IN THE HON’BLE SUPREME COURT OF INDIA

In the matter of
ESI Corporation
(Appellant)
Vs.

M/S Harrison Malyalam Pvt.Ltd. & Ors.

(Respondent)
DATE OF SUBMISSION -25/10/18

On submission to the Hon’ble Supreme Court of India

Counsel on behalf of the Appellant

Sounak verma

ROLL NO. – 158

Semester -V, Sec- A

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Contents
STATEMENT OF FACTS .................................................................................................................................. 1
ISSUE RAISED................................................................................................................................................. 3
Summary of Arguments ................................................................................................................................ 4
ARGUMENT ADVANCED ................................................................................................................................ 5
PRAYER FOR RELIEF ..................................................................................................................................... 13

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LIST OF ABBREVIATIONS

1. & And

2. Ker kerala

3. Bom. Bombay

4. Ors. Others
5. Hon’ble Honourable

6. L.L.J Labour Law Journal

7. AIR All India Reporter

8. S.C.C Supreme Court Cases

9. S. Section

10. Vs Versus

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INDEX OF AUTHORITIES

Acts/ Statutes/ Legislations:

 Employee State Insurance Act, 1947

Cases:

 E.S.I.C Trichur v poopally foods, Alleppy (1985) ILLJ 10 Ker.

 M.D.,Hassan Coop.Milk society union vs Asstt. Regnl.Director HCMPSU
Ltd 1993 4 SCC 361.
 ESI Corporation vs By Adv. Sri.Thomas Mathew M/s.Popy Umbrella Mart
(1988) ILLJ 24 Ker.
 Bombay Wires Healds vs Employees State Insurance corp 1986) IILLJ 121
Bom.

Books:

 S.N Mishra Labour Law

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STATEMENT OF FACTS

1. The respondent is a public limited construction company engaged in the

business and the work of undertaking construction work at various places in
the State of Kerala. During the period 1971 to 1982 it had undertaken
construction work for building factory premises of M/s. McDowell
Company at Ghertallei, so they employed contractor to execute the work
which they had undertaken.
2. During the relevant time the Employees' State Insurance Act, 1948
(hereinafter referred to as "the Act") was applicable in the State of Kerala.
The appellant-Corporation raised the demand against the respondent-
Company in connection with the contribution which should have been
remitted to the Corporation both consisting of employees' contribution as
well as employer's contribution amounting to Rs. 2 lakhs and odd for the
period from 1971 to 1982. This demand by the Corporation resulted in an
application by the respondent-Company before the Employees' Insurance
.The Insurance Court after hearing the parties took the view that as the claim
pertains to an earlier period i.e. from 1971 to 1982 and there was no clear
evidence to show whether the workmen concerned, who were said to be
employed by the respondent-Company during the relevant time, were
available on the payroll of the Company and as the appellant Corporation
had not taken steps in time to activise the respondent in this connection, the
claim put forward by the Corporation against the respondent for that period
could not be effectively entertained. However, the Insurance Court noted
that there was some evidence regarding continuity of employees at least
from 1983 onwards till the coverage was effected in 1986. The appellant-

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Corporation was held entitled to collect contribution in respect of those

employees who are employed by the respondent during 1983 and who
continued under employment thereafter till they were brought under
coverage w.e.f. 1-12-1986. In the result the respondent's application was
allowed to the aforesaid extent.
3. The appellant-Corporation being aggrieved by the said decision of the
Employees' State Insurance Court carried the matter in appeal before the
High Court of Kerala under Section 82 of the Act. The High Court by the
impugned judgment agreed with the decision rendered by the Insurance
Court and dismissed the appeal. The High Court observed that the Insurance
Court was justified in arriving at the finding that the Corporation could not
insist for payment of contribution from the respondent in respect of
employees whose particulars were not available.
4. Now the appellant preffered appeal in SC and the question before the SC is
whether the employees of the contractor engaged by the respondent-
Company to execute certain contract are covered by the Employees' State
Insurance Act, 1948 [hereinafter referred to as the 'Act'] and whether
contribution in respect of them is payable although the contract was
completed much prior to the demand for such contribution made by the
appellant-Corporation.

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ISSUE RAISED

1. Whether the employees of the contractor employed contractor comes under

the definition of employee or not?
2. Whether the respondent company is liable to pay employees contribution
which is employed by the contractor or not?

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Summary of Arguments

ISSSUE-1 Whether the employees employed by contractor comes under

the definition of employee?

No the Employees does not come within the definition of employees under
the ESI act, because there is not any supervision or control by the
principle employer as persection 2(9) of the ESI act.

ISSUE-II- Whether the respondent company is liable to pay employee

contribution which is employed by the contractor or not?

No the respondent are not liable to pay contribution in respect of employees

because they were not employees as per the definition of employee of the
ESI act ; so how the payment of contribution will come as per section 40 of
the ESI act.

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ARGUMENT ADVANCED
ISSSUE-1 Whether the employees employed by contractor comes under
the definition of employee or not?

No the Employees does not come within the definition of employees under
the ESI act, because there is not any supervision or control by the principle
employer .The definition of the employee given under section 2(9) of the
ESI act as –

Section 2(9) in The Employees' State Insurance Act, 1948

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—
1. 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
2. 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
3. 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 or with the purchase of raw materials for, or
the distribution or sale of the products of, the factory or establishment] [or any

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person engaged as apprentice, not being an apprentice engaged under the

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Apprentices Act, 1961 (52 of 1961), [and includes such person engaged as
apprentice whose training period is extended to any length of time] 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 22 [such wages as may be prescribed by the Central Government] a
month:
Provided that an employee whose wages (excluding remuneration for overtime
work) exceed 22 [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;]

If you refer to subsection 2 if the section 2(9) of the act it is clearly mentioned that
there must be supervision by the principle employer which is not present in this
case so it is not employee.

In case of E.S.I.C Trichur v poopally foods, Alleppy1 The respondent is a firm

carrying on business in export of fish (prawns). Peeling and/or grading are clone
through independent contractors at their premises. it is not done either by the firm
or in its premises and ESI corporation were demanding contributions from the
respondent .So, the respondent contended There is no relationship of employer-
employee between the firm and the persons who do the work. The firm has no
knowledge of the persons who do the work or the number of persons who are
engaged in the work nor exercises any supervision over the work. The contractors
do their contract work for different persons. In such circumstances, the firm
1
(1985) ILLJ 10 Ker
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contended that it is not liable to pay any contribution to the ESI Corporation for
persons who were doing peeling and grading and that the Corporation is not
entitled to claim the same. So the High court of Kerala held that there were
contract for service not contract of service and the firm had no supervision or
control in the peeling or grading works done so, there was no contract of
employment. Hence the employees does not come within the definition of the
employee under the ESI act andtherefore respondent are not liable to pay
contribution to ESI corporation

In case of M.D.,Hassan Coop.Milk society union vs Asstt. Regnl.Director

HCMPSU Ltd2. 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 retransported 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 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 there in (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

2
(1993) 4 SCC 361
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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; the
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 applicable. The SC held that 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.. 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 anything 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
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of such employees, in our opinion, these employees are not covered by the
definition of employee' under Section 2(9) of the Act.

ISSUE-II- Whether the respondent company is liable to pay employees

contribution which is employed by the contractor or not?

No the respondent are not liable to pay contribution in respect of employees

because they were not employees as per the definition of employee of the ESI
act ; so how the payment of contribution will come. If you refer section 40 of
the ESI act-

Principal employer to pay contribution in the first instance.—

(1) The principal employer shall pay in respect of every employee, whether
directly employed by him or by or through an immediate employer, both the
employers contribution and the employees contribution.
(2) Notwithstanding anything contained in any other enactment but subject to the
provision of this Act and the regulations, if any, made thereunder, the principal
employer shall, in the case of an employee directly employed by him (not being an
exempted employee), be entitled to recover from the employee the employees
contribution by deduction from his wages and not otherwise: Provided that no such
deduction shall be made from any wages other than such as relate to the period or
part of the period in respect of which the contribution is payable, or in excess of
the sum representing the employees contribution for the period.
(3) Notwithstanding any contract to the contrary, neither the principal employer
nor the immediate employer shall be entitled to deduct the employers contribution
from any wages payable to an employee or otherwise to recover it from him.

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(4) Any sum deducted by the principal employer from wages under this Act shall
be deemed to have been entrusted to him by the employee for the purpose of
paying the contribution in respect of which it was deducted.
(5) The principal employer shall bear the expenses of remitting the contributions to
the Corporation.

Immediate employer , Principle employer deals with section 2(13), 2(17)

respectively.
Section- 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]
Although immediate employer includes contractor but in the present case the
contractor has not undertaken the execution on the premises of a factory or an
establishment and has not work 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. So, he does not come
under the definition of the immediate employer, he is just an independent
contractor.

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In case of ESI Corporation vs By Adv. Sri.Thomas Mathew M/s.Popy Umbrella

Mart3 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. so the court held that 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 ESI corporation cannot get contribution for that.
In another case of Bombay Wires Healds vs Employees State Insurance corp4.
Messrs. Bombay Wire Healds Manufacturing Company of Sonawala Estate,
Goregaon (East), Bombay, are an ancillary unit engaged in the manufacture of
Wire Healds which are used by textile mills in their Weaving Departments. The
purchasing mills require a bundle of 500 pieces of wire and though the wires are
manufactured in the factory premises at Goregaon by the Appellant Company, they
find it economical, with a view to conserve scarce floor space of their premises, to
get the threading of these wires and bundling them together from house-wives who
do the work at their own premises. The material required viz., the wires, the thread
etc. is supplied by the factory to the house-wives who collect the same in the
factory premises in the morning, take them to their respective homes and after
completing the threading and bundling work, return the packages the next day.

3
(1988) ILLJ 24 Ker
4
(1986) IILLJ 121 Bom
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These packages are then examined by checkers and packers and the house-wives
are paid at the rate of 10 paise per bundle of 500 wires. Sometimes, even the
permanent employees of the factory take the material and the thread at home to
augment their income but generally it is done by non-working house-wives who
prefer to work in their respective homes. It matters little to the factory as to who
does this piece-work so long as it is done and done well. The Bombay HC held that
house wives who do the work on their own premises are not employees and the
company is not liable to the contribution in respect of them.

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PRAYER FOR RELIEF

Therefore in the light of facts of the case, issues raised, arguments advanced and
authorities cited, the appellant please the the honourable Supreme court to adjudge
and declare that-

1. To dismiss the appeal.

2. The Respondent is not liable to pay contrbution.
3. The Respondent contractors are not employee according to the section 2(9)
of the ESI act.
.

All of which is respectfully submitted.

Sounak verma

(Counsel for the Respondent)

Date: 06.04.2017

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