# TRANSPORT CORPORATION OF INDIA v. EMPLOYEES' STATE INSURANCE CORPORATION AND ANR

- **Citation:** [1999] Supp. 4 S.C.R. 393
- **Court:** Supreme Court of India
- **Decided:** 1999-11-05
- **Bench:** S.B. Majmudar, M. Jagannadha Rao, M.B. Shah
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/transport-corporation-of-india-v-employees-state-insurance-corporation-and-anr-16942
- **Pages:** 38

## Headnote

A
B
Employees' State Insurance Act, I948-Sections 1(4), 1(5), 1(6), 2(1),
2(9), 2(12), 2(13), 2(17), 2A, 38, 39, 40, 46, 49, 50, 51, 51 A to D-Notification
issued by the State of Andhra Pradesh under Section 1 (5) in exercise of its C
powers as an 'appropriate Govt. ' extending the provisions of the Act to road
motor transport establishments-Head Office of the appellant Corporation
being situated in the State of Andhra Pradesh, provisions of the Act applicable
to the same by virtue of the aforesaid notification-Branch offices of the
Appellant Corporation in other parts of the country-Applicability of the D
notification to-Held, once the Appellant Corporation having its registered
Head Office at Andhra Pradesh is governed by the Act, its branch offices
would also automatically get covered by the sweep of the Act by the very
same notification-Express legislative intention of sprea'ding the beneficial
network of the Act sufficiently wide for covering all employees working for
the main establishment covered by the Act even though actually stationed at E
different branches outside the State, wherein the Head Office of the
establishment is located-Any other technical or narrower construction
cannot be countenanced as that would frustrate the legislative intent
underlying the enactment of such a beneficial social security ~cheme
Employees' State Insurance (General) Regulations, 1950-Regulations 2(g), F
2(h), 2(i), 10-8, 29, Forms 1&6.
Principal employer-Employee-Existence of relationship of-The
appellant concern operating on al/ India level its transport business through
the active working and co-operation of all the branches and the employees
working at these branches-Transport business .carried on at the principal G
office as well as at its branch office being totally interdependent-Thus,
branches of the appellant spread over different parts of the country are part
and parcel of the main establishment of the company which remains the
'employer' and the employees in different branches remain its 'employees'-
There is unity of relationship and a complete integrality of working of the H
393
394
SUPREME COURT REPORTS [1999) SUPP. 4 S.C.R.
A employees in different branches and those working in the Head Office vis-avis the single and solitary management being the Appellant CorporationEach branch being under the direct supervision and control of the parent
office is an appendage of the main establishment and cannot be considered
as separate independent entity-Thus, an employee of the establishment
B whether working within the precincts of the main establishment or outside,
if carrying on the work of the establishment would be covered by the sweep
of the Act moment the main establishment is covered by the Act.
Appropriate Government-Concept of-Held, the 'Appropriate
Government' is constituted by the Parliament to be its delegate to uniformly
C apply the provisions of the Act to any other establishment or class of
establishments as found fit for its applicability-Once the appropriate Govt.
exercises that power and issues a notification in that respect, such a
notification covers within its sweep all establishments situated within the
State and covered by the notification and also automatically covers all the
branches situated outside the State which are mere appendages and part and
D parcel of the very same establishment-It co11ld not be said that such a
notification issued by the State in its power as 'Appropriate Government' has
any extra territorial operation-In the present case, Head Office of the
I
appellant Corporation being situated in Andhra Pradesh, it was only that
'Appropriate Government' which could apply the provisions of the Act to all
E its employees whether working at the Head Office or any of its branches in
any part of the country, being the very limb and interconnected organs of the
very same establishment of the Appellant-Corporation.
The appellant Corporation was engaged in the business of road motor
transport operatin

## Text

_Characters 0–39,963 of 96,832. This is a partial read: ask again with offset=39963 for what follows._

TRANSPORT CORPORATION OF INDIA
v.
EMPLOYEES' STATE INSURANCE CORPORATION AND ANR.
NOVEMBER 5, 1999
[S.B. MAJMUDAR, M. JAGANNADHA RAO
AND M.B. SHAH, JJ.]
A
B
Employees' State Insurance Act, I948-Sections 1(4), 1(5), 1(6), 2(1),
2(9), 2(12), 2(13), 2(17), 2A, 38, 39, 40, 46, 49, 50, 51, 51 A to D-Notification
issued by the State of Andhra Pradesh under Section 1 (5) in exercise of its C
powers as an 'appropriate Govt. ' extending the provisions of the Act to road
motor transport establishments-Head Office of the appellant Corporation
being situated in the State of Andhra Pradesh, provisions of the Act applicable
to the same by virtue of the aforesaid notification-Branch offices of the
Appellant Corporation in other parts of the country-Applicability of the D
notification to-Held, once the Appellant Corporation having its registered
Head Office at Andhra Pradesh is governed by the Act, its branch offices
would also automatically get covered by the sweep of the Act by the very
same notification-Express legislative intention of sprea'ding the beneficial
network of the Act sufficiently wide for covering all employees working for
the main establishment covered by the Act even though actually stationed at E
different branches outside the State, wherein the Head Office of the
establishment is located-Any other technical or narrower construction
cannot be countenanced as that would frustrate the legislative intent
underlying the enactment of such a beneficial social security ~cheme
Employees' State Insurance (General) Regulations, 1950-Regulations 2(g), F
2(h), 2(i), 10-8, 29, Forms 1&6.
Principal employer-Employee-Existence of relationship of-The
appellant concern operating on al/ India level its transport business through
the active working and co-operation of all the branches and the employees
working at these branches-Transport business .carried on at the principal G
office as well as at its branch office being totally interdependent-Thus,
branches of the appellant spread over different parts of the country are part
and parcel of the main establishment of the company which remains the
'employer' and the employees in different branches remain its 'employees'-
There is unity of relationship and a complete integrality of working of the H
393
394
SUPREME COURT REPORTS [1999) SUPP. 4 S.C.R.
A employees in different branches and those working in the Head Office vis-avis the single and solitary management being the Appellant CorporationEach branch being under the direct supervision and control of the parent
office is an appendage of the main establishment and cannot be considered
as separate independent entity-Thus, an employee of the establishment
B whether working within the precincts of the main establishment or outside,
if carrying on the work of the establishment would be covered by the sweep
of the Act moment the main establishment is covered by the Act.
Appropriate Government-Concept of-Held, the 'Appropriate
Government' is constituted by the Parliament to be its delegate to uniformly
C apply the provisions of the Act to any other establishment or class of
establishments as found fit for its applicability-Once the appropriate Govt.
exercises that power and issues a notification in that respect, such a
notification covers within its sweep all establishments situated within the
State and covered by the notification and also automatically covers all the
branches situated outside the State which are mere appendages and part and
D parcel of the very same establishment-It co11ld not be said that such a
notification issued by the State in its power as 'Appropriate Government' has
any extra territorial operation-In the present case, Head Office of the
I
appellant Corporation being situated in Andhra Pradesh, it was only that
'Appropriate Government' which could apply the provisions of the Act to all
E its employees whether working at the Head Office or any of its branches in
any part of the country, being the very limb and interconnected organs of the
very same establishment of the Appellant-Corporation.
The appellant Corporation was engaged in the business of road motor
transport operating from Bombay. It had its registered office at Secunderabad,
F Andhra Pradesh which operated on all India level through its various regional
offices spread over the country including the appellant's branch at Bombay.
A notification was issued by the State of Andhra Pradesh in exercise of its
powers as an 'appropriate Government' under Section 1(5) of the Employees'
State Insurance Act, 1948 extending the same to road motor transport
G establishment. The Head Office of the appellant Corporation being situated
at Secunderabad in the State of Andhra Pradesh, was covered by the provisions
of the Act by virtue of the aforesaid notification.
The Deputy Regional Director, Employees' State Insurance Corporation,
Bombay served upon the appellant a show-cause notice to explain as to why
H the contributions shou.ld not be paid by it for the period commencing from
'
TRANSPORT CORPN. OF INDIA v. E.S.l.C.
395
May, 1981 and ending with November, 1985 in respect of its branch office at A
Bombay. The appellant filed reply claiming that the contribution was paid from
August I, 1985 onwards under protest but the branch of the appellantCorporation in Bombay was not covered by the Act during the relevant period.
The Deputy Regional Director passed an order dated September 8, 1988 in
exercise of powers under Section I SA of the Act assessing contribution for B
the period commencing from May, 1981 to July, 1985. It was held that once
the main estab.lishment in Andhra Pradesh is covered by the notification
issued by the State of Andhra Pradesh, then the branches of the
establishment, wherever they are situated, also stood covered. Against the
aforesaid order the appellant moved the High Court. Single Judge, quashing
the impugned order held that the appellant's establishments in the State of C
Maharashtra were not covered by the notification issued under Section 1(5)
of the Act by the State of Andhra Pradesh. In appeal, Division Bench reversing
the judgment of the Single Judge held that once the Head Office was covered
by the notification issued by the State of Andhra Pradesh, it being the main
establishment, its branches situated outside the State which carried on the D
work of the main establishment, got covered by the sweep of the said
notification. Hence the present appeal.
On behalfof the appellant, it was contended that the Division Bench of
the High Court has patently erred in law in taking the view that the notification
issued by the State of Andhra Pradesh under Section 1(5) for covering the E
appellant's establishments in Andhra Pradesh could have automatically made
applicable the provisions of the Act to its branch at Bombay. Since the State
of Maharashtra had not issued appropriate notification for covering the
undertakings carrying on transport business in the State of Maharashtra as
per Section 1(5) of the Act during the period, notification of Andhra Pradesh
Govt. could not be pressed in service for covering the employees working in F
the Bombay Branch of the appellant. It was further contended that the view
taken by the Division Bench, in substance, amounted to giving extra territorial
jurisdiction to the State of Andhra Pradesh enabling it to cover the
establishments functioning in other States. It was also submitted that the term
'establishment' should be construed in the light of the term 'factory' as found G
in the very same Act and as factories covered by the Act have geographical
nexus, similarly establishments functioning in different parts of the country
had also geographical nexus. Each branch of the establishment was a separate
unit and hence the branches of the appellant functioning in different parts of
the country had to be separately dealt with by independent notifications, if
any, to be issued by the States concerned where these branches were located. H
396
SUPREME COURT REPORTS [1999] SUPP. 4 S.C.R.
A It was further contended that employees functioning at the Bombay Branch,
which is a separate entity having a separate Regional Manager and
Administrative staff, cannot be said to be 'employees' of the Appellant's
establishment.
B
c
Dismissing the appeal, the Court
HELD: I. I. Once the appellant-Corporation having its registered head
office at Andhra Pradesh is governed by the Employees State Insurance Act,
its branch offices would also automatically get covered by the sweep of the
Act by the very same notification. [418-G]
1.2. A conjoint reading of sub-sections 9, 13 & 17 of Section 2 clearly
shows that if the Head Office or the registered office of the appellant is
controlling its Bombay Branch, the employee working in its Bombay Branch
can obviously be treated to be an 'employee' working under the supervision
of the principal employer or his agent. Consequently, once such 'principal
D employer' like the appellant, having Head Office at Secunderabad in the State
of Andhra Pradesh, is covered by the sweep of the Act automatically employees
working in its branches, may be anywhere in India, including the branch at
Bombay would get covered by the sweep of the Act It is not in dispute that the
Andhra Pradesh Govt. was the 'appropriate Govt.' so far as the appellant's
E Head Office situated at Secunderabad was concerned. Once its Head Office,
being registered office, is admittedly situated in Andhra Pradesh, it was only
that 'appropriate Govt.' which could apply the provisions of the Act to all its
employees whether working at the Head Office or any of its branches in any
part of the country, being the very limb and inter- connected to the very same
establishment of the appellant. Once the provisions of the Act got applied to
F the appellant's establishment by virtue of the aforesaid notification issued by
the State of Andhra Pradesh, the appellant becomes liable to be registered
under the Act as per Section 2A. [417-B-E]
1.3. Once the definition of the term 'employee' as found in Section 2(9)(i)
G read with the inclusive part thereof, is read in juxtaposition with Section 38,
it becomes at once clear that as the appellant's establishment, namely, road
motor transport establishment is covered by the Act, all its employees,
whether working in the Head Office or at its branch offices in any part of the
country, including the State of~aharashtra, would get entitled to be insured
as per the beneficial provisions of Section 38. (412-A-B]
H
' -
TRANSPORT CORPN. OF INDIA v. E.S.l.C.
397
2.1. The Act applies to all factories wherever situated in India. That is A
the legislative intention. But so far as the other establishments are concerned,
the 'appropriate Govt.' within whose territorial jurisdiction the main
establishment is situated, meaning thereby, its Head Office being registered
office, is located will get covered by the sweep of the notification issued by
such 'appropriate Govt.' acting as delegate of the legislative power entrusted B
by the Parliament to it. Once the 'appropriate Govt.' exercises that power, all
the establishments situated within the territory of that State will get covered
by such a notification. Their branches within the State, admittedly, will be
covered by the sweep of the notification read with the proviso of Section 1 (5)
of the Act. So far as the branches situated outside the State are concerned, if
the establishment is covered by the notification being situated within the C
territories of the State and if on facts it is found that such outside branches
have functional integrality with the activities of the main establishment and
are directly under the control and supervision of the main establishment, it
could not be said that such notification issued by the State has any extra
territorial operation. It has only territorial operation. [420-B-E]
2.2. The appellant concern is a concern which operates on all India level
through its branches which are its part and parcel and are its own limbs. It
is through the branches that its main objects as an all India public carrier,
D
get fructified and achieved. All the activities of the Appellant Corporation are
obviously carried out through the active working and co-operation of all the E
branches and the employees working at these branches. The branches of the
appellant, though spread over in different parts of the country, are part and
parcel of the main establishment of the company which remains the 'employer'
and the employees in different branches remain its 'employees'. There is unity
of relationship between the employees working in different branches and those
working at the Head Office on the one hand and the management of the F
appellant Corporation on the other. It is, therefore, obviocs that the transport
business carried on at the principal office as well as at its bran-ch office is
totally interdependent. There is a complete integrality of working of the
employees in different branches and those working in the Head Office vis-avis the single and solitary management being the Appellant Corporation. Each G
branch, having functional integrality and being under the direct supervision
and control of the parent office, would be part and pa.reel of the main
establishment and all such branches have to be treated as miniatures of the
main office. They cannot be considered as separate independent entities~ There
is no escape from the conclusion that the Bombay branch is an appendage
and part and parcel of the main establishment at Secunderabad and is almost H
398
SUPREME COURT REPORTS [1999] SUPP. 4 S.C.R.
A a shortened mirror image thereof. [417-G-H; 418-A-D)
2.3. Once the factual data clearly points out that the Bombay branch of
the appellant concern was a limb of the appellant concern covered by the Act
and all its activities were appertaining to the main object and purposes of the
appellant corporation and through this branch the appellant was carrying on
B its activities on an integrated basis, it must be held that once the appellant
was governed by the Act on account of the notification issued by the appropriate
Government, namely, the State of Andhra Pradesh under Section 1(5) of the
Act, automatically the said notification took in its sweep all such branches of
the appellant situated even outside the State of Andhra Pradesh which were
c
having complete functional integrality with the main activities of the
establishment, namely, the appellant concern. In fact, but for the branches
and their activities, the appellant cannot effectively discharge its objects and
purposes for which it is incorporated. [422-E-F]
2.4. The main work of the appellant Corporation is to engage in
D transportation of goods to and through its various branches to different parts
of the country, the Bombay branch facilitating and directly connected with
this main activity of the principal office and working under the complete
control and supervision of the appellant's main office, cannot be treated to be
beyond the sweep of the Act once employees at Bombay Branch are held to be
'employees' of the appellant Corporation. It could not be held on facts of this
E case that the Bombay branch was functioning as a separate and independent
entity not being controlled or supervised by the Secunderabad principal office
so as to enable the appellant Corporation to contend before the authorities
that its Bombay branch was not its limb and was an independent establishment
by itself as if it was run by some independent transport company.
F
[428-H; 429-A-B)
2.5. The Bombay branch of the appellant, being part and parcel of the
main establishment, covered by the Act will stand entirely on a different
footing and will form a separate class of establishments as compared to those
transport establishments which are not covered by any notification of
G 'appropriate Govt.' and whose head office and branches are situated within
the State of Maharashtra. Such independent establishments may not get
covered by the Act in the absence of appropriate notification under Section
I (5) to be issued by the State of Maharashtra. They will form entirely a different
class. There is no question of equals being treated unequally under such
circumstances. If the contention of the appellant that the Bombay branch is
H an independent entity is considered to be true, then an employee working at
I
TRANSPORT CORPN. OF INDIA v. E.S.l.C.
399
the Head Office in Secundera bad may get all the benefits under the Act but A
once he is transferred to a branch, may be with his consent, he would lose
such benefit if the branch is not covered by the separate notification under
Section 1(5) of the concerned State Govt. within whose jurisdiction the
concerned branch is located. That would create a totally anomalous and
incongruous situation which is contra-indicated by factual data on record.
B
(420-H; 421-A-B)
3.1. The express phraseology of Section 2(9) of the Act defining an
'employee' read with Section 38 of the Act clearly projects the legislative
intention of spreading the beneficial network of the Act sufficiently wide for
covering all employees working for the main establishment covered by the C
Act even though actually stationed at different branches outside the State
wherein the Head Office of the establishment is located. Any other technical
or narrower construction, even if permissible, cannot be countenanced, as
that would frustrate the legislative intent underlying the enactment of such a
beneficial social security scheme. [430-B-D)
3.2. When Section 40(1) is read in the light of the definition of the term
'immediate employer' as found in Section 2(13) and the term 'principal
employer' as found in Sub-section l 7(iii) of Section 2, it would be clear that
D
the appellant, being the principal employer of the employees at Bombay branch,
cannot escape from its liability to pay contribution, in the first instance, even E
though the Bombay branch employees are employed by the immediate employer,
being local agent of the appellant principal employer stationed at Secunderabad
in Andhra Pradesh. In fact, so far as the appellant is concerned, employees of
its Bombay branch, even though working under its local manager, have direct
nexus with the appellant being the principal employer or the main employer
who can be said to be directly employing the employees at the Bombay branch. F
In fact there is. no immediate employer in between the appellant on the one
hand and its Bombay branch employees on the other. The question of
immediate employer would arise only when the employees are working under
a contractor who carries out the work of the principal employer under the
contract. So far as the employees at Bombay branch are concerned, for them, G
the appellant is the employe~ and they are the employees and, therefore, they
will be directly governed by Sections 38 and 39 of the Act.
(412-H; 413-A-DJ
3.3. When Form 6 is read with Sections 38, 39 and the definition in .
Section 2 (9) defining the 'employee' and Section 2(17) dealing with 'principal H
400
SUPREME COURT REPORTS [1999) SUPP. 4 S.C.R.
A employer', it becomes at once clear that the appellant, being the main employer
of its employees working in the Bombay branch, would squarely get covered
by the relevant provisions of the Act and the Regulations framed thereunder.
It would be liable to collect and remit the relevant contributions of the
employees and the employer to the authorities to enable the employees at its
B head office and its branches to get the medical benefits as insured persons
covered by the benevolent scheme of the Act. In the light of the aforesaid
statutory scheme there is no escape from the conclusion that the employees
of Bombay branch of the appellant's establishment would get covered by the
beneficial sweep of the Act or not, expressly in the light of well established
factual data on the record of this case. (416-A-C)
c
3.4. As per Section 2(9) of the Act an employee of the establishment
whether working within the precincts of the main establishment or outside,
if carrying on the work of the establishment would be covered by the Act.
Accordingly, the employees who were connected with the administration of
the Bombay branch of the Appellant-Corporation would be covered by the sweep
D <if Section 2(9). If that is so, it would be too incongruous to contend that though
the administrative staff of the Bombay branch would be covered, employees
actually working for the establishment and directly connected with its main
function namely, transport of goods throughout the country and inspecting
the goods to be despatched for the appellant from Bombay to outside stations
E and also connected with receipt and unloading of goods coming from outside
Bombay for being further carried within the State of Maharasht~a or outside,
would not be covered by the sweep of the Act. Such an incongruous and
contradictory situation cannot be countenanced by the scheme of the Act
especially in the light of clear working of the definition in Section 2(9) along
with its relevant amended provisions. (426-H; 427-A-D)
F
4. The Employees' State Insurance Act, 1948 is enacted to provide for
certain benefits to employees in case of sickness, maternity arid employment
injury and to make provisions for certain other matters in relation thereto It
is a Central Act, which the Parliament intended to operate throughout the
G country. The Act is a beneficial piece of legislation intended to provide benefits
to employees in case of sickness, maternity, employment injury and for certain
other matters in relation thereto. It is enacted with a view to ensuring social
welfare and for providing safe insurance cover to employees who were Hkely
to suffer from various physical illnesses during the course of their
employment. Such a beneficial piece of legislation has to be construed in its
H correct perspective so as to fructify the legislative intention underlying its
TRANSPORT CORPN. OF INDIA v. E.S.l.C.
401
enactment. When two views are possible on its applicability to a given set of A
employees, that view, which furthers the legislative intention should be
preferred to the one which would frustrate it. It is difficult to appreciate how
it could be contended by the appellant with any emphasis that an employee
working at its head office in Secunderabad would be governed by the beneficial
sweep of the Act as admittedly the head office employees are covered by the B
Act, but once such an employee, whether working on the administrative side
or connected with the actual transportation of goods, if transferred to the
/
Born bay branch even with his consent, cannot be governed by the beneficial
provisions of the Act. (429-C-E]
5. A mere look at sub-sections 5 and 6 of Section 1 shows that the C
'appropriate Government' is constituted by Parliament to be its delegate to
uniformly apply the provisions of the Act to any other establishment or class
of establishments as found fit for its applicability. Proviso to Sub-section 5
seeks to extend uniform applicability of the Act to similar establishment or
class of establishments within that part if the provisions have already been
extended to similar establishment or class of establishments in another part
of that State. As the appellant's establishment was not under the control of
the Central Government or a railway administration etc., it was the State
Government which was the 'appropriate Government' for deciding the
applicability of the Act of the appellant's concern. (406-C; 408-F]
State of Bihar and Ors. v. Smt. Charusila Dasi, AIR (1959) SC 1002;
D
E
The State of Bihar and Ors. v. Bhabapritananda Ojha, AIR (1959) SC 1073;
Kirloskar Brothers Ltd v. Employees' State Insurance Corpn. AIR (1996) SC
3261; Hyderabad Asbestos Cement Products Ltd v. Employees' Insurance
Court & Anr., (1978] l SCC 194; Nagpur Electric Light & Power Co. Ltd. v.
Regional Director, Employees State Insurance Corporation, [1967) 3 SCR F
92 and Royal Talkies, Hydrabad & Ors. v. Employees' State Insurance
Corporation, [1978) 4 sec 204, held applicable.
E.S.l.C. Hyderabadv. Southern Eastern Roadways, (1983) 2 LLJ 396,
affirmed.
The Buckingham and Carnatic Co. Ltd v. Venkatiah & Anr., [1964] 4
SCR 265, referred to.
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 810 of
1995.
G
H
402
SUPREME COURT REPORTS [1999] SUPP. 4 S.C.R.
A
From the Judgment and Order dated 13.7.94 of the Bombay High Court
in A.No. 732/93 in W.P.No. 931 of 1989.
G.B. Pai, Ms. Shally Bhasin Maheshwari and R.K. Maheshwari for the
Appellant.
B
N .. S. Mehta and Vijay K. Mehta for the Respondents.
The Judgment of the Court was delivered by
S.B. MAJMUDAR, J. The Transport Corporation of India, which is a
public limited company, incorporated under the Indian Companies Act, 1956,
C has brought in challenge the decision of Division Bench of the High Court
of judicature at Bombay, on grant of special leave to appeal. The question
posed for our consideration in this appeal moved against the Respondents
Employees' State Insurance Corporation and its officers is a short one. It is
the contention of the appellant that even though its head office, being a
D registered office, situated at Secunderabad in the State of Andhra Pradesh,
was covered by the" provisions of the Employees' State Insurance Act, 1948
(hereinafter referred to. as 'the Act'), its branch office located at Bombay in
the State of Maharashtra, was not governed by the provisions of the Act.
According to the appellant, the notification issued by the State of Andhra
Pradesh, in exercise of its powers as an 'appropriate Government' under
E Section 1 (5) of the Act extending the same to road motor transport
establishments, cannot by itself, cover the appellant's branch at Bombay
during the relevant time when the State
0of Maharashtra had not issued any
such notification covering road motor transport establishments in the earmarked
areas situated in that State. It is the case of the appellant that its Bombay
branch was got covered by the Act only pursuant to the subsequent
F notification issued by the State of Maharashtra on 10.3.1989 where-under
road motor transport establishments situated in Bombay in the earmarked
areas mentioned in Scheduled-II of the said notification were subjected to the
sweep of the Act.
G
The dispute in the present case between the parties arose on account
of the fact that on July 29, 1986, the Deputy Regional Director, Employees'
State Insurance Corporation, Bombay served show cause notice upon the
appellant to explain as to why the contributions should not be paid by it for
a period commencing from May, 1981 and ending with November, 1985 in
respect of its branch office at Bombay. The appellant filed reply claiming that
H the contribution was paid from August 1, 1985 onwards under protest but the
TRANSPORT CORPN. OF INDIA v. E.S.l.C. [S.B. MAJMUDAR, J.]403
branch of the appellate in Bombay was not covered by the Act during the A
relevant period. The Deputy Regional J;)irector passed an order dated
September 8, 1988 in exercise of powers under Section 15. A of the Act
assessing contribution for the p~riod commencing from May, 1981 to July,
1985. It was held that once the main establishment in Andhra Pradesh is
covered by the notification issued by the State of Andhra Pradesh, then the B
branches of the establishment, wherever they are situated, also stood covered.
Under the circumstances, the appellant moved the High Court of Bombay in
Writ Petition No. 931 of 1989 challenging the legality of the order passed by
the Employees' State Insurance Corporation. The learned Single Judge at
Bombay High Court by his judgment dated 30.4.1993 held that the appellant's
establishments in the State of Maharashtra were not covered by the notification C
issued under Section I (5) of the Act by the State of Andhra Pradesh.
Accordingly, the learned Single judge quashed the impugned order dated
September 8, 1988 passed by the authorities functioning under the Act whereby
the appellant was called upon to contribute Rs. 2,09,914, along with interest.
The aforesaid decision rendered by the learned Single Judge was carried D
in appeal by·the Employees' State Insurance Corporation-Respondent no. I,
herein, before the Division Bench of the High Court by way of a writ in
Appeal No. 732of1993. The Division Bench, speaking through Pendse J., (as
he then was), accepted the appeal and took the view on interpretation of the
relevant provisions of the Act that once the head office was covered by the E
notification issued by the State of Andhra Pradesh, it being the' main
establishment, its branches which carried on the work of the main establishment,
got covered by the sweep of the said notification and, therefore, the provisions
of the Act were rightly pressed in service by the authorities functioning under
the Act against the appellant so far as its Bombay branch employees were
concerned. The writ appeal was, accordingly, allowed and the judgment of the F
learned Single Judge was set aside. However, instead of entirely quashing the
impugned order passed under Section 45-A of the Act by the Deputy Regional
Director, the proceedings were remitted back to the deputy Regional Director
only for the purpose of quantifying the amount of contribution and the
amount of interest to be paid thereon. by the appellant. As noted earlier, it is G
the aforesaid judgment of the Division Bench that is made the subject matter
of the present appeal before this Court.
RIVAL CONTENTIONS:
Shri Pai, learned senior counsel for the appellant, vehemently contended H
404
SUPREME COURT REPORTS [1999) SUPP. 4 S.C.R.
A that the Division bench of the High Court has patently erred in law in taking
the view that the notification issued by the State of Andhra Pradesh under
Section 1(5) for covering the appellant's establishments in Andhra Pradesh
could have automatically made applicable the provisions of the Act to its
branch at Bombay. That as the State ofMaharashtrn had not issued appropriate
B notification for covering the undertakings carrying on transport business in
the State of Maharashtra as per Section 1 (5) of the Act during the period,
notification of Andhra Pradesh Government could not be pressed in service
for covering the employees working in the Bombay branch of the appellant.
That the view taken by the Division Bench, in substance, amounted to giving
extra-territorial jurisdiction to the State of Andhra Pradesh enabling it to cover
C the establishments functioning in other States. It was also submitted by Shri
Pai, that the term 'establishment' should be construed in the light of the term
'factory' as found in the very same Act and as factories governed by.the Act
have geographical nexus, similarly establishment functioning in different parts
of the country had also geographical nexus. That merely because the head
office of the company situated in Andhra Pradesh got covered by the Act,
D its branches functioning in various parts of the country could not automatically
get covered by the Act. That the .term 'establishment' envisages activities
being carried out at a fixed location and which have a nexus with the
geographical setting of such establishment in the concerned States and,
accordingly, each branch of the establishment was a separate unit and hence
E the branches of the appellant functioning in different parts of the country had
to be separately dealt with by independent notifications, if any, to be issued
by the States concerned where these branches were located. That the State
of Andhra Pradesh cannot be an 'appropriate government' for enabling it to
issue any notification having extra-territorial operation so far as the Bombay
branch of the appellant was concerned. Shri Pai, in support of his submissions,
F relied upon various decisions of this Court to which we will make reference,
hereinafter.
G
Learned counsel for the respondent, on the other hand, tried to support
the decision under appeal.
In the light of the aforesaid rival contentions, the following points arise
for our consideration:
I.
Whether the notification issued by the State of Andhra Pradesh
under Section 1(5) of the Act covering the transport undertakings
H
of the appellant, whose registered head office was situated in.
r
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TRANSPORT CORPN. OF INDIA v. E.S.I.C. [S.B. MAJMUDAR, J.] 405
Secunderabad in the State of Andhra Pradesh, could automatically A
cover its branch located at Bombay in the State of Maharashtra;
and
2.
Whether for the purpose of applicability of the Act to the
appellant's Bombay branch, a separate and independent
notification was required to be issued by the State of Maharashtra B
under Section I ( 5) of the Act?
For deciding the aforesaid points for consideration, it is necessary to
have a look at the relevant statutory provisions holding the filed.
STATUTORY FRAMEWORK
The Employees' State Insurance Act, 1948 is enacted to provide for
certain benefits to employees in case of sickness, maternity and employment
injury and to make provisions for certain other matters in relation thereto
Sub-section 2 of Section 1 of the Act lays down that:
"It extends to the whole of India"
c
D
It is, therefore, obvious that it is a Central Act, which the Parliament intended E
to operate throughout the country.
Sub-section 4 of Section 1 of the Act lays down as follows:
"It shall apply, in the first instance, to all factories, (including factories F
belonging to the Government other than seasonal factories)."
We are not concerned with the proviso to Sub-section 4 of Section I. However,
Sub-sections 5&6 of Section 1 of the Act are relevant for our present purpose.
They are, therefore, extracted as under.
"5. 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, after giving
G
six months notice of its intention of so doing by notification in the
Official Gazette, extend the provisions of this Act or any of them, to H
406
A
SUPREME COURT REPORTS (1999] SUPP. 4 S.C.R.
any other establishment or class of establishment, industrial,
commercial, agricultural or otherwise.
6. A factory or an establishment to which this Act applies shall
continue to be governed by this Act notwithstanding that the number
B
of persons employed therein at any time falls below the limit specified
by or under this Act or the manufacturing process therein ceases to
be carried on with the aid of power."
A mere look at these aforesaid provisions shows that the 'appropriate
Government' is constituted by the Parliament to be its delegate to uniformly
C apply the provisions of the Act to any other establishment or class of
establishments as found fit for its applicability. Proviso to sub-section 5 seeks
to extend uniform applicability of the act to similar establishments or class of
establishments within that part if the provisions have already been extended
to similar establishment or class of establishments in another part of that
D State. The operation of the proviso to Sub-section 5 of Section l can be
illustrated by taking a simple example. As in the present case, there is no
dispute between the parties that the State of Andhra Pradesh, in exercise of
its powers under Section 1(5), extended the Act, amongst others, to cover
road motor transport establishments whereon twenty or more persons are ·
employed, or were employed for wages on any day of the preceding twelve
E months of the notification in areas mentioned in Column (2) of the Schedule.
If similar road motor transport establishment was located in any other part of
the State of Andhra Pradesh not covered by the listed areas in Column (2)
of the Schedule of the notification, as for example Prakasam District of the
State of Andhra Pradesh, any road motor transport operator functioning at
F Prakasam District would also get covered by the sweep of the aforesaid
notification being owner of similar road motor transport establishment.
Sub-section frofSection I guarantees the continuance of the applicability
of the Act even though the number of persons in any establishment earlier
G covered may get reduced subsequently below the limit prescribed.
It will now be appropriate to refer to the notification issued by the State
of Andhra Pradesh covering the appellant's head office & the regional office
at Secunderabad, the applicability of which to the Bombay branch, is on the
anvil of consideration in the present case. The said notification reads as
H under:
r
.,
TRANSPORT CORPN. OF INDIA v. E.S.l.C. [S.B. MAJMUDAR, J.] 407
"NOTIFICATIONS BY GOVERNMENT
HEALTH, HOUSING AND MUNICIPAL AOMJNISTRATION
DEPARTMENT
(HEALTH)
EXTENSION OF EMP~OYEES STA TE INSURANCE SCHEME TO
FACTORIES, SHOPS, COMMERCIAL ESTABLISHMENTS,
HOTELS ETC.
CONFIRMED
(G.O.Ms.No.297, Health, 25th March, 1975)
In exercise of powers conferred by Sub-section (5) of section 1 of the
Employees State Insurance Act, 1948 (34 of 1948), the Government of
Andhra Pradesh, after giving six months' notice as required thereunder
A
B
c
by the Government of Andhra Pradesh Notification issued in D
G.O.Ms.No.788, Health, dated 25th September, 1974 and published in
the A.P. Gazette No.315, dated September 25, 1974, hereby extends
with effect from the 3Qth March, 1975, all the provisions o( the said
Act to the classes of establishments specified iri" Col. (I) of the
Schedule below situated in the areas specified in Col. (2) thereof:
SCHEDULE
Description of
Establishments
{I)
I.
Xxxxx xxxxxx xxxxxx
2.
Xxxxx xxxxx xxxxx
3.
The following establishments
whereon twenty or more persons
are employed, or were employed
for wages on any day of the
preceding twelve months, namelyAreas in which the
Establishments are situated.
(2)
HYDERABAD AND
SECUNDERABAD
I. Municipal limits of the
Corporations of Hyderabad
and Secunderabad;
Secunderabad cantonment.
E
F
G
H
408
SUPREME COURT REPORTS [1999] SUPP. 4 S.C.R.
A
(i)
Hotels;
(ii)
Restaurants;
x xxxx xxxxxxx
(iii)
Shops;
B
(iv)
Road Motor Transport establishments;
(v)
Cinemas including preview theatres;
xxxxxxx
The thrust of sub-section 6 of Section I is to the effect that even if the
C appellant's road motor transport establishment-head office at Secunderabad
having employed twenty or more persons during the relevant time got covered
by the Act, if subsequently the number of employees so employed fell below
twenty, the applicability of the Act would continue for the benefit of the
employees of the appellant's concern. We may now turn to the relevant
D definitions as found in the Act. Section 2 is a definition section. Sub-section
I, thereof, defines "appropriate Government" to mean:
" ... in respect of establishments under the control of the Central
Government or a railway administration ·or major part of a mine or oilfield, the Central Government, and in all other cases the State
E
Government."
It is, therefore, obvious that as the appellant's establishment was not under
the control of the Central Government or a railway administration etc., it was
the State Government which was the 'appropriate Government' for deciding
the applicability of the Act to the appellant's concern. There_ is no dispute
F between the parties that so far as the appellant's registered office, being head
office at Secunderabad in Andhra Pradesh was concerned, it got validly
covered by the appropriate notification issued by the State of Andhra Pradesh
under Section 1(5). But the dispute is whether that notification could
automatically cover within its sweep the Bombay branch bf the appellant's
G establishment. For deciding this question, the definition of the term 'employee'
as found in Section 2 (9) is required to be noted. It reads as under:
H
"employee" means any person employed for wage in or in connection
with the work of a factory or establishment to which this Act applies
and-
" \
...
if
TRANSPORT CORPN. OF INDIA v. E.S.J.C. [S.B.