IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE J.B.KOSHY & THE HONOURABLE MRS. JUSTICE K.HEMA MONDAY, THE 5TH NOVEMBER 2007 / 14TH KARTHIKA 1929 MFA.No. 1466 of 2001(B) ----------------------- IC.9/2000 of ESI COURT, PALAKKAD .................... APPELLANT: ---------------- THE REGIONAL DIRECTOR, EMPLOYEES STATE INSURANCE CORPORATION, THRISSUR-680 020. BY ADV. SRI.T.P.M.IBRAHIM KHAN RESPONDENTS: --------------------- BABY FRANCIS, PROPRIETOR, M/S.WESTERN REFRIGERATOR INDUSTRIES, PALAKKAD. BY ADV. SRI.T.M.RAMAN KARTHA THIS MISC. FIRST APPEAL HAVING BEEN FINALLY HEARD ON 5.11.2007, THE COURT ON 05/11/2007 DELIVERED THE FOLLOWING: J.B.KOSHY & K.HEMA,JJ. ----------------------------------------- M.F.A.NO. 1466 OF 20O1 ----------------------------------------- Dated this the 5th day of November, 2007 JUDGMENT Koshy, J. This appeal is filed by the Employees State Insurance Corporation. The appellant insisted that the respondent should insure its employees under the E.S.I Act and issued notice demanding contribution. The respondent-applicant approached the E.I.Court contending that it is not a covered establishment and only 8 persons are employed in the establishment. If 10 or more persons are employed, coverage is necessary. It is contended by the E.S.I.Corporation that the two persons by name Manoj and Muhammed Ali are manufacturing and supplying parts of de-freezing machineries manufactured by the respondent and since they are doing the work in connection with the factory, they also should be counted for purpose of fixing employment strength in the factory. 2. Respondent establishment relied on the decision of this Court reported in Choisons v. E.S.I.Corporation (2005(3) KLT 1038) to argue that those two persons who are not working inside the premises are not covered in the E.S.I scheme. Considering the MFA.1466/01 2 decision of the Supreme Court reported in M/s.Hindu Jea Band, Jaipur v. Regional Director, Employees' State Insurance Corporation, Jaipur (AIR 1987 SC 1166), the learned Single Judge referred the matter to the Division Bench in M/s.Hindu Jea Band's case Honourable Apex Court only considered meaning of the expression 'shops' and nothing was considered on the issue concerned. It is not disputed that if 10 or more persons are not employed, the respondent-applicant's establishment would not be covered under the Act. It is also proved that only 8 persons are working in the factory. The two persons pointed out by the Corporation are manufacturing articles independently. The fact that those articles are purchased by the respondent-company will not make the manufacturers of the articles, the employees of the company. There is no supervision over their work. The E.I Court found that they are not employees of the factory. They are not working inside the factory. There is no supervision or control over their work. Therefore, even if they are manufacturing and supplying part of de-freezing machineries manufactured by the respondent, they are independently manufacturing articles, and they are not employees of the respondent establishment. Here, Section 2(9) of Employees' State Insurance Act defines 'employee' as follows: MFA.1466/01 3 “(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 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; 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 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 MFA.1466/01 4 (b) any person so employed whose wages (excluding remuneration for overtime work) exceed such wages as may be prescribed by the Central Government a month: Provided 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;” As per the definition, any person employed for wages for work in the establishment on any work connected with the administration of the factory or for the distribution or sale of the products of the factory or establishment, are covered under the definition and they need not be working inside the establishment. But, they should be employed for wages. If the persons are working inside the factory premises in a contract, they are liable to be counted as employees, if their work is supervised by the establishment. Employees employed by or through a contract is also covered if they are employed inside the factory premises or working outside the premises, but under the contract or supervision of the principal employer. Here, these two persons are not direct employees or employed by or through a contractor. They are not employed for wages. No wages are paid to them. They are free to make articles for others also. The said persons, Manoj and Mohammed, also were examined. They stated MFA.1466/01 5 that they are not employees of the establishment. They have not received any wages from the establishment. Their work is not supervised by the respondent or or any of the employees of the first respondent. Respondent has no disciplinary control over them. Another question referred to us is regarding the burden of proof. Here, the EI court considered the evidence adduced by both parties and held that establishment of the respondent was not a covered establishment because only 8 persons were employed. Applicant establishment adduced evidence and examined Pws 1 to 4 and filed documents to establish their contentions. E.S.I. Corporation adduced evidence by examining RW1 and produced inspection reports etc. Both evidence were considered and E.I.Court came to the conclusion hat applicant establishment is not a covered establishment as they are employing only 8 employees. It is a finding of fact. It is true that when the respondent approached the E.I.Court with the contention that demand for Employees Insurance Corporation is not correct and they are not a covered establishment, it is for the applicant establishment to prima facie prove that they are not employing 10or more persons. When it was proved that they are employing only 8 persons, it is for the corporation to prove that two persons as alleged by them are employees of the company even though they are not working in the premises of the establishment. Therefore, they MFA.1466/01 6 cannot be added to counter the strength of the establishment. When both sides adduced evidence, it is for the court to consider evidence and arrive at a conclusion. We are of the opinion that the finding of the E.I Court that the respondent-applicant's establishment is only employing 8 persons and it is not a covered establishment is a finding of fact based on evidence and no substantial question of law arises for consideration in the appeal. The appeal is dismissed. J.B.KOSHY, JUDGE K.HEMA, JUDGE vgs. MFA.1466/01 7 J.B.KOSHY & K.HEMA, JJ. ------------------------------ M.F.A.NO. 1466 OF 2001 ------------------------------ JUDGMENT 5.11.2007