ESCORTS LTD Vs. REGIONAL DIRECTOR ESIC

JUDGEMENT

(1.) In this appeal under Section 82(2) of the Employees' State Insurance Act, 1948, ('Act') Escorts Ltd., the appellant, assails the order dated 23-9-1985 made in E.S.I, Application No. 13 of 1984 on the file of the Employees' Insurance Court, Bangalore, ('ESI Court' for short). Appellant initiated the proceedings before the ESI Court under Section 75 of the 'Act' questioning the determination made under Section 45A of the 'Act' demanding E.S.I. contributions from the appellant as 'Principal-employer' in respect of certain workmen employed by appellant's contractors engaged for the construction of appellant's factory-buildings.

(2.) The material facts are these : Appellant has a factory at Yelahanka engaged in the manufacture of 'Pistons'. The said project was taken-up pursuant to a project report prepared in or about the year 1974. The execution of the civil works of the factory buildings and of their sanitary and electrical installations was entrusted to three separate Contractors under rate-contracts. The contracts envisaged completion of the factory-buildings in three stages. In or about the year 1977 the buildings envisaged for the first stage were commissioned and the process of manufacture commenced. In respect of the execution of the subsequent stages of the buildings a sum of Rs. 41,75,252-98ps was paid to the three-contractors during the period between April 1979 and May 1980. The respondent-Corporation has sought to treat this entire sum as representing wages of the workmen and demanded the E.S.I. Contribution thereon at 7% amounting to Rs. 2,92,267/-. Proceeding this levy, an inspector of the Corporation had, on 9th and 10th of July 1980, inspected the records of the appellant in this behalf. The findings of this inspection were communicated to the appellant in the form of a notice dated 29-8-1980. Two claims for contributions were raised against the appellant. The first was as to the appellant's liability to make good the arrears of contribution in the said sum of Rs. 2,92,267/- the second was in respect of liability said to arise out of certain employments in the canteen. The present proceedings concern the former. To this notice dated 29-8-1980, the appellant sent a reply dated 18-12-1980 repudiating liability. The substance of reply was that the said sum of Rs. 41,75,252-98 ps was paid under a "contract for service" and not "contract of service," and that at all everts, in respect of the employees engaged by the Contractors, appellant would not become the "principal-employer" within the meaning of Section 2(9)(ii) of the 'Act'. It was contended that the work done pursuant to the contract could not be said to be "preliminary" or "incidental to the purposes" of the work of appellant's factory. The appellant did not hear any more of it for quite some time there-after. However, on 7-2-1984, the Corporation picked-up the old threads and issued to appellant a show cause notice No. KAR.INS.VI.53/2970/67 to the effect that the Corporation proposed to determine, under Section 45A of the 'Act' the liability of appellant to pay Rs. 2,92,267-70 ps as contribution and that if appellant had any cause to show against the proposed determination, it could do so within 15 days thereof. Apparently, no cause was shown within the time stipulated. Then followed the order dated 29-3-1984 determining the liability in this behalf at Rs. 2,92,267-70 ps under the said Section 45A. Appellant disputed its liability and raised a dispute in that regard under Section 75 before the ESI Court.

(3.) Two points were raised before the ESI Court. The first was that in respect of employees engaged by the Contractors, appellant could not be held to be the "principal-employer" under Section 2(9)(ii). The second was that, at all events, the entire sum of Rs. 41,75,252-98ps did not represent the salary or wages of the workmen but included cost of material also and that the demand of contribution at 7% on the entire sum was bad. Evidence, both oral and documentry, was adduced before the ESI Court. On a consideration of the material placed before it, the Court rejected the first contention and held that appellant was the "principal-employer". In regard to the second question which involved a break-up of the figure of Rs. 41,75,252-98ps into its component parts of cost of material and wages, the Court set-aside the determination under Section 45A and remitted the matter to the Corporation for a fresh determination, Appellant, aggrieved by this order of ESI Court, has come-up in appeal.