Supreme Court of India
REGIONAL DIRECTOR EMPLOYEES STATE INSURANCE CORPORATION, MADRAS, ETC. ETC.versusSOUTH INDIA FLOUR MILLS (P) LTD. ETC. ETC.
- Citation
- 1986 INSC 98
- Decided
- 29 April 1986
- Disposal
- Appeal(s) allowed
- Bench
- V BALAKRISHNA ERADI
Holding
Casual construction workers employed for the expansion of a factory are employees under section 2(9) of the Employees' State Insurance Act, 1948, as the work is incidental or preliminary to the factory's operations.
Summary
The Employees' State Insurance Corporation (ESIC) sought contributions from several manufacturing companies for casual daily‑wage workers employed to construct additional buildings for factory expansion. The Madras High Court held that such workers were not "employees" within the meaning of section 2(9) of the Employees' State Insurance Act, 1948, and dismissed ESIC's claim. On appeal, the Supreme Court examined whether (i) casual workers fall within the definition of "employee" and (ii) construction work for expanding a factory is "incidental, preliminary or connected" with the factory's work. The Court held that the definition in s.2(9) is wide, includes casual workers, and that construction for expansion is indeed incidental or preliminary to the factory's work, bringing the workers within the Act's purview. Consequently, the Supreme Court set aside the High Court judgments, allowed the appeals and special leave petitions, and directed the parties to bear their own costs.
Issues considered
- Whether casual daily‑wage construction workers are "employees" under section 2(9) of the Employees' State Insurance Act, 1948.
- Whether work of constructing additional factory buildings for expansion is "incidental, preliminary or connected" with the work of the factory within the meaning of the Act.
Legislation cited
- Employees' State Insurance Act, 1948s. 2(9), s. 39(4), s. 42(3)
- Factories Act, 1948
Subjects
Employees' State Insurance Actdefinition of employeecasual workersconstruction workersfactory expansionsocial security legislationsection 2(9)incidental workpreliminary workcontribution liability
Judgment
863
REGIOIW. DllF.C\'Oa, WLOYEl'.S 51'!'1'1'.: lNSU\WICE
COIU'ORATION, MADRAS, ln'C. ln'C.
A
v.
soom INDIA PLOIJ'R MIUS (P) LID. ln'C. ln'C.
APRIL 29, 1986
B
[V, BALAKRISHNA EfVJ)l AND MURARI MOHAN DUTT, JJ.]
Employees' State Insurance Act, 1948 - Section 2(9) -
'employee' - 'work of the factory' - interpretation of -
ca~ual employees - whether fall within purview of Act.
~
The respondent-co1111>any in Civil Appeal No, 601 of 1976 c
is engaged in ~tlling wlleat into wheat products in its flour
t llll,ll, It cQll!llll!nced the construction of another buU<\ing in the
CQlllPOund pf the existing factory for the expansion of the
f4ctory and engaged workmen for such construction on daily
w11ge basis. The appellant-Corporation Cl!lle<\ upon the
respondent-company to .,.k.e contribution in respect of the D
work!Ql!n emplo:ved for the construction work of the factory
buil<\tng as required by the El!lployees State Insurance Act,
1948. .
The respondent-company disputed its liability and filed
a petition under Art. 226. A Single Judge allowing the
petition to()k the view that the persons employed in the
construction of a new unit of the factory were not employees
!If.thin the meaning of the definiUon of the ter111 'employee'
·-4 under s. 2(9) of the Act.
II.. On appeal by the appel1ant.-Corporation, a Division Bench F
~ relying upon an earller decision of that Court in l'.llplayees
St:JJte ID8Urance Corporation v. Gllllnall!>ik.ai Mills Ltd., [ 1974]
2 LW 530 dismissed the appeal and held that construction
workers being causal employees. do not come within the purview
of the Act.
G
The connected appeals and the special leave petitions
~are based on similar facts and involve a co111110n question of
law.
864 SUPREME COURT REPORTS [1986 J 2 S.C. R.
A
Allowing the appeals and petitions of the
appellant-Corporation the Court. +
HELD : 1. The Act is a piece of social security
legislation enacted to provide for certain benefits to
employees in case of sickness, maternity and employment
B injury. [871 F]
2. Casual employees are employees within the meaning of,
the term 'employee' as defined in s. 2(9) of the Act andf
accordingly come within the purview of the Act.
c Andhra Pradesh State Electricity Board v. l!llployees'
State Insurance Corporation, Hyderabad, [1977] 1 LW 54,
llegl.onal DI.rector, ESIC, Bangalore v. llavangere Cotton Mills,
[ 1977] 2 LLJ 404 and Employees' State Insurance Corporation,+
t
Ouuidigarh v. Oswal Woollen Mills Ltd., [1980] 2 Lab. I.e.
1064, relied upon.
D
Employees State Insurance Corporation v. Ghanubikai
Mills Ltd., [1974] 2 LW 530, overruled.
Royal Talldes, Hyderabad v. l!llployees' State Insurance
Corporation, [1978] 4 sec 204, referred to.
E
3. The definition of the term "e~loyee" under s. 2(9)
of the Act is very wide. It includes within it any person
employed on any work incidental or preliminary to or connected ...
with the work of the factory or establishment. It is difficult
to enumerate the different types of work which may be said to~
F be incidental or preliminary to or connected with the work of
the factory or establishment. [871 B-C]
4, In the instant cases, the additional buildings have,
been constructed for the expansion of the factories in
question. It is because of these additional buildings that the
G existing factories will be expanded and consequently, there
will be increase in the production that is to say increase in
the work of the factories concerned. So the work of
construction of additional buildings has a link with the work.a..~
of the factories. It cannot, therefore be said that th~
construction work has no connection with the work or the
H purpose of the factories. [871 C-E]
E.S.I. CORPN. v. SOUTH FLOUR MILLS [DUTT, J. l 865
A
5. The expression 'work of the factory' should also be
0
understood in the sense of any work necessary for the
expansion of the factory or establishment for augmenting or
increasing the work of the factory or establishment. Such work
is incidental or preliminary to or connected with the work of
the factory or establishment. [873 A-BJ
B
CIVIL APPELLATE JURISDICTION : Ci vi.l Appeal No. 801 of
1976 Etc.
y
From the judgment and Order dated ll.12.1973 of the
Madras High Court in Writ appeal No. 288 of 1970.
V.C. Mahajan, Dr. Y.S. Chitale, Miss Kitty
c
Kumaramangalam, Gi rish Chandra, S. Ramasubramaniam, D. N.
Gupta, N.S. Das Bahal, Miss Sushma Ralhan, D.N. Gupta and C.V.
Subba Rao for the appearing parties.
The Judgment of the Court was delivered by
D
DUTT, J, Civil Appeal No. 801 of 1976 and Civil Appeal
No. 819 (NL) of 1976 have been preferred by Special Leave by
the Employees State Insurance Corporation, hereinafter
referred to as 'ESI Corporation'. The ESI Corporation has also
filed Special Leave Petition Nos. 1134-1145(NL) of 1978. These
E
appeals and the Special Leave Petition raise a common que"tion
of law and, as such, they have been heard together. Indeed, by
an order of this Court the Special Leave Petitions were
directed to be heard along with Civil Appeal No. 801 of 1976.
Before we indicate thhe question of law we may state a few
facts.
F
In Civil Appeal No. 801 of 1976, the respondent company,
South India Flour Mills (P) Ltd., ls engaged in milling wheat
into wheat products in its flour mill. It is not disputed that
the mill of the respondent company is a factory within the
meaning of the Factories Act, 1948. In or about the middle of
G
1964, the respondent company collllllenced the construction of
another building in the compound of the existing factory for
the expansion of the factory and engaged workmen for such
construction on daily wage basis. The ESI Corporation called
upon the respondent company to make contribution in respect of
H
866 SUPREME COURT REPORTS [ 1986] 2 S.C.R.
A
the wor!Qnen employed for the construction work of the factory
building as required by the Employees' State Insurance Act, ~
1948, hereinafter referred to as 'the Act'. The respondent
company 100ved the Madras High Court under Article 226 of the
Constitution against the said demand. A learned Single Judge
of the High Court took the view that the persons employed in
Jl the construction of a new unit of the factory were not
employees within the meaning of the definition of the term
'employee' under section 2(9) of the Act. In that view of the..,I
matter, the learned Judge allowed the writ petition of the ·
respondent company. On appeal by the ESI Corporation to a
Division Bench of the High Court, the Division Bench simply
c referred to and relied upon an earlier decision of that Court
in &iployees State Insurance C.Orporation v. Gnaniunbikai Mills ~
Led., (1974] 2 L.L.J. 530. In that case, it has been held that ·
though casual employees come within the definition of the term t
'employee' under section 2(9) of the Act yet, as they may not
be entitled to sickness benefit in case their employment is
D less than the benefit period or contribution period, it does
not appear to be the intention of the Act that casual
employees should be brought within its purview. Accordingly,
it has been held that construction workers being casual
employees do not come within the purview of the Act. The
appeal preferred by the ESI Corporation was dismissed.
E
In Civil Appeal No. 819 (NL) of 1976, the respondent
company, Shri Sakhti Textiles Pvt. Ltd., was granted an
additional spindleage. Accordingly, the respondent company
expanded its mill, that is the factory, by putting up of new
buildings and, for that purpose, the company had to employ a .~
F large number of workers. The ESI Corporation demanded from the
respondent company contributions in respect of the said {
workers for the period from July 1, 1963 to September 30, +.
1967, The respondent company instituted proceedings under i
section 75 of the Act in the Employees' State Insurance Court,
Coimbatore, inter alia, praying for a declaration that the
G workers employed for the construction work of the factory
buildings were not employees within the meaning of section
2(9) of the Act. The Employees' State Insurance Court held
that the workers engaged by the respondenht cofmpany for putting
up of additional constructions for t e actory were not
+·
employees within the definition of the term 'employee' under
H
E.S.I. CORPN. v. SOUTH FLOUR MILLS [DUTr, J,] 867
A
the Act. On appeal by the ESI Corporation against the order of
~ + the Employees' State Insurance Court a Di vision Bench of the
Madras High Court took the view that employment of workers for
putting up of additional buildings for the purpose of commenc-
ing manufacturing process would not be employment incidental
or preliminary to or connected with the work of the factory B
and, accordingly, the workers employed for the purpose of
construction of additional buildings were not employees within
the meaning of section 2(9) of the Act. In that view of the
'f matter, the Division Bench dismissed the appeal.
In the Special Leave Petition Nos. 1143-1145 of 1978,
the respondent companies owning the textile mills workers for c
the construction of additional factory buildings. The Division
Bench of the Madras High Court has following its earlier
decisions taken the same view that the workers employed for
the construction of additional factory buildings of the mills
in question are not employed within the meaning of section
2(9) of the Act. Hence the ESI Corporation has filed these D
Special Leave Petitions which, as aforesaid, have been heard
along with the above appeal.
In view of the facts stated above, the only question
that is involved in these appeals and the Special Leave
Petitions is whether the workers employed for the construction E
of additional buildings for the expansation of the factories
in question are employees within the meaning of section 2(9)
of the Act. Section 2(9) of the Act before the same was
' amended by the Amendment Act 44 of 1966 provided as follows
"Employee" means any person employed for wages in F
or in connection with the work of a factory or·
establishment to which this Act applies and -
(i) who is directly employed by the principal
employer on any work of, or incidental or
preliminary to or connected with the work of, the G
factory or establishment, whether such work if done
by the employee in the factory or establishment or
elsewhere; or
(ii) who is employed by or through an immediate
employer on the premises of the factory or H
868 SUPREME COURT REPORTS [1986] 2 S.C.R.
A
establishment or under the supervision of the
principal employer or his agent on work which is +
ordinarily part of the work of the factory or
establishment or which is preliminary to the work
carried on in or incidental to the purpose of the
factory or establishment; or
B
(iii) whose services are temporarily lent or let on
hire to the principal employer by the person with
whom the person whose services are so lent or let 1
on hire has entered into a contract of service."
c It appears from the definition that three categories of
persons as mentioned in clauses (i), (ii) and (iii) of section
2 ( 9) can be employees. We are, however, concerned with the j
category under clause (i) inasllllch as in all the cases before
us the workers concerned were directly employed by the ~
principal employers, namely, the respondent companies. Under
D category (i), in order to be an employee a person llllSt be
employed directly by the employer for wages in the factory or
establishment on any work which should be incidental or
preliminary to or connected with the work of the factory or
establishment. The definition seems to be very wide and brings
within the purview various types of employees. As soon as the
E conditions under the definition are fulfilled, one becomes an ~
employee within the meaning of the definition.
Before we proceed to consider the principal question, we
may deal with a connected question, namely, whether the
construction workers, who are admittedly casual workers, come ~
j
F within the purview of the Act. We have already noticed that in
the case of Gnanabikai Mllls (Supra) referred to and relied
upon by the Division Bench of the Madras High Court in Civil
Appeal No. 801 of 1976, it has been held that the casual
workers do not come within the purview of the Act although
they are covered by the definition of the term 'employee'
G under section 2(9) of the Act. The reason for the said '
finding is that in view of their short duration of ''
e~loyment,they will not be entitled to sickness benefit and,;
as such, it is not the intention of the Act that casual
employees should be brought within its purview. In expressing
that view, it appears that the Madras High Court has
+
H overlooked some other provisions of the Act which will be
referred to presently.
E.S.I. CORPN. v. SOUTH FLOUR MILLS [DUTT, J.] 869
A
Section 39 provides for contributions payable under the
.+- Act. Sub,;ection (4) of section 39 provides as follows :
"The contributions payable in respect of each week
shall ordinarily fall due on the last day of the
week, and where an employee is employed for part of B
the week, or is employed under two or mre
employers during the same week, the contributions
shall fall due on such days as may be specified in
the regultion."
Sub,;ection (4) clearly indicates employment of a casual
employee when it provides "and where an employee is employed c
for part of the week". When an employee is employed for part
of a week, he cannot but be a casual employee. We may also
refer to sub-section (3) of section 42 relating to general
provisions as to payment of contributions. Sub,;ection (3)
reads as follows :
D
"Where wages are payable to an employee for a
portion of the week, the employer shall be liable
to pay both the employer's contribution and the
employee's contribution for the week in full but
shall be entitled to recover from the employee the
employee's contribution." E
Sub,;ection (3), inter alia, deals with employer's
liability to pay both employer's contribution and the
employee's contribution where wages are payable to an employee
for a portion of the week. One of the circumstances when wages
may be payable to an employee for a portion of the week is F
that an employee is employed for less than a week, that is to
say, a casual employee. Thus section 39(4) and section 42(3)
+ clearly envisage the case of casual employees. In other words,
it is the intention of the Legislature that the casual
employee should also be brought within the purview of the Act.
It is true that a casual employee may not be entitled to G
sickness benefit as pointed out in the case of Qimawbfkaf
Mills (Supra). But, in our opinion, that cannot be a ground
for the view that the intention of the Act is that casual
employees should not be brought within the purview of the Act.
Apart from sickness benefit there are other benefits under the
H
870 SUPREME COURT REPORTS [19861 2 s.c.R.
A
Act including disablement benefit to which a casual employee
will be entitled under section 51 of the Act. Section 51 doeift.
not lay down any benefit period or contribution period. There
may again be cases when casual employees are employed over the
contribution period and, in such cases, they will be entitled
to even the sickness benefit. In the circumstances, we hold
B that casual employees come within the purview of the Act. In
Andhra Pradesh State Electricity Board v. F.ployee's State
Insurance Corporation, Hyderabad, [ 1977] 1 LLJ 54; Regional
DI.rector, ESIC, Bangalore v. Davangere Cotton Mills, [1977] ~
LW 404 and Eaployees' State Insurance Corporation, Oiandigarlt
v. Oswal Woollen Mills Ltd., [1980] 2 Lab. I.C. 1064, the
c Andhra Pradesh High Court, Karnataka High Court and the Punjab
and Haryana High Court have rightly taken the view that casua1
employees are employees withirt the meaning of the ter
'employee' as defined in section 2(9) of the Act and,
accordingly, come within the purview of the Act. f /
D Indeed Dr. Chitale, learned counsel appearing on behalf
of the respondent company in Civil Appeal No. · 819 (NL) 1976,
franckly concedes that it will be difficult for him to contend
that casual workers are not covered by the definition of the
term 'employee' under section 2(9) of the Act. He, however,
submits that in the instant case the work in which the casual
E workers were employed by the respondent company, namely, Shr~ ~
Shakthi Textiles Mills Pvt. Ltd., not being the work of the
factory or incidental or preliminary to or connected with the
work of the factory, such workers cannot be employees within
the meaning of section 2(9) of the Act. The contention of the
learned counsel is that the work of the factory bei~/
F 'weaving', an employee within the meaning of section 2(9) must
be employed on any work incidental or preliminary to or_
connected with the work of weaving that ls carried on in the'
mill or factory. Counsel submits that the work of constructio~
of factory buildings cannot be said to be an activity ot
operation incidental to or connected with the work of the
G factory, which is weaving. Mr. D.N. Gupta, learned counsel
appearing on behalf of the respondent companies in the other
cases adopts the contention of Dr. Chltale and submits that
the workers employed for the construction of the factory
buildings do not come within the purview of the def lnltion o~
'employee' under section 2(9) of the Act.
E.S.I. CORPN. v. SOUTH FLOUR MILLS [DUTr, J.] 871
Therefore, the investigation under the principal question A.
fornlll.ated above boils down to this, namely, whether the
construction of factory buildings for the expansion of the
existing factories is incidental or preliminary to or
connected with the work of the factory or not. It has been
already noticed that the definition of the term 'employee'
under section 2(9) of the Act is very wide. It includes within B
it any person employed on any work incidental or preliminary
to or connected with the work of the factory or establishment.
It is difficult to enUm;!rate the different types of work which
... may be said to be incidental or preliminary to or connected
with the work of the factory or establishment. It seems that
any work that is conducive to the work of the factory or
establishment or that is necessary for the augmentation of the c
work of the factory or establishment will be incidental or
preliminary to or connected with the work of the factory or
establishment. In the instant cases, the additional buildings
have been constructed for the expansion of the factories in
question. It is because of these additional buildings that the
existing factories will be expanded and, consequently, there D
will be increase in the production, that is to say, increase
in the work of the factories concerned. So the work of
construction of these additional buildings has a link with
the work of the factories. It cannot be said that the
construction work has no connection with the work or the
. purpose of the factories. So it is difficult to hold that the
work of construction of these additional factory buildings is
not work incidental or preliminary to or connected with the
E
work of the factories.
The Act is a piece of social security legislation enacted
to provide for certain benefits to emplocrees in case of F
sickness, maternity and employment injury. To hold that the
workers employed for the work of construction of buildings for
the expansion of the factory are not employees within the
meaning of section 2(9~ of the Act on the ground that such
construction is not incidental or preliminary to or connected
with the work of the factory will be against the object of the G
A.ct. In an enactment of this nature, the endeavour of the
:;... i Court should be to interpret the proyisions liberally in
favour of the persons for whose benefit the enactment has been
made.
H
872 SUPREME COURT REPORTS [19861 2 s.c.R.
In this connection, we may refer to a decision of this +- •
A
Court in Royal Talkies, Hyderabad v. ~loyees' State
Insurance Corporation, [ 1978] 4 sec 204. The question that
cam:! up for consideration by this Court was whether the
workers employed to run the canteen and the cycle stand
situate within the compound of a 'cinema theatre' were
employees within the m:!aning of section 2(9) of the Act. It
was held that the workers employed to run the canteen and the
B
cycle stand were employees within the m:!aning of section 2(9)j
of the Act. Krishna Iyer, J. speaking for the Court, observes:
"The expression "in connection with the work of an
establishm:!nt" ropes in a wide variety of workmen {
who may not be employed in the establishment but
c may be engaged only in connection with the work of
the establishm:!nt. Som:! nexus rust exist between +
I
the establishm:!nt and the work of the e~loyee but
it may be a loose connection. 'In connection with
the work of an establishm:!nt' only postulates some
n connection between what the employee does and the
work of the establishm:!nt. He may not do anything
directly for the establishm:!nt; he may not do
anything statutorily obligatory in the
establishm:!nt; he may not even do anything which is ~ ~
primary or necessary for the survival or smooth
running of the establishment or integral to the
E
adventure. It is enough if the employee does soue
work which is ancillary, incidental or, has
relevance to or link with the object of the
establishment ••• ,. Taking the present case, an I-'
establishm:!nt like a cinema theatre is not bound to
run a canteen or keep a cycle stand (in Andhra
F
Pradesh) but no one will deny that a canteen +---
service, a toilet service, a car park or cycle
stand, a booth for sale of catchy film literature
on actors, song hits and the like, surely have
connection with the cinema theatre and even further
the venture."
G
In our opinion, the work of construction of additional +- '-·.
buildings required for the expansion of a factory DllSt be
held to be ancillary, incidental or having som:! relevance to
or link with the object of the factory. It is not correct to
H
'f',S,I. CORPN. v. SOUTH FLOUR MILLS (DUTI, J,] 873
say that such work nust always have some direct connection A
-+ with the manufacturing process that is carried on in the
factory. The expression "work of the factory" should also be
understood in the sense of any work necessary for the
expansion of the factory or establishment or for augmenting or
increasing the work of the factory or establishment. Such work
is incidental or preliminary to or connected with the work of B
the factory or establishment.
We are, therefore, unable to accept the view of the
Madras High Court in all these cases that the workers employed
for the construction work of the additional buildings for the
expansion of the factories are not employees within the
meaning of section 2(9) of the Act. C
For the reasons aforesaid, we allow Civil Appeals Nos,
801 of 1976 and 819 (NL) of 1976 and set aside the judgments
of the Madras High Court.
So far as Special Leave Petitions Nos. 1143-1145 (NL) of D
1978 are concerned, we grant special leave in all these
matters, set aside the judgment of the Madras High Court and
allow the connected appeals.
The parties are directed to bear their own costs in all
these matters. E
A.P.J. Appeals allowed.
'
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