TaxTMI 
TaxTMI 
2020 (4) TMI 902
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....mately 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 such person by the insured. In addition, endorsement IMT-5 states: I.M.T. 5.....
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.... 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 percentage of the total money set aside every month out of the Operation Fee component of the Hospitalization Bills collected by REIN from the Institute patients; iii. AIG will ....
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....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 contract or in lieu of the notice period AIG shall have to pay an amount (to REIN) equivalent to the Hon. Amount paid to him by the Institute for the last three months just preceding the month of termination of the contract. NOTE: That in the event of the proven case indiscipline or breach of Trust, the REIN reserves the right to terminate the contract at any time without giving any compensatio....
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....g 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 analysis of the contract entered into between the Respondent No. 3 and Dr. Alpesh Gandhi, the contract was a contract for service, as a result of which the deceased could not have been held to have been in the employment of the Respondent No. 3. 8. The impugned judgment of the High Court dated 26.07.2018, after analyzing the provisions of the contract for services dated 04.05.1996 between the Respondent No. 3 and Dr. Gandhi came to the opposite conclusion, stating that since the contract was a....
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....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 said to be "in the employ" of the employer. Thus, in Dharangadhara (supra), the question posed before the Court was whether the salt manufactured by a class of professional laborers, known as agarias, from rain water that got mixed with saline matter in the soil, could be said to be in pursuance of contracts of service with the Appellant, as a result of which they would then be entitled to be treated as workmen under the Industrial Disputes Act. After setting out the definition of "workman" Under Section ....
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....s 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 exercise its discretion to interfere with the Industrial Tribunal's finding that on the facts of the case these agarias would have to be considered as workmen under the Industrial Disputes Act. 13. In Chintaman Rao v. State of M.P. 1958 SCR 1340, this Court held that Sattedars and their coolies were not workers within the meaning of Section 2(1) of the Factories Act. In so holding, the Court referred to the judgment of Dharangadhara (supra) and held that the fact that bidi rolling was done outside the factory premise....
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....sent 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 supplied to Pandurang for being taken home and cut there. Tobacco to fill the bidis used to be supplied at the Factory. Pandurang was not bound to roll the bidis at the factory. He could do so at his place, on taking permission from the Appellant for taking tobacco home. The permission was necessary in view of Excise Rules and not on account of any condition of alleged service. (7) At the close of the day, the bidis used to be delivered to the Appellant and bidis not up to the standard, used to be rejected. On these facts, the judgment in Birdhichand (supra) was distin....
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....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 incidental charges for rolling the bidis including the cost of thread and the remuneration paid to the bidi rollers; (5) that for every unit of 1000 bidis rolled and delivered by the intermediary to the proprietor, the latter should pay the stipulated amount, after deducting the cost of the tobacco and the bidi leaves supplied by the proprietor; (6) that the intermediary should not enter into similar engagement with any other industrial concern; (7) that the price of the raw materials and price to be paid for every unit of 1000 bidis rolled and delivered were to be fixed at the discretion of the proprietor. Besides these conditions, the....
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....o 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 498, this Court had to determine whether there is a relationship of employer and an employee between a tailoring shop and persons employed by the owner of the shop for stitching purposes Under Section 2(14) of the Andhra Pradesh (Telangana Area) Shops and Establishments Act, 1951. Section 2(14) of the said Act defined a 'person employed' as meaning, in the case of a shop, a person wholly or principally employed therein in connection with the business of the shop. The facts were set out in paragraph 7 of the said judgment as follows: 7. The following facts appear from the finding of the learned Single Judge. All the workers are paid on piece-rate basis. The Workers generally ....
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....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 submission to orders. It depends on whether the person is part and parcel of the organisation.... 23. In U.S. v. Silk [331 US 704] the question was whether men working for the Plaintiffs, Silk and Greyvan, were 'employees' within the meaning of that word in the Social Security Act, 1935. The Judges of the Supreme Court of U.S.A., agreed upon the test to be applied, though not in every instance upon its application to the facts. They said that the test was not "the common law test," viz. "power of control, whether exercised or not, over the manner of performing service to the undertaking", but whether the men were employees "as a matter of economic reality". Important factors were said to be "the degrees of control, opp....
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....05] 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 factors that have been referred to in the cases on the topic. Clearly, not all of these factors would be relevant in all these cases or have the same weight in all cases. It is equally clear that no magic formula can be propounded, which factors should in any case be treated as determining ones. The plain fact is that in a large number of cases, the Court can only perform a balancing operation weighing up the factors which point in one direction and balancing them against those pointing in the opposite direction [See Atiyah, PS. "Vicarious Liability in the Law of Torts", pp. 37-38]. 29. During the last two decades the emphasis in the field has shifted and no longer rests so strongly upon the question of control. Control is obviously an important factor and in many cases it may still b....
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....ns 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 direct employees of the owner. 19. In Shining Tailors v. Industrial Tribunal II, U.P. (1983) 4 SCC 464, a 3-Judge Bench of this Court followed Silver Jubilee (supra) to arrive at the conclusion that the persons employed were "workmen" within the meaning of the U.P. Industrial Disputes Act, 1947. 20. In P.M. Patel & Sons v. Union of India (1986) 1 SCC 32, this Court was faced with the important question as to whether the workers employed at their homes in the manufacture of bidis are entitled to the benefit of Employees' Provident Funds and Miscellaneous Provisions Act, 1952. After referring to the earlier judgments of this Court, this Court held that the Silver Jubilee case (supra) made the law take a major shift from the earlier judgments on criteria to be applied to determine relationship of m....
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....en 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 working hours. 3. No fixed working hours. 4. Monthly wages. 4. No guaranteed payment, only commission paid. 5. Subject to disciplinary control. 5. No disciplinary control. 6. Control/supervision is exercised not only with regard to the allocation of work, but also the way in which the work is to be carried out. 6. No control/supervision over the nature of work to be performed. 7. Wages are paid by the Bank. 7. Charges are paid by the borrowers. 8. Retirement age. 8. No retirement age. 9. Subject to transfer. 9. No transfer. 10. While in employment cannot carry on any other occupation. 10. No bar to carry on any avocation or occupation. Therefore, the jewel appraisers are not employees of the Bank. 23. At this stage, it is important to advert to a fairly recent judgment of the English Court of Appeal in E v. English Province of Our Lady of Charity and An....
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.... 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 seems to me that (a) and (d) are chiefly relevant in determining whether there is a contract of any kind between the supposed master and servant, and that they are of little use in determining whether the contract is one of service. The same is true of (b), unless one distinguishes between different methods of payment, payment by results tending to prove independence and payment by time the relation of master and servant. 65. That leaves control as an important distinguishing factor. The example is often given of the difference between the chauffeur and the taxi driver but it is not always as easy as that. As times have changed so control has become an unrealistic guide. It may have been more meaningful when work was done by labourers under the direction of employers who had the same or greater technical skills than their workmen. Now that one is frequently dealing with a professional person or a person of some particular skill and exper....
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....though 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 then is the standard to apply? This has proved to be a most elusive question and despite a plethora of authorities the courts have not been able to devise a single test that will conclusively point to the distinction in all cases. Their Lordships agree with the Court of Appeal when they said that the matter had never been better put than by Cooke J in Market Investigations Ltd. v. Minister of Social Security [1969] 2 QB 173, 184- 185: 'The fundamental test to be applied is this: "is the person who has engaged himself to perform these services performing them as a person in business on his own account?" If the answer to that question is "yes", then the contract is a contract for services. If the answer is "no", then the contract is a contract of service. No exhaustive list has been compiled and perhaps no exhaustive list can be compiled of the considerations which are relevant in determining that question, nor can strict Rules be laid down as to the relative weight which the various consid....
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....f 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 the tests leads me to the conclusion that Father Baldwin is more like an employee than an independent contractor. He is in a relationship with his bishop which is close enough and so akin to employer/employee as to make it just and fair to impose vicarious liability. Justice and fairness is used here as a salutary check on the conclusion. It is not a stand alone test for a conclusion. It is just because it strikes a proper balance between the unfairness to the employer of imposing strict liability and the unfairness to the victim of leaving her without a full remedy for the harm caused by the employer's managing his business in a way which gave rise to that harm even when the risk of harm is not reasonably foreseeable. 24. A conspectus of all the aforesaid judgments would show that in a society which has moved away from being a simple agrarian society to a complex modern society in the computer age, the earlier simple test of control, whether or not actually exercised, has now yielded more complex tests in order to decide complex ma....
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.... 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 performing them as a person in business on his own account, is also an important test, this time from the point of view of the person employed, in order to arrive at the correct solution. No one test of universal application can ever yield the correct result. It is a conglomerate of all applicable tests taken on the totality of the fact situation in a given case that would ultimately yield, particularly in a complex hybrid situation, whether the contract to be construed is a contract of service or a contract for service. Depending on the fact situation of each case, all the aforesaid factors would not necessarily be relevant, or, if relevant, be given the same weight. Ultimately, the Court can only perform a balancing act weighing all relevant factors which point in one direction as against those which point in the opposite direction to arrive at the correct conclusion on the facts of each case. 25. Given the fact that this balancing process may often not yield a clear result in hybrid situations, the context in which a finding is to be made a....
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.... which would point to the contract the contract being a contract for service, the following factors would point in the opposite direction: (i) The employment is full-time. Dr. Gandhi can do no other work, and apart from the seven types of work that Dr. Gandhi is to perform under Clause IV, any other assignment that may get created in the course of time may also be assigned to him at the employer's discretion. (ii) Dr. Gandhi is to work on all days except weekly offs and holidays that are given to him by the employer. However, what is important is that though governed by the leave Rules of the Institute as in vogue from time to time, Dr. Gandhi will not be entitled to any financial benefit of any kind as may be applicable to other regular employees of the Institute under Clause V. (iii) Dr. Gandhi will be governed by the Conduct Rules of the Institute as invoked from time to time and as applicable to regular employees of the Institute. (iv) That in the event of a proven case of indiscipline or breach of trust, the Institute reserves a right to terminate the contract at any time without giving any compensation whatsoever. 28. If the aforesaid factors are weighed in the s....
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....s well-settled that exemption of liability clauses in insurance contracts are to be construed in the case of ambiguity contra proferentum. Thus, in General Assurance Society Ltd. v. Chandumull Jain (1966) 3 SCR 500, this Court held: A contract of insurance is a species of commercial transactions and there is a well-established commercial practice to send cover notes even prior to the completion of a proper proposal or while the proposal is being considered or a policy is in preparation for delivery...In other respects there is no difference between a contract of insurance and any other contract except that in a contract of insurance there is a requirement of uberrima fides i.e. good faith on the part of the assured and the contract is likely to be construed contra proferentem that is against the company in case of ambiguity or doubt. 30. This judgment has been cited with approval in United India Insurance Co. Ltd. v. Pushpalaya Printers (2004) 3 SCC 694 as follows: 6. The only point that arises for consideration is whether the word "impact" contained in Clause 5 of the insurance policy covers the damage caused to the building and machinery due to driving of the bulldozer on th....
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.... is capable of two possible interpretations, one beneficial to the insured should be accepted consistent with the purpose for which the policy is taken, namely, to cover the risk on the happening of certain event. Although there is no ambiguity in the expression "impact", even otherwise applying the Rule of contra preferentem, the use of the word "impact" in Clause 5 in the instant policy must be construed against the Appellant. Where the words of a document are ambiguous, they shall be construed against the party who prepared the document. This Rule applies to contracts of insurance and Clause 5 of the insurance policy even after reading the entire policy in the present case should be construed against the insurer. A Constitution Bench of this Court in General Assurance Society Ltd. v. Chandmull Jain [AIR 1966 SC 1644 : (1966) 3 SCR 500] has expressed that (AIR p. 1649, para 11) in a contract of insurance there is requirement of uberrima fides i.e. good faith on the part of the assured and the contract is likely to be construed contra proferentem, that is, against the company in case of ambiguity or doubt. 31. Likewise, in Export Credit Guarantee Corporation of India Ltd. v. Ga....
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....ntem Rule is stated thus: Contra proferentem rule.-Where there is ambiguity in the policy the court will apply the contra proferentem rule. Where a policy is produced by the insurers, it is their business to see that precision and clarity are attained and, if they fail to do so, the ambiguity will be resolved by adopting the construction favourable to the insured. Similarly, as regards language which emanates from the insured, such as the language used in answer to questions in the proposal or in a slip, a construction favourable to the insurers will prevail if the insured has created any ambiguity. This rule, however, only becomes operative where the words are truly ambiguous; it is a Rule for resolving ambiguity and it cannot be invoked with a view to creating a doubt. Therefore, where the words used are free from ambiguity in the sense that, fairly and reasonably construed, they admit of only one meaning, the Rule has no application. 33. In Industrial Promotion & Investment Corpn. of Orissa Ltd. v. New India Assurance Co. Ltd. (2016) 15 SCC 315, this Court referred to the contra proferentum Rule as follows: 10. We proceed to deal with the submission made by the counsel for ....
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....e, the rest of the policy becomes clear, the policy should be construed accordingly. 34. The High Court held in the impugned judgment that as additional premium had been paid so as to attract the applicability of IMT-5, in any case the Insurance Company would be liable under the policy to pay compensation in the case of death to unnamed passengers other than the insured and his paid driver or cleaner, Dr. Alpesh Gandhi being one such unnamed passenger. This was done on the footing that the exception to IMT-5 was that a person in the employ of the insured coming within the scope of the Workmen's Compensation Act, 1923 is excluded from the cover, but that as Dr. Alpesh Gandhi did not come within the scope of the Workmen's Compensation Act, compensation payable due to his death in a motor accident would be covered by IMT-5. We see no reason to disturb this finding. The inapplicability of endorsement IMT-16, as additional premium had not been paid would, therefore, make no difference on the facts of this case. Section-II, entitled "liability to third parties" in the insurance policy dated 17.04.1997 set out hereinabove exempts the insurance company from the death of a person c....