TaxTMI 
TaxTMI 
1999 (11) TMI 901
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....#39;), its branch office located at Bombay in the State of Maharashtra, was not governed by the provisions of the Act. According to the appellant, the notification issued by the State of Andhra Pradesh, in exercise of its powers as an 'appropriate Government' under Section 1(5) of the Act extending the same to road motor transport establishments, cannot by itself, cover the appellant's branch at Bombay during the relevant time when the State of Maharashtra had not issued any such notification covering road motor transport establishments in the earmarked areas situated in that State. It is the case of the appellant that its Bombay branch was got covered by the Act only pursuant to the subsequent notification issued by the State of Maharashtra on 10.3.1989 where-under road motor transport establishments situated in Bombay in the earmarked areas mentioned in Scheduled-II of the said notification were subjected to the sweep of the Act. 2. The dispute in the present case between the parties arose on account of the fact that on July 29, 1986, the Deputy Regional Director, Employees' State Insurance Corporation, Bombay served show cause notice upon the appellant to expl....
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....arned Single Judge was set aside. However, instead of entirely quashing the impugned order passed under Section 45-A of the Act by the Deputy Regional Director, the proceedings were remitted back to the deputy Regional Director only for the purpose of quantifying the amount of contribution and the amount of interest to be paid thereon by the appellant. As noted earlier, it is the aforesaid judgment of the Division Bench that is made the subject matter of the present appeal before this Court. RIVAL CONTENTIONS: 4. Shri Pai, learned senior counsel for the appellant, vehemently contended that the Division bench of the High Court has patently erred in law in taking the view that the notification issued by the State of Andhra Pradesh under Section 1(5) for covering the appellant's establishments in Andhra Pradesh could have automatically made applicable the provisions of the Act to its branch at Bombay. That as the State of Maharashtra had not issued appropriate notification for covering the undertakings carrying on transport business in the State of Maharashtra as per Section 1(5) of the Act during the period, notification of Andhra Pradesh Government could not be pressed in ....
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....tate of Maharashtra under Section 1(5) of the Act? 7. For deciding the aforesaid points for consideration, it is necessary to have a look at the relevant statutory provisions holding the filed. STATUTORY FRAMEWORK 8. The Employees' State Insurance Act, 1948 is enacted to provide for certain benefits to employees in case of sickness, maternity and employment injury and to make provisions for certain other matters in relation thereto 9. Sub-section 2 of Section 1 of the Act lays down that: It extends to the whole of India It is, therefore, obvious that it is a Central Act, which the Parliament intended to operate throughout the country. 10. Sub-section 4 of Section 1 of the Act lays down as follows: It shall apply, in the first instance, to all factories, (including factories belonging to the Government other than seasonal factories). We are not concerned with the proviso to Sub-section 4 of Section 1. However, Sub-sections 5&6 of Section 1 of the Act are relevant for our present purpose. They are, therefore, extracted as under. 5. The appropriate Government may, in consultation with the Corporation and where the a....
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....ed. 12. It will now be appropriate to refer to the notification issued by the State of Andhra Pradesh covering the appellant's head office & the regional office at Secunderabad, the applicability of which to the Bombay branch, is on the anvil of consideration in the present case. The said notification reads as under: NOTIFICATIONS BY GOVERNMENT HEALTH, HOUSING AND MUNICIPAL ADMINISTRATION DEPARTMENT (HEALTH) EXTENSION OF EMPLOYEES STATE INSURANCE SCHEME TO FACTORIES, SHOPS, COMMERCIAL ESTABLISHMENTS, HOTELS ETC. CONFIRMED (G.O.Ms. No. 297, Health, 25th March, 1975) In exercise of powers conferred by Sub-section (5) of Section 1 of the Employees State Insurance Act, 1948 (34 of 1948), the Government of Andhra Pradesh, after giving six months' notice as required thereunder by the Government of Andhra Pradesh Notification issued in ] G.O.Ms. No. 788, Health, dated 25th September, 1974 and published in the A.P. Gazette No. 315, dated September 25, 1974, hereby extends with effect from the 30th March, 1975, all the provisions of the said Act to the classes of establishments specified in Col. (1) of the Schedule be....
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....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 (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 on hire is entered into a contract of service; and include any person employed for wages on any work connected with the administration of the factory or establishment or any part, department or branch thereof or with the purchase of raw materials for, or the distribution or sale of the products of, the factory or establishment, [or any person engaged as an apprentice, not being an apprentice engaged under the Apprentices Act, 1961 or under the standing orders of the establishment; but does not include.] xxx xxx xxx The term 'factory' is defined in Sub-section (12) of Section 2 to mean; ...any premises including the precincts thereof - (a) whereon ten or more persons are employed or were employed for wages on any day of the preceding twelve months, and in any part of which a manufacturing process is being ca....
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....t. The term 'principal employer' is found in Sub-section 17 of Section 2. Sub-clause (ii) & (iii), thereof, defines 'principal employer' as under: (ii) in any establishment under the control of any department of any Government in India, the authority appointed by such Government in this behalf or where on authority is so appointed the head of the Department; (iii) in any other establishment, any person responsible for the supervision and control of the establishment. xxx xxx xxx A conjoint reading of Sub-sections 9, 13, & 17 of Section 2, therefore, clearly shows that if the head office or the registered office of the appellant is controlling its Bombay branch, the employee working in its Bombay branch can obviously be treated to be an 'employee' working under the supervision of the principal employer or his agent. Consequently, once such 'principal employer' like the appellant, having head office at Secunderabad in the State of Andhra Pradesh, is covered by the sweep of the Act, automatically employees working in its branches, may be anywhere in India, including the branch at Bombay would get covered b....
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....rovisions of Section 38. Section 39 deals with Contributions to be made by the employer and the employee concerned. Sub-section 1 of Section 39 lays down as under: 39. Contributions: 1. The contribution payable under this Act in respect of an employee shall comprise contribution payable by the employer (hereinafter referred to as the employer's contribution) and contribution payable by the employee (hereinafter referred to as the employees' contribution) and shall be paid to the corporation. It has also to be kept in view that the present Corporation functioning under the Act is a Central Corporation known as Employees' State Insurance Corporation, which was established by the Central Government under Section 3 of the Act and it has all India operation. It operates through its various regional office spread over the country. It cannot be seriously disputed that employees working at the appellant's branch at Bombay are employees of the Appellant-Corporation. Shri Pai, learned senior counsel for the appellant, fairly stated that they are definitely employees of the company but his only grievance is that because they are functioning at the Bombay bran....
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....nsured women in case of confinement or miscarriage or sickness arising out of pregnancy etc. and also periodical payments to an insured person suffering from disablement as a result of an employment injury and various other benefits laid down by Section 46 of the Act. Sickness benefits to the insured employees are provided by Section 49 of the Act. Maternity benefits are provided by Section 50 of the Act. Disablement benefits are provided by Section 51 of the Act. Section 51-A to 51-D deal with the benefits available in case of accidents arising in course of employment. These benefits represent a benevolent statutory scheme for the welfare of employees working in factories and establishments covered by the sweep of the Act. Apart from the scheme of the Act and the relevant statutory provisions of the Act to which we have referred to until now, we may also turn to the Employees' State insurance (General) Regulations, 1950 framed by the Employees' State Insurance Corporation in exercise of its power under Section 97 of the Act. The terms 'employer' and 'employer's code number' are defined by Sections 2(g) and (h) of the Regulation which read as follows: ....
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....hase advertisement and their business at places other than the place mentioned at item 4 or anywhere in India. This clearly shows that information regarding branch office of such establishments functioning in any part of India has also to be furnished by the establishment seeking employer's code number. Various Notes are provided as part of the said statutory Form-01. Note (7) deals with the term 'employee' which reads as follow: "Employee" means any person employed for wages in 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 factory or establishment, whether such work is done by the employee in the factory or establishment or elsewhere; or xxx xxx xxx Sub-para (iii) of Note (7) is also relevant for our present purpose and it, amongst others, lays down that the term 'employee' would include: ...any person employed for wages on any work connected with the administration of the factory or establishment or any part, department ....
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....e parties, it is necessary to clear the factual background. The appellant-Corporation, which has its registered head office at Secunderabad in the State of Andhra Pradesh, has Bombay branch being one of its branches, apart from there being a chain of other branches in the rest of the country with which we are not concerned in the present proceedings. So far as the Bombay branch is concerned, a clear finding of fact is reached by the High Court in its impugned judgment to the effect that the business carried on by the appellant is transport of goods and materials all over the country and the nature of this business is such that it cannot be carried on only by the establishment at Andhra Pradesh without dependence on its branch offices. The goods are loaded at various places and in various branches spread over the country and also unloaded at various places. The branch office register the orders, accept the goods and materials to be transported from Bombay and to be received at Bombay. It is, therefore, obvious that the transport business carried on at the principal office as well as at its branch office is totally interdependent. In the light of the aforesaid factual position, which....
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....herefore, becomes obvious that the appellant concern is a concern which operates on all India level through its branches which are its part and parcel and are its own limbs. It is through the branches that its main objects as an all India public carrier, get fructified and achieved. May be, for accounting purposes, different branches may be maintaining separate accounts regarding administrative set up under the local offices, but ultimately complete control, supervision and management is by the principal head office at Secunderabad. All the activities of the appellant-Corporation are obviously carried out through the active working and co-operation of all the branches and the employees working at these branches. Even a copy of general power of attorney produced with the additional documents shows that the regional managers controlling the branches in different regions of the country have to act only on the basis of the general power of attorney given to them by the appellant-Corporation and the appellant-Corporation is stated as the principal, while the power of attorney holders regional managers are shown as merely its agents at regional offices under which the branches work, obvi....
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....e Andhra Pradesh Government, being 'appropriate Government' has thought it fit to apply the Act to the appellant's concern at Secunderabad and which would naturally cover branches of the appellant at least in the State of Andhra Pradesh, if the same notification is stated to have covered branches of the appellant situated in other State then such a notification would have extra territorial operation, which will be beyond the ambit, scope and authority of the Andhra Pradesh Government. The Andhra Pradesh Government cannot act as 'appropriate Government' vis-a-vis branches situated in other States for which the 'appropriate Government' will be the concerned Government within whose territories the branches are situated. He also submitted that if such an extra-territorial operation of the Andhra Pradesh Government's notification is countenanced, then an unworkable situation may arise. He submitted by way of illustration that once the State of Andhra Pradesh thinks it proper to apply the Act to the appellant's undertaking in Andhra Pradesh and if the State of Maharashtra does not think it fit to apply the Act to the appellant's undertakings in the....
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....ffice being registered office is located will get covered by the sweep of the notification issued by such 'appropriate Government' acting as delegate of the legislative power entrusted by the Parliament to it. Once the appropriate Government exercises that power, all the establishments situated within the territories of that State will get covered by such a notification. Their branches within the State, admittedly, will be covered by the sweep of the notification read with the proviso of Section 1(5) of the Act. So far as the branches situated outside the State are concerned, if the establishment is covered by the notification being situated within the territories of the State and if on facts it is found that such outside branches have functional integrality with the activities of the main establishment and are directly under the control and supervision of the main establishment, it could not be said that such notification issued by the State has any extra territorial operation. It has only territorial operation. Meaning thereby, it covers within its sweep all establishments situated within the State and covered by the notification and also automatically covers all the bran....
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....he Constitution Bench speaking through S.K. Das J., as under: It is now well settled that there is a general presumption that the legislature does not intend to exceed its jurisdiction, and it is a sound principal of construction that the Act of a sovereign legislature should, if possible, receive such an interpretation as will make it operative and not inoperative Case law Referred. Section 3 of the Bihar Act makes the Act applicable to all public religious trusts, that is to say, all public religious and charitable institutions within the meaning of the definition clause in Section 2(1) of the Act, which are situated in the State of Bihar and any part of the property of which is in that State. In other words, both conditions must be fulfilled before the Act can apply. As this is the true meaning of Section 3 of the Act, none of the provisions of the Act have extraterritorial application or are beyond the competence and power of the Bihar Legislature. Undoubtedly, the Bihar Legislature has power to legislate in respect of, to use the phraseology of item 28 of the Concurrent List, charities, charitable institutions, charitable and religious endowments ....
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....nts to which our attention was invited by learned Counsel for the respective parties. Before we consider the decisions of this Court, it is appropriate to refer to a decision of the Division bench of the Andhra Pradesh High Court in the case of Kirloskar Brothers Ltd v. Southern Eastern Roadways (1983)IILLJ396AP . The question before the Division Bench of the High Court in that case was as to whether the notification applying the Act to a branch of a transport company situated at Visakhapatnam in Andhra Pradesh whose head office was at Calcutta could make available to the employees of the branch benefits of the Act even though head office was not covered by the Act. It becomes at once clear that this was a converse case wherein the head office was not governed by the Act as the West Bengal Government had not issued any notification for governing the parent establishment at Calcutta but it was the branch which was governed by the Act because it was situated in Andhra Pradesh State which had issued the notification in question. It was held by the Division Bench, speaking through Rama Rao J., that even if the head office was not governed by the Act, so far as the branch was concerned,....
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.... separate independent entities on the factual data in the present case on which there is no dispute between the parties. As discussed by us earlier, there is no escape from the conclusion that the Bombay branch is an appendage and part and parcel of the main establishment at Secunderabad and is almost a shortened mirror image thereof. 22. In this connection, we may also usefully refer to a decision of three Judge bench of this Court in Kirloskar Brothers Ltd v. Employees State Insurance Corporation (1996)ILLJ1156SC . The question before this Court in the aforesaid decision was as to whether the main office of a factory once governed by the Act would automatically result in covering its regional or branch offices which are situated in a different State even when its branch offices or regional offices were not carrying on any manufacturing process and could not be treated to be independent factories. It was contended before this Court that the branch offices which are merely distributing or selling the goods manufactured by the factory situated in other State could not be covered by the sweep of the Act only because the parent factory was covered by the Act. Rejecting this content....
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....the present case. The ratio of this decision holding that Act would apply to a factory in one State and, therefore, will automatically apply to its sales offices in other States even though they themselves are not factories, will equally apply to cases of establishments covered by the Act as per notification issued by the appropriate Government as delegate of central legislature and which notification would automatically cover the branches of such establishments functioning outside the State but as integral part of the same establishment. Once the registered office or the principal office of the appellant is covered by the Act, all its branches in any part of the country would be covered by the Act, if such branches are under the supervision and ultimate control of the principal office at Secunderabad, as factually found herein-above. 23. Our attention was also invited to a two judge bench decision of this Court in Hyderabad Asbestos Cement Products Ltd. v. Employees Insurance Court and Anr. Etc. etc. (1978)ILLJ181SC . 24. While interpreting the term "employees" in a factory, this Court, on construction of Section 38 of the Act, took the view that zonal offices and branch off....
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.... administration of the establishment though stationed outside the precincts of the main establishment. Accordingly, the employees who were connected with the administration of the Bombay branch of the appellant-Corporation would be covered by the sweep of Section 2(9) after the aforesaid amendment. If that is so, it would be too incongruous to contend that though the administrative staff of the Bombay branch would be covered, employees actually working for the establishment and directly connected with its main function namely, transport of goods throughout the country and inspecting the goods to be despatched for the appellant from Bombay to outside stations and also connected with receipt and unloading of goods coming from outside Bombay for being further carried within the State of Maharashtra or outside, would not be covered by the sweep of the Act. Such an incongruous and contradictory situation cannot be countenanced by the scheme of the Act especially in the light of clear wording of the definition Section 2(9) along with its relevant amended provisions. 26. The very same definition of the term 'employee' as per Section 2(9) of the Act fell for consideration of a t....
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..... Ltd. v. Regional Director, Employees State Insurance Corporation etc. (supra) (1967)IILLJ40SC wherein this Court had an occasion to examine the width of the definition "employee" as found in Section 2(9) of the Act in connection with the factual matrix wherein persons doing non-manual work outside the factory premises claimed to be covered by the sweep of the Act by being treated as employees of the factory. Emphasising the term "employee in connection with the work of the factory" it was held that All the employees of the disputed categories clerks or otherwise were employed in connection with the work of the factory, that is to say, in connection with the work of transforming and transmitting electrical power. Some of the employees were not engaged in manual labour. But a person doing non-manual work can be an employee within the meaning of Section 2(9)(i) if he is employed in connection with the work of the factory. The duties of he administrative staff are directly connected with the work of the factory. In view of the aforesaid well established legal position, therefore, it has to be held that as it is seen that the main work of the appellant-Corporation is....
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....jendragadhar, J., (as he then was) held, accepting the contention of the learned Counsel Mr. Delia, that: ...It is a piece of social legislation intended to confer specified benefits on workmen to whom it applies, and so, it would be inappropriate to attempt to construe the relevant provisions in a technical or a narrow sense. This position cannot be disputed. But in dealing with the plea raised by Mr. Dolia that the section should be liberally construed, we cannot overlook the fact that the liberal construction must ultimately flow from the words used in the section. If the words used in the section are capable of two constructions one of which is shown patently to assist the achievement of the object of the Act, courts would be justified in preferring that construction to the other which may not be able to further the object of the Act.... As we have already seen earlier, the express phraseology of Section 2(9) of the Act defining an 'employee' read with Section 38 of the Act clearly projects the legislative intention of spreading the beneficial network of the Act sufficiently wide for covering all employees working for the main establishment covered by ....