ESI Corpn. vs Endocrinology & Immunology Lab

REPORTABLE

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.3368 OF 2012

E.S.I. CORPORATION, REP. BY THE REGIONAL DIRECTOR … Appellant(s)

VERSUS

M/s. ENDOCRINOLOGY AND IMMUNOLOGY LAB … Respondent(s)

JUDGMENT

Rajesh Bindal, J.

1. Order dated 21.08.2008 passed by the High Court of

Kerala has been challenged by the Corporation 1 by which the

appeal2 filed by the respondent was allowed. It was held that

the provisions of the Act3 will be applicable to the respondent

establishment w.e.f. 06.09.2007 and not from 22.11.20024.

1 The Employees State Insurance Corporation

2 Ins. App. No.4 of 2008(A)

3 The Employees’ State Insurance Act, 1948 (hereinafter ‘the Act’)

4 Wrongly typed in the impugned order as 24.11.2002

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2. Briefly stated, as per the facts available on record,

the respondent establishment is a pathological laboratory.

Inspection of the premises of the respondent was carried out by

the Inspector on 01.04.1999. Having found that there were 19

employees working in the establishment, a show cause notice

was issued to the respondent. The respondent establishment

challenged coverage of the establishment by filing an

application under Sections 75 and 77 of the Act before the

Employees’ Insurance Court. The Court vide order dated

19.04.2007, passed in I.C. No.13/2003 declared that the

establishment of the respondent is a ‘shop’ as per Section 1(5)

of the Act and the provisions of the Act would extend to the

respondent w.e.f. 22.11.2002. A review application 5 filed by the

respondent before the E.S.I. Court, was dismissed vide order

dated 21.12.2007. The orders of the E.S.I. Court were

challenged by the respondent by filing an appeal before the

High Court which was allowed vide impugned order.

3. Learned counsel for the appellant submitted that the

order passed by the High Court is not in conformity with the law

as the respondent establishment will be covered under the

provisions of the Act in terms of the notification dated 5 M.P. No.159/2007 Page 2 of 12 CIVIL APPEAL NO.3368 OF 2012

27.05.1976 issued by the Government of Kerala in exercise of

the powers conferred under the Act. In terms of the aforesaid

notification, if 10 or more persons are employed in an

establishment on any day in the preceding 12 months which

included a “shop”, it will be covered under the provisions of the

Act. The respondent establishment being a shop, was clearly

covered. After inspection, a notice was issued to the

respondent for coverage w.e.f. 01.04.1999. However, in view of

the Circular dated 22.11.2002, issued by the Corporation for

the coverage of pathological laboratories and diagnostic

centres, the establishment was covered from 22.11.2002. It is

stated that the findings of the High Court that the respondent

establishment shall be covered under the Act w.e.f. 06.09.2007,

is erroneous.

4. On the other hand, learned counsel for the

respondent submitted that there is no error in the order passed

by the High Court. Notification dated 27.05.1976, issued by the

Government of Kerala, does not cover the establishment of the

kind that the respondent has, which is pathological laboratory.

By no stretch of imagination can it be termed as a shop, where

merely buying and selling activities take place, and not the kind

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of work executed by experts engaged by the respondent. In

fact, medical institutions which included nursing homes,

diagnostic centres and pathological laboratories employing 20

or more persons were brought under the ambit of the Act vide

notification6 issued by the Government of Kerala. The order

passed by the High Court is in line with the said notification.

Hence, the present appeal deserves to be dismissed.

5. We have heard learned counsel for the parties and

perused the material placed on the record.

6. The short question which requires consideration by

this Court is, the date from which the respondent

establishment, which is undisputedly carrying on the business

of a pathological laboratory, will be covered under the Act.

7. (i) Section 1(4) of the Act provides that the Act

shall apply to all factories (including factories belonging

to the Government) other than seasonal factories.

Proviso to the aforesaid section provides that this sub-

section does not apply to the factory or establishment

belonging to or under the control of the Government

whose employees are otherwise in receipt of benefits

6 Dated 06.09.2007

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substantially similar or superior to the benefits provided

for under the Act.

(ii) Section 1(5) of the Act provides that the

appropriate Government may, in consultation with the

Corporation and where the appropriate Government is

a State Government, with the approval of the Central

Government, can extend the provisions of the Act by

issuing a notification in the official gazette, to any other

establishment or class of establishments.

(iii) The term “factory” has been defined under

Section 2(12) of the Act. The same as existed at the

relevant time, included any premises and part thereof

in which manufacturing process is being carried on with

or without the aid of power. The only difference being

that the number of persons required to be working in

the establishment with the aid of power was 10 or more

whereas in cases without the aid power, the number

required was 20 or more. It did not include a mine

subject to the operation of the Mines Act, 1952 or a

railway running shed.

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(iv) The term “manufacturing process” has been

defined in Section 14 (AA) of the Act to give it a

meaning as assigned to it in the Factories Act, 1948.

The same is defined under Section 2(k) of the Factories

Act, 1948 which is reproduced herein below:

“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 or other similar process or book binding; or

(v) constructing, reconstructing, repairing, refitting, finishing or breaking up ships or vessels; or

(vi) preserving or storing any article in cold storage; ”

8. On a perusal of the aforesaid provisions in the Act, it

can safely be concluded that the establishment of the

respondent will not be covered under the provisions of Section

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1(4) of the Act as it will not fall within the definition of a

“factory”, since no manufacturing process is carried on therein.

It is not even the case of the appellant. The respondent

establishment is merely a pathological laboratory.

9. The stand taken by the appellant is that the

respondent establishment will be covered in view of the

notification dated 27.05.1976 issued by the Government of

Kerala, the relevant part whereof is extracted below:

“GOVERNMENT OF KERALA LABOUR (E) DEPARTMENT NOTIFICATION 16141/E2/75/LBR Dated, Trivandaram 27th May 1976

S R O No.559/76 – In exercise of the powers conferred

1948 (Central Act 34 of 1948), the Government of

Kerala having already given six months’ notice as

required thereunder. The government of Kerala

Notification No.16141/E2/75/LBR dated 5.11.1975

published as SRO BNO.1070/75 in the State Gazette

dated 18.11.1975 hereby appoints the midnight of 29 th

shall extend to the classes of establishment and in

areas as specified in the schedule annexed hereto:-

SCHEDULE

Description of Area in which the establishment establishments are

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situated 1 2 xxx xxx The following Whole of the State of establishments 10 or more Kerala where the benefit persons are employed or provisions of Chapter IV, where employed for any V and VI of the Act have day of preceding 12 already been brought months namely: into force by the Central Hotels Government under Restaurants Section(3) of the Shops Employees State Road Motor Transport Insurance Act, 1948 Establishment (Central Act 34 of 1948) Cinema including preview except the areas where Theaters the scheme has already Newspaper establishment been extended with as defined in Section 2(d) effect from the midnight of the Working Journalists of 29th March 1975 vide (Conditions of Service notification and Miscellaneous No.22877/E2/73LBR Provisions) Act, 1955 (45 dated 22.03.1975 of 1955) published in the Kerala Gazette dated 25th March 1975 as SRO No.288/75

10. The argument raised by the appellant is that the

respondent establishment would fall within the term “shop” and

the same is sought to be covered in terms of the aforesaid

notification.

11. A notice was issued to the respondent establishment

on 27.04.2001, directing production of certain records. The

same was replied to. Though it is claimed that the respondent

establishment would be covered under the provisions of the Act

in terms of the Notification dated 27.05.1976, however, before

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the E.S.I. Court, reliance was placed on a letter issued by the

Corporation on 22.11.2002 through which an earlier Memo

dated 06.01.1989, was modified. In terms of the aforesaid

Memo letter, pathological laboratories and diagnostics centres

were not covered under the definition of “shop”. It was not

disputed that a “shop” as such is not defined under the Act. At

the time of hearing, reliance was also placed on the Notification

dated 06.09.2007, issued by the Government of Kerala bringing

certain establishments under the ambit of the Act.

12. It is not a matter of dispute that such a notification is

issued in terms of the power conferred under Section 1(5) of

the Act in consultation with the Corporation and with the

approval of the Central Government. In terms of the aforesaid

notification, medical institutions including diagnostic and

pathological laboratories, where 20 or more persons were

employed, were covered. The relevant part of the said

notification is extracted below:

“GOVERNMENT OF KERALA LABOUR & REHABILITATION (F) DEPARTMENT NOTIFICATION G.O. (P) NO/116/2007/LBR Dated, Thiruvanthapuram 6TH September 2007

Page 9 of 12 CIVIL APPEAL NO.3368 OF 2012

S R O No.749/2007 – In exercise of the power conferred by sub-section (5) of Section 1 of the Employees’ State Insurance Act 1948 (Central Act 34 of 1948), the Government of Kerala in consultation with the Employees’ State Insurance Corporation and with the approval of the Central Government and after having given six months’ notice of its intention to do hereby extend the provisions of the said Act to the classes of establishments specified in Column (1) of the Schedule annexed hereto and situated in the areas specified in column (2) thereof with immediate effect

SCHEDULE Description of Areas in which the establishment establishments are situated Medical institution Areas where the scheme (including corporate, has already been joint sector, trust, brought into force under charitable, and private sub-section (2) and (5) ownership hospitals, of Section 1 of the Act nursing homes, diagnostic centre, pathological laboratories wherein 20 or more persons are employed or were employed on any day of the preceding twelve months

13. A perusal of the aforesaid notification shows that

pathological laboratories were specifically covered under the

provisions of the Act in terms of the aforesaid notification. In

the case at hand, the respondent is running pathological

laboratory and would be covered under the Act in terms of the

Page 10 of 12 CIVIL APPEAL NO.3368 OF 2012

Notification dated 06.09.2007, issued by the Government of

Kerala. The order passed by the High Court is in terms of the

aforesaid notification directing coverage of the respondent

establishment from that date onwards, as undisputedly, 20 or

more persons were found to be employed in the establishment.

14. The argument raised by the appellant that the

respondent establishment should be deemed to be covered in

terms of the Notification issued on 27.05.1976 read with the

Circular dated 22.11.2002 issued by the Corporation, is merely

to be noticed and rejected. It is admittedly the case of the

Corporation itself that the term “shop” as such has not been

defined under the Act. It was sought to be assigned a meaning

as per the understanding of the “Corporation”. Clause 23 of the

aforesaid letter shows that even as per the earlier Memo dated

06.01.1989, pathological laboratories were not covered as

shops under Section 1(5) of the Act. The aforesaid Memo letter

was subsequently modified vide Memo letter dated 22.11.2002.

15. Further, fact remains that there is a Notification

issued on 06.09.2007 by the Government of Kerala covering

medical institutions including pathological laboratories from

that date. The aforesaid Notification was issued in consultation

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with the Corporation and with the approval of the Central

Government. If the pathological laboratories were already

covered under the Act, as is sought to be urged by the

Corporation, there was no occasion to issue such a notification.

This fact clearly establishes that even as per the understanding

of the Corporation, pathological laboratories were not covered

under the Act prior to that date.

16. For the aforesaid reasons, we do not find any merit in

this appeal. The same is hereby dismissed. There shall be no

orders as to costs.

…………………, J.

(Hima Kohli)

……………….., J.

(Rajesh Bindal) New Delhi August 02, 2023.

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