SWADESHI COTTON MILLS Vs. REGIONAL DIRECTOR ESIC

JUDGEMENT

(1.) Swadeshi Cotton Mills Company Limited and its six textile undertakings, are engaged in the manufacture and production of different varieties of cloth and yarn. The management of the said textile undertakings was taken over by the Central Government under the Notification dated April 13, 1978 under Section 18-AA of the industries (Development and Regulation) Act, 1951. The Swadeshi Cotton Mills Company Limited (Acquisition and Transfer of Undertakings) Act, 1986 came to be passed in 1986 (for short, the Act of 1986). Subsection (1) of Section 3 of the Act 1986, states that on the appointed day every textile undertaking and the right, title and interest of the Company in relation to every such textile undertaking shall, by virtue of this Act, stand transferred to and shall vest in the Central Government. Subsection (2) of Section 3 declares that every such textile undertaking which stands vested in the Central Government by virtue of Sub-section (1) shall, immediately after it has so vested, stand transferred to, and vested in the National Textile Corporation. By Notification dated April 13/14, 1978 the National Textile Corporation Limited, New Delhi-a Government of India undertaking-was appointed authorised person to manage the undertakings for and on behalf of the Central Government.

(2.) By virtue of Sections 38 and 39 of the Employees State Insurance Act, 1948 (briefly, 'the Act of 1948'), which is, admittedly, applicable to the employees of the undertakings, all the employees in the aforesaid undertakings are to be insured and both employer and the employees have to pay contribution to the Employees' State Insurance Corporation (for brevity sake "E.S.I. corporation"). It is averred in paragraph 8 of the writ petition that "the management has framed a scheme that if employees exceed the normal production, they would be paid additional remuneration. However, this amount of extra remuneration is not a regular payment nor is payable to a workman regularly on account of employment but depends on certain conditions to be fulfilled by employees and is called' incentive'. In paragraphs 10 and 15 of the writ petition, it is averred that incentive does not form part of the wages and, as such no contribution need be paid by the employer on such incentive. It is contended that without giving any opportunity of hearing, the respondent issued impugned demand notice dated June 7, 1982 (Annexure '2' to the writ petition) calling upon the petitioner to pay a sum of Rs. 28941.90 within fifteen days. The petitioner, namely, the Management of National Textile Corporation Limited, which was appointed as authorised person, then addressed a letter dated July 29, 1982 to the respondent denying the liability to pay contribution on incentive. It is averred that without deciding such objections of the petitioner, the respondent threatened to take coercive measure against the petitioner to recover the amount of impugned demand notice. This is how by this petition the petitioner prayed for quashing the impugned demand notice dated June 7, 1982 (Annexure '2' to the writ petition).

(3.) In paragraph 8 of the counter-affidavit filed by the respondent it is sated that "extra remuneration given to the employees were also part of the wages, according to the Employees State Insurance Act, and the employer is also liable to pay contribution on that extra remuneration."