BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT DATED : 25/01/2006 CORAM: THE HONOURABLE MR.JUSTICE A.C.ARUMUGA PERUMAL ADITYAN C.M.A.No.63 of 1998 The Assistant Regional Director, E.S.I.Corporation, 143, Sterling Road, Madras-34. ... Appellant Vs Sri Ganapathy Mills Company Limited, Sankar Nagar, Tirunelveli, represented by its Managing Director. ... Respondent Prayer Appeal filed under Section 82 of the E.S.I.Act, 1948, Central Act XXXIV of 48, against the order of the learned Principal District Judge / The Employees' State Insurance Judge, Tirunelveli, dated the 12.05.1994 and made in E.S.I.O.P.No.7 of 1988. !For Appellant ... Mr.J.S.Murali ^For Respondents ... Mr.K.Srinivasan, Mr.G.Prabhu Rajadurai. :JUDGMENT
This appeal has been preferred against the award E.S.I.O.P.No.7 of 1988
on the file of the Principal District Judge, Tirunelveli, dated 12.05.1994.
The short facts of the case, in brief, are as follows:
2. The petitioner, Sri Ganapathy Mills Company Limited, Sankar Nagar,
Tirunelveli, is a cotton Mill governed under the provisions of the Factories
Act, and the said factory was paying the E.S.I. Contribution under the
E.S.I.Act. The respondent, E.S.I.Corporation, Madras had sent a notice dated
02.07.1987 to the complainant / respondent to pay E.S.I Contribution for (i) a
sum of Rs.27,880.90 for the interim relief given to the employees, (ii) a sum of
Rs.137.75 for the salary given to the supervisors for the month of February ‘
1986 and March ‘ 1986, (iii) a sum of Rs.1,957.50 for the salary given to two
directos for the period between 01.11.1985 and 31.10.1986, (iv) a sum of
Rs.42.70 for the salary for the month of November ‘ 1985 to December ‘ 1985 and
May ‘ 1986 to August ‘ 1986 to the directors, (v) a sum of Rs.2,039 for the
holidays salary to the directors and (vi) a sum of Rs.20,601.95 for the stipend
given to apprentices for the period from 01.10.1985 to 30.09.1986.
3. The petitioner agreed to pay the E.S.I Contribution for the salary
given to supervisors, for the salaries of two directors and also the salaries
paid to the two directors at the time of strike period. But, the petitioner
would deny to pay any E.S.I. Contribution to the holidays salary, on the ground
that the interim relief is not a holidays salary. The respondent has further
stated that apprentices are not employees and hence any salary given to
apprentices, the Mill is not liable to pay E.S.I Contribution. The petitioner
has paid a sum of Rs.2,138 being the admitted E.S.I Contribution to the admitted
amounts. The respondent has arbitrarily issued the notice under Section 45 (A)
of E.S.I.Act along with the notice, dated 02.07.1987. The Inspector of the
respondent’s Corporation had not sent the report of the Inspector of the
respondent, along with the show cause notice. The respondent has not given any
reason for claiming the E.S.I Contribution for the stipend given to the
apprentices and also for the interim relief given to the petitioners. Hence,
the petitioner had filed the petition to set aside the order passed by the
respondent in T.N.I/N.S.IV/51-5466.11, dated 09.12.1987 and also to issue an
order of permanent injunction against the respondent from realising the sum of
Rs.50,521.80. The second respondent has filed a counter contending that since
the apprentices were working in the petitioner’s Spinning Mill itself, the
petitioner is liable to pay the E.S.I contribution for the stipend paid to the
apprentices and paid for the dismissal of the petition. Before the learned
Principal District Judge, had accepted Ex.A.1 to A.13 and Ex.R.1 and Ex.R.2. No
oral evidence was let in before the Principal District Judge / Labour court.
After going through the documentary evidence produced before it, the learned
Principal District Judge, Tirunelveli, had come to the conclusion that the order
passed by the respondent / E.S.I.Corporation, dated 09.12.1987, cannot be set
aside in respect of E.S.I Contribution for the holidays salary and set aside
the order of the E.S.I.Corporation in respect of the interim relief awarded to
the employees and also for the stipend paid to the apprentices.
4. Aggrieved by the orders of the learned Principal District Judge,
Tirunelveli, in E.S.I.O.P.No.7 of 1988, dated 12.05.1994, the E.S.I.Corporation
has preferred this appeal.
5. Now, the point for determination in this appeal is whether the award
passed by the Principal District Judge, Tirunelveli in E.S.I.O.P.No.7 of 1988,
dated 12.05.1994, is liable to be set aside for the reasons stated in the
Memorandum of appeal?
The Point:
6. The appellant had issued Ex.A.3, order, under Section 45(A) E.S.I.Act,
demanding the respondent / the petitioner, Sri Ganapathy Mills Company Limited,
Sankar Nagar, to pay E.S.I Contribution under six heads totalling a sum of
Rs.52,659.80. The details of demand are as follows:
1. towards interim relief sanctioned to the employees for the period from
8/85 to 9/86 is = Rs.27,880.90
2. the salary of supervisors for February 86 and March 86 , E.S.I share
contribution is = Rs.137.75
3. for the salary of two directors (Mr.K.V.Rajendran and Mr.V.Subburaj)
from 01.11.1985 to 31.10.1986 is = Rs.1,957.50
4. the salary sanctioned during strike period from May 86 to July 86 is =
Rs.42.70
5. for holiday salary is =
Rs.2,039
6. the stipend of the apprentices for the period between 01.10.1985 and
30.09.1986 is = Rs.20,601.95
7. The appellant challenges the orders of the Principal District Judge,
Tirunelveli in the above E.S.I.O.P.No.7 of 1988 only in respect of two grounds.
The first ground is in respect of the interim relief given to the workers for a
period of 8/85 to 9/86 amounting to Rs.27,880.90 and the next one is the stipend
paid to the apprentices for the period of 01.10.1985 to 30.09.1986 amounting to
Rs.20,601.95.
8. The learned Counsel appearing for the appellant relying on the decision
in Premier Polytronics Limited, Vs. Assistant Regional Director, Employees’
State Insurance Corporation reported in 2001-I-LLJ (page 187) and contended that
the apprentices, as defined under Section 2(a) of the Apprentices Act, 1961, are
not employees, against whom the employer, the E.S.I.Act will not be applicable.
In the said case, a notice under Section 45(A) of E.S.I.Act, 1948 dated 6th May
1986, was directed against the appellant in the said case and the Inspector of
the E.S.I.Corporation visited the factory and found that employees who were
designated as apprentices were not trainees or apprentices. Hence, the order
under Section 45(A) of the Act, was issued. In the reply to the notice, the
employer had contended that there was a full-fledged scheme of apprenticeship in
their factory with duly certified standing orders and regular classes were also
conducted for one day in a week to the apprentices and for the rest of the week,
they were being given job training. After ascertaining the actual state of
affairs and based on the facts, it was concluded that the employees were
actually given production work and they were not merely trainees. The E.S.I.
Court had also taken into account other facts as well as the fact that as
against the strength of the permanent employees of 25, the employer had
represented that there were 87 apprentices and in that case, there was no
reasonable materials placed to show that the employees were not apprentices.
So, on that ground the findings of the learned E.S.I.Court was set aside.
9. But, here in this case, before the learned Principal District Judge,
Tirunelveli / E.S.I Court, as per Ex.A.5 to A.7, the agreements, stipends were
given to the apprentices and it is seen from the above documents that apprentice
were doing apprentice work in the petitioner / respondent’s Mill. In Ex.A.1
itself, the appellant / respondent had claimed Rs.20,601.95 being the E.S.I
Contribution for the stipend paid to the apprentice for the period between
01.10.1985 and 30.09.1986. So, the appellant cannot now turn around and say
that they are not the apprentices, but they are employees. There is absolutely
no document produced before the Principal District Judge, Tirunelveli, at the
time of trial of E.S.I.O.P.NO.7 of 1988 that there were no apprentices under
training in the said respondent’s Mill. For the stipend given to the
apprentices, the E.S.I.Corporation cannot claim E.S.I Contribution, as decided
in Employees’ State Insurance Corporation Vs. Tata Engineering & Locomotive Co.,
Ltd., and another reported in Volume XXX (1966 – 67) F.J.R. 304, wherein the
question arose for consideration before the Patna High Court was whether the
apprentice falls within the definition of ’employee’ under Section 2(9) of the
E.S.I.Act, 1948. While deciding that question, it has been held by the said
Court as follows:
“The Crucial question for consideration is whether on a true construction
of the agreement between the apprentices and respondent No.1 (annexure A) it can
be held that these apprentices are employees of respondent No.1 as defined in
Section 2(9) of the Act. On behalf of the petitioners, it was urged that, in
essence, these apprentices were employees and not mere students undergoing
training notwithstanding the use of such words as ‘students’, ‘for practical
training’, ‘course of study’, and ‘holding of periodical examinations’. Some
reliance was placed on the use of the words “serve the Company” occurring in
sub-clause (1) of clause 12 of the agreement which may be quoted as follows:
“That the Apprentice will during the whole of the said term of three years
of training diligently and faithfully serve the Company and to the utmost power
and skill attend to the Company’s business at such places and times as the
Company or its representatives shall direct”
10. Ex.A.5 to Ex.A.7 are the agreements entered into by the apprentices
with the Management / Respondent herein. So, the contentions of the learned
Counsel appearing for the appellant that there were no apprentices in the said
Mill and that they are employees, cannot be sustainable, as rightly held by the
Principal District Judge, Tirunelveli in E.S.I.O.P.NO.7 of 1988.
11. The next contention raised by the learned Counsel for the appellant,
was that interim relief paid to workers for the period from August 1986 to
September 1986 amounting to Rs.3,84,564.15 for which the E.S.I Contribution of
Rs.27,880.90 was demanded under Ex.A.1. It was contended by the learned Counsel
for the appellant that interim relief given to the employees, is also salary and
hence, the Mill / respondent herein, is liable to pay the E.S.I Contribution.
It is seen from Ex.A.1 that the E.S.I Contribution of Rs.27,880.90 was demanded
only for the interim relief paid to the workers for 8/85 to 9/86 and it was
definitely not for an ex-gratia payment. In Annexure 1 to A.13 shows that only
a basic wages and dearness allowance, house rent allowance and increments were
given to the workers as per the settlement. Further, there is no document
produced by the respondent herein / Mill to show that Rs.3,84,564.15 paid to the
workers for the period from 8/85 to 9/86 are only ex-gratia payments and not
interim wages.
12. The learned Counsel for the respondent relying on the decision in
Employees State Insurance Corporation, etc. Vs. The Narasimha Mills Limited,
etc., reported in 2003-1-L.W.210 and contended that as per Section 10-B,22 of
the Industrial Disputes Act, wages include ex-gratia payments also that the
E.S.I Contribution demanded under Section 2(22) of E.S.I.Act for the interim
relief paid to the workers of the respondent for the period from 8/85 to 9/86,
will be construed only as ex-gratia and that the Mill / respondent is not liable
to pay any E.S.I contribution.
13. But, the learned Counsel appearing for the appellant brought to the
notice of this court that the above said judgment has been over-ruled by the
judgment of the Apex Court in Employees’ State Insurance Corporation Vs.
Gnanambigai Mills Limited, reported in 2005(6) SC 67. The relevant observation
of the Apex Court is as follows:
“In our view the High Court has gone completely wrong in concluding that
by virtue of the award it ceases to be wages. As stated above, the Tribunal has
not applied, its mind as to whether or not the payments were wages. All that
the Tribunal did was to give its imprimatur to a compromise between the parties.
Merely because the parties in their compromise chose to term the payments as ‘ex
gratia payments’ does not mean that those payments cease to be wages if they
were otherwise wages. As stated above, they were wages at the time that they
were paid. They did not cease to be wages after the award merely because the
terms of compromise termed them as ‘ex gratia payments’. We are therefore
unable to accept the reasoning of the judgments of the High Court. The judgment
of the Division Bench as well as that of the Single Judge accordingly stand set
aside. It is held that the amounts paid are wages and contribution will have to
be made on those amounts also.”
14. So, I am of the view that the interim relief paid to the workers for
the period from 8/85 to 9/86 will not amount to ex-gratia payments as per
settlement arrived at between the Management and the workers, as contended by
the learned Counsel appearing for the respondent.
15. Under such circumstances, the findings of the learned Principal
District Judge, Tirunelveli that they are not interim relief, but they are ex-
gratia payments, cannot be accepted. So, under Ex.A.1, the respondent / Sri
Ganapathy Mill Company Limited is not liable to pay the E.S.I. Contribution of
Rs.27,880.90 to the appellant. Hence, I hold on the point that the award passed
by the learned Principal District Judge, Tirunelveli in E.S.I.O.P.No.7 of 1988,
dated 12.05.1994, is liable to be set aside in respect of the interim relief for
the period from 8/85 to 9/86 for the E.S.I Contribution to the tune of
Rs.27,880.90 and the finding in respect of E.S.I Contribution for apprentice
stipend for the period between 01.10.1985 to 30.09.1986 to the tune of
Rs.20,601.95 is to be confirmed. The point is answered accordingly.
16. In the result, the appeal is partly allowed and the findings of the
learned Principal District Judge, Tirunelveli, in E.S.I.O.P.No.7 of 1988, dated
12.05.1994 in respect of the E.S.I contribution for interim relief to the tune
of Rs.27,880.90 is hereby set aside. With regard to the other findings, the
award passed in E.S.I.O.P.No.7 of 1988 is confirmed. No costs.
rsb
To
The Principal District Judge –
The Employees’ State Insurance Judge,
Tirunelveli