{"id":227360,"date":"2005-06-14T00:00:00","date_gmt":"2005-06-13T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/vrindavan-hotels-p-ltd-vs-e-s-i-corpn-on-14-june-2005"},"modified":"2015-12-31T17:09:15","modified_gmt":"2015-12-31T11:39:15","slug":"vrindavan-hotels-p-ltd-vs-e-s-i-corpn-on-14-june-2005","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/vrindavan-hotels-p-ltd-vs-e-s-i-corpn-on-14-june-2005","title":{"rendered":"Vrindavan Hotels (P) Ltd vs E.S.I. Corpn on 14 June, 2005"},"content":{"rendered":"
Kerala High Court<\/div>\n
Vrindavan Hotels (P) Ltd vs E.S.I. Corpn on 14 June, 2005<\/div>\n
       \n\n  \n\n  \n\n \n \n  IN THE HIGH COURT OF KERALA AT ERNAKULAM\n\nMFA No. 565 of 1996\n\n\n1. VRINDAVAN HOTELS (P) LTD.               \n                      ...  Petitioner \n\n                        Vs\n\n\n1. E.S.I. CORPN.                           \n                       ...       Respondent\n\n                For Petitioner  :SRI.M.V.JOSEPH                          \n\n                For Respondent  :SRI.TPM.IBRAHIM KHAN                    \nThe Hon'ble MR. Justice K.A.ABDUL GAFOOR                \nThe Hon'ble MR. Justice K.M.JOSEPH                      \n\n Dated :     14\/06\/2005\n O R D E R\n<\/pre>\n
.PL 55
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\n           K.A. ABDUL GAFOOR & @@
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           – – – – – – – – – – – – – – – – – – – – -@@
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\n           M.F.A.No.565 of 1996 E@@
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           – – – – – – – – – – – – – – – – – – – – -@@
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\n           Dated this the 14th day of June, 2005.@@
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\n           JUDGMENT@@
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\n.HE 1
\n          Abdul Gafoor, J.@@
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          \tA private limited company is the appellant.  It
\n          came into existence on  1.2.1994.    It  is  a  company
\n          engaged in a family business of conducting hotel.  Even
\n          before the formation of the company, the hotel business
\n          was being  conducted.  There was a restaurant and a bar
\n          attached to the  hotel  by  name  Dwaraka  Hotel.    As
\n          regards  the  coverage  of the employees engaged in the
\n          hotel including the bar, there were disputes  including
\n          as  to  whether  bar  was  a  different  establishment.
\n          Finally, the matter went up to the  Supreme  Court  and
\n          the employer  could  not  succeed.  Later, the employer
\n          filed an application seeking de-coverage from  the  Act
\n          from 1.10.1989.      That   was  not  accepted  by  the
\n          Employees’ State Insurance Corporation  on  the  ground
\n          that  bar  and  restaurant  were part and parcel of the
\n          hotel business.  It  was  thereafter  the  company  was
\n          formed with  the  name “Vrindavan Hotels Limited”.  The
\n          restaurant facility available in the  hotel  was  being
\n          run  by  a  lessee,  who  had  been  employing  his own
\n          workmen.   In  spite  of  that,  the  Employees’  State
\n          Insurance  Corporation clubbed the lodge as well as the
\n          restaurant together for the  purpose  of  coverage  and
\n          issued   Ext.C18   notice  of  assessment  and  Ext.C19
\n          recovery notice.  It was in  the  above  circumstances,
\n          the employer filed an application before the Employees’
\n          Insurance    Court   for   a   declaration   that   his
\n          establishment became de-covered from the purview of the
\n          E.S.I.Scheme with effect from 1.10.1998.   Taking  into
\n          account   the  history  of  the  establishment  it  was
\n          contended that the restaurant was an  inseparable  part
\n          of the hotel business of the company that the lodge and
\n          restaurant were integral part and that the employees in
\n          both  the  sections  have  to be taken together for the
\n          purpose of coverage under the Act and the Scheme.    In
\n          support  of this contention, the ESI Corporation relied
\n          on the memorandum of association of the company wherein
\n          one among the main objects was to carry on business  of
\n          the restaurant as well.\n<\/p>\n
          \t2.    Appreciating   this  contention  and  the
\n          evidence on record, the EI court found that the  lessee
\n          was  really  an agent of the company and therefore, the
\n          restaurant was not a  separate  establishment  and  the
\n          employees in both the sections have to be taken for the
\n          purpose of  coverage  under  the  ESI  scheme.  This is
\n          under challenge in this appeal at the instance of  that
\n          company.\n<\/p>\n
          \t3.   It  is  contended  by  the  appellant that
\n          though the memorandum of association contains that  the
\n          company  does  have an object of conducting restaurant,
\n          it is not obligatory always to conduct the  restaurant.
\n          It  can  also  lease  out the space in its ownership to
\n          another to conduct the restaurant on  lease  basis  and
\n          really  a  lease  deed  was  executed as is revealed by
\n          Ext.D3.  It provided that the lessee has to arrange his
\n          own workmen.  Therefore the lessee is the employer  and
\n          not the company – the lessor.\n<\/p>\n
          \t4.   In  support of this contention, a decision
\n          of the Andhra Pradesh High Court reported in K.V.Ratnam@@
\n                                                       AAAAAAAAAA
\n          v.  Government of India and another {1987 Lab.I.C.1288}@@
\n          AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAA
\n          is relied on.    Another  decision  of  this  court  in
\n          K.C.Thomas v.     Regional  Director,  ESI  Corporation<\/a>@@
\n          AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAA
\n          {1997(1) K.L.J 321}is also relied on.   It  is  further@@
\n          AAAAAAAAAAAAAAAAAAA
\n          contended  that  there  ought to have been a show cause
\n          notice under Section  45(a)  of  the  Employees’  State
\n          Insurance Act,  1948  before determination.  Therefore,
\n          the  recovery,  without  such  show  cause  notice  and
\n          hearing is  illegal.    Reliance  is much placed on the
\n          decision reported in  Fenner  Garments  v.    E.S.I.C.,@@
\n                                AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAA
\n          Madras {1994(2) LLJ 754}.@@
\n          AAAAAAAAAAAAAAAAAAAAAAAA\n<\/p>\n
          \t5.   On  the other hand, it is submitted by the
\n          E.S.I.Corporation that the restaurant  is  an  integral
\n          part of  the  hotel  business of the appellant.  Merely
\n          because  a  lease  arrangement  is  made  between   the
\n          parties,  it will not make it a different establishment
\n          having a distinct entity.    Even  in  the  lease  deed
\n          Ext.D3,   the  appellant  company  is  insisting  about
\n          employment  of  necessary  persons  and   running   the
\n          restaurant in   a   proper  manner.    That  itself  is
\n          sufficient to make it clear that restaurant  is  not  a
\n          separate business  of  the company.  The lessee is none
\n          other than the husband of one  among  the  major  share
\n          holders in the company.  Much reliance is placed on the
\n          decision     reported    in    Madona    Textiles    v.@@
\n                                         AAAAAAAAAAAAAAAAAAAAAAAA
\n          E.S.I.Corporation {20002 (2) K.L.T.  741}.    There  is@@
\n          AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAA
\n          unity of ownership, management and control and unity of
\n          employment and with its functional integrity and unity,
\n          the  lodging house as well as the restaurant shall have
\n          to be taken as joint establishment run by the  company.
\n          When  it  is viewed so, the number of employees will be
\n          more than 20 resulting in coverage.  So,  there  is  no
\n          reason to interfere with the impugned order.\n<\/p>\n
          \t6.  Ext.D3 is a lease deed even  admittedly  by
\n          the respondent.  Merely because the lessor had insisted
\n          proper  running  of  the restaurant after employing the
\n          necessary workmen by the lessee,  it  cannot  be  taken
\n          that the restaurant is under the same management of the
\n          company.   Of  course,  the  decision  in  K.C.Thomas’s@@
\n                                                     AAAAAAAAAAAA
\n          case{1997(1) K.L.J.321} relied on by the appellant does@@
\n          AAAAAAAAAAAAAAAAAAAAAAA
\n          not have application to the facts of this case.  It  is
\n          regarding  leasing out a factory altogether to a lessee
\n          whereby the owner will cease to become  liable  to  pay
\n          contribution.   But  the fact situation in the decision
\n          of the Andhra Pradesh High Court in  Ratnam’s  case  is@@
\n                                               AAAAAAAAAAAAAA
\n          similar to  the  one  arising  on the case on hand.  In
\n          Ratnam’s case, there was a lodge and a  restaurant  and@@
\n          AAAAAAAAAAAAA
\n          the  restaurant  was  leased out to a different person.
\n          Considering such a situation, the Andhra  Pradesh  High
\n          Court held that:\n<\/p>\n
           “To  attract  the  application  of  the  act in@@
\n          i
\n                  respect  of  the  employees  engaged   in   the
\n                  restaurant   section  being  clubbed  with  the
\n                  employees engaged in the lodging section, these
\n                  two  in   my   judgment   are   different   and
\n                  independent  establishments and, therefore, for
\n                  each establishment the criteria laid down under
\n                  the  Act  will  have  to  be  satisfied  before
\n                  attracting the application of the Act.”\n<\/p>\n
          Merely because the lessee is the husband of  one  among
\n          the  major  share  holders of the company, it cannot be
\n          taken that  the  restaurant  is  a  part  of  the  same
\n          establishment as the lodge run by the company.\n<\/p>\n
          \t7.    It  is  true  that  the  running  of  the
\n          restaurant is also one  of  the  main  objects  of  the
\n          company as per the memorandum of association.  But that
\n          does  not  mean  that  the company shall always run the
\n          establishments  and   businesses   mentioned   in   the
\n          memorandum of association.  Even if sufficient space is
\n          owned  by  the  company  to  do  such business, nothing
\n          prevents the company from leasing out the premises  for
\n          doing some  other business.  Therefore, the stipulation
\n          in the memorandum of association of the company  cannot
\n          go against  the  contention  of  the  company.\n<\/p>\n
          \t8.  In such circumstances, we are  inclined  to
\n          accept  the view taken by the Andhra Pradesh High Court
\n          to hold that the restaurant run on lease basis  has  to
\n          be  taken as a separate establishment and the employees
\n          therein cannot be  clubbed  to  the  employees  in  the
\n          lodging house  to  decide  coverage.    The decision in
\n          Madona Textiles cited by the respondents  do  not  have@@
\n          AAAAAAAAAAAAAAA
\n          any  application  to  the facts situation of this case.
\n          There is no unity  of  ownership,  management  and  the
\n          company  does not have control in that business, as the
\n          restaurant is run, based on  a  lease  by  a  different
\n          person.   It  has  to  be managed by the lessee and the
\n          employees are to be controlled by him  and  the  lessor
\n          does not have any role in that regard.  So, there is no
\n          functional integrity even.\n<\/p>\n
          \tAccordingly the appeal is allowed and the order
\n          under challenge is set aside.  No costs.\n<\/p>\n
.SP 1
\n.JN <\/p>\n
          \t\t\t\t    (K.A.ABDUL GAFOOR)@@
\n              AAAAAAAAAAAAAAAAAAAAAA
\n          \t\t\t\t\t   JUDGE.@@
\n               AAAAAAAAA<\/p>\n
          \t\t\t\t      (K.M.JOSEPH)@@
\n              AAAAAAAAAAAAAAAAAA
\n          \t\t\t\t\t   JUDGE@@
\n               AAAAAAAA
\n          sk\/-\n<\/p>\n
.PA
\n……..T…….T…….T…….T…….L…….T…….T…….T…………J
\n((HDR 0<\/p>\n
))
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\n.SP 2<\/p>\n
                                         K.A.ABDUL GAFOOR &@@
\n                                        jAAAAAAAAAAAAAAAAAA
\n                                         K.M.JOSEPH,  JJ.@@
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                                        – – – – – – – – – – – – – – – – – – –\n<\/p>\n
                                         M.F.A.No.565 of 1996 E@@
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                                         JUDGMENT@@
\n                                        jEEEEEEEE<\/p>\n
                                         14th June, 2005.@@
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                                        – – – – – – – – – – – – – – – – – – –<\/p>\n","protected":false},"excerpt":{"rendered":"
Kerala High Court Vrindavan Hotels (P) Ltd vs E.S.I. Corpn on 14 June, 2005 IN THE HIGH COURT OF KERALA AT ERNAKULAM MFA No. 565 of 1996 1. VRINDAVAN HOTELS (P) LTD. … Petitioner Vs 1. E.S.I. CORPN. … Respondent For Petitioner :SRI.M.V.JOSEPH For Respondent :SRI.TPM.IBRAHIM KHAN The Hon’ble MR. Justice K.A.ABDUL GAFOOR 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-227360","post","type-post","status-publish","format-standard","hentry","category-high-court","category-kerala-high-court"],"yoast_head":"\nVrindavan Hotels (P) Ltd vs E.S.I. Corpn on 14 June, 2005 - 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\/vrindavan-hotels-p-ltd-vs-e-s-i-corpn-on-14-june-2005\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Vrindavan Hotels (P) Ltd vs E.S.I. 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