1996 (1) TMI 467 - SC - Indian Laws

Summary

Issues Involved:
1. Applicability of the Employees' State Insurance Act, 1948 to the regional offices of the appellant in Secunderabad and Bangalore.
2. Interpretation of "employee" under Section 2(9) of the Act.
3. Relevance of the predominant business activity test.
4. Applicability of the principle of res judicata.

Issue-wise Detailed Analysis:

1. Applicability of the Employees' State Insurance Act, 1948 to the regional offices of the appellant in Secunderabad and Bangalore:
The primary question was whether the Employees' State Insurance Act, 1948 (the Act) applies to the appellant's regional offices at Secunderabad and Bangalore. The Government of Andhra Pradesh and Karnataka had applied the provisions of Section 2(g) of the Act to these regional offices, and the respondent issued notices under Section 3(9) of the Act, demanding contributions for the health insurance of the workmen. The appellant disputed this liability and filed an application before the Insurance Court under Section 75 of the Act. The Insurance Court held that the regional offices are covered under the Act, and the High Courts of Andhra Pradesh and Karnataka upheld this decision. The Supreme Court affirmed this view, holding that the regional offices are indeed covered under the Act, and the appellant is liable to pay contributions.

2. Interpretation of "employee" under Section 2(9) of the Act:
Section 2(9) of the Act defines "employee" as any person employed for wages in or in connection with the work of a factory or establishment to which the Act applies. This includes any person employed for wages on any work connected with the administration of the factory or establishment or any part, department, or branch thereof, or with the purchase of raw materials for, or the distribution or sale of the products of, the factory. The Supreme Court emphasized that the definition of "employee" under the Act is broad and includes those engaged in the sale or distribution of the factory's products at regional offices. Therefore, employees at the regional offices in Secunderabad and Bangalore fall under the purview of the Act.

3. Relevance of the predominant business activity test:
The appellant argued that the regional offices at Secunderabad and Bangalore transacted business of products manufactured by the Deewas factory ranging between 3% to 33%, and thus, the predominant business activity test should apply, as held by the Orissa High Court. However, the Supreme Court rejected this argument, stating that the test of predominant business turnover is not relevant. Instead, the relevant test is the control by the principal employer over the employee, as laid down in the Hyderabad Asbestos Cement Products Ltd. case. The Court held that the connection between the factory and its finished products sold or distributed in the regional offices, and the principal employer's control over the employee, are the determining factors for the Act's applicability.

4. Applicability of the principle of res judicata:
The appellant contended that the decision of the Orissa High Court between the same parties should operate as res judicata. The Supreme Court dismissed this argument, noting that the Orissa High Court's decision was based on peculiar facts and did not lay down any law. The Court clarified that the principle of res judicata does not apply in this case, as the entire issue is now at large and under consideration by the Supreme Court. Therefore, the Supreme Court held that the view expressed by the Andhra Pradesh and Karnataka High Courts is correct in law, and the appellant is liable to pay contributions from the respective dates of demand.

Conclusion:
The Supreme Court dismissed the appeals, affirming that the Employees' State Insurance Act, 1948 applies to the appellant's regional offices at Secunderabad and Bangalore. The Court held that the definition of "employee" under the Act includes those engaged in the sale or distribution of the factory's products at regional offices. The predominant business activity test is not relevant, and the principle of res judicata does not apply. The appellant is liable to pay contributions from the respective dates of demand as per the orders of the High Courts of Andhra Pradesh and Karnataka.