- (1.) THIS appeal is directed against the order of the Employees State Insurance Court, Nagapattinam, in E.S.I.O.P. No. 33 of 1988. The petitioner before the E.S.I. Court is the appellant in this appeal.
(2.) ACCORDING to the appellant, the petitioner is a Co-operative Milk Supply Society, registered under the Co-operative Societies Act. The object of the Society was to purchase and sell the milk to the residents of Velipalayam and Nagapattinam. The milk is purchased from cattle owners and sometimes from other societies according to the needs of the customers. Normally the entire milk will be sold every day and if there was any excess milk it will be stored in a cooler for storage and will be sold to the customers. The Society was carrying on business for the past 25 years. In the beginning the number of employees of the Society was very meagre and they worked sometimes in shift system. While so, the E.S.I. Corporation proposed to apply the provisions of the Employees State Insurance Act (hereinafter called "the Act) from December, 1982 and the Society has been paying the contribution regularly. At that time, it was represented by the Inspector of the Corporation that there may not be any liability for me payment of contribution prior to December, 1982. However, the Corporation issued a show-cause notice dated 28.9.1988 proposing to determine and recover damages under Section 85(B)(1) of the Act. The notice did not contain any particulars. Therefore, the petitioner was waiting for the proper notice with particulars. However, an order was passed on adhoc basis directing the petitioner to pay a contribution of Rs. 21,385/- for the period from 14.5.1978 to 30.11.1982. The said order was totally void. It was further stated that the petitioner society was not a factory as defined under Section 2(12) of the Act as no manufacturing process was being carried out. Cold storage was installed only recently in the year 1984. The Corporation was not entitled to collect any contribution even if the society was liable to pay. The Corporation did not render any benefit or assistance to the employees from 14.5.1978 to 30.11.1982. The Special Officer of the Society made representation to the respondent requesting that the proposed action may be withdrawn. However, the respondent Corporation sought to proceed under the Act. Hence the petition. In the counter filed by the Corporation, it was contended that the Society was involved in the manufacturing process within the meaning of Section 2(12) of the Act and the meaning assigned to the expression "manufacturing process" under the Factories Act, 1948, By an amendment to the Factories Act, 1948 the process of storing any article in cold storage, deep freezer etc. had been brought under the definition of manufacturing process under Section 2(k)of the Factories Act with effect from 26.10.1976. The Inspector of the Corporation had surveyed the petitioner's factory on 22.12.1981 and found that the society was liable to pay contribution. The Inspector collected the particulars from personal inspection as well as the records produced by the society. From the records, he had collected the particulars of number of employees employed during the period from May, 1978 to 1982. An amount of Rs. 21,384.38 was arrived at on a calculation of wages totalling Rs. 3,05,491.58. The order passed by the E.S.I. Corporation was in conformity with the provisions of the Act and hence the petition was liable to be dismissed. The E.S.I. Court held that the establishment had not substantiated its contention that the cooler was purchased only in the year 1984 and that since there was evidence to show that more than 20 persons had been employed to work in the year 1978, the establishment was liable to pay the contribution for the period from 14.5.1978 to 30.11.1982. Hence the appeal. Mr. Srinath, learned counsel for the appellant had raised the very issue of liability of the appellant establishment under the Act and on his interpretation of the relevant provisions, the liability of any industry involved in preserving or storing any article in a cold storage to pay contribution under the Act arose only in the year 1989 and hence the demand raised for the period long prior to 1989 was totally incompetent. To appreciate his contention, it is necessary to extract the relevant provisions under the E.S.I Act, 1948 and the Factories Act, 1948. Under Section 1(4) the Act is made applicable to all factories other than seasonal factories. "Factory" is defined under Section 2(12) of the Act as follows as it stood prior to Amending Act 29 of 1989. 2(12). "Factory" means any premises including the precincts thereof whereon twenty 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 carried on with the aid of power or is ordinarily so carried on but does not include a mine subject to the operation of the Mines Act, 1952(35 of 1952) or a railway running shed; "Seasonal factory" means a factory which is exclusively engaged in one or more of the following manufacturing processes; namely, cotton ginning, cotton or jute pressing, decortication of groundnuts the manufacture of coffee, indigo, lac, rubber, sugar (including gur) or tea or any manufacturing process which is incidental to or connected with any of the aforesaid process and includes a factory which is engaged for a period not exceeding seven months in a year. (a)in any process of blending, packing or re-packing of tea or coffee; or (b) in such other manufacturing process as the Central Government may, by notification in the Official Gazette, specify. The expressions "manufacturing process" and "power" shall have the meanings respectively assigned to them in the Factories Act, 1948 (63 of 1948);"
(3.) "Manufacturing process" has been defined under Section 2(k) of the Factories Act which is as follows:- 2(k) "Manufacturing Process" means any process for- (i) making, altering, repairing, ornamenting, finishing, packing, oiling, washing, cleaning, breaking up, demolishing, or otherwise treating or adapting any article or substance with a view to its use, sale, transport, delivery or disposal, or (ii) pumping oil, water, sewage or any other substance, or (iii) generating, transforming or transmitting power, or (iv) composing types for printing, printing by letter press, lithography, photogravure of other similar process or book binding, or (v) constructing, reconstructing, repairing, refitting, finishing or breaking up ships of vessels, or (vi) preserving or storing any article in cold storage; Of the six sub-clauses above mentioned, sub-clause (vi) brings in the establishment involved in preserving or storing any article in cold storage. The definition came to be inserted in the year 1976 by Amendment Act (Factories Act) 94 of 1976. In the E.S.L Act, the definition of "factory" under Section 2(12) underwent certain changes under the Amendment Act 29 of 1989 whereby the definition of seasonal factory was excluded and separately defined under Section 2(19-A) of the Act. By the same Amendment Act 29 of 1989 Section 2(14AA) was introduced by incorporating a separate definition of "manufacturing process" as follows:- "manufacturing process" shall have the meaning assigned to it in the Factories Act, 1948 (63 of 1948)" Likewise, the expression "power" was separately defined and incorporated under Section 2(15C) and it was defined that the said expression shall have the meaning assigned to it in the Factories Act, 1948. The extracts of the provisions as above, would show that the E.S.I. Act had adopted the definition of "manufacturing process" as in the Factories Act even as it originally stood and prior to the insertion of Section 2(14AA). But the contention of Mr. Srinath is two-fold. Firstly, though the E.S.L Act adopted the definition of "manufacturing process" as occurring in the Factories Act, such adoption or incorporation was made long prior to the insertion of clause (vi) in Section 2(k) of the Factories Act. The said clause was inserted only in the year 1976 and therefore, such subsequent amendments unless and otherwise are specifically endorsed by the borrowing Legislation cannot be taken up as part of the borrowing Legislation. In other words, the Legislature should have carried out a specific amendment in the E.S.I. Act also so as to include or to approve inclusion of clause (vi) to Section 2(k) of the Factories Act defining "manufacturing process". ;