FACTS OF THE CASE

FACTUAL BACKGROUND

“The Nagpur Electric Light & Power Co., Ltd. operates out of a location on Kamptee Road in
Nagpur, where it transforms and transmits electrical energy. The building is surrounded by a
compound wall. There are many buildings, yards, and open spaces on the site. Inside the
premises, there are separate buildings for the receiving station, workshop, metre testing
department, engineers' quarters, general office, and stores. The company does not produce
electricity. It maintains an internal receiving station where it receives electrical energy in bulk
from the Maharashtra Electricity Board's Khapparkhed producing unit. When the energy is
received, it has a voltage of 11,000 volts. The energy is either carried through electric supply
lines to a transformer, where it is stepped down to 3,300 volts and then carried to the city's sub-
stations, where it is again stepped down to 400 volts by other transformers, or it is carried
directly from the receiving station to the city's sub-stations, where it is stepped down to 400
volts by other transformers, or, alternatively, it can be routed directly from the receiving station
to substations, where it is stepped down from 11,000 to 400 volts. The electricity is distributed
to users via electric supply lines that run from the substations.”

JUDICIAL BACKGROUND

“Under Section 75 of the Act, the corporation and the employees filed two separate applications
with the Employees' Insurance Court to have the question decided. Their argument is that, of
the five kinds of employees specified in the company's petition's appendices 1 to 5, those
associated with the receiving station and workshop (appendices 1 and 2) were employees
within the meaning of Section 2(9), but employees in the engineering, stores, and outdoor work
departments, as well as the metre, consumer, and allocation departments and administration
(appendices 3, 4, and 5) were not among them. The Employees State Insurance Corporation's
Regional Director challenged the applications, but admitted that the workers in the categories
listed in appendix 4 items 5 to 14 and appendix 5 items 1, 7 and 8 were not employees within
the meaning of Section 2. (9). The Employees Insurance Court determined that such workers,
as well as those listed in appendix 5 item 12, were not such employees.”

“The Employees Insurance Court determined that the workers in question were employees
under Section 2(9) of the Act. Under Section 82 of the Act, the company and the employees
filed two separate appeals against the verdict in the High Court of Bombay (Nagpur Bench).
The Employees Insurance Court's decision was upheld by the High Court, and the appeals were
dismissed. Letters Patent challenges against the orders were dismissed summarily by a High
Court Bench. The corporation and the employees have now filed two separate special leave
appeals with this Court.”

LEGAL ISSUES RAISED IN THE CASE

1. Whether or not the company has a factory, and if so, where it is located.
2. “Whether certain employees of the Nagpur Electric Light & Power Co. Ltd., are
employees within the meaning of Section 2(9) of the Employee’s State Insurance Act,
1948 (34 of 1948).”

RULES
 • Section 4 of the Employee’s State Insurance Act, 1948
• Section 1(5) of the Employee’s State Insurance Act, 1948
• Section 2(12) of the Employee’s State Insurance Act, 1948
• Sections 2(g) of the Employee’s State Insurance Act, 1948
• Section 2(k) of the Employee’s State Insurance Act, 1948
• Section 2(9) of the Employee’s State Insurance Act, 1948
• Section 2(1) of the Factories Act, 1948

ANALYSIS

“Whether the company maintains a factory and if so, where its factory is located.”

“In the Employees State Insurance Act of 1948, Section 4 specifies that it applies to all
factories except seasonal industries, and Section 1(5) states that it may apply to any other
establishment or class of establishments, whether industrial, commercial, agricultural, or
otherwise.”

A ‘factory’ is defined as follows in Section 2(12) of the Employees State Insurance Act of
1948:

Except for a mine and a railway operating shed, any facility, including its surroundings,
qualifies as a factory if it meets the following criteria:

1. At least 20 people are working or were working there on any given day in the previous
12 months, and
2. A manufacturing process is being carried out with the assistance of power in any
component of it.

“If these two prerequisites are met, the entire premises, including its precincts, is considered a
factory, even if only a portion of the premises is used for manufacturing. A factory's premises
can be either a building or open land or both.”

Ardeshir H. Bhiwaniwala v. The State of Bombay 1

“It was stated in this case that there could be two or more establishments within the same
compound wall. The premises employed in the manufacturing process may constitute a factory,
but the other premises within the same compound wall may be used for purposes unrelated to
the manufacturing process and may not be considered part of the factory.”

“Power” is defined in Section 2(g) of the Act as “electric energy, or any other type of anergy
that is mechanically transmitted and is not generated by human or animal agency.”

Section 2(k) of the Act defines “‘manufacturing process’ as any process for-

1 (1961) 2 S.C.R. 542.

 1. Making, altering, repairing, ornamenting, finishing, packing, oiling, washing, cleaning,
breaking up, demolishing, or otherwise treating or adapting any article or substance
with a view to its use, sale, transport, delivery or disposal, or
2. Pumping oil, water/or sewage, or
3. Generating, transforming or transmitting power; or
4. Composing types for printing, printing by letter press, lithography, photogravure or
other similar process or book binding;
5. Constructing, reconstructing, repairing, refitting, finishing or breaking up ships or
vessels.”

“The process of converting electrical energy from high to low potential and the process of
transmitting the energy through supply lines are both manufacturing processes, according to
Section 2(k)(iii). When the abovementioned clause is applied to the facts in issue, it can be
shown that the two operations are carried out with the help of power via electrical gadgets and
other devices in a portion of the company's premises. More than twenty people worked and
continue to work on the site. No part of the facility is used for anything that isn't related to the
production process.”

The High Court said that “This manufacturing process is carried on by the Company not only
in the building known as the workshop or the receiving station, but also over the entire area
over which the transmission process is carried on, including the sub-stations where electricity
is stored and supplied to the consumers by further transmission lines. As a result, any area
where this process is carried out will be considered a factory under the Employees' State
Insurance Act."

“The Supreme Court rejected this line of reasoning stating that it seems like a startling
proposition that every inch of the wide area over which the transmission lines are spread is a
factory within the meaning of Section 2(12) of the Act. The Court held that “A factory must
occupy a fixed site”2 A company’s factory has a fixed site. It is located inside the Kamptee
Road premises and its boundaries are fixed by the compound wall of the premises.”

“Whether certain employees of the Nagpur Electric Light & Power Co. Ltd., are employees
within the meaning of Section 2(9) of the Employee’s State Insurance Act, 1948 (34 of 1948).”

“The concerned category of workers are employed on remuneration which in the aggregate
does not exceed four hundred rupees a month.”

“Under Section 2(9) of the Employee’s State Insurance Act Employee is defined as any
person employed for wages in or in connection with work of a factory or establishment to
which this Act applies and”-

1. “Who is directly employed by the principal employer on any work of, or incidental or
preliminary to or connected with the work of, the factory or establishment, whether
such work is done by the employee in a factory or establishment, or elsewhere; or”
2. “Who is employed on the premises of the factory or establishment by or through an
immediate employer or under the supervision of the principal employer or his agent on
work that is ordinarily part of the factory or establishment's work or is preparatory to
or incidental to the factory or establishment's purpose; or”

2 Halsbury’s Laws of England, 3rd ed., Vol. 17, art. 15, p.15.
 3. “Whose services are temporarily lent or let on hire to the principal employer by the
person with whom the person whose services are lent or let on hire has entered into a
service contract;”

but does not include-

a. “any member of the Indian naval, military, or air forces;”

b. “any person hired on a monthly wage of more than four hundred rupees.”

A similar contrast can be drawn with Section 2(1) of the Factories Act, 1948, which defines
worker as "any person employed, directly or through any agency, whether for wages or not, in
any manufacturing process, or in cleaning any part of the machinery or premises used for a
manufacturing process, or in any other kind of work incidental to, or connected with, the
manufacturing process, or the subject of manufacturing process."

“It can be seen that the Employees State Insurance Act's definition of an employee is broader
than the Factories Act's definition of a worker. The purpose of the Factories Act is to protect
factory workers' health, safety, welfare, reasonable working hours, leave, and other benefits.
This Act does not apply to field workers who work outside of the factory.”

State of Uttar Pradesh v. M.P. Singh3

“The purpose of the Employees' State Insurance Act, according to the Court, is to provide
sickness, maternity, disablement, and medical benefits to factory and establishment employees,
as well as medical benefits to their dependents. The benefit of this Act extends, among other
things, to the employees listed in Section 2(9)(i), whether they work within or outside the
factory or facility.”

“There are three types of employees covered by Section 2(9)'s definition of "employee." We
are concerned about the employment class described in Section 2(9) (i). The lower courts ruled,
correctly in my opinion, that all of the contested categories' workers are persons employed for
wages in or in connection with the company's factory's work and are directly employed by the
firm on factory work or work incidental to or linked with factory work. Some of them work in
the factory, while others work elsewhere, yet they are all employees under Section 2(9) (i).”

“Consider the employees listed in Appendix III, Appendix IV items 1–4, and Appendix V items
2–6 and 9. All of the employees included in these categories, whether clerical or not, are
employed in connection with factory work, that is, work involving the transformation and
transmission of electrical power. Some of the personnel work as clerks rather than doing
manual labour. However, if he is hired in conjunction with factory activity, a person conducting
non-manual work can be considered an employee under Section 2(9)(i). The administrative
staff's responsibilities are inextricably linked to the factory's operations.”

Employee’s State Insurance Corporation Bombay v. Raman4

“In this case, A corporation had a plant and an administrative office in this scenario. The office
was housed in a structure that was part of the same compound as the factory. A single

3 MANU/SC/0045/1959; 1960CriLJ750
4 [1957] I L.L.J. 267
compound wall encircled the entire compound. It was discovered that the factory's work began
with the collection of raw materials and ended with the manufacturing of finished goods, and
that the labour of selling the goods was unrelated to the factory's activity. The administrative
office was in charge of both domestic and international sales of the factory's products. Separate
muster and wage rolls, as well as separate accounts, were kept by the factory and the
administrative office. In these circumstances, it was determined that the administrative office
clerks, whose primary duties included taking down dictations from the manager and other
officials and typing out letters, were not employees within the meaning of Section 2 (9).”

“However, the current situation is rather different. In the current factual situation, the company
only has one factory location. The factory is in charge of converting and transmitting
electricity. All of the individuals in question, including the clerks and administrative staff, are
working on this project. None of them work at a separate establishment unrelated to the
factory's operations.”

Some employees work outside the plant, yet their responsibilities are related to the factory's
operations. As a result, they are employees in the sense of section 2(9)(i). Some people work
in the substations. Sub-stations are frequently used as standalone factories. The sub-station
attendants are responsible for work that is directly related to the factory's activity at the main
station. As a result, they are classified as workers under Section 2(9)(i).

CONCLUSION

“In light of the foregoing legal provisions and judicial pronouncements, it can be concluded
that, in the current factual scenario, the company satisfies the conditions set forth in Section 2
(12) of the Employees State Insurance Act and thus maintains a factory because it has a fixed
site that is located within the Kamptee Road premises and whose boundaries are defined by the
premises' compound wall.”

“Furthermore, the corporation in this situation keeps a single industrial location. The factory is
in charge of converting and transmitting electricity. All of the individuals in question, including
the clerks and administrative staff, are working on this project. None of them work at a separate
establishment unrelated to the factory's operations.”

Some employees work outside the plant, yet their responsibilities are related to the factory's
operations. As a result, they are classified as employees under Section 2(9) of the Act. Some
people work in the substations. Sub-stations are frequently used as standalone factories. The
sub-station attendants are responsible for work that is directly related to the factory's activity
at the main station. As a result, they are classified as employees under Section 2(9) of the Act.