1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY CIVIL SIDE APPELLATE JURISDICTION FIRST FIRST FIRST APPEAL NO.844 OF 2004 APPEAL NO.844 OF 2004 APPEAL NO.844 OF 2004 Regional Director, Employees State Insurance Corporation Appellant vs. Tulsiani Chambers Premises Co-operative society Respondents Mr.R.M.Jayakar with Miss Dimple Mehta i/b.M/s.M.V.Jaykar & Co. for the appellant. Mr.Rajesh Gehani for the respondents. ALONG ALONG ALONG WITH WITH WITH FIRST FIRST FIRST APPEAL NO.510 OF 2006 APPEAL NO.510 OF 2006 APPEAL NO.510 OF 2006 WITH WITH WITH CIVIL CIVIL CIVIL APPLICATION NO.1377 OF 2006 APPLICATION NO.1377 OF 2006 APPLICATION NO.1377 OF 2006 Regional Director, Employees State Insurance Corpn. Appellant vs. Agra Road Commercial Premises Co-operative society Limited. Respondents Mr.Rajesh Gehani for the appellant. Mr.H.V.Mehta for respondent no.1. WITH WITH WITH FIRST FIRST FIRST APPEAL NO.309 OF 2006 APPEAL NO.309 OF 2006 APPEAL NO.309 OF 2006 Regional Director, Employees State Insurance Corpn. Appellant vs. Dalamal Towers Premises Co-op. Society Ltd. Respondents Mr.H.V.Mehta for the appellant. Mr.S.C.Naidu with Mr.M.M.Gujar, Mr.Sidharth Ingale and Mr.Mikhail Behl i/b.M/s.C.R.Naidu & Co. for the respondents. WITH WITH WITH FIRST FIRST FIRST APPEAL NO.823 OF 2006 APPEAL NO.823 OF 2006 APPEAL NO.823 OF 2006 Regional Director, 2 Employees State Insurance Corporation Appellant vs. Arun Chambers Commercial Premises Co-op.Society Ltd. Respondents Mr.H.V.Mehta for the appellant. Mr.S.C.Naidu with Mr.M.M.Gujar, Mr.Sidharth Ingale and Mr.Mikhail Behl i/b.M/s.C.R.Naidu & Co. for the respondents. WITH WITH WITH FIRST FIRST FIRST APPEAL NO.724 OF 2004 APPEAL NO.724 OF 2004 APPEAL NO.724 OF 2004 Employees State Insurance Corporation Appellant vs. M/s.Visvesvaraya Industries Research & Development Centre Respondents Mr.R.M.Jaykar with Miss.Dimple Mehta i/b.M/s.M.V.Jayakar & Co. for the appellant. Mr.R.R.Pai i/b.M/s.Sanjay Udeshi & Co. for the respondents. WITH WITH WITH FIRST FIRST FIRST APPEAL NO.742 of 2004 APPEAL NO.742 of 2004 APPEAL NO.742 of 2004 M/s.Visvesvaraya Industrial Research & Development Centre Appellant vs. Employees State Insurance Corpn. Respondents Mr.R.R.Pai i/b.M/s.Sanjay Udeshi & Co. for the appellant. Mr.R.M.Jaykar with Miss.Dimple Mehta i/b.M/s.M.V.Jayakar & Co. for the respondents. WITH WITH WITH FITRST FITRST FITRST APPEAL NO.2019 OF 2006 APPEAL NO.2019 OF 2006 APPEAL NO.2019 OF 2006 The Regional Director, Employees’ State Insurance Corporation, Mumbai 400013. Appellant vs. Shree Nirmal Commercial Limited Mumbai Respondents Mr.H.V.Mehta for the appellant. 3 Mr.S.C.Naidu with Mr.M.M.Gujar, Mr.Siddharth Ingale and Mr.Mikhail Behl i/b.M/s.C.R.Naidu & Co. for the respondents. CORAM : ANOOP V. MOHTA,J. DATED : 2nd November, 2007 JUDGMENT: In First Appeal No.844/2004 First Appeal No.844/2004 First Appeal No.844/2004, the Appellant is a Corporation incorporated under Employees State Insurance Act, 1948 (for short, ‘ESI Act’). The respondent is a co-operative society incorporated and registered under the Maharashtra Cooperative Societies Act, 1960 having its registered office at Tulsiani Chambers, 212, Nariman Point, Bombay 400 021. 2. On 2.4.1986 an Officer from the Appellant visited the respondent’s premises for inspection. On 8.9.1988, the appellant sent a letter to furnish complete and correct information in respect of the respondent society. On 4.1.1989, the appellant issued a letter to the respondents reminding them of the unpaid dues. On 5.1.1989, the appellant’s officer visits the respondent’s premises to verify the records. 3. On 10.1.1989, the appellant issues a letter to the respondents informing them that they are covered by the ESI Act and requesting immediate compliance. On 17.1.1989 a show cause Notice by the appellants issued 4 to the respondents in form C-18 and provided for a personal hearing on 30.1.1989. On 14.2.1989 a Recovery Order under Section 45-A passed by the appellants against the respondents. On 20.2.1989 the respondents replied to show cause notice. 4. On 28.3.1989 an application to the ESI Court Bombay made by the respondents. On 19.12.2003 the application was allowed and the respondent society held to be not coverable under the ESI Act. Therefore the appeal. 5. In First Appeal No.510/2006 First Appeal No.510/2006 First Appeal No.510/2006, in or about 1980, the respondent society was covered under the provisions of Section 1(5) of the ESI Act with effect from 1.10.1980 (Prov.) on the basis of O-1 form submitted by the respondent society and the preliminary survey report dated 29.10.1980 submitted by the appellant’s Inspector. 6. In 1986, the respondents society disputed the coverage by filling an application (ESI) No.81 of 1986 before the ESI Court, Mumbai. This application was dismissed for default. 7. In 1994, thereafter, the respondents society filed an application for restoration. On hearing the application, the Employees’ Insurance Court directed the respondent society to deposit the amount of contribution 5 claimed by the appellant Corporation in the Court. 8. On 20.9.1995, the respondent society complied with the order of the ESI Court and paid the contribution amount and further informed that they do not want to proceed in the matter in the EI Court. 9. On 26.7.1996, the appellant Corporation thereafter issued a notice to the respondents society for damages amounting to Rs.44,893/- for late payment of contribution for the period 4/86 to 5/90. 10. On 18.11.1999, the appellant Corporation passed an order under section 85-B for recovery of damages. On 26.4.2000, the appellant Corporation thereafter issued a demand letter claiming interest of Rs.1,33,051.69 for late payment of contribution for the period 1.10.1980 to 31.3.1986. On 26.4.2000, the appellant Corporation thereafter issued a notice under section 85-B proposing to levy damages of Rs.1,38,710/- for late payment of contribution for the period from 1.10.1980 to 31.3.1986. On 15.5.2000/7.6.2000, the respondent society disputed the claim for levy of damages. 11. On 20.6.2000 the appellant Corporation passed an order under Section 85-B levying damages of Rs.1,38,710/-. On 12.9.2000, since the respondent 6 society did not pay the amount, the corporation issued two Revenue Recovery certificates for recovery of a sum of Rs.44,893/- and Rs.1,38,710/- from the Respondent society. On 4.11.2000, the respondent society thereafter filed an Application (ESI) No.33 of 2000 challenging the coverage of the society and the subsequent claims of the corporation towards damages and interest on late payment of contribution and prayed for refund of the entire amount paid by the society for the period from 1.10.1980 till date along with interest at the rate of 18% on the ground that their establishment is not covered under the provisions of the ESI Act. 12. The respondent society deposited 50% of the amount claimed by the Corporation. On 7.11.2000, the respondent society obtained ex-parte stay order against the recovery proceedings from the EI Court. The appellant Corporation was not aware of the stay order and therefore recovery has already been effected through the Bankers of the respondent society prior to the intimation dated 13.11.2000 received from the respondent society about the stay order granted by the EI Court. 13. On 20.1.2006 the Employees Insurance Court, Mumbai after hearing both the sides by its judgment and order dated 20.1.2006 declared that the respondent society is not amenable and/or coverable under the ESI Act, and set 7 aside and quashed the order passed under section 85-B of the Act levying the damages and interest and demanding Rs.44,893/- and Rs.1,38,710/- for the period 4/86 to 5/90 and 1.10.1980 to 31.3.1986 and further directed the corporation to refund the amount recovered through the Recovery Certificates. 14. Being aggrieved by the judgement and order dated 20.1.2006 the appellant corporation has approached this Hon’ble Court by filing the present first Appeal under Section 82 of the ESI Act praying for quashing and setting aside the said judgement and order dated 20.1.2006 passed by the Employees’ Insurance Court at Mumbai in Application (ESI) No.33 of 2000. 15. In First Appeal No.309 of 2006, First Appeal No.309 of 2006, First Appeal No.309 of 2006, the appellant through its letter dated 23.09.1988 addressed to respondent asked to comply with the provisions of the ESI Act from September, 1988. The respondents filed an application under section 75 read with Section 1(5) of the ESI Act. The respondents therein asked for the relief of non coverage of respondent’s cooperative Society under the purview of the said Act. The Trial Court vide its order dated 23.04.2002, has allowed the application. 16. In First Appeal No.823 of 2006, First Appeal No.823 of 2006, First Appeal No.823 of 2006, on 10.06.1993 the 8 Insurance Inspector visited the Respondent society, verified the records and provisionally covered the Society under the ESI Act with effect from 1.4.1991, and directed the respondents to start compliance. On 15.09.1993 the appellant corporation communicated the coverage of the respondents society with effect from 1.4.1991 and directed to pay the contribution. The respondents paid a sum of Rs.3,22,269/- towards the contribution for the period from 1.1.1990 to 31.7.1998. The respondents disputed the coverage of the society in view of the judgement of the Hon’ble Bombay High Court in the matter of ESI Corporation vs. Adhyaru Industrial Premises Co-op. Society Ltd., and requested the appellant to withdraw the communication dated 15.09.1993. On 1.9.1998 the appellant informed the respondents that their society stands decovered and henceforth they are not required to comply with the provisions of the ESI Act. On 23.11.1998 the respondents addressed a notice to the appellant to refund the amount of Rs.3,22,269/- towards contribution paid by the respondents. On 24.12.1998, the appellant informed the respondents that the employees of the respondents have availed the benefits provided under the Act during the period of coverage and therefore the respondents are not eligible for refund of the contribution. Respondents challenged the decision of the Corporation by filing an application (ESI) No.22 of 9 2001 before the Employees’ Insurance Court, Mumbai, claiming refund of the contribution amount together with interest at the rate of 15%. On 25.10.2005, the Employees’ Insurance Court after hearing both the sides directed the Corporation to refund the amount of Rs.3,22,269/- with interest at the rate of 6% p.a. from the date of filing the Application in addition to the cost of Rs.2,000/-. Being aggrieved by the judgement and order dated 15.10.2005 the appellant begs to approach this Hon’ble Court by filing the present First Appeal under Section 82 of the ESI Act praying for quashing and setting aside the said judgment and order dated 15.10.2005 passed by the Employees’ Insurance Court at Mumbai in Application (ESI) No.22 of 2001. 17. In First Appeal No.724/2004, First Appeal No.724/2004, First Appeal No.724/2004, On 26.6.1970, the respondents incorporated under the Companies Act. On 18.9.1978, notification under section 1(5) of the E.S.I. Act. On 5.6.1990, letter to the respondents from the appellant asking to submit form C/1 and also a code number was provided. On 29.8.1990, reply by the respondents claiming that the ESI Act is not applicable. 18. On 7.11.1990, notice in form C/11 issued by the appellants to the respondents, whereby they were informed that they were covered under Section 1(5) of ESI Act as per Notification. 10 19. On 17.1.1991, an application was filed in ESI Court by respondents for various declarations. On 5.3.2004, the judgement was passed partly allowing the application. The Notice dated 7.11.1990 was set aside. 20. In First Appeal No.742/2004, First Appeal No.742/2004, First Appeal No.742/2004, the appellant is a company incorporated with a license under section 25 of the Companies Act, 1956. The appellant is basically a scientific research organization to organize, sponsor, promote, conduct or undertake scientific research in any area or field including research and development in India trade or industry. The appellant has established world Trade Centre at Mumbai as an object of public utility not involving carrying on any activity for profit. 21. The administration management is run by four members which are nominated by the Government of Maharashtra of which one is Industry Minister and Three Secretaries of the Urban Development Department. The appellant constructed a building known as World Trade Center, being the owner of the building Appellant looks after the maintenance and upkeep of the building. The appellant recovers the charges incurred by the appellant towards the charges of upkeep of building promise various members/lesdsees. On 7.11.1990 , the respondent 11 Corporation issued a notice to the appellant directing the appellant to cover the establishment of the appellant under the Employees State Insurance Act stating that the establishment of the appellant would fall within the ambit of "shop" brought within the purview of ESI Act by; Notification dated 18.09.1978 issued by the State of Maharashtra under Section 1(5) of the ESI Act. 22. The appellant inform the Regional Director of the respondent Corporation that the appellant cannot cover under the provisions of ESI Act in as much as the dominant activities of the appellant is research activity which would not constitute appellant a shop for the purpose of ESI Act. 23. On 17.01.1991, therefore, they filed an application under section 75 of the ESI Act being Application (ES ) No.18 of 1991 before the Employees Insurance Court, Mumbai. The respondent corporation opposed the said application by filing its written statement. On 05.03.2004 after hearing the parties the learned Judge of the Employees Insurance Court, Mumbai was pleased to partly allowed the said application. 24. In First Appeal No.2019/2006, First Appeal No.2019/2006, First Appeal No.2019/2006, on 20.10.1982 the Insurance Inspector of the Corporation visited the 12 respondents establishment for survey. 25. On 29.12.1984, the Corporation informed the respondents that on the basis of the inspection report the respondents company was covered under the provisions of Section 1(5) of the ESI Act, w.e.f. 12-11-1978, and to comply with the provisions of the said Act. 26. On 18.1.1985, the respondents informed the Corporation that their establishment is not a shop as defined in the Bombay Shops and Establishments Act, 1948. On 23.08.1985 the Corporation requested the respondents to produce the records for verification at the next visit of the Inspector on 25-11-1986. On 25-11-1986, the Insurance Inspector visited the premises and verified the records of the respondents. On 8.09.1988 the Corporation informed the respondents that on the basis of the inspection report, their establishment is covered provisionally under Section 1(5) of the ESI Act, w.e.f. 1.11.1983. On 22-02-1989, the Corporation informed the respondents to pay the contribution for the period from 1-11-1983 to 30-9-1988. 27. On 07-04-1989, the respondents challenged the letter dated 8.9.1988 before the Employees Insurance Court, Mumbai, by filing Application (ESI) No.65/89 which was allowed. Therefore, the present appeal. 13 28. As common points are involved in all these appeals under Section 82 of the ESI Act, 1948. filed by the appellant-ESIC as well as the respondents-society, therefore, by consent heard together & decided by this common Judgment. 29. The basic points urged by the appellants Corporation are: a) The most of the Societies and in some cases commercial limited companies engaged in respect of cleaning, sweeping, repairs, maintaining gardens, maintaining and sweeping of compound, pumping water, electrical services, lift services, security guards for the building/premises and other common services they are engaging/employing certain employees. Therefore, these employees are covered under Section 1(5) of the ESI Act. b) The societies or companies therefore ought to have paid the contribution (as provided under Section 40 of the ESI Act) treating the establishment of the respondents/societies as a "shop" within the meaning of the ESI Act. c) The further submission is that the employees employed by the respondents/societies are rendering economic 14 services and those services are in demand and, therefore, such respondents fall within the ambit of the meaning of "shop" notified in the State notification, specifically based upon the ratio laid down by the Hon’ble Supreme Court in the matter of Cochin Shipping Cochin Shipping Cochin Shipping Companies Companies Companies vs. ESIC, reported in 1993 II LLJ 795 and vs. ESIC, reported in 1993 II LLJ 795 and vs. ESIC, reported in 1993 II LLJ 795 and ESIC ESIC ESIC vs. R.K.Swamy, reported in 1993 I LLJ page 51. vs. R.K.Swamy, reported in 1993 I LLJ page 51. vs. R.K.Swamy, reported in 1993 I LLJ page 51. d) The further submission therefore was that the word "shop" though not defined in the ESI Act but needs to be given wider sense and wider meaning as defined in the Bombay Shops and Establishments Act. 30. It is prayed that the orders passed by the Employees Insurance Court, Mumbai be quashed and set aside. 31. Principally on an application filed by the societies under Section 75 of the ESI Act, the Employees Insurance Court framed the issue as under: Issue no.1: Does the applicant(society)/company prove that their establishment is not amenable to the provisions of ESI Act as shop under item No.III of Government of Maharashtra Notification dated 18.9.1978 and answered in positive and thereby allowed the application by holding that such society/company cannot 15 be viewed as shop for the purposes of ESI Act. In very few matter, as the order was otherwise, the society/companies have preferred the appeals. 32. The basic submissions of the respondents/societies are as under: "(1) The respondents are a Co-operative Society incorporated and registered under the Maharashtra Co-operative Societies Act, 1960 (hereinafter referred to as "the Societies Act’) and have their Registered Office as shown in the cause title at the above address. A co-operative housing society is classified into three categories for the purpose of the Societies Act, viz. Commercial, Residential or Industrial. It does not matter as to the purpose for which the premises is put to use as long as the members form a Society for the purpose of acquiring a premises. The premises is put to use by the member and not by the Society. The Society only allots the premises to the member. Irrespective of use of premises where 10 or more members come together and organize themselves to form a Society for the purpose of constructing/purchasing premises then such a Society is registered as a "Co-operative society" 16 for the purpose of the Societies Act and Rules framed thereunder. (2) It is not in dispute that the Society owns the building which has various units. The units in turn are allotted to individual members. The society is under a statutory duty to manage, administer and maintain the said building. The members of the Society elect a Committee which functions under the name and style of "Managing Committee" of the Society. The Managing Committee is responsible for ensuring that property taxes water tax and common electricity charges are paid to the concerned authorities within the stipulated time. To facilitate this payment each member is required to contribute, within the time prescribed by the byelaws of the society, his share of contribution in the aforesaid statutory outgoings. In addition to the above collection the Managing Committee ensures maintenance of the building and also the amenities such as lift etc. The facilities generally are to ensure that the Society building and premises are maintained. Towards this end services of a sweeper is engaged generally on part time basis. For the security of the building watchmen are engaged, who also in most of the societies attend to pumping of water and switching 17 on and off common lights and in case the building has a lift, a liftman is engaged. Salary/wages to these employees are collected from each member under the head "Society Maintenance Charges". It may be stated here that in such a Cooperative society "Maintenance Charges" collected are in accordance with its bye-laws. The Managing Committee is required to govern itself in accordance with the byelaws of the Society. The respondents have relied upon their byelaws in the original proceedings which are on record." 33. The learned counsel for the appellants have strongly relied on the following citations: (1) New India Maritime Agenciexs Pvt.Ltd. vs. State of Tamil Nadu reported in 1987 II CLR 590 Madras High Court Division Bench; (2) Hindu Jea Band vs. ESIC reported in 1987 I LLJ 502 SC (3) Kirloskar Consultants Pvt.Ltd. vs. ESIC reported in 2000 II LLJ 1657. (4) Kunnathunad C.S.Co-op. Socy vs. Reg. Director, ESI Corporation, 1989 1 CLR 516 (Ker.D.B.). 18 (5) Madras Govt. Servants Co-op. Socy. Ltd. vs. ESIC, 1997 I LLJ 606 (Madras). (6) Rasid Maskati & Ors. vs. Abbas Ali Hussaini M., 1999 III LLJ (Suppl) 331 (Bom.D.B.); (7) The Regional, ESI Corporation vs. The Taj Textiles Industrial Co.op. Socy., 1980 LIC 1301; (8) Karnani Properties Ltd. v/s. St. of West Bengal, 1994 III LLJ (Suppl.) 378; (9) Bangalore Water Supply & Sewerage Board vs. A. Rajappa & ors., 1978 Lab IC 467 (SC FB); (10) ESIC v. Hyderabad Race Club, 2004 (6) SCC 191; (11) TISCO vs. Chief Inspector Officer & ors., 2005 (9) SCC 605; (12) Tuticorin Thermal Station-Industrial Co-operative Society Ltd., Tuticorin vs. Deputy Regional Director, Sub-Regional Office, ESI Corporation, Madurai & ors., 2005-II-LLJ-398. (13) Southern Agencies vs. AP ESIC, 2001 - I-LLJ 161; 19 (14) Kirloskar Consultants Ltd. vs. ESIC, 2001 (1) SCC 57; (15) Cochin Shiping Co. vs. ESI Corporation, 1993-II-LLJ-795 (SC); (16) ESIC vs. R.K.Swami, AIR 1994 SC 1154; (17) ESIC vs. Indian Sewing Machine Co. Ltd., 1995(1) Bom. CR 342. 34. In answer to that the learned counsel for the respondents/society have relied on the following citations and documents: (1) First Appeal No.508/1990 dt.16-03-1995 -ESI Corporation vs. Adhyaru Industries (S.B.) (2) L.P.A. Stamp No.12742/1995 dt.19-11-1996, ESI Corporation vs. Adhyaru Industries (D.B.) (3) Dainik Deshdut & ors. vs. Employees State Insurance Corporation, 1995-I CLR-446; (4) Oral order dated 7th June, 2005 by D.G.Deshpande,J. in F.A.No.443/2005-The Regional Director, ESIC vs. Raheja Centre Premises Co.op. Society Ltd. (5) Management of SOM Vihar Apartment Owners Hsg. Maintenance Society Ltd. and Workmen c/o.Indian Engineering & General Mazdoor; 2001-I-LLJ-1413. (6) Asstt. Commissioner (Intelligence) vs. Nandanam Construction Co. , 1999(8) SCC 69; (7) S.P. Boarkar & ors., vs. N.T.C. (S.M.) Ltd. & ors., 2001-I-LLJ-1415; 20 (8) Kiran Industrial Premises Co-op. Society Ltd. vs. Janata Kamgar Union & ors., 2001-I-CLR-1046; (9) Sundarajas Kanyalal Bhathija vs. Collector, Thane, AIR 1991 SC 1893; (10) Maharashtra Rajya Suraksha Rakshak & General Kamgar Union vs. Security Guard’s Board for Greater Bombay & Thane & ors., AIR 2007(2) R-146; (11) Backbay Premises Co-op. Society Ltd. vs. Union of India & ors., 1997-II CLR 1075; 35. Admittedly, there is a notification, Exhibit "A" issued by the Urban Development Public Health Department, Mantralaya, Bombay under Section 1(5) of the Employees State Insurance Act, 1948 (ESI Act) dated 18th September, 1978, wherein the Central Government with effect from 12.11.1978 has extended all the provisions of the ESI Act to the establishments, mentioned in column "1" and the area specified in column "2" of the Schedule. The relevant portion of item No.3 is as under: "3. The following establishments wherein twenty or more employees are employed or were employed for wages on any day of the proceeding twelve months, namely, i) hotels; ii) restaurants; iii) shop; iv) cinemas, including preview theatres, and newspaper establishments as defined in section (2)(d) of the working Journalists (Condition of Service) and Miscellaneous provisions Act, 1955 (45 of 1955)." 21 36. Admittedly, the societies or the companies like the respondents/societies are not mentioned in the said item. Therefore, such societies cannot be treated as establishments even though twenty or more employees employed or were employed for wages on any day of the proceeding twelve months, as contemplated under the ESI Act. Therefore, unless extended and made applicable specifically by notification and/or by any other mode, the society and/or such companies cannot be treated as an establishment as defined under the ESI Act. Therefore, on the face of record, the respondent/societies/companies does not fall within the purview of the said notification and, therefore, the case that respondents/societies are amenable to the provisions of the ESI Act is unacceptable. 37. Admittedly, this Court in First Appeal No.508/1990 dated 16th March, 1995-ESI Corporation vs. Adhyaru Industrial Premises Cooperative Society Ltd., a judgment of Single Judge, based upon the other judgements held that the society was not engaged in any commercial activities and it was operating on no profit or no loss basis; and as it was formed to look after the interest of its members and as the only source of its income was the contributions collected from its members, therefore, refused to extend the provisions of ESI Act to such societies. This judgment was subsequently upheld by the 22 Division Bench consisting of the then Chief Justice Shri M.B.Shah and Justice A. V.