Director, Employees State Insurance Corporation Vs. Ram Chander  INSC 292
(27 October 1987)
SABYASACHI (J) MUKHARJI, SABYASACHI (J) OZA, G.L. (J)
1988 AIR 113 1988 SCR (1) 835 1988 SCC Supl. 90 JT 1987 (4) 313 1987 SCALE
State Insurance Act, 1948 Whether the respondent's L tailoring establishment
falls within the purview thereof by virtue of notification issued under section
The respondent Ram Chander ran a tailoring shop, employing about 10 to 12
tailors. The number of his employees never exceeded 20. At the shop, clothes
were stitched and electric iron was used in the process of stitching and also
for ironing the finished goods.
dispute that arose for decision in the case was whether by virtue of
Notification dated September 20, 1975, issued under Section 1(5) of the
Employees' State Insurance Act, 1943, the respondent's establishment came
within the purview of the Act.
the Appeal by special leave against the judgment and order of the High Court,
and restoring the decision of the Employees' State Insurance Court the Court, ^
Stitching process is carried on in the respondent's establishment. By stitching
commercially, different goods with distinctive names, characters and uses are
brought into existence. If by a process, a different entity comes into
existence, the process is a manufacture, as held by this Court in Empire
Industries Limited & Ors. etc. v. Union of India & Ors. etc., 
(Suppl. 1) SCR 292. In the stitching process, ironing is an essential part, and
for that electric power is used. Also the respondent's shop employed more than
ten but less than 20 persons. The respondent's establishment clearly falls
within the purview of the Employees' State Insurance Act. [837G-H;838C] Deputy
Commissioner, Sales Tax (Law) Board of Revenue (Taxes), Ernakulam v. Pio Food
Packers,  3 SCR 1271; Chowgule & Co. Pvt. Ltd & Anr. v. Union of
India and others,  2 SCR 271; Ardeshir H. Bhiwandiwala v. The State of
Bombay,  3 H 836 SCR 592; M/s. Hindu Jea Band, Jaipur v. Regional
Director, Employees' State Insurance Corpn. Jaipur, AIR 1987 SC 1166;
Readywear Company v. Collector of Customs,  2 Excise Law Times 520 and
Employees' State Insurance Corporation v. M/s. New Empire Tailores and others,
(unreported) referred to.
Appellate Jurisdiction: Civil Appeal No. 2904 of 1987.
the Judgment and order dated 2.9.1986 of the Rajasthan High Court in D.B. (Civil)
Special Appeal No. 43 of 1986.
Chandrasekhran, V.J. Francis and N.M. Popli for the Appellant. B.D. Sharma for
Judgment of the Court was delivered by SABYASACHI MUKHARJI, J. Special leave
appeal arises out of the judgment and order of the Division Bench of the
Rajasthan High Court dated 2nd September, 1986. The judgment under appeal was
rendered in an appeal under section 82(2) of the Employees' State Insurance
Act, 1948 (hereinafter called 'the Act'). The respondent, Ram Chander, was the
proprietor of M/s. Commercial Tailors, Sojati Gate, Jodhpur. At all material
times, he used to run a tailoring shop, where clothes were stitched. The shop
employed at the relevant time about 10 or 12 persons as tailors. The number of
employees, however, never exceeded 20. The clothes were supplied by the
customers and these were stitched according to the different sizes of the
customers. Such stitching were done at the shop of the respondent herein
manually by electric iron which was also used in the process of stitching.
There where ironing of finished clothes also. The Employers State Insurance
Court, Rajasthan came to the conclusion as follows:
applicant is a tailoring shop which has employed more than 20 persons on one occasion
and less on other days and makes use of power in the shape of electric press
which is used for ironing of stitched clothes for customers. The electric iron
is also used during the process of stitching in addition to the ironing of
finished clothes." 837 The question before the Rajasthan High Court. Was
whether such an establishment was covered by the Notification dated 20th
September, 1975 and came within the mischief of the Act. The answer to that
question would depend on the relevant notification being the Notification dated
20th September, 1975 issued under section 1(5) of the Act. The schedule which
extends the scheme to different establishments, inter alia, provided by clause
(1)(b) as follows: B. description of Establishments Areas in Which the
Establishments are Situated.
Any premises including the precincts thereof 1.Alwar whereon ten or more
persons but in any case 2.Ajmer less than twenty persons are employed or were
3.Bikaner employed for wages on any day of the preceding twelve months, and in
any part of which a 5.Jodhpur manufacturing process is being carried on with
6.Kota the aid of power or is ordinarily so carried 7.Udaipur on but excluding
a mine subject to the operation of the Mines Act, 1952 (35 of 1952) or a rail
way running shed or an establishment which is exclusively engaged in any of the
manufacturing processes specified in clause (12) of section 2 of the Employees'
State Insurance Act, 1948 (34 of 1948) (emphasis supplied) In order to answer
the question whether the establishment of the respondent comes within the
mischief of the Act, it is necessary therefore, in view of the facts found as
noted before to determine only whether manufacturing process was carried on
with the aid of power.
is manifest that there is use of electric power in the process of stitching.
This is a finding of fact that the establishment of the shop employed more than
10 but less than 20 persons. It cannot also be disputed that by stitching
commercially different goods are brought into existence. These are known
differently, stitched shirt is indubitably a different commodity than
unstitched cloth. It is so commercially known and treated. If by a process a
different entity comes into existence then it can be said that this was
manufactured. See in this connection the observations of this Court in Empire industries
Limited & H 838 others etc. v. Union of India & others etc., [ 1985]
Suppl. 1 S.C.R. 292. It was observed therein that manufacture is complete as
soon as by the application of one or more process, the raw material undergoes
some change. If a new substance is brought into existence or if a new or
different article having a distinctive name, character or use result from
particular processes, such process or processes would amount to manufacture.
Whether in a particular case manufacture has resulted by a process or not would
depend on the-facts and circumstances of the particular case. There is no doubt
that the process must bring into existence a new item or a new commodity known
differently in the market as such by people who use or deal with that good. In
that process the ironing of clothes as has been found to be an essential part
and for that power is used. These are facts found and are not disputed. If that
is the position, then in our opinion, it comes clearly within the purview of
the Act in view of the other facts noted before and the employees are covered
by the Act.
attention was drawn by learned counsel appearing on behalf of the respondent to
the observations of this Court in Deputy Commissioner, Sales Tax (Law) Board of
Revenue (Taxes) Ernakulam v. Pio Food Packers,  3 S.C.R. 1271 and the
decision of this Court in Chowgule & Co. Pvt. Ltd. & ANR. v. Union of
India & others, [ 1981] 2 S.C.R. .271. The effect of both these decisions
have been considered in the aforesaid Empire Industries's case (supra). Learned
counsel drew our attention to the decision of this Court in Ardeshir H.
Bhiwandiwala v. The State of Bombay,  3 S.C.R. 592, where the question
arose under the Factory Act. It was held therein that the salt works was a
factory within the definition given in the Act and the appellant therein was
rightly convicted for working it without a licence. The decision is of no
assistance to the respondent in resolving the contentions involved in this
attention was also drawn to the decision of this Court in M/s. Hindu Jea Band,
Jaipur v. Regional Director, Employers' State Insurance Corporation, Jaipur,
A.I.R. 1987 S.C. 1166, where it was held that it was not that a place where
goods were sold was only a shop. A place where services were sold on retail
basis was also a shop. The facts of that case were entirely different from
these in this case. But the ratio of that decision is apposite to the issue in
dispute here. There this Court reiterated that it was not that a place where
goods were sold was only a shop.
a place where services were sold on retail basis was also a shop. The place of
business of a firm carrying on the business of playing music on occasion such
as, marriages and 839 Other social functions which made available on payment of
the stipulated price the services of the members of the group of musicians
employed by it on wages was a shop to which the Act was applicable by virtue of
fact that the services were rendered by the employees engaged by the firm
intermittently or during marriages did not entitle the firm to claim any
exemption from the operation of the Act. In Metro Readywear Company v.
Collector of Customs, [ 1978] 2 Excise Law Times 520 of the High Court of
Kerala at Ernakulam it was held that the brassieres were undoubtedly
undergarments falling within the description "articles of ready-to-wear
apparel (known commercially as ready made garments) and therefore was classified
under Item 22D of Central Excise Tariff. Ironing with electric iron amounted to
a process of manufacture with the aid of power. It was held that ironing of
stitched brassieres is incidental or ancillary to their manufacture since the
said process was intended to give a finishing, touch in order to render them
marketable. In our opinion the ratio or the reasoning of the said decision is
applicable to the facts of this case.
attention was drawn to the unreported decision of the Andhra Pradesh High Court
in Employees State Insurance Corporation v. M. S.New Empire Tailors and others,
where the aforesaid reasoning was accepted by the High Court.
the light of the aforesaid, we are of the opinion that the High Court in the
instant case was in error and the decision of the E.S.I. Court must be upheld.
The appeal is accordingly allowed and the judgment and order of the High Court
are set aside and the order of the E.S.I. Court restored. In the facts and
circumstances of the case the parties will pay and bear their own costs. This
judgment will apply to the facts as pertinent to the facts in the relevant year