{"id":163200,"date":"2009-05-25T00:00:00","date_gmt":"2009-05-24T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/the-regional-director-vs-m-joy-vargheese-on-25-may-2009"},"modified":"2015-08-07T08:18:32","modified_gmt":"2015-08-07T02:48:32","slug":"the-regional-director-vs-m-joy-vargheese-on-25-may-2009","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/the-regional-director-vs-m-joy-vargheese-on-25-may-2009","title":{"rendered":"The Regional Director vs M.Joy Vargheese on 25 May, 2009"},"content":{"rendered":"
Kerala High Court<\/div>\n
The Regional Director vs M.Joy Vargheese on 25 May, 2009<\/div>\n
       \n\n  \n\n  \n\n \n \n  IN THE HIGH COURT OF KERALA AT ERNAKULAM\n\nIns.APP.No. 55 of 2003(A)\n\n\n1. THE REGIONAL DIRECTOR, E.S.I.CORPORATION\n                      ...  Petitioner\n\n                        Vs\n\n\n\n1. M.JOY VARGHEESE, MANAGING PARTNER,\n                       ...       Respondent\n\n                For Petitioner  :SRI.P.SANKARANKUTTY NAIR\n\n                For Respondent  :SRI.A.M.SHAFFIQUE (SR.)\n\nThe Hon'ble MR. Justice K.M.JOSEPH\nThe Hon'ble MR. Justice M.L.JOSEPH FRANCIS\n\n Dated :25\/05\/2009\n\n O R D E R\n                          K. M. JOSEPH &\n                 M.L. JOSEPH FRANCIS, JJ.\n              - - - - - - - - - - - - - - - - - - - - - - - - - -\n                       INS.A.No. 55 of 2003\n              - - - - - - - - - - - - - - - - - - - - - - - - - -\n             Dated this the 25th day of May, 2009\n\n                             JUDGMENT\n<\/pre>\n
Joseph, J.\n<\/p>\n
      This is an appeal filed under Section                      82(2) of the<\/p>\n
Employees State Insurance Act (hereinafter referred to as ‘the<\/p>\n
Act’). The respondent filed the application before the E.S.I.<\/p>\n
Court under Section 75 r\/w. Section 77 of the Act seeking a<\/p>\n
declaration that the assessment of Rs.4,59,300\/- towards E.S.I.<\/p>\n
contribution in respect of production charges in the Books of<\/p>\n
Account of the respondent for the period from 1.4.1991 to<\/p>\n
31.3.1995 is unsustainable.\n<\/p>\n
      2.  The establishment of the respondent is engaged in<\/p>\n
manufacture and sale of Micro Cellular Sheets, Hawai Chappals<\/p>\n
and Straps. The establishment is covered under the E.S.I. Act.<\/p>\n
According to the      respondent, as his factory lacks facility to<\/p>\n
INS.A.No. 55 of 2003
\n                                    2<\/span><\/p>\n
manufacture the required quantum of straps and chappals for<\/p>\n
marketing, he used to place orders on contract basis to outside<\/p>\n
manufacturing units. It was their case that to maintain the quality of<\/p>\n
chappals, it supplied Micro Cellular sheets and straps to the<\/p>\n
manufacturing units and the contractors were instructed about the<\/p>\n
details of the items to be manufactured.       After the manufacturing<\/p>\n
process is over, the respondent’s staff used to go over to the units and<\/p>\n
check the products and take delivery of the same. If the manufactured<\/p>\n
items were not keeping with the requirements, it would be rejected.<\/p>\n
The case of the appellants is that the      payments made shown as<\/p>\n
production charges are amounts paid as wages to the employees of the<\/p>\n
contractors and they are to be treated as the employees of the<\/p>\n
respondent and they were bound to deduct the amounts under the Act,<\/p>\n
failing which action shall be taken.\n<\/p>\n
            3. There was an inspection by the Inspector. He found that<\/p>\n
large amounts were shown in the accounts as production charges.<\/p>\n
Therefore, Form C-18 notice proposing determination of contribution<\/p>\n
INS.A.No. 55 of 2003
\n                                    3<\/span><\/p>\n
due on adhoc basis amounting to Rs.4,59,300\/- was issued on<\/p>\n
16.3.1998. According to the appellant, there was no response and<\/p>\n
therefore the respondent was constrained to conclude the assessment<\/p>\n
ex parte and passed an order assessing Rs.4,59,300\/- towards E.S.I.<\/p>\n
contribution on production charges for the period from 1.4.91 to<\/p>\n
31.3.1995.\n<\/p>\n
      4. On the side of the respondent PWs. 1 to 5 were examined<\/p>\n
and Exts. P1 to P33 were marked. The appellant gave evidence as<\/p>\n
DW1 and produced Exts.D1 to D5A.          The Insurance Court, on a<\/p>\n
consideration of the entire matter, allowed the application and declared<\/p>\n
that the assessment of demand of E.S.I. contribution on production<\/p>\n
charges is unsustainable. Feeling aggrieved by the said order this<\/p>\n
appeal has been filed by the E.S.I. Corporation.<\/p>\n
      5.  We heard the learned counsel for the appellant        and the<\/p>\n
learned counsel for the respondent.\n<\/p>\n
      6. The following questions are raised as substantial questions of<\/p>\n
law.\n<\/p>\n
INS.A.No. 55 of 2003
\n                                  4<\/span><\/p>\n
          i)   The scope and ambit of passing orders under<\/p>\n
    Section 45A of the E.S.I. Act is properly analysed by the<\/p>\n
    E.S.I. Court in strict conformity with the section while<\/p>\n
    setting aside the order under challenge.\n<\/p>\n<\/p>\n
          ii) Whether the E.S.I. Court is justified in interfering<\/p>\n
    the orders under Section 45A of the Act by declaring the<\/p>\n
    order as illegal even without giving another opportunity to<\/p>\n
    pass fresh orders by the quasi judicial authority under the<\/p>\n
    Act.\n<\/p>\n<\/p>\n
          iii) Speculative anlysis of evidence can form the basis<\/p>\n
    of a judgment.\n<\/p>\n<\/p>\n
          iv) When an assessment is made on the basis of the<\/p>\n
    documentary admission made in the acocunt books whether<\/p>\n
    the conclusion of the E.I. Court that the assessment is made<\/p>\n
    in speculative exercise of power is justifiable in law.<\/p>\n
          v)     Whether the employees employed by the<\/p>\n
    contractors are employees as defined under Section 2(9) of<\/p>\n
    the E.S.I. Act.\n<\/p>\n
INS.A.No. 55 of 2003
\n                                   5<\/span><\/p>\n
            vi) Whether the contractors are immediate employees<\/p>\n
     coming under Section 2(13) of the E.S.I. Act.”<\/p>\n
      7. According to the learned counsel for the appellant. this is a<\/p>\n
case where pursuant to the notice issued to the respondent, there was<\/p>\n
no response on his part. Noting huge amount as production charges in<\/p>\n
the accounts,   taking note of the fact that     contractors were also<\/p>\n
engaged in the business     and other materials it was concluded by<\/p>\n
determination order that the employees of the contractors were being<\/p>\n
effectively supervised by the respondent and consequently they would<\/p>\n
constitute employees within the meaning of the Act. The respondent<\/p>\n
failed to respond to the notice. Thereafter, according to the learned<\/p>\n
counsel for the appellant, when the liability is determined, it may not<\/p>\n
be open to the respondent to require the Court to go into the matter<\/p>\n
afresh as it were the original adjudicating authority. He further points<\/p>\n
out that, since the point of issue that arises for consideration and<\/p>\n
decision was whether there was supervision by the principal employer<\/p>\n
within the meaning of the definition ’employee’, as there was clear<\/p>\n
INS.A.No. 55 of 2003
\n                                    6<\/span><\/p>\n
documentary evidence in the form of entries in the account, that the<\/p>\n
respondent was incurring supervisory charges, the true purport of the<\/p>\n
said expression could not be got over by tendering oral evidence. He<\/p>\n
would submit that it is a case where the finding is perverse. The<\/p>\n
appellant has raised a substantial question of law, which warrants<\/p>\n
consideration by this Court and in the facts of the case the answering<\/p>\n
of the same in favour of the appellant is necessary, he contends.<\/p>\n
      8.   The learned counsel for the respondent on the contrary<\/p>\n
submits that this is a case where notice was issued on the basis of the<\/p>\n
inspection conducted. The case is set up on the basis of the amounts<\/p>\n
styled as production charges as also supervisory charges in the<\/p>\n
accounts. The counsel also points out that in view of the availability<\/p>\n
of jurisdiction under Section 75 of the Act, where the entire materials<\/p>\n
have been produced and evidence adduced, the mere fact that the<\/p>\n
respondent has not produced materials before the authority could not<\/p>\n
detract from the availability of jurisdiction with the court to decide the<\/p>\n
issue.\n<\/p>\n
INS.A.No. 55 of 2003
\n                                    7<\/span><\/p>\n
      9. The Tribunal has found apparently on the strength of the<\/p>\n
depositions of PWs. 1 and 2, who are the employees of the respondent<\/p>\n
as also on the strength of the depositions of PWs. 3 to 5, who are some<\/p>\n
of the contractors, to whom the work was given, that the expression<\/p>\n
supervisory charges are nothing, but the amount expended by the<\/p>\n
respondent for the purpose of taking delivery of the product from the<\/p>\n
contractors.\n<\/p>\n
      10. The Insurance Court has extracted the definition of the word<\/p>\n
’employee’. We would also refer to the same. It reads as follows:<\/p>\n
            “Employee” means any person employed for wages<\/p>\n
      in or in connection with the work of a factory or<\/p>\n
      establishment to which this Act applies and<\/p>\n<\/blockquote>\n
            i) who is directly employed by the Principal<\/p>\n
      employer on any work of or incidental or preliminary to or<\/p>\n
      connected with the work of, the factory or establishment,<\/p>\n
      whether such work is done by the employee in the factory<\/p>\n
      or establishment or elsewhere; or<\/p>\n<\/blockquote>\n
            ii) who is employed by or through an immediate<\/p>\n
      employer on the premises of the factory or establishment<\/p>\n
INS.A.No. 55 of 2003
\n                                   8<\/span><\/p>\n
      or under the supervision of the principal employer, or his<\/p>\n
      agent on work which is ordinarily part of the work of the<\/p>\n
      factory or establishment or which is preliminary to the<\/p>\n
      work carried on in or incidental to the purpose of the<\/p>\n
      factory or establishment, or<\/p>\n<\/blockquote>\n
            iii) xx    xxx “<\/p><\/blockquote>\n
      11.  Undoubtedly the case of the respondent would not fall<\/p>\n
within the ambit of the first portion. The entire focus is whether the<\/p>\n
respondent’s case would fall within the scope of the latter clause.<\/p>\n
There can be dispute that either the employment must be done within<\/p>\n
the premises of the principal employer or it is carried on in another<\/p>\n
premises, where there must be supervision of the work by the principal<\/p>\n
employer. The court has placed reliance on the decision of the Calcutta<\/p>\n
High Court to take the view that merely for the reason that the<\/p>\n
principal employer retains right to accept or reject the goods after the<\/p>\n
manufacturing is over, it would not amount to a case of principal<\/p>\n
employer supervising the employee        within the meaning      of the<\/p>\n
definition.  In fact the learned counsel for the appellant also does not<\/p>\n
INS.A.No. 55 of 2003
\n                                     9<\/span><\/p>\n
essentially dispute the correctness of this proposition. What he would<\/p>\n
submit is the conduct of the respondent in not responding to the notice<\/p>\n
and attempting to explain away the expressions found in the<\/p>\n
documentary evidence by oral evidence.\n<\/p>\n
     12.    In a proceedings under Section 75 of the Act, the powers of<\/p>\n
the E.S.I. Court are that of a Civil Court.        The law contemplates<\/p>\n
adducing    of oral evidence, production of documents and material<\/p>\n
objects. In fact necessarily it is just as a power which could have been<\/p>\n
exercised by a Civil Court . Section 75 of the Act speaks of matters to<\/p>\n
be decided by the E.S.I. Court. It reads as follows:<\/p>\n
            “S.75. Matters to be decided by Employees’<\/p>\n
     Insurance Court.- (1) If any question or dispute arises<\/p>\n
     as to –\n<\/p><\/blockquote>\n
            a) whether any person is an employee within the<\/p>\n
     meaning of this Act or whether he is liable to pay the<\/p>\n
     employee’s contribution, or<\/p>\n<\/blockquote>\n
            b) the rate of wages or average daily wages of an<\/p>\n
     employee for the purposes of this Act, or<\/p>\n
INS.A.No. 55 of 2003
\n                                10<\/span><\/p>\n<\/blockquote>\n
          c) the rate of contribution payable by a principal<\/p>\n
    employer in respect of any employee, or<\/p>\n<\/blockquote>\n
          d) the person who is or was the principal employer<\/p>\n
    in respect of any employee, or<\/p>\n<\/blockquote>\n
          e) the right of any person to any benefit and as to<\/p>\n
    the amount and duration thereof, or<\/p>\n
          (1)ee) any direction issued by the Corporation<\/p>\n
    under Section 55A on a review of any payment of<\/p>\n
    dependents’ benefit, or<\/p>\n
          (2) xx<\/p>\n<\/blockquote>\n
          g) any other matter which is in dispute between a<\/p>\n
    principal employer and the Corporation, or between a<\/p>\n
    principal employer and an immediate employer or<\/p>\n
    between a person and the Corporation or between an<\/p>\n
    employee and a principal       immediate employer, in<\/p>\n
    respect of any contribution or benefit or other dues<\/p>\n
    payable or recoverable under this Act, or any other<\/p>\n
    matter required to be or which may be decided by the<\/p>\n
    Employees’ Insurance Court under this Act.<\/p>\n<\/blockquote>\n
INS.A.No. 55 of 2003
\n                                    11<\/span><\/p>\n
      such question or dispute subject to the provisions of sub-<\/p>\n
      section (2A) shall be decided by the Employees’<\/p>\n
      Insurance Court in accordance with the provisions of this<\/p>\n
      Act .”\n<\/p>\n<\/p>\n
      13. If that be so, in a case where matters are such that they are to<\/p>\n
be decided by the Court under Section 75 read with the powers<\/p>\n
available to it under Section 78, it can safely be said that the<\/p>\n
proceedings before the E.S.I. Court is in the nature of an original<\/p>\n
proceedings.    It cannot be said to be an appeal as such. The disputes<\/p>\n
are to be finally decided by the designated authority, viz. the Insurance<\/p>\n
Court and none other. We further notice that in this case, as already<\/p>\n
noticed, both sides have adduced evidence. It is true as the learned<\/p>\n
counsel pointed out, that it has been brought to the notice of the<\/p>\n
Insurance Court that the respondent did not respond to the notice. But<\/p>\n
can it be said that the E.S.I. Court was without jurisdiction to decide<\/p>\n
the issue? The Insurance Court did have the jurisdiction to decide the<\/p>\n
issue. Once it is found that the E.S.I. Court did have the jurisdiction to<\/p>\n
decide the issue, at worst it could be said that the conduct of the<\/p>\n
INS.A.No. 55 of 2003
\n                                     12<\/span><\/p>\n
respondent was a matter, which was to be weighed by the Insurance<\/p>\n
Court.\n<\/p>\n
      14.   On a perusal of the entire evidence, the Insurance Court has<\/p>\n
come to the conclusion that the respondent is not liable to pay the<\/p>\n
amount, as the employees of the contractors are not to be treated as his<\/p>\n
employees. The case of supervision set up by the appellant was found<\/p>\n
not acceptable. The very same principle has been accepted by the Full<\/p>\n
Bench of the Madras High Court in E.S.I. Corporation rep. by its<\/p>\n
Regional Director v. Bethal Engineering Company,<\/a> rep. by Ms.<\/p>\n
S.V. Umayal (2008 (1) LLJ 278). Essentially it may amount to a<\/p>\n
question of fact as to whether there is supervision.         Applying the<\/p>\n
doctrine to the facts of this case, it may not give rise to a substantial<\/p>\n
question of law.\n<\/p>\n
      15.     It is true that the expression used in the account book is<\/p>\n
supervision charges.     It appears to be a little incongruous to say that it<\/p>\n
is to be treated as expenses. In this case, it should be noted that PWs. 3<\/p>\n
to 5 are persons who are contractors to whom work was given. They<\/p>\n
have given evidence as to the system in practice. They specifically<\/p>\n
INS.A.No. 55 of 2003
\n                                    13<\/span><\/p>\n
spoke about absence of supervision. PWs. 1 and 2 have gone into the<\/p>\n
box and spoke about the amount representing supervision charges<\/p>\n
being expenses.    We cannot say that it is a finding which is perverse.<\/p>\n
It is a view taken by the Court accepting the version of the respondent<\/p>\n
and its witnesses. In this view of the matter, we do not think that the<\/p>\n
appellant has made out a case for interference.<\/p>\n
       16. The appeal fails and it is dismissed.\n<\/p>\n<\/p>\n
                                           (K. M. JOSEPH)
\n                                                Judge<\/p>\n
                                       (M.L. JOSEPH FRANCIS)
\n                                                 Judge<\/p>\n
tm<\/p>\n","protected":false},"excerpt":{"rendered":"
Kerala High Court The Regional Director vs M.Joy Vargheese on 25 May, 2009 IN THE HIGH COURT OF KERALA AT ERNAKULAM Ins.APP.No. 55 of 2003(A) 1. THE REGIONAL DIRECTOR, E.S.I.CORPORATION … Petitioner Vs 1. M.JOY VARGHEESE, MANAGING PARTNER, … Respondent For Petitioner :SRI.P.SANKARANKUTTY NAIR For Respondent :SRI.A.M.SHAFFIQUE (SR.) The Hon’ble MR. Justice K.M.JOSEPH The Hon’ble […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[8,21],"tags":[],"class_list":["post-163200","post","type-post","status-publish","format-standard","hentry","category-high-court","category-kerala-high-court"],"yoast_head":"\nThe Regional Director vs M.Joy Vargheese on 25 May, 2009 - Free Judgements of Supreme Court & High Court | Legal India<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.legalindia.com\/judgments\/the-regional-director-vs-m-joy-vargheese-on-25-may-2009\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"The Regional Director vs M.Joy Vargheese on 25 May, 2009 - 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