PETITIONER:
REGIONAL DIRECTOR, EMPLOYEES STATE INSURANCECORPORATION A
Vs.
RESPONDENT:
RAM CHANDER
DATE OF JUDGMENT27/10/1987
BENCH:
MUKHARJI, SABYASACHI (J)
BENCH:
MUKHARJI, SABYASACHI (J)
OZA, G.L. (J)
CITATION:
1988 AIR 113 1988 SCR (1) 835
1988 SCC Supl. 90 JT 1987 (4) 313
1987 SCALE (2)941
ACT:
Employees State Insurance Act, 1948 Whether the
respondent's L tailoring establishment falls within the
purview thereof by virtue of notification issued under
section 1(5).
HEADNOTE:
%
The respondent Ram Chander ran a tailoring shop,
employing about 10 to 12 tailors. The number of his
employees never exceeded 20. At the shop, clothes were
stitched and electric iron was used in the process of
stitching and also for ironing the finished goods.
The dispute that arose for decision in the case was
whether by virtue of Notification dated September 20, 1975,
issued under Section 1(5) of the Employees' State Insurance
Act, 1943, the respondent's establishment came within the
purview of the Act.
Allowing the Appeal by special leave against the
judgment and order of the High Court, and restoring the
decision of the Employees' State Insurance Court the Court,
^
HELD: Stitching process is carried on in the
respondent's establishment. By stitching commercially,
different goods with distinctive names, characters and uses
are brought into existence. If by a process, a different
entity comes into existence, the process is a manufacture,
as held by this Court in Empire Industries Limited & Ors.
etc. v. Union of India & Ors. etc., [1985] (Suppl. 1) SCR
292. In the stitching process, ironing is an essential part,
and for that electric power is used. Also the respondent's
shop employed more than ten but less than 20 persons. The
respondent's establishment clearly falls within the purview
of the Employees' State Insurance Act. [837G-H;838C]
Deputy Commissioner, Sales Tax (Law) Board of Revenue
(Taxes), Ernakulam v. Pio Food Packers, [1980] 3 SCR 1271;
Chowgule & Co. Pvt. Ltd & Anr. v. Union of India and others,
[1981] 2 SCR 271; Ardeshir H. Bhiwandiwala v. The State of
Bombay, [1961] 3 H
836
SCR 592; M/s. Hindu Jea Band, Jaipur v. Regional Director,
Employees' State Insurance Corpn. Jaipur, AIR 1987 SC 1166;
Metro Readywear Company v. Collector of Customs, [1978] 2
Excise Law Times 520 and Employees' State Insurance
Corporation v. M/s. New Empire Tailores and others,
(unreported) referred to.
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2904 of
1987.
From the Judgment and order dated 2.9.1986 of the
Rajasthan High Court in D.B. (Civil) Special Appeal No. 43
of 1986.
M. Chandrasekhran, V.J. Francis and N.M. Popli for the
Appellant.
B.D. Sharma for the Respondent.
The Judgment of the Court was delivered by
SABYASACHI MUKHARJI, J. Special leave granted.
This appeal arises out of the judgment and order of the
Division Bench of the Rajasthan High Court dated 2nd
September, 1986. The judgment under appeal was rendered in
an appeal under section 82(2) of the Employees’ State
Insurance Act, 1948 (hereinafter called ‘the Act’). The
respondent, Ram Chander, was the proprietor of M/s.
Commercial Tailors, Sojati Gate, Jodhpur. At all material
times, he used to run a tailoring shop, where clothes were
stitched. The shop employed at the relevant time about 10 or
12 persons as tailors. The number of employees, however,
never exceeded 20. The clothes were . supplied by the
customers and these were stitched according to the different
sizes of the customers. Such stitchings were done at the
shop of the respondent herein manually by electric iron
which was also used in the process of stitching. There were
ironing of finished clothes also. The Employers State
Insurance Court, Rajasthan came to the conclusion as
follows:
“The applicant is a tailoring shop which has
employed more than 20 persons on one occasion and
less on other days and makes use of power in the
shape of electric press which is used for ironing
of stitched clothes for customers. The electric
iron is also used during the process of stitching
in addition to the ironing of finished clothes.”
837
The question before the Rajasthan High Court. was
whether such A establishment was covered by the Notification
dated 20th September, 1975 and came within the mischief of
the Act. The answer to that question would depend on the
relevant notification being the Notification dated 20th
September, 1975 issued under section 1(5) of the Act. The
schedule which extends the scheme to different
establishments, inter alia, provided by clause (1)(b) as
follows: B
DESCRIPTlON OF ESTABLISHMENTS
AREAS IN WHICH THE
ESTABLISHMENTS
ARE SITUATED.
1. Any premises including the precincts thereof 1.Alwar
whereon ten or more persons but in any case 2.Ajmer
less than twenty persons are employed or were 3.Bikaner
employed for wages on any day of the preced- 4.Jaipur
ing twelve months, and in any part of which a 5.Jodhpur
manufacturing process is being carried on with 6.Kota
the aid of power or is ordinarily so carried 7.Udaipur
on but excluding a mine subject to the
operation of the Mines Act, 1952 (35 of 1952)
or a rail way running shed or an establishment
which is exclusively engaged in any of the
manufacturing processes specified in clause
(12) of section 2 of the Employees’ State
Insurance Act, 1948 (34 of 1948)
(emphasis supplied)
In order to answer the question whether the
establishment of the respondent comes within the mischief of
the Act, it is necessary therefore, in view of the facts
found as noted before to determine only whether
manufacturing process was carried on with the aid of power.
It is manifest that there is use of electric power in the
process of stitching. This is a finding of fact that the
establishment of the shop employed more than 10 but less
than 20 persons. It cannot also be disputed that by
stitching commercially different goods are brought into
existence. These are known differently, stitched shirt is
indubitably a different commodity than unstitched cloth. It
is so commercially known and treated. If by a process a
different entity comes into existence then it can be said
that this was manufactured. See in this connection the
observations of this Court in Empire lndustries Limited & H
838
others etc. v. Union of India & others etc., [ 1985] Suppl.
1 S.C.R. 292. It was observed therein that manufacture is
complete as soon as by the application of one or more
process, the raw material undergoes some change. If a new
substance is brought into existence or if a new or different
article having a distinctive name, character or use result
from particular processes, such process or processes would
amount to manufacture. Whether in a particular case
manufacture has resulted by a process or not would depend on
the-facts and circumstances of the particular case. There is
no doubt that the process must bring into existence a new
item or a new commodity known differently in the market as
such by people who use or deal with that good. In that
process the ironing of clothes as has been found to be an
essential part and for that power is used. These are facts
found and are not disputed. If that is the position, then in
our opinion, it comes clearly within the purview of the Act
in view of the other facts noted before and the employees
are covered by the Act.
Our attention was drawn by learned counsel appearing on
behalf of the respondent to the observations of this Court
in Deputy Commissioner, Sales Tax (Law) Board of Revenue
(Taxes) Ernakulam v. Pio Food Packers, [1980] 3 S.C.R. 1271
and the decision of this Court in Chowgule & Co. Pvt. Ltd. &
Anr. v. Union of India & others, [ 1981] 2 S.C.R. .271. The
effect of both these decisions have been considered in the
aforesaid Empire Industries’s case (supra). Learned counsel
drew our attention to the decision of this Court in Ardeshir
H. Bhiwandiwala v. The State of Bombay, [1961] 3 S.C.R. 592,
where the question arose under the Factory Act. It was held
therein that the salt works was a factory within the
definition given in the Act and the appellant therein was
rightly convicted for working it without a licence. The
decision is of no assistance to the respondent in resolving
the contentions involved in this appeal.
Our attention was also drawn to the decision of this
Court in M/s. Hindu Jea Band, Jaipur v. Regional Director,
Employers’ State Insurance Corporation, Jaipur, A.I.R. 1987
S.C. 1166, where it was held that it was not that a place
where goods were sold was only a shop. A place where
services were sold on retail basis was also a shop. The
facts of that case were entirely different from these in
this case. But the ratio of that decision is apposite to the
issue in dispute here. There this Court reiterated that it
was not that a place where goods were sold was only a shop.
But a place where services were sold on retail basis was
also a shop. The place of business of a firm carrying on the
business of playing music on occasion such as, marriages and
839
Other social functions which made available on payment of
the stipulated price the services of the members of the
group of musicians employed by it on wages was a shop to
which the Act was applicable by virtue of the notification.
The fact that the services were rendered by the employees
engaged by the firm intermittently or during marriages did
not entitle the firm to claim any exemption from the
operation of the Act. In Metro Readywear Company v.
Collector of Customs, [ 1978] 2 Excise Law Times 520 of the
High Court of Kerala at Ernakulam it was held that the
brassieres were undoubtedly undergarments falling within the
description “articles of ready-to-wear apparel (known
commercially as ready made garments) and therefore was
classified under Item 22D of Central Excise Tariff. Ironing
with electric iron amounted to a process of manufacture with
the aid of power. It was held that ironing of stitched
brassieres is incidental or ancillary to their manufacture
since the said process was intended to give a finishing,
touch in order to render them marketable. In our opinion the
ratio or the reasoning of the said decision is applicable to
the facts of this case.
Our attention was drawn to the unreported decision of
the Andhra Pradesh High Court in Employees State Insurance
Corporation v. M s. New Empire Tailors and others, where
the aforesaid reasoning was accepted by the High Court.
In the light of the aforesaid, we are of the opinion
that the High Court in the instant case was in error and the
decision of the E.S.I. Court must be upheld. The appeal is
accordingly allowed and the judgment and order of the High
Court are set aside and the order of the E.S.I. Court
restored. In the facts and circumstances of the case the
parties will pay and bear their own costs. This judgment
will apply to the facts as pertinent to the facts in the
relevant year in question.
S.L. Appeal allowed.
840