Employee; Regional Director, E. S. I. Corporation Vs. Thankamma Baby [Kerala High Court, 03-06-2016]

Employees State Insurance Act –¬†Sections 2 (9), 2 (22) & 82(2) –¬†Insurance Court – Assembling work of umbrellas outside the factory premises – will come within the purview of ’employee’ – ‘wages’ – Held, when the definition of ’employee’ in Section 2(9) of the ESI Act has been cast deliberately in the widest terms in order to cover every possibility so as not to exclude even distant categories of men employed either in the primary work or cognate activities, the burden is heavily on the shoulders of the respondent establishments to prove with cogent and convincing materials that, the workers employed by the contractors or home workers engaged to carry out the assembling works of umbrellas fall outside the purview of ’employees’ as defined under Section 2(9) of the ESI Act, and that, the payments made to them cannot be treated as ‘wages’ as defined under Section 2(22) of the said Act.

# Work outside Factory


IN THE HIGH COURT OF KERALAAT ERNAKULAM

P.R.RAMACHANDRA MENON & ANIL K.NARENDRAN, JJ.

Insurance Appeal Nos.63 & 64 of 2009

DATED THIS THE 3rd DAY OF JUNE, 2016

AGAINST THE JUDGMENT IN IC 35/2006 of EMPLOYEES INSURANCE COURT, ALAPPUZHA DATED 29-06-2009

APPELLANT/RESPONDENT

THE REGIONAL DIRECTOR, E.S.I.CORPORATION, PANCHADEEP BHAVAN, THRISSUR – 20.

BY ADV. SRI.THOMAS MATHEW NELLIMOOTTIL

RESPONDENT/APPLICANT

THANKAMMA BABY, PROPRIETRIX, M/S.POPY UMBRELLA MART, C.C.N.B. ROAD, IRON BRIDGE P.O., ALAPPUZHA – 11.

BY ADV. SRI.JOSEPH KODIANTHARA ADV. SRI.MATHEWS K.UTHUPPACHAN

JUDGMENT

ANIL K.NARENDRAN, J.

Insurance Appeal No.63 of 2009 arises out of the judgment of the Employees Insurance Court, Alappuzha dated 29.6.2009 in I.C.No.35 of 2006 and Insurance Appeal No.64 of 2009 arises out of another judgment of the said court dated 29.6.2009 in I.C.No.25 of 2004. In both the appeals filed on behalf the Employees State Insurance Corporation (hereinafter referred to as ‘the appellant Corporation’) under

# Section 82(2) of the Employees State Insurance Act

(hereinafter referred to as ‘the ESI Act’) common questions of law are raised, which read thus;

“A. Whether the Insurance Court was justified in declaring that the persons doing assembling work of umbrellas outside the factory premises will not come within the purview of ’employee’ as defined in Section 2(9) of the ESI Act?

B. Whether the Insurance Court was justified in declaring that the wages paid to the persons doing assembling work of umbrellas outside the factory premises do not constitute ‘wages’ as defined under Section 2(22) of the ESI Act?

C. Whether the principal employer is liable to pay contribution in respect of the employees employed through the immediate employer for the purpose of assembling work of umbrellas outside the factory premises?”

2. Since the factual matrix and substantial questions of law in both the appeals are identical, we deem it appropriate to deal with both the cases in this common judgment.

2.1. We heard arguments of the learned Standing Counsel for the appellant and also the learned counsel for the respondent in both the appeals.

3. The factual matrix in Insurance Appeal No.63 of 2009 is as follows;

3.1. The respondent in this appeal, namely, the Proprietrix of M/s.Popy Umbrella Mart, Alappuzha is the applicant in I.C.No.35 of 2006 on the file of the Employees Insurance Court, Alappuzha, an application filed under Section 75 read with Section 77 of the ESI Act, seeking for a declaration that assembling charges paid to outside parties do not constitute wages as per Section 2(22) of the Act and hence the assessment and demand of 8,22,318/- towards ESI contribution on assembling charges assessed as per Ext.A3 order dated 20.10.2005 issued under Section 45A of the Act is unsustainable.

3.2. M/s.Popy Umbrella Mart is an establishment covered under the ESI Act, engaged in the business of assembling umbrellas and its sale. The assembling work of umbrellas is being done through outside agencies and home workers. They do the work at their own places, with the help of their family members and neighbours. The establishment has no manner of control or supervision over them. Further, no assembling work of umbrellas is done within the premises of the establishment. The outside agencies/home workers used to collect the materials from the establishment and after assembling the umbrellas, they return it to the establishment and collect the assembling charges and disburse it to their people. Therefore, the persons who are doing assembling work of umbrellas outside the factory premise will not come within the purview of ’employee’ as defined in Section 2(9) of the ESI Act and that, the wages paid to persons doing assembling work of umbrellas outside the factory premises do not constitute ‘wages’ as defined under Section 2(22) of the ESI Act. Despite this, the appellant Corporation assessed and demanded contribution as per Ext.A3 order dated 20.10.2005. Being aggrieved, the respondent/applicant has approached the court below seeking appropriate reliefs.

3.3. Before the court below, the appellant Corporation contended that, the Insurance Inspector, who conducted an inspection in the establishment on 16.12.2004 and verified the records for the period from 4/2000 to 11/2004, reported that the establishment has paid an amount of 1,70,73,186/- as assembling charges for which no contribution was paid to the appellant Corporation. On the basis of the said report, the contribution due on the above expenditure amounting to 11,09,758/- was proposed as per Ext.A1 notice dated 29.1.2005, issued in Form No.C-18, along with contribution on other heads of omitted wages amounting to 15,397/-. The respondent/applicant was afforded with an opportunity of personal hearing, on 23.2.2005. However, she neither responded to Ext.A1 notice nor availed the opportunity of personal hearing. Instead, she remitted15,397/- on 12.1.2005, towards contribution due on other heads of wages. As there was no payment of contribution in respect of assembling charges, contribution was computed treating 75% of 1,70,73,186/- reported as omitted wages by the Insurance Inspector as wages and assessed 8,32,312/- as contribution on assembling charges for the period from 2000-01 to 2003-04, by passing Ext.A3 order dated 20.10.2005. In the said order, out of the reported amount of 1,70,73,186/-, 25% was treated as the profit of the contractor. Therefore, the appellant Corporation contended that, the assessment and demand made in Ext.A3 is legal and proper.

3.4. Regarding the contention that, as the assembling work of umbrellas is being done outside the premises of the establishment, the persons employed by the contractors will not come within the purview of ’employee’ as defined in Section 2(9) of the ESI Act, it was contended by the appellant Corporation that, even if the work is not done in the premises of the establishment, the respondent/applicant exercises the liberty to reject the products which are not upto their specifications. The right to reject the end products indicates that there is supervision and control by the respondent and as such the assessment and demand is perfectly legal and proper.

3.5. Before the court below, the Power of Attorney holder of the Proprietrix of the establishment was examined as PW1 and Exts.A1 to A11 were marked on her side. On the side of the appellant Corporation, the concerned Insurance Inspector was examined as DW1 and Exts.D1 and D2 were marked.

3.6. After considering the pleadings and materials on record, the court below arrived at a conclusion that, the assembling charges paid to outside agencies are payments made to those agencies who carry out assembling work in their premises. There is no supervision and control of the respondent/applicant or her agents when the assembling works are carried on at the premises of the outside agencies. The court below, by accepting the contention of the respondent/applicant that the mere right to reject the end product is not sufficient to conclude that there is supervision, held that the persons employed by the outside agencies to carry out the assembling works of umbrellas cannot be treated as ’employees’ as per Section 2(9) of the ESI Act and consequently, the payments made to them cannot be treated as ‘wages’ as per Section 2(22) of the said Act. In order to arrive at such a conclusion, the court below relied on the judgment of the Apex Court in

# Calcutta Electrical Company Ltd. v. E.S.I. Corporation, (1992) 1 SCC 441

Accordingly, the court below set aside the assessment and demand for contribution based on Ext.A3 order dated 20.10.2005.

4. The factual matrix in Insurance Appeal No.64 of 2009 is as follows;

4.1. The respondent in this appeal, namely, the Proprietor of M/s.John’s Umbrella, Alappuzha is the applicant in I.C.No.25 of 2004 on the file of the Employees Insurance Court, Alappuzha, an application filed under Section 75 read with Section 77 of the ESI Act, seeking for a declaration that the assessment and demand of 2,70,728/- towards contribution on omitted wages in respect of assembling charges relating to the period 2000-01 and 2001-02 assessed as per Ext.P2 order dated 28.7.2008 issued under Section 45A of the ESI Act is unsustainable.

4.2. M/s.John’s Umbrella is an establishment covered under the ESI Act, engaged in the business of assembling of umbrellas and its sale through their own shop and number of independent dealers. The work of assembling of umbrellas is being done through outside persons known as home workers engaged through contractors. They do the work at their own places, with the help of their family members, neighbours or any other persons engaged by them. The establishment has no manner of control or supervision over the work done by them in their premises. No such work is done within the premises of the establishment. There is no employer-employee relationship between the establishment and the home workers. Therefore, the persons doing assembling work will not come within the purview of ’employee’ as defined in Section 2(9) of the ESI Act and the wages paid to them do not constitute ‘wages’ as defined under Section 2(22) of the ESI Act. The position was accepted by the appellant Corporation for the period prior to 2000-01 and no contribution was collected in respect of assembling charges. Despite the above, the appellant Corporation assessed and demanded contribution on assembling charges as per Ext.P2 order dated 28.7.2008. Being aggrieved, the respondent/ applicant has approached the court below seeking appropriate reliefs.

4.3. Before the court below, the appellant Corporation contended that, the Insurance Inspector attached to the Corporation, who conducted inspection in the establishment on 9.7.2002 and verified the records, reported that the establishment has not paid contribution on the payments booked under the head assembling charges during the period 2000-01 and 2001-02 and the contribution towards the same was worked out to 2,70,728/-. Based on the said inspection report, Ext.P1 notice dated 23.9.2002 was issued in Form No.C-18 proposing to assess contribution on assembling charges. The respondent/ applicant was afforded with an opportunity of personal hearing on 27.10.2002. As requested by the applicant, the hearing was adjourned to 29.11.2002. During the personal hearing held on 29.11.2002, the representative of the respondent/applicant submitted that, major part of the amount spent under the head assembling charges are payments made to home workers who worked at their residence and the establishment has no supervision or control over them. Since no records in this regard were produced, the assessment was concluded as proposed and Ext.P2 order was issued demanding 2,70,278/- as contribution.

4.4. Regarding the contention that, as the assembling work of umbrellas is being done outside the premises of the establishment, the persons employed by the contractors will not come within the purview of ’employee’ as defined in Section 2(9) of the ESI Act, it was contended by the appellant Corporation that, even if the work is not done in the premises of the establishment, the respondent/applicant exercises the right to check the finished products and to get it rectified if it is not upto their specifications. The right to reject the end products indicates that there is supervision and control by the respondent and as such the assessment and demand is perfectly legal and proper.

4.5. Before the court below, the proprietor of the establishment was examined as PW1 and Exts.P1 to P18 were Ins. marked on his side. On the side of the appellant Corporation, the concerned Insurance Inspector was examined as DW1 and Exts.D1 to D6 series were marked.

4.6. After considering the pleadings and materials on record, the court below arrived at a conclusion that, the establishment gets the assembling work of umbrellas done through home workers or independent contractors and the charges paid in this regard are booked under the head assembling charges. There is no control or supervision of the respondent/applicant or his agents when the assembling works are carried on at the premises of the home workers or contractors. The court below, by accepting the contention of the respondent/applicant that the mere right to reject the end product is not sufficient to conclude that there is supervision, held that the persons employed by the outside agencies to carry out the assembling works of umbrellas cannot be treated as ’employees’ as per Section 2(9) of the ESI Act and consequently, the payments made to them cannot be treated as ‘wages’ as per Section 2(22) of the said Act. In order to arrive at such a conclusion, the court below relied on the judgment of the Apex Court in Calcutta Electrical Company’s case (supra). Accordingly, the court below set aside the assessment and demand for contribution based on Ext.P2 order dated 28.7.2008.

5. The ESI Act was enacted to provide for certain benefits to the employees in case of sickness, maternity and employment injury and to make provision for certain other matters in relation thereto. Section 2(9) of the ESI Act defines the term ’employee’, Section 2(13) defines the terms ‘immediate employer’; Section 2 (17) defines the term ‘principal employer’; and Section 2(22) defines the term ‘wages’. Sections 2(9), 2(13), 2(17) and 2(22) of the ESI Act read thus;

# 2. Definitions

In this Act, unless there is anything repugnant in the subject or context,-

xxx xxx xxx

(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 of 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 such wages as may be prescribed by the Central Government a month:

Provided that an employee whose wages (excluding remuneration for overtime work) exceed such wages as may be prescribed by the Central Government 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;

xxx xxx xxx

(13) ‘immediate employer’, in relation to employees employed by or through him, means a person who has undertaken the execution, on the premises of a factory or an establishment to which this Act applies or under the supervision of the principal employer or his agent, of the whole or any part of any work which is ordinarily part of the work of the factory or establishment of the principal employer or is preliminary to the work carried on in, or incidental to the purpose of, any such factory or establishment, and includes a person by whom the services of an employee who has entered into a contract of service with him are temporarily lent or let on hire to the principal employer and includes a contractor;

xxx xxx xxx

(17) principal employer’ means-

(i) in a factory, the owner or occupier of the factory and includes the managing agent of such owner or occupier, the legal representative of a deceased owner or occupier, and where a person has been named as the manager of the factory under the Factories Act, 1948 (63 of 1948), the person so named;

(ii) in any establishment under the control of any department of any Government in India, the authority appointed by such Government in this behalf or where no authority is so appointed, the head of the Department;

(iii) in any other establishment, any person responsible for the supervision and control of the establishment;

xxx xxx xxx

(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 layoff 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;”

6. Under the first part of Section 2(9) of the ESI Act, any person employed for wages in or in connection with the work of a factory or establishment to which ESI Act applies, 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, will be an ’employee’. Under the second part of that Section, any person employed for wages in or in connection with the work of a factory or establishment to which the ESI Act applies, 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 will also be an ’employee’.

7. In

# Royal Talkies v. ESI Corporation, (1978) 4 SCC 204

the Apex Court, after extensively analysing the provisions of Section 2(9) of the ESI Act, held that when, as in Section 2(9), the definition has been cast deliberately in the widest terms and the draftsman has endeavoured to cover every possibility so as not to exclude even distant categories of men employed either in the primary work or cognate activities, it will defeat the object of the statute to truncate its semantic sweep and throw out of its ambit those who obviously are within the benign contemplation of the Act. Salvationary effort, when the welfare of the weaker sections of society is the statutory object and is faced with stultifying effect, is permissible judicial exercise. The Apex Court held further that, the whole goal of the statute is to make the principal employer primarily liable for the insurance of kindred kinds of employees on the premises, whether they are there in the work or are merely in connection with the work of the establishment.

7.1. In Royal Talkies’ case (supra) the Apex Court held that, Section 2(9) of the ESI Act contains two substantive parts. Unless the person employed qualifies under both he is not an ’employee’. Firstly, he must be employed ‘in or in connection with’ the work of an establishment. The expression ‘in connection with the work of an establishment’ ropes in a wide variety of workmen who may not be employed in the establishment but may be engaged only in connection with the work of the establishment. Some nexus must exist between the establishment and the work of the employee but it may be a loose connection. ‘In connection with the work of an establishment’ only postulates some connection between what the employee does and the work of the establishment. He may not do anything directly for the establishment; he may not do anything statutorily obligatory in the establishment; he may not even do anything, which is primary or necessary for the survival or smooth running of the establishment or integral to the adventure. It is enough if the employee does some work which is ancillary, incidental or has relevance to or link with the object of the establishment. Merely being employed in connection with the work of an establishment, in itself, does not entitle a person to be an ’employee’. He must not only be employed in connection with the work of the establishment but also be shown to be employed in one or other of the three categories mentioned in Section 2(9) of the ESI Act.

7.2. In Royal Talkies’ case (supra), the Apex Court held further that, Section 2(9)(i) of the ESI Act covers only employees who are directly employed by the principal employer. Even here, there are expressions which take in a wider group of employees than traditionally so regarded, but it is imperative that any employee who is not directly employed by the principal employer cannot be eligible under Section 2(9)(i). The language used in Section 2(9)(ii) of the Act is extensive and diffusive imaginatively embracing all possible alternatives of employment by or through an independent employer. In such cases, the ‘principal employer’ has no direct employment relationship since the ‘immediate employer’ of the employee concerned is some one else. Even so, such an employee, if he works (a) on the premises of the establishment, or (b) under the supervision of the principal employer or his agent ‘on work which is ordinarily part of the work of the establishment or which is preliminary to the work carried on in or incidental to the purpose of the establishment’, qualifies under Section 2(9)(ii) of the Act. The plurality of persons engaged in various activities who are brought into the definitional net is wide and considerable; and all that is necessary is that the employee be on the premises or be under the supervision of the principal employer or his agent. Assuming that the last part of Section 2(9)(ii) qualifies both these categories, all that is needed to satisfy that requirement is that the work done by the employee must be (a) such as is ordinarily (not necessarily nor statutorily) part of the work of the establishment, or (b) which is merely preliminary to the work carried on in the establishment, or (c) is just incidental to the purpose of the establishment.

8. In

# Regional Director, ESI Corporation v. Ramlal Textiles, 1990 (1) KLT 548

a Division Bench of this Court has occasion to deal with a case in which the respondent’s factory manufactures Handloom cloth and workers are employed in the factory for that purpose. There was a practice of giving the work of winding and weaving cloth to outsiders who undertake to do the work in their own places. Such persons collect yarn from the factory for winding on weightage basis and return ‘wound yarn’ to the establishment and for that purpose charges are paid to them. Similarly yarn is given to outsiders for weaving. According to the respondent, they are not employed in connection with the work carried on in the factory and there is no employer-employee relationship and it has no right of supervision over these workers. It is a contract for service and they are not employees as defined in the Act. Yarn is supplied by the establishment to master weavers available in the locality and they manufacture and supply cloth to the establishment. These master weavers carry yarn to their own work place, weave cloth either by themselves or by engaging other persons under them and sell manufactured cloth to the establishment. From the price payable for the cloth supplied, value of yarn supplied to the master weaver is deducted and the balance amount is paid to them. The master weavers have their own looms and they engage workers to work in their looms and convert the yarn to cloth. Therefore, it was contended that, the persons engaged by master weavers are not employees of the respondent’s establishment and they are not paid by the respondent. Per contra, it was contended by the ESI Corporation that, this is only a ruse to deny ESI benefits to the employees and absolve the respondent of the liability to pay contribution. After referring to various decision of the Apex Court, the Division Bench held that, the out-workers who are paid wages through contractors are employees as defined in Section 2(9)(ii) of the Act since they do the work which is ordinarily part of the work of the factory of the respondent and which is incidental to the purpose of the factory and which is subject to the supervision of the principal employer. This conclusion cannot be faulted merely because respondent has tried to camouflage the real relationship by creating smoke-screen of sale of yarn and purchase of woven cloth. Para.16 of the judgment reads thus;

“16. The facts disclosed from the evidence and arguments are as follows: Raw materials belong to and are supplied by the respondent. Work is admittedly done by workers engaged by the master-weavers in premises outside the establishment of the respondent. Finished fabrics are returned to the respondent who makes payments. Amounts required to be paid as wages are separately shown in the accounts. It is evident that the master- weavers will retain their commission or remuneration due to them for their investment in time. Right of rejection of substandard cloth spells out effective degree of supervision and control as observed in

# M/s.P.M. Patel & Sons v. Union of India and others, (1986) 1 SCC 32

This principle can be applied where lesser amounts are paid for such cloth. Identical work as is done by outside workers is done in the premises of the factory of the respondent who employs employees for that purpose. Having regard to all these circumstances and the purpose of the statute as explained by the decisions of the Supreme Court in

# Silver Jubilee Tailoring House v. Chief Inspector of Shops and Establishments, AIR 1974 SC 37

and

# B.M. Lakshmanamoorthy v. ESI Corporation, AIR 1974 SC 759

and other decisions which were not taken into consideration by the ESI Court, we are of opinion that the court has committed a substantial error of law in arriving at a decision in favour of the respondent. We hold that the out-workers who are paid wages through contractors are employees as defined in Section 2(9)(ii) of the Act since they do the work which is ordinarily part of the work of the factory of the respondent and which is incidental to the purpose of the factory and which is subject to the supervision of the principal employer. This conclusion cannot be faulted merely because respondent has tried to camouflage the real relationship by creating smoke-screen of sale of yarn and purchase of woven cloth.”

9. In

# Calcutta Electrical Company Ltd. v. ESI Corporation, (1992) 1 SCC 441

a judgment relied on by the court below in the impugned judgment, the question that fell for consideration before the Three-Judge Bench of the Apex Court was, whether on the facts found, the right of the principal employer to reject or accept work on completion, on scrutinizing compliance with job requirements, as accomplished by a contractor, the immediate employer, through his employees, is in itself an effective and meaningful ‘supervision’ as envisaged under Section 2(9) of the ESI Act. The Apex Court held that, in the ordinary dictionary sense ‘to supervise’ means to direct or oversee the performance or operation of an activity and to oversee it, watch over and direct. It is work under eye and gaze of someone who can immediately direct a corrective and tender advice. In the textual sense ‘supervision’ of the principal employer or his agent is on ‘work’ at the places envisaged and the word ‘work’ can neither be construed so broadly to be the final act of acceptance or rejection of work, nor so narrowly so as to be supervision at all times and at each and every step of the work. A harmonious construction alone would help carry out the purpose of the Act, which would mean moderating the two extremes. When the employee is put to work under the eye and gaze of the principal employer, or his agent, where he can be watched secretly, accidentally, or occasionally, while the work is in progress, so as to scrutinise the quality thereof and to detect faults therein, as also put to timely remedial measures by directions given, finally leading to the satisfactory completion and acceptance of the work, that would be supervision for the purposes of Section 2(9) of the Act. It is the consistency of vigil, the proverbial ‘a stich in time saves nine’. The standards of vigil would of course depend on the facts of each case. This function, the principal employer, no doubt can delegate to his agent who in the eye of law is his second self, i.e., a substitute of the principal employer. The majority view explained in Paras.13 and 14 of the judgment reads thus;

“13. In whatever manner the word ’employee’ under Section 2(9) be construed, liberally or restrictedly, the construction cannot go to the extent of ruling out the function and role of the immediate employer or obliterating the distance between the principal employer and the immediate employer. In some situations he is the cut-off. He is the one who stumbles in the way of direct nexus being established, unless statutorily fictioned, between the employee and the principal employer. He is the one who in a given situation is the principal employer to the employee, directly employed under him. If the work by the employee is conducted under the immediate gaze or overseeing of the principal employer, or his agent, subject to others conditions as envisaged being fulfilled, he would be an employee for the purpose of Section 2(9). Thus besides the question afore-posed with regard to supervision of the principal employer the subsidiary question is whether instantly the contractual supervision exercised by the immediate employer (the electrical contractors) over his employee was exercised, on the terms of the contract, towards fulfilling a self obligation or in discharge of duty as an agent of the principal employer.

14. P. M. Patel case (1986 (1) SCC 32) can also be of no help to interpret the word ‘supervision’ herein. The word as such is not found employed in Section 2(f) of the Employees Provident Funds and Miscellaneous Provisions Act, 1952 but found used in the text of the judgment. It appears to have been used as a means to establish connection between the employer and the employees having regard to the nature of work performed. But what has been done in Patel case cannot ipso facto be imported in the instant case since the word ‘supervision’ in the textual context requires independent construction. In the ordinary dictionary sense ‘to supervise’ means to direct or oversee the performance or operation of an activity and to oversee it, watch over and direct. It is work under eye and gaze of someone who can immediately direct a corrective and tender advice. In the textual sense ‘supervision’ of the principal employer or his agent is on ‘work’ at the places envisaged and the word ‘work’ can neither be construed so broadly to be the final act of acceptance or rejection of work, nor so narrowly so as to be supervision at all times and at each and every step of the work. A harmonious construction alone would help carry out the purpose of the Act, which would mean moderating the two extremes. When the employee is put to work under the eye and gaze of the principal employer, or his agent, where he can be watched secretly, accidentally, or occasionally, while the work is in progress, so as to scrutinise the quality thereof and to detect faults therein, as also put to timely remedial measures by directions given, finally leading to the satisfactory completion and acceptance of the work, that would in our view be supervision for the purposes of Section 2(9) of the Act. It is the consistency of vigil, the proverbial ‘a stich in time saves nine’. The standards of vigil would of course depend on the facts of each case. Now this function, the principal employer, no doubt can delegate to his agent who in the eye of law is his second self, i.e., a substitute of the principal employer. The immediate employer, instantly, the electrical contractors, can by statutory compulsion never be the agent of the principal employer. If such a relationship is permitted to be established it would not only obliterate the distinction between the two, but would violate the provisions of the Act as well as the contractual principle that a contractor and a contractee cannot be the same person. The ESIC claims establishment of such agency on the terms of the contract, a relationship, express or implied. But, as is evident, the creation or deduction of such relationship throws one towards the statutory scheme of keeping distinct the concept of the principal and immediate employer, because of diverse and distinct roles. The definition is well drawn in Halsbury’s Laws of England (Hailsham Edition) Vol. 1 at page 193 as follows:

“An agent is to be distinguished on the one hand from a servant, and on the other from an independent contractor. A servant acts under the direct control and supervision of his master and is bound to conform to all reasonable orders given to him in this course of his work; an independent contractor, on the other hand, is entirely independent of any control or interference and merely undertakes to produce a specified result, employing his own means to produce that result. An agent, though bound to exercise his authority in accordance with all lawful instructions which may be given to him from time to time by his principal, is not subject to its exercise to the direct control and supervision of the principal.”

And this statement of law was used with approval by this Court in

# Superintendent of Post Offices v. P.K. Rajama, (1977) 3 SCC 94

9.1. In Calcutta Electrical Company’s case (supra) the Three-Judge Bench of the Apex Court was dealing with a case in which, the Calcutta Electricity Supply Corporation (CESC) engaged various contractors to carry out work of excavation, conversion of overhead electric lines and laying of underground cables under public roads, as well as for repair and maintenance of the aforesaid works. Subhash Chandra Bose and some others, the private respondents therein, were given such contracts, terms and conditions in respect of each were reduced to writing. The CESC was on notice alerted by the Regional Director of the ESI Corporation by means of communication dated 26.8.1975 that the employees whose wages were being paid through such a contractor would fall within the scope of Section 2(9) of the ESI Act and for reasons and details mentioned in the communication. Thereupon the CESC on its part engaged in correspondence with the Association of Electrical Contractors of Eastern India, a representative body of the contractors who are the party respondents, requiring them to comply with the provisions of the said Act immediately or else it will deduct a lump sum of 7% from their bills. After indulging in some correspondence on the subject, the CESC started making deductions from their bills on account of contribution to the ESI Fund on and from 1984 and continued deducting till 1985 at the rate of 10%.

9.2. The electrical contractors then moved the High Court of Calcutta by means of a writ petition under Article 226 of the Constitution so as to have the entire basis of the demand and deductions from bills annulled, contending that, for carrying out their contracts they were not supervised by the CESC, the principal employer, and they were carrying out works allotted to them at sites outside the factory establishment of the CESC and that, their employees did not come within the definition of the term ’employee’ in Section 2(9) of the ESI Act. Before the High Court, the dispute necessarily centred round as to whether the CESC exercised any supervision while the contracts were being executed, and as to whether the terms thereof, assuming that they were faithfully observed, amounted to work being carried out under the supervision and gaze of the CESC.

9.3. The learned Single Judge construed the contracts between the electrical contractors and the CESC, whereunder the contractors were obliged to supervise on their own the work undertaken, so as to hold that in the facts and circumstances of the case the ultimate supervision was that of the ESIC, and hence the Act was applicable. The learned single Judge also took the view that the ESI Act being a beneficial piece of legislation, enacted for the protection and benefit of workers, required liberal interpretation, as was held by the Apex Court in

# Mangalore Ganesh Beedi Works v. Union of India, (1974) 4 SCC 43

and then proceeded to hold that the contractors as supervisors were in the nature of agents of the CESC, the principal employer. The learned Single Judge also took the view that since ultimate energising of the transmission lines was invariably effected by the CESC after proper checks were effected for laying of cables or other maintenance work, that step by itself was ‘supervision’ so as to attract the provisions of the Act. Such finding was based on the fact that even though the agreement specified that work was to be done under the supervision of the electrical contractor the CESC retained the ultimate power of supervision and in fact did supervise the work executed by the contractors. It is then that the learned Single Judge abruptly came to the conclusion that the principal employer could not escape the liability for the works of his contractors, as the latter was acting as the agent of the principal, and in sense confirmed the view of the Regional Director of the ESI Corporation.

9.4. Against the dismissal of the writ petitions, appeals were filed. The only dispute before the Division Bench was whether there is any supervision of the employees of the electrical contractors by the CESC or its agents. The Division Bench observed that, it has not been found by the Regional Director of the ESI Corporation as a fact that in carrying out the aforesaid work the employees of the electrical contractors are under the supervision of the CESC or its agents. All that has been found is that after the works which are entrusted to the electrical contractors are completed, the same are checked by the CESC. Therefore, the Division Bench held that, checking of a work after the same is completed and supervision of the same while the same is being performed are entirely different. Checking of a work after its completion is always done in every case by the person who ordered the same to be done so that the work can be finally accepted and payment made therefor. After the work is completed, a further checking cannot mean or imply any or any further supervision. Accordingly, the Division Bench reversed the judgment of the learned Single Judge, which has given cause for the Special Leave Petitions before the Apex Court.

9.5. The Apex Court, with reference to the particular contract entered into between the electrical contractors and the CESC, which relates to laying of new underground cables and conversion of overhead mains and service to underground system at Barrackpore Trunk Road, which provides that, the electrical contractor will have to provide competent supervision while carrying out the work in accordance with the provisions of the Indian Electricity Rules, 1956 and that, the electrical contractor will also have to provide adequate watch and ward arrangement for the safe custody of the materials till such time and complete installation is handed over to the CESC, concluded that, the obligation embodied, as is plain, is for the electrical contractor to provide competent supervision while carrying out the work. The Apex Court has also noted that, the electrical contractor is otherwise a licensee under the Indian Electricity Act and the Rules made thereunder and as per the conditions of his licence, which licence is issued subject to the compliance with the conditions set out on the reverse, and also to the continued compliance with the conditions set out in Regulation 24 of the Regulations under Rule 45(1) of the Indian Electricity Rules, 1956, which mandates that, all electrical installation work coming within the purview of Rule 45(1) of the Indian Electricity Rules, 1956 undertaken by the holder of such licence, shall be carried out under the direct supervision of a person holding a valid certificate of competency. Paras.17 and 18 of the judgment read thus;

“17. The terms and conditions of the licence postulate the licensee to carry out the installation work of the kind mentioned under the direct supervision of a person holding a valid certificate of competency. For that purpose the licensee shall maintain a register of supervision. Such register is open to inspection on demand by an Electrical Inspector or other person authorised in this behalf by the Licensing Board. On completion of the installation work of the kind mentioned, a test report shall be submitted by the licensee to the Secretary, which report shall first be signed by the supervisor under whose supervision the work had been carried out and then countersigned by the licensee who shall be wholly responsible for the due execution of the work. The licence further enjoins the licensee either to retain a valid supervisory certificate of competency or keep one such person retained in his employment failing which the licence can be invalidated. Same is the position if the licensee accepts employment under any other firm or person for the purpose of carrying out or supervising any electrical installation work of the kind mentioned. In that situation, the licence is to be returned to the Secretary for cancellation.

18. On the conjoint reading of the contract with the CESC and the terms and conditions of the licence, assuming the terms were to be faithfully obeyed, could it otherwise be held that the CESC could appoint the electrical contractor as its agent to have the work carried out under the later supervision, in place of CESC. As is evident, the contract relates to laying of new underground cables, conversion of overhead mains and service and maintenance to the underground system. The work being highly sophisticated in nature, requiring special skill and expertise, is given by the CESC to the contractor on the condition that the latter will have to provide competent supervision while the work progresses, in accordance with the provisions of the Indian Electricity Rules, 1956, which, in the larger interest of the electrical network and the community and its safeguards, require an electrical contractor obtaining a licence to carry out electrical installation work of the kind mentioned. Then the Rules obligate him to take in his services a person holding a valid certificate of competency under whose direct supervision the work is required to be carried out, and on completion its final report being first signed by the supervisor supervising the work and then countersigned by the holder of the licence, who will be responsible for the due execution of the work. The licence is capable of being rendered invalid or liable for cancellation due to non employment of a supervisor given in the terms and conditions. Even if, the terms of the contract and the terms and conditions of the licence, the first being at the behest of the CESC and the second being at the behest of the Government of West Bengal, be suggested to be complementing each other, still these cannot be so interplayed to mean that an agency, express or implied, has been created by the CESC in favour of the electrical contractor appointing him to supervise work as envisaged under Section 2(9) of the Act, and thus to have established a direct link between the employee and the CESC to the exclusion of the electrical contractor.”

9.6. The Apex Court, on the facts and circumstances established before the Division Bench of the High Court and the finding of the High Court that, the work done by the employees was under the exclusive supervision of the electrical contractors or competent supervisors engaged by them under the terms of the contract and the licence, with reference to the contract with the CESC and the terms and conditions of the licence held by the electrical contractor, concluded that by necessary implication supervision by the CESC or its agents stood excluded, since supervision rested with persons holding valid certificates of competency for which a register of supervision was required under the licence to be maintained. Accordingly, the Apex Court held that, the employees of the electrical contractors, on the facts and circumstances, established before the Division Bench of the High Court, do not come in the grip of the Act and thus all demands made towards ESI contribution made against the CESC and the electrical contractors were invalid. Paras.19 and 20 of the judgment read thus;

“19. Section 182 of the Indian Contract Act, 1872 defines ‘agent’ as a person employed to do any act or to represent another in dealing with third person, the person for whom such act is done, or is so represented is called the ‘principal’. Section 184 of the said Act further provides that as between Principal and the third person any person may become an agent so as to be responsible to his principal. Now it is to be understood that the agent has an identity distinct from his principal in one sense and a fictional identity with his principal in the other. The agreement nowhere amalgamates the identity of the electrical contractor with that of the principal CESC by undertaking to provide adequate supervision for the purposes of the Act, on behalf of the CESC. The agreement no doubt provides that the electrical contractor would provide adequate supervision while carrying on with the work, the purpose dominant is to safeguard obtaining quality work and safety safeguards, and to conform to the provisions of the Electricity Supply Act. To the Division Bench of the High Court it was obvious that the Regional Director of the ESI Corporation had nowhere found that there was actual supervision, either by the CESC or its duly appointed agents, over works which were performed by the employees of the electrical contractors. All that has been found is that the said works on completion were checked by the CESC and then accepted. Checking of work after the same is completed and supervision of work while in progress is not the same. These have different perceptions. Checking of work on its completion is an activity, the purpose of which is to finally accept or reject the work, on the touchstone of job specifications. Thereafter, if accepted, it has to be paid for. Undisputably electrical contractors had to be paid on the acceptance of the work. This step by no means is supervision exercised. Neither can it be the terminating point of an agency when the interests of the so called principal and the so called agent become businesslike. Besides, the High Court has found that the work done by the employees was under the exclusive supervision of the electrical contractors or competent supervisors engaged by them under the terms of the contract and the licence. By necessary implication supervision by the CESC or its agents stood excluded. Supervision rested with persons holding valid certificates of competency for which a register of supervision was required under the licence to be maintained. Under the contracts, the electrical contractors cannot in one breath be termed as agents of the CESC, undertaking supervision of the work of their employees and innately under the licence to have before hand delegated that function to the holder of the certificate of competency. Thus we hold that on the terms of the contract read with or without the terms of the licence, no such agency, factually or legally, stood created on behalf of the CESC in favour of the electrical contractors, and none could be, as that would violate the statutory scheme of distinction well marked under Section 2(a) of the Act. The supervision taken was to fulfil a contractual obligation simpliciter and we leave it at that level.

20. Thus on both counts, the principal question as well as the subsidiary question must be answered against the ESI Corporation holding that the employees of the electrical contractors, on the facts and circumstances, established before the Division Bench of the High Court, do not come in the grip of the Act and thus all demands made towards ESI contribution made against the CESC and the electrical contractors were invalid. We affirm the view of the High Court in that regard.”

10. In

# Managing Director, Hassan Co-operative Milk Producer’s Society Union Limited v. Assistant Regional Director, (2010) 11 SCC 537

the Apex Court was dealing with a case in which the main business of the appellant Society is purchasing milk and pasteurization of the same. The milk procured by member societies is transported in lorries/vans to the appellant’s dairy. For that purpose, contract is awarded on the basis of rate per kilometer to the lowest bidder. The contractor collects the milk from various societies in cans on specified routes and transports to the appellant’s dairy. The empty cans are re-transported and returned to the respective member societies. The issue before the Apex Court was whether the workers engaged by the contractor (immediate employer) for transportation of milk having been employed in connection with the work of the principal employer, qualify under first substantive part of Section 2(9) of the Act. The Apex Court held that, the expression ‘on the premises of the factory or establishment’ comprehends presence of the persons on the premises of the factory or establishment for execution of the principal activity of the industrial establishment and not casual or occasional presence. The said expression does not comprehend every person who enters the factory for whatever purpose. Accordingly, it was held that, the persons employed by the contractor for loading and unloading of milk cans are not the persons employed on the premises of the appellants’ establishment. Para.18 of the judgment reads thus;

“18. It is not the case of any of the parties nor there is any evidence to show that the persons who did loading and unloading were directly employed by the appellants. Section 2(9)(i) is, therefore clearly not attracted as it covers the workers who are directly employed by the principal employer. As a matter of fact, the thrust of the arguments centred round clause (ii) of Section 2(9). This clause, requires either (a) that the person to be an employee should be employed on the premises of the factory or establishment, or (b) that the work is done by the person employed under the supervision of the principal employer or his agent on work which is ordinarily part 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. The expression ‘on the premises of the factory or establishment’ comprehends presence of the persons on the premises of the factory or establishment for execution of the principal activity of the industrial establishment and not casual or occasional presence. We shall again assume in favour of the ESI Corporation that for the purposes of loading and unloading the milk cans, the truck driver and loaders enter the premises of the appellants but mere entry for such purpose cannot be treated as an employment of those persons on the premises of the factory or establishment. We are afraid, the said expression does not comprehend every person who enters the factory for whatever purpose. This is not and can never be said to be the purpose of the expression. It has to be held that the persons employed by the contractor for loading and unloading of milk cans are not the persons employed on the premises of the appellants’ establishment.

10.1 In Hassan Co-operative Milk Producer’s case (supra) the Apex Court, after referring to the Three-Judge Bench decision in Calcutta Electrical Company’s case (supra), held further that, the ordinary meaning of the word ‘supervision’ is ‘authority to direct’ or ‘supervise’, i.e., to oversee. The expression ‘supervision of the principal employer’ under Section 2(9) means something more than mere exercise of some remote or indirect control over the activities or the work of the workers. Even if it be held that the transportation of milk is incidental to the purpose of factory or establishment, for want of any supervision of the appellants on the work of such employees, these employees are not covered by the definition of ’employee’ under Section 2(9) of the Act. Para.22 of the judgment reads thus;

“22. Although, ESI Court in respect of the appellants in separate orders, has recorded a finding that such workers work under the supervision of the principal employer and the said finding has not been interfered with by the High Court but we find it difficult to accept the said finding. The ordinary meaning of the word ‘supervision’ is ‘authority to direct’ or ‘supervise’, i.e., to oversee. The expression ‘supervision of the principal employer’ under Section 2(9) means something more than mere exercise of some remote or indirect control over the activities or the work of the workers. As held in Calcutta Electrical Company’s case (supra) that supervision for the purposes of Section 2(9) is ‘consistency of vigil’ by the principal employer so that if need be, remedial measures may be taken or suitable directions given for satisfactory completion of work. A direct disciplinary control by the principal employer over the workers engaged by the contractors may also be covered by the expression ‘supervision of the principal employer’. The circumstances, as in the case of HCMPSU Ltd., that the authorized representatives of the principal employer are entitled to travel in the vehicle of the contractor free of charge or in the case of BURDCMPS Union, that the principal employer has right to ask for removal of such workers who misbehave with their staff are not the circumstances which may even remotely suggest the control or interference exercised by the appellants over the workers engaged by the contractor for transportation of milk. From the agreements entered into by the appellants with the contractors, it does not transpire that the appellants have arrogated to themselves any supervisory control over the workers employed by the contractors. The said workers were under the direct control of the contractor. Exercise of supervision and issue of some direction by the principal employer over the activities of the contractor and his employees is inevitable in contracts of this nature and that by itself is not sufficient to make the principal employer liable. That the contractor is not an agent of the principal employer under Section 2(9) (ii) admits of no ambiguity. This aspect has been succinctly explained in Calcutta Electrical Company’s case (supra) with which we respectfully agree. No evidence has been collected by the ESI Corporation during the inspection of the appellants’ establishments or from the contractors that the appellants have any say over the terms and conditions of employment of these employees or that the appellants have any thing to do with logistic operations of the contractors. As a matter of fact, there is nothing on record to show that principal employer had any knowledge about the number of persons engaged by the contractors or the names or the other details of such persons. There is also no evidence that the appellants were aware of the amount payable to each of these workers. In the circumstances, even if it be held that the transportation of milk is incidental to the purpose of factory or establishment, for want of any supervision of the appellants on the work of such employees, in our opinion, these employees are not covered by the definition of ’employee’ under Section 2(9) of the Act.”

11. As we have already noticed, going by Section 2(9)(ii) of the ESI Act, any person employed for wages in or in connection with the work of a factory or establishment to which the said Act applies, 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 will also be an ’employee’.

12. As held by the Apex Court in Royal Talkies’ case (supra), the definition of ’employee’ in Section 2(9) of the ESI Act has been cast deliberately in the widest terms in order to cover every possibility so as not to exclude even distant categories of men employed either in the primary work or cognate activities. The Apex Court held further that, the term ‘in connection with the work of an establishment’ only postulates some connection between what the employee does and the work of the establishment. It is enough if the employee does some work which is ancillary, incidental or has relevance to or link with the object of the establishment. The Apex Court has also held that, the language used in Section 2(9)(ii) of the Act is extensive and diffusive imaginatively embracing all possible alternatives of employment by or through an independent employer. In such cases, the ‘principal employer’ has no direct employment relationship since the ‘immediate employer’ of the employee concerned is some one else. Even so, such an employee, if he works (a) on the premises of the establishment, or (b) under the supervision of the principal employer or his agent ‘on work which is ordinarily part of the work of the establishment or which is preliminary to the work carried on in or incidental to the purpose of the establishment’, qualifies under Section 2(9)(ii) of the Act.

13. In Calcutta Electrical Company’s case (supra), a decision relied on by the court below, the Three-Judge Bench of the Apex Court held that, in the textual sense ‘supervision’ of the principal employer or his agent is on ‘work’ at the places envisaged and the word ‘work’ can neither be construed so broadly to be the final act of acceptance or rejection of work, nor so narrowly so as to be supervision at all times and at each and every step of the work. A harmonious construction alone would help carry out the purpose of the Act, which would mean moderating the two extremes. When the employee is put to work under the eye and gaze of the principal employer, or his agent, where he can be watched secretly, accidentally, or occasionally, while the work is in progress, so as to scrutinise the quality thereof and to detect faults therein, as also put to timely remedial measures by directions given, finally leading to the satisfactory completion and acceptance of the work, that would be supervision for the purposes of Section 2(9) of the Act. It is the consistency of vigil, the proverbial ‘a stich in time saves nine’. The standards of vigil would of course depend on the facts of each case. This function, the principal employer, no doubt can delegate to his agent who in the eye of law is his second self, i.e., a substitute of the principal employer.

14. As we have already noticed, in Calcutta Electrical Company’s case (supra), the Apex Court, with reference to the particular contract entered into between the electrical contractors and the CESC, which relates to laying of new underground cables and conversion of overhead mains and service to underground system, which provides that, the electrical contractor will have to provide competent supervision while carrying out the work in accordance with the provisions of the Indian Electricity Rules, 1956, concluded that, the obligation embodied, as is plain, is for the electrical contractor to provide competent supervision while carrying out the work. The Apex Court has also noted that, the electrical contractor is otherwise a licensee under the Indian Electricity Act and the Rules made thereunder and as per the conditions of his licence, which licence is issued subject to the compliance with the conditions set out on the reverse, and also to the continued compliance with the conditions set out in Regulation 24 of the Regulations under Rule 45(1) of the Indian Electricity Rules, 1956, which mandates that, all electrical installation work coming within the purview of Rule 45(1) of the Indian Electricity Rules, 1956 undertaken by the holder of such licence, shall be carried out under the direct supervision of a person holding a valid certificate of competency.

15. In Calcutta Electrical Company’s case (supra), the Apex Court, on the facts and circumstances established before the Division Bench of the High Court and the finding of the High Court that, the work done by the employees was under the exclusive supervision of the electrical contractors or competent supervisors engaged by them under the terms of the contract and the licence, with reference to the contract with the Calcutta Electrical Company and the terms and conditions of the licence held by the electrical contractor, concluded that by necessary implication supervision by the Calcutta Electrical Company or its agents stood excluded, since supervision rested with persons holding valid certificates of competency for which a register of supervision was required under the licence to be maintained.

16. In the instant appeals, the common case of the respondent establishments is that, materials for making umbrella are collected from various sources and the assembling work of umbrellas are entrusted to contractors/home workers, who undertake the assembling work by engaging their own employee/ family members/neighbours and the finished product is supplied to the respondent establishments. The said works are carried on at the premises of the contractors/home workers and respondent establishments or their agent has no control or supervision over the assembling work. In order to substantiate the above contention, the respondent establishments relied on the vouchers regarding payment of assembling charges, counter foils of ‘in pass’ and ‘out pass’, assembling registers/ledgers. In I.C.No.35 of 2006, the respondent establishment has also produced certain agreements alleged to have been executed with outside agencies regarding assembling of umbrellas.

17. A reading of the impugned orders would show that, merely accepting the version of PW1 the court below accepted the case of the respondent establishments and concluded that there is no control or supervision of the respondent establishments or their agents when the assembling works are carried on at the premises of the contractors/home workers. None of the alleged contractors/home workers were examined before the court below in order prove the vouchers, receipts, agreements, etc., and the court below merely accepted the version of PW1 and held that, the mere right to reject the end product is not sufficient to conclude that there is supervision and as such the persons employed by the outside agencies to carry out the assembling works of umbrellas cannot be treated as ’employees’ as per Section 2(9) of the ESI Act. Consequently, the payments made to them cannot be treated as ‘wages’ as per Section 2(22) of the said Act.

18. The fact that, without the assistance of outside agencies, the respondent establishments will not be able to make umbrellas in their own factory for meeting the market demand is not in dispute. The evidence of PW1 would also indicate that the respondent establishments get major part of assembling of umbrellas done through contractors/home workers. The evidence of DW1, the concerned Insurance Inspector would also indicate that, similar activity is being undertaken in the premises of the respondent establishments. When, the definition of ’employee’ in Section 2(9) of the ESI Act has been cast deliberately in the widest terms in order to cover every possibility so as not to exclude even distant categories of men employed either in the primary work or cognate activities, the burden is heavily on the shoulders of the respondent establishments to prove with cogent and convincing materials that, the workers employed by the contractors or home workers engaged to carry out the assembling works of umbrellas fall outside the purview of ’employees’ as defined under Section 2(9) of the ESI Act, and that, the payments made to them cannot be treated as ‘wages’ as defined under Section 2(22) of the said Act. Since the reasoning of the court below in the impugned orders is not supported by any such materials, we find no reasons to sustain the said judgments.

In the result, Insurance Appeal Nos.63 of 2009 and 64 of 2009 are allowed, setting aside the impugned judgments dated 29.6.2009 of the Employees Insurance Court, Alappuzha in I.C.Nos.35 of 2006 and 25 of 2004 and the said cases are remanded to the court below for fresh consideration, taking note of the observations contained in this judgment, after affording both the sides an opportunity to adduce fresh evidence, if any. The court below shall dispose of the cases finally, as expeditiously as possible, at any rate within a period of 4 months from the date of production of a copy of this judgment. The parties shall appear before the court below on 13.6.2016.

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