IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE M.N.KRISHNAN FRIDAY, THE 17TH OCTOBER 2008 / 25TH ASWINA 1930 Ins.APP.No. 51 of 2006(A) ------------------------ IC.21/1999 of E.I.COURT, KOLLAM .................... APPELLANT/PETITIONERS ----------------------------------- 1. AYOOR KSHEERA VYAVASAYA CO-OPERATIVE SOCIETY LTD.NO.15(D) P.O.AYOOR, KOLLAM REPRESENTED BY ITS SECRETARY. 2. MANAGING COMMITTEE OF AYOOR KSHEERA VYAVASAYA CO-OPERATIVE SOCIETY LTD.NO. 15(D) P.O. AYOOR, KOLLAM REPRESENTED BY ITS PRESIDENT. BY ADV. SRI.T.M.CHANDRAN SRI.S.SUJITH RESPONDENT/RESPONDENT(S): ------------------------------------ 1. THE INSURANCE INSPECTOR, E.S.I. OFFICE, KOTTARAKKARA. 2. REGIONAL DIRECTOR, E.S.I. CORPORATION, PANCHADEEP BHAVAN, NORTH SWARAJ ROUND, TRICHUR-680 020. 3. DEPUTY DIRECTOR, REGIONAL OFFICE, (KERALA) E.S.I. CORPORATION, PANCHADEEP BHAVAN, N.S.ROUND TRICHUR-680 020. ADDL. RESPONDENTS IMPLEADED: ADDL. R4: N. PUSHPAVATHYAMMA, D/O NARAYANA PILLAI, AYUR KSHEERA VYAVASAYA CO-OPERATIVE SOCIETY LTD.NO.Q.15(D) AYUR-691533, KOLLAM DISTRICT KERALA STATE. ADDL.R5: BENSAMMA JOHN D/O JOHN, DO. DO. ADDL.R6: N. SOMAN, S/O NANU, DO. DO. ADDL.R7: K.Y. CHACKO, S/O YOHANAN, DO. DO. ADDL.R8: N. GOPINATHA KURUP, S/O NARAYANA KURUP, DO. DO. ADDL.R9: M. ACHAN KUNJU, S/O MATHEW, DO. DO. ADDL.R10: M.THOMAS, S/O MATHAI, DO. DO. ADDITIONAL RESPONDENTS 4 TO 10 ARE IMPLEADED VIDE ORDER DATED 18.8.07 ON I.A. 1749/07. ADV. SRI.P.SANKARANKUTTY NAIR, SC, ESI CORPN FOR R1TO R3 SRI.V.E.ABDUL GAFOOR FOR ADDL.RES. SRI.A.MOHAMMED SAVAD FOR ADDL.RES. THIS INSURANCE APPEALS HAVING BEEN FINALLY HEARD ON 17/10/2008, THE COURT ON THE SAME DAY PASSED THE FOLLOWING: M.N. KRISHNAN, J. = = = = = = = = = = = = = = INS.APPEAL NO. 51 OF 2006 = = = = = = = = = = = = = = = Dated this the 17th day of October, 2008. J U D G M E N T This appeal is preferred against the judgment of the Employees Insurance Court, Kollam in I.C.21/99. Appellants herein moved an application for a declaration that the applicants' establishment is not liable to be covered under the E.S.I Act. The E.I. Court on consideration of the materials held that it is liable to be covered and the applicants are bound to comply with the provisions of the Act. It is against that decision the applicants have come up in appeal. 2. Heard the counsel for the appellants as well as the respondents. The points that are raised for consideration are; (1) Whether the Court below was right in holding that the two units namely the milk society and the milk products can be clubbed together Ins. Appeal 51 OF 2006 -:2:- (2) whether there are 10 employees as contemplated u/s 2(12) of the E.S.I. Act to attract the coverage and (3) Whether the Court below was right in considering the proviso to S.1(4) and holding that E.S.I benefits are more beneficial. 3. Let me first consider the question of clubbing. The society was registered as one in 1973 and it has decided to start the factory and it was named as Surabi Milk Products. There is no dispute that there is a motor working with the aid of power and a chilling plant. It is contended by the learned counsel for the appellant that procuring and selling of milk and making of products are two different entities which have no interconnection and therefore it cannot be clubbed together. Admittedly, the society is registered as a Ksheera Vyavasaya Co-operative Society which means it will deal with milk and milk products. Learned counsel would submit that the Vyavasaya does not indicate any factory but only procurement of milk. But from the Governmental orders it is very clear that there is a milk society and there is also sanction granted to produce milk products and it is named as Surabi Milk Products. Whether it Ins. Appeal 51 OF 2006 -:3:- is available can be seen from the evidence of the society Secretary extracted in page 5 of the order. He has submitted that the society as well as the Surabi Milk Products are in one building but they are working independently. It is also submitted that the building belongs to the society. The Director Board of the society as well as the Surabi are one and the same. It is further deposed that the officers of both are functioning similarly and the society is purchasing the milk and selling and that there is a chilling plant with the aid of electricity. It is also further submitted the attendance is marked in one attendance register but under two separate heads. He would submit that he makes attendance as Secretary of Surabi as well as society. 4. How and what are the materials to be considered for clubbing the units have been considered by a Division Bench of this Court reported in Madona Textiles v. E.S.I. Corporation 2000 (2) KLT 741). The Division Bench held that, “The tests to be applied in such cases could be one of the geographical proximity, unity of ownership, management and control, unity of employment and conditions Ins. Appeal 51 OF 2006 -:4:- of service; functional integrality, general unity of purpose, common management and the like. The purpose is to find out the true relationship between the parts, branches, units etc. If in spite of the apparent veil, they constitute one integrated whole, it can be said that the establishments in question are actually one.” 5. Now, with these principles on mind let us find out whether the present case satisfies the same. As stated by me earlier the establishment has been registered as a corporate body and it has started with procuring and selling milk and later extended the business to milk products. They are functioning under the same roof and the supply of materials for the factory necessarily should be from the society procurement. Similarly, the Director Board is the same, the secretary is the same and there is interconnection between the work of the society. So without any hesitation it can be held that the units are so integrated coming under the same control, management and supervision within the objects of the formation of the society and I do not find any mistake committed by the Court below in arriving at a Ins. Appeal 51 OF 2006 -:5:- decision that it can be clubbed together for the purpose of E.S.I. Act. So the said finding of the E.I. Court is confirmed. 6. The next question is regarding the number of employees. U/s 2(12) of the E.S.I. Act when there is an establishment with 10 workers and it is working with the aid of power then u/s 2(12)(i) it comes within the ambit of the E.S.I Act. The learned counsel for the appellant would contend before me the number of employees of 10 is including the Secretary and he would further contend that the salary of the Secretary as on that day will take him out of the purview of employee u/s 2 (9) of the Act. If he is excluded then it will be only 9 workers which will take out the establishment from the purview of the E.S.I Act. Unfortunately, the particulars regarding the salary, the date on which it is to be made applicable are not available before the E.I. Court which made it impossible for that Court to consider the same. But it is a crucial matter that requires consideration. Therefore I permit the appellant herein to produce evidence to substantiate that contention to find out whether the Secretary will come within the ambit of an employee as contemplated u/s 2(9) of the Act. Ins. Appeal 51 OF 2006 -:6:- 7. Then the learned counsel strongly submits before me that the E.I. Court has only superficially considered about the proviso to S.1(4) and he had brought to my attention to the Rules of Kerala Co-operative Employees' Welfare Fund and its constitution and administration published as a G.O. dated 30.9.86. Sec.1(4) proviso of the E.S.I. Act makes it clear that nothing contained in the sub section shall apply to a factory or establishment belonging to or under the control of the Government whose employees are otherwise in receipt of benefits substantially similar to or superior to the benefits provided under this Act. So what is contemplated is there must be a comparative study of the benefits one will derive under the E.S.I Act as well as the Rules of the society and if on a comparison it is found that the Rules of the society provides better benefit then necessarily the proviso must come to the rescue of the society. Learned counsel had drawn my attention to Rule 19, Rule 20 as amended, Rule 26 as well as R.26(f)(g) which all prescribes benefits to the employee, the employees' family members etc. Unfortunately this has not been placed before the E.I. Court for the purpose of consideration. So an exhaustive Ins. Appeal 51 OF 2006 -:7:- consideration of the benefits that one can derive under the E.S.I. Act and also under the rules referred to is necessary to decide the question of the entitlement of the above proviso to S.1(4) of the E.S.I. Act. Unfortunately only a few classes had been quoted out and conducted. It may not be sufficient to satisfy that purpose. Therefore the said finding also requires interference and therefore it is vacated and directed to be reconsidered. In the result the appeal is disposed of as follows: (1) The finding that the units can be clubbed is confirmed. (2) E.I. Court is directed to consider whether the Secretary of the Society is to be taken as an employee for the purpose of E.S.I. Act. (3) The E.I. Court is also directed to consider the applicability of the proviso to S.1(4) of the E.S.I Act in the light of the observations made in the order. (4) Both the parties are permitted to produce documentary as well oral evidence in support of their respective contentions and the matter be decided in accordance with law. Ins. Appeal 51 OF 2006 -:8:- (5) The E.I. Court shall issue notice to the parties fixing the date of appearance. M.N. KRISHNAN, JUDGE. ul/-