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2006 DIGILAW 764 (KER)

Aringath Kelan v. State of Kerala

2006-11-06

S.SIRI JAGAN

body2006
Judgment :- The petitioner approaches this Court aggrieved by revenue recovery proceedings for recovery of contributions payable under Toddy Workers Welfare Fund Act, 1969 (the Act for short) in respect of employees of shop Nos.5 and 6 of Thalasserry Range on the ground that since he was not the licensee of the said shops, he has no liability to pay contributions under the Act. 2. Admittedly, additional respondents 3 to 5 were the licensees. Although, the petitioner would not admit the same fully, it is pretty much in evidence that the petitioner was associated with the running of the shops, though not as licensee. 3. The 2nd respondent initiated proceedings for determining the contributions payable in respect of the employees of the shop as per Ext.P-1 pre-assessment notice against the petitioner as well as respondents 3 to 5. The same ended in Ext.P-4 order by which the petitioner and respondents 3 to 5 were held to be jointly and severally liable to pay contributions demanded therein. Petitioner’s appeal before the Government was dismissed by Ext.P-7 order, in which while dismissing the appeal, the Government held that the petitioner was running the shop and the employees were directly employed by him. The petitioner is challenging Ext.P-7 order in this writ petition. 4. The petitioner heavily relies on the decision of the Supreme Court in Joseph Joseph v. State of Kerala (2001 (1) K.L.T. 827 (S.C.), in support of his contention that merely because a person is associated with the conduct of a toddy shop, it cannot be said that he had employed workers on his own behalf. 5. Ironically, the 3rd respondent also relies on the very same decision (supra) to contend that since the petitioner was running the toddy shops, employing workers therein by himself, he alone is liable to pay contributions and not respondents to 5. In support, he has filed Ext.R-3 (a) agreement between the petitioner and respondents 3 to 5 as per which the petitioner had taken over the entire liability in respect of the toddy shops in question. He has also produced Ext.R-3(c) affidavit of one Sri T.M. Surendran, General Secretary of the Thalasserry Range Toddy Contractors’ Association, who vouches for the fact that he was a witness to Ext.R-3(a) agreement and that pursuant to the said agreement, the petitioner was running the shops in question. He has also produced Ext.R-3(c) affidavit of one Sri T.M. Surendran, General Secretary of the Thalasserry Range Toddy Contractors’ Association, who vouches for the fact that he was a witness to Ext.R-3(a) agreement and that pursuant to the said agreement, the petitioner was running the shops in question. He further relies on Ext.R-3 (b) Judgment of this Court rendered in identical circumstances wherein a Single Bench of this Court has held that once it is proved that a particular person was running the shop employing toddy workers, there is no scope for the Welfare Fund Inspector to look for the licensee as the other person answers the description of employer. 6. The petitioner, in his reply affidavit denies having executed Ext.R-3(a) and submits that since the said document was never produced before the welfare fund authorities, the same cannot be relied upon. 7. I have heard arguments of learned counsel for the petitioner, the 2nd respondent, the 3rd respondent and the learned Government Pleader. 8. Before going into the question of liability to pay welfare fund contributions as between the petitioner on the one hand and respondents 3 to 5 on the other, I think it necessary to refer to certain provisions of the Abkari Act and Rules under which licence to run toddy shops is issued. Under Section 15 of the Abkari Act, sale of liquor without a licence is prohibited. Section 15 reads thus: “15. Sale of liquor or intoxicating drug without licence prohibited. Power to exempt toddy.- No liquor or intoxicating drug shall be sold without a licence from the Commissioner provided that a person having the right to the toddy drawn from tree may sell the same without a licence to person licensed to manufacture or sell under this Act: Provided also that the Government may, by notification, declare that any or all of the provisions of this Act, shall not apply in any local area to trees tapped, or to toddy drawn under such conditions as the Government may prescribe. Nothing in this section applies to the sale of any foreign liquor legally procured by any person for his private use and sold by him or by auction on his behalf or on behalf of his representatives in interest upon his quitting a station, or after his decease.” Under Section 3 (10) of the Abkari Act, liquor is defined to include toddy also. 9. 9. Section 18A gives power to the Government to grant exclusive or other privilege of manufacture or selling by retail liquor on payment of rentals. Section 18A reads as under: “18A. Grant of exclusive or other privilege of manufacture, etc., on payment of rentals.- (1) It shall be lawful for the Government to grant to any person or persons, on such conditions and for such period as they may deem fit the exclusive or other privilege - (i) of manufacturing or supplying by wholesale; or (ii) or selling by retail; or (iii) of manufacturing or supplying by wholesale and selling by retail, any liquor or intoxicating drugs within any local area on his or their payment to the Government of an amount as rental in consideration of the grant of such privilege. The amount of rental may be settled by auction, negotiation or by any other method as may be determined by the Government, from time to time, and may be collected to the exclusion of, or in addition, to the duty or tax leviable under Sections 17 and 18. (2) No grantee of any privilege under sub-section (1) shall exercise the same until he has received a licence in that behalf from the Commissioner. (3) In such cases, if the Government shall by notification so direct, the provisions of Section 12 relating to toddy and toddy producing trees shall not apply.” 10. Rule 5 of the Kerala Abkari Shops Disposal Rules, 2002 lays down the general conditions applicable to the sale of toddy shops. (3) In such cases, if the Government shall by notification so direct, the provisions of Section 12 relating to toddy and toddy producing trees shall not apply.” 10. Rule 5 of the Kerala Abkari Shops Disposal Rules, 2002 lays down the general conditions applicable to the sale of toddy shops. Some of those conditions which are relevant for the purpose of this case, may be reproduced as under: “(3) No individual is eligible for the privilege of any shop if he - (i) * * * (ii) * * * (iii) is a defaulter of Abkari arrears, Sales Tax arrears or any other arrears due to the Kerala Toddy Workers Welfare Fund or the Kerala Abkari Workers Welfare Fund unless he produces from the Circle Inspector of Excise, Sales Tax Officer, the Authority of the said Welfare Fund Board or any other officer authorized in this behalf as the case may be a certificate to the effect that no dues are outstanding against him or that he has remitted before the date of sale of shop 50% of the arrears pending against him as on the date of sale notification; * * * (7) When the sale for each shop commences, the officer conducting the sale shall announce the name of range, the number and name of toddy shop to be sold and the annual rental fixed for the shop and shall invite applications for taking up the privilege from the intending purchasers. The individuals desirous of purchasing the privilege shall thereon submit application in writing before the officer conducting the sale requesting for the grant of privilege. The application shall be in Form II appended to these rules and shall bear necessary court fee stamps of the value prescribed by law. The application shall be accompanied by a Bank Draft drawn in favour of the Assistant Excise Commissioner concerned for an amount equal to the annual rental fixed for the shop. In addition the applicant shall furnish a Bank Guarantee or a Bank Draft, drawn in favour of the Assistant Excise Commissioner of the division concerned equivalent to the wages and other benefits to the workers of the shop payable for one month, which shall be fixed by the Toddy Workers Welfare Fund Board. In addition the applicant shall furnish a Bank Guarantee or a Bank Draft, drawn in favour of the Assistant Excise Commissioner of the division concerned equivalent to the wages and other benefits to the workers of the shop payable for one month, which shall be fixed by the Toddy Workers Welfare Fund Board. The application shall also be accompanied by the following documents namely: (i) * * * (ii) * * * iii) Certificate to the effect that the applicant is not a defaulter of Abkari arrears, Sales Tax arrears or any other arrears due to the Kerala Toddy Workers Welfare Fund or the Kerala Abkari Workers Welfare Fund or that he has remitted before the date of sale of shops 50% of the arrears pending as on the date of sale notification, obtained the Circle Inspector of Excise, Sales Tax Officer or the Authority of the said Welfare Fund Board; 12) The individual declared to be the grantee of privilege by the officer conducting the sale shall immediately deposit the whole amount of annual rental fixed for the shop. Further the grantee shall remit the Welfare Fund contribution of workers for three months in advance. The bank draft furnished along with his application can be utilized for the purpose of depositing rental. If he fails to comply with these requirements, the whole amount covered in the demand draft furnished by him along with the application shall be forfeited to Government and the shop re-sold.” (emphasis supplied) 11. Rule 7 of the Rules lays down the conditions applicable to the licensees of Toddy of Foreign Liquor 1 shops. Sub-rule 23 of the Rule lays down thus: “(23) The licensee shall not sell or otherwise transfer the privilege granted licensees issued to him. No licensee shall lease out or sub-let the whole or portion of the privilege or licence granted to him.” 12. Under Rule 5 (10), the licensee is to execute an agreement in Form No.III of the Rules in which the licensee, specifically undertakes that the licensee shall not retreat from the privilege granted to him and that he is duty bound to pay all dues to the Government. He further agrees that in default the Government can recover the same from the licensee by recourse to revenue recovery. 13. He further agrees that in default the Government can recover the same from the licensee by recourse to revenue recovery. 13. From these provisions, it is abundantly clear that all responsibilities in respect of the toddy shop is squarely on the licensee himself, which would naturally include the liability to pay welfare fund under the Act. This is abundantly clear from the fact that the dues under the Kerala Toddy Workers Welfare Fund Act is specifically stipulated as payable by the licensee in the above quoted rules. Since Rule 7(23) specifically prohibits transfer of the privilege to run toddy shop or licence issued to the licensee, any agreement executed in violation of the same would be an illegal and void agreement, unenforceable in any court of law. The Abkari Act and the Rules made thereunder and the Kerala Toddy Workers Welfare Fund Act are complementary laws and the provisions of the latter cannot be interpreted in isolation especially when the Kerala Abkari Shops Disposal in Auction Rules specifically prohibits transfer of a licence. Therefore, a licensee of a toddy shop cannot under law escape from the liability of paying welfare fund under the Act notwithstanding any contract to the contrary with any other person. Any transfer made by him being illegal, the licensee cannot take advantage of his illegal act. As such, at all times currency of the currency of the licence, the responsibility of paying any Government dues in respect of the period of licence including welfare fund dues, rests squarely on the licensee irrespective of any intervening circumstances like lease of licence. Even if anybody else runs the toddy shop, which itself would be illegal, in view of the prohibition under the provisions of sub-rule 23 of Rule 7 quoted above, such person at best would only be an agent, for whose actions the licensee would be liable as the principal to the fall extent. 14. In view of the law as discernible from the Act and Rules, respondents 3 to 5 cannot escape the liability to pay welfare fund dues either relying on Ext.R-3(a), which is an illegal and unenforceable contract, or by proving that the petitioner was the actual employer by any amount of evidence. Therefore, the liability of respondents 3 to 5 to pay the welfare fund dues in respect of the toddy shops 'in question to beyond any doubt. 15. Therefore, the liability of respondents 3 to 5 to pay the welfare fund dues in respect of the toddy shops 'in question to beyond any doubt. 15. However, by that logic, the petitioner cannot be absolved from liability to pay contributions. He was a party to an illegal act prohibited by the Abkari Act and derived advantage by conducting the toddy shop. Therefore, he cannot be permitted to take advantage of his own illegal act. In Ext.P-4 order, the 2nd respondent categorically finds on evidence adduced before him that the petitioner was in fact running the toddy shop, paid salary to the workers and deducted from the wages of the workers their share of the welfare fund contributions. So, he was acting as a de facto employer. As he has deducted worker’s share of contributions, he should also be certainly made liable to make good the same as that money belongs to the employees. 16. Although the petitioner and respondents 3 to 5 rely on Joseph Joseph’s case (supra), I am of opinion that the same goes against both and the decision is an authority for the proposition that both the licensee and the de facto employer are equally liable for payment of the contributions. The following extract from the judgment is eloquent enough to disprove the case of both: “S.2(c) of the Act defines ‘employer’ as under: 2(c) employer means any person who employs, whether directly or through another person, or whether on behalf of himself or any other person, one or more employees and includes any person who has a licence for the manufacture, distribution, storage or sale of toddy under the Abkari Act for the time being in force.” The High Court found that as the appellants were also running the business of the shop and had employed the workers, they shall be deemed to be the employers vis­-a-vis those workers and liable to pay the contribution to the find under the Act. A perusal of S.2(c) shows that it refers to the person who employs any person, whether directly or through any other person or whether on behalf of himself or any other person, as employer. The employment by any person can be for himself or for any other person. A perusal of S.2(c) shows that it refers to the person who employs any person, whether directly or through any other person or whether on behalf of himself or any other person, as employer. The employment by any person can be for himself or for any other person. Merely because the person is associated with the conduct of the business of an establishment or shop, it cannot be said that he had employed the workers on his own behalf. There may be cases where it can be shown that besides the owner any other person conducting the business of the said shop may employ workers on his own behalf and not on behalf of original owner. But in the absence of proof to the contrary, particularly in view of the statement of principal employer that he had employed the workers, the intermediary persons could not be held to be the employer of the workers who were employed for the conduct of the business in the shop covered under the Act. Law presupposes the conduct of a legal business and cannot be interpreted in a manner which frustrates the object of the Act and results in not only miscarriage of justice but violation of the statutory provision of law. If, Under the Rules, the licensee was not authorized to lease out or sub-let the whole or any portion of the privilege or licence granting, to him for conducting the Abkari business, holding the appellants as employer with respect to the licensee’s shop would amount to facilitate the violation of the Kerala Abkari Shops Act, and the Rules framed there under. Such an interpretation is not called for as it is against the Public policy. In any particular case, where the authorities find that besides the licensee any other person conducting the business in a licenced premises under the Abkari Act and the Rules framed there under is also liable to contribute to the fund under the Act, they are under the legal duty to assert and positively hold that such persons were the employers vis-a-vis the workers and that they were conducting the business either with the legal authority of the licensee or the licensing authority…….” (emphasis supplied) 17. In that case also, the dispute was between the licensee and the de facto employer. In that case also, the dispute was between the licensee and the de facto employer. My reading of the Judgment is that, the Supreme Court has held that “where the authorities find that besides the licensee any other person conducting the business in the licensed premises under the Abkari Act and the Rules framed there under is also liable to contribute to the fund under the Act, they are under the legal duty to assert that they were conducting the business either with the legal authority of the licensee or the licencing authority”. This is exactly what the 2nd respondent has done in Ext.P-4. He has categorically found on acceptable evidence that respondents 3 to 5 were the licensees and the petitioner was running the shop under the authority of the licensee and therefore all of them are jointly and severally liable for the contributions payable under the Act. The Kerala Toddy Workers Welfare Fund Act, by giving a wider definition to the term ‘employer’ wanted to rope in other people who functions as employers in addition to the licensee, but the intention of the legislature was not to exclude licensee although in addition to the licensee some other person also was included in the definition of ‘employer’. In short, the intention was to make both of them jointly and severally liable for contributions under the Act. Still further, licensee would always be liable, but when it is proved that others also acted as employers under the licensee though under an illegal contract, they also should be made liable in addition to the licensee. This is for protecting the toddy workers from whose wages contributions had been deducted by the licensee or the other person acting as employer and the legislature wanted to see that at any costs the toddy workers would not lose their money because of illegal arrangement against law by licensees with others. In the Supreme Court decision the court ultimately found that there was an admission by the licensee that he alone was the employer and only on that finding the other person from whom contribution was demanded as the real employer was absolved from liability. Therefore, based on that decision, in this case neither the petitioner nor respondents 3 to 5 cannot be absolved from liability. 18. Therefore, based on that decision, in this case neither the petitioner nor respondents 3 to 5 cannot be absolved from liability. 18. In the result, I find that the finding in Ext.P-7 order of the 1st respondent to the effect that the petitioner alone was the employer is against the law. Therefore, the finding in Ext.P-4 that the petitioner and respondents 3 to 5 are jointly and severally liable to pay the contributions is perfectly valid in law. Accordingly, I set aside Ext.P-7 and restore Ext.P-4. Respondent 1 and additional respondents 6 and 7 are directed to recover the dues from the petitioner as well as respondents 3 to 5 as per Ext.P-4. The writ petition is disposed of as above.