Coop. Milk Produ. Soc. U. Ltd. Vs. Asstt. Regnl. Director, E.S.I.C.  INSC
306 (26 April 2010)
SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. 3816 OF
2010 (Arising out of SLP(C) No. 746 of 2006) The Managing Director, Hassan
Co-operative Milk Producer's Society Union Limited ...Appellant Versus The
Assistant Regional Director Employees State Insurance Corporation ...Respondent
CIVIL APPEAL NO. 3817 OF 2010 (Arising out of SLP(C) No. 3455 of 2008)
JUDGEMENT R.M. Lodha, J.
two appeals, by special leave, are concerned with the liability of the
appellants to pay ESI contribution in respect of the workers employed by the
contractors in performance of the contract awarded to them for transportation
two appeals arise out of different proceedings.
narration of facts in relation to each of the appellants may be set out first.
Cooperative Milk Producer's Society Union Limited (for short, `HCMPSU Ltd.').
Ltd. is a federal society. Its main business 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 the various societies in cans on specified
routes and transports to the appellant's dairy. The empty cans are retransformed
and returned to the respective member societies. On September 23, 1994, a show
cause notice was issued by the Assistant Regional Director, Employees' State
Insurance Corporation, Bangalore to the HCMPSU Ltd. calling upon them to
furnish explanation and show cause as to why action should not be taken against
them for non-payment of contribution under the Employees' State Insurance Act,
1948 (for short, `1948 Act') in respect of the 2 employees of the appellant. It
is not in dispute that this notice related to the employees engaged by the
contractors for the transportation of milk. The appellant responded to the show
cause notice by filing their reply on October 10, 1994, inter-alia, stating
therein (a) that the main business of the appellant is to process milk, receive
and sell the same to the public in the concerned districts through their
agents. The appellant does not appoint the officers and subordinates to collect
the milk from the societies located in different places and (b) that appellant
calls for tenders and awards the contract for transportation of milk for
specified period at a particular rate per kilometer. The contractors engage
workers for that work but such workers are neither directly nor indirectly
employees of the appellant and;
appellants have no control over such employees nor they supervise their work.
The wages or salary of such workers have also not been paid by the appellant.
Another notice was also issued by the concerned authority to which reply was
submitted by the appellant stating therein that the workers so engaged by the
contractors do not work in the premises of the appellant's establishment and
for this reason also 1948 Act is not 3 applicable. It appears that inspection
of the appellant's establishment was conducted by the concerned authority under
the 1948 Act and thereafter an order under Section 45A of 1948 Act came to be
passed on March 21/24, 1995 calling upon the appellant to pay contributions
totaling Rs. 65,834/- for the period April 1, 1989 to March 31, 1990 in respect
of the workers employed for transportation and procurement of milk together
with interest payable at the rate of 12 per cent per annum upto August 31, 1994
and 15 per cent from September 1, 1994 till the date of actual payment, within
a period of 15 days from the date of receipt of the order. The appellant
challenged the aforesaid order under Section 75 read with Sections 76 and 77 of
1948 Act before the Employees' State Insurance Court at Mysore (ESI Court). The
ESI Court did not find any merit in the application and dismissed the same vide
order dated January 29, 2004 holding that the work of employees engaged by the
contractors is incidental to the main work carried out by the appellant and
that supervision over the work of such employees by the appellant is also
established. The appellant challenged the aforesaid order before High Court of
Karnataka 4 by filing statutory appeal under Section 82(2) of 1948 Act which has
been dismissed by the impugned order.
Bangalore Urban and Rural District Co-operative Milk Producers Societies Union
Limited (for short, `BURDCMPS Union')
BURDCMPS Union is a cooperative society. By virtue of a tripartite agreement,
Bangalore Dairy became its unit w.e.f. September 1, 1988. Bangalore Dairy was
earlier a constituent of Karnataka Dairy Development Corporation and
subsequently became a constituent of Karnataka Milk Federation. For the purpose
of transportation, distribution and procurement of milk and milk products,
Bangalore Dairy used to entrust the work to independent contractors after
inviting tenders. The said contractors were being paid charges on kilometer
basis. The appellant adopted the same system. An inspection was conducted by
ESI Inspector in respect of transportation of milk and milk products through
transport contractors for the period from October 1985 to December 1991 and
from January 1992 to March 1993. On October 13, 1993, a notice indicating
tentative determination of dues was issued to the appellant to 5 show cause as
to why contribution under 1948 Act should not be recovered from them. In
response to the show cause notice, the appellant appeared through its
representative and contested the liability. It appears that the authority asked
the appellant to bifurcate the wage element involved in the amount paid to the
contractors and produce the same for verification which was not done. The
Assistant Regional Director, Bangalore by his order dated September 6, 1994 finally
determined an amount of Rs. 4,81,313/- for the period from October 1985 to
March 1993 and held that the said amount was liable to be paid by the appellant
within 15 days from the date of receipt of the order. In the said order,
interest at the rate of 12 per cent per annum was also ordered to be paid. The
appellant challenged the aforesaid order before ESI Court, Bangalore under
Section 75 of 1948 Act. ESI Court dismissed the application vide order dated
October 30, 1999. The appellant then filed an appeal under Section 82 of 1948
Act before the Karnataka High Court which too was dismissed on August 24, 2007.
Act was enacted to provide for certain benefits to employees in case of
sickness, maternity and employment injury and for certain incidental matters.
That the Act is beneficial legislation admits of no doubt. It is appropriate at
this stage to refer to definition of terms, `contribution', `employee',
`immediate employer', `principal employer' and `wages' occurring in 1948 Act.
`Contribution' is defined in Section 2 (4) which means the sum of money payable
to the Employees State Insurance Corporation by the principal employer in
respect of an employee and includes any amount payable by or on behalf of the
employee in accordance with the provisions of 1948 Act.
`Employee' is defined in Section 2(9) as follows :
2(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 7
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;
includes any person employed for wages on any work connected with the
administration of the factory or establishment or any part, department or
branch thereof or with the purchase of raw materials for, or the distribution
or sale of the products of, the factory or establishment or any person engaged
as apprentice, not being an apprentice engaged under the Apprentices 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
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;"
2(13) defines `immediate employer' while Section 2(17) defines `principal
employer'. The definitions of `immediate employer' and `principal employer' in
the 1948 Act are as follows :
"S. 2(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"
2 (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;
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;
any other establishment, any person responsible for the supervision and control
of the establishment;"
Section 2 (22) defines `wages' thus :
2 (22).- "wages" means all remuneration paid or payable in cash to an
employee, if the terms of 9 the contract of employment, express or implied,
were fulfilled and includes any payment to an employee in respect of any period
of authorized leave, lock-out, strike which is not illegal or lay-off and other
additional remuneration, if any, paid at intervals not exceeding two months,
but does not include -- (a) any contribution paid by the employer to any
pension fund or provident fund, or under this Act;
traveling allowance or the value of any traveling concession;
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;"
Sections 46 to 73 in Chapter-V provide for claims and benefits such as sickness
benefit, maternity benefit, disablement benefit, medical benefit, etc.
answer to the controversy presented before us has to be found primarily from
Section 2(9) which defines `employee' and the terms of agreements. Section 2(9)
has been extensively analysed by this Court in Royal Talkies, Hyderabad and
Others v. Employees State Insurance Corporation1 thus :
Now here is a break-up of Section 2(9). The clause contains two substantive parts.
Unless the person employed qualifies under both he is not an `employee'.
4 SCC 204 10 Firstly, he must be employed "in or in connection with"
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.
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. Surely, an amenity or facility for the customers who frequent
the establishment has connection with the work of the establishment. The
question is not whether without that amenity or facility the establishment
cannot be carried on but whether such amenity or facility, even peripheral may
be, has not a link with the establishment.
may not be exhaustive but may be informative. Taking the present case, an
establishment like a cinema theatre is not bound to run a canteen or keep a
cycle stand (in Andhra Pradesh) but no one will deny that a canteen service, a
toilet service, a car park or cycle stand, a booth for sale of catchy film
literature on actors, song hits and the like, surely have connection with the
cinema theatre and even further the venture.
other hand, a bookstall where scientific works or tools are sold or a stall
where religious propaganda is done, may not have anything to do with the cinema
establishment and may, therefore, be excluded on the score that the employees
do not do any work in connection with the establishment, that is, the theatre.
case of a five-star hotel, for instance, a barber shop or an arcade, massage
parlour, foreign exchange counter or tourist assistance counter may be run by
some one other than the owner of the establishment but 11 the employees so
engaged do work in connection with the establishment or the hotel even though
there is no obligation for a hotel to maintain such an ancillary attraction. By
contrast, not a lawyer's chamber or architect's consultancy. Nor, indeed, is it
a legal ingredient that such adjunct should be exclusively for the
establishment if it is mainly its ancillary.
primary test in the substantive clause being thus wide, the employees of the
canteen and the cycle stand may be correctly described as employed in
connection with the work of the establishment. A narrower construction may be
possible but a larger ambit is clearly imported by a purpose-oriented interpretation.
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
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).
Section 2(9)(i) 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). In the present case, the employees concerned
are admittedly not directly employed by the cinema proprietors.
Therefore, we move down to Section 2(9)(ii). Here again, the language used 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'
12 of the employee concerned is someone 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). 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.
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. No one can seriously say that a canteen or cycle
stand or cinema magazine booth is not even incidental to the purpose of the
theatre. The cinema goers ordinarily find such work an advantage, a facility,
an amenity and sometimes a necessity. All that the statute requires is that the
work should not be irrelevant to the purpose of the establishment. It is
sufficient if it is incidental to it. A thing is incidental to another if it
merely appertains to something else as primary. Surely, such work should not be
extraneous or contrary to the purpose of the establishment but need not be
integral to it either. Much depends on time and place, habits and appetites, ordinary
expectations and social circumstances. In our view, clearly the two operations
in the present case, namely, keeping a cycle stand and running a canteen are
incidental or adjuncts to the primary purpose of the theatre."
masterly analysis and clear exposition of the term `employee' as defined in
Section 2(9) done by V.R. Krishna Iyer, J. in Royal Talkies1 has been
consistently 13 followed in subsequent decisions. Some of these decisions are :
(1) Regional Director, Employees' State Insurance Corpn., Madras v. South India
Flour Mills (P) Ltd.2 ; (2) Kirloskar Brother Ltd. v. Employees' State
Insurance Corporation3; (3) RaJakamal Transport and Another v. Employees' State
Insurance Corporation, Hyderabad4; (4) Transport Corporation of India v. Employees'
State Insurance Corporation and Another5 and (5) M/s. Saraswat Films v.
Regional Director, E.S.I. Corporation,. Trichur6.
the light of the definition of the `employee' under Section 2(9) as interpreted
by this Court in Royal Talkies1 and subsequent decisions, we may examine the
question as to whether the workers employed by the contractors in performance
of the contract awarded to them by the appellants for transportation of milk
are covered by Section 2(9). The reference to relevant clauses of the agreement
at this stage will be appropriate.
3 SCC 238 3 (1996) 2 SCC 682 4 (1996) 9 SCC 644 5 (2000) 1 SCC 332 6 JT 2002
(Suppl 1) SC 454 14
relevant clauses of the agreements between HCMPS Union and contractors are :
That in consideration of the H C M P S U Ltd., paying to the contractor at the
rate of Rs. 2.50 (Rupees two and fifty paise only) per Kilometer of journey,
the contractor hereby agrees to transport the Milk from the places on routes
specified in schedule-1 annexed to this agreement, which all shall form part of
2) It is
further agreed that the rate of specified above shall include the cost of
loading the milk at the points specified as above into the vehicles,
transporting the same on the routes specified to the specified Dairy/Chilling
Centres and unloading the same at the specified Dairies/Chilling centre.
also brings back the empty cans, bottles, etc. to the place from where he had
taken them out.
contractor shall ply the vehicles owned by him and shall provide/produce the
vehicles with the registration certificate tax paid receipts, comprehensive
insurance certificate and all the specified for the purpose of satisfying the
ownership of the vehicles and road worthiness of the vehicles and farther
undertakes to replace the such vehicles which in the option of the authorities
of the HCMP SUL are not fit for the purpose of transporting the milk as agreed
contractor shall make his own arrangements for the engaging the workers
required for loading and unloading and transport operations and further agrees
to abide by the provisions of the contract labour (Regulation and Abolition)
Act, in the matter of payment of their wages etc. and further indemnify the
HCMP SUL against any claim by such workers.
The contractor shall strictly confirm to the various instructions to be given
from time to time by the authorities of the HCMPSU Ltd., with regard to the
safe transportation of the can milk/sachet Milk and other materials as agreed
to under this contract.
contractors further agreed that the addition to his workmen he shall allow the
staff authorized representatives of HCMPSU Ltd, including the officials of the
Milk Producing Co-operatives societies to travel free of charges in the
If any employee/representative of the contractor is found pilfering and/or
adulterating and/or destroying the milk and other items entrusted to the
contractor during the transportation or during/loading/unloading operations to
the premises of the milk producers Union/societies the contractor shall
responsible for the loss and the contractor shall make good all such losses
incurred by DCs from the day of default upto 15 days H C M P S U Ltd., may at
its discretion forfeit the security, deposit and terminate the contract.
any employee of representative of the Contractor misbehaves and or indulges in
disorderly conduct with the staff of the milk producers union/societies, or
with the members of the General public the H C M P S U Ltd., may require the
contractor to remove such undesirable persons from the transport work. The
contractor shall not reemployed such undesirable persons who have been removed
from the transport work either by the contractor himself or by any other
contractor engaged by H C M P S U Ltd., "
regards the agreements between BURDCMPS Union and contractors, the relevant
clauses are :
In consideration of payment of transport charges by the Dairy the Contractor at
the rate of Rs.6-40 (Rupees six and paise forty only) per K.M. of journey, the
contractor shall carry in his motor vehicles and deliver at the appointed sale
points the Dairy products entrusted to him for such purpose, once in the
morning and one in the evening or as required by the Dairy daily. The
Contractor, who files tenders for more than two routes should have one standing
vehicle for replacement in the event of any breakdown of his vehicle during the
transport of Dairy products.
delivery of the Dairy products at all the sale point, the Contractor shall
deliver all the teens, crates containers and returned dairy products to the
Dairy immediately upon arrival at the Dairy.
person other than the persons employed by the Dairy or the contractor for the
purpose of Transport, shall be carried in any vehicle of the contractor while
it is engaged in the performance of this contract.
contractor shall promptly remove any employee of his who behaves improperly
with the Dairy staff or the selling agents or their men at the sale points, on
a complaint by the Dairy.
7) If any
pilferage or shortage or adulteration is found to have occurred in the course
of transport, the full value of the Dairy property pilfered, short found or
adulterated shall be recoverable by the Dairy from the contractor. If any
pilferage or shortage or adulteration is found to have occurred in the course
of transport for second time, the contractor will also incur the liability for
cancellation of the contract in addition to his 17 liability to pay full value of
the Dairy property pilfered, short-found or adulterated."
shall assume, to test the validity of the contention, in favour of the E.S.I.
Corporation that workers engaged by the contractor (immediate employer) for
transportation of milk have been employed in connection with the work of the
principal employer and these employees, thus, qualify under first substantive
part of Section 2(9). But as stated in Royal Talkies1 that 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). Are these
workers covered by any of these categories?
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 18 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 E.S.I. 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 19 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.
the next question is, can these workers, in the facts and circumstances of the
case, be said to be working under the supervision of the appellants. It is
appropriate to refer to a decision of this Court in C.E.S.C. Limited and Others
v. Subhash Chandra Bose and Others7. In that case, the question that fell for
consideration 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 1948 Act. The
majority view explained :
......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 7 (1992)
1SCC 441 20 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
decision also referred to the definition of "agent" drawn in
Halsbury's Laws of England (Hailsham Edition) Vol. I at page 145, para 350
which is as follows :
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
the 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 21 subject in its exercise to the direct control and supervision of the
taking into consideration Section 182 of the Indian Contract Act, 1872 that
defines `agent', the majority view recorded its conclusion thus :
Thus on both counts, the principal question as well as the subsidiary question
must be answered against the ESIC 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
Although, E.S.I. 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 C.E.S.C.
Ltd. 7 that supervision for the purposes of Section 2(9) is `consistency 22 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 23 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 C.E.S.C. Ltd.7 with which we
respectfully agree. No evidence has been collected by the E.S.I. 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 24 employees are not covered by the
definition of `employee' under Section 2(9) of the Act.
23. As a
result of the foregoing discussion, both appeals are allowed and the impugned
orders are set aside. No order as to costs.
.............................J (R. V. Raveendran)
.............................J (R. M. Lodha)
April 26, 2010.