ORDER
B. Seshasayana Reddy, J.
1. This Civil Miscellaneous Appeal is directed against the order dated 10-1-2001 passed in E.I. Case No. 37 of 1999 on the file of Employees Insurance Court and Chairman Industrial Tribunal-I, Hyderabad whereby the learned Chairman dismissed the application of the appellant filed under Section 75(1)(g) of Employees State Insurance Act, 1948.
2. Facts of the case in brief giving rise to filing of this Civil Miscellaneous Appeal by the appellant-Vijaya Spinning Mills Ltd. are:
The appellant is a spinning mill having its factory at Ganguru, Penamaluru Mandal, Krishna District. A canteen in the company premises is run by a Co-operative Society registered under A.P. Co-operative Societies Act. The said society is known as Vijaya Spinning Mills Employees Co-operative Canteen Limited. It has its own bye-laws and it is run on no profit and no loss basis. The Managing Committee of the canteen looks after the canteen and maintains the books and registers of the canteen. The appellant has no control of whatsoever over the affairs of the canteen. The respondent-Corporation demanded the appellant for payment of ESI contributions on the wages paid to the canteen employees. The appellant sent explanation stating that the canteen employees are not the employees of the appellant company and hence there is no obligation on its part to pay the ESI contributions. The respondent - corporation passed orders under Section 45-A of the ESI Act, 1948 (as amended) and directed the appellant to pay Rs. 21,785/- towards ESI Contributions in respect of the employees working in the canteen run in the company premises for the purpose of serving essential food items to the workmen. The appellant filed the appeal petition under Section 75 of the ESI Act before the Employees State Insurance Court-cum-Industrial Tribunal, Hyderabad. The respondent-Corporation filed written statement contending that the appellant is the principal employer of the employees working in the canteen run in the company premises and therefore it is liable to pay ESI contributions in respect of the employees working in the canteen. On behalf of the appellant/petitioner, P.W.1 and 2 were examined and Exs.P-1 to P-10 were marked and on behalf of the respondent-Corporation, RW. 1 and RW.2 were examined and Exs. Rule 1 to Rule 7 were marked. On considering the evidence and on hearing Counsel for both the parties, the learned Chairman confirmed the order dated 20-4-1999 and thereby dismissed the application. Aggrieved by the order passed in E.I. Case No. 37 of 1999 on the file of Employees Insurance Court and Chairman, Industrial Tribunal-I, Hyderabad, the petitioner-Vijaya Spinning Mills Limited has filed this Civil Miscellaneous Appeal.
3. Learned Counsel for the appellant contends that the canteen is run by the Cooperative Society registered under A.P. Cooperative Societies Act, 1964 and therefore employees working in the canteen are not the workmen in the company and so there is no obligation on the part of the company to pay ESI contributions as demanded by the respondent-Corporation. He placed reliance on the following decisions in support of his contention.
(1) CESC Limited v. S.C. Bose, 1992 FLR (SC) 248.
(2) H.S. Sharma v. Artificial Limbs Mfg. Corporation, 2002 (92) FLR 14.
(3) Regl. Dir.., Esic v. C.C. Industries Soc. Ltd. 2001 (1) LLJ 1597 (187).
(4) Ferro Alloys Corporation Limited and Ors. v. Government of Andhra Pradesh, : (2002)IIILLJ392AP (DB).
(5) Employees' State Insurance Corporation, Hyderabad v. Laxmi Power Loom Weavers Co-operative and Sales Society Ltd., Warangal and Ors., 1986 (1) LLN 584.
(6) Hindustan Machine Tools Employees Union v. Hindustan Machine Tools Ltd and Ors., 1995 (75) FLR 506.
In the first cited decision the Supreme Court held that the employees of contractors to whom certain contract works were entrusted by the Corporation did not fall within the scope of Section 2(9) of Employees State Insurance Act, 1948. It is further held that checking of works after completion and supervision of the works is not the same and they have different perspectives. Checking of works on its completion is an activity, the purpose of which is to finally accept or reject the work, on the touchstone of job specifications. In the cited decision the works engaged by the contractor were not working on the premises of the establishment and they were carrying on the works allotted to them at site outside the establishment. In the second cited decision the Supreme Court held that whenever in discharging of a statutory mandate a canteen is set up by an establishment, the employees of such canteen not necessarily become the employees of that establishment and that it depends on how the obligation is discharged by such establishment. It is further held that merely because a canteen has been set up in compliance with the rules by providing the equipment and for the rate at which the foodstuffs would be sold at the canteen by the contractor would not necessarily mean that the employer was running the canteen through the agency of the contractor. The dispute in the above-referred decision was on claiming status of regular workmen by the employees working in the canteens maintained by the contractors. The provisions of Employees State Insurance Act, 1948 are not referred in the cited decision. In the third cited decision, Delhi High Court held that the members of the Co-operative Society are not employees within the meaning of Section 2(9) of the Employees State Insurance Act merely because the society was engaged in any organised business or because the bye-laws of the society require them to be on probation to be on formal enrolment as members. In the fourth cited decision, our High Court held that simply because the industrial unit is a specified industry within the meaning of Section 46 of the Factories Act it is not obligatory on the factory to get the canteen work done by its own workers without entrusting it to a contractor. The provisions of Employees State Insurance Act, 1948 are not referred in the cited decision. In the fifth cited decision, our High Court held that members of Co-operative Society working in society though for remuneration are not employees within the meaning of Section 2(9) of the Employees State Insurance Act. In the sixth cited decision, Jaipur Bench of Rajasthan High Court held that simply because the employees of the company who were also the executive members of the committee of co-operative canteen, it cannot be considered that there was a direct link to manage or supervise the canteen by the company.
4. The learned Standing Counsel for the respondent-Corporation contends that it was the statutory obligation on the part of the appellant to maintain canteen and it was the principal employer of the workers engaged by the contractors in the canteen and therefore it was liable to pay the contributions in respect of the workers engaged by the contractor in the canteen. It is further contended by him that since the labour were employed on the premises of the principal employer, the principle laid down by the Supreme Court in Regional Director, ESI Corporation v. Standard Pottery Works, 2002 Lab.IC 419, fully covers the situation. He also placed reliance on the decision of the Supreme Court in Royal Talkies, Hyderabad v. Employees State Insurance Corporation, : (1978)IILLJ390SC , and the Division Bench decision of our High Court in LPA No. 292 of 1998 disposed of on 18-6-2003.
5. There seems to be no dispute thatit is the statutory obligation under Section46 of the Factories Act for the appellant toset up canteen in the establishment. Theappellant discharged the obligation byentrusting the work to the society to run thecanteen in the factory premises. The essentialquestion is whether the appellant-factory whohas a statutory obligation to run the canteenfor its employees enters into an agreementwith a society to maintain the canteen canbe held liable for contributions as theprincipal employer of the workmen, althoughthey are engaged independently by the ownerof the canteen.
6. It is the case of the appellant that the workers in the canteen are not directly under its control. At this stage it is appropriate to read the definition of employee once again before analyzing components thereof. Section 2(9) reads as follows:
'employee' means any person employed for wages in or in connection with the work of a factory or establishment to which this Act applies and--
(i) 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 the factory or establishment or elsewhere; or
(ii) who is employed by or through an immediate employer on the premises of the factory or establishment or under the supervision of the principal employer or his agent on work which is ordinarily part of the work of the factory or establishment or which is preliminary to the work carried on in or incidental to the purpose of the factory or establishment; or
(iii) whose services are temporarily lent or let on hire to the principal employer by the person with whom the person whose services are so lent or let on hire has entered into a contract of service; and includes any person employed for wages on any work connected with the administration of the factory or establishment or any part, department or branch thereof or with the purchase of raw materials for, or the distribution or sale of the products of, the factory or establishment or any person engaged as an apprentice, not being an apprentice engaged under the Apprentices Act, 1961, or under the standing orders of the establishment; but does not include--
(a) any member of (the Indian) naval, military or air forces; or
(b) any person so employed whose wages (excluding remuneration for overtime work) exceed such wages as may be prescribed by the Central Government:
Provided that an employee whose wages (excluding remuneration for overtime work) exceed such wages as may be prescribed by the Central Government) at any time after (and not before) the beginning of the contribution period, shall continue to be an employee until the end of that period.'
7. A question came up for consideration before the Supreme Court in Royal Talkies (supra) cited where a cinema theatre Manager who has no statutory obligation to run a canteen or provide a cycle stand but, for the better amenities of his customers and improvement of his customers and improvement of his business, enters into an agreement with another to maintain a canteen and a cycle stand and that employs on his own, workers in connection with the canteen and the cycle stand, can be held liable for contribution as the principal employer of the workmen although they are engaged independently by the owner of the canteen or the cycle stand. The Supreme Court considered the definition of employee in the Employees State Insurance Act, 1948 and held that keeping a cycle stand and running a canteen are incidental to the primary purpose of theatre and therefore the workers employed in the canteen and the cycle stand come within the definition of an employee of the establishment. A Division Bench of our High Court in LPA No. 292 of 1998 (Employees' State Insurance Corporation v. Prakash Road Lines Private Limited) considered the question whether the casual labour employed by the contractor in the premises of the principal employer are covered by the provisions of the ESI Act. It is useful to refer the observation of the Division Bench of our High Court in the aforesaid decision and it is thus:
'The only issue that arises for consideration in this L.P.A. directed against the judgment dated 16.12.1997 in C.M.A. No. 1754 of 1992 is whether the casual labour employed by the contractor in the premises of the principal employer are covered by the provisions of the E.S.I. Act (for short 'the Act') and whether the employer is liable to pay contribution. This issue is no more res integra. It has been held by the Apex Court in Regional Director, E.S.I. Corporation v. Standard Pottery Works, 2002 Lab.IC 419, that if the casual labour is employed in the premises of the principal employer for the work connected with the business or incidental to the main business, the principal employer is liable to deposit E.S.I, contribution as the labour would fall within the meaning of Section 4(i) of the Act. Admittedly, in the instant case, the labour were employed in the premises of the principal employer and therefore the principle laid down by the Supreme Court in Standard Pottery's case fully covers the situation.'
It is no more in dispute that the workers engaged by the contractor are working on the premises of the appellant-factory and therefore under Section 2(9)(ii) they are to be construed as the employees of the appellant-factory and the appellant-factory is liable to pay the ESI Contributions as demanded by the respondent-Corporation. The ESI Court considered the material brought on record in right perspective and upheld the order of the respondent-Corporation dated 20-4-1999,
8. In the result, this CivilMiscellaneous Appeal fails and it is herebydismissed confirming the order dated 10-1-2001 passed in E.I. Case No. 37 of 1999 onthe file of Employees Insurance Court andChairman Industrial Tribunal-I, Hyderabad.No costs.