IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE HARUN-UL-RASHID MONDAY, THE 21ST FEBRUARY 2011 / 2ND PHALGUNA 1932 Ins.APP.No. 37 of 2009() ----------------------------------- IC.NO.58/2005 OF EMPLOYEES' INSURANCE COURT, ALAPPUZHA .................... APPELLANT/APPLICANT ------------------------------------- M/S.BHARAT PETROLEUM CORPORATION LIMITED, (FORMERLY KOCHI REFINERY), POST BAG 2, AMBALAMUGAL, REPRESENTED BY GENERAL MANAGER (HR). BY ADV. SRI.E.K.NANDAKUMAR. SRI.A.K.JAYASANKAR NAMBIAR. SRI.K.JOHN MATHAI. SRI.P.BENNY THOMAS. RESPONDENT/RESPONDENT: -------------------------------------------- THE REGIONAL DIRECTOR, EMPLOYEES STATE INSURANCE CORPORATION, PANCHDEEP BHAVAN, N.S.ROUND, THRISSUR-20. BY ADV. SRI.THOMAS MATHEW NELLIMOOTTIL. THIS INSURANCE APPEALS HAVING BEEN FINALLY HEARD ON 21/02/2011, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: rs Ins.APP.No. 37 of 2009 ORDER ON I.A. NO.2359/2009 IN I.N.A.P. NO.37/2009 DISMISSED 21/02/2011. SD/- HARUN-UL-RASHID, JUDGE //TRUE COPY// P.S. TO JUDGE rs HARUN-UL-RASHID,J. ------------------------------- INSURANCE APPEAL. NO. 37 OF 2009 ------------------------------- DATED THIS THE 21ST DAY OF FEBRUARY, 2011 JUDGMENT The substantial questions of law formulated in the appeal are as follows: “i) Whether the Employees' Insurance Court was legally correct in upholding the demand for contribution for the payments made in connection with the guest house situated 3000 kms. away from the factory when the appellant's establishment is a factory and was coverable under Section 1(4) of the ESI Act? ii) Whether the caretakers can be considered as employees of the appellant and the relationship between the parties is contract for service and not contract of service? iii) Whether the guest house caretakers can be considered as employees of the appellant in the absence of supervision or control by the appellant or its agent or officers over them? iv) Whether the retainer charges paid to the guest house caretakers of the guest houses situated 3000 kms. away from the factory is wages as defined in Section 2(22) of the ESI Act?” -2- Insurance Appeal.No.37/2009 2. Applicant in I.C.No.58/2005 on the file of the Employees' Insurance Court Alappuzha is the appellant. I.C.No.58/2005 is an application submitted by the appellant for a declaration that the assessment and demand of Rs.27,625/- towards contribution on payments made to the caretaker-cum-cook at the Delhi guest house for the period from 3/1998 to 8/2001 are unsustainable. The Insurance Court dismissed the application and declared that the caretaker-cum-cook attached to the Delhi guest house will come within the purview of 'employee' as per Section 2 (9) of the Employees State Insurance Act ('for short ESI Act') and the payments made to him constitute wages and therefore the impugned assessment and demand of Rs.27,625/- towards contribution in respect of one caretaker-cum-cook at Delhi guest house for the period from 3/1998 to 8/2001 are legal and proper. This appeal is directed against the said judgment. The parties hereinafter are referred to as the applicant and respondent as arrayed in the Insurance Case. 3. The common case of the party is that the applicant -3- Insurance Appeal.No.37/2009 namely, M/s. Bharat Petroleum Corporation Ltd. (Formerly Kochi Refinery) is a factory covered under the E.S.I. Act, but its regular employees are exempted from the provisions of the said Act. The Insurance Inspector in his report dated 29/10/2004 stated that the applicant has booked Rs.4,25,000/- towards payment to the caretaker-cum-cook at the Delhi guest house and an amount of Rs.27,625/- is payable as contribution in this regard. The applicant approached the ESI Court assailing the assessment and demand. 4. The applicant contended that there was no employer- employee relationship between the applicant and the caretaker-cum- cook of their guest house, that the relationship was that of principal to principal, that the applicant had no control or supervision over the caretaker-cum-cook and that the caretaker-cum-cook is not an employee of the applicant as per Section 2(9) of the E.S.I. Act. It is also contended that the claim made to the caretaker-cum-cook is retainer fee, which is not wages as per Section 2(22) of the E.S.I. Act. Therefore, the applicant submits that the assessment and demand of contribution are arbitrary and unsustainable. -4- Insurance Appeal.No.37/2009 5. The respondent contended that the guest house was maintained by the applicant to accommodate their officers on tour and the caretaker is engaged to manage the affairs of the guest house. According to the respondent, the caretakers are persons employed directly by the applicant for their business purpose and therefore the relationship is that of employer-employee and not that of principal to principal. It is also contended that the payments made to them are wages. The Insurance Court examined the contentions of the parties with reference to the provisions of the Employees Insurance Act and the legal principles laid down by the court. The court also appreciated the documents produced by the applicant as Exts.P4, P5 and P6. The Insurance Court took the view that the caretaker is directly employed. After considering the contentions of the parties and the materials on record, the Insurance Court held that the caretaker-cum-cook, who is a provisional employee, is directly employed by the applicant in connection with the work, which is incidental to the work of the factory and therefore, he need not execute the work under the control and -5- Insurance Appeal.No.37/2009 supervision of the applicant or his agent. It is further observed that when the caretaker-cum-cook is directly employed, he need not work in the premises of the factory and therefore, need not have close control and supervision over his work as per sub section (1) of Section 2(9) of the E.S.I. Act and that all the remuneration paid in cash to an employee as per the terms of contract of employment express or implied are wages. Consequently, the retainer fee paid to the caretaker-cum-cook can be considered as wages. The court below dismissed the application and declared that the caretaker- cum-cook attached to the Delhi guest house will come within the purview of term 'employee' and the payment made to him as wages. 6. The applicant has produced Exts.P4, P5 and P6 which are copies of contract arrived at between the various caretakers and the applicant. Ext.P4 is extracted by the Insurance Court in page 5, 6 and 7 of the judgment. Ext.P4 shows that the applicant-Company awarded the caretaker contract for the work on the terms and conditions stated thereon. The applicant invited tenders from qualified and experienced personnel and awarded the maintenance -6- Insurance Appeal.No.37/2009 of the guest house by the most suitable persons. The caretakers are self-employed persons. Ext.P4 contract is made for the purpose of carrying out certain works of the applicant. It may not be proper to treat Ext.P4 as an appointment order. By no stretch of imagination, a contractor, who had agreed to maintain the guest house, cannot be termed as an employee of the applicant-Company. The evidence in this case indicates that the contractors are given monthly consolidated amount called 'retainer charges' for the maintenance of the guest house. The evidence also indicates that the functioning of the guest house was not in any way incidental to the activities of the factory. The definition of the term 'employee' takes in its fold, not only the employees directly engaged by the employer, but those who are placed at its disposal by an agency known as immediate employer. The term 'immediate employer' is defined under sub section 13 of Section 2 of the ESI Act. The materials on record will show that the applicant is not a principal employer. The caretakers can only be considered as persons, who entered into a contract for service. The retainer fee made to such -7- Insurance Appeal.No.37/2009 contract for services would not attract the provisions of the ESI Act. For another reason also the impugned order cannot stand. It is not disputed that the regular employees of the applicant have been exempted from the provisions of the ESI Act. Therefore, no ESI contribution need be remitted to the guest house caretakers. The impugned judgment of the Employees Insurance Court is liable to be set aside, as it is contrary to law. In the circumstances, the appeal is allowed. The impugned judgment is set aside and I.C.No.58/2005 is allowed. It is declared that the demand of Rs.27,625/- towards contribution on payment to the caretaker-cum-cook at Delhi guest house for the period from 3/1998 to 8/2001 is unsustainable. There will be no order as to costs. HARUN-UL-RASHID, Judge. kcv.