Appeal No 1626 of 1967
Appeal by Special Leave from the Judgment and Decree dated the 14th October 1966 of the High Court of Mysore at Bangalore in Misc
First Appeal No 124 of 1966
M Natesan and Saroja Gopalkrishnan for the appellant Gobind Das and section P Nayar for the respondent
The Judgment of the Court was delivered by GOSAMI J
The appellant and his brother Srinivasamurthy are partners of a firm carrying on the business of manufacturing and exporting of polished granite memorial stones in the name and style of Messrs Narayanaswami  Sons
The firm is admittedly a factory both under the Factories Act as well as under the Employees  State Insurance Act briefly the Act
The appellant claims to directly employ about 35 persons in his factory and has been paying contri bution under the Act on their account
It is stated that adjacent to his own factory there is another factory situated on the appellant s land leased out by him to two persons Chidambarchari and Shankarsubbachari hereinafter referred to as the contractors
The contractors employ about 50 workers in their factory for purposes of cutting and dressing the granite stones
The lorry drivers bring granite from the surrounding areas and unload them outside the factory  The contractors get these to their portion of the leased land for cutting them
After cutting these are sent back to the appellant s factory where these are designed and polished and thereafter exported
The Employees State Insurance Corporation briefly the Corporation applied to the Employees  State Insurance Court at Bangalore briefly the Court for recovery of an amount of Rs 8893 being the employees  contribution payable by the appellant for the period commencing from 27 7 1958 to 31 1 1964 on account of the workers employed by the two contractors described as immediate employers  tinder the Act
The court decided against the Corporation holding that the contractors were not immediate employers  within the meaning of section 2 13 of the Act and they were independent con tractors and hence the appellant was not the principal employer in respect of the employees working under the contractors
The Corporation appealed to the High Court of Mysore against the aforesaid order under section 822 of the Act
The High Court held that the appellant was the principal employer an the contractors were the immediate employers under the Act
The High Court further held that the workers under the contractors were employees within the meaning of section 2 9 ii of the Act
The High Court thus accepted the appeal of the Corporation
Hence this appeal by special leave
Before the court evidence was given by both sides and the following findings of the court are adverted to by the High Court 144 lm15 All that can be said to have been proved by the applicant corporation in this case is that RWs 2 and 3 the con tractors work at a place belonging to the respondent and execute part of the work which is necessary to manufacture the final finished product for sale
All that can be said to have been proved in this case is that the contractors are doing some work which would be the foundation for the work that is finally done by the respondent
After examining the evidence the High
Court also found as follows There is evidence to show that these employees under the contractors are employed in connection with the work of the respondent facory
The respondent in the High Court s judgment refers to the appellant herein
As stated earlier the High Court answered both the questions in favour of the Corporation
The same points are raised for consideration in this appeal and Mr Natesan on behalf of the appellant submits that the contractors owned a separate factory and are independent contractors and cannot be held to be immediate employers  within the meaning of section 213 of the Act and hence the appellant is not liable as principal employer to pay the contribution on account of the persons working under the contractors
Before we deal with the questions of law raised in this appeal it will be appropriate to refer to the material provisions of the Act
The Act as it appears from the preamble is passed to provide for certain benefits to employees in case of sickness maternity and employment injury and to make provision for certain other matters in relation thereto
Section 2 contains the definitions
By section 2 4 contribution means the sum of money payable to the Cor poration 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 this Act
 By section 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 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     145 By section 212factory means any premises including the precincts thereof whereon twenty or more persons are employed or were employed for wages on any day of the preceding twelve months and in any part of which a manufacturing process is being carried on with the aid of power or is ordinarily so carried on
But does not include a mine subject to the operation of the or a railway running shed
     By section 213 immediate employer in relation to employees employed by or through aim 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 tent or let on hire to the principal employer
By section 214 insured person means a person who is or was an employee in respect of whom contributions are or were payable under this Act and who is by reason thereof entitled to any of the benefits provided by this Act
By section 217 principal employer means 1 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 the person so named
      Chapter IV deals with contributions
The opening section 38 provides that subject to
the provisions of this Act all employees in factories or establishments to which this Act applies shall be insured in the manner provided by this Act       By Section 391 the contribution payable under this Act in respect of an employee shall comprise contribution payable by the employer hereinafter referred to as the employer s contribution and contribution payable by the employee hereinafter referred to as the employee s contribution and shall be paid to the Corporation
By section 40 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 employer s contribution and the employee s contribution
146 By section 422 Contribution both the employer s contribution and the employee s contribution shall be payable by the principal employer for each week in respect of the whole or part of which wages are payable to the employee and not otherwise
Section 43 and section 97 empower the Corporation to make regulations
Under section 44 every principal and immediate employer has to submit returns to the Corporation and maintain registers and records
Section 68 provides for Corporation s rights where a principal employer fails or neglects to pay any contribution
By section 72 an employer is barred from reducing wages by reason only of his liability to pay contribution
Chapter VA provides for certain transitory provisions
The opening section 73A provides for employer s special contribution
Chapter VI deals with adjudication of disputes and claims
Under section 74 1 Employee s Insurance Court is constituted
Inter alia under section 75 1 If any question or dispute arises as to a whether any person is an employee within the meaning of this Act or whether he is liable to pay the employees  contribution or       d the person who is or was the principal employer in respect of any employee       such question or dispute shall be decided by the Employees  Insurance Court in accordance with the provisions of this Act Under section 751 g inter alia any dispute between a principal employer and an immediate employer shall also be decided by the court
Under section 75 2 b any claim by principal employer to recover contributions from any immediate employer shall also be decided by the Employees  Insurance Court
By section 75 3 jurisdiction of a civil court is barred regarding amongst others any question or dispute as specified in the section
Section 82 provides for appeals and under sub section 2 thereof an appeal shall lie to the High Court from an order of the Employees  Insurance Court if it involves a substantial question of law
Chapter VII provides for different penalties
Under Chapter VIII Miscellaneous section 94 provides interalia that contributions due to the Corporation shall have priority over all other debts
The Act is thus a beneficial piece of social security legislation in the interest of labour in factories at the first instance and with power to extend to other establishments
Provisions of the Act will have to be construed with that end in view to promote the schemes and avoid 147 the mischief
From some of the material provisions set out above the underlying aim of the Act is to insure the employees against various risks to their life health and well being and the charge is upon the principal employer even though he may get his usual work done through an intermediary who is described in the Act as immediate employer
Any dispute between the principal employer and the immediate employer is to be settled between themselves de hors the employees and the Act charges the principal employer with the liability to pay the contribution not only of its own but also that of the employees subject to his right to deduct the employees  contribution
from their wages under section 40 2 of the Act
There is a quicker mode of recovery as arrears of land revenue under section 45B and 73D
Chapter VA provides for transitory provisions and by section 73A every principal employer shall have to pay a special contribution in lieu of the employer s contribution payable under Chapter IV
Adjudication of all kinds of specified disputes are also intended to be ex peditiously disposed of by the court constituted under section 74
Such disputes include a dispute between a principal employer and an immediate employer as noticed earlier
Civil courts  jurisdiction is barred in respect of matters specified in the Act
There is only one special type of appeal to the High Court and that also in a restricted form
The Act insists on compliance with its provisions on pain of penalties and the contributions due to the corporation have priority over other debts
Keeping in view the scheme and the principal object of the Act we will now examine the questions of law raised in this appeal
The definition of the immediate employer  under section 2 13 omitting what is not necessary for our purpose is as follows  immediate employer  in relation to employees employed by or through him means a person who his undertaken the execution on the premises of a factory to which this Act applies 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    That the appellant who is the principal employer has a factory where granite memorial stones are manufactured for export is beyond question
The finished articles are the dressed and polished granite stones
The raw material is the stone from the quarry brought therefrom cut to sizes dressed polished and then exported
The other factory of the contractors on the leased land of the principal employer adjoining the latter s factory
is registered under the Fac tories Act in the year 1963
Although admittedly a factory there is no evidence on the record that the contractors pay any contribution under the Act or have been even charged separately as principal employers so far as their so called direct employees are concerned
The principal employer the appellant is making a claim which if correct will make the contractors also principal employers liable under the Act
But it is easy for the appellant to make such 148 a claim to avoid his personal liability which in all fairness to labour should have been settled by impleading the contractors as parties in order to make the entire position clear
It is not necessary for us to examine whether this is a mere device of the principal employer to avoid his liability under the Act
We agree with the High Court that on the findings of fact the work undertaken by the contractors in the adjoining vicinity even though their factory may have been subsequently registered under the factories Act is preliminary or incidental to the work in the principal employer factory turning out the finished product for export
The work in the two places has an intimate correlation and is a piece of an integrated whole and the said work by the contractors through their labour is ordinarily part of the work of the principal factory undertaken by the contractors
Their factory is situated in the premises of the appellant s factory which according to the definition clause includes the precincts thereof
It therefore follows that the two contractors are immediate employers  within the meaning of section 2 13 and the workers employed for cutting and dressing the granite stones by the immediate employers are employees within section 2 9 ii of the Act being employed through the immediate employers on the premises of the factory including the precincts thereof
The fact that in 1963 the contractors  factory was separately registered under the Factories Act or that after meeting the prior requirements of the principal employer work of some other parties was also permissible does not in our opinion militate against the predominant purposes of the work of the contractors being part and parcel of the main work of the principal employer factory for which the contractors mainly work
A good deal of argument is advanced with regard to the expression on the premises of a factory in the definition clause of immediate employer under section 2 13
The word premises according to the dictionary means house or building with its ground or other apurtenances
The premises include under section 2 13 the precints thereof The word precincts means the environs
This Court in Ardeshir H Bhiwandiwala vs The State of Bombay1 dealt with the term Premises in the definition of factory under section 2m of the Factories Act and after noticing its meaning in various Law Lexicons and dictionaries observed The word premises has now come to refer to either land or buildings or to both depending on the context 
It is therefore clear that the word premises is a generic term meaning open land or land with buildings or buildings alone The contention in that case that the word premises must be restricted to mean buildings and not taken to cover I open lands as well was repelled
In the instant case on an examination of the site plan Ext
P 1 and the evidence it is evident there is a definite environmental as well as functional unity between the two portions namely the main 1 149 factory Portion A and the contractors  factory with the precincts Portion B even though separated by a wall in which there was a door which sometimes was closed
The work undertaken by the contractors and carried on in their portion of the area is surely componental to make it a part of the complex whole
The principal requirement of the definition namely that the work or the construction is undertaken on the premises of the factory and about which both sides join issue is satisfied in the present case on the evidence on records and we hold accordingly
We are also satisfied that the workers under the contractors are employees employed by the principal employer through the immediate employers  on the premises of the factory in work which is ordinarily the normal work of the factory or is at any rate preliminary to the work or which is certainly incidental to the purpose of the main factory of the appellant
Mr Natesan laid great stress upon the requirement of a unity of control of the principal employer over the manufacturing process of the work undertaken by the contractors but it will be obvious from the facts found and the evidence noted below that the work is done on the premises of the factory
We need not examine this aspect in detail in view of the uncontradicted evidence of PW 1 as follows The work done in the Factory consisted of manufacture of granite stones for export
I found raw stones lying all over the surrounding area
I found that raw stones were moved to the premises marked B in exhibit P 1
I found that about 50 persons working at the spot
I learnt from the partners those 50 persons had been employed by two or three con tractors
Cutting and dressing of the stones were done by those fifty men
There were 1 sand blasting machine belonging to the partners and 2 Electric blower
Power was used in these machines
After the stones are cut and dressed they are removed to p remises A for designing and polishing
Final touches are then given to them in the premises B They are again brought back to premises A for packing and despatching
The premises A and B belong to the partners
Only a wall separated the two premises
There was a connecting door which appeared to have been closed
Again RW 2 also deposed that it is since last three years that I undertook the work of the second party ie the appellant
R W 1 partner of the appellant stated as follows in cross examination exhibit P 4 is the copy of the letter dated 19 3 63 written by PW 1 to me for copy of the agreement and plan
exhibit P 5 is my interim reply  
By Factory premises in exhibit P 5 1 meant both the portions A and B in exhibit p 1
Mr Natesan has referred to a decision of the Bombay High Court in Employees  State Insurance Corporation Bombay vs Raman Chittur Harihar Iyer1 but the High Court dealt in that case with the definition of employee prior to the amendment of the Act in 1966 and is of no 1 1957 I LLJ 267
150 aid to counsel
This case was also distinguished by this Court in Nagpur Electric Light  Power Co Ltd vs Regional Director Employees State Corporation Etc1 Counsel also relied upon a decision of the Delhi High Court in Employees  State Insurance Corporation vs Peter Sewing Machine Co etc2 dealing with the definition of factory  under section 2 12 of the Act
The High Court inter alia was posing a question in that case as to whether the whole or any part of the work of the contractors there consisted of any work which was ordinarily a part of the work of the factory or establishment of the principal employer and answered it in the negative on the finding of facts in that case that the contractors manufacture their goods independently and not as a part of the goods manufactured by the Peter Sewing Machine Company
On the facts of this case that question does not arise and we express no opinion thereon
The decision is therefore of no aid to the appellant in this case
The learned counsel further draws our attention to Ms Hindustan Construction Co Ltd vs Employees  State Insurance Corporation3 in which case the High Court remanded the matter to find out whether the work done at the site can be regarded as a manufacturing process 
We however do not fail to notice that the judgment did not take note of the complete definition of  employee under section 2 9 the first part of which is joined by a conjunctive and  with two clauses
Further the High Court is not correct in thinking that the definition of the word factory under the Factories Act is same as that of factory under the Employees  State Insurance Act which is of wider amplitude with an expanding horizon of objectives in the latter Act
It is not necessary however to consider
in this case if these factors may have affected the decision in the above case
At any rate the appellant does not derive any aid from this decision
The next decision in Nagpur Electric Light  Power Co Ltd supra relied upon by the appellant for the construction of the definition of employee under section 2 9 i of the Act is not of assistance to him since we are dealing with a case under section 29 ii
We of course notice that the High Court in this case held as follows at page 20 of the judgment  From the foregoing it is clear that the contractors have been executing the work which is ordinarily part of the work of the factory and that within the premises of the respondent factory
The definition clauses of immediate employer section 2 13 and employee section 2 9 11 contain the expression on the premises of a factory and not within it
Even so as detailed above after examining the evidence ourselves we are clearly of opinion 1 2 AIR 1970 Delhi 182
3 Assam  Nagaland 87
151 that the work of the contractors was undertaken by them on the premises of the factory which may not be the same thing as in or within the factory
We are further of the view that the entire site of the factory is a composite one containing portions A as well as B and there is no doubt that the contractors are the immediate employers  within the meaning of section 2 13 of the Act and the workers employed by them are employees under the Act
In the result the appeal fails and is dismissed with costs
PBR Appeal dismissed


Summary:
The appellants firm was carrying on the business of manufacturing and exporting polished granite memorial stones
The firm was a factory both under the Factories Act as well as under the Employees  State Insurance Act
Adjacent to this factory was another factory situated on the appellant s land leased out to two contractors who employed 50 workers in their factory for the purposes of cutting and dressing the granite stones
The granite stones unloaded outside the factory by the lorries were brought on the portion of the leased land and after cutting them they were sent back to the appellant s factory where they were designed and polished
The Employees  State Insurance Corporation claimed from the appellant a certain sum as the firms contribution on account of the workers employed by the two contractors described as immediate employers  under the Act
The Employees  State Insurance Court held that the contractors were not immediate employers  within the meaning of section 213 of the Employees  State Insurance Act and that they were independent contractors
On appeal the High Court held that the appellant was a principal employer and the contractors were the immediate employers under the Act
The High Court also held that the workers tinder the contractors were employees within the meaning of section 29ii of the Act
Dismissing the appeal to this Court HELD  1 The underlying aim of the Act is to insure the employees against various risks to their life health and well being and the charge is upon the principal employer even though he may get his usual work done through an intermediary who is described in the Act as immediate employer 
Any dispute between the principal employer and the immediate employer has to be settled between themselves de hors the employees and the Act charges the principal employer with the liability to pay the contribution not only of its own but also that of the employees subject to his right to deduct the employees  contribution from their wages under section 402 Of the Act
147A 2 On the findings of fact the work undertaken by the contractor s in the adjoining vicinity is preliminary or incidental to the work in the principal employer factory turning out the finished product for export
The work in the two places has intimate correlation and is a niece of an integrated whole and the said work by the contractors through their labour is ordinarily part of the work of the principal factory undertaken by the contractors
Their factory is situated in the premises of the appellant s factory which according to the definition clause includes the precincts thereof
In the instant case on an examination of the site plan and the evidence it is evident that there is a definite environmental as well as functional unity between the two portions namely the main factory and the contractors  factory with the precincts even though separated by a wall in which there was a door which sometimes was closed
The work undertaken by the contractors and carried on in their portion of the area is surely componental to make it a part of the complex whole
The principal requirement of the definition namely that the work or the construction is undertaken on the premises of the factory is satisfied in the present case
It therefore follows that the two contractors are immediate employers within the meaning of section 213 and the workers employed for cutting and dressing the granite stones by the immediate employers are employees within section 29ii of the Act
148B Employees  State Insurance Corporation
Bombay vs Raman Chittur Harihar Iyer1957 1 LLJ267Nagpur Electric Light and Power CoLtd
vs Regional Director Employees State Insurancea Corporation Etc  Employees 
143 State Insurance Corporation vs Peter Sewing Machine Co etc
AIR 1970 Delhi 182 and Ms Hindustan Construction Co Ltd vs Employees  State Insurance Corporation Assam  Nagaland 87 referred to