BEFORE THE MADURAI BENCH OF THE MADRAS HIGH COURT (JUDICATURE)
DATED: 11/02/2005
CORAM
THE HON'BLE MR.MARKANDEY KATJU, CHIEF JUSTICE
and
THE HON'BLE MRS.JUSTICE PRABHA SRIDEVAN
C.M.A. No.890 of 1997
The Regional Director,
ESI Corporation,
143, Sterling Road,
Madras 34. ..Appellant.
-Vs-
K.V.B. Rajeswaran,
Prop: Ezhil Achagam,
8, Kakkathope Street,
Madurai. ..Respondent.
PRAYER: This Civil Miscellaneous Appeal is directed against the
order of the learned II Additional District Judge, Madurai (The Employees
State Insurance Judge, Madurai) dated 31.05.1993 and made in ESIOP No.
32/1989.
!For Appellant :: Mr.J.S.Murali
^For Respondent :: No appearance
:J U D G M E N T
(The Judgment of the Court was delivered by The Honble The Chief
Justice)
This Civil Miscellaneous Appeal has been filed under Section 82 of the
ESI Act, against the order of the Employees State Insurance Court, Madurai
dated 31.05.1993.
2. We have heard the learned counsel for the appellant. The
respondent has been served and the name of the respondent has also been
printed in the cause list, but neither the respondent appeared nor any
representation is made on behalf of the respondent.
3. The case of the respondent herein in this Civil Miscellaneous
Appeal is that he was running a Printing Press in the name and style of Ezhil
Achagam, in which, the respondent has employed 5 or 6 persons only and never
employed 10 or more persons, at any time and hence, the provisions of the ESI
Act are not attracted. The respondent received a notice dated 08.04.1988 from
the ESI Corporation, fixing the date of personal hearing as 14.06.1988.
Subsequently, the respondent received an order dated 24.04.1989, passed under
Section 45A of the ESI Act, determining the employees contribution amount for
the period from 27.5.1984 to 30.8.1986. It is alleged that this order is not
valid and that the respondent never refused to furnish any particulars nor
obstructed any officials of the Corporation and there was no justification for
invoking Section 45A of the ESI Act. It is also alleged that the principles
of natural justice have been violated and the calculation of contribution is
not correct.
4. The Corporation filed a written statement before the ESI Court,
alleging that the respondent was running a Printing Press at Madurai using
Power (4 U.P.) and employing about 18 persons (13 persons for composing and 5
persons for printing). The respondent seems to have his Press from 1979. On
inspection of their accounts and other documents, it was found that the
respondent is covered by the Act from 27.5.19 84. The respondent did not
produce the ledgers, when called to do so. The Corporation issued show cause
notices, dated 14.10.1986 and 13.3 .1987, proposing to determine the
contribution. It was served on him on 21.04.1987 and the respondent was given
a reasonable opportunity to represent his case. It is denied that there is
any violation of the principles of natural justice.
5. The ESI Court, after discussing all the material placed before it,
has held that the Corporation had wrongly clubbed the two establishments and
had wrongly arrived at the conclusion that the establishment of the respondent
is attracted by the provisions of the ESI Act, and the ESI Court allowed the
petition filed by the respondent.
6. The short question, that is to be decided in this appeal is:-
Whether there was one establishment or there were two establishments?
7. The respondent in this appeal had contended before the E.S.I.
Court that there were two separate establishments, one for printing work and
the other for composing work. We do not agree with this submission. As held
in the decision of the Division Bench of this Court in The Regional Director,
ESI Corporation, Madras and Another Vs. Aruna Stores, Proprietrix J.Shantha
and Another, 2005 (1) MLJ 354, the concept of functional integrality is a well
known concept in industrial law, and two units can be treated as one unit for
the purpose of industrial law although it may be that for the purpose of sales
tax, etc., or under the general principles of law, they may be treated as two
separate units. As observed in the aforesaid decision, if ostensibly they are
two units, but, there is functional integrality in the two, then for the
purpose of industrial law, they should be treated really as one unit.
8. In the above said decision, it was further held that
the concept of functional integrality has been referred to in several
decisions of the Supreme Court, where it was considering, whether two units
were really one establishment, e.g.,
(1)Indian Cable Company Limited Vs. Its Workmen, 1962 (1) LLJ 409
(2)Associated Cement Companies Limited Vs. Their Workmen, 1960 (1) LLJ 1
(3)South India Mill Owners Association Limited Vs. Coimbatore District
Textile Workers Union, 1962 (1) LLJ 223 (SC)
(4)Western India Match Company Limited Vs. Their Workmen, 1963 (2) LLJ 459
(SC)
(5)National Iron and Steel Company Limited Vs. State of West Bengal, 1967 (2)
LLJ 23 (SC)
(6)Pratap Press Vs. Their Workmen, 1960 (1) LLJ 388 (SC)
(7)Wenger & Company Vs. Their Workmen, 1963 (2) LLJ 403 (SC)
(8)Workmen of Straw Board Manufacturing Company Limited Vs. Company, 1974 (1)
LLJ 499 (SC)
(9)Fine Knitting Company Limited Vs. Industrial Court, 1962 (1) LLJ 2 75
(SC)
9. Thus, in Associated Cement Companies Ltd., Vs. Their Workmen,
1960 (1) LLJ 1, the Supreme Court observed:-
It is, perhaps, impossible to lay down any one test as an
absolute and invariable test for all cases. The real purpose of these tests
is to find out the true relation between the parts, branches, units, etc. If,
in their true relation, they constitute one integrated whole, we say that the
establishment is one; if, on the contrary, they do not constitute one
integrated whole, each unit is then a separate unit. How, the relation
between the units will be judged must depend on the facts proved, having
regard to the scheme and object of the statute which gives the right of
unemployment compensation and also prescribes a disqualification therefor.
Thus, in one case, the unity of ownership, management and control may be the
important test; in another case functional integrality or general unity may be
the important test; and in still another case, the important test may be the
unity of employment. Indeed, in a large number of cases several tests may
fall for consideration at the same time. The difficulty of applying these
tests arises because of the complexities of modern industrial organization;
many enterprises may have functional integrality between factories, which are
separately owned; some may be integrated in part with units or factories
having the same ownership and in part with factories or plants which are
independently owned. In the midst of all complexities, it may be difficult to
discover the real thread of unity.
10. In Pratap Press Vs. Their Workmen, 1960 (1) LLJ 388, the Supreme
Court has observed:-
“The question, whether the two activities, in which the single owner
is engaged, are one industrial unit or two distinct industrial units is not
always easy of solution. No hard-and-fast rule can be laid down for the
decision of the question and each case has to be decided on its own peculiar
facts. In some cases, the two activities each of which by itself comes within
the definition of industry are so closely linked together that no reasonable
man would consider them as independent industries. There may be other cases
where the connection between the two activities is not by itself sufficient to
justify an answer one way or the other, but the employers own conduct in
mixing up or not mixing up the capital, staff and management may often provide
a certain answer”.
11. Applying the aforesaid principles, in the present case, we are of
the clear opinion that there is functional integrality between the composing
unit and the printing unit. The composing work is being done in the 1st
floor, whereas the printing is being done on the ground floor. This is a
common practice in many printing press establishments, and hence we cannot
say, by any stretch of imagination, that the composing work must be treated as
a separate unit and an independent establishment, apart from the printing
work. In our opinion, there is clear functional integrality between the two.
It may be that for the purpose of reducing sales tax liability and for
avoiding being covered by various labour statutes, the respondent sought to
create an impression that there were two units. However, in view of the
concept of functional integrality, we are not inclined to accept the version
of the employer. In view of the above, we are of the opinion that there was
only one unit and not two units. Hence, the respondent is attracted by the
provisions of the ESI Act.
12. In the result, this Civil Miscellaneous Appeal is allowed and the
impugned order is set aside. No costs.
Index: Yes
Website: Yes
srcm/sm
Copy to:
1.The II Additional District Judge, Madurai (The Employees State Insurance
Judge, Madurai).
2. The Record Keeper, VR Section, Madurai Bench of the Madras High Court