Judgment 1. Substantial question of law involved in this appeal is as follows : "Whether the exemption granted vide Government Notification, issued under section 88 read with section 91A of the Employees’ State Insurance Act, 1948, in respect of establishment of the Apex body of a Cooperative Marketing Federation Limited, would be applicable and valid so as to claim exemption from payment of Employees State Insurance (ESI) contribution in respect of other units of the Co-operative Marketing Federation ?" 2. By consent, the appeal is finally heard at stage of admission. 3. The appellants filed an application under section 75 read with sections 77 and 78 of the Employees’ State Insurance Act, 1948 (hereinafter referred to as "the ESI Act"), before the Industrial Court, Aurangabad. The applicant No. 1 is a registered Cooperative Society under the Maharashtra Cooperative Societies Act, 1960 and the appellant No. 2 is a unit dealing in manufacturing of granulated fertilizers at its factory situated within the industrial area of Chikalthana (Aurangabad). They asserted that the appellant No. 2 is not required to contribute for ESI amount under the ESI Act in as much as the State of Maharashtra has exempted the appellant No. 1 from application of the ESI Act vide notification dated 28th April, 1992 with effect from 1st February, 1996. They further asserted that the competent officer of the respondent visited the factory of the appellant No. 2 and noticed nonpayment of contribution of the ESI amount. By communication dated 30th July, 1993, the respondent directed payment of certain amounts towards contribution of the ESI. The appellant No. 2 raised certain objections vide communication dated 11th August, 1992. It was asserted that the construction work at the factory was carried out by contractors and the employees engaged for said work were under the domain of such contractors. It was contended that the appellant No. was not the principal employer in relation to those employees who worked for the construction work. The respondent No. 2 - the Recovery Officer, by order dated 6th August, 1993, called upon the appellant No. 2 to pay an amount of Rs. 42,56,927/- towards the ESI contribution. It was contended that the appellant No. was not the principal employer in relation to those employees who worked for the construction work. The respondent No. 2 - the Recovery Officer, by order dated 6th August, 1993, called upon the appellant No. 2 to pay an amount of Rs. 42,56,927/- towards the ESI contribution. The appellant No. 2 informed, vide letter dated 19th August, 1993, that there was exemption available from payment of the ESI contribution with effect from 1st February, 1996 in accordance with the Government Notification dated 28th April, 1992 and, therefore, urged for withdrawal of the notice of recovery. Subsequently, by order dated 12-11-1993, again the respondent called upon the appellant No. 2 to make payment of Rs. 5,19,337/- which was finally determined and that of interest amount of Rs. 22,839/-, for period till end of December, 1993. 4. Being aggrieved by the said order and the communication pertaining to recovery of ESI contribution, the appellants filed an application before the Industrial Tribunal seeking quashing of the recovery order and the demand notice issued by the respondents. 5. By their written statement (Exh-10), the respondents resisted the application. They asserted that the exemption granted vide notification referred by the appellants is only limited to the extent of the Head Office at Mumbai and it does not cover the factory unit at Aurangabad. They contended that the factory unit at Aurangabad is a separate legal entity and is liable to contribute towards the ESI contribution in respect of the employees working on its Establishment. They came out with a case that the appellants have attempted to misconstrue the Government Notification. They, therefore, supported the order issued in respect of recovery of the ESI contribution amount. It is the case of the respondent that a separate Code was assigned to the appellant No. 2 and the appellant No. 2 was required to furnish details of the wages and deductions of the ESI contribution. The appellant No. 2 did not submit proper returns. The appellant No. 2 had paid certain contribution amount in the past but failed to pay such amounts as required under section 40 of the ESI Act. They contended that the application is devoid of substance and, therefore, liable to be dismissed. 6. The learned Member of the Industrial Court framed issues below Exh-2. The appellants did not adduce any oral evidence. They contended that the application is devoid of substance and, therefore, liable to be dismissed. 6. The learned Member of the Industrial Court framed issues below Exh-2. The appellants did not adduce any oral evidence. The respondents filed affidavit of DW Madhav Tukaram Kawade in support of defence. He is Insurance Inspector. He was subjected to cross-examination during trial. 7. Heard learned counsel for the parties. 8. Before I embark upon the exercise of examining legal aspects of the matter, it would be appropriate to deal with the legal status of the appellants. The appellant No. 1 is Marketing Federation duly registered under the Maharashtra Cooperative Societies Act, 1960. The appellant No. 1 is the Apex body of several units, including the appellant No. 2, which are affiliated to it. The appellant No. 1 and other affiliated units work in a league. There is a Joint 45th Annual Report for 2003-2004 placed on record. A bare perusal of the Annual Report reveals that the financial transactions of the appellants alongwith other units, which are affiliated to the appellant No. 1, have been included in the Report. The appellant No. 1 is the controlling body of all the units of the Marketing Federation. The appellant No. 1 is having financial control over the units. Needless to say, the appellant No. 1 has financial and administrative control over the other units of the appellant No. 1. The appellant No. 1 and other units may be of the factory which manufactures cattlefeed in the name and style "Vaibhav Pashu Khadya" or may be the factory which manufactures granulated fertilizers in the name and style "Bhagirath Danedar Mishra Khat" are functional at different places, but are annexed to the apex body i.e. the appellant No. 1 for the purpose of financial and administrative control. 9. Mr. V.D. Sonawane, learned counsel for the respondents, strenuously argued that the appellant No. 2 is completely separate entity and is responsible for the internal affairs of the factory unit at Aurangabad and, therefore, cannot claim exemption from payment of ESI contribution only because the Government Notification provides such kind of exemption to the Head Office at Mumbai. 9. Mr. V.D. Sonawane, learned counsel for the respondents, strenuously argued that the appellant No. 2 is completely separate entity and is responsible for the internal affairs of the factory unit at Aurangabad and, therefore, cannot claim exemption from payment of ESI contribution only because the Government Notification provides such kind of exemption to the Head Office at Mumbai. He would further submit that when the separate Code number was assigned to the appellant No. 2 after due inquiry, as contemplated under the ESI Regulation No. 10B, now it is not open to the appellant No. 2 to turn volte-face and claim such exemption. He would submit that the appellant No. 2 never made representation for such exemption under the Government Notification and made no efforts to ask for exemption as provided under the law. He would point out that previously, the appellant No. had paid the contribution in respect of the ESI contribution. According to Mr. Sonawane, the appellant No. 2 acquiesced the legal position in view of the payment for subsequent period. Hence, he urged for dismissal of the appeal. 10. The expression "Federal Society" is defined under section 2 (13) of the Maharashtra Cooperative Societies Act, 1960. There is no dispute about the fact that both the appellants are registered Cooperative Societies under the provisions of the Maharashtra Cooperative Societies Act, 1960. The expression "Federal Society" is defined under section(13) with reference to the federation of societies dealing in various kinds of business. The provision reads as follows : "2(13) ‘federal society’ means a society .(a) not less than five members of which are themselves societies, and . (b) in which the voting rights are so regulated that the members which are societies have not less than four -fifths of the total number of votes in the general meeting of such society;" 11. The State Government has notified certain classes of the societies. One of the classes of such federal society is the Maharashtra State Cooperative Marketing Society, which includes (i) Agricultural Marketing Societies; (ii) Agricultural Processing Societies other than sugar factories; and (iii) Non-credit resources societies. 12. It would be manifestly clear that the Maharashtra State Cooperative Marketing Society would include the above three (3) kinds of the societies dealing in the activities, which are envisaged under sub-category (i) to (iii). 12. It would be manifestly clear that the Maharashtra State Cooperative Marketing Society would include the above three (3) kinds of the societies dealing in the activities, which are envisaged under sub-category (i) to (iii). Section 90 of the Maharashtra Cooperative Societies Act, 1960 lays down the power to levy supervision charges on constitution of a Federal Authority as recognized under the Act. The vires of Section 90 was subject matter of challenge in “Shetkari Sahakari Ginning and Oil Mills Society Ltd., Katol, District Nagpur Vs. State of Maharashtra and another”, 2005(4) Mah.L.J. 319 : [2005(4) ALL MR 897]. It has been held that Section 90 is not ultra vires to the provisions of the Maharashtra Cooperative Societies Act. 13. The meaning of the word "federal" in the context of the structure of the appellants need to be ascertained. The Black’s Law Dictionary defines the word "federation" as stated below : "Federation. A joining together of states or nations in a league or association, the league itself." 14. The word "Federation" is defined in the Law of Lexicon as follows : "Federation. Government based on federal principles; group of states for political purposes; federated society. It is Federation of various States, which were designated under the constitution for the purpose of efficient administration and governance of the country. A Union of societies or organisations; a political unit with a central government and consisting of several States each of which claims control of its internal affairs." 15. Mr. Sonawane invited my attention to the decision of a Division Bench of Madras High Court in “M. Karunnanidhi Vs. The Union of India” AIR 1977 MADRAS 192. A Division Bench of Madras High Court considered legal import of the expression ""federation" in the context of the subject matter of challenge in respect of notification issued by the Department of Personnel and Administration Reforms, Government of India, under section 3 of the Commissions of Inquiry Act, 1952. It would be appropriate to refer to certain observations of the learned Judges of the Division Bench in this context. It is observed : "We feel that the words ‘federation’, ‘autonomy’ and ‘federating States’ have varying meanings and what a particular word means will depend upon the context. For example, there may be a federation of independent States, as it is in the case of United States of America. It is observed : "We feel that the words ‘federation’, ‘autonomy’ and ‘federating States’ have varying meanings and what a particular word means will depend upon the context. For example, there may be a federation of independent States, as it is in the case of United States of America. As the name itself denotes, it is a union of States, either by treaty or by legislation by the concerned States. In those cases, the federating units gave certain powers to the federal Government and retained some. To apply the meaning of the word ‘federation’ or ‘autonomy’ used in the context of the American Constitution, to our Constitution will be totally misleading." 16. The concept of ‘federalism’ in relation to the Central Government and State Government would defer from one nation to another. The concept of ‘federation of cooperative societies’ will also vary from one kind of the organisation to another, depending upon nature of functioning and the supervisory powers available to the Apex Body. In the present case, it is explicit that various Cooperative Societies work in a league and their financial control is with the appellant No. 1. Not only that, all the units are jointly assessed for their performance. A Joint Annual Report is submitted in respect of the financial activities of all the units including that of the appellant No. 2. The appellant No. 1 and all the other units work in a league. To put it differently, it may be said that the appellant No. and other units like the appellant No. 2 form a chain of business notwithstanding the fact that their activities are multifarious. 17. Though the appellant No. 2 might have paid contribution afterwards for certain period, yet, it would not cause estoppel by conduct when the legal plea of exemption is put forth in view of the Government Notification referred by the appellants. The Government Notification relied upon by the appellants (P-17) purports to show that in the exercise of powers conferred under section 88 read with section 91A of the ESI Act, the State Government has exempted "the persons employed in the establishments of Maharashtra State Cooperative Marketing Federation Limited, Kanmoor House, Narsi Mehta, Bombay 400009" from the operation of the provisions of the said Act. The prior notification dated 28th April, 1992 (P-15) purports to show that the exemption was granted prospectively upto 31st March, 1993. The prior notification dated 28th April, 1992 (P-15) purports to show that the exemption was granted prospectively upto 31st March, 1993. Significantly, the State Government is empowered to grant such exemption in an appropriate case under sections 87 and 88 of the ESI Act. Section 88 reads as follows : “88. Exemption of persons or class of persons :- The appropriate Government may, by notification in the Official Gazette and subject to such conditions as it may deem fit to impose, exempt any person or class of persons employed in any factory or establishment or class of factories or establishments to which this Act applies from the operation of this Act." 18. A plain reading of section 88 would make it amply clear that the State Government is empowered to exempt "class of persons employed in any factory or establishment, or class of factories or establishments, to which the Act is applicable." It does not restrict application of the exemption to a particular place. Section 88 does not refer to a place pertaining to exemption. However, section 87 refers to the exemption in respect of any specific area. 19. The scheme of the ESI Act, 1948 is elaborately discussed and stated in “Transport Corporation of India Vs. Employees’ State Insurance Corporation & another”, 2001(1) CLR 38. The Apex Court held that once it is found that the employees of the branch office of an Undertaking dealing in transport of goods are doing the same work which is the main work of the principal establishment at the main office covered by the exemption, then the exemption would be available to such a branch office too. The Apex Court observed : "In our view, the aforesaid observations on the scheme of the Act for covering the activities of head office and branches of the establishment are well sustained. In the light of the statutory scheme envisaged thereunder, there is no escape from the conclusion that each branch, having functional integrality and being under the direct supervision and control of the parent office, would be part and parcel of the main establishment and all such branches have to be treated as miniatures of the main office. They cannot be considered as separate independent entities on the factual data in the present case on which there is no dispute between the parties. They cannot be considered as separate independent entities on the factual data in the present case on which there is no dispute between the parties. As discussed by us earlier there is no escape from the conclusion that the Bombay branch is an appendage and part and parcel of the main establishment at Secunderabad and is almost a shortened mirror image thereof." 20. Mr. Upadhye also seeks to rely on “M/s. Southern Agencies, Rajamundry vs. Andhra Pradesh Employees’ State Insurance Corporation”, 2001(88) FLR 347. It has been held that the administrative office is nothing but a controlling office to supervise the sales and would fall within the definition of expression ‘shop’. 21. Mr. Sonawane relied upon certain observations in “All India I.T.D.C. Employees’ Union Vs. Employees State Insurance Corporation and others” 2000(84) FLR 869 . The Apex Court held that remedy by way of writ petition was not proper since the dispute could be resolved by filing an application under section 91 of the ESI Act. With due respect, this authority has no bearing on the issue involved in the present case. 22. A cumulative consideration of the relevant aspects would make it manifest that the appellants work conjointly and are members of a league formulated under the provisions of the Maharashtra Cooperative Societies Act, 1960. One can not be oblivious of the intention of the legislature in enacting the Maharashtra Cooperative Societies Act. The internal cooperation and the motto "all for one and one for all" is the backbone of the cooperative movement. It is of common knowledge that the Government is expected to endeavour for giving booster dose to the cooperative movement in the State. The exemption granted from the operation of the ESI Act is one kind of the endeavour of the State Government to give helping hand to the appellants. It is within the powers of the State Government to grant exemption from operation of the ESI Act. There cannot be duality of opinion that the ESI Act is a social beneficial legislation. At the same time, in parallel field, the cooperative sector also is being given due support by way of subsidies or exemptions as permissible under the Government policies. It is also a social welfare legislation. There cannot be duality of opinion that the ESI Act is a social beneficial legislation. At the same time, in parallel field, the cooperative sector also is being given due support by way of subsidies or exemptions as permissible under the Government policies. It is also a social welfare legislation. In keeping with such intention of the Government while issuing notification in question, am of the opinion that mere reference in the Government Notification that it would be applicable to the appellant No. 1, with reference to the address given of the Head Office, would not disentitle the appellant No. 2 from claiming such exemption. Nor the fact that in the past contribution of the E.S.I. amount was made by the appellant No. 2 will operate as estoppel from seeking exemption from legal liability to pay the same. It cannot be said that the appellant No. 2 is a completely separate and segregated unit without having any nexus with the business of the appellant No. 1. Taking a composite view of the financial activities of the appellants and the fact that they are in league with each other in the cooperative business, I have no hesitation in holding that the exemption granted under the Government Notification, referred to hereinabove, would be equally available to the appellant No. likewise that of the appellant No. 1. In this view of the matter, the impugned judgement is quite unsustainable and will have to be set aside. 23. In the result, the appeal is allowed. The impugned judgement is set aside. The recovery orders/certificate challenged by the appellants is quashed and the application filed by them be deemed as allowed. No costs.