IN THE HIGH COURT OF JUDICATURE AT MADRAS Dated: 11/04/2003 Coram The Hon'ble Mr. Justice P. SATHASIVAM and The Hon'ble Mr. Justice S. SARDAR ZACKRIA HUSSAIN Civil Misc. Appeal No. 1054 of 1994 The Kumbakonam Milk Supply Cooperative Society, represented by its Secretary. (Cause Title amended-vide Order dated 1-7-98 in CMP No.19165/97). .. Petitioner/Appellant. -Vs- The Regional Director, Employees' State Insurance Corporation, Madras-34. .. Respondent/Respondent. Appeal against the Order and Decree dated 28-2-94, made in E.S.I.O.P.No.33/87 on the file of the District Judge, Thanjavur. !For appellant in both CMAS. : Mr. T. Susindran ^For Respondent : Mr. G. Desappan :JUDGMENT
(Judgment of the Court was delivered by P. Sathasivam,J)
Kumbakonam Milk Supply Cooperative Society through its Secretary, aggrieved by
the order dated 28-02-1994, made in E.S.I.O.P.No. 33/87 on the file of the
District Judge, Thanjavur, has filed the above appeal under Section 82 (2) of
The Employees’ State Insurance Act, 1948.
2. According to the appellant, it is a society registered under the
Co-operative Societies Act and their main object is to purchase milk from its
members and to sell the same. The said work was being done for the last 45
years. While so, on 14-5-85, a memo was issued claiming Rs.87,101/- towards
E.S.I. contribution for the period between 1-4-79 and 31-12-84. Again, on
26-5-86 it received another notice demanding Rs.1,11,488.40 towards E.S.I.
contribution. It is further stated that on receipt of the said notices, the
appellant sent a reply stating that it is a society and not an industry, that
no manufacturing process is being carried out and that the persons working in
the society are not employees within the meaning of Section 2 (9) of the
Employees’ State Insurance Act, 1948 (hereinafter referred to as “the Act”).
It is further stated that since their explanation was not satisfactory, the
society filed E.S.I.O.P.No.33/87 before the District Court under Section 75
(1) of the Act. Before the District Court, the Accountant of the Society was
examined as P.W.1 and Exs. P-1 to P-11 were marked in support of their claim.
On the side of the Employees’ State Insurance Corporation, their Inspectors
were examined as R.W.1 and R.W.2 and Exs. R-1 to R-4 marked in support of
their defence. The learned District Judge, after framing necessary issues and
after considering the evidence, both oral and documentary, and after holding
that the appellant society is an organisation under the Act, and hence it is
liable to pay its contribution, dismissed the O.P., filed by the society. The
District Court also permitted the society to approach the Corporation for
modification of the quantum, if there is any variation in the contribution.
Questioning the said award, the society has preferred the above appeal.
3. Heard Mr. T. Susindran, learned counsel for the appellant and Mr. G.
Desappan for respondent.
4. Though no substantial question of law was framed by this Court at the time
of admission, the appellant society has raised the following substantial
questions of law in the Memorandum of Grounds of Appeal:
a) Whether the appellant-Society can be attracted by the provisions of the
State Employees’ Insurance Act, 1948, in view of the fact that the
Appellant-Society’s duty is only to preserve the milk purchased from the
purchasers for the purpose of distributing the same to its customers and as
such no question of manufacturing process arises, as contemplated under the
provisions of the said Act?
b) Whether in the absence of any transformation of a new product from the milk
preserved by the Appellant-Society, can the Appellant-Society be termed as
‘factory’ in which manufacturing process is undertaken so as to attract the
provisions of the State Employees’ State Insurance Act, 1948.
5. First we shall refer the relevant provisions of the Employees’ State
Insurance Act and the Factories Act which are required for the disposal of
this appeal. Section 2(9) of the Employees’ State Insurance Act, 1948 reads
thus:
“Section 2(9) “employee” means any person employed for wages in or in
connection with the work of a factory or establishment to which this Act
applies and-…”
Section 2 (12) “factory” means any premises including the precincts thereof-
(a) whereon ten or more persons are employed or were employed for wages on any
day of the preceding twelve months, and in any part of which a manufacturing
process is being carried on with the aid of power or is ordinarily so carried
on, or
(b) whereon twenty or more persons are employed or were employed for wages on
any day of the preceding twelve months, and in any part of which a
manufacturing process is being carried on without the aid of power or is
ordinarily so carried on,
but does not include a mine subject top the operation of the Mines Act, 1952
or a railway running shed;”
Section 2 (14AA) “manufacturing process” shall have the meaning assigned to it
in the Factories Act, 1948;
Section 2 (k) of The Factories Act, 1948 reads thus:
“Section 2 (k)”manufacturing process” means any process for-
(i) xx xx
(ii) xx xx
(vi) preserving or storing any article in cold storage; ( inserted by Act 94
of 1976).
6. Even according to the appellant-Society, though they employed 24 persons,
except two who are working in cold storage, the others, namely, 20 persons are
mainly working outside the premises. According to the Society, their main job
is to procure milk from the members. The documents-Exs. P-1 to P-7 produced
by the Society would go to show that the appellant society is a factory within
the definition of Section 2 (12) of the Employees’ State Insurance Act. As
per Section 2 (14AA) of the Act, ‘manufacturing process’ shall have the
meaning assigned to it in the Factories Act, 1948. Section 2 (k) of the
Factories Act, 1948 defines the expression “manufacturing process” and we have
already referred to the insertion of Clause (vi)of Section 2 (k) by Act 94 of
1976 which makes it clear that preserving or storing any article in cold
storage is deemed to be a manufacturing process. Though it is stated that
only two persons are being engaged in cold storage and others are messengers
and their main work is to procure milk from its members, in the light of the
definition of the words “employee”, “factory”, and “manufacturing process”, as
referred to in the Employees State Insurance Act, and the Factories Act and in
the light of the details furnished in the documents produced by the society,
we hold that the appellant society is an establishment which comes within the
ambit of Employees’ State Insurance Act and that the learned District Judge
was perfectly right in arriving at a conclusion, confirming the action
initiated by the Employees’ State Insurance Corporation.
7, Learned counsel for the appellant very much relied on a decision of
Maharajan, J., in Madurai Co-op. Milk Supply Union v. R.S.I. Corporation,
reported in Volume 39 F.J.R. 452; and another decision of Govardhan, J. in
C.M.A.No. 766 of 1986 dated 21-11-1994. Since the cases dealt with in those
decisions were decided prior to insertion of sub-Clause (vi) of Clause (k) of
Section 2 of the Factories Act, we are of the view that both the decisions are
not applicable to the facts of the present case.
8. Learned counsel for the appellant would contend that as most of the
employees had gone away and are not available as on date, the direction of the
Employees’ State Insurance Corporation to deposit the contribution inclusive
of the unavailable employees cannot be sustained. In this regard, it is
relevant to refer a Division Bench decision of this Court in Madras Govt.
Servants Co-op. Society Ltd., v. Employees’ State Insurance Corpn., reported
in 1996 II M.L.J. 4 47, wherein this Court, while considering certain
provisions of the Employees’ State Insurance Act, 1948, has held that if there
is systematic economic or commercial activity, it will be shop within the
meaning of Section 1 (9) of the Act.
9. In E.K. Haj Mohammadmeera Sahib and Sons v. The Regional Director,
Employees State Insurance Corporation (D.D), reported in 2003-1-L.W.669, a
Division Bench of this Court has held that even in a case where the person, to
whom wages was paid and on which the contribution is sought, is not in a
position to avail the benefits provided under the Act, nevertheless the
employer is not relieved from the obligation to pay the contribution. The
Division Bench further held that the benefit of the contribution would become
part of a fund available for use for the benefit of workmen who are eligible
to claim the benefit under the Act.
10. In Employees State Insurance Corporation v. Hotel Kalpaka
International,reported in AIR 1993 Supreme Court 1530, Their Lordships have
held that: (para 27)
“27. It is equally fallacious to conclude that because the employees had gone
away there is no liability to contribute. It has to be carefully remembered
that the liability to contribute arose from the date of commencement of the
establishment and is a continuing liability till the closure. The very object
of establishing a common fund under Section 26 for the benefit of all the
employees will again be thwarted if such a construction is put.”
Both the decisions referred to above make it clear that even if the employees
had gone away, the liability to contribute arises from the date of
commencement of the establishment and it is a continuing liability till it is
closed. Accordingly, we reject the contrary argument of the learned counsel
for the appellant.
11. The Employees’ State Insurance Act is a piece of social welfare
legislation enacted primarily with the object of providing certain benefits to
employees in case of sickness, maternity and employment injury and also to
make provisions for certain other matters incidental thereto. In an enactment
of this nature, the endeavour of the Court should be to interpret the
provisions liberally in favour of the persons for whose benefit the enactment
has been made. In the light of the statutory provisions of the Employees’
State Insurance Act, 1948 and the Factories Act, 1948, coupled with the
factual details available in the case on hand, we do not want to take a
different view than that taken by the District Judge, and hence we are in
agreement with the conclusion arrived at by the learned District Judge. There
is no merit in the appeal. Accordingly, both the substantial questions of law
referred to above are answered in the negative. Consequently, the appeal is
dismissed. No costs.
(P.S.J.,) (Z.H.J.,)
R.B.
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To:-
1) The District Judge, Thanjavur.
2) The Section Officer, High Court, Madras.