ORDER
Prabha Sridevan, J.
1. The appellant is aggrieved by the order passed by the Employees' State Insurance Court holding that the appellant is a factory for the purposes of the Act and bound to make contributions. The only objection that the appellant has to the impugned order is that the appellant-hotel/restaurant/ canteen is not subject to the provisions of the Act since G.O. Ms. No. 360, Labour and Employment, dated 2nd May 1978 extends the provisions of the Act only to hotels or restaurants employing 20 or more persons on wages and not to other hotels.
2. In the absence of a notification under Section 1(5) of the E.S.I. Act, the amendment brought by Central Act 29 of 1989 amending the definition of 'Factory' would not by itself make the provisions, of the Act applicable to the establishment in question was the point raised before the E.S.I. Court in order to avoid the liability of making statutory contributions. This was answered against the establishment by the E.S.I. Court. In other words, the point raised was, so long as the notification of the year 1978 issued by the State. Government exercising power under Section 1(5) of the E.S.I. Act stands and is neither revoked nor repealed, the amendment brought into the definition of 'Factory' would not alter the situation.
3. The appellant employs ten or more persons in its premises, where manufacturing process is being carried on with the aid of power. This is not disputed.
4. Let us see the relevant provisions. The Notification in question reads as follows:
'Extension of provisions of Employees' State Insurance Act to certain new sectors of establishments in all the implemented areas in certain Districts.
(G.O.Ms. No. 360, Labour and Employment, 2nd May 1978.)
No. II(2)/LE/1965/78.-- In exercise of the powers conferred by Sub-section (5) of Section 1 of the Employees' State Insurance Act, 1948 (Central Act 34 of 1948), the Governor of Tamil Nadu having already given six months' notice as required there under (vide the Labour and Employment Department Notification No. II(2)/LE/1859/76, dated the 3rd April, 197 6, published at pages 217 to 220 of Part II-Section 2 of the Tamil Nadu Government Gazette, dated the 21st April, 1976) with the approval of the Central Government, extends the provisions of the said Act to the Classes of establishments specified in Schedule I situated in the areas specified in Schedule II, with effect on and from the 14th May, 1978.
[Vide the Tamil Nadu Government Gazette, Extraordinary, Part II, Section 2, dated the 3rd May, 1978, at Page 1.]
Schedule I
Classes of Establishments
1. Any persons (sic.) including the precincts thereof whereon ten or more persons but in any case less than twenty persons are employed or were employed for wages on any day of the preceding twelve months and in any part of which a manufacturing process is being carried on with the aid of power or is ordinarily so carried on but excluding a mine subject to the operation of the Mines Act, 1952 (Central Act 35 of 1952), or a railway running shed or an establishment which is exclusively engaged in any of the manufacturing processes specified in Clause (12) of Section 2 of the Employees' State Insurance Act, 1948 (Central Act 34 of 1948).
2. Any premises including the precincts thereof wherein twenty or more persons are employed or were employed for wages on any day of the preceding twelve months, and in any part of which manufacturing process is being carried on without the aid of power or is ordinarily so carried on, but excluding a mine subject to the operation of the Mines Act, 1952 (Central Act 35 of 1952) or a railway running shed or an establishment which is exclusively engaged in any of the manufacturing processes specified in Clause (12) of Section 2 of the Employees' State Insurance Act, 1948 (Central Act 34 of 1948).
3. The following establishments whereon twenty or more persons are employed or were employed for wages on any day of the preceding twelve months, namely:
(1) Hotels;
(2) Restaurants;
(3) Shops;
(4) Cinemas including theatres;
(5) Newspaper establishments as defined in Section 2(a) of the Working Journalists (Conditions of Service) and Miscellaneous Provisions Act, 1955 (Central Act 45 of 1955).'
5. Originally, the definition of a 'factory' was to mean, 'any premises including the precincts thereof wherein twenty or more persons are employed or were employed for wanes on any day of the preceding twelve months and in any part of which a manufacturing process is being carried on with the aid of power or is ordinarily so carried on but does not include Mine subject to the operation of the Mines Act 1952 or a railway running shed.'
6. This definition was amended by Act 29/89 and Section 2(12) now reads as follows:
(12) 'factory' means any premises including the precincts thereof--
(a) whereon ten or more persons are employed or were employed for wages on any day of the preceding twelve months, and in any part of which a manufacturing process is being carried on with the aid of power or is ordinarily so carried on, or
(b) whereon twenty or more persons are employed or were employed for wages on any day of the preceding twelve months, and in any part of which a manufacturing process is being carried on without the aid of power or is ordinarily so carried on.'
6(a). The statement of objects and reasons to the amendment Act 29/89 read as follows:
'Based on the above recommendations, it is proposed to carry out certain amendments in the Act. Some of the more important amendments are--
(i) Under the existing provisions, the Act is, in the first instance, applicable to the factories. The Act can be extended to an establishment only after giving six months notice to that effect. This creates difficulties in implementing the Act in the areas where there are very few factories. It is, therefore, now proposed to make the Act applicable simultaneously to factories and other establishments where the Act is applicable in a State to such factories and other establishments in any other part of the State.'
There is no dispute that 'manufacturing process' is carried on in hotels and restaurants, and has been so held in several decisions including G.L. Hotels Ltd. v. T.T. Sarin : (1994)IILLJ883SC :
'Since the manufacturing process in the form of cooking and preparing food is carried on in the kitchen and the kitchen is a part of the hotel or a part of the precinct of the hotel, the High Court has held that the entire hotel falls within the purview of the said definition. We do not see any infirmity in the conclusion arrived at by the High Court although we agree with Shri Sorabjee that the reasons given by the Court in support of the conclusions are not all valid.'
7. According to the learned Counsel for the appellant a special provision will prevail over a general provision and a general provision would apply only to such cases which are not covered by special provision and for this purpose relied on J.K. Cotton Spinning and Weaving Mills Co. Ltd. v. State of Uttar Pradesh : (1961)ILLJ540SC . The learned Counsel also referred to the following extracts in A.S. Bindra's Interpretation of Statutes, 7th edition 1984, Paragraph No. 27 which reads as follows:
'27. Generalia specialibus non derogant.-- General words do not derogate from special provisions, or, special provisions will control general provisions (I lbert 250).'
and also to Page No. 640 of the same book which reads as follows:
'7. Special and general provisions in same statute.-- Where there is in the same statute a specific provision and also a general one which in its most comprehensive sense would include matters embraced in the former, the particular provisions must be operative and the general provision must be taken to affect only such cases within its general language as are not within the provisions of the particular provision.'
8. The learned Counsel also referred to Gunepally Thammayya v. Sri Pajah Tyadapusapati Khandendu Dora AIR 1930 Mad. 963, where on a difference of opinion between Ananthakrishna Ayyar and Curgenven, JJ., Ramesam, J., held that Court should lean against repeal of the earlier Act by implication and unless it is absolutely clear that the operation of the first Act has to be curtailed by the later Act, the previous Act should be held to continue in force. It is therefore the contention of the learned Counsel for the appellant that the subsequent amendment in 1989 will not have the effect of nullifying the effect of notification. That is to say the employees of a 'hotel' would be covered by the provisions of the Act only if it had employed twenty or more persons on any day for wages. So, according to the learned Counsel for the appellant notwithstanding the amended definition of a 'factory', a hotel in which employs only ten or more persons will not be covered by the provisions of Employees' State Insurance Act.
9. The learned Counsel for the respondent would submit that once the definition of 'factory' underwent a change, all establishments which were factories came under the Act and the issue of notification under Section 1(5) became irrelevant. The learned Counsel relied on Regional Director, E.S.I. Corporation v. T.V. Poulose 1997 (1) LLJ 613.
10. We will look at some decisions which throw light on this matter.
(a) In Boehringer Knoll Ltd. v. E.S.I. Corporation 1977 Lab.I.C. 1116, a Division of the Bombay High Court had to decide how the words 'employees in the factories' in Section 38 of the Act should be construed. They came to the conclusion that the said words must be so construed, that effect, is given to the intention of the legislature in amending the definition of 'employee' given in Section 2(9) and otherwise there would be no purpose in amending Section 2(9). In that case, objection was raised against the Corporation demanding contributions in respect of employees employed in the Head Offices, Branch offices and medical representatives in the employment of their Company. The Division Bench held that--
'It is no doubt true that if the words 'employees in factories' had stood by themselves, the literal construction canvassed for on behalf of the Company could have been placed on those words. The legislature, however, has taken care not only to define the term 'employee', but has further chosen to amend that definition by Act 44 of 1966. The amendment in the definition was made with a certain purpose.'
Prior to the amendment there was a conflict of judicial opinion and:
'It is in the state of such divergent views with regard to the meaning of the word 'employee' that the Parliament intervened and introduced an amendment in the definition of the term 'employee' in Section 2(9) of the Act.'
The Division Bench also held that the laudable object of the legislature would be clearly defeated.
'...if literal construction as canvassed by the learned Counsel for the Company is adopted. Indeed such a construction is likely to make the amendment itself redundant and otiose. Intention cannot be attributed to the Parliament to make a redundant amendment....
If the object of Parliament was to provide for this benefit under the Act to a larger number of employees, who were to be called 'insured employees', and then if the construction canvassed on behalf of the Company is accepted, that object will clearly be defeated because an employee being merely covered by the definition will be of no purpose, if he cannot be insured employee for the purposes of the Act.'
To arrive at the above conclusion, the learned Judge referred to Works Manager, Central Railway Workshop, Jhansi v. Vishwanath : (1970)ILLJ351SC , wherein it was held,
'It is probably true that all legislation in a welfare State is enacted with the object of promoting general welfare; but certain types of enactments are more responsive to some urgent social demands and also have more immediate and visible impact on social vices by operating more directly to achieve social reforms. The enactments with which we are concerned, in our view, belong to this category and, therefore, demand an interpretation liberal enough to achieve the legislative purpose, without doing violence to the language.'
(b) In Regional Director, E.S.I. Corporation v. T.V. Poulose 1997 (1) LLJ 613, the Division Bench of the Kerala High Court held --
'Section 1(4) of the Act provided for the initial application of the Act to factories other than seasonal factories. So a factory as defined by the Act, not being a seasonal factory was covered by the Act. What Section 1(5) did was to give power to the State Government or the appropriate Government to extend the provisions of the Act to establishments other than those which stand covered by virtue of the provisions of the Act in terms of Section 1(4) of the Act. The power thus granted under Section 1(5) of the Act is the power to expand the applicability of the Act. That is a power to rope in establishments that would not have been covered originally by the Act. The purpose of Section 1(5) of the Act is to extend that applicability of the Act to more institutions than that were originally envisaged by the Act.'
(c) In E.S.I. Corporation v. Spencer & Co. Ltd. (Mad.), 1978 (53) FJR 126, the Division Bench of our High. Court held that a hotel is a factory.
'On the facts which we have enumerated above, if the 13 workers are engaged in work incidental or preliminary to or connected with the work of the factory or establishment, then they would also be employees within the meaning of the expression defined in Section 2(9)(i) of the Act, and, if there are more than 20 persons in the premises engaged in manufacturing process and manufacturing process is carried on with the aid of power, the premises would become a factory as defined in Section 2(12) of the Act, and, by virtue of Section 1(4), the Act would apply to all those employees, it cannot be gainsaid that the preparation of food would be a manufacturing process, as envisaged by the Act. This is clear from the definition. Any process of cleaning raw materials for the preparation of food would be work incidental to or connected with the manufacturing process, namely, preparation of food, and it will be difficult to say that that work of cleaning or preparation of raw material as the first step before cooking food or of preparing it by other means to make it more delectable and palatable will not be a work connected with or incidental to the process of preparing food, which, as already indicated, would be a manufacturing process.'
(d) In ITDC Employees' Union v. Hotel Ashok (Kar.), 1984 (64) FJR 184, Karnataka High Court held that --
'Therefore, there can be no doubt that the provisions of the ESI Act had become applicable to such of the hotels which fell within the definition of the word 'factory' as defined in the ESI Act with effect from the date the provisions of the ESI Act were extended to the area in which such hotels were located. That being the position, in respect of a factory or a hotel which is a 'factory' as defined under Section 2(12) of the ESI Act established thereafter, the ESI Act applied from the date of its establishment. As Hotel Ashok was established in or about the year 1970, the ESI Act was applicable from the date of its establishment. Because of lack of correct understanding of the provisions of the ESI Act, i.e., the scope of Section 1(3) and (4) of the ESI Act and the meaning of the word 'factory', the same had not been enforced, but the position had been made clear by the judgment of the Madras High Court in respect of Connemara Hotel and of the Bombay High Court in respect of Hotel Blue Diamond, and it is obviously for this reason the ESI Corporation has called upon the Hotels of ITDC to implement the provisions of the ESI Act with effect from the 1st February, 1980, a date shortly after the judgment of the Bombay High Court. The fact that the ESI Corporation had called upon the hotels to implement the scheme with effect from 1st February, 1980, does not in any way affect the legal position that the provisions of the ESI Act had already come into force in respect of these hotels.'
The learned Judge rejected the contention that unless a further notification under Section 1(5) of the Employees' State Insurance Act was issued extending the provisions of the Act, the Act would not apply, since the hotel in Question fall within the definition of the word 'factory'. It was held categorically that such a contention would have been tenable only if a 'hotel' did not come within the definition of 'factory' and was only regarded as an 'establishment' other than a 'factory'.
11. On a consideration of all the decisions referred to above and the relevant provisions. The following features emerge:
(a) The Act applies to all factories without anything more to be done by the appropriate Government as per Section 1(4).
(b) If an establishment is not a factory as defined under the Act then unless there is a notification under Section 1(5), the employees in such establishment will not be protected by the Act.
In 1978, the position was not clear whether the activity that is carried on in a hotel or a restaurant or a canteen as the case may be would be 'manufacturing process'. The Government with a view to extending the protection of the Act to the employees in a hotel, which employs twenty or more persons issued G.O.Ms. No. 360 of 1978. The appellant's case is that the appellant being a hotel which employs less than twenty persons need not comply with the provisions of the Act. This submission cannot be accepted because it would create an anomalous position which the legislature cannot be intended to create. The Division Bench of our High Court in the Spencer's case cited above has held that a manufacturing process goes on in a premises where there is preparation of food. Therefore, even as per the 1978 G.O., Item 1 of the classes of establishment brings within the fold of the Employees' State Insurance Act, premises including the precincts thereof where ten or more persons are employed for wages in any part of which a manufacturing process is being carried out with the aid of power since the legal position is that preparation of food is manufacturing process. So even by virtue of G.O.Ms. No. 360/1978, the provisions of the Act stand extended to a hotel or a restaurant or a canteen. The State included in serial No. 3 of the said G.O., establishments such as hotels and restaurants only because at that time the legal position was not settled as to whether preparation of food was a manufacturing process. Once it is accepted that preparation of food is a 'manufacturing process', obviously, establishments covered by Item 1 will be governed by the Act which will include a hotel employing ten or more persons, where manufacturing process is carried on with the aid of power. Considering the object of the Act which intends to bring into its fold all the employees working in the country there can be no doubt Serial No. 3 of the G.O., will have to give way to Serial No. 1. The position only gets better for the employee after the amendment Act 29/89, whereby the definition of 'factory' itself changed. It is not necessary to either cancel the notification or issue a notification for extending the provisions of the Act to 'hotel'. Section 1(4) of the Act will automatically apply to 'hotels' which are 'factories' as defined under the Act. The objection of the learned Counsel that special provisions will control general provisions will not apply to this case.
12. The observations of the First Bench of this Court in Priyadharshini, N. v. Secretary to Government, Education Dept. : AIR2005Mad315 , are useful.
'27. In this connection, it may be mentioned that according to theory of the eminent jurist Kelsen (the pure theory of law) in every country there is a hierarchy of laws and the general principle is that a law in a higher layer of this hierarchy will prevail over the law in a lower layer of the hierarchy (see Kelsen's 'The General Theory of Law and State'). In our country this hierarchy is as follows:
(i) The Constitution of India
(ii) Statutory law (which may be either Parliamentary law or law made by the State legislature).
(iii) Delegated Legislation (which may be in the form of rules made under the statute, regulations made under the statute, etc.)
(iv) Purely administrative or executive orders.'
So the amended Section 2(12), which is statutory law; will prevail over the notification which is subordinate legislation in the lower layer of hierarchy if there is conflict. Even the apparent conflict does not exist once we accept, 'hotel' is a factory and preparation of food is a manufacturing process.
13. In Union of India v. C. Dinakar : (2004)6SCC118 , the Supreme Court considered whether the CBI (Senior Police Posts) Recruitment Rules, 1996 framed under the proviso to Act 309 would survive after the Delhi Special Police Establishment Act was amended by the Central Vigilance Commission Ordinance. It was urged on behalf of the Union, that the Rules were not 'superseded expressly'. The Supreme Court thought otherwise and said:
'It is not in dispute that on the basis of the judgment in Vineet Narain the appellant did intervene by promulgation of the aforementioned Ordinance and, thus, a subordinate legislation in the form of the 1996 Rules would cease to exist as the Ordinance provides for the process of selection to the post of Director, CBI'
and that,
'Once by reason of a Parliamentary Act, the procedure for appointments of the Director, CBI has been laid down, it is idle to contend that the 1996 Rules would still survive.'
14. If one were to accept the appellant's case, a hotel in State of Tamil Nadu though a factory as defined in Section 2(12) will not have to comply with the provisions of the Act unless they employ twenty or more persons whereas all other factories will have to comply with the provisions of the Act if they employ ten or more persons and carry on manufacturing process with the aid of power. There cannot be such an anomaly.
15. In Poona Industrial Hotel Ltd. v. I.C. Sarin, FJR (63) 354, Division Bench of Bombay High Court it was held as follows:
'By the notifications referred to above, the State Government has extended the provisions of the Act to the establishments including hotels and restaurants wherein 20 or more persons are employed. This is necessarily different from the word 'factory' contained in Section 1(4) of the ESI Act and if the hotel which answers the description of a factory is already covered by the provisions of the Act, the notification issued by the State Government will necessarily not apply to the said hotel. Indeed, the language used in the notification shows that the provisions may apply to establishments where power is not used in the manufacturing process. It is also conceivable that by extending all the provisions of the Act to the wider classes of hotels and restaurants, the intention might be to cover employees of a hotel who may not have been covered despite the fact that the hotel is held to be a factory under the provisions of the ESI Act. For these reasons we are unable to read with Mr. Chinoy a meaning into the notifications which would suggest that prior to the notifications the provisions of the Act did not apply to the hotels which include the 'Hotel Blue Diamond.'
16. The object of the Act is to bring as many employees under the protective cover of insurance. The Act though a Pre-Independence Act, is in tune with the spirit behind the Directive Principles and we must not defeat the spirit of the Act, by adopting a narrow approach.
'When, as in Section 2(9), the definition has been cast deliberately in the widest terms and the draftsman has endeavoured to cover every possibility so as not to exclude even distant categories of men employed either in the primary work or cognate activities, it will defeat the object of the statute to truncate its semantic sweep and throw out of its ambit those who obviously are within the benign contemplation of the Act. Salvationary effort, when the welfare of the weaker sections of society is the statutory object and is faced with stultifying effect, is permissible judicial exercise.' (vide Royal Talkies v. ESI Corporation : (1978)IILLJ390SC .
The same principle applies to this case.
17. In conclusion:
(a) The definition of the 'factory' was amended only with a certain purpose which is to include more employees under the umbrella of the Act.
(b) The purpose of the amendment will be defeated, if notwithstanding the same, establishments which are factories are allowed to evade their duty relying on a piece of subordinate legislation.
(c) ESI Act is enacted to meet a specific social need and any interpretation of a statutory provision requires, nay demands an interpretation liberal enough to achieve the purpose without doing violence to the language.
(d) Since the appellant is a 'factory' as defined by Section 2(12) of the Act as amended by Act 29/89 the Act applies to it as per Section 1(4) and so Section 1(5) or any notification under the said Section is irrelevant.
For all these reasons, the appeal is dismissed. No costs.