M/S. KENCHAMBA SERVICE STATION, B. M. ROAD, HASSAN v. UNION OF INDIA AND OTHERS
1999-01-06
H.RANGAVITTALACHAR
body1999
DigiLaw.ai
( 1 ) PETITIONER has sought for issuance of writ of certiorari for quashing Item No. 1 of notification produced by him as Annexure-C and also the demand made by the Employees' State Insurance (ESI) Corporation demanding him to contribute a sum of Rs. 32,109. 80 vide Annexure-D in this petition under Article 226 of the Constitution of India. Though the petitioner has also sought for quashing Section 1 (5) of the ESI Act (hereinafter referred to as the 'act' for brevity), 1948 as unconstitutional, in the writ petition since the same was not argued during hearing of the petition, the same is not dealt in this order. ( 2 ) THE case of the petitioner is that as a dealer of Indian Oil Corporation has established a petrol bunk along with it is running a Service Station in his own individual right employing about 7 to 8 persons in the latter businesses at Hassan. The Regional Director, ESI Corporation, on the basis that the petitioner had employed 11 persons during December 1982 and since the petitioner is running his Petrol Bunk and Service Station with the aid of power, called upon him to contribute as per the provisions of ESI Act for the period 1-12-1982 to 31-3-1986 by an order dated 1-12-1986 vide Annexure-A. Petitioner challenged the same by means of an application under Section 75 of the ESI Act before the ESI Court, which has been dismissed, which order also he has challenged by means of an appeal before this Court. ( 3 ) SINCE the basis of demand is the notification issued by the State Government dated 1-12-1985 vide Annexure-A in exercise of its powers under Section 1 (5) of the Act, petitioner has challenged the said notification as stated above. ( 4 ) RESPONDENTS 3 and 4. e. , the ESI Corporation and its Director have filed the statement of objections defending the power of State to issue the notification. ( 5 ) SRI Veerabhadrappa, learned Counsel appearing for the petitioners submitted that Item No. 1 to the impugned notification in effect amends the definition of the Factory as defined under section 2 (12) of the ESI Act as unamended which is beyond the power of the rule making body. Elaborating the contention he submitted, the legislature itself has made a distinction between a factory and an Establishment, is clear by a reading of Section 38.
Elaborating the contention he submitted, the legislature itself has made a distinction between a factory and an Establishment, is clear by a reading of Section 38. A Factory is denned under section 2 (12) of the Act (prior to amendment) whereunder manufacturing process is carried on with the aid of power and employing 20 or more persons. According to him the petitioners unit is a manufacturing process, carried on with the aid of power, hence is a "factory". The impugned notification takes within its net, the petitioner's unit where admittedly the employees' are less than 20 persons. Thus the notification redefines a Factory as a Manufacturing Unit run on power with less than 20 employees' also which is ultra vires of the power under Section 1 (5) of the Act. In support of his arguments, learned Counsel took me through the definition of the Factory Section 2 (12) and Section 38 of the ESI Act. The argument on a closer scrutiny of the provisions of the Act and the notification deserves to be rejected. ( 6 ) AS the preamble of the Act suggests the Act is a beneficial piece of legislation mainly meant for the benefit of the employees' to provide an insurance coverage when in distress during sickness, maternity, employment injury etc. The Act is made to apply by Section 1 (4) to all factories by operation of law which reads: "section 1 (4 ). It shall apply in the first instance, to all factories (including factories belonging to the Government other than seasonal factories): (Provided that nothing contained in this sub-section shall apply to a factory or establishment belonging to or under the control of the Government whose employees' are otherwise in receipt of benefits substantially similar or superior to the benefits provided under this Act)". ( 7 ) A "factory" as it stood prior to amendment which definition is the one relied on to by the petitioner in this petition is defined by Section 2 (12): "section 2 (12 ). Factory means any premises including the precincts thereof.
( 7 ) A "factory" as it stood prior to amendment which definition is the one relied on to by the petitioner in this petition is defined by Section 2 (12): "section 2 (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, but does not include a mine subject to the operation of the Mines Act, 1952 (35 of 1952), or a railway running shed". ( 8 ) BY Section 1 (5) of the Act the State Government is given the discretion to bring any other-industrial, commercial, agricultural establishment within the net for application of the provisions of the Act. Section 1 (5) reads as under: "section 1 (5 ). The appropriate Government may, in consultation with the Corporation and (where the appropriate Government is a State Government, with the approval of the Central government), after giving six months' notice of its intention of so doing by notification in the official Gazette, extend the provisions of this Act or any of them, to any other establishment or class of establishments, industrial, commercial, agricultural or otherwise: (Provided that where the provisions of this Act have been brought into force in any part of a state, the said provisions shall stand extended to any such establishment or class of establishments within that part if the provisions have already been extended to similar establishment or class of establishments in another part of that State)". In exercise of its powers the State Government has issued notification, the relevant portion of which is under challenge in this petition extracted herein: "karnataka GAZETTE PUBLISHED BY AUTHORITY (EXTRAORDINARY), PART IV, 2-C (ii) bangalore, Thursday, February 19,1976 No. 839 (MAGHA 30. SHAKA ERA 1897) social Welfare and Labour Secretariat, Notification No. SWL 124 LSI 74 A (III), Bangalore, dated 18th February, 1976.
SHAKA ERA 1897) social Welfare and Labour Secretariat, Notification No. SWL 124 LSI 74 A (III), Bangalore, dated 18th February, 1976. S. O. 536.--In exercise of the powers conferred by sub-section (5) of Section 1 of the Employees state Insurance Act, 1948 (Act 34 of 1948), the Government of Karnataka having already given six months notice as required thereunder, vide the Government Notification No. SWL 124 LSI 74, S. O. 2535, dated 28th July, 1975 published in the Gazette dated 31st July, 1975 hereby appoints 29th February, 1976 as the date on which all provisions of the said Act shall extend to the class of establishments in areas as specified in the Schedule annexed hereto. SCHEDULE description of Establishments 1. Any premises 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 ordinarily so carried on; but excluding a mine subject to the operation of the Mines act, 1962 (Act 35 of 1952), or a Railway running shed or an establishment which is exclusively engaged in one or more of the manufacturing processes specified in clause (12) of Section 2 of the Employees' State Insurance Act, 1948 (Act 34 of 1948)". By Section 38 of the Act, all Employees of any factory or establishment must be compulsorily insured. Section 38 reads as under: "section 38.--Subject to the provisions of the Act, all the employees' in factories or establishments to which this Act applies shall be insured in the manner provided by this Act". ( 9 ) THE Act as stated is a beneficient piece of social welfare legislation and the interpretation of all the provisions including the relevant ones for purposes of this petition should be only to advance the object of the Act. The scheme of the Act is to provide a cover of insurance to all the employees' in the country. This is sought to be achieved first by making the Act to apply by legislative operation under Section 1 (4) to all the Factories as defined under Section 2 (12) of the act.
The scheme of the Act is to provide a cover of insurance to all the employees' in the country. This is sought to be achieved first by making the Act to apply by legislative operation under Section 1 (4) to all the Factories as defined under Section 2 (12) of the act. It is left to the discretion of the respective State Government under Section 1 (5) to make the act applicable to any other establishments also. In Basant Kumar Sarkar v Eagle Rolling Mills limited, the Supreme Court has stated the purpose of Section 1 (5) of the Act in the following passage: "in the very nature of things, it would have been impossible for the legislature to decide in what areas and in respect of which factories the Employees' State Insurance Corporation should be established. It is obvious that a scheme of this kind, though very beneficent, could not be introduced in the whole of the country all at once. Such beneficial measures which need careful experimentation have sometimes to be adopted by stages and in different phases, and so, inevitably, the question of extending the statutory benefits contemplated by the Act has to be left to the discretion of the appropriate Government. 'appropriate Government' under Section 2 (1) means in respect of establishments under the control of the Central Government or a railway administration or a major port or a mine or oil field, the Central Government, and in all other cases, the State Government. Thus, it is clear that when extending the Act to different establishments the relevant Government is given the power to constitute a Corporation for the administration of the scheme of Employees' State Insurance. The course adopted by modern legislatures in dealing with welfare scheme has uniformly conformed to the same pattern. The legislature evolves a scheme of socio-economic welfare, makes elaborate provisions in respect of it and leaves it to the Government concerned to decide when, how and in what manner the scheme should be introduced. That, in our opinion, cannot amount to excessive delegation. The expression "any other establishment or class of establishments" to which the appropriate government intends to extend the Act may be classified either on the basis of the nature of the establishments or on the basis of their geographical situation or on the basis of both of them".
That, in our opinion, cannot amount to excessive delegation. The expression "any other establishment or class of establishments" to which the appropriate government intends to extend the Act may be classified either on the basis of the nature of the establishments or on the basis of their geographical situation or on the basis of both of them". ( 10 ) THE word Establishment is not defined in the Act. Websters' third new International dictionary defines the word as "sizeable place of business". "the act of setting up so that a certain continuance is assured (See Factory)". The Shorter Oxford English Dictionary defines as "an organised staff of employees' or servants including or occasionally limited to the building in which they are located". This meaning is referred to by the Orissa High Court in Sunder Paper box Company v State of Orissa and Others , while answering a similar question as the one in hand cited to by the learned Counsel for the respondent to which I will again refer to at an appropriate place. Thus in the ordinary sense, the word establishment is of wider import than factory taking within its sweep even Factories. This reasoning is also buttressed by a closer reading of expressions in Section 1 (5) which provides for application of Act to "commercial, industrial, Agricultural Establishments or otherwise" as an "industrial Establishment" is wide enough to encompass even the manufacturing units employing more than 10 but less than 20 employees'. In this context the distinction between Establishment and Factory occurring in section 38 of the Act on which the learned Counsel Sri Veerabhadrappa relied, can only mean that a Factory as defined or in terms of Section 2 (12) of the Act and not otherwise. In other words wherever there is a manufacturing process done with the aid of power but employs less than 20 persons, the distinction loses significance and the same becomes establishment. ( 11 ) BESIDES if the argument of the learned Counsel is accepted it will mean, that a "manufacturing Unit run on power employing more than 10 but less than 20 persons" will not come within the definition of either Factory or an Establishment.
( 11 ) BESIDES if the argument of the learned Counsel is accepted it will mean, that a "manufacturing Unit run on power employing more than 10 but less than 20 persons" will not come within the definition of either Factory or an Establishment. Hence such employees' will not have the benefit of ESI Coverage whereas similarly placed employees' working in other establishments will have the benefit of the coverage, thus exposing the powers under Section 1 (5) to the vice of discrimination. Such an interpretation has to be avoided and can be avoided by adopting the above reasoning. Therefore the impugned notification cannot be said in any way as amending the definition of Factory but can only mean it brings within its Net, establishments which also indulge in manufacturing process with the aid of power employing 10 or more persons but less than 20 persons, In other words this new category of employees' are sought to be provided the benefit which was denied to them earlier, by means of the impugned notification. ( 12 ) IN this context it is also useful to refer to the decisions cited by the learned Counsel appearing for the respondent. ( 13 ) IN the first decision cited by the Counsel in A. P. Handloom Weavers Co-operative Society v employees' State Insurance Corporation, an identical contention like the one in this case was raised before the said Court viz. , "that a State Government could not in exercise of its powers under Section 1 (5) of the Act is. sue a notification to cover such employees' working in any manufacturing unit run on power whose number is above 10 but less than 20 without the legislature suitably amending the definition of Factory under Section 2 (12) occurring in the Act". Repelling the said contention, it has been held as follows: "in my view this contention cannot be accepted. The provision of Section 1 (4) read with Section 2 (12) were contemplated by the Legislature as referable to certain factories wherein the employees' were 20 or more and that was because the Legislature intended that such factories should straightaway come within the purview of the Act.
The provision of Section 1 (4) read with Section 2 (12) were contemplated by the Legislature as referable to certain factories wherein the employees' were 20 or more and that was because the Legislature intended that such factories should straightaway come within the purview of the Act. The provision in Section 1 (5) of the act enabling the Government to issue a notification in respect of any other establishment or class of establishments industrial, commercial, agricultural or otherwise was introduced in the Act with the specific purpose of enabling the Government to extend the provisions even to factories wherein the employees' were less than 20. It was in that context that the notification in question was issued applying the Act to factories wherein the employees' were 10 or more and less than 20. In my view, the impugned notification is clearly within the powers of the Government under section 1 (5) of the Act. This contention is therefore rejected". ( 14 ) THE second case relied on by is of the Orissa High Court in Sundar Paper Box Company's case, supra. That was also a case where the question that came up for consideration was whether the State Government could issue a notification under Section 1 (5) to cover a manufacturing unit, run on power for employing more than 10 persons but less than 20 persons during the relevant time without amending Section 2 (12) of the Act. In answering the same, Court has held: "establishment is a wide term which is capable of embracing even a factory. The words 'any other' preceding 'establishment' in Section 1 (5) support the view that a factory is also an establishment and an establishment which is not a factory in view of the definition can be brought within the fold of the power to extend application of the statute". ( 15 ) TO come to the said conclusion, the Court interpreting the word Establishment has relied on its meaning in, the Shorter Oxford English Dictionary (referred to by me above ). Similar is the view of the Punjab and Haryana High Court in Mis, W. H. Deeth and Company, Bal-labhgarh v. Employees' State Insurance Corporation. ( 16 ) ALL these authorities also support the view I have taken. ( 17 ) FOR the reasons stated it is held that the impugned notification in the writ petition is valid and legally enforceable.
Similar is the view of the Punjab and Haryana High Court in Mis, W. H. Deeth and Company, Bal-labhgarh v. Employees' State Insurance Corporation. ( 16 ) ALL these authorities also support the view I have taken. ( 17 ) FOR the reasons stated it is held that the impugned notification in the writ petition is valid and legally enforceable. Therefore, there is no merit in this petition. Petition is dismissed. ( 18 ) IN view of the dismissal of the writ petition, the appeals MPA Nos. 1866 of 1989 and 265 of 1995 also stands dismissed as the result of it is dependent on the result of the writ petition. ( 19 ) IN the facts and circumstances of the case, there would be no order as to costs.