1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY CIVIL APPELLATE JURISDICTION FIRST APPEAL NO. 1440 OF 2005 Ashrafiya and Company (M/s. Raymond Retail shop) ........Appellant versus Employees State Insurance Corporation........ Respondent. Mr. Amol Gite i/b A.V. Anturkar adv. for the Appellant Mr. M.V. Jayakar i/b. M. V. Jaykar & Co. adv. for the respondent CORAM: A. P. DESHPANDE, J. DATED : 14th JANUARY, 2009. P.C.: 1. This appeal is directed against the judgment and order passed by the Employees Insurance Court at Pune dated 16-12-2002 rejecting the application (ESI) No.11/96 which in turn questioned the correctness of an order of recovery passed by the Employees State Insurance Corporation under section 45-A of the ESI Act. 2. The appellant's establishment viz the premises of Ashrafiya & Company was visited by ESI Inspector Juneja with a view to carry out the verification under the ESI Act. During the visit and on verification of the attendance register, he found 17 employees were shown in the attendance register whereas on 2 physical verification he found eight more persons working in the applicant's establishment. He recorded their names in his report which has been proved and exhibited. The inspector obtained the signatures of the employees on the report. The employer refused to sign the same and hence inspector made an endorsement in that regard. Having found that there are in all 25 employees working with the appellant, show cause notices were issued to the appellant, calling upon the appellant to explaine and by affording an opportunity of hearing, recovery order has been passed on reaching the conclusion that more than 20 persons were employed by the appellant. It is the case of the appellant that in the same premises, wherein the appellant is operating, there are other two companies which are also operating and the same are by name Ashrafiya & Company and La-Mode Tailors. According to the appellant, the additional eight employees found working with the appellant were not the employees of the appellant but they were employees of another concern, by name La-Mode Tailors. It is not in dispute that all the three establishments are being managed and owned by the members of the family i.e Mushtaq Parwani family. It is also not in dispute that the partners in one establishment are the partners in the other establishment. Thus in substance, the three units are being owned and managed by the same group. In this state of facts the learned counsel appearing for the respondent ESI Corporation has raised a preliminary objection about 3 maintainability of the present appeal. According to the learned counsel under section 82(2) of ESI Act, an appeal would only lie to the High Court if the same involves a substantial question of law and not otherwise. Bare reading of section 82 makes it amply clear that no appeal lies from an order of Employees Insurance Court except to the High Court when it involves substantial question of law. In the appeal memo, as filed by the appellant, no substantial question of law was framed. However at a later point of time the learned counsel for the appellant has framed the questions which are termed as substantial question of law. In substance the questions framed emphasise that the court below should have applied the test of `functional integrality' to find out as to whether the three units are different units or they constitute one unit. The contention of the appellant is that the additional eight persons who were found working at the time of inspection in the establishment of the appellant were employees of La-Mode Tailors. 3. The learned counsel for the respondent has placed reliance on a Division Bench judgment of this Court interpreting Section 82(2) of the Employees State Insurance Act reported in 1995 CLR 446. In the said case as well an identical question fell for consideration of the Division Bench. In substance, the question that fell for consideration of the Division Bench was whether the two concerns carrying on business were to be treated as one or separate and the Court concluded by holding 4 that such an exercise is nothing but fact finding, which is required to be done on the basis of appreciation of evidence on record. The Court proceeded to hold that whether two units constitute the same establishment or are different for the purpopses of ESI Act, would not be a substantial question of law as envisaged by section 82(2) of the Act. True it is, that the ESI Court was called upon to examine as to whether the eight additional persons, who were found working with the appellant were infact the employees of the appellant or were employees of the other unit by name La-Mode Tailors, would obviously be a question of fact and is not a question of law much less subsstantial. The ESI Court, having found on facts that the two units constitute one establishment and having further found that the eight additional persons were working with the appellant has recorded a finding accordingly. No question of law emerges for consideration in the said fact situation. Thus, upholding the prleiminary objection, I conclude that in the absence of any substantial question of law the First Appeal is not maintainable. Assuming that the appeal is maintainable, I proceed to deal with the contentions raised by the appellant. The Insurance Court have given due weightage to the following facts while reaching to the conclusion that there is integrality between the ownership, administration and management of the two units. i) It is an admitted position that there is only one entrance 5 door for approaching the three units viz. the appellant's unit, Ashrafiya & Company and La-Mode Tailors, and there are no separate entrance for all the three units so that even if one is shut down the other can work. Unless and until the entrance door is opened, none of the units can function. ii) The ownership is with the same group of persons so also is the case in regard to the management of the business. The nature of the business carryied on by the three units, are complimentary to each other, in as much as the appellant is carrying on business of sale of clothes with an exclusive business from Raynmonds. Ashrafiya & Company is carrying similar business of readymade garments whereas La Mode Tailors deals in tailoring of the cloth. Thus the activities of the business of the appellant and other two units are complimentary to each other. Iii) What is relevant to note is that if the appellant was in control of the records of the La Model Tailors in view of the fact that they are controlling the said business as well as owners and are in management, the appellants could have placed on record the registers maintained by La Mode Tailors to point out that the names of the additional eight employees who were found to be working at the time of inspection carried out by the inspector, were borne on the registers of La Mode Tailors but the appellants did not produce the said evidence and there is nothing on record except bare statement of the appallent that the eight 6 additional employees were borne on the register of La Mode Tailors. The question as to whether the two units constitute the same establishment or whether they are distinct, also need not be gone into for the obvious reason that the inspector of the Corporation has noticed the presence of eight persons at the time of visit and obtained their signatures on the report, which report has been duly proved and exhibited. Per contra no evidence has been led by the appellant to show that the said eight persons were infact borne on the register of La Mode Tailors. Hence on facts the conclusion drawn by the court below that the appellant is liable to make contribution to the fund cannot be faulted with. 4. The learned counsel for the appellant has submitted that in every case the test of functional integrality as explained in Associated Cement Company's case has to be applied and thus places reliance on the judgment reported in (1) Pratap Press etc. Vs. Their Workmen reported in AIR 1960 S.C. 1213 and the other judgment in Ebrahim Currim & Sons Vs. The Regional Provident Fund Commissioner, Mah & ors reported in 1993(3) BCR 246. Per contra the learned counsel for the respondent has placed reliance on a judgment in the case of Royal Talkies, Hyderabad and ors Vs. ESIC reported in 1978(4) SCC 204 so also on a judgment of a Division Bench of Kerala High Court in case of Madona Textiles Vs. ESIC, reported in 2000-II-LLJ Kerala page 322. Perusal of the judgments referred to by the 7 learned counsel, it can be safely conclude that the test of functional integrality is not a sole test. Various tests are laid down and depending upon the facts and circumstances, the test could be applied with a view to find out as to whether the units constitute the same establishment or otherwise. Various tests such as test of Geographical proximity, unity of ownership and control, common management etc. and various other factors will have to be taken into account. Having regard to the fact that there is only one entrance door for having access to the three units, coupled with the fact that all the units are owned and managed and under the control of the same group of persons, it has to be held that additional eight employees found to be working with the appellant are the employees of appellant for the purposes of this Act. It has also to be held that there is functional integrality between the appellant and the unit carrying on business in the name and style of La Mode Tailors. 5. In the result, the impugned judgment does not call for any interference. There being no merit in the appeal the same is dismissed. (A. P. DESHPANDE, J.)