2003 (9) TMI 808 - SC - Indian Laws

Toddy shops deemed 'shops' under ESI Act, appellants liable as employers

K.R. Anitha And Ors. Versus Regional Director  E.S.I. Corporation And Anr.

K.R. Anitha And Ors. Versus Regional Director  E.S.I. Corporation And Anr. - TMI Issues Involved:1. Applicability of the Employees' State Insurance Act, 1948 (ESI Act) to toddy shops.2. Liability of appellants as principal employers.3. Coverage of toddy shops under the ESI Scheme.4. Applicability of Section 1(6) of the ESI Act.Issue-wise Detailed Analysis:1. Applicability of the Employees' State Insurance Act, 1948 (ESI Act) to toddy shops:The appellants argued that toddy shops were not covered by the ESI Act as they were not specifically included in the notification issued under Section 1(5) of the Act by the State of Kerala in 1974. They contended that the employees of toddy shops were receiving benefits under the Abkari Welfare Fund Act, which were substantially similar or superior to those under the ESI Act. The respondents countered that toddy shops were covered by the ESI Act from 1983 onwards and that the appellants failed to pay contributions during their license period. The High Court, referencing judgments from the Supreme Court, concluded that toddy shops qualified as 'shops' under the ESI Act and thus were covered by the Act. The Supreme Court upheld this view, agreeing that toddy shops fell under the entry 'shop' in the schedule.2. Liability of appellants as principal employers:The appellants claimed they could not be treated as principal employers since the Excise Department of the State Government was the owner and principal employer of the toddy shops. They argued that their role was limited to that of immediate employers, with the primary responsibility for contributions lying with the Excise Department. The High Court, however, found that the toddy shops neither belonged to nor were under the control of the Government. The Supreme Court supported this finding, noting that the State's control over the toddy shops was merely regulatory and did not extend to financial, functional, or administrative participation in the business operations.3. Coverage of toddy shops under the ESI Scheme:The El Court initially ruled that toddy shops were not covered under the ESI Scheme as the employees were receiving similar benefits under the Abkari Act and Rules. However, the High Court overturned this decision, stating that the toddy shops were indeed covered by the ESI Act. The Supreme Court upheld the High Court's decision, emphasizing that the appellants failed to prove that the toddy shops were not previously covered by the Act or that the number of employees was insufficient for coverage.4. Applicability of Section 1(6) of the ESI Act:The appellants argued that even if the Act was applicable from 20.10.1989, it did not automatically apply to them as they began operating the toddy shops in 1991-92. The High Court dismissed this argument, and the Supreme Court agreed, noting the lack of necessary pleas and material evidence regarding the number of employees and continuity of employment in the toddy shops. The Supreme Court left the question of law based on Section 1(6) of the Act open for future cases.Conclusion:The Supreme Court dismissed the appeals, affirming the High Court's judgment that the ESI Act applied to the toddy shops and that the appellants were liable for contributions under the Act. The Court found no merit in the appellants' contentions and upheld the High Court's interpretation of the relevant legal provisions.