Case: Bombay Anand Bhavan Restaurant Vs. Dy. Director , Esi Corpn.

The appellant in Misc. First Appeal is a proprietorship concern and is engaged in the activity of making and selling coffee, tea and other beverages, and also sweets and savories. It is registered under Shops and Commercial Establishments Act. Sometime in the year 1997 and 1998, the appellant had purchased a bottle cooler and also a coffee roaster. According to the appellant, even after such purchase, it had not employed more than 10 or more employees.3) The appellant also states, that power is being used for operating coffee roaster and bottle cooler. It is its further case, that, since it has not employed 10 or more employees, the provisions of the Employees State Insurance Act, 1948 (hereinafter referred to as `ESI Act) are not attracted to the appellants establishment.4) The insurance inspector of the ESI corporation had visited the business premises of the appellant on 11.12.1998 and 07.01.1999, and inspected the records from April 1994 and had recorded that the appellant had employed more than 10 employees as on 01.04.1994, as per the records and was using power for the coffee roasting machine and the bottle cooler and as such the appellants restaurant stood covered under the ESI Act with effect from 01.04.1994, and therefore, the appellant should have started complying with the mandatory provisions of ESI Act.5) The Deputy Director of ESI corporation, by incorporating the report of the insurance inspector by his letter dated 18.02.1999, had directed the appellant to pay contributions from April, 1994, and submit Form-01 at the earliest. In response to the aforesaid letter, the appellant by its reply letter dated 08.03.1999, had brought to the notice of the Deputy Director of the Corporation, that, after purchase of bottle cooler and coffee roaster, had not employed more than 10 employees and, therefore, they are not covered under the provisions of the ESI Act and, therefore, they are not obliged to pay any contribution under the ESI Act.6) The Deputy Director of the Corporation by his subsequent letter dated 09.04.1999, had informed the appellant, that, on verification of the records produced before the insurance inspector, it was observed that the appellant is using LPG gas for preparation of coffee, tea and other beverages and, therefore, covered under the ESI Act and therefore, appellant has to comply with the statutory provisions of ESI Act, failing which contributions would be recovered by resorting to coercive measures as provided under the ESI Act. The proposal so made was objected to by the appellant, inter-alia, contending that the use of LPG gas cannot be equated with the use of power and as per the provisions of the ESI Act, it is only when electric power is used in manufacturing process with 10 or more employees, then alone ESI Act could be made applicable and, therefore, requested the authorities to drop the proceedings, as proposed in their letter dated 09.04.1999.7) Since the explanation offered by the appellant was not satisfactory, the authorities under the ESI Act, issued a demand notice, inter-alia directing the appellant to pay contribution for the entire period, i.e. from April, 1994 till the date of inspection. Since the appellant did not comply with the demand so made, the Deputy Director of ESI Corporation, passed an order under Section 45-A of the ESI Act, ordering the payment of contribution under the ESI Act for the aforesaid period.8) The appellant, being aggrieved by the aforesaid order, had filed an appeal before the ESI Court and Additional Industrial Tribunal, Bangalore, as provided under Section 75 of the ESI Act. The ESI Court dismissed the application/appeal, on the ground that use of LPG gas also amounts to use of electrical energy for the purpose of manufacturing activity and that the manufacturing activity is being carried on with the aid of power and since 10 or more employees were employed, the appellant is covered under the provisions of the ESI Act.9) The appellant had carried the matter further by filing Misc. Appeal before the High Court and the same was dismissed following the earlier ruling of the Court in ESI Corpn. Vs. Bhagat Ram and Sons and Anr., reported in 2001 (2) Labour Laws Journal 973.10) The appellant being aggrieved by the judgment and order passed by the High Court in Misc. First Appeal No.4152 of 2001, is before us in this appeal.11) The facts in Misc. First Appeal No.1954 of 2002 are more or less similar to the facts in the other appeal which we have already noticed. The only additional fact is that, the appellants in this appeal manufacture sweets and savories by using cooking gas and the number of employees employed by them was not more than 17 (seventeen) at any point of time. They were also unsuccessful before all the

Reasoning: 23) Both the appellants prepare sweets, savories and other beverages in their establishments. It is a settled position of law that cooking and preparing food items qualifies as manufacturing process. In the case of ESI v. Spencer and Co. [(1978) L.I.C 1759], the Madras High Court held, while dealing with the case of a hotel run by Sponsor and Company, that preparation of coffee, peeling of potatoes, makingetc., in a hotel, involve manufacturing process. Similarly the Bombay High Court in Poona Industrial Hotel Limited v. I. C. Sarin, [(1980) L.I.C. 106] held that the kitchen attached to Hotel Blue Diamond run by the Petitioners therein, should be considered as a factory for the purpose of ESI Act. Hence, it is beyond doubt that there is manufacturing process involved in the establishment of the appellants.24) We need not go into the details of the number of workers in the establishment of the appellants in the 12 months preceding the relevant period as the same has been proved beyond doubt. So, the essential question which comes up for consideration is whether there has been use of power in the aid of the manufacturing process. It is the contention of the respondent corporation that use of LPG gas amounts to use of power.25) The definition of `Power is in two parts. Firstly, it is electrical energy, and includes any other form of energy which is mechanically transmitted. The second part of the definition provides for exclusion from the definition of power, i.e., it does not include power generated by human or animal energy. The definition is wide enough to include all forms of energy which is mechanically transmitted. We will revert back to this definition little later after understanding what is LPG Gas and the mechanism employed while transmitting the energy from LPGLPG is stored in a cylinder fitted with a tube. Upon careful perusal of the definitions, which we have noticed earlier, it is clear that an LPG cylinder would qualify as an appliance which provides power. This power is transmitted by a tube which upon careful reading of the definition qualifies as transmission machinery as it is an appliance or device by which the motion of a primary mover is transmitted. In fact an analogy between the transmission of electricity and transmission of LPG can be drawn. The movement or transfer of electrical energy takes place over an interconnected group of lines and associated equipment between points of supply and points at which it is transformed for delivery to consumers or is delivered to other electric systems. Transmission is considered to end when the energy is transformed for distribution to the consumer. In many countries transmission of LPG also takes place in a similar manner from a large fixed tank. In case of LPG stored in a cylinder the mechanism of transmission is essentially the same as the gas travels from the cylinder where it is stored to the gas cooking stove. While transmission of electricity involves a switch, transmission of LPG involves a valve mechanism or a regulator to ensure smooth flow. Hence, LPG is a source of energy which is mechanically transmitted by way of the tube attached to the machinery.32) In our view, the use of LPG satisfies the definition of power as it is mechanically transmitted and is not something generated by human or animal agency.