D. P. WADHWA, J. - (1.) DISSATISFIED with the judgment of Delhi High Court holding that the notification dated 30/09/1988 issued under sub-section (5) of Section 1 of the Employees' State Insurance Act, 1948 (for short, the 'Act') was inapplicable to the establishment of the respondent, Employees' State Insurance Corporation (ESIC) has filed the present appeal after obtaining leave from this Court.
(2.) UNDER sub-section (5) of Section 1 of the Act, notification was issued, after complying with necessary formalities, extending the provision of the Act to 'shops'. It is not disputed that respondent is a shop and that the notification would be applicable to it if other conditions for application of the Act are fulfilled. The notification is as under : "DELHI ADMINISTRATION (LABOUR DEPARTMENT) Dated : 30-9-1988 NOTIFICATION In exercise of power conferred by sub-section (5) of Section 1 of the Employees' State Insurance Act, 1948 (34 of 1948), read with the Ministry of Labour, Government of India, Notification No. 55.122 (2) dated the 14th Dec., 1949 the Lt. Governor of the Union Territory of Delhi in consultation with the approval of the Central Government, and having previously given the requisite notice vide this Administration's Notification No. F. 28(2) 87/TMP/LC/Lab dated the 9th Feb. 1988 published in the Delhi Gazette (extra ordinary) Part-IV dated the 9th Feb., 1988 hereby extends the provisions of the said Act to the classes of establishments specified in column I of the Schedule below w.e.f. the 2nd day of Oct., 1988. JUDGEMENT_111_8_1998Html1.htm By order and in the name of the Lt.Governor of the Union Territory of Delhi. Sd/- (Mrs M Bassi.) Deputy Secretary (Labour) Delhi Administeration, Delhi" Provisions of the Act apply to factories. 'Factory' is defined under clause (12) of Section 2 of the Act. It reads as under : "factory' means 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 carried on with the aid of power or is ordinarily so carried on, or (b) 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 without 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." This definition of 'factory' was introduced w.e.f. 20/10/1989. Definition of 'factory' as it originally existed prior to amendment by Act 44 of 1966 (w.e.f. 28-1-1968) was as under : "factory' means any premises including the precincts thereof wherein twenty or more persons are working or were working 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 Indian Mines Act, 1923 (IV of 1923) or a railway running shed." After the amendment by Act 44 of 1966 as aforementioned the words "or were working" in the definition of 'factory' were substituted by the words "or employed or were employed for wages". By subsequent amendment the number of persons have now been reduced to ten or more persons instead of twenty or more persons in the definition of 'factory'. 'Employee' and 'wages' have also been defined in clauses (9) and (22) and are as under : "(9) "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 (ii) who is employed by or through an immediate employer on the premises of the factory or establishment or under the supervision of the principal employer or his agent on work which is ordinarily part of the work of 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 has entered into a contract of service; and includes 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 apprentice, not being an apprentice engaged under the Apprentice Act, 1961 (52 of 1961), or under the standing orders of the establishment; but does not include - (a) any member of the Indian naval, military or air forces; or (b) any person so employed whose wages (excluding remuneration for overtime work) exceed Rs. 1,600.00 a month at any time after (and not before) the beginning of the contribution period, shall continue to be an employee until the end of that period." "(22) "Wages" means all remuneration paid or payable in cash to an employee, if the terms of the contract of employment, express or implied, were fulfilled and includes any payment to an employee in respect of any period of authorised leave, lock-out, strike which is not illegal or lay off and other additional remuneration, if any, paid at intervals not exceeding two months, but does not include - (a) any contribution paid by the employer to any pension fund or provident fund, or under this Act; (b) any travelling allowance or the value of any travelling concession; (c) any sum paid to the person employed to defray special expenses entailed on him by the nature of his employment; or (d) any gratuity payable on discharge." Considering these provisions, High Court was of the view that "the word 'employee' is applicable to those who are not officers. In the instant case, there are five officers and the balance of the workers are less than 20". High Court was, thus, of the view that the notification was not applicable in the case of the respondent.
(3.) THERE is conflict on decisions of the High Courts. One view is that for Act to be applicable to an establishment total number of employee should be 20 or more (now it is 10 or more) irrespective of the fact whether all the employees fall within the definition of 'employee' as given in Section 2(9) meaning thereby that drawing of any amount of wages is immaterial. Other view is that these 20 or more persons should be those who fall within the definition of 'employee' as given in Section 2 (9) of the Act getting wages as prescribed therein. As to what 'wages' means has also been defined. Second view commends to us. It was submitted that if there are 18 employees drawing the amount of wages prescribed and only two or more are drawing more than that, the Act should be applicable as in any case this is beneficial legislation. Reliance has been placed on a Division Bench decision of the Andhra Pradesh High Court in Andhra Pradesh State Electricity Board, Nellore v. Employees' State Insurance Corporation, Hyderabad, 1997 Lab IC 1107 where the High Court said that the expression 'wages' used under Section 2(12) must be understood in wider sense as meaning any remuneration paid to any person who is employed in the factory and cannot be restricted only to remuneration paid to the employees, who come within the definition of Section 2(9). Section 2(12), no doubt, uses the words "persons are employed or were employed for wages". Stress was, therefore, on the word 'persons' and it is submitted that for the Act to be applicable only criteria is to see if the establishment has 20 or more persons in its employment. This interpretation ignores the fact of wages as defined in Section 2(22). If we refer to the definition of 'factory' when the Act came into force or at least till 1968 when the Act was amended by amending Act 44 of 1966, 'factory' meant any premises "wherein 20 or more persons are working". This definition of 'factory' was changed and at the relevant time it was substituted by the words "employed for wages". The exact amendment we have already noticed above. When the word 'wages' is specifically introduced in the Section it can only mean to have reference to what 'wages' mean in Section 2(22) of the Act. It cannot be given any other meaning as has been done by the Andhra Pradesh High Court. In our view, therefore, the Act would apply to an establishment only when number of employees is 20 or more and all those employees answer the description of employee contained in Section 2(9) of the Act. To controvert the argument that even though majority of the persons employed are 'employees' and their number is less than 20 they should not be deprived of the benefit under the Act, it was submitted that what will happen when the 'employees' falling within the definition of Section 2(9) of the Act are only 2 or 3 though the total strength in the establishment is more than 20. How can it be said in that case that the Act should nevertheless apply to such an establishment? The answer is obviously in negative that Act cannot apply.;