ANAND BYRAREDDY, J. ( 1 ) IN the present appeal the following substantial questions of law are raised: i) Whether the ESI Corporation, Bangalore (Karanataka) has jurisdiction to claim contributions in respect of construction of property situated in Nallur Village, dharmapuri District, Tamil Nadu, which is not a notified area under the ESI Act and beyond its coverage/applicability? ii) Whether the employees engaged by the second respondent Batra Developers for the purpose of construction of building for the purpose of Guest House of the appellant will fall under the definition of 'employee' under section 9 of the ESI Act? and in) Whether the judgment of the Lower court is opposed to the law laid down by the Supreme Court in Calcutta Electricity board v. Subash Chandra Bose, reported in air 1992 SC 573 : 1992 (1) SCC 441 : 1992-I-LLJ-475. ( 2 ) THE facts briefly stated, as would be relevant for consideration of this appeal, are as follows: the appellant-company which has several factories as well as service centres throughout india, had engaged second respondent, who is an independent contractor, for the purpose of construction of a guest house in Nallur Village, hosur Taluk, Dharmapuri District, Tamil nadu, respondent No. 3, who is again an independent entity, was engaged for the purpose of sinking a borewell. The employees engaged for the construction of the building and for sinking of borewell were that of respondents 2 and 3 and they were not employees of the appellant? ( 3 ) THE first respondent-Corporation had issued a notice dated January 30, 1996 claiming contributions under the Employees' State insurance Act, 1948 (hereinafter referred to as the 'esi Act' for brevity) on the amount of expenditure incurred for the purpose of construction of the building aforesaid, during the period October 1992 to October 1994 in a sum of Rs. 4,46,266/ -. This was followed by a second notice dated February 26, 1999 claiming contributions to the tune of Rs. 36,826/- and Rs. 4,440/- towards developing charges and for sinking of borewell, respectively. Further a recovery notice was issued claiming a sum of Rs. 83, 466/ -. ( 4 ) ON objections being filed by the appellant, an Inspector of the Corporation had re-verified the records and submitted a report on October 21, 1998 and thereafter an order was passed under Section 45-A of the ESI Act claiming a sum of Rs. Further a recovery notice was issued claiming a sum of Rs. 83, 466/ -. ( 4 ) ON objections being filed by the appellant, an Inspector of the Corporation had re-verified the records and submitted a report on October 21, 1998 and thereafter an order was passed under Section 45-A of the ESI Act claiming a sum of Rs. 61,572/- and a recovery notice was issued demanding a sum of Rs. 97,742/- against which a sum of Rs. 20,487/-, which, according to the appellant, is paid by the concerned contractors who were liable and who were covered under the Act. Insofar as the liability sought to be fastened on the appellant is concerned, it was challenged in proceedings under Section 75 of the ESI Act before the ESI Court. ( 5 ) THE ESI Court on the above facts had framed the following issues:"1) Whether the applicant proves that the respondent is not the appropriate authority under Section 2 (1) of the ESI Act? 2) Whether the applicant proves that the respondent has no jurisdiction to initiate action since location of property is situated outside Karnataka? 3) Whether the construction of holiday home and borewell are not manufacturing processes as defined under Section 2 (14-AA) the ESI Act? 4) Whether order under Section 45-A of the esi Act was passed without giving proper opportunity to the applicant? 5) Whether the applicant proves that kalyani Constructions, S. R. Jadhav and company have remitted Rs. 7,204/-, rs. 11,065/- and Rs. 2,217/- in all amounting to Rs. 20, 486/- ? 6) Whether the applicant is entitled for the reliefs claimed? 7) What order ?" ( 6 ) MR. Kasturi, learned senior advocate appearing for the appellant would submit that prima facie the construction work in respect of which the contributions was claimed is not a part of the factory of the appellant nor within the premises of the establishment. It is admittedly a residential building, meant for use of visiting VIPs and its officers, away from the nearest factory of the appellant. It is admittedly a residential building, meant for use of visiting VIPs and its officers, away from the nearest factory of the appellant. He submitted that in terms of Section 2 (9) of the Act, an employee is defined as follows:"9 "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 ). . . . . . . " ( 7 ) HE would draw my particular attention to clause (ii) of sub- section (2) of Section 9 and contend that the costs of the construction of the residential building, to which contribution was sought to be claimed was not on the premises of the factory or establishment of the appellant and since the works were being carried on by independent contractors, the question of supervision as contemplated and as understood in several decided cases did not arise. Hence, on Issue No. 1 the ESI Court having summarily held that since the amounts were spent by the applicant, the said works were within the jurisdiction of first respondent, is without any basis. The amounts being spent by the appellant is undisputed. But to establish the liability for contribution in respect of monies expended towards such works, would necessarily have to be demonstrated with relation to the contractor engaging the employees or such employees being engaged by the appellant or being under the supervision of the appellant as a first step before initiating action and to ensure that the authority would have jurisdiction in this regard. In the absence of any document to indicate that first respondent was authorised to exercise the power of office as required under Regulation 3-A of the Employees' State Insurance (General) Regulations, 1950, jurisdiction could not have been assumed in respect of construction activity that was wholly outside the jurisdiction of the first respondent, even though the appellant might have expended monies on such works from Bangalore. ( 8 ) SRI Kasturi, would rely on the following judgments to support his contentions. He firstly relied upon the judgment in the case of regional Director, Employees ' State Insurance corporation v. Standard Pottery Works, reported in 2001-II-LLJ-1208, wherein a division Bench of the Kerala High Court has considered a case where casual workers were employed for repairs and maintenance and for construction of a compound wall of the establishment and the Court has concluded that the claim for contribution in respect of employees employed in construction of the compound wall would not be sustainable. ( 9 ) HE next relied on the case of Regional director, ESI Corporation v. Patel Printing press, reported in 2003-III-LLJ- 647 (Guj) wherein contribution was claimed in respect of construction carried on by a printing press and the Court held that the demand pertained to building construction and construction activity would not be covered by Section 2 (22) of the act with reference to the circumstance pertaining in that case. ( 10 ) SRI Kasturi, would submit that insofar as the present case on hand is concerned, it cannot be disputed that the construction activity was carried on 40 kilometres away from the nearest factory of the applicant and there were independent contractors engaged for construction and they could not be considered as agents and they were independent contractors and some of whom are covered under the Act. And therefore, the first respondent was not justified in upholding the demand only on the basis that amounts towards construction was spent by the appellant and the appellant is having its establishment at bangalore, within the jurisdiction of the first respondent. Sri Kasturi, would further contend that insofar as the coverage of the area and jurisdiction of the Officer is concerned, it would be relevant to note that the building activity was being carried on in a place which was not notified under the Act. Sri Kasturi, would further contend that insofar as the coverage of the area and jurisdiction of the Officer is concerned, it would be relevant to note that the building activity was being carried on in a place which was not notified under the Act. ( 11 ) THESE aspects have not been considered by the ESI Court in answering issue no. 1. ESI Court in holding that the appellant would be liable has further accepted the reasoning canvassed by the Corporation that as long as the building which was meant to be a guest House for visitors of the appellant and since this would augment the business of the appellant, that there exists a connection and that it is a manufacturing activity and therefore, by this token of reasoning, irrespective of location of the building, it should be held that the construction of the building was connected with the manufacturing activity of the appellant and its establishment. The ESI Court has also accepted the reasoning canvassed by the respondent-corporation that the expression 'premises of the factory or premises of the establishment' in a particular locality and that it can be extended to the premises including the premises such as one in the present case, namely any additional premises which is set apart from the establishment or factory. ( 12 ) SRI Narasimha Holla, would contend that insofar as the application of definition or the manner in which the first respondent has assumed jurisdiction, was not at all an issue before the ESI Court and the issues framed and having regard to the tenor of the issues framed, the ESI Court has answered it by a well reasoned order. ( 13 ) ON these rival contentions, in my opinion, the finding of the ESI Court upholding the demand for contribution is not tenable, firstly for the reason that it cannot be said that the employees who were engaged in the construction of the building which was 40 kilometers away from the nearest factory of the appellant, was situated within the premises of the factory or establishment as contemplated under sub-section (9) (ii) of Section 2 of the ESI act and consequently the same was not within the jurisdiction of the first respondent. To bring it within the jurisdiction of the first respondent, it ought to have been authorised as contemplated under Regulation 3-A of the regulations as aforesaid. To bring it within the jurisdiction of the first respondent, it ought to have been authorised as contemplated under Regulation 3-A of the regulations as aforesaid. ( 14 ) ON the next issue whether the activity of construction of a guest house of the appellant can be treated as connected with its manufacturing activity, the answer has to be in the negative having regard to the reasoning given namely, that the same was to augment the manufacturing activity of the appellant. In this connection, having regard to the judgment rendered by a Division Bench of the Kerala high Court in Standard Pottery case, (supra), which has been rendered following the dictum in the case of Regional Director, ESI corporation v. Kerala State Drugs and pharmaceuticals Ltd. and others, 1995 Supp (3) scc 148 : 1996-III-LLJ (Suppl)-47, I have no hesitation in holding that the residential building which was under construction was not connected with the manufacturing activity of the appellant. ( 15 ) THE contention of Sri Narasimha holla, counsel appearing for the first respondent that the ESI Court not having framed issue on contentions now sought to be urged, the matter ought to be remanded for reconsideration, also does not merit consideration for the reason that no matter the manner in which the issues are framed, the liability is fastened on the basis of legal provisions of law. If the action is to be set at naught, no reasonable purpose would be served in remitting the matter for reconsideration. The findings are, notwithstanding the materials placed, are questions of fact and are directly relatable to the legal propositions, which as I found above, could not be pressed into service. Hence, the following judgment: the appeal is allowed. Order of the ESI court is set aside consequently the order under Section 45-A of the Act is also set aside in so far as the appellant's liability is concerned. --- *** --- .