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Karnani Industrial Bank, Ltd. v. Ranjan .
Factual and Procedural Background
This appeal arises from an order of the Commissioner for Workmen's Compensation, Bengal, concerning a compensation claim by a workman injured while engaged by a contractor, Kamil Sardar, to install joists in a building on Park Street. The building was being constructed for the Karnani Industrial Bank, which had contracted different persons for various parts of the construction rather than a single builder. The Commissioner awarded the applicant a lump sum compensation of Rs. 514, holding the Karnani Industrial Bank liable under the relevant statute. The appeal challenges the bank's liability based on the interpretation of Section 12 of Act 8 of 1923.
Legal Issues Presented
- Whether the Karnani Industrial Bank, as the principal, is liable under Section 12 of Act 8 of 1923 for compensation to a workman employed by a contractor in carrying out building work.
- Whether the work of putting up joists in a building is "ordinarily part of the trade or business" of the Karnani Industrial Bank, thereby triggering the bank's liability under the statute.
- Whether the Commissioner correctly applied the test prescribed by Section 12 in determining the bank’s liability.
Arguments of the Parties
The opinion does not contain a detailed account of the parties' legal arguments.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Bahia v. The Agent, Or. I.P By, AIR 1929 Bom 179 | Interpretation of Section 12 regarding principal's liability for contractor's workmen. | Referenced to illustrate the Indian judicial approach to the meaning of Section 12. |
| Skates v. Jones & Co., 1910 2 KB 903 | Work must be ordinarily part of the principal's trade or business to impose liability under corresponding English statute. | Used to emphasize that liability arises only if the work is ordinarily part of the principal’s business, supporting remand for factual determination. |
Court's Reasoning and Analysis
The court examined the statutory provision of Section 12 of Act 8 of 1923, which imposes liability on a principal who contracts others for work ordinarily part of the principal’s trade or business. The Commissioner had found the bank liable based on the bank’s memorandum of association clause permitting it to construct buildings and the fact that it was undertaking the construction. However, the court clarified that Section 12 requires that the work be ordinarily part of the principal’s trade or business, not merely that the principal is engaged in the work in a particular instance.
The court noted that an ordinary understanding of banking does not include house building as part of its business. The memorandum clause cited was considered insufficient evidence that building construction was ordinarily part of the bank’s business, especially as banks typically contract out such work rather than perform it themselves.
Further, the court referred to English and Indian authorities emphasizing that the principal’s liability depends on whether the work is ordinarily part of their trade or business, a factual question to be determined on evidence. It found that the Commissioner had not properly focused on this test and had misunderstood the nature of the proceedings.
Accordingly, the court remanded the matter for further evidence and a definite finding on whether the bank’s business ordinarily included such construction work, thus requiring the Commissioner to reconsider the bank’s liability in light of the correct legal test.
Holding and Implications
The appeal is allowed and the order of the Commissioner is set aside. The matter is REMANDED to the Commissioner for Workmen's Compensation to determine, based on further evidence, whether the work of putting up joists was ordinarily part of the business of the Karnani Industrial Bank within the meaning of Section 12 of Act 8 of 1923.
The direct consequence is that the bank’s liability for compensation is not established at this stage and requires factual inquiry. No order as to costs was made. The decision does not establish a new legal precedent but clarifies the proper application of Section 12 and the necessity of factual findings regarding the nature of the principal’s business.
Rankin, C.J:— This is an appeal from the order of the Commissioner for Workmen's Compensation, Bengal. The applicant was a workman engaged by one. Kamil Sardar to do the work of putting, up certain joists in a building in Park Street. Kamil Sardar was employed as a contractor by the Karnani Industrial Bank. It appears that the Karnani Industrial Bank was causing this house to be put up and it was getting the house put up by contracting with different people to do different parts of this work. It had evidently not entered into a contract with one builder to do the whole work, but it entered into contracts with particular persons employed in that behalf that particular parts of the work should be done on behalf of the bank. In these circumstances, the applicant having met with an injury by a joist falling on his leg, the commissioner has, fixed the compensation at a lump sum of Rs. 514. Originally, the application was brought against Rai Bahadur Sukhlal Karnani personally but, in view of the written statement, the Karnani Industrial Bank was added as an opposite party and, in the end, the commissioner has made this award against the bank. The matter coming before us, it is pointed out that the liability of the bank depends upon the terms of S. 12, Act 8 of 1923.
2. That section deals with a case where the principal, as it calls him, in the course of or for the purpose of his trade or business contracts with any other person called the contractor for the execution by or under the contractor of the whole or any part of any work which is ordinarily part of the trade or business of the principal.
3. If these conditions are fulfilled, the principal is made liable for compensation to the contractor's men. The first question therefore to which the commissioner had to address his mind was; Is it ordinarily part of the trade or business of this bank to put up joists as a house building operation? Any ordinary notion one has of banking business would lead one prima facie to give a firm answer in the negative to that suggestion. The only evidence that was before the commissioner to satisfy him that it was ordinarily part of the business of this bank to undertake the erection of joists in a house is the circumstance that in the Memorandum of Association of the Limited Company, there is among the thirty-six objects of the usual redundant character one No. 14 which says:
“To build, erect, construct, lay down, enlarge, alter, equip, improve and maintain any offices, buildings, warehouses, godowns factories, wharves, mills, jetties, roadways, tramways, railways.”
4. On the basis and on the basis of the fact that this Dank was building this house, the commissioner found in favour of the applicant saying this:
“It is clear that the bank constructed the house in the course of its business as such bank and it is clear also from paras, 13 and 14 of the Memorandum of Association of the Karnani Industrial Bank Limited that the bank was competent to do so.”
5. I quite agree with the commissioner that these two propositions are both clear; but they are not the tests laid down by S. 12. The general notion of S. 12 is that, if it is ordinarily part of the business of a person to execute certain work, then ordinarily he will do that work by his own servants; he is note to escape liability for any accident that takes place merely by interposing a contractor, the contractor undertaking to do what ordinarily the principal would do for himself. But, if anybody is entitled to say that he is outside that principle if, for example, he went to a builder to build a house for him, I should suppose that body to be a bank which ordinarily would not take house building operations into its own hands at all. Of course, my notion of banking business may not be the same as the notion of the Karnani Industrial Bank. Merely because it is called a bank, I cannot say, as a matter of law, that it has not got this business of a speculative builder or the business of building houses for itself. I cannot say that it is not part of its ordinary business except upon some evidence. It seems rather extraordinary that any person engaged in banking business should go so very far from ordinary banking business, but in the particular circumstances of this case, as neither the parties nor the commissioner appear to have appreciated what the test is in the act, it would only be fair to the applicant to let the matter go back to the commissioner to have this question determined upon evidence if there is any reason to suppose that putting up a house is ordinarily part of business of the bank. I may say here that it is by no means evident to me that Cl. 14 of the Memorandum of Association was intended to entitle the bank to build houses in the sense of building them itself as distinct from getting them built in the ordinary way as one Would expect a bank to do. There is Indian authority upon the meaning of S. 12 in the case of Bahia v. The Agent, Or. I.P By. . AIR 1929 Bom 179. In these circumstancss, this appeal must be allowed, the order of the commissioner must be set aside and the matter must be remanded to him to deal with this question of fact upon further evidence according to law. There will be no order as to costs in this appeal.
Costello, J.:— I agree that this matter should go back for further consideration by the learned commissioner. It is to be observed that the language of S. 12 of Act 8 of 1923 is somewhat more specific than the language used in the corresponding section of the English Act of 1925. That section is S. 6. The words there are:
“Where any person (in this section referred to as the principal) in the course of or for the purposes of his trade or business contracts with any other person (in this section referred to as the contractor) for the execution by or under the contractor of the whole or any part of any work undertaken by the principal, the principal shall be liable to pay any workman employed in the execution of the work any compensation under this Act, etc.
6. So Section 6 of the English Act applies where the work is “undertaken” by the principal. Even so, the English authorities are all one way in this respect: the work must be of a kind which is part of the business or trade of the principal who carries it out. The words of the Indian Statute, as I have said, are even more specific because the section says that the work must be work “which is ordinarily part of the trade or business.” In this connexion I would refer to the case of Skates v. Jones & Co. . 1910 2 KB 903. In that case, the respondents were two shopkeepers. They also kept a billiard saloon. They were minded to join together in running a skating rink. They bought an existing iron structure and made a contract with a person for its removal and re-erection. The applicant, that is to say, the workman while employed on this work by the person with whom the two shopkeepers contracted was injured by accident and in respect of his injuries he claimed compensation from the respondents, that is to say, the two shopkeepers who were the principals. It was held that the work in which the applicant was injured was not undertaken in the course of or for the purposes of the respondents' trade or business and that therefore they were not liable to pay compensation. Also it has been held in English authorities that it as the duty of the arbitrators as is there called, and therefore in India it is the duty of the Commissioner in India, to find as a fact that the work undertaken is so undertaken as part of the ordinary trade or business of the person or persons who are to be put in the position of the principal for purposes of S. 12. Looking at the judgment of the learned Commissioner it does not appear that he has fully directed his mind to the importance of that part of S. 12 because I find that he says at the top of p. 21 of the paper book:
“The learned pleader's argument on behalf of the opposite party No. 2 based on the language of S. 12 does not assist the employer for the present proceedings are not indemnity proceedings.”
7. That observation of the learned commissioner seems to indicate that he has not considered the question of whether or not the erection of the building with which this matter is concerned was ordinarily part of the business of the Karnani Industrial Bank. I agree with my Lord therefore that this matter should be remanded. It is desirable and necessary that there should be a definite finding on that question.
R.K
8. Case remanded.
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