E.S.I. Corporation, Rep. by the Regional Director v. M/S. Endocrinology and Immunology Lab

JUDGMENT RAJESH BINDAL, J. 1. Order dated 21.08.2008 passed by the High Court of Kerala has been challenged by the Corporation 1 by which the appeal 2 fi led by the respondent was allowed. It was held that the provisions of the Act 3 will be applicable to the respondent establishment w.e.f. 06.09.2007 and not from 22.11.2002 4. 1 [T_h e Employees State Insurance Corporation 2 Ins. App. No.4 of 2008(A) 3 [T_h e Employees’ State Insurance Act, 1948 (hereina[f_t er ‘the Act’) 4 Wrongly typed in the impugned order as 24.11.2002 161 E.S.I. CORPORATION, REP. BY THE REGIONAL DIRECTOR v. M/s. ENDOCRINOLOGY AND IMMUNOLOGY LAB [RAJESH BINDAL, J.] 2. Briefl y stated, as per the facts available on record, the respondent establishment is a pathological laboratory. Inspection of the pr emises of the respondent was carried out by the Inspector on 01.04.1999. Having found that there were 19 employees working in the establishment, a show cause notice was issued to the respondent. The respondent establishme nt challenged coverage of the establishment by fi ling an application under Sections 75 and 77 of the Act before the Employees’ Insurance Court. The Court vide order dated 19.04.2007, passed in I.C. No.13/2003 declared that the establishment of the respondent is a ‘shop’ as per Section 1(5) of the Act and the provisions of the Act would extend to the respondent w.e.f. 22.11.2002. A review application 5 fi led by the respondent before the E.S.I. Court, was dismissed vide order dated 21.12.2007. The orders of the E.S.I. Court were challenged by the respondent by fi ling an appeal before the High Court which was allowed vide impugned order. 3. Learned counsel for the appellant submitted that the order passed by the High Court is not in conformity with the law as the respondent establishment will be covered under the provisions of the Act in terms of the notifi cation dated 27.05.1976 issued by the Government of Kerala in exercise of the powers conferred under the Act. In terms of the a foresaid notifi cation, if 10 or more persons are employed in an establishment on any day in the preceding 12 months which included a “shop”, it will be covered under the provisions of the Act. The respondent establishment being a shop, was clearly covered. After inspection, a notice was issued to the respondent for coverage w.e.f. 01.04.1999. However, in view of the Circular dated 22.11.2002, issued by the Corporation for the coverage of pathological laboratories and diagnostic centres, the establishment was cove red from 22.11.2002. It is stated that the fi ndings of the High Court that the respondent establishment shall be covered under the Act w.e.f. 06.09.2007, is erroneous. 4. On the other hand, learned counsel for the respondent submitted that there is no error in the order passed by the High Court. Noti fi cation dated 27.05.1976, issued by the Government of Kerala, does not cover the establishment of the kind that the respondent has, which is pathologic al laboratory. By no stretch of imagination can it be termed as a shop, where merely buying and selling activities take place, and not the kind of w ork executed by experts engaged by the respondent. In fact, medical institutions 5 M.P. No.159/2007 which included nursing homes, diagnostic centres an d pathological laboratories employing 20 or more persons were brought under the ambit of the Act vide notifi cation 6 issued by the Government of Kerala. The order passed by the High Court is in line with the said notifi cation. Hence, the present appeal deserves to be dismissed. 5. We have heard learned counsel for the parties and perused th e material placed on the record. 6. The short question which requires consideration by this Court is, the date from which the respondent establishment, which is undisputedly carrying on the business of a pathological laboratory, will be covered under the Act. 7. (i) Section 1(4) of the Act provides that the Act shall apply to all factories (including factories belonging to the Government) other than seasonal factories. Proviso to the aforesaid section provides that this sub- section does not apply to the factory or establishment belonging to or under the control of the Government whose employees are otherwise in receipt of benefi ts substantially similar or superior to the benefi ts provided for under the Act. (ii) Section 1(5) of the Act provides that the appropriate Government may, in consultation with the Corporation and where the appropriate Government is a State Government, with the approval of the Central Government, can extend the provisions of the Act by issuing a notifi cation in the offi cial gazette, to any other establishment or class of establishments. (iii) The term “factory” has been defi ned under Section 2(12) of the Act. The same as existed at the relevant time, included any premises and part thereof in which manufacturing process is being carried on with or without the aid of power. The only diff erence being that the number of persons required to be working in the establishment with the aid of power was 10 or more whereas in cases without the aid power, the number required was 20 or more. It did not include a mine subject to the operation of the Mines Act, 1952 or a railway running shed. (iv) The term “manufacturing process” has been defi ned in Section 14 (AA) of the Act to give it a meaning as assigned to it in the Factories 6 Dated 06.09.2007 163 Act, 1948. The same is defi ned under Section 2(k) of the Factories Act, 1948 which is reproduced herein below: “2(k) “manufacturing process” means any process for – (i) making, altering, repairing, ornamenting, fi nish ing, packing, oiling, washing, cleaning, breaking up, demolishing, or otherwise treating or adapting any article or substance with a view to its use, sale, transport, delivery or disposal, or (ii) pumping oil, water, sewage or any other substa nce; or (iii) generating, transforming or transmitting powe r; or (iv) composing types for printing, printing by lette r press, lithography, photogravure or other similar process or book binding; or (v) constructing, reconstructing, repairing, refi tt ing, fi nishing or breaking up ships or vessels; or (vi) preserving or storing any article in cold stor age; “ 8. On a perusal of the aforesaid provisions in the Act, it can safely be concluded that the establishment of the respondent will not be covered under the provisions of Section 1(4) of the Act as it will not fall within the defi nition of a “factory”, since no manufacturing process is carried on therein. It is not even the case of the appellant. The respondent establishment is merely a pathological laboratory. 9. The stand taken by the appellant is that the respondent establishment will be covered in view of the notifi cation dated 27.05.1976 issued by the Government of Kerala, the relevant part whereof is extracted below: “GOVERNMENT OF KERALA LABOUR (E) DEPARTMENT NOTIFICATION 16141/E2/75/LBR Dated, Trivandaram 27th May 1976 S R O No.559/76 – In exercise of the powers conferred 1948 (Central Act 34 of 1948), the Government of Kerala having already given six months’ notice as required thereunder. The government of Kerala Notifi cation No.16141/E2/75/ LBR dated 5.11.1975 published as SRO BNO.1070/75 in the State Gazette dated 18.11.1975 hereby appoints the midnight of 29th shall extend to the classes of establishment and in areas as specifi ed in the schedule annexed hereto:- E.S.I. CORPORATION, REP. BY THE REGIONAL DIRECTOR v. M/s. ENDOCRINOLOGY AND IMMUNOLOGY LAB [RAJESH BINDAL, J.] SCHEDULE Description of establishment Area in which the estab lishments are situated 1 2 xxx xxx [T_h e following establishments 10 or more persons are employed or where employed for any day of preceding 12 months namely: Hotels Restaurants Shops Road Motor Transport Establishment Cinema including preview [T_h eaters Newspaper establishment as defi ned in Section 2(d) of the Working Journalists (Conditions of Service and Miscellaneous Provisions) Act, 1955 (45 of 1955) Whole of the State of Kerala where the benefi t provisions of Chapter IV, V and VI of the Act have already been brought into force by the Central Government under Section(3) of the Employees State Insurance Act, 1948 (Central Act 34 of 1948) except the areas where the scheme has already been extended with eff ect from the midnight of 29th March 1975 vide notifi cation No.22877/ E2/73LBR dated 22.03.1975 published in the Kerala Gazette dated 25th March 1975 as SRO No.288/75 10. The argument raised by the appellant is that the re spondent establishment would fall within the term “shop” and the same is sought to be covered in terms of the aforesaid notifi cation. 11. A notice was issued to the respondent establishment on 27.04.2001, directing production of certain records. The same was replied to. Though it is claimed that the respondent establishment would be covered under the provisions of the Act in terms of the Notifi cation dated 27.05.1976, however, before the E.S.I. Court, reliance was placed on a letter issued by the Corporation on 22.11.2002 through which an earlier Memo dated 06.01.1989, was modifi ed. In terms of the aforesaid Memo letter, pathological laboratories and diagnostics centres were not covered under the defi nition of “shop”. It was not disputed that a “shop” as such is not defi ned under the Act. At the time of hearing, reliance was also placed on the Notifi cation dated 06.09.2007, issued by the Government of Kerala bringing certain establishments under the ambit of the Act. 12. It is not a matter of dispute that such a notifi cation is issued in terms of the power conferred under Section 1(5) of the Act in consultation with the 165 Corporation and with the approval of the Central Government. In terms of the aforesaid notifi cation, medical institutions including diagnostic and pathological laboratories, where 20 or more persons were employed, were covered. The relevant part of the said notifi cation is extracted below: “GOVERNMENT OF KERALA LABOUR & REHABILITATION (F) DEPARTMENT NOTIFICATION G.O. (P) NO/116/2007/LBR Dated, Thiruvanthapuram 6TH September 2007 S R O No.749/2007 – In exercise of the power conferred by sub-section (5) of Section 1 of the Employees’ State Insurance Act 1948 (Central Act 34 of 1948), the Government of Kerala in consultation with the Employees’ State Insurance Corporation and with the approval of the Central Government and after having given six months’ notice of its intention to do hereby extend the provisions of the said Act to the classes of establishments specifi ed in Column (1) of the Schedule annexed hereto and situated in the areas specifi ed in column (2) thereof with immediate eff ect SCHEDULE Description of establishment Areas in which the esta blishments are situated Medical institution (including corporate, joint sector, trust, charitable, and private ownership hospitals, nursing homes, diagnostic centre, pathological laboratories wherein 20 or more persons are employed or were employed on any day of the preceding twelve months Areas where the scheme has al- ready been brought into force un- der sub-section (2) and (5) of Sec- tion 1 of the Act 13. A perusal of the aforesaid notifi cation shows that pathological laboratories were specifi cally covered under the provisions of the Act in terms of the aforesaid notifi cation. In the case at hand, the respondent is running pathological laboratory and would be covered under the Act in terms of the Notifi cation dated 06.09.2007, issued by the Government of E.S.I. CORPORATION, REP. BY THE REGIONAL DIRECTOR v. M/s. ENDOCRINOLOGY AND IMMUNOLOGY LAB [RAJESH BINDAL, J.] Kerala. The order passed by the High Court is in terms of the aforesaid notifi cation directing coverage of the respondent establishment from that date onwards, as undisputedly, 20 or more persons were found to be employed in the establishment. 14. The argument raised by the appellant that the r espondent establishment should be deemed to be covered in terms of the Notifi cation issued on 27.05.1976 read with the Circular dated 22.11.2002 issued by the Corporation, is merely to be noticed and rejected. It is admittedly the case of the Corporation itself that the term “shop” as such has not been defi ned under the Act. It was sought to be assigned a meaning as per the unde rstanding of the “Corporation”. Clause 23 of the aforesaid letter shows that even as per the earlier Memo dated 06.01.1989, pathological laboratories were not covered as shops under Section 1(5) of the Act. The aforesaid Memo letter was subsequently modifi ed vide Memo letter dated 22.11.2002. 15. Further, fact remains that there is a Notificat ion issued on 06.09.2007 by the Government of Kerala covering medical institutions including pathological laboratories from that date. The aforesaid Notifi cation was issued in consultation with the Corporation and with the approval of the Central Government. If the pathological laboratories were already covered under the Act, as is sought to be urged by the Corporation, there was no occasion to issue such a notifi cation. This fact clearly establishes that even as per the understanding of the Corporation, pathological laboratories were not covered under the Act prior to that date. 16. For the aforesaid reasons, we do not fi nd any merit in this appeal. The same is hereby dismissed. There shall be no orders as to costs.