BOEHRINGER KNOLL LTD. Vs. EMPLOYEES' STATE INSURANCE CORPORATION

JUDGEMENT

(1.) IN this appeal filed by M/s. Boehringer Knoll Ltd., which is a company registered under the Indian Companies Act, an important question, which has boon raised is whether persons employed in the head office and branch offices of the company and the medical representatives are covered under the Employees' State Insurance Act, 1948, hereinafter referred to as the Act, -a question on which there is some divergence of judicial opinion in some of the High Courts in the country. The company admittedly owns a factory situate at Kolshet Road, Thana where pharmaceutical products are manufactured and about four hundred persons are employed for that purpose. There is No. dispute that the employees working in the factory are covered by the Act and the company has been paying the necessary contribution required under the provisions of the Act. The head office of the company is situate at Bombay and it has branch offices at Madras, Delhi, Lucknow and Calcutta, where these branch office have been duly registered as establishments under the respective statutes dealing with the registration of shops and establishments, The dispute which gave rise to the application made by the company before the Employees' Insurance Court at Bombay arose out of the demands made by the Employees' State Insurance Corporation, hereinafter referred to as the Corporation, demanding contributions in respect of the employees employed in the head office, the branch offices, the medical representatives in the employment of the company and certain apprentices, who are being paid stipends by the company. According to the Corporation as sum, of Rs. 45,856.55P. was due from the company on account of the employers' contribution and Rs. 30,284.15P. on account of the employees' contribution for the period from April I, 1968 to July 81, 1970. This demand was resisted by the company on the ground that the head; office and the branch offices were not covered under the Act, inasmuch as no notification of contemplated by Section 1(5) of the Act had been issued by any Government and the provisions of Section 38 of the Act would be applicable only in respect of the employees employed in the factory. According to the company the definition of 'employee' given in Section 2(9) of the Act by itself would not fasten any liability on the company to pay any contribution in respect of the employees at the head office or at the branch offices, which are distinct units from the factory. With regard to the claim for the contribution in respect of the medical representatives, the case of the company was that the main duties of the medical representatives were to canvass and propagate the company's products and for that purpose they visit doctors, chemists and stockists and that the medical representatives were not engaged either for sale or distribution of the company's products and were, therefore, not employees as defined in Section 2(9) of the Act. In the matter of demand for contributions in respect of the stipends paid to the trainee medical representatives the case of the company was that the stipends wore not wages and the company was, therefore, not liable. According to the Corporation the head office was concerned with the work of formulating a plan regarding production, distribution, sales promotion, maintenance of accounts etc. and the said work was incidental to, or preliminary to or connected with the work of the factory. Similarly the branch offices, whore the products of the company were stored, wore controlled by the head office and the expenses of the factory were borne by the head office land therefore, the head office, the branch offices and the factory were inter -dependent and inter -connected. It appears that the basis of the contributions claimed was the amended definition of 'employee' in Section 2(9) of the Act, which became operative on January 28, 1968. This dispute between the Corporation and the company came to be decided by the Employees' State Insurance Court at Bombay under Section 75 of the Act. The company led oral evidence of two witnesses; one was Surendra Pandharinath Parulkar, Special Assistant to the Managing Director of the, company and the other was Sheshadrinathan, who was working as Chief Accountant of the company since 1959. On oral evidence the trial Court found that the company had a propaganda department, sales department and export and import department in the had office and some raw material which was not available in India was imported by the head office. With regard to the arrangement for selling the product manufactured at the factory, it was found that there was an agreement with Rallies India Limited. who were described as sole selling agents. It was found that the branch offices controlled the medical representatives. On the evidence of the Chief Accountant it is found that, the account' books of the factory were written in the head office, where the accounts wore finally consolidated and there was also a sales department in the head office whose duty was to undertake propaganda in respect of the goods manufactured by the factory. The planning department, statistical department, finance department and marketing department in the head office wore found to be doing the -work of the factory and the finance department was found to be making payments to the factory workers. On the evidence of the two witnesses the trial Court positively came to the conclusion that the parsons working in the head office were doing the Work regarding the purchase of raw material or the distribution or sale of the products manufactured in, the factory. In view of this evidence the trial Court took the view that the person employed in the head Office were employees as defined in the Act. Even with regard to the medical representatives the trial Court found that their work was connected with the sale of products of the factory and since the medical representatives were controlled by the branch offices, the persons employed in the branch offices were in fact controlling the work with regard to the sale of the products of the factory. Having taken this view the trial Court came to the conclusion that the parsons employed in the head office and the branch offices of the company were amenable to the provisions of the Act. The trial Court took the same view with regard to the medical representatives because they wore found to be connected with the sale of the products of the factory, provided the wages paid to the medical representatives did not exceed Rs. 500 or after the amendment of the definition of 'employee1 in Clause (9) of Section 2 of the Act the wages did not exceed Rs. 1,000. The trial Court, however, found in favour of the company that the stipends paid to the trainee medical representatives were not 'wages' and such trainee medical representatives were, therefore; not employees and the Corporation will not be entitled to make any claim for the contribution in respect of the trainee medical representatives. On proper computation of the employers' and the employees' contributions the trial Court found that Rs. 35,590 and Rs. 23,601,65P, would have to be paid by, the company as employers' and employees contributions respectively. In respect of the overtime payments the liability of the company was determined at Rs. 7,061 and Rs. 4,762.10P. as employers' and employees' contributions respectively. Similarly in respect of the casual workers the liability was determined at Rs. 812 and Rs. 604.10P. Being aggrieved by this decision of the trial Court the company has now filed this appeal under Section 82 of the Act.

(2.) MR . Bhatkal appearing on behalf of the appellant -company has strenuously contended that in spite of the amendment in the definition of 'employee' in Section 2(9) of the Act the persons employed at the head office and the branch offices would not be employees for the purposes of Section 38 of the Act, which was a charging section according to him. The learned Counsel contended that the head office and the branch offices of the company were 'establishments' and inasmuch as no notification has been issued by any Government as required under Section 1(5) of the Act, the provisions of the Act would not be applicable to the establishments and the applicability must be restricted merely to the factories, to which the provisions of the Act became applicable by force of Section 1(4) of the Act and consequently according to the learned Counsel it is only the factory owned by the company in respect of which the demands for employers' and employees' contributions could validly be made by the Corporation. To quote the argument of the learned Counsel himself 'although the employment of the persons in the factory is insurable employment by reason of Section 1(4) read with Section 2(9), 2(12) and 38 of the Act, the employment of the persons working in the head office and the branch offices in the absence of the notification under Section 1(5) of the Act is not insurable employment and in any case the employment of the medical representatives is not insurable employment at all as they are not engaged in connection with the sale or distribution of the products manufactured in the factory'. The learned Counsel placed heavy reliance on the two decisions, which undoubtedly support the claim of the company. The first one is the decision of the Calcutta High Court in Andrew Yule and Co. v. E.S.I. Corporation (1973) 29 F.L.R. 275; and the second one is the decision of the Madras High Court in Mettur Beardsell Ltd. v. E.S.I. Corporation [1974] I L.L.J. 39

(3.) NOW the question, which falls for decision in the present appeal is whether having regard to the fact and the finding is not challenged before us -'that the employees who were working in the head office dealt with the propaganda in respect of the goods manufactured by the factory and from where the payments were made even to the employees of the factory and where the accounts were consolidated, can be said to have been employed on work connected with the administration of the factory or any part, department or branch thereof or with the purchase of raw materials or for distribution or sale of the products of the factory as contemplated by the amendment newly introduced in the definition of 'employee'. The amendment which was made in the definition of 'employee' has used words of widest possible amplitude and if the work in respect of which a person is employed has some nexus with the activity referred to in the definition, it is difficult to see why such an employee will not fall within the inclusive part of the definition of 'employee'. The test which the Parliament has introduced in Section 2(9) of the Act by covering the original definition of 'employee' which was an exclusive definition into an inclusive definition has to be found in the newly added portion.