Case Note & Summary
The appeals arose from a Division Bench judgment of the Andhra Pradesh High Court dated 7 February 1985 in C.M.A. Nos. 868 and 297 of 1981. The appellant, a transport carrier, engaged hamalis for loading and unloading goods entrusted to it. The Employees' State Insurance Corporation applied the Employees' State Insurance Act, 1948 to the appellant's establishment and demanded contributions with interest at 7 per cent for the periods specified in the notice. The appellant disputed liability and filed an application under Section 76 of the Act before the Insurance Court. The Insurance Court held that the hamalis were employees within the meaning of Section 2(9) of the Act because, although the appellant collected charges from customers and paid the hamalis at piece rates, the appellant supervised loading and unloading and the hamalis were not appointed or controlled by any other agency. Consequently, the appellant was liable to contribute. The High Court dismissed the appellant's appeals. Before the Supreme Court, senior counsel for the appellant contended that there was no relationship of master and servant, no regular salary, and no fixed hours of work for the hamalis; therefore, they could not be treated as employees and the appellant could not be treated as employer. The Court rejected this contention. Section 2(9) of the Act defines employee to mean any person employed for wages in or in connection with the work of a factory or establishment to which the Act applies. Clause (ii) expressly provides that employment need not be direct; persons employed by or through an immediate employer on the premises or under the supervision of the principal employer or his agent on work ordinarily part of or incidental to the establishment are covered. The Court noted that the controversy was no longer res integra. In Royal Talkies, Hyderabad v. Employees State Insurance Corpn., this Court held that the definition is wide and deliberately transcends pure contractual relationships. In E.S.I. Corpn. v. South Flour Mills, even casual employees were held covered. In Kirloskar Brothers Ltd. v. Employees' State Insurance Corpn., the Court reiterated that the true test is control by the principal employer, not predominant business activity or remote connection. Applying these principles, the Court affirmed the Insurance Court's finding that the appellant had control over loading and unloading of goods. The fact that the appellant collected charges from customers and paid the hamalis from that collection was held irrelevant; what mattered was that the hamalis worked in connection with the establishment under the appellant's direction and control. The appellant also argued that the Andhra Pradesh Muttah Jattu and Other Manual Workers (Regulation of Employment & Welfare) Act, 1976, which received presidential assent on 27 December 1976, applied to the scheduled establishment and therefore the ESI Act had no application or stood repealed. The Supreme Court observed that this argument appeared to have been raised before the High Court but was not considered because no material was placed on record; similarly, no material was placed before the Supreme Court, so it was not necessary to decide the question of applicability of the local Act. Accordingly, the Supreme Court dismissed the appeals and upheld the concurrent findings of the Insurance Court and the High Court. No costs were awarded. The judgment reinforced the broad, purposive interpretation of the term employee under social welfare legislation, emphasizing that control and connection to the establishment are decisive factors.
Headnote
A) Labour and Employment - Employees' State Insurance - Definition of Employee and Principal Employer's Liability - Employees' State Insurance Act, 1948, Section 2(9) - The issue was whether hamalis engaged for loading and unloading by a transport carrier were employees under Section 2(9) despite absence of direct master-servant relationship, regular salary, and fixed hours. The Court held the definition is wide and transcends pure contractual relationships; persons employed in connection with the work of the establishment, even indirectly or through an immediate employer, are covered if under the principal employer's control and supervision. The control test is decisive, and mode of payment or lack of direct salary is irrelevant. Relying on Royal Talkies, South Flour Mills, and Kirloskar Brothers, the Court dismissed appeals and upheld liability for ESI contributions. Held that hamalis are employees and appellants are liable. (Pages 1-3) B) Labour Law - Applicability of State Legislation and Repeal by Implication - Andhra Pradesh Muttah Jattu and Other Manual Workers (Regulation of Employment & Welfare) Act, 1976 and Employees' State Insurance Act, 1948, Section 2(9) - Appellants contended that the Andhra Pradesh Act, having received presidential assent, applied to scheduled establishments and thereby excluded or repealed the ESI Act. The High Court did not examine this because no material was placed. The Supreme Court also declined to go into the question for lack of material. Thus the issue was not decided. Held not necessary to decide. (Pages 2-3)
Issue of Consideration
Whether hamalis engaged for loading and unloading by a transport carrier are employees within the meaning of Section 2(9) of the Employees' State Insurance Act, 1948; Whether the Andhra Pradesh Muttah Jattu and Other Manual Workers (Regulation of Employment & Welfare) Act, 1976, having received presidential assent, excluded or repealed the application of the ESI Act to the establishment
Final Decision
The Supreme Court dismissed the appeals and upheld the orders of the Insurance Court and the High Court. The appellants were held liable to contribute towards ESI for the hamalis engaged in loading and unloading. No costs were awarded. The Court did not decide the question of applicability of the Andhra Pradesh Act due to lack of material.
Law Points
- Definition of employee under Section 2(9) of Employees' State Insurance Act
- 1948 is wide and deliberately transcends pure contractual relationships
- direct employment not necessary
- employees working under supervision or control of principal employer on work connected with establishment are covered
- control test is decisive
- mode of payment or absence of direct salary is irrelevant
- local state act issue not decided due lack of material
