Case Note & Summary
The appellant, M/s. Natraj Cinema, a partnership firm running a cinema theatre in Nagpur, challenged an order dated 21.09.2005 passed by the Industrial Court at Nagpur in Insurance Case No. 7 of 1994 under Section 75 of the Employees State Insurance Act, 1948. The Industrial Court had rejected the appellant's application to set aside an order dated 11.07.1994 passed under Section 45A of the Act, which made the ESI Act applicable to the appellant's establishment on the ground that it employed more than 20 employees during the period 01.04.1991 to 29.09.1993. The appellant had closed its theatre on 30.09.2006. The dispute centered on whether certain categories of persons working on the premises were to be counted as employees of the appellant. It was undisputed that the appellant had 10 permanent employees and 3 temporary employees, totaling 13. The ESIC claimed that additionally, there were 2 handbill boys (for pasting handbills/posters), 2 employees of the canteen contractor, and 4 employees on the cycle stand, making a total of 21. The canteen and cycle stand were within the premises of the establishment. The appellant contended that these persons were not its employees. The court framed the issue of whether these persons could be considered employees under Section 2(9) of the ESI Act. The court held that the employees of the canteen contractor and cycle stand were not employees of the appellant as they were employed by independent contractors and there was no evidence of control or supervision by the appellant. The handbill boys were also not employees as their work of pasting handbills was not incidental to or connected with the work of the cinema theatre. Therefore, the total number of employees was only 13, below the threshold of 20, and the ESI Act was not applicable. The court allowed the appeal, set aside the order of the Industrial Court, and quashed the Section 45A order.
Headnote
A) Employees State Insurance - Coverage - Threshold of 20 Employees - Employees of independent contractors (canteen and cycle stand) not counted as employees of principal employer under ESI Act, 1948 - Held that such employees are not under direct control or supervision of principal employer and are not engaged in work incidental to the establishment (Paras 4-5). B) Employees State Insurance - Definition of Employee - Handbill Boys - Persons engaged for pasting handbills/posters not employees under Section 2(9) of ESI Act, 1948 - Held that such work is not incidental to or connected with the work of the cinema theatre (Para 5). C) Employees State Insurance - Burden of Proof - ESIC must prove that employees are under control and supervision of principal employer - Held that in absence of evidence, employees of contractor cannot be counted (Para 5).
Issue of Consideration
Whether employees of canteen contractor, cycle stand employees, and handbill boys are to be counted as employees of the appellant establishment for determining applicability of the Employees State Insurance Act, 1948.
Final Decision
Appeal allowed. Order dated 21.09.2005 passed by Industrial Court at Nagpur in Insurance Case No. 7 of 1994 is set aside. Order dated 11.07.1994 passed under Section 45A of ESI Act is quashed.
Law Points
- Employees of independent contractors not counted for ESI coverage threshold
- Handbill boys not employees under ESI Act if work not incidental to establishment
- Burden of proof on ESIC to establish employee count
- Section 2(9) ESI Act definition of employee
- Section 45A ESI Act assessment
