Case Note & Summary
The Regional Director of the Employees' State Insurance Corporation (ESI Corporation) appealed against an order of the Employees Insurance Court, Mumbai, dated 6th May 1998 in Application (ESI) No.138/1988. The respondent, M/s Homa Engineering Works, a partnership concern, had a factory at Cotton Green, Mumbai, registered under the Factories Act, 1948, and covered under the ESI Act. Additionally, the respondent independently undertook servicing and maintenance of ships at various docks or at stream/anchorage, i.e., on the ships themselves, away from the factory premises. The ESI Corporation issued orders dated 15/9/1987 and 13/9/1988 demanding contributions of Rs.1,61,000/- and Rs.9,161/- respectively for employees engaged in such ship work. The respondent filed an application before the ESI Court seeking a declaration that they were not liable to pay contributions for those employees and that the orders were illegal. The ESI Court allowed the application, holding that the employees working on ships were not covered under the ESI Act. The ESI Corporation appealed to the High Court. The High Court allowed the appeal, setting aside the ESI Court's order. The Court held that the definition of 'factory' under Section 2(12) of the ESI Act includes all branches and departments of the employer, and employees working away from the factory premises but under the same employer are covered. The Court reasoned that the ESI Act is a social welfare legislation intended to provide benefits to employees, and a narrow interpretation would defeat its purpose. The Court directed the ESI Court to decide the application afresh in accordance with law, considering the correct legal position.
Headnote
A) Employees' State Insurance Act, 1948 - Coverage - Definition of 'Factory' and 'Employee' - Sections 2(12), 2(9), 40 - The respondent employer had a registered factory under the Factories Act, 1948, and also independently undertook ship servicing and maintenance work at docks or anchorage. The ESI Court held that employees engaged in such off-site work were not covered under the ESI Act. The High Court reversed, holding that the definition of 'factory' under Section 2(12) includes all branches and departments of the employer, and employees working away from the factory premises but under the same employer are covered. The employer is liable to pay contributions for such employees. (Paras 1-5)
B) Employees' State Insurance Act, 1948 - Contribution - Liability - Section 40 - The ESI Corporation claimed contributions for employees engaged in ship servicing and maintenance. The employer contended that such work was not carried out in the factory and thus not covered. The High Court held that the ESI Act applies to all employees of a factory, including those working outside the factory premises, as long as they are employed in connection with the work of the factory. The orders of the ESI Corporation demanding contributions were valid. (Paras 2-5)
Issue of Consideration
Whether employees engaged in servicing and maintenance of ships at docks or anchorage, away from the registered factory premises, are covered under the Employees' State Insurance Act, 1948, and whether the employer is liable to pay ESI contributions for such employees.
Final Decision
The High Court allowed the appeal, set aside the order of the Employees Insurance Court dated 6th May 1998, and directed the ESI Court to decide the application afresh in accordance with law, considering that employees engaged in ship servicing and maintenance work are covered under the ESI Act.
Law Points
- Employees' State Insurance Act
- 1948
- Section 2(12) definition of 'factory'
- Section 2(9) definition of 'employee'
- Section 40 contribution
- Section 75 adjudication of disputes
- coverage of employees working outside factory premises but under same employer
- establishment includes all branches and departments
Case Details
2005 LawText (BOM) (03) 95
First Appeal No.382 of 1999
Mr. H.V. Mehta for the appellants, Mr. Rajesh Gelani for the respondents
The Regional Director Employees’ State Insurance Corporation, Mumbai
M/s. Homa Engineering Works, Mumbai
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Nature of Litigation
Appeal against order of Employees Insurance Court allowing application of employer seeking declaration that they are not liable to pay ESI contributions for employees engaged in ship servicing and maintenance work away from factory premises.
Remedy Sought
The ESI Corporation sought setting aside of the ESI Court's order and a declaration that the employer is liable to pay contributions for employees engaged in ship work.
Filing Reason
The ESI Court held that employees working on ships at docks or anchorage were not covered under the ESI Act, and the employer was not liable to pay contributions for them.
Previous Decisions
The Employees Insurance Court, Mumbai, by order dated 6th May 1998 in Application (ESI) No.138/1988, allowed the employer's application and declared that the orders of the ESI Corporation dated 15/9/1987 and 13/9/1988 demanding contributions were illegal and invalid.
Issues
Whether employees engaged in servicing and maintenance of ships at docks or anchorage, away from the registered factory premises, are covered under the Employees' State Insurance Act, 1948.
Whether the employer is liable to pay ESI contributions for such employees.
Submissions/Arguments
Appellant (ESI Corporation): The ESI Act covers all employees of a factory, including those working outside the factory premises, as the definition of 'factory' includes all branches and departments. The employer is liable to pay contributions for all employees engaged in connection with the work of the factory.
Respondent (Employer): The ship servicing and maintenance work was independently undertaken and not carried out in the factory premises. Therefore, employees engaged in such work are not covered under the ESI Act, and the employer is not liable to pay contributions for them.
Ratio Decidendi
The definition of 'factory' under Section 2(12) of the Employees' State Insurance Act, 1948, includes all branches and departments of the employer, and employees working away from the factory premises but under the same employer are covered under the Act. The ESI Act is a social welfare legislation and must be interpreted broadly to extend coverage to all employees employed in connection with the work of the factory.
Judgment Excerpts
This appeal is filed by the Regional Director Employees' State Insurance Corporation Mumbai against the order of the Employees Insurance Court Mumbai dated 6th May 1998 in Application (ESI) No.138/1988.
The claim and contention of the applicants/respondents before the Insurance Court was that they are a partnership concern. They had a factory at Cotton Green, Mumbai, where they fabricated the machinery spare parts and accessories. It was registered under the Factories Act, 1948 and was covered under the ESI Act. But apart from this, the respondents were independently undertaking the work of servicing and maintenance of ships on various docks or at the stream/anchorage i.e. on the ship itself. This work was not carried out in the factory nor in the premises of the factory.
Procedural History
The respondent employer filed Application (ESI) No.138/1988 before the Employees Insurance Court, Mumbai, seeking a declaration that they were not liable to pay ESI contributions for employees engaged in ship servicing and maintenance work and that the orders of the ESI Corporation dated 15/9/1987 and 13/9/1988 were illegal. The ESI Court allowed the application on 6th May 1998. The ESI Corporation appealed to the High Court of Bombay by filing First Appeal No.382 of 1999. The High Court heard the appeal and delivered judgment on 7th March 2005, allowing the appeal and remanding the matter to the ESI Court for fresh decision.
Acts & Sections
- Employees' State Insurance Act, 1948: Section 2(12), Section 2(9), Section 40, Section 75
- Factories Act, 1948:
