Holding

The stitching and ironing of garments using electric power constitute a manufacturing process, and a premises employing ten to twenty workers engaged in such a process is covered by the Employees' State Insurance Act, 1948 under the 1975 notification.

Summary

Ram Chander operated a tailoring shop employing about 10‑12 tailors and used an electric iron for stitching and finishing garments. The issue was whether, under the Notification of 20 September 1975 issued under Section 1(5) of the Employees' State Insurance Act, 1948, his establishment fell within the Act’s coverage. The Supreme Court held that the stitching and ironing of cloth using electric power constitute a manufacturing process, and the shop employed more than ten but fewer than twenty workers, satisfying the criteria of the notification. Relying on precedents that define manufacture as a process that creates a new commodity, the Court concluded that the establishment is covered by the Act. Consequently, the appeal was allowed, the High Court’s decision set aside, and the ESIC Court’s order restored.

Issues considered

Whether a tailoring establishment employing between ten and twenty persons and using electric power for stitching and ironing qualifies as a 'manufacturing process' under the 1975 notification of the Employees' State Insurance Act, 1948
Whether such an establishment therefore falls within the purview of the Employees' State Insurance Act, 1948

Legislation cited

Employees' State Insurance Act, 1948s. 1(5), s. 82(2)

Subjects

Employees' State Insurance Actmanufacturing processtailoring shopnotificationemployment thresholdstitchingironingelectric power

Judgment

REGIONAL DIRECTOR, EMPLOYEES STATE
A
INSURANCE CORPORATION
v.
RAM CHANDER

OCTOBER 27, 1987
B
[SABYASACHI MUKHARJI AND G.L. OZA, JJ.]

- Employees State Insurance Act, 1948-Whether the respondent's
tailoring establishment falls within the purview thereof by virtue of
notification issued under section 1(5).

"\- The respondent Ram Chander ran a tailoring shop, employing c
about 10 to 12 tailors. The number of his employees never exceeded 20. At
the shop, clothes were stitched and electric iron was used In the process
of stitching and also for ironing the finished goods.

The dispute that arose for decision in the case was whether by D
virtue of Notification dated September 20, 1975, issued under Section
1(5) of the Employees' St&te Insurance Act, 1943, the respondent's
establishment came within the purview of the Act.

1 Allowing the Appeal by special leave against the judgment and
order 9f the High Court, and restoring the decision of the Employees' E
State Insurance Court the Court,

- HELD: Stitching process is carried on in the respondent's
establishment. By stitching commercially, different goods with distinc-
tive names, characters and uses are brought Into existence. If by a
process, a different entity comes into existence, the process is a F
~ manufacture, as held by this Court in Empire Industries Limited
& Ors, etc. v. Union of India & Ors. etc., (1985] (Suppl. 1)
SCR 292. In the stitching process, ironing is an essential part, and

• A
for that electric power is used. Also the respondent's shop employed
more than ten but less than 20 persons. The respondent's establish-
ment clearly falls withln the purview of the Employees' State G
Insurance Act. [837G-H; 838C]
-.,,, Deputy Commission~r, Sales Tax (Law) Board of Revenue
, (Taxes), Ernakulam v. Pio Food Packers, (1980] 3 SCR 1271;
Chowgule & Co. Pvt. Ltd & Anr. v. Union of India and others, (1981] 2
SCR 271; Ardeshir H. Bhiwandiwala v. The State of Bombay, (1961] 3 H
835
836 SUPREME COURT REPORTS [1988] I S.C.R.

A SCR 592; M/s. Hindu lea Band, Jaipur v. Regional Director,
Employees' State Insurance Corpn. Jaipur, AIR 1987 SC 1166; Metro
Readywear Company v. Collector of <;ustoms, [1978] 2 Excise Law
Times 520 and Employees' State Insurance Corporation v. Mis. New
Empire Tai/ores and others, (unreported) referred to.

B CIVIL APPELLAIB JURISDICTION: Civil Appeal No. 2904
of 1987,

From the Judgment and Order dated 2.9.1986 of the Rajasthan
High Court in D.B. (Civil) Special Appeal No. 43 of 1986. ._

C M. Chandrasekhran, V.J. Francis and N.M. Popli for the
Appellant. -f
B .D. Sharma for the Respondent.

The Judgment of the Court was delivered by
l)
SABYASACHI MUKHARJI, J. Special leave granted.

This appeal arises out of the judgment and order of the Division
Bench of the Rajasthan Higb Court dated 2nd September, 1986. The
judgment under appeal was rendered in an appeal under section 82(2) ''f
i;: of the Employees' State Insurance Act, 1948 (hereinafter called 'the
Act'). The respondent, Ram Chander, was the proprietor of M/s.
Commercial Tailors, Sojati Gate, Jodhpur. At all material times, he
used to run a tailoring shop, where clothes were stitched. The shop
employed at the relevant time about 10 or 12 persons as tailors. The
number of employees, however, never exceeded 20. The clotpes were
f supplied by the customers and these were stitched according to the
different sizes of the customers. Such stitchings were done at the shop ·-f1
of the respondent herein manually by electric iron which was also used
in the process of stitching. There were ironing of finished clothes also.
The Employers State Insurance Court, Rajasthan came to the conclu-
sion as follows:
c
"The applicant is a tailoring shop which has employed
more than 20 persons on one occasion and less on other
days and makes use of power in the shape of electric press 1r'
which is used for ironing of stitched clothes for customers.
The electric iron is also used during the process of stitching
H in addition to the ironing of finished clothes." ·
REGIONAL DIRECTOR E.S.I.C. v. RAM CHANDER [MUKHARJI, J.] 837

The question before the Rajasthan High Court was whether such A
establishment was covered by the Notification dated 20th September,
1975 and came within the mischief of the Act. The answer to that
question would depend on the relevant notification being the Notifica-
tion dated 20th September, 1975 issued under section 1(5) of the Act.
The schedule which extends the scheme to different establishments,
inter alia, provided by clause ( 1)(b) as follows: B

DESCRIPTION OF ESTABLISHMENTS

- AREAS IN WHICH THE
ESTABLISHMENTS
ARE SITUATED.
c
I. Any premises including the precincts thereof I. Alwar
whereon ten or more persons but in any case 2. Ajmer
less than twenty persons are employed or were 3. Bikaner
employed for wages on any day of the preced- 4. Jaipur
ing twelve months, and in any part of which a 5. Jodhpur
manufacturing process is being carried on with 6. Kota D
the aid of power or is ordinarily so carried on 7. Udaipur
but excluding a mine subject to the operation
of the Mines Act, 1952 (35 of 1952) or a rail-
way running shed or an establishment which
is exclusively engaged in any of the manu-
facturing processes specified in clause ( 12) of E
section 2 of the Employees' State Insurance
Act, 1948 (34 of 1948)

(emphasis supplied)

In order to answer the question whether the establishment of the F
respondent comes within the mischief of the Act, it is necessary there-
fore, in view of the facts found as noted before to determine only
whether manufacturing process was carried on with the aid of power.
It is manifest that there is use of electric power in the process of
stitching. This is a finding of fact that the establishment of the shop
employed more than 10 but less than 20 persons. It cannot also be G
?ispute~ that by stitching commercially different goods are brought
mto existence. These are known differently, stitched shirt is indubit-
ably a different commodity than unstitched cloth. It is so commercially
known and treated. If by a process a different entity comes into exist-
ence then it can be said that this was manufactured. See in this connec-
tion the observations of this, Court in Empire Industries Limited & H
838 SUPREME COURT REPORTS [ 1988] 1 S.C.R.

others etc. v. Union of India & others etc., [1985] Suppl. 1 S.C.R. 292.
A
It was observed therein that manufacture is complete as soon as by the
application of one or more process, the raw material undergoes some
change. If a new substance is brought into existence or if a new or
different article having a distinctive name, character or use result from
particular processes, such process or processes would amount to
B manufacture. Whether in a particular case manufacture has resulted
by a process or not would depend on the.facts and circumstances of the

-
particular case. There is no doubt that the process must bring into
existence a new item or a new commodity known differently in the
market as such by people who use or deal with that ollOOd. In that
process the ironing of clothes as has been found to be an essential part
and for that power is used. These are facts found and are not disputed.
C If that is the position, then in our opinion, it comes clearly within the
purview of the Act in view of the other facts noted before and the
employees are covered by the Act.

Our attention was drawn by learned counsel appearing on behalf
D of the respondent to the observations of this Court in Deputy Commis-
sioner, Sales Tax (Law) Board of Revenue (Taxes) Emakulam v. Pio
Food Packers, [1980] 3 S.C.R. 1271 and the decision of this Court in
Chowgule & Co. Pvt. Ltd. & Anr. v. Union of India & others, [1981] 2
S.C.R. 271. 1he effect of both these decisions have been considered in
the aforesaid Empire Industries's case (supra). Learned counsel drew
J:!, our attention to the decision of this Court in Ardeshir H.
Bhiwandiwala v. The State of Bombay, [1961] 3 S.C.R. 592, where the
question arose under the Factory Act. It was held therein that the salt
works was a factory within the definition given in the Act and the
appellant therein was rightly convicted for working it without a
licence. The decision is of no assistance to the respondent in resolving
--
'

F the contentions involved in this appeal.
--JI
Our attention was also drawn to the decision of this Court in
Mis. Hindu lea Band, Jaipur v. Regional Director, Employers' State
Insurance Corporation, Jaipur, A.LR. 1987 S.C. 1166, where it was
held that it was not that a place where goods were sold was only a
G shop. A place where services were sold on retail basis was _also~ shop.
The facts of that case were entirely different from these m this case.
But the ratio of that decision is apposite to the issue in dispute here.
There this Court reiterated that it was not that a place where goods Y ·
were sold was only a shop. But a place where services were sold on
retail basis was also a shop. The place of business of a firm carrying on
H the business of playing music on occasion, ·such as, marriages and
REGIONAL DIRECTOR E.S.I.C. v. RAM CHANDER [MUKHARJl,J.] 839

other social functions which made available on payment of the A
stipulated price the services of the members of the group of musicians
employed by it on wages was a shop to which the Act was applicable by
virtue of the notification. The fact that the services were rendered by
the employees engaged by the firm intermittently or during marriages
did not entitle the firm to claim any exemption from the operation of
the Act. In Metro Readywear Company v. Collector of Customs, [1978]
B
2 Excise Law Times 520 of the High Court of Kerala at Ernakulam it
was held that the brassieres were undoubtedly undergarments falling

- within the description "articles of ready-to-wear apparel (known com-
mercially as ready made garments) and therefore was classified under
Item 220 of Central Excise Tariff. Ironing with electric iron amounted
to a process of manufacture with the aid of power. It was held that
ironing of stitched brassieres is incidental or ancillary to their man-
C

ufacture since the said process was intended to give a finishing, touch
in order to render them marketable. In our opinion the ratio or the
reasoning of the said decision is applicable to the facts of this case.

Our attention was drawn to the unreported decision of the D
Andhra Pradesh High Court in Employees State Insurance Corporation
v. M s. New Empire Tailors and others, where the aforesaid reasoning
was accepted by the High Court.

In the light of the aforesaid, we are of the opinion that the High
Court in the instant case was in error and the decision of the E.S.I. E
Court must be upheld. The appeal is accordingly allowed and the
judgment and order of the High Court are set aside and the order of
the E.S.I. Court restored. In the facts and circumstances of the case
the parties will pay and bear their own costs. This judgment will apply
to the facts as pertinent to the facts in the relevant year in question.
F
S.L. Appeal allowed.