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Citation Codes
Equivalent Citations
citation codes
Case Number
Attorney(S)
Judges
Acts
  • S. 2(d) of the Working Journalists (Conditions of Service) and Miscellaneous Provisions Act, 1955 (45
  • S. 75 of the Employees' State Insurance Act, 1948 (hereinafter called the Act),
  • PUNJAB SHOPS AND COMMERCIAL ESTABLISHMENTS ACT 1958
  • S. 2(1)(p) of the Punjab Trade Employees' Act, 1940.
  • S. 2(k)(i) of the Factories Act
  • FACTORIES ACT 1948
  • S. 2(k) of that Act
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Cites
Cited by
Citation Codes
Equivalent Citations
citation codes
Case Number
Attorney(S)
Judges
Acts
  • S. 2(d) of the Working Journalists (Conditions of Service) and Miscellaneous Provisions Act, 1955 (45
  • S. 75 of the Employees' State Insurance Act, 1948 (hereinafter called the Act),
  • PUNJAB SHOPS AND COMMERCIAL ESTABLISHMENTS ACT 1958
  • S. 2(1)(p) of the Punjab Trade Employees' Act, 1940.
  • S. 2(k)(i) of the Factories Act
  • FACTORIES ACT 1948
  • S. 2(k) of that Act
Smart Summary

Factual and Procedural Background

National Service and Petrol Pump filed an application under S. 75 of the Employees' State Insurance Act, 1948, before the Employees' Insurance Court, Chandigarh, challenging the extension of the Act to their establishment by the Employees' State Insurance Corporation. The petitioner contended that it operated two independent businesses—a petrol sale and a motor car repair service—with fewer than ten employees each, thus falling outside the Act’s applicability. Alternatively, they argued that even if employees were combined, the total was below twenty and the Act would not apply as no manufacturing process was involved, referencing Notification No. 10102-SA-1-II-76/10308 dated 30 August 1976. The Corporation opposed, asserting the businesses were conducted on the same premises with a single power connection, thus employees should be clubbed, exceeding ten employees, and that a manufacturing process was involved. The Employees' Insurance Court dismissed the application, holding the Act applicable. The petitioner appealed this order.

Legal Issues Presented

  1. Whether the two businesses operated by the petitioner can be considered separate for the purpose of counting employees under the Act.
  2. Whether the activities carried on by the petitioner constitute a "manufacturing process" under the Act and the Factories Act, 1948, thereby attracting the Act.
  3. Whether the establishment qualifies as a "shop" under serial (3) of the relevant notification, making the Act applicable if twenty or more employees are engaged.
  4. Whether the Employees' State Insurance Act applies to the petitioner’s establishment given the number of employees and nature of the business.

Arguments of the Parties

Appellant's Arguments

  • The two businesses (petrol sale and motor repair service) are independent and can be treated separately, each having fewer than ten employees, thus falling outside the Act’s scope.
  • Even if employees are clubbed, the total is fewer than twenty, and since no manufacturing process is involved, the Act should not apply.
  • The business does not fit within any category of manufacturing process as defined by the Factories Act, 1948.
  • The establishment does not fall under serial (3) of the notification as a “shop.”

Respondent's Arguments (Corporation)

  • The petrol pump and service station are operated on the same premises with a single power connection, so employees must be clubbed together.
  • The combined number of employees exceeds ten, making the Act applicable.
  • The petrol pump involves a manufacturing process as it includes pumping of oil, which is covered under the Factories Act.
  • The service station’s repair activities fall within the definition of manufacturing process under the Factories Act.
  • The establishment qualifies as a "shop" under serial (3) of the notification, making the Act applicable if twenty or more employees are engaged.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Employees' State Insurance Corporation v. Triplex Dry Cleaners [F.A.O No. 405 of 1978, dated 22 October, 1981 (1983 I L.L.N 676)] Definition of “manufacturing process” requiring a new marketable commodity to come into existence after the process. Applied to hold that repair of motor vehicles is not a manufacturing process as no new marketable commodity is produced.
Ram Chander v. State [A.I.R 1963 Punj. 148] Definition of “shop” as premises where goods are bought or sold or services rendered to customers. Applied to hold the petrol pump and service station premises qualify as a “shop” under the notification.

Court's Reasoning and Analysis

The court first considered whether the petrol pump and service station could be treated as separate businesses for counting employees and found that since both businesses operated on the same premises with one power connection, they were not separate concerns. Next, the court examined if the activities constituted a “manufacturing process” under the Employees' State Insurance Act and the Factories Act, 1948. It noted that while pumping of oil is defined as a manufacturing process, selling petrol or diesel at a petrol pump does not amount to pumping oil in the statutory sense, as the core business is sale, not pumping from the source. Regarding the service station, the court referred to precedent and the statutory definition, holding that repair work does not qualify as a manufacturing process since it does not produce a new marketable commodity. The court then turned to serial (3) of the notification which applies to shops and similar establishments with twenty or more employees. It found that the premises qualified as a “shop” because they carried on trade and rendered services. However, since the total number of employees was less than twenty, the Act was not applicable. The court declined to decide on the separate business contention, leaving it open for future consideration.

Holding and Implications

The appeal is allowed, the order of the Court below is set aside, and the application filed by the appellant under S. 75 of the Employees' State Insurance Act, 1948, is allowed. It is held that the appellant-firm is not covered by the Act and the demand made by the Corporation is illegal and cannot be sustained. If the Corporation has already recovered any amount, the appellant is entitled to a refund. The parties are directed to bear their own costs. No new precedent was established beyond the direct effect on the parties.

    National Service Centre And Petrol Pump, Chandigarh (By Bhag Singh, Proprietor) v. Employees' State Insurance Corporation, Chandigarh

    1. National Service and Petrol Pump filed an application under S. 75 of the Employees' State Insurance Act, 1948 (hereinafter called the Act), before the Employees' Insurance Court, Chandigarh, to challenge the action of the Employees' State Insurance Corporation (hereinafter called the Corporation), extending the Act to their establishment. They pleaded that it was carrying on two independent businesses, one of sale of petrol, etc, and the other of running a service station for repair of motor cars, etc., and each of the two businesses could be carried on independently and the one was not so inter-dependent on the other that the one could not be carried on without the other. Taking the number of employees of the two businesses separately, they were below ten and, therefore, the provisions of the Act were not applicable to them. In the alternative it was pleaded that even if the employees of both the businesses were clubbed together, they were below twenty and since the petitioners were not carrying on any manufacturing process, yet the Act cannot be made applicable to it because the Act becomes applicable to such defined establishments where twenty or more persons are employed in view of serial (3) of Notification No. 10102-SA-1-II-76/10308, dated 30 August, 1976, published in Chandigarh Administration Gazette (Extraordinary), dated 30 August, 1976.

    2. The matter was opposed by the Corporation and their stand was that the petitioner was carrying on manufacturing process where one power connexion was fitted and, therefore, the minimum number of employees required for making the Act applicable was ten. It was also the stand of the corporation that the business of petrol pump and of service station was carried on in the same premises and, therefore, the employees of both the concerns had to be clubbed together to find out the applicability of the Act and since the number of employees was more than ten, therefore, the Act was clearly applicable.

    3. This matter was considered by the Court below. It came to the conclusion that admittedly the petrol pump and service station were carried on in one and the same premises having one power connexion and since they were not separate concerns and had employed more than ten persons, therefore, the Act was applicable. Vide order, dated 30 October, 1979, the application filed by the business concern was dismissed. This appeal is from the aforesaid order.

    4. Assuming for the sake of argument that the employees working in the petrol pump and in the service station can be clubbed together, the total number of employees in this case is more than ten but less than twenty. Therefore, the first question to be determined on these premises would be whether any of the two types of businesses carried on in this case can be called to be a “manufacturing process” so as to attract the Act by virtue of serial (3) of the aforesaid notification. In the Act, S. 2(12) defines “factory” which has reference to manufacturing process and the expression “manufacturing process” has got the same meaning as assigned in the Factories Act, 1948. A reading of the definition of manufacturing process contained in S. 2(k) of that Act would show that pumping of oil is one of the manufacturing processes. Whether selling of petrol or diesel at a petrol pump can be called a process of pumping of oil would again be a question to be gone into. A perusal of the definition shows that the process of pumping of oil, water, sewage or any other substance has also been defined to be a manufacturing process but to my mind this would not include dealership of petrol or diesel. It is true that some pumping process is involved because petrol and diesel is stored by the petrol dealers in huge tanks but the underlying object of the definition seems to be the pumping of oil from refineries or water from underground the earth and so on. Essentially, the business carried on by a petrol pump dealer is to sell petrol or diesel, as the case may be, and not pumping the oil. I am, therefore, of the firm view that selling of petrol or diesel by a petrol dealer will not be a “manufacturing process.”

    5. As regards service station for repairing motor cars, etc., the counsel for the Corporation wants it to be brought within the definition of “manufacturing process” as per S. 2(k)(i) of the Factories Act wherein the word “repairing” has been used. But this word has to be read along with the words “any article or substance with a view to its use, sale, transport, delivery or disposal” coming thereafter. So, the process of repairing has to be with any of these views which would be completely missing in the business carried on in this case. This matter was dealt with by me in detail in Employees' State Insurance Corporation v. Triplex Dry Cleaners [F.A.O No. 405 of 1978, dated 22 October, 1981—since reported in 1983 — I L.L.N 676] (current issue), wherein the process of dry cleaning was sought to be included within the definition of “manufacturing process” because the definition included the words “washing and cleaning” In that case, I recorded the finding that unless a new marketable commodity comes into being after the process and can be used, sold, transported, delivered or disposed of, the process cannot be called a manufacturing process. The same reasoning would apply in the present case. Customers bring their vehicles and after repair, etc., they pay service charges and take away their vehicles. Therefore, I am of the view that repairing of motor vehicles is also not a manufacturing process.

    6. Once the two types of businesses carried on by the appellant-firm are not found to be “manufacturing process,” serial (1) of the notification will not apply. Admittedly, serial (2) thereof does not apply to the present case and then we are left with serial(3) which is as follows:

    “The following establishments whereupon twenty or more persons are employed, or were employed, for wages on any day of the preceding twelve months, namely:

    (i) hotels;

    (ii) restaurants;

    (iii) shops;

    (iv) road motor transport establishments;

    (v) cinemas including preview theatres; and

    (vi) newspaper establishments as defined in S. 2(d) of the Working Journalists (Conditions of Service) and Miscellaneous Provisions Act, 1955 (45 of 1955).”

    According to the appellant, his case will not fall under serial (3) but the counsel for the Corporation respondent states that it will fall under item (iii) of serial (3) of the notification because if the business of the appellant is not a manufacturing process it is certainly an establishment where either petrol or diesel is sold or service is rendered to the customers who bring their motor vehicles and the premises in which both these things are carried on would be termed “shop.” I am of the view that the premises in dispute would come within the term shop. “Shop” is not defined in the Act hut is defined in S. 2(xxv) of the Punjab Shops and Commercial Establishments Act, 1958, as also in S. 2(1)(p) of the Punjab Trade Employees' Act, 1940. According to these definitions “shop” means any premises where any trade or business is carried on or where services are rendered to customers and includes offices, store-rooms, godowns or warehouses, whether in the same premises or otherwise, used for such trade or business. As I have already found, the appellant-firm being engaged in the dealership of petrol/diesel besides rendering services for repairing automobiles, the premises in dispute would certainly be a shop. This view of mine finds support from a Full Bench judgment of this Court in Ram Chander v. State [A.I.R 1963 Punj. 148], wherein it was observed:

    “Hence the question arises, what then is a shop? This phrase as understood by a common man denotes nothing more and nothing less than a premises where goods are bought or sold. Where their price is paid or is to be paid, that is, the purchase or sale is either on cash or credit basis. It cannot be said that when goods are being sold to customers, no service is being rendered. Most likely, this additional element has been specifically introduced into the definition of the shop for the reason that there are certain places known as shops, for instance, tinsmith's shop or a mechanic's shop, where services are sold instead of goods, or, may be partly goods are sold and partly services are rendered. It is primarily for this reason that in the definition of shop, in addition to the carrying on of trade or business, another alternative requirement is envisaged, namely, the rendering of services to the customers.”

    But in spite of the fact that serial (3) of the said notification is applicable to the present case, the Act shall not be applicable unless the strength of employees is twenty or more. Since the number of employees in the present case is admittedly less than twenty, the Act would not be applicable.

    7. Since on the aforesaid reasoning, the Act would not be applicable in the present case, I do not propose to enter into the other point raised on behalf of the appellant, namely, that the two businesses run by the appellant-firm are separate and they should not have been clubbed together and the number of employees in each of the two businesses should be twenty or more for making the Act applicable. Accordingly, this point is left open to be gone into whenever the occasion arises therefor.

    8. For the reasons recorded above, this appeal is allowed, the order of the Court below is set aside and the application filed by the appellant under S. 75 of the Act is allowed and it is held that the appellant-firm is not covered by the Act and the demand made by the Corporation is illegal and cannot be sustained. In case the Corporation has already recovered the amount in question as stay was not granted while admitting the appeal, the appellant will be entitled to refund of the same. I order accordingly. Since question of law of importance was involved, the parties are left to bear their own costs of this appeal.

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