M/S. BHARAGATH ENGINEERINGversusR. RANGANAYAKI AND ANR.

    A                    MIS. BHARAGATH ENGINEERING
I
                                           V.                                        '
                           R. RANGANA YAKI AND ANR.

                                DECEMBER 20, 2002

    B               [SYED SHAH MOHAMMED QUADRI AND
                            ARIJIT PASA VAT, JJ.]


               Employees' State Insurance Act, 1948--Sections 2(14), 53-Death of
        employee during course of employment with employer-Registration with
    c   Insurance Corporation after the death of employee-Proceedings under
        Compensation Act-Applicability ofthe Insurance Act on the employee-Held,
        employee is 'insured person' under the Act-Date of payment of contribution
        is not very material-Date of commencement is from the date of employment
        of the employee-Proceeding under Compensation Act barred-Employees'
    D   State Insurance (Central) Rules, 1950-Rule 58(2)(b)(u)-Employees' State
        Insurance (General) Regulations, 1950-Workmen 's Compensation Act, 1923.

              Deceased employee died in the course of his employment with the
        appellant-employer. Application for registration with Employees State
        Insurance Corporation for the purpose of insurance was submitted and
    E   registration was granted after the death of the employee. Respondent-
        claimant filed application under Workmen's Compensation Act, 1923.
        Maintainability of the proceeding was questioned on the ground that
        entertainment ofsuch application was barred by Seetion 53 of Employees'
        State Insurance Act, 1948. Commissioner for workmen Compensation held
        that deceased employee was covered under Insurance Act and was an
    F   "insured person" as contemplated under Section 2(14) of Insurance Act.
        In appeal High Court held that Section 53 of Insurance Act was not
        applicable and deceased employee could not be treated to be an insured
        person; and that since registration was outcome of contract between the
        employee and the Corporation, employee could be covered by the benefits
    G   of the Insurance Act only when registration is granted to him and not at
        an anterior point of time. Hence the present appeal.

             Allowing the appeal, the Court

              HELD: I.I. The deceased employee was an 'insured person', as           -.
        defined. in section 2(14) of Employees' State Insurance Act, 1948. As the
    H                                      642
        BHARAGATH ENGINEERING v. R. RANGANA YAK! [ARIJIT PASAYAT, J.]   643
 deceased employee has suffered an employment injury as defined under          A
 Section 2(8) of the Act and there is no dispute that he was in employment
·of the employer, by operation of Section 53 of the Act, proceedings under
 the Workmen's Compensation Act, 1923 were exduded statutorily. The
 High Court was not justified in holding otherwise. The benefits shall be
 worked out by the Corporation and shall be extended to the eligible           B
 persons. 1647-C, D, El
        '
     Harrisson Malayalam Pvt. ltd. 119931 4 SCC 361 and £.S./.
Corporation v. Hotel Kalpaka International, 119931 2 SCC 9, relied on.

      1.2. Crucial expression in section 2(14) of the Act is 'are or were
payable'. It is the obligation of the employer to pay the contribution from    C
the date the Insurance Act applies to the factory or the establishment. That
being the position the date of payment of contribution is really not very
material. In fact, Section 38 of Insurance Act, casts a statutory obligation
on the employer to insure its employees. That being a statutory obligation,
the date of commencement has to be from the date of employment of the          D
concerned employee. 1645-H; 646-B, q

      Employees' State Insurance Corporation v. Harrison Malayalam
limited, 1199819sec74, relied on.

      2. The scheme of the Insurance Act, Employees' State Insurance           E
(Central) Rules, 1950 and Employees' State Insurance (General)
Regulations, 1950 clearly spell out that the insurance covered under the
Act is distinct and different from the contract of insurance in general.
                                                                  1646-CI

        CIVIL APPELLATE JURISDICTION : Civil Appeal No. 8623 of                f
2002.

     From the Judgment and Order dated 15.12.1999 of the Madras High
Court in LPA 222/99.

      K.V. Viswanathan, Kunwar Ajit Mohan Singh and K.V. Venkataraman          G
for the Appellant.

        K.B. Sounder Rajan and V.J. Francis for the Respondents.

        The Judgment of the Court was delivered by

        PASAYAT, J. Leave granted.                                             H
    644                     SUPREME COURT REPORTS [2002) SUPP. 5 S.C.R.
A         The challenge in this appeal is to a Division Bench judgments of the
    High Court at Madras. The point involved, though short, is interesting and
    relates to the question as to who can be treated as an 'insured person' under
    Section 2(14) of the Employees' State Insurance Act, 1948 in short, 'the
    Act'.

B        A brief reference to the factual position, which is almost undisputed,
    would suffice.

         One Balakrishnan [hereinater referred to as 'the deceased employee]'
   was employed by the appellant [hereinafter referred to as 'the employer'] on
   and from 20th May 1987. He lost his life in an accident which was claimed
C to be arising out of and in the course of his employment with the employer.
   Respondent No. I [hereinafter referred to as 'the claimant'] filed an application
  .for compensation before the Commissioner for Workmen's Compensation,
   Trichy, under Workmen's Compensation Act, 1923 hereinafter referred to as
   'the Compensation Act'. IThe employer questioned the maintainability of the
D proceeding on the ground that Section 53 of the Act clearly barred
   entertainment of such an application. The stand was accepted by the Deputy
   Commissioner of Labour and the Commissioner for Workmen Compensation,
   who held that the deceased employee was covered by the Act and was an
   'insured person' as contemplated under Section 2(14) of the Act. The matter
   was carried in appeal before the High Court by the claimant which, by the
E impugned order, held that Section 53 of the Act had no application. Consequent
   upon recording a finding that the deceased employee cannot be treated to be
   an insured person. It was noticed by the High Court that the n;gistration for
   the purpose of insurance was granted subsequent to the death of the employee.
   In fact, the application for registration was submitted after the death of the
F employee and at the time the registration was granted, the employee was
   dead. Registration with the Employees' State Insurance Corporation [in short
   'the Corporation'] was considered to be the outcome of a contract between
   the employee and the Corporation. It was, therefore, held that an employee
   could be covered by the benefits of the Act only when the registration is
   granted and not at an anterior point of time. Direction was given to the
G authorities under the Compensation Act to deal with the application.
         In support of the appeal, learned counsel appearing for the appellant
  submitted that the High Court's approach was erroneous because the language
  of Section 2( 14) of the Act makes it clear that even before an employee is
  registered for the purpose of insurance with the Corporation, the obligation
H of the employer to pay contribution is not wiped out. Reference was made
                                                                                        ,,
                                                                                       Ii
      BHARAGA TH ENGINEERING v. R. RANGANA YAKI [ARIJIT PASA YAT. J.]        645
to various provisions, more particularly to Rule 58(2)(b) of the Employees' A
State Insurance (Central) Rules, 1950 (in short the Rules) and Regulation (4)
of the Employees' State Insurance (General) Regulations, 1950 [in short, 'the
Regulations'.] Rule 58(2)(b) deals with a situation where 'employment injuries'
are sustained before the commencement of the first benefit period. Merely
because the contribution had not been paid by the time the employee died, B
that does not affect the liability of the Corporation. There is a statutory
obligation to pay the contribution in respect of every employee once the
factory or establishment is covered by the Act and the obligation to pay the
contribution commences from the date of the application of the Act to such
factory or establishment. With reference to Section 38 of the Act, it was
submitted that there was a statutory requirement for insurance in relation to C
all employees. The scheme of the Act is conceptually different from other
contracts of insurance and the relationship of the contractor and the contractee
is not that of the employee and the Corporation, but that of the employer and
the Corporation.

      Learned counsel appearing for the Corporation submitted that Section           D
2(14) of the Act was wide enough to cover an employee who dies even
before the registration with the Corporation. According to him, the benefit
under the Act is more beneficial to the employee than the compensation that
could be awarded under the Compensation Act.

      Learned counsel appearing for the claimant, on the other hand, submitted       E
that only when the person is registered for the purpose of insurance with the
Corporation, the Act has application and it is not that all the employees are
automatically insured. What is contemplated under Section 38 of the Act,
which is a statutory requirement, is to insure all the employees.
                                                                                     F
      Section 2( 14) of the Act, which is the povotal provision, reads as follows:

       " 'Insured person' means a person who is or was an employee in
       respect of whom contributions are or were payable under this Act and
       who is, by reason thereof, entitled to any of the benefits provided by
       this Act."
                                                                                     G
       It is to be noted that the crucial expression in Section 2(14) of the Act
is 'are or were payable'. It is the obligation of the employer to pay the
contribution from the date the Act applies to the factory or the establishment.
In E.S./. v. Harrisson Malayalam Pvt. Ltd., (1993] 4 S.C.C. 361, the stand
of the employer that employees are not traceable or that there is dispute about H
    646                    SUPREME COURT REPORTS (2002] SUPP. 5 S.C.R.

A their whereabouts does not do away with the employer's obligation to pay the
    contribution. In E.S.I. Corporation v. Hotel Ka/paka International, [1993] 2
    SCC 9, it was held that the employer cannot be heard to contend that since
    he had not deducted the employee's contribution on the wages of the e~ployees
    or that the business had been Closed, he could not be made liable. Said view
B   was reiterated in Employees' State Insurance Corporation v. Harrisons
    Malayalam limited, (1998] 9 SCC 74. That being the position, the date of
    payment of contribution is really not very material. In fact, Section 38 of the
    Act casts a statutory obligation on the employer to insure its employees. That
    being a statutory obligation, the date of commencement has to be from the
    date of employment of the concerned employee.
c        The scheme of the Act, the Rules and the Regulations clearly spell out
  that the insurance covered under the Act is distinct and different from the
  contract of insurance i.n general. Under the Act, the contributions go into a
  Fund under Section 26 for disbursal of benefits in case of accident,
  disablement, sickness, maternity, etc. The contribution required to be made
D is not paid back even if an employee does not avail any benefit. It is to be
  noted that under Regulation 17-A, if medical care is needed before the issuance
  of temporary identification certificate, the employer is required to issue a
  certificate of employment so that the employee can avail the faeilities available.
  'Wage period', 'benefit peri.od' and 'contribution period' are defined in Section
E 2(23) of the Act, Rule 2(1C) are Rule 2(2-A) of the Rules. Rule 58(2)(b) is
  a very significant provision. For a persoa who becomes an employee for the
  first time within the meaning of the Act, the contribution period under
  Regulation (4) commences from the date of such employment from the
  contribution period current on that day and corresponding benefit period
  shall commence on the expiry of the period of nine months from the date of
F such employment. In cases where employment injuries results in death before
  the commencement of the first benefit period, Rule 58(2)(b)(ii) provides the
  method of computation of dependent benefit. It provides for computation of
  dependent benefits in the case of an employee dying as a result of employment
  injuries sustained before the first benefit period and before the expiry of the
G first wage period.
          Rule 58(2)(b)(ii), insofar as it is relevant, reads as follows:

            Dependants' s benefits.
            2(b) Where an employment injury occurs before the commencement
H           of the first benefit period in respect of a person, the daily rate of
         BHARAGA TH ENGINEERING v. R. RANGANA YAKI [ARIJIT PASAYAT, J.)    64 7
         dependant's benefit shall be:                                             A
         (i) xxx                         xxx                         xxx

         (ii) Where a person sustained employment injury before the expiry of
         the first wage period in the contribution period in which the injury
         occurs, the rate, forty per cent more than the standard benefit rate,     B
         rounded off to the next higher multiple of five paise corresponding
         to the group in which wages actually earned or which would have
         been earned had he worked for a full day on the date of accident/
         fall."

       When considered in the background of statutory pro'visions, noted above,    C
the payment of non-payment of contributions and action or non-action prior
to or subsequent to the date of accident is really inconsequential. The deceased
employee was clearly an 'insured person', as defined in the Act. As the
deceased employee has suffered an employment injury as defined under
Section 2(8) of the Act and there is no dispute that he was in employment
of the employer, by operation of Section 53 of the Act, proceedings under the      D
Compensation Act were excluded statutorily. The High Court was not justified
in holding otherwise. We find that the Corporation has filed an affidavit
indicating that the benefits under the Act shall be extended to the persons
entitled under the Act. The benefits shall be worked out by the Corporation
and sh.all be extended to the eligible persons.                                    E
     The civil appeal is, accordingly, allowed but m the circumstances,
without any order as to costs.

K.K.T.                                                        Appeal allowed.