1991 (11) TMI 274 - SC - Indian Laws

Supreme Court Upholds Exclusion of Contractors' Employees from Employees State Insurance Act

C.E.S.C. Limited and Ors. Versus Subhash Chandra Bose and Ors.

The Supreme Court dismissed the appeals and upheld the Division Bench's decision that the Employees State Insurance Act did not apply to the employees of ... - Issues Involved:1. Whether the right of the Principal employer to reject or accept work constitutes 'supervision' under Section 2(9) of the Employees State Insurance Act, 1948.2. The applicability of the Employees State Insurance Act to employees of contractors working for the Principal employer.3. The interpretation of 'supervision' and 'agent' under Section 2(9) of the Act.4. The liability of the Principal employer for contributions to the Employees State Insurance Fund for employees of contractors.Issue-Wise Detailed Analysis:1. Whether the right of the Principal employer to reject or accept work constitutes 'supervision' under Section 2(9) of the Employees State Insurance Act, 1948:Justice Punchhi's judgment focused on the literal construction of the statute. He concluded that the right of the Principal employer to reject or accept work does not constitute 'supervision' as envisaged under Section 2(9) of the Act. He emphasized that 'supervision' means overseeing the performance or operation of an activity, which involves consistent vigilance during the execution of work, not merely checking the work after its completion. The Division Bench of the High Court supported this view, stating that checking work after completion is different from supervising work while it is being performed.2. The applicability of the Employees State Insurance Act to employees of contractors working for the Principal employer:The Division Bench of the High Court reversed the Single Judge's decision, which had held that the Act applied to the employees of the contractors. The Division Bench found that there was no actual supervision by the Principal employer (C.E.S.C.) over the work performed by the employees of the contractors. The Principal employer's role was limited to checking the work after completion, which did not amount to supervision under the Act.3. The interpretation of 'supervision' and 'agent' under Section 2(9) of the Act:Justice Ramaswamy, in his dissenting judgment, argued for a broader interpretation of 'supervision' and 'agent' to align with the social security objectives of the Act. He contended that the Act aims to provide medical benefits and social security to workers, and thus, the terms should be interpreted in a manner that furthers these objectives. He argued that the contractors acted as agents of the Principal employer, and their employees should be considered under the supervision of the Principal employer for the purposes of the Act.4. The liability of the Principal employer for contributions to the Employees State Insurance Fund for employees of contractors:Justice Punchhi and the Division Bench of the High Court concluded that the Principal employer (C.E.S.C.) was not liable for contributions to the Employees State Insurance Fund for the employees of the contractors. They held that the Act did not cover these employees as there was no supervision by the Principal employer. Justice Ramaswamy, however, dissented, arguing that the Principal employer should be liable as the contractors acted as their agents, and the employees were effectively under the supervision of the Principal employer.Conclusion:The Supreme Court, by majority, dismissed the appeals and upheld the Division Bench's decision that the Employees State Insurance Act did not apply to the employees of the contractors working for the Principal employer (C.E.S.C.). Justice Ramaswamy dissented, advocating for a broader interpretation of 'supervision' and 'agent' to extend the Act's benefits to these employees.