H.L Anand, J.:— This First Appeal under Section 82 of the Employees' State Insurance Act, 1948, hereinafter called ‘the Act’ is directed against the judgment of the Employees' Insurance Court, Delhi, hereinafter called ‘the Court’ in E.S.I Case No. 6/72, by which, on a remand from this Court in an earlier appeal, the Court has held that the appellant employed, during the material period, more than 20 persons including the Karta of the H.U.F which carries on the business of the appellant and was, therefore, liable to pay Its. 570 as employees' contribution on ad hoc basis in respect of the period June 28, 1961 to June 30, 1962.

2. The facts in brief are that the Employees' State Insurance Corporation, hereinafter called ‘the Corporation’ made an application under Section 75(2) of the Act for recovery of Rs. 817 from the appellant as the employees' contribution on ad hoc basis for the period June 28, 1961 to June 30, 1962, which was contested on behalf of the appellant and, after framing issues and recording evidence, the Court came to the conclusion that the appellant was liable to pay Rs. 570 on an ad hoc basis as employees' contribution. The appellant came came up in appeal, being F.A.O No. 44-D/66, and by an order of April 19, 1972, this Court found that the only question involved in the appeal was whether the Karta of the appellant family should or should not be included in the total number of persons for determining if the factory employed 20 or more persons but felt that evidence was insufficient on the records to determine if the said Karta was actively working in the factory. It was a common case of the parties before this Court at that stage that the appellant employed 19 persons. The appeal was accordingly accepted and the matter was remanded to the Court to determine, after recording evidence of the parties, if the Karta was actively working in the factory so aa to cover the factory within the Act and then to compute the liability of the appellant to the employees' contribution on the actual basis. The appellant was directed to file in the Court the cash book and ledger for the relevant period to enable the Court to compute the aforesaid liability on the aforesaid basis.

3. On remand, the Court recorded the evidence of the parties and by the impugned judgment has returned a finding that at least 20 of the employees of the appellant were in attendance on June 28, 1961, and that even if participation of the Karta was ignored the appellant would still be covered under the Act. The Court then proceeded to consider the further question if the participation of the Karta in the factory was so active as to entitle the Court to take that into account for the purpose of determining if the appellant's factory was covered under the Act and returned the finding, on the basis of the evidence placed before it, that the Karta was actively carrying on the business of the appellant. He has, however, not been able to return a finding that the Karta was actively working in any manufacturing process being carried on in the factory. In this context, the Court further considered the question as to the appellant's liability to pay the employees' contribution and after a careful analysis of the books of accounts and other records submitted by the appellant, came to the conclusion that no reliance could be placed on those records and proceeded to determine the liability on an ad hoc basis, as had been done by his predecessor by an earlier order which was challenged in the earlier appeal, and accordingly decreed the claim of the Corporation for Rs. 570 as the employees' contribution. The Court proceeded with the further question as to the liability of the (sic) of the Corporation or of the Karta for being proceeded for perjury but these questions do not survive at this stage. Aggrieved by the aforesaid judgment, the appellant has come up in appeal.

4. Shri H.L Sehgal, the Karta of the family, who has argued the appeal in person, has assailed the judgment on a number of grounds and after hearing Shri Sehgal and the learned counsel for the Corporation, it appears to me that the appeal must be accepted

5. In the first instance, this Court by its earlier order had clearly recorded that it was the common case of the parties that the appellant employed, during the material period, 19 persons and the only two questions posed for determination on remand were, whether the participation of the Karta could be taken into account for the purpose of determining if the factory would be covered under the Act and the amount of the liability of the appellant on account of employees' contribution on the basis of the actual wage bill of the appellant. That being so, it was not open to the Court to proceed to consider the material placed before it with a view to find the actual number of persons employed by the appellant during the material period. In terms of the order of remand that was a closed chapter and the Court had to proceed on that basis. The finding that during the material period, 20 persons were employed by the appellant must, therefore, be set aside. Shri Sehgal contends that even otherwise the determination of the Court that there were 20 persons employed is based on a wrong calculation but in the view that I have taken of the limited power of the Court on remand, it is unnecessary to go into that question. Secondly, it was also a common case of the parties that the appellant maintained the various registers, books of accounts and other records and there was at no stage any allegation that the appellant had failed to maintain these records or to produce the same or to have obstructed any official to inspect the same or to have made default in submitting any return or returns as is required of an employer under the Act and that is why this Court in its remand order had directed computation of the liability of the appellant on account of employees' contribution on an ‘actual basis’ and not on an ad hoc or tentative or notional basis. That being so, it was not open to the Court to proceed to determine the liability on any basis other than the actual basis even though the Court came to the conclusion that certain entries in the registers and books of accounts produced by the appellant justified the conclusion that these had been tampered with or had not been properly or correctly maintained. The determination by the Court, therefore, of the liability of the appellant on an ad hoc basis must, therefore, be set aside.

6. Apart from the limits placed on the scope of the enquiry by this Court by the remand order, the determination of liability on ad hoc basis would even otherwise be unjustified.

7. It is not disputed that the Act makes numerous provisions which enjoin an employer covered by the Act to maintain certain statutory records, certain books of accounts and to submit periodic returns and to furnish information and particulars that may be required of an employer from time to time by the authorities under the Act. It is also not disputed that ordinarily the liability of an employer for the employees' contribution must be based on the records of the employer, that is, on the basis of its wage bill, and therefore, on an actual basis. Section 45-A of the Act, however, empowers the Corporation to determine the liability of an employer on an ad hoc basis only if the conditions of that section are satisfied. The section is in the following terms:

“45-A. (1) Where in respect of a factory or establishment no returns, particulars, registers or records are submitted, furnished or maintained in accordance with the provisions of section 44 or any Inspector or other official of the Corporation referred to in sub-section (2) of Section 45 is obstructed by the principal or immediate employer or any other person, in exercising his functions or discharging his duties under Section 45, the Corporation may, on the basis of information available to it, by order, determine the amount of contributions payable in respect of the employees of that factory or establishment.

(2) An order made by the Corporation under sub-section (1) shall be sufficient proof of the claim of the Corporation under Section 75 or for recovery of the amount determined by such order as an arrear of land revenue under Section 45-B.”

8. I had occasion to consider the true meaning and scope of the aforesaid provisions in the case of Masco (Private) Ltd. v. Employees' State Insurance Corporation, Delhi (1) and had defined the extent of the powers of the authorities under the Act to resort to Section 45-A of the Act for determination of liability on an ad hoc basis. This is how I had put my conclusion:—

“……. Section 45-A on the other hand was merely intended to lay down an alternative method for determination in case no material was made available by the employer to the Corporation and the only reasonable way, therefore, would be to hold that the first condition of Section 45-A of the Act would be satisfied only if the employer neither submitted the returns nor furnished the particulars nor maintained the registers or records required by law. It is equally difficult to hold that even after these returns, particulars, registers or records were submitted, furnished or maintained but did not conform strictly to the norms or were incorrect or incomplete or were discrepant or were otherwise unreliable, the first condition of Section 45-A of the Act would still be attracted. Such an interpretation is also unjustified on the language of the section and it is not possible to read into the provisions the word which do not occur in it. The interpretation sought to be placed on the first part of the section on behalf of the Corporation is, therefore, not possible without committing considerable violence to the language in which the section is couched, which is clearly not permissible.”

9. I am, therefore, of the view that the determination of the liability on an ad hoc basis could be made only if the records are not maintained and there is no material available with the Corporation to determine such liability. What is true of the Corporation must also be true of the Court which is seized of the problem of determination because according to sub-section (1) of Section 75 the Court has to determine liability “in accordance with the provisions of the Act”. If the Court finds that records are maintained, it is not open to the Court to proceed to determine the liability on any notional or ad hoc basis. In such cases the determination must be based on the material available to the Corporation and such further material as may be placed before the Court at the trial or may be requisitioned by the Court for the purpose. The determination by the Court in tne present case on an ad hoc basis cannot, therefore, be supported.

10. The only question that remains to be considered is whether on a correct and true interpretation of the various provisions of the Act and the material offered before the Court, the conclusion of the Court that the participation of the Karta in the business of the appellant should be taken into account is justified or not.

11. On a reference to the impugned judgment, it appears that the Court relied on a decision of the Punjab High Court in the case of Chanan Singh v. Employees' State Insurance Corporation, Amritsar (2), to the effect that in border line cases, the question whether the participation of the principal employer is to be taken into account in determining the total number of persons working in a factory would depend on facts of each case and it must, therefore, be determined in every case whether the principal employer was actively working at the premises in connection with the business. But, in the operative part of the order of this Court it had been observed that ‘his inclusion in the figure of twenty would depend on a finding that he was actively working in the factory.’ If one applies, therefore, the test laid down in the remand order, the conclusion of the Court would not be justified even on its own finding that the Karta was generally supervising the business as a proprietor and attended to the business in the office attached to the factory. The Court has not come to the conclusion that the Karta was in any manner directly participating in any of the processes being carried on in the factory. If the enquiry before the Court was, therefore, confined within the terms of the remand order, and I see no reason why it should not be, it could not be said that the condition imposed in the order for the inclusion of the Karta in the total strength had been satisfied. This is so because there is an obvious distinction between the work in the factory and the work that may be carried on outside the factory whether in the office attached to the factory or in the market or anywhere else; the distinction is quit obvious. The work in the factory consists of the manufacturing process at various stages until the goods are converted from raw material to the finished form and may even extend to the stage where they are properly packed for the purpose of marketing. The operations of the business which are concerned with the maintenance of accounts, marketing of the products, purchase of raw-material and various dealings outside the factory for the purpose of carrying on the business would be distinct from the operations in the factory. There is some support for this proposition in the case of Employees' State Insurance Corporation v. Ganapatia Pillai (3).

12. Be that as it may, it appears to me that even otherwise on the plain language of the definition of the terms ‘employee’ and ‘factory’ and the Scheme as indeed the object of the Act, it is difficult to hold that the Karta's participation in the business of the establishment could be taken into account for the purpose of determining if the factory would be covered by the Act.

13. The Act as its preamble shows, was intended ‘to provide for certain benefits to employees in case of sickness, maternity and employment injury and to make provision for certain other matters in relation thereto’. The benefits are to be provided, inter alia, out of the contributions that are made to fund by the employer as well as the employee in a certain ratio proportion which are laid down by the Act. The Act then provides for a machinery for the computation of benefits, determination of liability and for the recovery from the employer of the employers own contribution and that of the employees contribution which it must deduct out of the wages payable to the employees.

14. Section 1(4) of the Act extends the provisions of the Act to all factories. The term ‘factory’ is defined by Section 2(12) of the Act, as it stood before its amendment in 1966, as meaning ‘any premises including the precincts thereof whereon twenty or more persons are working or were working’.

15. It appears to me that having regard to the object of the Act, the expression ‘persons are working or were working’ in sub-section (12) of Section 2 would exclude the proprietor or the employer himself because the Act was intended for the benefit of the employees and others who may be working there for wages or on a job basis and it is the strength of such persons which should determine if the premises would be a factory within the meaning assigned to the term by the Act, so as to attract its provisions to it. To hold to the contrary would create peculiar anomalies because the employer in one case may be the sole proprietor but in a given case it may mean a large number of persons where there are a number of working partners of a firm.

16. It may be useful at this stage to consider some of the decisions which may be of assistance in determining the true meaning and scope of the expressions ‘persons are working or were working’ employed in sub-section (12) of Section 2 of the Act.

17. In the case of Ellis v. Joseph Ellis and Company (4), the Court of Appeal was concerned with a case in which a partnership had been formed for the purpose of working a mine. By arrangement with his co-partners one of the members of the partnership worked in the mine as a foreman and received wages. While forking as such he met with an accident which proved fatal leading to a claim of compensation by the widow under the Workmen's Compensation Act from the surviving partners. The question arose whether he was a workman or not within the meaning of that Act. Dealing with the question Collins, M.R, observed at page 328 of the report as follows:

“It seems to me that, when one comes to analyse an arrangement of this kind, namely, one by which a partner himself works, and receives sums which are called wages, it really does not create the relation of employers and employed, but, is, in truth, a mode of adjusting the amount that must be taken to have been contributed to the partnership assets by a partner who has made what is really a contribution in kind, and does not affect his relation to the other partners, which is that of co-adventurer and not employee. Such a partner cannot put himself in the position of not being a partner when he is one, or of being a workman employed, when that position would involve that he would be both employer and employee…. It seems to me obvious, when the true position of the deceased is analysed, that he was not such a workman as is contemplated by the Act, and that a person cannot for the purpose of the Act occupy the position of being both employer and employee.”

18. The above case was ???ollowed in In re: Workmen's Compensation of Jaglipathan (5), where it was observed that in order to be a workman within the meaning of the Workmen's Compensation Act, the persons claiming to be a ‘workman’ must be under a contract of service with some other person.

19. In Employees' State Insurance Corporation v. M.A.H Siddique (6), it was observed that the definition of the term ‘factory’ contained in Section 2(12) of the Act did not speak of persons working for wages as such and that so long as the number of persons working on the premises was twenty ormore, the premises became a factory within the meaning of the term, it being immaterial whether those persons were working for wages or not.

20. In Bank Silver Company, Bombay v. Employees' State Insurance Corporation (7), it was observed that under Section 2(12) the sole test that must be applied for determining whether a premises was a factory or not, was whether 20 or more persons were working in the factory, and it was immaterial that some of the persons who worked in the factory were either the proprietors of the establishment or were partners in the firm which owns the establishment.

21. In Chanan Singh v. Employees' State Insurance Corporation, Amritsar (8), a Division Bench of that Court held that the question whether the principal employer was to be included in the twenty persons necessary to make a premises a ‘factory’ within the meaning of Section 2(12) of the Act must depend on the facts of each case. It was observed that in case of small business which are on the border line of being factories within the meaning of the Act, the principal employer being a person who actively worked on the premises in connection with the business must be included in the figure of twenty, but where a person was the principal employer merely by being the owner or occupier of the factory and did not take any personal active part in running the business on the spot, he should be excluded. In arriving at the aforesaid conclusion, Falshaw, C.J, as he then was and who spoke for the Court, noticed that Section 2(12) employed the expression ‘persons’ in preference to ‘workers’ which was employed by Section 2(m) of the Factories Act, and observed that the word ‘persons’ was deliberately used instead of the term ‘employees’ in the definition of the term ‘factory’. It was also observed that this departure may partly be due to the fact that in the definition of the term ‘employee’ certain persons employed on a remuneration exceeding a certain figure were excluded and that the obvious intention appeared to be that at any rate twenty persons necessary to constitute a factory under Section 2(12) may include persons who were employees in the ordinary sense, but were excluded from the scope of the Act and all the benefits thereunder by reason of the fact that their emoluments were more than Rs. 400.

22. The decision of the Punjab High Court as indeed the other decisions referred to above, were referred to in the case of Employees' State Insurance Corporation v. Pioneer Laundry (9) where the Madras High Court was concerned with a case in which the managing partner of the firm used to come to the office to acquaint himsellf with the day-to-day work and affairs of the business, but there was no evidence as to the actual part and the nature of work he was carrying on within the factory premises in connection with the work of the factory, and it was, therefore, held that such a managing partner could not be included among the twenty persons working in the factory.

23. It appears to me that the cases referred to above in which the participation of the principal employer in the management of the business was taken into consideration in determining if the premises was a factory because of the employment of the wider expression ‘persons are working or were working’ in preference to the narrower expression such as ‘workmen’, ‘employees’ or ‘persons employed’ have not given due weight to the object for which the Act had been enacted, and the class of persons on whom the Act confers benefits. If the Act was intended to benefit certain class of persons, it is difficult to hold that the criteria for the application of the Act to a premises would have anything to do with persons other than those intended to be benefited by the Act or persons on whom such benefits could eventually be extended. It was also ignored in these decisions that the wider expression ‘persons’ was employed in Section 2(12) not to bring within its ambit employers but all those persons who may be employed to work in a premises, but may nevertheless, be not covered by the restricted expressions such as ‘workmen’, ‘employees’, ‘persons employed’, etc. If the term ‘workmen’ was used it would have deprived a class of employees who were not covered by the meaning of the term ‘workmen’ as known to industrial legislation. If the term ‘employee’ was employed it would still have excluded from its ambit persons employed for wages who may not qualify to be employees having regard to the definition of the term in Section 2(9) of the Act. A class of employees drawing a salary beyond a certain limit may not be entitled to the benefits under the Act and the expression of the term ‘employee’ would have, therefore, created some difficulty. The wider expression ‘persons’ was intended to cover a class of persons such as apprentices or even persons who were working on job basis, on daily wages or on contract basis. It is for this reason that the wider expression ‘persons’ was advisedly used.

24. It further appears to me that whatever doubt may have been possible as to the true meaning of the expression ‘persons’ in Section 2(12) of the Act would appear to have since been set at rest by the amendment of Section 2(12) by Section 2 of Act 44 of 1966 which has substituted for the words ‘persons are working or were working’ the expression ‘persons are employed or were employed for wages’ and it has been pointed out in the notes on the clauses to the Bill which led to the aforesaid Amendment Act, that clause 2 of the Bill, which later became section 2 of the Amendment Act and amended, inter alia, Section 2(12) of the Act, was intended ‘to clarify certain terms and expressions’ used in the Act. The amendment of Section 2(12) by Section 2 of Act 44 of 1966 being, therefore, merely clarificatory would not represent any fresh legislative thinking on it, but would represent the will of the legislature throughout. The view that I have taken of the matter, and I say so with utmost respect to the learned Judges who have taken the contrary view, is fully reinforced by the amendment of Section 2(12) of the Act.

25. I am, therefore, of the view that in determining if a premises was a factory within the meaning of the Act and would, therefore, be covered by it, it is not possible to take into account the participation of the employer or the proprietor of the establishment because such a person could neither be said to be an employee or employed for wages within the meaning of the expression used in the subsection after its amendment, which according to me, must have been the original intention of the Legislature when it enacted sub-section (12). The participation of the Karta in the present case in the business of the appellant could not, therefore, have been taken into account for the purpose of determining if 20 or more persons were working in the factory during the material period and the Act would not be applicable to the establishment of the appellant. In the result, the appeal succeeds, and the judgment in appeal is set aside. The appellant would be entitled to the refund of the amount, if already paid.

26. The appellant would also be entitled to costs throughout.