IN THE HIGH COURT OF KERALA AT ERNAKULAM
Ins.APP.No. 12 of 2009()
1. THE REGIONAL DIRECTOR,
... Petitioner
2. THE RECOVERY OFFICER, E.S.I.CORPORATION,
Vs
1. M/S.TATA TEA LIMITED,
... Respondent
For Petitioner :SRI.T.P.M.IBRAHIM KHAN, SC, ESI CORPN.
For Respondent :SRI.E.K.NANDAKUMAR
The Hon'ble MR. Justice M.N.KRISHNAN
Dated :13/12/2010
O R D E R
M.N. KRISHNAN, J.
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INS.APPEAL NO. 12 OF 2009
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Dated this the 13th day of December, 2010.
J U D G M E N T
This appeal is preferred against the order
of the Employees Insurance Court, Alappuzha in
I.C.79/04. The applicant’s establishment moved
an application u/s 75 of the E.S.I.Act for
setting aside the direction to pay E.S.I.
contribution on the amount reimbursed to M/s
P.G. Parameswara Iyer and sons, their stockists
in connection with their sale promotion
activities. The applicant’s establishment is
engaged in the manufacturing and marketing of
tea. They are having dealers and stockists at
different centres and they purchase packets of
tea from the establishment and they are being
sold. The applicant also introduced a promotion
scheme whereby the dealers/stockists are free to
INS.APPEAL NO. 12 OF 2009
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accept any mode prescribed in the sale promotion
scheme. Those persons receive remuneration from
the stockists which was reimbursed by the
applicant by way of sale promotion expenses. It
has nothing to do with the persons so involved
and therefore the prayer is to set aside the
order of the E.S.I. Corporation.
2. On the other hand the E.S.I.
Corporation would contend that the records of
the establishment reveal reimbursement of those
charges to the stockists and therefore it can be
considered as the principal employer liable to
pay contribution. This was based on the report
of an insurance inspector.
3. In the trial court PW1 and DW1 were
examined. Exts.P1 to P3 and D1 were marked. On
an analysis of the materials the trial court
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found in favour of the establishment and held
that interim salesmen are not employees under
the E.S.I.Act therefore set aside the order. It
is against that decision the E.S.I. Corporation
has come up in appeal. The points of law
formulated are,
(1) Whether the interim salesmen are
employees within the meaning of Section 2 (9)
of the E.S.I.Act and the salary paid to them
will be wages to attract the E.S.I.
Contribution.
(2) Whether the interim salesmen are coming
under provisions of Section 2 (9) of the Act and
the contributions are payable in the facts and
circumstances of this case.
INS.APPEAL NO. 12 OF 2009
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Points 1 and 2:
4. Heard the learned counsel for the
appellant as well as the respondent. It is
desirable to understand the work done by these
persons in order to decide the question. Tata
Tea Ltd. is a manufacturer and seller of tea
products. M/s P.G. Parameswara Iyer and sons
is the stockists/dealer under them. They are
non-exclusive in the sense that they are
entitled to store and sale the products of other
companies as well. The persons who are
attempted to be roped in for the purposes are
persons who had purchased packets of tea from
the stockists and had sold it during different
festivals or exhibitions. It is contended that
since Tata Tea Ltd. has reimbursed the amount
incurred for the sale promotion which amounts to
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wages and therefore the company is bound to pay
contribution for these persons. So the question
to be decided is whether a person who sells tea
for promotion activities independently whose
expenses are reimbursed by the Tata Tea Ltd. to
its stockists can be considered as wages for an
employee that is either under the principal
employer or the immediate employer. This fact
has been considered by the learned Insurance
Court Judge in paragraph 9 of the award. He had
considered the evidence of DW1 and found that
payments were reimbursed by the Tata Tea Ltd. to
M/s P.G. Parameswara Iyer and Company. In cross-
examination DW1 deposed that he did not see any
agreement executed between Tata Tea Company and
M/s P.G. Parameswara Iyer and sons and his
report was based only on the ledger payments.
INS.APPEAL NO. 12 OF 2009
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He had not enquired about the nature of works of
interim salesmen and nothing is stated in the
report. It is also not stated that those
interim salesman were attached to the stockist’s
office. He does not know whether E.S.I.
Corporation has claimed contribution from M/s
P.G. Parameswara Iyer and sons. He would submit
further it had not entered into any agreement
with M/s P.G. Parameswara Iyer and sons as
stockists. It is further interesting to note
that the so called activities of salesmen are
not carried out in the establishment of M/s
P.G. Parameswara Iyer and sons and again it is
deposed that the said Company did not maintain
any records relating to interim salesmen. So
the basis on which the E.S.I. Corporation wanted
to rope in the establishment is that since the
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amounts spent by the stockists for promotion of
sale had been reimbursed to the stockists, the
principal company will become liable for
contribution. I am afraid such an interpretation
may lead to dare consequences. As extracted by
the trial court neither the stockists nor the so
called principal employer has any control or
right over these salesmen. In fact what they do
is they purchase these stocks but sell it for
the purpose of the improvement of the business
for which the stockists paid some remuneration
and as a part of the sale improvement scheme the
Company reimburses that amount to the stockists.
In order to be an employee it is fundamental
that he is to be employed by the person. Though
employment need not be direct S.2(a)(i) gives a
picture about the same. So far as this case is
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concerned 2(a)(i) of the E.S.I.Act cannot have
any application at all and if at all we have to
see whether S.2 (9)(ii) will have any
application. In S.2(9)(ii) also employee means,
“………..who is employed by or through an
immediate employer, on the premises of the
factory or establishment or under the
supervision of the principal employer or is an
agent of work which is ordinarily part of the
work of the factory or establishment or which is
preliminary to the work carried on in or
incidental to the purpose of the factory or
establishment.” Just because the stockists or
somebody else makes genuine attempts to improve
their business and in the process since the
products of the manufacture is being sold out if
one comes to the conclusion that these people
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have to be tacked with the principal employer,
as stated by me earlier will lead to dangerous
consequences. Sale promotion activity is a
factor which is concerning all, right from the
manufacturer to the wholesaler or the retailer
as the case may be and in all those cases just
because the reimbursement is made by the
manufacturer as an incentive for the sale
promotion activity one cannot classify it as
wages so as to attract the provisions of the
E.S.I.Act or broadly speaking neither they can
be treated as an employee of the principal
employer nor the amount received as taken as
wages for the purpose of the E.S.I.
Contribution. The learned judge had considered
the matter elaborately on factual basis and the
finding on the said fact does not appear to be
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perverse or mis guided by law. So the facts
emanating make it very clear that they are not
attracted and therefore considering the nature
of the work done in this case I hold that they
will not be covered under the provisions of the
Act and so the respondent Tata Tea Ltd. cannot
be directed to pay any contribution. Both the
questions of law are answered against the
Corporation and the appeal fails and the same is
dismissed but without costs.
Sd/-
M.N. KRISHNAN, JUDGE.
ul/-
[true copy]
P.A. To Judge.