TaxTMI 
TaxTMI 
2020 (4) TMI 902
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.... husband of Appellant No. 1 was seriously injured and ultimately succumbed to his injuries. 3. On 17.04.1997, the Respondent No. 3 had entered into a comprehensive Private Car 'B' Policy from the New India Assurance Company Limited (the Respondent No. 1 herein). The aforesaid Insurance Policy was valid from 24.04.1997 till 20.04.1998. The limitation of liability Clause which has been relied upon by the impugned judgment of the High Court is set out as follows: SECTION II LIABILITY TO THIRD PARTIES 1. Subject to the limits of liability as laid down in the Schedule hereto the Company will indemnify the insured in the event of an accident caused by or arising out of the use Motor Car against all sums including claimant's costs and expenses which the insured shall become legally liable to pay in respect of (a) death of or bodily injury to any person including occupants carried in the motor car (provided such occupants are not carried for hire or reward) but except so far as it is necessary to meet the requirements of Motor Vehicles Act, the Company shall not be liable where such death or injury arises out of and in the course of the employment of suc....
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....ary Ophthalmic Surgeon at the aforesaid Respondent No. 3 institute. Since the important question to be determined in this appeal is whether Dr. Alpesh I. Gandhi can be said to be employed by the Respondent No. 3 or has only entered into a contract for services with the Respondent No. 3 as an independent professional, the terms of the contract being important are set out herein in full: SUB: CONTRACT FOR SERVICES AS HONORARY OPHTHALMIC SURGEON AT ROTARY EYE INSTITUTE, NAVSARI. This contract on the captioned subject entered into between Dr. ALPESH I. GANDHI, hereinafter referred to as AIG and the Rotary Eye Institute, Navsari, hereinafter referred to as REIN, has become effective from dated 01-04-1996 and the same is governed by the following terms and conditions. I. DESIGNATION: Honorary Ophthalmic Surgeon. II. HONORARIUM: Rs. 4000/- P.M. III. OTHER COMPENSATIONS: That for the Honorary Services to REIN, AIG will be compensated as follows: i. AIG will be paid 10% of the appropriate percentage of the total money set aside every month out of the OPD collection at the REIN; ii. AIG will also be paid 10% of the appropriate pe....
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....s. ii. That AIG will be entitled to 30 days of contingency leave during each accounting year. VII. CONDUCT RULES: That AIG will be governed by the conduct Rules of the Institute as in vogue from time to time and as applicable to the regular employees of the Institute. VIII. ARBITRATION OF DISPUTES: That the disputes, if any, arising in course of the tenure of this contract will be referred to the Managing Committee of the Institute and the decision of the Managing Committee will be final. IX. TENURE OF CONTRACT: That this contract is operative for a period of THREE YEARS effective from 1-4-96. This period can, however, be extended from time to time with the mutual consent. X. TERMINATION OF CONTRACT: That a notice of clear THREE MONTHS will have to be given. i. By REIN to AIG, if the institute wishes to terminate this contract or in lieu of notice period the institute shall have to pay an amount (to AIG) equivalent to the Hon. Amount paid to AIG for last three months just preceding the month of termination of contract; ii. By AIG to REIN, if AIG wishes to terminate this contr....
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....bove issues are as under for the reasons to follow: 1. In the affirmative. 2. In the affirmative. As per finding. 2-A. In the affirmative. 2-B. In the negative 3. As per final order. 7. By way of findings of fact, it found that the driving license in favour of the driver was valid, and that the driver was rash and negligent in driving the vehicle, which led to the death of Dr. Alpesh Gandhi. The Tribunal then found that the said Doctor was earning an annual income of INR 1,47,000. Following Sarla Verma v. DTC (2009) 6 SCC 121, the Tribunal, after considering deductions as well as future prospects, ultimately arrived at an income figure of INR 18,275 as the monthly income. The Tribunal then applied the multiplier of '17' to the annual income of INR 2,19,300, making a total of INR 37,28,100/-. Consortium expenses were added as INR 25,000; Funeral expenses as INR 10,000, thereby arriving at a total compensation figure of INR 37,63,100 which had to be paid together with interest at 8% per annum. Importantly, all three Respondents were made jointly and severally liable to pay the aforesaid amount. This was on the basis that on an a....
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....d the judgment of the High Court, stating that on a holistic reading of the agreement between the Respondent No. 3 and Dr. Alpesh Gandhi, dated 04.05.1996, the contract is one of service and not for service. Even otherwise, the learned Counsel argued that the High Court was wrong in stating that the insured was covered by endorsement IMT-5, by which personal accident cover to unnamed passengers other than the insured and his paid driver or cleaner will be extended to the extent of 100% where death is caused, on payment of an additional premium. The learned Counsel states that IMT-5 would not be applicable in the facts of this case, but that IMT-16 would be applicable. Since additional premium has not been paid to apply IMT-16, the Insurance Company is not liable to indemnify the insured in respect of any liability arising for death sustained by an employee in respect of the accident in connection with the motor vehicle in question. 12. This Court has in a series of judgment indicated the tests to be followed in order to determine, in the context of the Industrial Disputes Act and the Factories Act, as to whether different kinds of persons who supply goods or services could be sa....
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....s requisite to establish the relationship of employer and employee must necessarily vary from business to business and is by its very nature incapable of precise definition. As has been noted above, recent pronouncements of the Court of Appeal in England have even expressed the view that it is not necessary for holding that a person is an employee, that the employer should be proved to have exercised control over his work, that the test of control was not one of universal application and that there were many contracts in which the master could not control the manner in which the work was done (Vide observations of Somervelle, L.J. in Cassidy v. Ministry of Health, (supra), and Denning, L.J. in Stevenson, Jordan and Harrison Ltd. v. Macdonald and Evans, (supra). Ultimately, the Court held that it would be a question of fact to be decided by all the circumstances of the case. It was further held that the mere fact that the agarias did piece-rated labour, the work being seasonal, and the fact that they can engage others to do the work for them, would not detract from the fact that they are professional labourers who have been hired by the employer. Finally, the Court refused to exe....
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....tails of the work Pandurang did in the factory. The following are the established facts: (1) There was no agreement or contract of service between the Appellant and Pandurang. (2) Pandurang was not bound to attend the factory for the work of rolling bidis for any fixed hours of work or for any fixed period. He was free to go to the factory at any time he liked and was equally free to leave the factory whenever he liked. Of course, he could be in the factory during the hours of working of the factory. (3) Pandurang could be absent from work on any day he liked. He could be absent up to ten days without even informing the Appellant. If he was to be absent for more than ten days he had to inform the Appellant, not for the purpose of taking his permission or leave, but for the purpose of assuring the Appellant that he had no intention to give up work at the factory. (4) There was no actual supervision of the work Pandurang did in the factory. (5) Pandurang was paid at fixed rates on the quantity of bidis turned out. There was however no stipulation that he had to turn out any minimum quantity of bidis in a day. (6) Leaves used to be....
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....e may say that this opinion further finds support from what we hold on the second contention. If Pandurang was a worker, the provisions about; leave and leave wages should apply to him. We are of opinion that they do not and what we say in that connection reinforces our view that Pandurang was not a worker as the three criteria and conditions laid down in Shri Chintaman Rao case [1958 SCR 1340] for constituting him as such are not fulfilled in the present case. 16. In D.C. Dewan Mohideen Sahib and Sons v. Secretary, United Beedi Workers' Union (1964) 7 SCR 646, the Court set out a sample agreement which disclosed the facts of the case before it, as follows: It seems that a sample agreement was produced before the High Court, which provided inter alia for the following terms: (1) That the proprietor should supply the tobacco and the bidi leaves; (2) that the intermediary should engage premises of his own and obtain the requisite licence to carry on the work of having the bidis rolled there; (3) that at no time should more than nine bidi rollers work in the premises of that intermediary; (4) that the intermediary should meet all the....
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....ed independent contractor is supplied with tobacco and leaves and is paid certain amounts for the wages of the workers employed and for his own trouble. We can therefore see no difficulty in holding that the so-called contractor is merely an employee or an agent of the Appellants as held by the appeal court and as such employee or agent he employs workers to roll bidis on behalf of the Appellants. The work is distributed between a number of so-called independent contractors who are told not to employ more than nine persons at one place to avoid Regulations under the Factories Act. We are not however concerned with that aspect of the matter in the present appeals. But there can be no doubt that the workers employed by the so-called contractors are really the workmen of the Appellants who are employed through their agents or servants whom they choose to call independent contractors. 17. The next case in chronological order is of seminal importance in deciding which side of the line a particular set of facts would lead to a conclusion that a contract is one for service or of service. Thus, in Silver Jubilee Tailoring House v. Chief Inspector of Shops & Establishments (1974) 3 SCC 4....
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....lled employments, to apply the test of control over the manner of work for deciding the question whether the relationship of master and servant exists would be unrealistic. 21. In Montreal v. Montreal Locomotive Works Ltd. etc. [(1947) 1 DLR 161 at p. 1969] Lord Wright said that a single test, such as the presence or absence of control, was often relied on to determine whether the case was one of master and servant, mostly in order to decide issues of tortious liability on the part of the master or superior and that in the more complex conditions of modern industry, more complicated tests have often to be applied. He said that it would be more appropriate to apply a complex test involving: (i) control; (ii) ownership of the tools; (iii) chance of profit; (iv) risk of loss, and that control in itself is not always conclusive. He further said that in many cases the question can only be settled by examining the whole of the various elements which constitute the relationship between the parties. 22. In Bank Voor Handel en Scheepvaart N.V. v. Slatford [(1952) 2 All ER 956 at 971] Denning, L.J., said: ... the test of being a servant does not rest nowadays on su....
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....ricultural mechanization) a craftsman and a journeyman, a householder and a domestic servant, and even a factory owner and an unskilled 'hand'. It reflects a state of society in which the ownership of the means of production coincided with the profession of technical knowledge and skill in which that knowledge and skill was largely acquired by being handed down from one generation to the next by oral tradition and not by being systematically imparted in institutions of learning from universities down to technical schools. The control test postulates a combination of managerial and technical functions in the person of the employer i.e. what to modern eyes appears as an imperfect division of labour. [See Prof. Kahn-Freund in (1951), 14 Modern Law Review, at p. 505] 27. It is, therefore, not surprising that in recent years the control test as traditionally formulated has not been treated as an exclusive test. 28. It is exceedingly doubtful today whether the search for a formula in the nature of a single test to tell a contract of service from a contract for service will serve any useful purpose. The most that profitably can be done is to examine all the facto....
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.... other is, in fact, the employer. He has economic control over the workers' subsistence, skill, and continued employment. If he, for any reason, chokes off, the worker is, virtually, laid off. The presence of intermediate contractors with whom alone the workers have immediate or direct relationship ex contractu is of no consequence when, on lifting the veil or looking at the conspectus of factors governing employment, we discern the naked truth, though draped in different perfect paper arrangement, that the real employer is the Management, not the immediate contractor. Myriad devices, half-hidden in fold after fold of legal form depending on the degree of concealment needed, the type of industry, the local conditions and the like may be resorted to when labour legislation casts welfare obligations on the real employer, based on Articles 38, 39, 42, 43 and 43-A of the Constitution. The court must be astute to avoid the mischief and achieve the purpose of the law and not be misled by the maya of legal appearances. Applying this test, the economic reality of control of the employer over the workman's subsistence, skill and continued employment pointed to such persons being ....
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....ng of Section 2(s) of the Industrial Disputes Act. After distinguishing the Indian Banks case (supra), this Court referred to Dharangadhara (supra), Silver Jubilee (supra), Shining Tailors (supra) and Chintaman Rao (supra) and then held: 17. The inferences culled out from the reading of those judgments can be summed up as follows: (a) Where the contractors were substantially responsible for the main and sole business, they would be treated as workers. (b) One exception is that where in such cases flexibility of the contract was at variance with the normal worker's contract, the contractors would not be treated as workers. (c) Where the contractor is in the nature of supplier of goods and services, they are to be treated as supplier contractors and not workmen. 18. At this juncture the distinction between jewel appraisers and the regular employees of the Bank can be noted. Regular employees Jewel appraisers 1. Subject to qualification and age prescribed. 1. No qualification/age. 2. Recruitment through employ-ment exchange/Banking Service Recruitment Board. 2. Direct engagement by the local Manager. 3. Fixed workin....
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.... or other remuneration, he will provide his own work and skill in the performance of some service for his master. (ii) He agrees, expressly or impliedly, that in the performance of that service he will be subject to the others control in a sufficient degree to make that other master. (iii) The other provisions of the contract are consistent with its being a contract of service. He elaborated: Control includes the power of deciding the thing to be done, the way in which it shall be done, the means to be employed in doing it, the time when and the place where it shall be done. All these aspects of control must be considered in deciding whether the right exists in a sufficient degree to make one party the master and the other his servant. Later, at p 524, he commented on Lord Thankerton's "four indicia" of a contract of service, said in Short v. J & W Henderson Ltd. (1946) 62 TLR 427, 429 to be: "(a) The master's power of selection of his servant; (b) the payment of wages or other remuneration; (c) the master's right to control the method of doing the work; and (d) the master's right of suspension or dismissal." MacKenna J said: It s....
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....atters which have to be borne in mind. To my mind, no single one is decisive. One has to look at the totality of the evidence, at the totality of the facts found and then apply them to the language of the statute. One cannot do better than echo the words of Somervell LJ in Cassidy v. Ministry of Health [1951] 2 KB 343, 352: 'one perhaps cannot get much beyond this: "was his contract a contract of service within the meaning which an ordinary person would give to the words?" Roskill J also referred to Denning LJ's views expressed in Stevenson Jordan & Harrison Ltd. v. Macdonald & Evans [1952] 1 TLR 101, 111 and Bank voor Handel en Scheepvaart NV v. Slatford (No 2) [1953] 1 QB 248, 295. In the former Denning LJ said: One feature which seems to run through the instances is that, under a contract of service, a man is employed as part of the business, and his work is done as an integral part of the business; whereas, under a contract for services, his work, although done for the business, is not integrated into it but is only accessory to it. 67. The Privy Council in the Lee Ting Sang case did, however, give this help [1990] 2 AC 374, 382: What....
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....ome cases possible to decide the issue by raising as the crucial question whose business is it, or in other words by asking whether the party is carrying on the business, in the sense of carrying it on for himself or on his own behalf and not merely for a superior. 69. There being no single test, what one has to do is marshal various tests which should cumulatively point either towards an employer/employee relationship or away from one. Adopting that approach confirms that which is accepted as the common ground, namely, that Father Baldwin is not a true employee. The test may yet be useful to see whether he can be said to be an independent contractor, for if he is, the law is clear: the employer is not vicariously liable for the torts of his independent contractor. I am satisfied that Father Baldwin is no more a true independent contractor than he is an employee. For a start, he has no contractual relationship with his bishop. He is hardly a person in business on his own account with a free hand to carry out the job, if it is a job, as and when he wishes. In concluding that the Church would be vicariously liable, the Court then held: 81. The result of each of t....
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....ere accessory thereof is another important test in order to determine on which side of the line the contract falls. The three-tier test laid down by some of the English judgments, namely, whether wage or other remuneration is paid by the employer; whether there is a sufficient degree of control by the employer and other factors would be a test elastic enough to apply to a large variety of cases. The test of who owns the assets with which the work is to be done and/or who ultimately makes a profit or a loss so that one may determine whether a business is being run for the employer or on one's own account, is another important test when it comes to work to be performed by independent contractors as against piece-rated labourers. Also, the economic reality test laid down by the U.S. decisions and the test of whether the employer has economic control over the workers' subsistence, skill and continued employment can also be applied when it comes to whether a particular worker works for himself or for his employer. The test laid down by the Privy Council in Lee Ting Sang v. Chung Chi-Keung [1990] 2 A.C. 374, namely, is the person who has engaged himself to perform services perfor....
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....of the earnings of the Respondent No. 3 from out of the OPD, Operation Fee component of Hospitalization Bills, and Room Visiting Fees. (v) The arbitration Clause which speaks of disputes arising in the course of the tenure of this contract will be referred to the Managing Committee of the Institute, the decision of the Managing Committee being final, is also a Clause which is unusual in a pure master-servant relationship. (vi) The fact that the appointment is contractual - for 3 years - and extendable only by mutual consent, is another pointer to the fact that the contract is for service, which is tenure based. (vii) The fact that termination of the contract can be by notice on either side would again show that the parties are dealing with each other more as equals than as master-servant. (viii) Clause XI of the agreement also makes it clear that the earlier appointment that was made of Dr. Gandhi would cease the moment this contract comes into existence, Dr. Gandhi no longer remaining as a regular employee of the Institute. 27. As against the aforesaid factors which would point to the contract the contract being a contract for service, the fo....
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....n some of the judgments hereinabove, can yet amount to contracts of service, being a neutral factor. Likewise, the fact that Dr. Gandhi must devote his entire attention to the Institute would not necessarily lead to the conclusion that de hors all other factors the contract is one of service. Equally important is the fact that it is necessary to state Dr. Gandhi will be governed by the Conduct Rules and by the Leave Rules of the Institute, but by no other Rules. And even though the Leave Rules apply to Dr. Gandhi, since he is not a regular employee, he is not entitled to any financial benefit as might be applicable to other regular employees. Equally, arbitration of disputes between Dr. Gandhi and the Institute being referred to the Managing Committee of the Institute would show that they have entered into the contract not as master and servant but as employer and independent professional. A conspectus of all the above would certainly lead to the conclusion, applying the economic reality test, that the contract entered into between the parties is one between an Institute and an independent professional. 29. Even otherwise, it is well-settled that exemption of liability clauses i....
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....le found in the company of other words in the same Clause 5 normally indicates that damage caused to the building on account of vibration by driving of vehicle close to the road is also included. In order to interpret this clause, it is also necessary to gather the intention of the parties from the words used in the policy. If the word "impact" is interpreted narrowly, the question of impact by any rail would not arise as the question of a rail forcibly coming to the contact of a building or machinery would not arise. In the absence of specific exclusion and the word "impact" having more meanings in the context, it cannot be confined to forcible contact alone when it includes the meanings "to drive close", "effective action of one thing upon another" and "the effect of such action", it is reasonable and fair to hold in the context that the word "impact" contained in Clause 5 of the insurance policy covers the case of the Respondent to say that damage caused to the building and machinery on account of the bulldozer moving closely on the road was on account of its "impact". It is also settled position in law that if there is any ambiguity or a term is capable of two possible interpre....
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....edit Guarantee Corpn. Ltd. (2015) 9 SCC 414, this Court held: 31. As has been held in Chandumull Jain [AIR 1966 SC 1644 : (1966) 3 SCR 500] by the Constitution Bench that in a contract of insurance, there is a requirement of good faith on the part of the insured and in case of ambiguity, it has to be construed against the company. As per other authorities, the insurance policy has to be strictly construed and it has to be read as a whole and nothing should be added or subtracted. That apart, as has been held in Polymat India (P) Ltd. [ (2005) 9 SCC 174], it is the duty of the Court to interpret the document as is understood between the parties and regard being had to the reference to the stipulations contained in it. xxx xxx xxx 35. The terms of the policy are to be strictly construed. There can be no cavil about the proposition of law that in case of ambiguity, the construction has to be made in favour of the insured 32. In United India Insurance Co. Ltd. v. Orient Treasures (P) Ltd. (2016) 3 SCC 49, this Court quoted Halsbury's Laws of England as follows: 37. In Halsbury's Laws of England (5th Edn., Vol. 60, Para 105) principle of co....
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....proferentem Rule as under: Quite apart from contradictory clauses in policies, ambiguities are common in them and it is often very uncertain what the parties to them mean. In such cases the Rule is that the policy, being drafted in language chosen by the insurers, must be taken most strongly against them. It is construed contra proferentem, against those who offer it. In a doubtful case the turn of the scale ought to be given against the speaker, because he has not clearly and fully expressed himself. Nothing is easier than for the insurers to express themselves in plain terms. The assured cannot put his own meaning upon a policy, but, where it is ambiguous, it is to be construed in the sense in which he might reasonably have understood it. If the insurers wish to escape liability under given circumstances, they must use words admitting of no possible doubt. But a Clause is only to be contra proferentem in cases of real ambiguity. One must not use the Rule to create an ambiguity. One must find the ambiguity first. Even where a Clause by itself is ambiguous if, by looking at the whole policy, its meaning becomes clear, there is no room for the application of the do....