1. The National Rayon Corporation Ltd. has preferred this appeal against Order, dated January 9, 1980 passed by Employees Insurance Court, Bombay in Application No. 61 of 1973. By the impugned order, the Corporation was directed to recover the employer's special contribution and employees' contribution on the amount of Rs. 33,34,102.43 for the period between January, 1970 and December, 1970 with interest at the rate of six per cent per annum from the date on which the said amount became payable. By the said order, the employer company was also directed to pay cost of Rs. 250 to the Corporation of the proceeding.
2. The appellant carries on business of manufacturing and selling Rayon threads. The appellant employed more than 6000 workers in its factory. The appellant employed about 40 to 41 contractors for carrying out various categories of work for the appellant on the premises of the factory. The said contractors employed various employees. The nature of contracts differed.
3. Sometime in the month of 1964, Inspector Kale of the Respondent Corporation visited the factory of the appellants and found employees of the contractors working on the premises of the factory. Relevant information was called for by the Corporation. No information was available in respect of the amounts paid as wages to the contractor's employees. In this situation, on August 5, 1971, the Respondent informed the appellants that the appellants shall have to pay is employe's special contribution as well as employees special contribution on the lump sum payments made by the appellants to the various contractors for various categories of work set-out in letter dated August 5, 1971. The said lumpsum payments computed from the Ledger Book of the appellant worked out to Rs. 34,93,701.66 for the period January, 1970 to December, 1970. The appellants had entered into a contract with one M/s. Dinkar & Co. regarding electrification of quarters of the employees of the appellant. The appellant had entered into contract with M/s. R. Pathak & Co. for work of oil painting and colour wash. Contracts were entered into with M/s. C. P. Patel & Co. for carrying out the work of loading and unloading. A contract was entered into between the appellant and M/s. Dave Brothers for transport of salt and sulphur etc. A contract was also entered into for carrying out repair work in respect of wooden articles with M/s. D. R. Mistry & Co. The appellant preferred application No. 61 of 1973 before the Employees Insurance Court at Bombay under Section 75 of the Act. Some of the Contractors were impleaded as party respondents therewith. The names of M/s. Dinkar & Co. and M/s. R. Pathak & Co. were deleted from the cause title of the application.
4. In the said application the appellant contended that the workers employed by the contractors were casual employees/workers. The appellant also contended that the appellants were not responsible to the Respondent Corporation to make any contribution in respect of contractors employees. The appellant also contended that the appellant was not liable to pay the amount claimed for contribution in view of the nature of the contract work in question.
5. It is not known whether written contracts were entered into between the parties or not. No such contracts were produced. The evidence led by the parties at the trial of the said proceeding was at least partly unsatisfactory. There is no clear evidence on the various issues which arose for consideration of the trial Court.
6. The trial Court held that the amount of contribution was liable to be computed not on the amount of Rs. 34,93,701.66 but on the amount of Rs. 33,34,102.43. The trial Court observed in Para 12 of its judgment that it was unable to agree with the view taken by High Court of Madras in the case of E. S. L. Corporation v. Ganambikai Mills Ltd. : (1974)IILLJ530Mad to the effect that the principal employer was not liable to make any contribution in respect of casual employees of the contractors. The Hon'ble Supreme Court has already agreed with the view taken by the High Court of Andhra Pradesh and the High Court of Karnataka in its recent judgment in the case of Regional Director, E. S. I. C. v. South India Flour Mills : (1986)IILLJ304SC . In view of the provisions of law contained in Sections 40 and 41 of the Employees State Insurance Act, 1948, the appellant is undoubtedly liable to make contribution in respect of contractors employees insofar as the Corporation is concerned. In its turn, the appellant as principal employer may pursue its remedy against the contractors. The causal Employees are also covered under the Act.
7. In my opinion there is no merit in this appeal except in respect of one of the contentions urged on behalf of the appellant. In Para 24 of its judgment the trial Court held that the amount of contribution shall have to be computed on all the amounts paid by the appellant to the contractors as it was for the appellants to adduce evidence to show what amount was paid by the appellant to the contractors towards their profit. The amount of contribution is payable on the wages paid to the contractors employees. No adverse inference can be drawn against the appellants in this behalf as the appellants must not be having the relevant information in respect of the amount of wages paid by the contractors to their employees. Some of the contractors were party respondents in the above referred proceeding. The trial Court could have compelled these contractors to bifurcate the figures and disclose the amount of wages paid to the employees of the contractors. This exercise was not attempted on either side. With all respect, I must observe that the trial of this proceeding was not conducted, in a manner satisfactory. This Court has, therefore, no alternative but to pass an Order of remand and direct the trial Court to give, further opportunity to the parties to lead evidence. The remedy of remand is, however, being obviated in view of the very fair attitude adopted by the learned Counsel of both sides.
8. The Court is invited to grant reasonable reduction from the lumpsum amount paid by the appellant to the contractors on the basis which is known as 'best judgment assessment' in common parlance. This undoubtedly creates problems for the Court. There is, however, no escape and the Court shall have to endeavour to reach a just conclusion on this aspect of the matter in light of submissions made at the Bar.
9. Mr. Presswala, the learned Counsel for the appellant has invited the attention of the Court to the Circular No. VIII-37/486, dated February 13, 1984 issued by the Employees State Insurance Corporation. The said circular takes note of the problem of the principal employers to bifurcate the figures when a lumpsum payment is made to the contractor. In such a situation when the principal employer is to be directed to make contribution on the basis of wages of contractor's employees, the lumpsum amount paid to the contractor or contractors is liable to be reduced by margin of profit and the cost of material utilised by the contractor for execution of the contract. In the said circular an opinion was expressed to the effect that the Corporation has decided to treat only 25 per cent of the amount of lumpsum contract as deemed wages of contractors' employees in view of the fact that the contractor must have used his own material and labour for execution of the contract. Mr. Presswala, learned Counsel for the appellant has submitted that in case of contracts which are subject-matter of this appeal, atleast in case of some of the contracts, the contractor had used his own material for execution of the contract. Mr. Presswala has submitted that this Court may reduce lumpsum paid to the contractors by 50 per cent if not by 75 per cent as clearest possible information in respect of each contract is not available from the record. As against that Mr. Jaykar, learned Counsel for the Corporation has invited the attention of the Court to the judgment of V. V. Vaze, J., dated January 10, 1986 in First Appeal No. 103 of 1976. In this case, the Court assumed the profit of the contractor to be 10 per cent. In this case the Court further observed that the said assumption would be variable depending upon the facts of the case.
10. Since neither of the parties desire the proceedings to be remanded and rightly so. In view of the lapse of time, I exercise my discretion and hold that having regard to the facts and circumstances of the case the lumpsum amount paid to the contractors fixed by the trial Court at Rs. 33,34,102.43, be reduced by 40 per cent. There was a very serious dispute between the parties about the quantum of the claim. In this view of the matter the provisions made by the trial Court for payment of interest and cost is also deleted.
11. In the result, the appeal is partly allowed. The order passed by the trial Court is substituted by the following order :
(a) The Corporation is authorised to recover the employee's special contribution and employees special contribution to be computed, on 60 per cent of the amount of Rs. 33,34,102.43 without any interest for the period between January, 1970 and December, 1970. The Appellant to pay the amount computed on the above footing to the respondent.
12. Mr. Presswala, the learned Counsel for the appellant makes a solemn statement to the Court that the appellant shall make the necessary payment to the Respondent within two weeks from receipt of the letter of demand from the Respondent No. 1 calculating the necessary amount on the footing aforesaid. On the said amount being paid the bank guarantee shall stand discharged. I accept the statement and order accordingly.
13. The parties shall bear their own cost throughout.
14. Issue of certified copy is expedited.