1987 (10) TMI 50 - SC - Indian Laws

Whether the establishment of the respondent was covered by the notification dated 20th September, 1975 and came within the mischief of the Employees State Insurance Act, 1948 ? Held that - Whether in a particular case manufacture has resulted by a process or not would depend on the facts and circumstances of the particular case. There is no doubt that the process must bring into existence a new item or a new commodity known differently in the market as such by people who use or deal with that good. In that process the ironing of clothes as has been found to be an essential part and for that power is used. These are facts found and are not disputed. If that is the position, then in our opinion, it comes clearly within the purview of the Act in view of the other facts noted before and the employees are covered by the Act.

Summary

Issues:
Interpretation of the Employees' State Insurance Act, 1948 regarding coverage of establishments under the Act based on the number of employees and the use of power in manufacturing processes.

Analysis:
The appeal before the Supreme Court arose from a judgment of the Rajasthan High Court in an appeal under Section 82(2) of the Employees' State Insurance Act, 1948. The respondent operated a tailoring shop with around 10-12 employees, using electric power for stitching and ironing clothes. The key issue was whether the establishment fell within the scope of the Act, as per the notification dated 20th September, 1975. The notification specified establishments with manufacturing processes involving power and employing 10-20 persons. The Court had to determine if the respondent's shop qualified as such. The Court found that the use of electric power in stitching constituted a manufacturing process, creating new commodities, and thus fell within the Act's purview.

In analyzing the case, the Court referred to precedents like Empire Industries Limited v. Union of India, emphasizing that any process resulting in a new commodity amounts to manufacturing. The use of power in ironing clothes was deemed essential to the manufacturing process. The Court distinguished the case from Ardeshir H. Bhiwandiwala v. The State of Bombay, where the definition of a factory under the Factory Act was discussed. Additionally, the Court cited M/s. Hindu Jea Band, Jaipur v. Regional Director, ESI Corporation, highlighting that establishments selling services on a retail basis were considered shops under the Act. The Court also referenced Metro Readywear Company v. Collector of Customs, supporting the view that ironing with electric power constitutes a manufacturing process.

Further, the Court noted a decision by the Andhra Pradesh High Court in Employees State Insurance Corporation v. M/s. New Empire Tailors, which aligned with the reasoning in the present case. Ultimately, the Supreme Court held that the High Court erred in its decision, upholding the order of the E.S.I. Court. The appeal was allowed, setting aside the High Court's judgment. Each party was directed to bear its own costs. The judgment applied to the relevant facts of the case for the year in question, affirming the coverage of the establishment under the Employees' State Insurance Act, 1948.