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Date : 01/09/2023

(2006) 10 KAR CK 0055

In the Karnataka High Court
Case No : Miscellaneous First Appeal No. 6250/03

Employees State Insurance Corporation APPELLANT

Vs
New Taj Mahal Cafe (Pvt.) Ltd. RESPONDENT

Date of Decision : 31-10-2006

Acts Referred:
Employees State Insurance (General) Regulations, 1950 — Regulation 12, 14, 15
Employees State Insurance Act, 1948 — Section 45 A, 75
Citation : (2007) 112 FLR 574 : (2006) ILR (Kar) 4695 : (2007) 3 KarLJ 277 :
(2007) 2 LLJ 448
Hon'ble Judges : V. Jagannathan, J
Bench : Single Bench
Advocate : M.P. Geetadevi, , Harikrishna S. Holla,
Final Decision : Allowed

Judgement
V. Jagannathan, J.
In this appeal, the Employees State Insurance Corporation (ESIC) has questioned
the legality of the order passed by the ESI Court, Mangalore in setting-aside the
orders passed u/s 45A of the Act.
2. I have heard the learned Counsel for the parties.
3. Learned Counsel Smt. Geetha devi appearing for the Corporation submitted that
in respect of the two orders u/s 45A of the Act, the respondent establishment took
up the matter before the ESI Court by filing an application, u/s 75 of the ESI Act
and the ESI Court after examining the material on record came to the conclusion
that insofar as the contribution demanded by the appellant concerning the
employment of security guards is concerned, there is evidence to the effect that
the contributions have been paid towards the security guards and as such once
again, directing the principal employer i,.e, the respondent herein to pay the
contribution on the employment of three security guards will not arise and
accordingly the order dated 11.9.2002 i.e., Ex.A.9 was set-aside. So far as the said
order of the ESI Court is concerned, learned Counsel submitted the said order does
not require any interference in view of the fact that the contributions have been
paid in respect of the security guards. However, the main grievance of the
appellant according to the learned Counsel is that insofar as the order passed as
per Ex.A. 10 requiring the respondent to pay the contributions in respect of the
wages paid to the employees of the contractor is concerned, the ESI court did not
property appreciate the entire material on record and has passed an illegal order
and therefore the said part of the order of the ESI court setting aside the
contributions demanded as per Ex.A. 10 requires interference at the hands of this
Court.
4. Elaborating the submissions in this regard, learned Counsel Smt Geetadevi
submitted that it has come in the evidence of both AW1 and AW2 that a number of
workers were engaged by the contractor to get the repair work done and in view of
this admission by the two witnesses examined on behalf of the respondent
establishment, the ESI Court could not haw closed its eyes to the said evidence but
on the contrary ESI Court has gone off in a tangent by referring to the materials
produced by the respondent establishment and has observed that the amounts
which were spent as per Exs. 13,14 to 23 do pertain to the purchase of materials
and amount given to the contractors and the said documents are silent with regard
to the labour component and therefore the question of contribution being paid on
the wages paid to the workers of the contractors will not arise. This reasoning of
the ESI Court according to the appellant''s counsel is totally erroneous and contrary
to the evidence on record.
5. The further submission made is to the effect that it was an incumbent on the
part of the employer to have placed evidence with regard to the number of
workers engaged by the contractor and the wages paid to those workers and when
the employer does not place all these materials before the ESI Court, the burden
does not shift to the Corporation to prove the same and when the respondent
establishment do not come out with the correct amount of wages that was paid to
the workers of the contractor, the ESI Court need not go into that question any
further and has to accept the amount (sic) by the corporation. It was also
submitted that once it is admitted that the respondent establishment did engage a
contractor to carry out the repair works and if the respondent fails to get the
details of the workers engaged by the contractor or the wages paid to the workers
by the contractors, the appellant corporation is entitled to demand the contribution
from the respondent-establishment. In support of the above submission, learned
Counsel placed reliance on the decision reported in Modella Woollens Limited v.
Employees State Insurance Corporation and Anr. 1994 (3) Suppl. SCC 580 and
Dharam Deo Singh Vs. State of Uttar Pradesh, .
6. On the other hand, learned Counsel for the respondent-establishment at the out-
set contended that appeal itself is not maintainable because no substantial question
of law is involved and as the question related to number of workers engaged by
the contractor is a pure question of law, no law is involved and a such relying on
the decision of this Court reported in Employees'' State Insurance Corporation,
Bangalore Vs. Super Tailors, Gulbarga, , it was argued that the appeal has to fail
for lack of substantial question of law being involved. Apart from this, learned
Counsel for the respondent-establishment also referred to the observations of the
trial Court at paragraph 6 of the impugned order and contended that the question
of the contractor engaging the workers does not arise and it is not necessary in the
case of carrying out repairs or furnishing an establishment that workers will
necessarily have to be employed. As such the order of the ESI Court is just and
proper.
7. In the light of the submissions made as above and having carefully gone
through, the material on record, the points that arise for consideration are the
following:
(a) Whether any substantial question of law is involved in this appeal.
(b) Whether the order of the ESI Court setting-aside the contribution demanded by
the corporation in respect of the wages paid to the works of the contractor is
sustainable in law.
8. Insofar as the first point is concerned, although learned Counsel for the
respondent-establishment contended very forcefully that no substantial question of
law is involved in this appeal, I am unable to agree with the said submission
because one of the substantial questions of law raised by the appellant-corporation
is whether the respondent is liable to pay the contribution in respect of the workers
engaged by the contractor. In my view, this question is a question of law having
regard to the provisions of the ESI Act and the definition of the "employee" as per
Section 2(9) of the Act, Therefore, there is no substance in the argument advanced
by the learned Counsel for the respondent-establishment that no substantial
question of law is involved. On the other hand, as opined by me above, the
question of law involved is as to whether the establishment is liable to pay
compensation in respect of the workers engaged by the contractor. Having regard
to the definition of the employee in Section 2(9) of the act, I answer the point No.
1 in the affirmative.
POINT No. 2
9. Coming to the merits of the case, it is not in dispute that the respondent-
establishment did carry out the work of repairs and the number of documents
produced as per Exs. 14 to 23 bear testimony to this fact. Apart from this, there is
also the evidence of AW1 - Shankarprabhu - the accountant of the respondent-
establishment and in his evidence by way of affidavit he has stated at Paragraph 7
that workers who have done the building repairs are not the workers of the
employer but were the persons employed by the outside contractor. AW2 K
Varnana Shenoy who is the Managing Director of the respondent-establishment in
the course of his evidence by way of an affidavit has also stated particularly during
his cross examination that when the ESI inspector visited the establishment, the
respondent was informed to split the wages paid to the workers in the total
expenditure involved in carrying out the repairs and further necessary records
were also asked to be sent to the corporation but he goes on to admit that neither
the establishment furnished the information with regard to the wages paid to the
workers out of the total expenditure incurred nor any records were sent in this
regard. This witness further admits in the cross examination that the contractor,
one Mohandas Shetty did repair work and number of workers have engaged and
for that period AW2 did not maintain any records and he is also not aware of the
wages paid by the contractor to the workers.
10. In the face of such evidence on record placed by AW1 and AW2, it becomes
very clear that number of workers were engaged by the respondent-establishment
to carry out the repair works and inspite of the ESI inspector directing the
respondent-establishment to furnish the particulars of the wages paid, the
respondent did not give any positive reply, Such being the State-of-affairs in the
instant case, the decision of the Hon''ble Supreme Court in Modella Woollens''s
case stated as supra becomes squarely applicable. In the aforesaid decision, the
Hon''ble Apex Court has observed that "In the application filed before the
Insurance Court, if the employer does not come out with the correct amount which
according to them was payable, assuming their contention that the production
bonus was not wages, was not upheld". The ESI Court did not go into that question
any further and its acceptance of the amount calculated by the corporation as the
correct amount of contribution therefore has to be upheld". In another decision
viz.,, Dharam Deo Singh Vs. State of Uttar Pradesh,, it has been observed by the
Hon''ble Supreme Court that under the ESI Act "It is the duty of the respondent
Company to get the necessary details of the workman employed by the contractor
at. the commencement of the contract since primary responsibility of payment of
the contribution is on the primary employer". The Court went on to further observe
that On the admitted fact that the respondent-establishment had engaged the
contractor to execute the work, it was also the duty of the respondent company to
get the temporary identity certificates issued to the workmen as per the provisions
of Regulations 12, 14 and 15 of the Employees State Insurance (General)
Regulations, 1950". In the very same decision, the Apex Court has further
observed that "lf the respondent company failed to get the details of the workmen
employed by the contractor, it has only itself to thank for its default". Since the
workman, were in fact engaged by the Contractor to execute the work in question
and the respondent-company had failed to pay the contribution, the appellant-
corporation was entitled to demand the contribution although both the contribution
period and the corresponding benefit period had expired.
11. In the light of the aforesaid decision of the Apex Court which in my opinion is
squarely applicable to the case on hand, the ESI Court was totally in error in
ignoring the evidence on record particularly those of AW1 and AW2 and it is rather
surprising that the ESI Court makes an observation that the employer only spent
about securing the materials for the repairs and that there is no labour component
involved, I fail to understand as to how the employer could have got the work of
repairs done by spending such huge amount as could be seen from Exs. A14 to 23
without engaging any workers. The evidence of Aws 1 and 2 goes to indicate that
the workers were in fact employed by the contractor concerned. Hence the said
observation of the trial Court at paragraph 6 is totally perverse and contrary to the
evidence placed by the respondent-establishment of AW1 and AW2. Before parting
with this case, it also has to be mentioned that the ESI Court has made certain
observation with, regard to the appellant asking the respondent employer to go
with records to Bangalore. In my opinion, the observations made at paragraph
Nos. 16 and 17 are totally uncalled for and it is hoped that in future the ESI Court
will not make such observations which have no bearing on the facts and questions
involved before the ESI Court are concerned. Restraint on the part of the ESI Court
is necessary while making observations of the nature that is found in the impugned
order.
12. In the result, I answer the point, under consideration in the negative and hold
that the ESI Court was in error in setting-aside the order passed u/s 45A as per
Ex.A. 10 and therefore the said part of the order of the ESI Court requires to be
set-aside. Hence I pass the following
ORDER
The appeal is allowed. The impugned order of the ESI Court insofar as setting-
aside the order passed u/s 45A as per Ex. A. 10 is Set-aside.