellate jurisdiction conferred by Section 76 it has to exercise that jurisdiction in the same manner as it exercises its other appellate jurisdiction and when such jurisdiction is exercised by a single Judge, his judgment becomes subject to appeal under clause 15 of the Letters Patent, there being nothing contrary in the Trade Marks Act.”
9. This decision is on all fours with the present case for the reason that there is nothing in the Act which prohibits a further or second appeal against the order of a single Judge, making the appeal filed under sub-section (2) of Section 82 of the Act final. Chief Justice Subba Rao in South Asia Industries (P.) Ltd. v. Sarup Singh (3). dealing with the provisions of the Delhi Rent Control Act with reference to a judgment of a single Judge of Punjab High Court observed:
“A statute may give a rght of appeal from an order of a tribunal or a Court to the High Court without any limitation thereon. The appeal to the High Court will be regulated by the practice and procedure obtaining in the High Court. Under the rules made by the High Court in exercise of the powrs conferred on it under Section 108 of the Government of India Act, 1915 an appeal under Section 39 of the Act will be heard by a single Judge.”
10. The learned Chief Justice also considered the meaning of the expression ‘final’ and observed:
“The expression ‘final’ prima facie connotes that an order passed on appeal under the Act is conclusive and no further appeal lies against it. The last sentence in Section 43 of the Act, does not restrict the scope of the said expression; indeed, the said sentence imposes a further bar. The expression ‘final’ in the first part of Section 43 of the Act puts an end to a further appeal and the words ‘shall not be called in question in any original suit, application or execution proceeding’ bar collateral proceedings. The section imposes a total bar. The correctness of the judgment in appeal cannot be questioned by way of appeal or by way of collateral proceedings”.
11. No where is the expression ‘final’ used in Section 82 of the Act for us to hold that finality has been given to any ‘judgment’ rendered by a single Judge of this Court. To the same effect is the decision in Collector, Varanasi v. Gauri Shanker (4). Dealing with the scope of Sections 19(1)(b) and 19(1)(f) of the Defence of India Act (1939) Hegde, J., observed that;
“Appeals under that provision have to be disposed of just in the same manner as other appeals to the High Court. Obviously after the appeal has reached the High Court it has to be determined according to the rules of practice and procedure of that Court. The rule is well settled that when a statute directs that an appeal shall lie to a Court already established then that appeal must be regulated by the practice and procedure of that Court.”
12. It is needless to say that when there is no bar or prohibition imposed by the Legislature regarding a further or second appeal to this Court, the question whether any further appeal lies or not, has to be determined according to the rules of practice and procedure of that Court. Therefore, we overrule the preliminary objection and hold that an appeal, under clause 15 of the Letters Patent, lies to this Court.
13. It is now to be considered whether the respondent Corporation is entitled to recover special contributions and employees' contributions without coverage of risk for the period prior to April 1, 1968. According to Mr. Kannabhiran, the number of workmen that the employer had employed in the Maintenance Section prior to April 1, 1968, was less than 20 and therefore the provisions of the Act do not apply to the period prior to April 1, 1968, so as to make the employer liable to make the contributions. In support of this contention, he relies upon the fact that the employer made an application in the prescribed form for registration only from the date he employed 20 or more workmen and that when he was not running any ‘factory’ within the meaning of Section 2(12) of the Act no demand can be made by the Corporation from the employer for contributions prior to that date. We may therefore notice the relevant provisions of the Act. Sub-section (9) of Section 2 defines an ‘employee’; and to the extent material, it reads:
“‘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.”
14. Section 2(12) defines ‘factory’ in these terms:
“‘factory’ means any premises including the precincts thereof whereon twenty 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 but does not include a mine subject to the operation of the Mines Act, (XXXV of 1952), or a railway running shed;
The expressions ‘manufacturing process’ and ‘power’ shall have the meanings respectively assigned to them in the Factories Act (LXIII of 1948).”
15. It is the case of the learned Counsel for the appellant that even those who were not incidentally connected with the work of the Maintenance Section have been included in the category of employees and therefore the Employee Insurance Court was wrong in treating the Maintenance Section of the employer as a ‘factory’. In other words, it is his case that the Corporation will have no jurisdiction to ask for and collect contributions unless there were 20 or more persons working in the Maintenance Section. Whether there were 20 or more persons employed by the employer prior to April 1, 1968 and whether the persons employed in the factory were ‘employees’ within the meaning of Section 2(9) are mixed questions of fact and law which have to be determined having regard to the material placed before the Court. The Employees Insurance Court, as may be seen from its order, examined a representative of the employer as P.W 1 and on the basis of what he stated before it, it held that the Maintenance Section of the employer was a ‘factory’ within the meaning of that expression. The objection of Mr. Kannabiran to the finding is that that Court had taken into consideration persons who were not working in the Maintenance Section and whose employment was not incidental or preliminary to or connected with the work of the factory. According to him, it is by a curious or fallacious process of reasoning, because all the persons employed by the employer work in the same premises and not in separate buildings, that the Employees Insurance Court came to the conclusion that they were all employees employed in the ‘factory.’ Whether a particular concern is a ‘factory’ or not depends not on the question whether all the workmen work in the same compound irrespective of the nature of the jobs unconnected with their employment in it, but whether the workmen are engaged in connection with the manufacturing process of the same concern, whether it be in one building or several or separate buildings. As pointed out by a Division Bench of the Madras High Court consisting of Rajagopalan and Ramachandra Iyer, JJ., in E.S.I Corporation v. Sriramulu Naidu (5), the question for consideration should be whether ‘both the premises were part of a single establishment or factory’. The Employees Insurance Court obviously has taken into consideration not only the fact that all the employees work in the same premises but alsoo the nature of the work connected with the factory before it recorded the finding that the Maintenance Section of the employer at Vijayawada was a ‘factory’ within the meaning of the Act even prior to April 1, 1988. This finding of fact was affirmed by our learned brother though it was observed by him that though the argument of the learned Counsel ‘sounds reasonable’. While dealing with the question whether the provisions of the Act apply to a particular employer, we have to go by the definition of ‘factory’ and see whether the persons who work there are employees within the meaning of that expression. We do not find anything from the order of the Employees Insurance Court to suggest that any of those who were held to be employees were doing any work other than the work connected with the Maintenance Section. It is enough if the work turned out by them in incidental or preliminary to the manufacturing process or connected with that process. Further, it should be remembered that an appeal to this Court under sub-section (2) of Section 82 lies only if it involves a substantal question of law. We are, therefore, unable to hold that any substantial question of law is involved in regard to the contention put forth by the learned Counsel apart from the fact that the findngs of fact arrived at by our learned brother and the Employees Insurance Court cannot be assailed in this Letters Patent Appeal. It is next to be seen whether the Corporation can recover the contributions which it has chosen to levy and demand from April 20, 1968, i.e, a date anterior to the date of registration of the factory. The relevant provisions to be noticed in this connection are these: Section 1(4) of the Act makes it applicable to all factories including factories belonging to the Government other than seasonal factories. This Act has been enacted in case of sickness, maternity and employment injury and to make provisions for certain other matters in relation thereto. Chapter IV of the Act deals with contributions. It makes it obligatory that all employees in factories should be insured in the manner provided by the Act. Contributions are payable both by the employee and the employer to the Corporation at the rates specified in the First Schedule. An obligation is cast on the employer to deduct contributions payable by the employees from their wages and himself pay his contribution as specified in that schedule. The method and payment of contribution is regulated by the Regulations made under the Act. The employers are required to furnish returns and maintain registers in certain cases. The provisions of Chapter IV cast a duty only on the employer not only in respect of payment of the contributions payable by himself but also by the employees. No obligation is cast on the employee as such regarding payment except that whatever contribution he has to make has to be deducted at source by the employer and paid to the Corporation.
16. It is argued by Mr. Kannabiran that when there is nothing to suggest that any employee had received any payment or any benefit prior to April 1, 1968, it is not open to the Corporation to ask for contributions. The question here is not whether the employee received any benefit of any payment, but whether the employer is liable to make contributions from the date his establishment or concern became a ‘factory’ within the meaning of that expression in Section 2(12). The obligation to make contributions is not dependent upon the fact whether the employees received any payment or benefit or not, but it is peremptory on the part of the employer, when once he employs 20 or more workmen, to make contributions in the manner provided in Chapter IV. He cannot escape his liability on the ground that the workmen did not receive any payments or benefit or that he had not chosen to deduct at source the contribution payable by the employees. When the Act prescribes a particular mode and manner of payment of contributions by the employers, there should be compliance with those requirements. The employee in a factory is entitled to receive benefits of the insurance and there is nothing in the Act which says that if an employer does not contribute as required under Chapter IV, the employee will be denied all the be???fits clue to him under Chapter V. We are only trying to stress the point that the benefits to which the employees are entitled to have nothing to do with the liability of the employer to make contributions. It cannot be said that if an employer falls in arrears in making payments towards contribution, the employees in factories or establishments will not be entitled to the benefits tinder Chapter V. Section 2-A of the Act is a mandatory provision and it requires that every factory or establishment to which it applies shall be registered wtihin such time and in such manner as may be specified in the regulations made in this behalf. Regulation 10-B insists upon the employer in respect of a factory or an establishment to furnish to the concerned Regional Office a declaration of registration in the prescribed form. Benefits due to the employees cannot be denied to them by the mere fact that there was delay in the registration of the factory or establishment or that the factory was registered only after the Corporation found that the employer was running a factory.
17. Mr. Kannabiran placed great reliance on a judgment of single Judge Jagadisan, J., of the Madras High Court in K.R Subbaier… v. The Regional Provident Fund Commissioner, Madras…., Madras (6) in support of his contention that the right to recover contribution from a date anterior to the date of registration does not exist. That was a case where a writ of mandamus or an appropriate writ was sought under Article 226 of the Constitution against the Regional Provident Fund Commissioner. The factory concerned in that case was started in 1942 for the purpose of manufacturng tapes for insulation, lamp wicks, braided cords etc. The Regional Provident Fund Inspector issued a notice to the petitioner therein asking for contribution of the employer's share on the ground that the factory came within the ambit of the scheme framed under the provisions of the Employees' Provident Funds Act 1952. The claim of the Provident Fund Inspector was assailed by the factory owner after he failed to get any favourable reply from the Ministry of Labour and Employment by filing a writ petition. The learned Judge referred to the provisions of the Employees' Provident Funds Act and observed thus:
“The gist of these provisions is such as to make them operative only on and from the point of time when the authorities hold that a particular unit is within the ambit of the Act and make a consequential demand in terms of the Act and the scheme. Any demand for a back period appears to be not merely illogical and oppressive, but plainly inconsistent with the terms of the enactment, which are manifestly prospective in their operation. There is no duty laid on the Court to yield to absurd construction of statutes”.
18. In the case on hand, it has been found by the Employees Insurance Court and by our brother that the Maintenance Section run by the employer was a ‘factory’ within the meaning of Section 2(12) from April 20, 1966. The fact that the employer chose to make an application in the prescribed form about two years later will not help him if on April 20, 1966, there were more than 20 employees working in that particular section. The crucial date for the applicability of the provisions of the Act is the date on which the Maintenance Section has been held to be a ‘factory’ and not the date when the employer chose to make an application for registration as a factory. We, therefore, do not think that what was expressed by Jagadisan, J. in Subbaier's case (), renders any assistance; for, the Corporation is not asking for contributions from any date prior to the date when the Maintenance Section became a factory.
19. Another decision on which reliance was placed by the learned Counsel for the appellant is Stonewara Pipes (Madras) Ltd. v. Union Of India (7). A Division Bench of the Madras High Court consisting of Veeraswami, C.J and Gokulakrishnan, J., were considering the provisions of the Emergency Risks (Factories) Insurance Act, 1962 and also the date from which the liability to pay insurance premium arises. On the facts presented in that writ petition, it was held:
“The liability to pay premium evaded arises only on its determination and a demand being made on the defaulter. Where, therefore, proceedings for determination of premium evaded and for its recovery have been taken under Section 11 of the Act after expiry of Act, those cannot be saved under Section 1(3), as those are not in respect of liability incurred or right accrued prior to repeal contemplated by Section 6 of General Clauses Act. The phraseology that expiry of Act shall not affect anything done or omitted to be done is also not helpful to save the proceedings as that phraseology will be apposite to things completed either by a positive act or by an omission before expiry of the Act”.
20. That was a case where prosecution was launched for alleged failure of insurance premiums. The Central Government had to determine the premium evaded by the party. The question that arose was whether the proceedings for determination of the unpaid premium and its recovery were taken after the expiry of the Act, and it was answered that the proceedings were initiative after the expiry of the aforesaid Act. It was, therefore, held that the proceedings for recovery of the unpaid premium are not saved by Section 1(3). Here no recovery is sought to be made on the basis of any Act after the expiry of that Act. The Act provides for recovery of contributions under Section 45-A(2) as if it were an arrear of land revenue. The demand for contribution is no doubt made after the factory was registered on the application of the employer. But that makes no difference so far as payment of contributions is concerned. What has to be seen is not when the employer made an application for registration; but, as already adverted to by us, the date on which the Maintenance Section became a ‘factory’ within the meaning of that expression. The date when it became a factory is the relevant date: for, it is from that date that the employees would be entitled to all the benefits under Chapter V.
21. Insurance on the part of employees is made compulsory. ‘Insured person’ in Section 2(14) of the Act is defined to mean.
“a person who is or was an employee in respect of whom contributions are or were payable under this Act and who is, by reason thereof, entitled to” any of the benefits provided by this Act”.
22. This definition makes it clear that every employee in respect of whom contributions are payable is entitled to the benefits under Chapter V. Even a former employee also is brought within the definition of an ‘insured person’. Chapter II of the Regulations framed under the Act deals with collection of contributions and other connceted matters. Regulation II makes it obligatory on the part of the employer to require every employee in his establishment to furnish particulars in the form prescribed. It reads:
“The employer in respect of a factory or an establishment shall require every employee in such factory or establishment to furnish and such employee shall on demand furnish to him either before or on the appointed day correct particulars required for the purpose of Form I (hereinafter referred to as the Declaration Form). Such employer shall enter the particulars in the Declaration Form including the temporary Identification Certificate, and obtain the signature on the thumb impression of such employee and also complete the form as indicated thereon”.
Regulation 13 deals with the preparation of contribution cards. The obligation to prepare a contribution card is also laid on the employer. It says:
“The employer shall prepare a contribution Card in Form 2, in respect of every employee in his employment on the appointed day or who is taken into employment after that day, including those who produce an Identity Card and in respect of whom no fresh Declaration Form is prepared”.
Regulation 14 further provides:
“The employer shall send to the appropriate Office by registered post or messenger, all Declaration Forms without detaching the temporary identification certificate prepared under these regulations together with a return in duplicate in Form 3 on or before the Saturday following the end of the week in which the particulars for the Declaration were furnished”.
23. Regulation 15 deals with allotment of Insurance Numbers and it says:
“On receipt of the return required under Regulation 14, the appropriate Office shall promptly allot in Insurance Number to each person in respect, of whom the Declaration Form has been received unless it finds that the person had already been allotted an Insurance Number. The Temporary Identification Certificate with Insurance Numbers marked thereon shall be detached and returned to the employer along with one copy of Form 3. The employer shall deliver the Temporary Identification Certificate to the employee to whom it relates after obtaining his signature or thumb-impression thereon except in the case of an employee to whom a certificate of employment has been issued under Regulation 17-A. The Insurance Number allotted by the Regional Office to an employee and indicated ???n the copy of Form 3 returned to the employer, shall be entered by the employer on the contribution card such employee.”
24. Regulation 16 also says that an employer shall render all necessary assistance which the Corporation may reequire in connection with the registration of his employees and specially for photographing such employees and affixing the photographs to the identity cards. These Regulations make it very clear that it is the employer that should take the initiative in the matter of obtaining declarations from the employees in regard to contributions, preparation of contribution cards and allotment of Insurance Numbers. If the employer had failed to take such steps which have to be taken by him under Regulations, he cannot put the blame at the door of the employees and say that they have not obtained identity cards or were not allotted Insurance Numbers prior to April 1, 1968 and therefore they were not entitled to the benefits under the Act anterior to the date of registration or that they had not received benefits under the Act and therefore there is no liability on his part to make the contributions.
25. Another argument advanced by Mr. Kannabiran, relying upon a Division Bench decision of this Court in W.P Nos. 2382, 2914 and 2564 of 1968 decided on December 16, 1971, is that no amenities have been provided or benefits given to the employees in the Maintenance Section of the appellant's establishment so as to entitle the Corporation to levy or demand special contributions under Section 73-A of the Act. Gopal Rao Ekbote, J. (as he then was) observed there:
“We are thus clear in our mind that all the three grounds on which levy of special contribution under Section 73-A from the factories, whose employees do not get any kind of service or benefit under the Act is sought to be justified, are not tenable and therefore fee cannot be validly recovered from such factories. Since the petitioner's factory employees are not receiving any service and as no benefits are conferred upon the employees of the petitioner's factory, the petitioner companies cannot be required to pay the fee in the nature of special contribution under Section 73-A.”
26. There is nothing to suggest from the order of the Employees Insurance Court or from the judgment of our learned brother that any argument was advanced before them on the ground that the employees did not get any kind of benefit or service and as such, no special contribution can be asked under Section 73-A of the Act. It is true, as stated by Mr. Kannabiran, that two items of special contribution payable by the employer are questioned here. But it does not appear from the facts appearing in the order of the Employees Insurance Court that the witness examined by the employer referred to those items or stated before it on what grounds the Corporation is not entitled to ask for special contributions. There is nothing in the judgment of our learned brother to indicate that his attention was invited to the special contributions which were demanded by the Corporation. We are, therefore, not prepared to go into this question which was not adverted to by our learned brother or by the Employees Insurance Court and raised for the first time before us as it requires further enquiry into facts. We cannot, having regard to the provisions of Section 82(2) of the Act, enquire into disputed questions of fact as that provision clearly says that an appeal lies to this Court only when a substantial question of law is involved. We also feel that no substantial question of law is involved regarding the special contributions payable by the employer to the Corporation. For the reasons recorded above, we confirm the judgment of o???r learned brother and dismiss the Letters Patent Appeal with costs.
27. Letters Patent.
28. Appeal dismissed.
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