ESI CORPORATION Vs. POULOSE

JUDGEMENT

(1.) In this appeal under S.82 of the Employees' State Insurance Act, the Regional Director of the Employees' State Insurance Corporation has challenged the decision of the Employees' Insurance Court, Alleppey in I.C.No. 8 of 1985 holding that a saw mill employing more than 10 workers but less than 20 cannot be taken to be covered by the Act The respondent is the proprietor of a saw mill which at the relevant time employed 14 persons. The authority under the Act initiated proceedings for assessing the contribution due from the respondent as the employer for the period from 21.9.1981 to 29.1.1983. After two inspections a demand was finalised and an ad-hoc assessment made on 23.7.1984. By that assessment a sum of Rs. 2821.95 was assessed to be the contribution payable by the respondent. The respondent refused to make the contribution on the basis of that ad-hoc assessment on the ground that he had never employed the minimum required so as to bring the establishment under the coverage of the Act. Since the amount was not paid, the authority under the Act initiated proceedings for recovery of the contribution assessed to be due. It is at that stage that the respondent approached the Insurance Court with I.C.No. 8 of 1985 questioning the claim of the authority under the Act that the respondent was liable to contribute under the Act.

(2.) The respondent contended that going by the definition of 'factory' in S.2(12) of the Act, the establishment run by the respondent is not covered by the Act since the number of employees at the relevant period was not 20 or more as stipulated. This contention was met by the authority under the Act by contending that by virtue of a Notification issued by the State Government in exercise of its power under S.1(5) of the Act an establishment like that of the petitioner which employs more than 10 persons and which uses power has also been brought under the purview of the Act and the fact that the respondent's establishment is not a 'factory' as defined in S.2(12) of the Act does not enable the respondent to deny liability to make contribution under the Act. The Employees' State Insurance Court held that the establishment of the respondent would be covered by the Act only if it is possible to say that it would be a 'factory' as defined in S.2(12) of the Act and once it is conceded that it would not satisfy the definition of a 'factory' occurring in the Act, it could not be brought under the cover of the Act. In a sense, the court found that since there was no occasion when the respondent had employed 20 or more workers in his establishment, it could not be held that the establishment was covered under the Act. It was stated that if an establishment is registered under the Factories Act it could only be considered as a factory and not as an establishment at any time thereafter and the Notification issued by the Government under S.1(5) of the Act would not take in such a factory. It is this conclusion that is questioned before us by the Regional Director of the Employee's State Insurance Corporation.

(3.) By virtue of S.1(4) of the Act the Act was made applicable in the first instance to all factories including factories belonging to the Government other than seasonal factories. A factory was defined as a premises where 20 or more persons are employed for wages on any day of the preceding 12 months and in any part of it a manufacturing process was being carried on with the aid of power. A seasonal factory meant a factory which was exclusively engaged in the manufacturing process specified in the definition itself. On the facts established in this case, the establishment in question did not satisfy either the definition of 'factory' in the Actor the definition of seasonal factory in the Act. Under S.1(5) of the Act, the State Government was given the power to extend the provisions of the Act or any of them to any other establishment or class of establishments not directly covered under the Act on fulfilment of the conditions laid down in S.1(5) of the Act There is no dispute that the State Government issued a Notification in terms of S.1(5) of the Act extending the applicability of the Act to establishments other than those covered in the first instance by the Act. The relevant Notification relied on by the Corporation is the one dated 27.5.1976 by which any premises wherein 10 or more persons but less than 20 persons are employed for wages and in any part of which a manufacturing process could be carried on with the aid of power other than an establishment which was exclusively engaged in any of the manufacturing process specified in Clause.12 of S.2 of the Act was brought under the purview of the Act. According to counsel for the Corporation what are excluded are only a mine, a railway running shed or an establishment which would qualify as a seasonal factory under the definition that occurred at the relevant time. In other words, his contention was that all establishments using power and employing 10 or more persons and not being a seasonal factory were brought within the purview of the Act. This is sought to be met by contending that a factory already stood covered by virtue of S.1(4) of the Act and the factory that was covered was the factory as defined in the Act and once the entity 'factory' stood initially covered by the Act itself, any notification issued under S.1(5) of the Act specifying an establishment to be covered by the Act would not include within its purview a factory which does not satisfy the definition contained in S.2(12) of the Act. The contention is that an establishment could not be understood as a factory since the factory has already been dealt with by the definition in the Act. This argument found favour with the Employees' State Insurance Court. The question is whether the position canvassed for by the respondent is acceptable.