ORDER
P.K. Sethuraman, J.
1. Respondent is the appellant. The appeal is against the order passed by the Employees' State Insurance Judge (First Additional Judge, City Civil Court), Madras, in E.I.O.P. No. 13 of 1979 filed by the respondent herein under Section 75 of the Employees' State Insurance Act.
2. The respondent herein filed the petition alleging that it is a partnership firm having 8 partners and carrying on business as sole selling agents of dairy products and they have an establishment in Kerala and Karnataka State besides at Madras city. The establishments at Madras, Kerala and Karnataka are different entities and the administration and management of each establishment are different and independent. There are 8 employees in the establishment at Madras, 7 at Karnataka and 23 at Kerala. The Employees' State Insurance Corporation viz., the appellant herein, sent a letter to the respondent herein to the effect that the respondent establishment is covered by the Employees' State Insurance Act, 1948 and they are liable to pay the contributions, on the basis of the two notifications issued by the Government of Tamil Nadu wherein shops are also covered by the said Act. The said letter was issued according to the Government notifications relied upon by the Employees' State Insurance Corporation, and hence the same cannot apply to their establishments outside the State of Tamil Nadu and therefore they sought a declaration that the establishment in Madras and the establishments in Kerala and Karnataka are not liable to be covered under the Act 34 of 1948. The Employees' State Insurance Corporation in the written statement contended that the establishments in Madras, Kerala and Karnataka are not independent, but they are branches of the Madras firm and so they are liable to be covered under the Act. If the number of employees in all the three States had been taken into consideration the coverage cannot be questioned and even in the Madras unit the employees were more than 20 and they become covered even without reference to Karnataka and Kerala. Accordingly the respondent herein will not be entitled for the reliefs claimed.
3. The following are the issues framed for determination:
i) Are all the employees at Madras, Karnataka and Kerala liable to be taken into account for the purpose of coverage under Act 34 of 1948?
ii) To what relief is the petitioner entitled?
4. On behalf of the petitioner, the respondent herein, the Manager of the firm was examined as P.W. 1 and one Inspector of the Employees State Insurance Corporation, who inspected the offices of the petitioner's firm at Madras and also the other branches, had been examined as R.W.1. The document filed by the petitioner has been marked as Ex. P-1 and on the side of the respondent/the appellant herein documents filed have been marked as Exs. R-1 to R-4. The learned First Additional Judge, City Civil Court, Madras constituting the Employees State Insurance Court, held that the notification issued by the Government of Tamil Nadu will not cover the establishments in Kerala and Karnataka States, even if they are in the nature of shop, and the persons working in Madras, Karnataka and Kerala are liable to be considered for deciding the question of coverage under the Act and so far as the Madras establishment is concerned the number of employees is less than 20. Accordingly it was haled that the petitioner/respondent herein will be entitled to a declaration and the petition was allowed. Hence the present appeal.
5. In the present appeal, the Employees State Insurance Corporation has come forward with the contentions that the trial Court erred in coming to the conclusion that the persons working in the respondent's establishment in Madras, Karnataka and Kerala are not liable to be considered together for deciding the question of coverage under the Act and the Court below erred in holding that even so far as the Madras Establishment is concerned the number of employees is less than 20. The Court below failed to see that the respondent's establishments at Karnataka and Kerala are not independent units, but branches of the head office at Madras and even in the Madras office more than 20 employees are working. In this connection the Court below failed to take into consideration the definition of 'immediate employer' as stated in Section 2(13) of the Employees State Insurance Act. Having regard to the facts the stockists in the branches will come under the definition of 'immediate employer' and such fact had been clearly established by the reports submitted by R.W.1 and accordingly it is contended that the establishments at Madras as well as in Karnataka and Kerala are liable to be covered under the Act. The definition of 'employee' given in Section 2(9) of the Employees' State Insurance Act also covers the persons employed for wages not only in an establishment or a factory, but elsewhere also. Accordingly it has been prayed that the petition filed by the respondent herein ought to have been dismissed.
6. The point that arises for consideration in this appeal is as to whether the respondent herein viz., Nambisans L.V. Dairy Farm, is liable to be covered under the Act in respect of stockists at Madras as well as in Karnataka and Kerala.
7. It is to be seen that on the basis of the reports submitted by R.W.1, the Inspector of E.S.I. Corporation who conducted survey of the respondent Farm, the E.S.I. Corporation is shown to have sent a letter marked as Ex. R-3, dated 21.7.1978, stating that the establishment is covered under the Act and they are liable to pay the contribution. Along with the report Ex. R-1, R.W. 1 had enclosed a specimen copy of the agreement between the respondent herein and the stockists and it has been marked as Ex. R-2. While dealing with the said specimen agreement copy the trial Court has pointed out that as per the agreement the stockists cannot sell any products other than those of the respondent. The maintenance of the premises, the name boards for the premises, hours of work, etc., are to be prescribed by the respondent and even the rent was being paid by the respondent and the respondent has the right of supervision over these stockists. The trial Court has also stated that the evidence that such stockists are entitled to commission only on sales effected by them and they are not on regular salary or wages basis and therefore the stockists cannot be taken into account to determine the number of employees under the respondent in the Madras Office. As regards this I feel the trial Court failed to properly scrutinise the said agreement. A proper scrutiny can be said to be revealing that the so called stockists are only employees under the respondent. The trial Court failed to see that under Clause 23 of the agreement all property or goods or products entrusted to the stockist shall be the property of the principals and the stockist will only be the custodian thereof, subject to the stockist being solely liable in respect of the quality or standard of the products entrusted to him for sale. Under Clause 25, the tenancy agreement in respect of the premises shall continue to be in the name of the principals, but the stockists shall pay them some amount as per Clause 18, as licence fee for the use of the same. The stockists should not sell any other goods. Therefore a reading of the entire agreement can be said to be establishing that they are the salesmen under the respondent herein and not stockists as such having independent right over the stocks and right to deal with the products in the manner they desire. Merely because they are to be paid commission on sales it cannot be stated that they are not employees. In the connection, I feel, if the definition of wages under Section 2(22) of the Act is taken into consideration, the terms of the agreement between the respondent herein and the stockists, may be stated to be amounting to a contract of employment and what the stockists receive from the respondent may be wages. The definition of employee under Section 2(9) of the Act also may be said to be applicable to the stockists of the respondent herein. Under such circumstances I do not think that it is open to the respondent herein to come forward with the contention that they are only stockists and not employees. It is also to be stated that P.W. 1 himself had stated that the establishment at Madras is the principal establishment and the establishments at Kerala and Karnataka are the agents. On a similar basis the agents at Kerala and Karnataka also receive a commission and having regard to the same nature of contract with regard to the stockists at Karnataka and Kerala it can be clearly stated that the stockists in Kerala and Karnataka also are liable to be covered since the Madras office is the principal office and the other offices are branches. Merely because separate accounts are maintained for the stockists at Kerala and Karnataka they cannot be stated to be outside the purview of the notifications issued by the Government of Tamil Nadu. In this connection learned Counsel for the appellant submitted the decisions reported in India Jute Co. v. E.S.I. Corporation, West Bengal 81 Cal.W.J. 459 : 50 F.J.R. 449 : 1977 Lab.I.C. 816, and Hyderabad Asbestos v. E.I.C. : (1978)ILLJ181SC . In the decision reported in India Jute Co. v. E.S.I. Corporation, West Bengal : AIR1977Cal258 , rendered by the Calcutta High Court, it has been held that the persons who are employed in registered office or head office at Calcutta, of a company running a jute and cotton factory at Serampore in Hooghly and who are engaged in types of work referred to in Section 2(9) of the Employee's State Insurance Act, 1948, are employees within the Act. It has been pointed out that the definition of 'employees' in Section 2(9) as amended in 1966 is an exhaustive one. It is a beneficial piece of legislation and it had to be given a meaning that would give benefit to those for whom it is intended, and after the amendment the administrative staff engaged to purchase of raw materials or. the distribution or sale of the products of a factory whether the work is done in the factory or elsewhere would be 'employees' within the Act. It is also pointed out therein that Section 38 of the Act, does not appear to be an impediment. In the decision reported in Hyderabad Asbestos v. E.I.C. : (1978)ILLJ181SC , rendered by the Supreme Court, it has been held that the employees not working in the factory but employed in connection with the work of the factory are covered by the definitions under Sections 2(9) and 2(12) of the Employees State Insurance Act, 1948. In the said decision the Supreme Court negatived the contention that only employees who are employed in the factory are required to be insured and not employees employed in connection with the work of the factory. The Supreme Court held that the employees employed for administrative purposes or for purchase of raw materials for sale of the finished goods if employed in connection with the work of the factory are included within the definition of employees.
8. Learned Counsel for the respondent herein strenously contended that the terms of the agreement cannot be construed as a contract of employment and the Madras office and the establishments at Kerala and Karnataka cannot be said to be a common unit and the administration of each unit is separate and further the notification by the Government of Tamil Nadu cannot cover the employees working in the establishments at Kerala and Karnataka. The learned Counsel also placed reliance in the decision reported in Employees State Insurance Corporation, Madras v. Kwality Spinning Mills (P) Ltd. (1975) 88 LW 751. In that decision the appeal was in respect of workers employed in building work also but the same was not pressed and hence the appeal was confined only with regard to apprentices. But the case of apprentices cannot be said to be any way helpful to the case of the stockists of the respondent herein as pointed out by me in the discussion above. Therefore I am unable to accept the contention put forward on behalf of the respondent herein.
9. In the result the civil miscellaneous appeal is allowed with costs.