http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 30  

PETITIONER: C.E.S.C. LTD. ETC.

       Vs.

RESPONDENT: SUBHASH CHANDRA BOSE AND ORS.

DATE OF JUDGMENT15/11/1991

BENCH: MISRA, RANGNATH (CJ) BENCH: MISRA, RANGNATH (CJ) PUNCHHI, M.M. RAMASWAMY, K.

CITATION:  1992 AIR  573            1991 SCR  Supl. (2) 267  1992 SCC  (1) 441        JT 1991 (6)   373  1991 SCALE  (2)996

ACT:     Employees’State    Insurance    Act,     1948----Section 2(9)--"Employee"  ---Definition---Employees  of   contractor under  works  contract--Whether  covereel  under   Right  of principal employer to reject or accept work done by contrac- tor through his employees whether includes "supervision" Emplovees’State Insurance Act, 1948---Object and purpose of     Interpretation of Statutes---Constitution of India, 1950 (preamble.  Chapter IV) and Employees’State  Insurance  Act, 1943 [Section 2(9)]---Construction of-strict  interpretation when leads to unjust situation, duty of Judges, indicated.     Constitution of India, 1950---Articles 39,21--Health and strength       of      workers--Medical       care       and health.facilities---Purpose     of--Right     to      social justice--Whether fundamental--Right to health  Nature of. Words and phrases--"Health ",  "Supervision ", "To super. vise "--Construction.     Indian   Contract   Act,   1872--Sections   182,    184, 23--"Agent", "Principal"  Meaning--’Agent’ u/s. 2(9) (ii) of the          Employees’State         Insurance          Act, 1948--Construction---Method  indicated--Contractor  under  a works contract whether agent of Corporation.

HEADNOTE:     The  appellant-Corporation engaged the  respondents-con- tractors  to  carry out work of  excavation,  conversion  of over-head  electric lines and laying of  underground  cables under public roads and for repair and maintenance.     On  26.8.1975, the Regional Director of  the  Employees’ State  Insurance Corporation noticed the appellant that  the employees, whose wages were being paid through the  respond- ents-contractors, would come under the provisions of Section 2(9) of the Employees’ State Insurance Act, 1948. 268     The  appellant directed the representative body  of  the contractors--respondents’  Association-to  comply  with  the provisions  of the Act immediately, failing which a  lumpsum of 7% would be deducted from their bills. When the  respond- ents’ Association refused to carry out such obligation,  the appellant  started to deduct the E.S.I. contribution  amount

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 30  

at the rate of 10% from their bills from 1984 and  continued deducting till 1985.     The  respondents-contractors challenged  the  deductions from bills by filing a writ petition before the High  Court, contending  thai for carrying out their contracts,  the  re- spondents were not supervised by the appellant, the  princi- pal  employer and they were carrying out the  allotted  work under the contracts of sites outside the factory  establish- ment of the appellant and that the employees of the respond- ents  did not come within the definition of the  term,  ’em- ployee’ under section 2(9) of the Act.     On 23.3.1984, the Single Judge of the High Court  passed an interim order permitting the appellant to respond to  the notice issued by the E.S.I.C. and staying the realisation of the E.S.I. contribution from the respondent-contractors.     On 30.3.1985, under section 45-A of the Act, the Region- al Director, E.S.I.C. held that the appellant was liable  to pay  the E.S.I. contribution in respect of the employees  of its contractors and directed to pay the same.     The appellant challenged that order under Article 226 of the Constitution of India by filing another writ petition.     The Single Judge hearing both the writ petitions togeth- er,  dismissed them, holding that the  ultimate  supervision was that of the appellant and hence the Act was  applicable. Following  the  decision of this Court in M.G.  Beedi  Works case (AIR 1974 SC 1952), the Single Judge further held  that the    respondents-contractors    were   agents    of    the appellant--the  principal employer, and that  the  appellant the  principal employer could not escape the  liability  for the works of its agents - the respondents - contractors.     The Division Bench, in appeal, reversed the judgment  of the  Single  Judge,  against which the  present  appeals  by special   leave   were  made  to  this  Court   posing   the question--whether  on the facts, the right of the  principal employer to reject or accept work on 269 completion,  on  scrutinizing compliance with  job  require- ments,  as accomplished by a contractor, the  immediate  em- ployer, through his employees, is in itself an effective and meaningful ’supervision’ as envisaged under section 2(9)  of the E.S.I. Act, 1948?"     The  appellants  contended that the High Court  fell  in error in giving a restricted meaning to the word,  ’supervi- sion’,  occurring in section 2(9) of the Act and  in  taking out  the final act of rejection or acceptance of  work  from the purview of that word. Dismissing the appeals, this Court, HELD: Per Ranganath Misra, CJ.     1.  The legislative intention should have  been  brought out more clearly by undertaking appropriate legislation once this Court took a different view. The legislation is benefi- cial and if by interpretation put by the Court the intention is  not  properly brought out it becomes a  matter  for  the legislature to attend to. [278 E] Per M.M. Punchhi. J.     1.  In whatever manner the word ’employee’ under Section 2(9) be construed, liberally or restrictidly, the  construc- tion cannot go to the extent of ruling out the function  and role of the immediate employer or obliterating the  distance between  the principal employer and the immediate  employer. In  some  situations he is the cut-off. He is  the  one  who stumbles  in  the  way of direct  nexus  being  established, unless  statutorily fictioned, between the employee and  the principal  employer. He is the one who in a given  situation is the principal employer to the employee, directly employed

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 30  

under  him. If the work by the employee is  conducted  under the immediate gaze or overseeing of the principal  employer, or his agent, subject to other conditions as envisaged being fulfilled,  he would be an employee for the purpose of  sec- tion 2(9). [284 B-D]     2.  In the ordinary dictional sense "to supervise" means to  direct  or over-see the performance or operation  of  an activity  and to over-see it, watch over and direct.  It  is work  under  eye and gaze of someone,  who  can  immediately direct a corrective and tender advice. In the textual  sense ’supervision’  of the principal employer or his agent is  on ’work’  at  the  places envisaged and the  word  ’work’  can neither be construed so broadly to be the final act of 270 acceptance or rejection of work, nor so narrowly so as to be supervision  at all times and at each and every step of  the work.  A harmonious construction alone would help carry  out the purpose of the Act, which would mean moderating the  two extremes. [284 G-H]     3.   When the employee is put to work under the eye  and gaze  of the principal employer, or his agent, where he  can be watched secretly, accidently, or occasionally, while  the work is in progress, so as to Scrutinise the quality thereof and to detect faults therein, as also put to timely remedial measures by directions given, finally leading to the  satis- factory,completion and acceptance of the work, that would be supervision for the purposes of Section 2(9) of the Act.  It is the consistency of vigil, the proverbial ’a stich in time saves  nine’. The standards of vigil would of course  depend on the facts of each case. [284 H-285 B]     4.  Section 182 of the Indian Contract Act, 1872 defines "agent"  as a person employed to do any act or to  represent another  in dealing with third persons, the person for  whom such act is done, or is so represented is called the  "prin- cipal". Section 184 of the said Act further provides that as between Principal and the third person any person may become a, agent so as to be responsible to his principal. [288 E]     5.  The agent has an identity distinct from his  Princi- pal in one sense and a fictional identity with his Principal in the other. The agreement nowhere amalgamates the identity of  the  electrical contractor with that  of  the  principal (C.E.S.C.)  by undertaking to provide  adequate  supervision for  the purposes of the Act, on behalf of the C.E.S.C.  The agreement  no doubt provides that the electrical  contractor would  provide adequate supervision while carrying  on  with the  work,  the purpose dominant is to  safeguard  obtaining quality  work  and safety safeguards and to conform  to  the provisions of the Electricity Supply Act. [288 E-G]     6.   The creation or deduction of principal-agent  rela- tionship throws one towards the statutory scheme of  keeping distinct the concept of the principal and immediate  employ- er, because of diverse and distinct roles. [285 D]     7.   The  electrical contractor is  obliged  to  provide competent  supervision  while  carrying out  the  work.  The electrical contractor 271 is otherwise a licensee under the Indian Electricity Act and the Rules made thereunder. [286 C]     8.  The principal employer can not delegate the function of  supervision  to his agent who in the eye of law  is  his second  self, i.e., a substitute of the principal  employer. The immediate employer can by statutory compulsion never  be the agent of the principal employer. If such a  relationship is permitted to be established, it would, not only  obliter- ate  the distinction between the two, but would violate  the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 30  

provisions  of the Act as well as the contractual  principle that  a contractor and a contractee cannot be the same  per- son. [285 B-C]     9.   Checking  of work after the same is  completed  and supervision of work while in progress is not the same. These have different perceptions. Checking of work on its  comple- tion  is  an activity, the purpose of which  is  to  finally accept or reject the work, on the touchstone of job specifi- cations.  Thereafter if accepted, it has to be paid  on  the acceptance of the work. This step by no means is supervision exercised.  It cannot be the terminating point of an  agency when  the  interests of the so called principal and  the  so called agent become business-like. [288 H-289 B]     10.  Supervision rested with persons holding valid  cer- tificates of competency for which a register of  supervision was required under the licence to be maintained. [289 C]     11.  Under  the contracts,  the  electrical  contractors cannot  in  one breath be termed as agents of  the  C.E.S.C. undertaking  supervision of the work of their employees  and innately under the licence to have beforehand delegated that function  to  the holder of the certificate  of  competency. [289 C-D]     12. Even if, the terms of the contract and the terms and conditions of the licence, the first being at the behest  of the  C.E.S.C.  and  the second being at the  behest  of  the Government,  be  suggested to be complementing  each  other, still these cannot be so interplayed to mean that an agency, express  or  implied, has been created by  the  C.E.S.C.  in favour of the electrical contractor appointing him to super- vise  work as envisaged under Section 2(9) of the  Act,  and thus to have established a direct link between the  employee and the C.E.S.C. to the exclusion of the electrical contrac- tor. [288 C-D]     13.  On the terms of the contract read with  or  without the  terms  of  the licence, no such  agency,  factually  or legally, stood ere- 272 ated  on behalf of the C.E.S.C. in favour of the  electrical contractors,  and none could be, as that would  violate  the statutory  scheme of distinction well marked  under  Section 2(9)  of  the  Act. The supervision taken was  to  fulfil  a contractual obligation simplicitor.  [289 D]     14. The employees of the electrical contractors, on  the facts  and circumstances do not come in the grip of the  Act and  thus  all demands made towards  ESI  contribution  made against  the  C.E.S.C. and the electrical  contractors  were invalid. [289 E-F]     M.G.  Beedi Works v. Union of lndia,  AIR 1974 SC  1952; Royal Talkies v. E.S.I.C, [1979] 1 SCR 80; Regional Director E.S.I.C. Trichur v.  Ramanuja Match Industries, [1985] 2 SCR 119;  M/s.  P.M. Patel & Sons & Others v. Union of  India  & Ors. [1986]1 SCC 32; The Superintendent of Post Offices etc. etc.,  v.P.K. Rajamma etc. etc., AIR 1977 SC 1677,  referred to.     Halsbury’s Laws of England (Hailsham  Edition) Vol-1  at page 193, referred to. Per K. Ramaswamy, J. (Dissenting)     1.   The Employees’ State Insurance Act, 1948  seeks  to serve the twin objects namely, social security, i.e.,  medi- cal  benefits in case of sickness, maternity and  employment injury and other matters relating thereto and to augment the efficient performance of the duty. [289 H-290 A]     2.   Section 2(9) of the Act encompasscs  employees  em- ployed  for  wages in or in connection with the  work  of  a factory  or establishment to which the Act applies  (i)  who

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 30  

arc  directly  employed by the principal  employer  or  (ii) employed  by or through "an immediate employer";  and  whose services are temporarily lent or let on hire to the  princi- pal  employer by the person with whom the person is  entered into a contract of service. [293 B-C]     3.   Clause 2(9)(ii) (applicable to the facts  on  hand) attracts  a person employed by or through an  immediate  em- ployer as an employee of the principal employer provided the f. flowing conditions are satisfied, namely, (1) the immedi- ate  employer  employs an employee on the  premises  of  the factory  or establishment of the principal employer; (2)  or "under the supervision of the principal employer". (3)  "his agent" on work which is ordinarily part of the 273 work of the factory or establishment or which is preliminary to  the work carried out in or incidental to the purpose  of the factory or establishment. [293 C-D]     4.  Article 39(2) of the Constitution enjoins the  State to direct its policies to secure the health and strength  of workers. The right to social justice is a fundamental right. Right  to livelihood springs from the right to life  guaran- teed  under Art. 21. The health and strength of a worker  is an  integral facet of right to life. The aim of  fundamental rights  is  to  create an egalitarian society  to  free  all citizens  from  coercion or restrictions by society  and  to make  liberty  available for all. Right  to  human  dignity, development of personality, social protection, right to rest and  leisure as fundamcntal human rights to common man  mean nothing  more than the status without means. To the  tillers of the soil, wage earners, labourers, wood cutters, rickshaw pullers, scavengers and hut dwellers, the civil and  politi- cal  rights are ’mere cosmetic" rights.  Socio-economic  and cultural  rights  are their means and relevant  to  them  to realise  the basic aspirations of meaningful right to  life. [293 F-H]     5.  The Universal Declaration of Human Rights,  Interna- tional  Conventions of Economic, Social and Cultural  Rights rccognise their needs which include right to food, clothing, housing,  education,  right to work,  leizure,  fair  wages, decent working conditions, social security, right to  physi- cal or mental health, protection of their families as  inte- gral  part  of the right to life. Our  Constitution  in  the Preamble and Part IV reinforce them compendiously as  social economic justice, a bed-rock to an egalitarian social order. The right to social and economic justice is thus fundamental right. [293 H-294 B]     6.   The term ’health’ implies more than an  absence  of sickness.  Medical  care  and  health  facilities  not  only project  against sickness but also ensures stable man  power for  economic development. Facilities of health and  medical care  generate devotion and dedication to give the  workers’ best,  physically  as well as mentally in  productivity.  It enables the worker to enjoy the fruit of his labour, to keep him physically fit and mentally alert for leading a success- ful, economic, social and cultural life. The medical facili- ties,  arc thcrefore, part of social security and like  gilt edged  security,  it  would yield immediate  return  in  the increased  production or at any rate reduce  absenteeism  on grounds of sickness, etc. health is thus a state of complete physical,  menial and social well being and nut  merely  the absence of disease or infirmity. [294 E-G] 274     7.   Right  to health is a fundamental  human  right  to workmen.  The  maintenance of health is  a  most  imperative constitutional  goal whose realisation requires  interaction

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 30  

by  many  social and economic factors. Just  and  favourable condition of work implies to ensure safe and healthy working conditions to the workmen. The periodical medical  treatment invigorates  the health of the workmen and  harnesses  their human  resources.  Prevention of  occupational  disabilities generates  devotion and dedication to duty and  enthuse  the workmen  to  render efficient service which  is  a  valuable asset for greater productivity to the employer and  national production to the State. [294 H - 29S B]     8.The  Employees’ State Insurance Act aims at  relieving the  employees  from health and  occupational  hazards.  The interpretation  calls for in this case is of the meaning  of the meanings ’supervision’ and ’agent’ in s.2(9)(ii) of  the Act. The legal interpretation is not an activity sui  gener- is.  The  purpose  of the enactment is  the  touch-stone  of interpretation  and every effort would be to give effect  to it. The judge acts as a vehicle of communication between the authors  and  the recipients. The end result is  to  promote rule  of  law and to enliven social order and  humane  rela- tions. [295 C-D]     9.   In  an attempt to construe the  provisions  of  the statute,  construction,  as  a balancing  wheel,  should  be meaningful  so  as to make the statute workable and  not  to render it futile or sterile. Whenever strict  interpretation of  the statute gives rise to unjust situation  or  results, the  Judges  can  ensure their good sense to  remedy  it  by reading words in, if necessary, so as to do what  Parliament would  have  done had they had the situation  in  mind.  The meaning of the same words in a statute may be mended in  the laborynth of interpretation and may be enlarged or restrict- ed in order to harmonise them with the legislative intention of  the  entire  statute. The spirit of  the  statute  would prevail  over  the literal meaning.  The  jurisprudence  and principle,  therefore,  in such a situation,  would  be  the contextual  interpretation  to subserve  the  constitutional scheme and to alongate the legislative purpose,  harmonising the  individual  interest with the community good so  as  to effectuate social transformation envisioned in the  preamble of the Constitution. [297 D-F]     10. The word "supervision" is not one of precise  import and is broad enough to require either supervisor’s  constant presence  during work supervised or his devotion thereto  if only  time necessary to see that it complies  with  contract specifications,  advise  as to  details,  prepare  necessary sketches and drawings, etc. [298 C] 275     11. The Employees’ State Insurance Act does not give its own definition of the word "supervision". Therefore, it must be  construed  in the context the ultimate purpose  the  Act aims to serve and the object behind the Act, i.e. to  extend sickness  benefits and to relieve the employee from  occupa- tional hazards consistent with the constitutional and  human rights scheme. Under the Electricity Act and the Rules,  the Corporation,  licencee, is enjoined to perform the acts  and duties contemplated thereunder to lay overhead lines, under- ground cables, their repairs and maintenance there of,  etc. It authorised, under the contract, the immediate employer to perform, on its behalf, those acts and duties. The immediate employer  would  get the work done through  their  employees employed  for that purpose. It is not a sporadic work but  a constant  and  an ongoing process, so long as  the  licencee generates,  transmits and supplies electrical energy to  the consumers  of their supply area. Had the principal  employer performed  those  acts  and duties  through  its  employees, indisputably,  their  employees would be covered  under  the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 30  

Act,  though the work was got done at highways or at  places other than the factory or the establishment. When the  prin- cipal employer authorises the respondents as its contractors under contracts the need for constant supervision is obviat- ed  relegating  that function to  its  immediate  employers. Otherwise  the  need for contracts would be  redundant.  The Corporation  retained,  under  the contract,  the  power  of acceptance  or  rejection of the work  done  or  supervision effected in maintenance of the work got done by the  immedi- ate employer, subject to overall supervision by the Electri- cal Inspector, on behalf of the State Government. The super- vision in the fact situation is not the day to day  supervi- sion  but legal control, i.e. right to accept or reject  the work done or maintenance effected. The exercise of right  of acceptance  or rejection is the supervision as envisaged  in the contract between the principal employer and the  immedi- ate  employer. It would supply the needed unifying  or  con- necting  thread between the constitutional creed  of  social justice i.e., social security under the Act and  supervision of  the acts or duties by the principal  employer  vis-a-vis the  employees of the immediate employer under the  contract who  ultimately  perform  them on behalf  of  the  principal employer.  Undoubtedly in a bilateral contract  between  the corporation and the respondents qua their rights and liabil- ities  under  the contracts, strict  interpretation  of  the words cngrafted therein, be of paramount relevance and  call for attention as per Contract Act. [301 C-302 B]     12.  In the context of the statutory  interpretation  of "supervision"  under the Act of the works  undertaken  under the contract, the 276 interest  of  the  workmen or the welfare  schemes  for  the employees under the Act interposed and call attention to and need  primacy.  In its construction the  courts  must  adopt contextual  approach to effectuate the statutory  animation, namely,  social security. The literal  interpretation  would feed  injustice  in perpetuity denying to the  employees  of sickness benefit etc. under the Act, which would be avoided, lest the purpose of the Act would be frustrated. [302 B-C]     13.  The  application  of the golden rule  to  the  word "agency" under the Indian Contract Act between the  respond- ents and the corporation, perhaps, does not encompass agency in strict sense under the Act. But public policy of the Act, the  constitutional and human right’s philosophy to  provide social  security to protect the health and strength  of  the workers must be kept at the back of the mind to construe the word  "agent" under s. 2 (9) (ii) of the Act, in  contradis- tinction with the bilateral stipulations under the contract. In  this regard public policy interposes and plays  a  vital role  to  read into the contracts the  extended  meaning  of agency to bring about connecting links between the  respond- ents  and  the licencee corporation. Lest the  contract,  if intended  to  deny  welfare benefits to  workmen,  would  be opposed to public’ policy and would become void under s.  23 of  the  Indian  Contract Act. Such an  intention  would  be avoided by reading into the contract the extended meaning of agency but not fiduciary. [302 E-G]     14.  The contractors, respondents, knew at the  date  of the agreements that the Corporation, as principal  employer, is  under statutory obligation to execute or  keep  executed the works and keep them repaired and maintained as an  inte- gral  activity of generation, transmission and  distribution of the electrical energy to the consumers within their  area of  supply.  On authorisation, the respondents  execute  and keep  executed the works and repairs or kept  them  repaired

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 8 of 30  

and  the maintenance thereof effected through their  employ- ees, which in law is on behalf of the Corporation, principal employer. The genesis and aim of the transaction was to  act on  behalf of the Corporation. The agency of the  respondent with the Corporation, thus, springs into being. The prohibi- tion  of the qualified supervisors, while in service of  the respondents,  to disengage themselves with third parties  in terms  of  the contract was only to  extract  unstinted  and exclusive  devotion  to duty and no further.  It  stands  no impediment to construe that/he respondents are agents to the Corporation as immediate employers. [303 F-H] 277     15. The employees working under the respondents  perform their duties in execution of the works, repairs and  mainte- nance  thereof in connection with the generation,  transmis- sion and distribution of the electrical energy by the Corpo- ration licensee. The Corporation is the principal  employer. The  respondents’ immediate employers execute the work  etc. under  the  supervision of the Corporation  as  its  agents. Their  employees, in law, work under the supervision of  the principal  employer,  corporation. They  are  covered  under s.2(9)  (ii) of the Act entitling to the sickness  benefits, etc.  envisaged  therein and the respondents are  liable  to make  their contribution to the Employees’  Insurance  Fund. [304 A-B]     Senior Electric Inspector & Ors. v. Laxmi Naravan Chopra JUDGMENT: Muddala  Veeramallapa  & Ors., [1961] 2 SCR 295 at  p.  313; Massachusetts  Bonding & Insurance Co. v. United  States  of America, 352 US 128, 1 Led 2d 189; Atma Ram Mittal v. Ishwar Singh Punia, [1988] 4 SCC 284; Owen v. Evans & Owen  (Build- ers)  Ltd., 1962(1) Weekly Law Reports 933; Regional  Direc- tor, E.S.I.C v. South India Flour Mills (P) Ltd., 1986  (69) F.J.R.  77; A.P. State Electricitv Board v.E.S.I.C,  Hydera- bad,  [1977] 51 F JR 171(A.P.); Regional Director.  E.S.I.C, Bangalore  v.  Davangere  Cotton Mills, [1977]  2  LLJ  404; E.S.I.C Chandigarh v. Oswal Woolien Mills Ltd., [1980] 57  F JR  171  (P&H)  (F.B.); Birohichand Sharma  v.  First  Civil Judge,  Nagpur & Ors., [1961] 3 SCR 161; D.C Dewan  Mohideen Sahib  & Sons v. The Industrial Tribunal. Madras,  [1964]  7 SCR 646; Nagpur Electric Light & Power Co. Ltd. v.  Regional Director E.S.I.C, [1967] 3 SCR Reprint 92; Kirloskar,  Pneu- matic  Co. Ltd. v.E.S.I.C, [1987] 70 FJR 199  (Bom.);  Royal Talkies,  Hyderabad & Ors. v.E.S.I.C, [1979] 1 SCR 80;  M/S. P.M. Patel & Sons & Ors. v. Union of India & Ors., [1986]  1 SCC 32, Superintendent of Post Office v.P.K. Rajamma, [1977] 3  SCR 678; Prenn v. Simmonds, 1971 (1) Weekly  Law  Reports 1381 (H.L.), referred to.     World  Labour  Report  - 2, at  Chapter  9  (Safety  and Health); Lawyer Oct. 1987 Page 5; Report of the Committee on Labour Welfare, 1969 in paragraph 5.77 of Chapter 5; Webster Comprehensive  Dictionary  (International Edition)  at  page 1260,  in  Vol, 1I; Corpus Juris Secundum, Vol. 83  at  page 900;  The  Words and Phrases. Permanent Edition,  Vol.  40A; Halsbury’s  Laws  of England (Hailsham Edition);  Chitty  on Contracts,   26th  Edition,  paragraph  2502  at   page   4, A.G.Guest:Anson’s Law of Contract, 26th Edition, at page 308 - referred to. 278

&      CIVIL APPELLATE JURISDICTION: Civil Appeal No.  3197-98 of 1988.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 9 of 30  

    From  the  Judgment  and Order dated  4.4.1988  of  the Calcutta High Court in Appeal Nos. 16 and 438 of 1986.      P.P.  Rao, M.K. Ramamurthy, S.S. Ray, Raj Kumar  Gupta, V.J.  Francis, N.M. PopIi, S.K. Nandy, P.K. Dutta  and  A.D. Sikri for the appearing parties. The Judgment of the Court was delivered by     RANGANATH MISRA, CJ. I have had the advantage of  perus- ing  the  draft judgments prepared by  my  learned  brethren Punchhi and Ramaswamy, JJ. While Justice Punchhi has gone by the  literal construction of the statute, brother  Ramaswamy has tried to find out the spirit of the legislation and with a view to conferring the benefit on the workmen, has adopted a construction different from the reported decision of  this )  Court.      I agree with Justice Punchhi that the appeals should be dismissed  and the judgment of the Division Bench should  be sustained.  At the same time, 1 would like to add  that  the legislative  intention  should have been  brought  out  more clearly  by  undertaking appropriate legislation  once  this Court  took a different view in the decision referred to  in brother  Punchhi’s judgment. The legislation  is  beneficial and  if by interpretation put by the Court the intention  is not  properly brought out it becomes a matter for the  legi- siatture to attend to.      PUNCHHI, J. The sole question which falls for  determi- nation in these appeals is, whether on the facts found,  the right of the Principal employer to reject or accept work  on completion,  on  scrutinizing compliance with  job  require- ments,  as accomplished by a contractor, the  immediate  em- ployer, through his employees. is in itself an effective and meaningful "supervision" as envisaged under Section 2(9)  of the  Employees’ State Insurance Act, 19,;8 (,for  short  the Act)? The said provision, as it stood at the relevant  time, is set out below, as is relevant for our purpose:-               "2(.9’)    - ’employee’ means any  person  em-               ployed for wages in or in connection with  the               work  of a factory or establishment  to  which               this Act applies and -                      (i)  who  is directly employed  by  the               principal employer on any work of, or inciden-               tal or preliminary to or connected               279               with  the work of, the factory  or  establish-               ment, whether such work is done by the employ-               ee  in the factory or establishment  or  else-               where; or                    (ii)  who  is employed by or  through  an               immediate  employer  on the  premises  of  the               factory or establishment or under the supervi-               sion of the principal employer or his agent on               work  which is ordinarily part of the work  of               the  factory  or  establishment  or  which  is               preliminary  to  the  work carried  on  in  or               incidental  to the purpose of the  factory  or               establishment; or                    (iii) whose services are temporarily lent               or  let on hire to the principal  employer  by               the person with whom the person whose services               are so lent or let on hire has entered into  a               contract of service;     The  Calcutta  Electricity  Supply  Corporation  (India) Ltd.,  hereinafter referred to as the C.E.S.C. engages  var- ious contractors to carry out work of excavation, conversion of overhead electric lines and laying of underground  cables under public roads, as well as for repair and maintenance of

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 10 of 30  

the aforesaid works. Subhash Chandra Bose & some others, the private respondents herein, were given such contracts, terms and  conditions in respect of each were reduced to  writing. They would be adverted to at the appropriate time common  as they  are to all. The C.E.S.C. was on notice alerted by  the Regional Director of the Employees State Insurance  Corpora- tion (for short ’E.S.I.C. ’) by means of communication dated 26August,1975 that the employees whose wages were being paid through  such  a contractor would fall within the  scope  of Section  2(9)  of the Act and for reasons and  details  men- tioned  in the communication. Thereupon the C.E.S.C. on  its part  engaged  in  correspondence with  the  Association  of Electrical  Contractors of Eastern India,  a  representative body of the contractors who are parties respondents  herein, requiring them to comply with the provisions of the said Act immediately  or  else it will deduct a lumpsum  of  7%  from their bills. The Association questioned the move and strong- ly  refuted such obligation. After indulging in some  corre- spondence on the subject, the C.E.S.C. started making deduc- tions  from  their bills on account of contribution  to  the Employees State Insurance Fund on and from 1984 and  contin- ued deducting till 1985 at the rate of 10%. Some more corre- spondence ensued, but in vain.     The electrical contractors then moved the High Court  of Calcutta  on  December 6, 1985 by means of a  writ  petition under  Article 226 of the Constitution against the  E.S.I.C. and its officers as also the C.E.S.C. as 280 well as the Union of India so as to have the entire basis of the  demand and deductions from bills annulled. It  was  the categoric  stand of the writ petitioners that  for  carrying out  their  contracts  they  were  not  supervised  by   the C.E.S.C., the principal employer, and they were carrying out works  allotted to them at sites outside the factory  estab- lishment  of the C.E.S.C. Claiming that there employees  did not  come within the definition of the; term  ’employee’  in Section 2(9) of the Act, they required of the High Court  to determine  this jurisdictional fact and issue the asked  for writ, direction or order appropriate in the case to have  it nipped  in the bud. The matter was enter‘ained by  the  High Court  and was heard on affidavits. The dispute  necessarily centred  round  as  to whether the  C.E.S.C.  exercised  any supervision while the contracts were being executed, and  as to whether the terms thereof, assuming that they were faith- fully observed. amounted to work being carried out under the supervision and gaze of the C.E.S.C. The respective  parties put  in supportive affidavits to their respective stands.  A learned  Single Judge of the High Court, when seized of  the matter,  on March 23, 1984, passed an interim order,  giving leave to the C.E.S.C. to respond to the notice issued by the E.S.I.C.  and  avail of the opportunity of being  heard.  as required by law, and till then stayed the realisation of the contribution.  The matter was then thrashed by the  Regional Director  of the E.S.I.C., who on March 30, 1985, passed  an order  under  Section  45-A  of the  Act  holding  that  the C.E.S.C.  was liable to pay Rs. 16,21,564.05 on  account  of contribution to the Employees State Insurance in respect  of employees  of  its contractors and askedil to pay  the  same within the time allotted. This order of the Regional  Direc- tor  of the E.S.I.C. gave legitimacy to the deductions  from the bills of the private electrical contractors already made by  the C.E.S.C. But sinceil was otherwise aggrieved of  the foisting  of the obligation, it moved another writ  petition of its own under Article 226 of the Constitution against the E.S.I.C.  and  others claiming that it was  not  obliged  to

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 11 of 30  

demand contributions on account of insurance in: respect  of the employees of the electrical contractors.      These  two writ petitions were beard together and  were dismissed  by  a learned Single Judge of the High  Court  on January  11,  1986. The learned Single Judge  construed  the contracts   between  the  electrical  contractors  and   ire C.S.E.C., whereunder the contractors were obliged to  super- vise on their own the work undertaken, so as to held that in the facts and circumstances of the case the ultimate  super- vision  was that of the E.S.I.C.,and hence the Act  was  ap- plicable.  The learned Single Judge also took the view  that the Act being a beneficial piece of legislation, enacted for the  protection  and benefit of  workers,  required  liberal interepretation,  as  was held by this Court in  M.G.  Beedi Works v. Union of India, AIR 1974 SC 1952, and then proceed- ed  to hold that the contractors as supervisors were in  the nature  of agents of the C.E.S.C., the  principal  employer. The learned 281 Single Judge also took the view that since ultimate energis- ing of the transmission lines was invariably effected by the C.E.S.C.  after  proper checks were effected for  laying  of cables  or other maintenance work, that step by  itself  was "supervision’  so as to attract the provisions of  the  Act. Such  finding  was based on the fact that  even  though  the agreement  specified  that  work was to be  done  under  the supervision  of  the electrical contractor the  C.ES.C.  re- tained  the  ultimate power or supervision and in  fact  did supervise  the work executed by the contractors. It is  then that  the learned Single Judge abruptly come to the  conclu- sion  that the principal employer could not escape  the  li- ability for the works of his contractors, as the latter  was acting as the agent of the principal, ,’red in sense contin- ued the view of the Regional Director of the E.S.I.C.     Two appeals were filed against the dismissal of the  two writ  petitions before the Division Bench of the High  Court who,  after re-considering the matter, reversed the  learned Single  Judge,  which has given cause for these  appeals  by special leave and the poser of the question mentioned at the outset.     Now  it is noteworthy that the Regional Director of  the E.S.I.C.  drew  deductions of facts in  his  impugned  order dated March 30,1985 in this manner:               "The job which is performed by these employees               engaged  through the contractors. was  princi-               pally  maintenance and distribution  of  elec-               tricity  generated  by the C.E.S.C.  and  also               consumers’ service. It was conceded during the               course of hearing that after the work entrust-               ed  to such contractors was completed, it  was               subject to checking by C.E.S.C. for compliance               with  their  job specifications and  the  work               related  to main business of the  C.E.S.C.  It               cannot therefore be argued that merely because               such  job  was performed outside  the  factory               premises  as  stated, it did not  concern  the               C.E.S.C. The definition of the term ’premises’               includes  such work site where the job of  the               factory  is being done. 1 cannot agree  there-               fore with the argument that such .job was  not               done for the factory and/or that there was  no               supervision of the C.E.S.C. over such job.  It               could not but be a fact that (  E. ,S. C.  was               executing its own  job through lite agency  of               the   coontractors   engaged  by   them.   The

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 12 of 30  

             C.E.S.C’s contention that they have acted upon               the guidelines as provided in the letter dated               26.8.75 does not hold good as the letter dated               26.8.75,  Annexure E, issued by  the  Regional               Director of E.S’.I. Corporation. does not hold               good as the said letter only con-               282               tained  broad guidelines regarding  provisions               of  the  E.S.I. Act and the truth  has  to  be               ascertained  from the realities of the  situa-               tion". [underlining ours]       In place thereof the Division Bench of the High  Court taking stock of the admitted facts opined as follows:               "There  is  no dispute  that  respondent  no.4               (ESIC) is the principal employer in respect of               the  said work and that the appellants  (elec-               trical contractors) are the immediate  employ-               ers  of the said employees in connection  with               the  said work. There is no dispute  that  the               employees  of the appellants are not  directly               employed by the respondent no.4 (ESlC).  There               is  also no dispute that the employees of  the               appellants  (electrical  contractors)  do  not               carry  out  the aforesaid work either  in  the               premises  or the factory or  establishment  of               respondent  no. 4 (E.S.I.C.). It is  also  not               disputed that the work which is carried out by               the  employees of the  appellants  (electrical               contractors)  can be stated to be  work  ordi-               narily part of the work of the respondent no.4               (ESIC)  or preliminary or incidental  to  such               work.  The only dispute appears to be  whether               there  is any supervision of the employees  of               the appellants (electrical contractors) by the               respondent  no.4  (E.S.I.C.) or  its  agents."               [bracketing ours]       Commenting  on  the  impugned order  of  the  Regional Director of the E.S.I.C. dated March 30, 1985 afore-extract- ed, the Division Bench observed as follows:               "It has not been found by the respondent  no.2               (Regional Director) as a fact that in carrying               out  the aforesaid work the employees  of  the               appellants  are under the supervision  of  the               respondent  no.4 or its agents. All  that  has               been  found is that after the works which  are               entrusted to the appellants axe completed, the               same are checked by the respondent no.4.  From               the  aforesaid it is obvious that it  has  not               been  found by the ESI Authorities that  there               is  actual supervision by the respondent  no.4               or its agents of the aforesaid works which are               performed by the employees of the  appellants.               All  that  has been found is  that  after  the               aforesaid  work  is completed  the  respondent               no.4 checks the same. In our view, checking of               a work after the same is completed and  super-               vision  of  the same while the same  is  being               performed are entirely different. Checking  of               a work after its completion is always done  in               every case by the person who ordered the  same               to be done so that the work               283               can  be  finally  accepted  and  payment  made               therefor.  After  the  work  is  completed,  a               further  checking cannot mean or imply any  or

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 13 of 30  

             any further supervision."     Vehemently was it urged on behalf of the appellants that the High Court fell in error in giving a restricted  meaning to  the word ’supervision’ occurring in Section 2(9) of  the Act and in taking out the final act of rejection or  accept- ance of work from the purview of that word. Strong  reliance was  placed  on a decision of this Court  in  Royal  Talkies v.E..S.I. C, [1979] 1 SCR 80, to project that this Court has spelled  out that the main aim of the Act was to insure  all employees  in factories or establishments  against  sickness and  allied disabilities, but the funding. to implement  the policy of insurance was by contribution  from the  employers and  the employees. In the same breath it was observed  that since the benefits belong to the employees and are  intended to embrace as extensive a circle as is feasible, the  social orientation,  protective purpose and human coverage  of  the Act were important considerations in the statutory construc- tion, more weighty than mere logomachy or grammatical  nice- ty. Reliance also was placed on Regional Director,  E.S.I.C, Trichur  v. Ratnanuja Match Industries, [1985] 2 SCR 119  in which  it was ruled that beneficial legislation such as  the Act  is to receive a liberal interpretation. The  Court  yet ruled  that  it could not travel beyond the  scheme  of  the statute  and extend the scope of it on pretext of  extending statutory benefits to those not covered by the scheme of the statute.  The Act being not meant for  universal  converage, the negatives in the Act, one of them being that the Act did not  apply to factories or establishments with less than  20 employees,  was  taken  into account to  rule  that  liberal construction would not go to hold a partner to be an employ- ee as he would be a person who would not answer the  defini- tion.     A  judgment  of this Court in M/s. P.M. patel &  Sons  & Others v. Union of India & Ors., [1986] I SCC 32 rendered in the context of the Employees Provident Fund and  Miscellane- ous Provisions Act, 1952 was pressed into service on  behalf of  the appellants to contend that when rolled beedis,  pre- pared by the worker elsewhere, were placed for acceptance or rejection,  conforming  to the standards  envisaged  by  the manufacturers,  that  in  itself was  held  constituting  an effective decree of supervision and control. The benefit  of the said Act was extended to beedi workers employed  through contractors and the question arose whether such workers came within  the definition of ’employee’ in Section 2(f) of  the said  Act.  The definition of the word  ’employee’  provided that  it shall include any person employed by or  through  a contractor, in or in connection with work of the  establish- ment, which words were held wide enough 284 to include work performed elsewhere than the factory itself, including the dwelling house of a home worker, as also  that the manufacturing operation, simple as it was, performed  by illiterate  workers, young and old, subjecting to  rejection and acceptance, was by itself an effective degree of  super- vision and control, establishing the relationship of  master and servant.     In  whatever  manner the word ’employee’  under  Section 2(9) be construed, liberally or restrictedly, the  construc- tion cannot go to the extent of ruling out the function  and role of the immediate employer or obliterating the  distance between  the principal employer and the immediate  employer. In  some  situations he is the cut-off. He is  the  one  who stumbles  in  the  way of direct  nexus  being  established, unless  statutorily fictioned, between the employee and  the principal  employer. He is the one who in a given  situation

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 14 of 30  

is the principal employer to the employee, directly employed under  him. If the work by the employee is  conducted  under the immediate gaze or overseeing of the principal  employer, or his agent, subject to other conditions as envisaged being fulfilled,  he would be an employee for the purpose of  sec- tion 2(9). Thus besides the question afore-posed with regard to  supervision  of the principal  employer  the  subsidiary question  is whether instantly the  contractual  supervision exercised by the immediate employer (the electrical contrac- tors)  over his employee was exercised, on the terms of  the contract,  towards  fulfilling a selfobligation or  in  dis- charge of duty as an agent of the principal employer.     P.M  Patel’s case can also be no help to  interpret  the word  ’supervision’  herein. The word as such is  not  found employed in Section 2(1) of The Employees Provident Fund and Miscellaneous  Provisions  Act, 1952 but found used  in  the text  of  the judgment. It appears to have been  used  as  a means  to establish connection between the employer and  the employee having regard to the nature of work performed.  But what  has  been done in Patel’s case cannot  ipso  facto  be imported in the instant case since the word ’supervision’ in the  textual context requires independent  construction.  In the ordinary dictional sense "to supervise" means to  direct or over-see the performance or operation of an activity  and to over-see it, watch over and direct. It is work under  eye and gaze of someone who can immediately direct a  corrective and tender advice. In the textual sense ’supervision’ of the priucipal  employer or his agent is on ’work’ at the  places envisaged  and the word ’work’ can neither be  construed  so broadly  to be the final act of acceptance or  rejection  of work,  nor  so narrowly so as     to be supervision  at  all times  and at each and every step of the work. A  harmonious construction  alone would help carry out the purpose of  the Act. which would mean moderating the two extremes. When the 285 employee’is put to work under the eye and gaze of the  prin- cipal  employer, or his agent, where he can be  watched  se- cretly,  accidently, or occasionally, while the work  is  in progress,  so  as to scrutinise the quality thereof  and  to detect faults therein, as also put to timely remedial  meas- ures by directions given, finally leading to the  .satisfac- tory  completion and acceptance of the work, that  would  in our view be supervision for the purposes of Section 2(9)  of the  Act. It is the consistency of vigil, the proverbial  ’a stitch in time saves nine’. The standards of vigil would  of course depend on the facts of each case. Now this  function, the  principal employer, no doubt can delegate to his  agent who in the eye of law is his second self, i.e., a substitute of the principal employer. The immediate employer,  instant- ly,  the electrical contractors, can by statutorily  compul- sion never be the agent of the principal employer. If such a relationship  is  permitted to be established it  would  not only  obliterate the distinction between the two, but  would violate the provisions of the Act as well as the contractual principle  that a contractor and a contractee cannot be  the same  person.  The  E.S.I.C. claims  establishment  of  such agency on the terms of the contract, a relationship  express or implied. But, as is evident, the creation or deduction of such relationship throws one towards the statutory scheme of keeping distinct the concept of the principle and  immediate employer, because of diverse and distinct roles. The defini- tion  is well drawn in Halsbury’s Laws of England  (Hailsham Edition) Vol. 1 at page 193 as follows:               "An  agent is to be distinguished on  the  one               hand from a servant, and on the other from  an

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 15 of 30  

             independent  contractor. A servant acts  under               the  direct  control and  supervision  of  his               master and is bound to conform to all reasona-               ble orders given to him in this course of  his               work; an independent contractor, on the  other               hand,  is entirely independent of any  control               or  interference  and  merely  undertakes   to               produce a specified result, employing his  own               means to produce that result. An agent, though               bound to exercise his authority in  accordance               with  all  lawful instructions  which  may  be               given to him from time to time by his  princi-               pal,  is  not subject to its exercise  to  the               direct control and supervision of the  princi-               pal".     AND this statement of law was used with approval by this Court  in AIR 1977 SC 1677 titled as The .Superintendent  of post Offices  etc. etc. v. P.K. Rajamma etc. etc.     Now  coming  to the subsidiary question the  High  Court took  up one particular contract dated January  20,1984  be- tween one of the electrical contractors and the C.E.S.C. The material portion thereof is as follows: 286               "The  said contract relates to laying  of  new               undergound  cables and conversion  of  overcad               mains  and  service to underground  system  at               Barrackpore Trunk Road between Paikpare  Junc-               tion  to  D.F. 1/6 and from Baranagar  P/T  to               D.FI/67.               Please  note  that you will  have  to  provide               competent  supervision while carrying out  the               work in accordance with the provisions of  the               Indian Electricity Rules, 1956. You will  also               have  to provide adequate watch and  ward  ar-               rangement for the safe custody of the  materi-               als  till such time and complete  installation               is handed over to us. You will be required  to               insure  against  theft and  pilferage  of  all               materials while held in your site godown".     The  obligation embodied, as is plain, is for the  elec- trical  contractor  to provide competent  supervision  while carrying  out the work. The electrical contractor is  other- wise  a  licensee under the Indian Electricity Act  and  the Rules made thereunder and the conditions of his licence read as follows:               "Mr./Messrs. Eastern Engineers & Constructions               is/are hereby authorised to carry out electri-               cal  installation  work in the State  of  West               Bengal. This licence is issued subject to  the               compliance with the conditions set out on  the               reverse, and also to the continued  compliance               with  the conditions set out in Regulation  24               of  the Regulations under Rule 45(,1)  of  the               Indian Electricity Rules, 1956.                    (1)  All  electrical  installation   work               coming  within the purview of Rule 45  (1)  of               the Indian Electricity Rules, 1956  undertaken               by  the holder of this licence, shall be  car-               ried  out  under the direct supervision  of  a               person  holding a valid certificate of  compe-               tency...                    (2)  The  holder of  this  licence  shall               maintain a register of supervision and workmen               in the form below and shall produce the regis-               ter for inspection on demand by an  Electrical

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 16 of 30  

             Inspector  or other person authorised in  this               behalf the Licensing Board.                    (3)  On the completion of any  electrical               installation  work  coming within  purview  of               rule  45(1) of the Indian  Electricity  Rules,               1956, a test report in the form prescribed  by               the Board shall be submitted by the holder  of               this  licence  to the  Secretary.  The  report               shall be signed by the supervisor under  whose               supervision the work has been carried out,               287               and  countersigned by the holder of  this  li-               cence, who shall be wholly responsible for the               due execution of the work.                    (4) If the holder of this licence  ceases               to  be in possession of a  valid  supervisor’s               certificate of competency, ceases to retain in               his  said employment at least  one  supervisor               holding valid certificate of competency,  this               licence shall be invalid.                    (5) If the holder of this licence accepts               an  employment under any other firm or  person               for the purpose of carrying out or supervising               any electrical installation work coming within               the purview of rule 45(1) of the Indian  Elec-               tricity  Rules,  1956 this  licence  shall  be               invalid  and the holder shall return the  same               to the Secretary for cancellation.     The  terms and conditions of the licence  postulate  the licensee  to  carry out the installation work  of  the  kind mentioned under the direct supervision of a person holding a valid certificate of competency. For that purpose the licen- see shall maintain a register of supervision. Such  register is  open to inspection on demand by an electrical  inspector or  other person authorised in this behalf by the  Licensing Board.  On completion of the installation work of  the  kind mentioned, a test report shall be submitted by the  licensee to the Secretary, which report shall first be signed by  the supervisor under whose supervision the work had been carried out  and  then countersigned by the licensee  who  shall  be wholly  responsible for the due execution of the  work.  The licence  further  enjoins the licensee either  to  retain  a valid supervisory certificate of competency or keep one such person retained in his employment failing which the  licence can  be  invalidated. Same is the position if  the  licensee accepts  employment under any other firm or person  for  the purpose  of carrying out or supervision any  electrical  in- stallation  work of the kind mentioned. In  that  situation, the license is to be returned to the Secretary for cancella- tion.     On  the  conjoint  reading  of  the  contract  with  the C.E.S.C. and the terms and conditions of the licence, assum- ing the terms were to be faithfully obeyed, could it  other- wise be held that the C.E.S.C. could appoint the  electrical contractor  as its agent to have the work carried out  under the  latter’s supervision, in place of C.E.S.C. As is   evi- dent,  the   contract relates to laying of  new  underground cables, conversion of overhead mains and service and mainte- nance  to  the  underground system. The  work  being  highly sophisticated in nature, requiring special skill and  exper- tise,  is  given by the C.E.S.C. to the  contractor  on  the condition  that  the latter will have to  provide  competent supervision while the work progresses, in ac- 288 cordance  with  the  provisions of  the  Indian  Electricity

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 17 of 30  

Rules, 1956, which, in the larger interest of the electrical network  and community and its safeguards, require an  elec- trical contractor obtaining a licence to carry out  electri- cal installation work of the kind mentioned. Then the  Rules obligate  him  to take in his services a  person  holding  a valid certificate of competency under whose direct  supervi- sion the work is required to be carried out, and on  comple- tion  its final report being first signed by the  supervisor supervising the work and then countersiged by the holder  of the  licence, who will be responsible for the due  execution of  the work. The licence is capable of being  rendered  in- valid  or liable for cancellation due to nonemployment of  a supervisor  given in the terms and conditions. Even if,  the terms  of the contract and the terms and conditions  of  the licence,  the first being at the behest of the  C.E.S.C  and the  second  being at the behest of the Government  of  West Bengal,  be suggested to be complementing each other,  still these  cannot  be  so interplayed to mean  that  an  agency, express  or  implied, has been created by  the  C.E.S.C.  in favour of the electrical contrator appointing him to  super- vise  work as envisaged under Section 2(9) of the  Act,  and thus to have established a direct link between the  employee and the C.E.S.C. to the exclusion of the electrical contrac- tor.     Section  182  of the Indian Contract Act,  1872  defines "agent"  as a person employed to d3 any act or to  represent another  in dealing with third person, the person  for  whom such act is done, or is so represented is called the  "prin- cipal". Section 184 of the said Act further provides that as between principal and the third person any person may become an agent so as to be responsible to his principal. Now it is to  be  understood that the agent has an  identity  distinct from  his  principal in one sense and a  fictional  identity with  his  principal  in the other.  The  agreement  nowhere amalgamates  the identity of the electrical contractor  with that  of the principal (C.E.S.C) by undertaking  to  provide adequate supervision for the purposes of the Act, on  behalf of  the  C.E.S.C. The agreement no doubt provides  that  the electrical  contractor  would provide  adequate  supervision while carrying on with the work, the purpose dominant is  to safeguard obtaining quality work and safety safeguards,  and to conform to the provisions of the Electricity Supply  Act. To the Division Bench of the High Court it was obvious  that the Regional Director of the E.S.I.C. had nowhere found that there  was actual supervision, either by the C.E.S.C or  its duly  appointed agents, over works which were  performed  by the  employees of the electrical contractors. All  that  has been found is that the said works on completion were checked by  the C.E.S.C. and then accepted. Checking of  work  after the  same  is  completed and supervision of  work  while  in progress is not the same. These have different  perceptions. Checking 289 of  work  on its completion is an activity, the  purpose  of which is to finally accept or reject the work, on the touch- stone of job specifications. Thereafter, if accepted, it has to  be paid for. Undisputably electrical contractors had  to be paid on the acceptance of the work. This step by no means is Supervision exercised. Neither can it be the  terminating point  of  an  agency when the interests of  the  so  called principal  and  the so called  agent  become  business-like. Besides,  the  High Court has found that the  work  done  by employees  was under the exclusive supervision of the  elec- trical contractors or competent supervisors engaged by  them trader the terms of the contract and the licence. By  neces-

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 18 of 30  

sary  implication supervision by the C.E.S.C. or its  agents stood  excluded.  Supervision rested  with  persons  holding valid  certificates  of competency for which a  register  of supervision was required under the licence to be maintained. Under  the contracts, the electrical contractors  cannot  in one breath be termed as agents of the C.E.S.C.,  undertaking supervision  of  the work of their  employees  and  innately under the licence to have beforehand delegated that function to the holder of the certificate of competency. Thus we hold that  on the terms of the contract read with or without  the terms of the licence, no such agency, factually or  legally, stood  created  on behalf of the C.E.S.C. in favour  of  the electrical  contractors,  and none could be, as  ’hat  would violate  the  statutory scheme of  distinction  well  marked under Section 2(a) of the Act. The supervision taken was  to fulfil a contractual obligation simplicitor and we leave  it at the level.     Thus  on both counts, the principal question as well  as the  subsidiary question must be answered against  the  ESIC holding that the employees of the electrical contractors, on facts  and  cricumstances, established before  the  Division Bench of the High Court, do not come in the grip of the  Act and  thus  all demands made towards  ESI  contribution  made against  the  C.E.S.C. and the electrical  contractors  were invalid.  We affirm the view of the High Court in  that  re- gard.     The  appeals are accordingly dismissed. In  the  circum- stances, however, we make no order as to costs.     K. RAMASWAMY, J. From the midst of personal warmth 1  am enjoying  with my learned brethren, I have to cool off  from the discomfortable breeze generated by the draft judgment of brother  Punchhi,  J., given my anxious reflections  of  its consequences and with due respect, 1 express my inability to fail in line with.     The Employees’ State Insurance Act 34 of 1948 (for short ’the  Act’) seeks to serve the twin objects  namely,  social security i.e. medical 290 benefits  in  case  of sickness,  maternity  and  employment injury and other matters relating thereto and to augment the efficient performance of the duty. The respondents  (immedi- ate  employers) had contracts with the Calcutta  Electricity Corporation (India) Ltd. (for short ’the Corporation’),  the Principal  employer,  to carry out excavation,  erection  of overhead  electric  lines and laying of  underground  cables beneath  public roads as well as their repairs  and  mainte- nance.  The Act enjoins the employer to contribute  his  50% share towards medical reimbursement with a proportionate cut from  the  wages  of the employees and to debit  it  to  the Employees’ State Insurance Corporation fund to render  medi- cal  assistance etc. to the employees. In consequence  there would  be cut, to the extent of 10% or as may  be  specified from  time to time, in the "profit packet" of the  immediate employers.  For  some time, it was complied  with  but  late assailed their liability under Art. 226 of the Constitution. The  conflagration of the claims between the  immediate  em- ployers and their employees gave rise to the lis. The  imme- diate employers arming themselves with independent  contrac- tor’s clout summon the services of the "gramarian" and tells him  that "our contracts with the Corporation are  bilateral untramelled by routine supervision or agency with the Corpo- ration  under  s. 2(9) of the Act and tell us  whether  your "golden rule" does not apply to us? Like Shylock, are we not entitled to prevent inroad into our profit pocket not even a farthing from minimal of 10%, though the workman may give us

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 19 of 30  

efficient  service  on receiving medical  treatment  ?"  The employees request the social engineer to sharpen his  foren- sic skills of his instruments to provide them social secunty from health and occupational hazards fastering a part of the liability on the immediate employers whom they serve. Wheth- er the social engineer would avoid unjust result like  Port- jo’s  judgment ? Whether the words in the contract would  be masters by golden rules ? Whether the words "Supervision" or "agent" in s.2(9) of the Act would be so construed or adopt- ed  by purposive approach as to do what justice  and  equity required  ? The result of the combat between the  granmarian and  the social engineer would provide the answer  to  these searching questions.     Before adverting to angle into their perceptions, it  is of  utility  to keep abreast the brass facts that lie  in  a short  compass.  The Corporation had from  the  State  Govt. Licensor, licence under s.3 of the Indian Electricity Act  9 of  1910  (for  short the ’Electricity  Act’)  to  generate, transmit  and supply electrical energy to the  consumers  of the  area.  The Corporation is enjoined  to  erect  electric supply lines and also overhead lines, service lines,  under- ground cables through which energy is to be supplied to  the either distributing main or immediately from the  suppliers’ premises etc. It entered into contracts with the respondents to  lay  undergound cables, to erect overhead  lines,  their repairs  and maintenance and for execution thereof  employed their own employees. 291     The Elecricity Act empowers the Corporation as licensee, under s. 12 thereof, to open and break Up the soil etc.  and lay  down electricity supply lines and other works,  repair, alter or remove the same and do all other acts necessary for due  supply  of energy. It also empowers under  Sec.  13  to execute new works in compliance of that section. Under  Sec. 14  & 15 it is empowered alteration of the pipes  or  wires. Sec.  10  empowers a licensee to place  any  overhead  lines along or across any street etc. Sec. 20 empowers the  licen- see  or "any person duly authorised by a licensee" to  enter upon any premises, at reasonable time on prior intimation to the  occupier  of any premises or land etc. upon  which  the electricity  supply line or other works have  been  lawfully placed for the purpose of (a) inspecting, testing, repairing or altering the electricity supply, lines meters,  fittings, works  and apparatus for the supply of energy  belonging  to the  licensee etc. Thus, the Corporation, as a licensee,  is ordinarily  and as an integral scheme, to execute the  works or duly authorise on its behalf any other person to  execute any  of  the  works enumerated  herinbefore  or  inspection, repair,  testing or alteration of the works and  maintenance thereof.     A conjoint reading of s. s. 3 (2) (b) of the Electricity Act and Clause (1) (a) of the Schedule shows that the licen- see  is required to show to the "satisfaction of  the  State Government  that the Corporation is in a position  to  fully and efficiently discharge the duties and obligations imposed upon  him by the licence throughout the area of the  supply. On  its failure, the State Govt. under s. 4 (1) (c)  (i)  is entitled  to revoke the licence. In terms of s.  15(1)  "the duly authorised persons" of the licensee is to operate under the Act to lay new electric supply lines or other works etc. Equally  Clause V (1) of the Schedule provides to  lay  down distributing  mains for public lighting of any street  on  a requisition  made by two or more owners of occupiers of  the premises. The Indian Electricity Rules, 1956 (for short ’the Rules’) made under s. 37 of the Electricity Act provides the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 20 of 30  

procedure  in this regard. Rule 36 adumberates  handling  of electric  supply lines. apparatus. only "by authorised  per- son"  who is required to take safety measures  "approved  by the  electrical  Inspector", appointed under s.  36  of  the Electricity Act. Sub-rule (2) of Rule 36 provided thus:               "No  person  shall work on any  live  electric               supply  line or apparatus and no person  shall               assist such person on such work, unless he  is               authorised in that behalf and takes the safety               measures approved by the Inspector".     Rule  45 provides precautions to be taken by  electrical workmen,  suppliers etc. Unless electrical  contractor,  li- censed in this behalf by the 292 State  Govt.,  appoints a person holding  a  certificate  of competency and a permit in this behalf issued or  recognised by the State Govt., the contractor shall not be entitled  to undertake  any installation work etc. Rule 51 provides  cer- tain safety measures to be taken to the satisfaction of  the Inspector  so  as  to prevent danger. Rule  64  requires  an authorised  person to carry out the acts  mentioned  therein subject to the supervision provided in Clause (b) thereof by the Electrical Inspector. Rule 123(4) speaks of  examination of  flexible  cables by authorised persons and  Rule  125(8) enjoins  that  all apparatus to be operated  only  by  those persons who are authorised for the purpose.     It could, thus, be seen that the Corporation as a licen- see  is empowered and enjoined to lay the works  production, transmission  and distribution of electrical energy  to  the consumers  within the area of supply. It is also  authorised to  entrust, any person authorised by it in this behalf,  to perform  the  duties of the licensee under the Act  and  the Rules. The contractor in turn appoint a qualified supervisor to  have works executed and maintained or repaired,  subject to inspection and supervision by the Electrical Inspector of the State Govt. The primary duty and responsibility is  that of  the  Corporation as the Principal employer to  have  the works  etc.  executed, repaired and maintained  through  its employees.  It duty authorises the contractor to have  these works  done, repaired or maintained, on its  behalf,  though the  media  of contract. The question  emerges  whether  the respondents are not immediate employers executing the  works etc.  under the supervision of the Principal empleyer or  as its agents ? From the above backdrop of statutory operation, the scope of s. 2(9) is to be gauged which reads thus:-               "2(9)  - ’employee’ means any person  employed               for wages in or in connection with the work of               a  factory or establishment to which this  Act               applies and -                    (i)  who  is  directly  employed  by  the               principal employer on any work of, or inciden-               tal  or preliminary to or connected  with  the               work of, the factory or establishment, whether               such  work  is  done by the  employee  in  the               factory or establishment or elswhere; or                    (ii)  who  is employed by or  through  an               immediate  employer  on the  premises  of  the               factory or establishment or under the supervi-               sion of the principal employer or his agent on               work  which is ordinarily part of the work  of               the  factory  or  establishment  or  which  is               preliminary to the work carried               293               on  in  or incidental to the  purpose  of  the               factory or establishment; or

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 21 of 30  

                  (iii) Whose services are temporarily lent               or  let on hire to the principal  employer  by               the person with whom the person whose services               are so lent or let on hire has entered into  a               contract of service ."     It  encompasses  employees employed for wages in  or  in connection  with the work of a factory or  establishment  to which  the Act applies (i) who are directly employed by  the principal employer or (ii) employed by or through "an  imme- diate employers"; and whose services are temporarily lent or let  on  hire to the principal employer by the  person  with whom  the  person  is entered into a  contract  of  service. Clause  2(9)(ii) (applicable to the facts on hand)  in  turn attracts  a person employed by or through an  immediate  em- ployer as an employee of the principal employer provided the following conditions are satisfied, namely, (1) the  immedi- ate  employer  employs an employee on the  premises  of  the factory or establishment of the principal employer; (2)  "or under  the supervision of the principal employer"; (3)  this agent  on work which is ordinarily part of the work  of  the factory or establishment or which is preliminary to the work carried  out in or incidental to the purpose of the  factory or  establishment.  Clauses  (i) and (iii) of  s.  2(9)  are inapplicable to the facts.     Article 25(2) of Universal Declaration of Human  Rights, 1948  assures that everyone has the right to a  standard  of living adequate for the health and well being of himself and of  his family  ....including medical care, sickness,  disa- bility  .....  ,Art. 7(b) of the International Convention on Economic, Social  and  Cultural Rights, 1966 recognises the  right  of everyone to the enjoyment of just and favourable  conditions of work which ensure, in particular, safe and healthy  work- ing  conditions. Article 39(e) of the  Constitution  enjoins the  State to direct its policies to secure the  health  and strength of workers. The right to social justice is a funda- mental right. Right to livelihood springs from the right  to life  guaranteed under Art.21. The health and strength of  a worker  is  an integral fact of right to life.  The  aim  of fundamental  rights is to create an egalitarian  society  to free  all citizens from coercion or restrictions by  society and to make liberty available for all. Right to human digni- ty, development of personality, social protection, right  to rest  and leisure as fundamental human rights to common  man mean  nothing  more than the status without  means.  To  the tillers to the soil, wage earners, labourers, wood  cutters, rickshaw pullers, scavengers and hut dwellers the civil  and political  right are ’mere cosmetic’ rights.  Socio-economic and cultural rights are their means and relevant to them  to realise  the basic aspirations of meaningful right to  life. The  Universal  Declaration of Human  Rights,  International Conventions of Economic, 294 Social  and  Cultural  Rights recognise  their  needs  which include  right to food, clothing, housing, education,  right to  work,  leizure, fair wages, decent  working  conditions, social security, right to physical or mental health, protec- tion  or  their families as integral part of  the  right  to life. Our Constitution in the Preamble and Part IV reinforce them  compendiously as socioeconomic justice, a bed-rock  to an egalitarian social order. The right to social and econom- ic justice is thus fundamental right.     In  World  Labour Report - 2, at Chapter 9  (Safety  and Health) it is stated that "in every three minutes  somewhere in the world one worker dies and in every second that passes

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 22 of 30  

at least three workers are injured". In India on an  average every day 1100 workers are injured and three are killed  "in industrial  establishments" vide (Lawyer Oct. 1987 page  5). In 26th I L.O. Convention held in Philadephia in April 1944, recommendation  No. 69 laid down norms for medical care  for workers. In October 1943, the Government of India  appointed Health Survey and Development Committee known as Sir  Joseph Bhore Committee which laid emphasis on "Preventive Schemes". I.L.O.  Asian  Regional Conference held in  Delhi  in  3947, resolved  that in very scheme for medical care in any  Asian country  the  need  for the prevention of  disease  and  the improvement  of the general standard of health must be  con- sidered  as of almost importance. The Act had culminated  in its  birth of these recommendations providing in  a  limited area social security to the employees from health and  occu- pational hazards.     The  term health implies more than an absence  of  sick- ness.  Medical care and health facilities not  only  protect against  sickness  but  also ensures stable  man  power  for economic development. Facilities of health and medical  care generate devotion and dedication to give the workers’  best, physically as well as mentally, in productivity. It  enables the  worker  to enjoy the fruit of his labour, to  keep  him physically  fit and mentally alert for leading a  successful economic,  social and cultural life. The medical  facilities are, therefore, part of social security and like gilt  edged security,  it would yield immediate return in the  increased production  or at any rate reduce absentecism on grounds  of sickness, etc. Health is thus a state of complete  physical, mental  and social well being and not merely the absence  of disease or infirmity. In the light of Arts. 22 to 25 of  the Universal Declaration of Human Rights, International Conven- tion  on  Economic, Social and Cultural Rights, and  in  the light of socio-economic justice assured in our Constitution, right to health is a fundamental hUman right to workmen. The maintenance  of health is a most  imperative  constitutional goal  whose realisation requires interaction by many  social and economic factors. Just and favourable condition of  work implies to ensure      295 safe  and  healthy working conditions to  the  workmen.  The periodical  medical treatment invigorates the health of  the workmen  and harnesses their human resources. Prevention  of occupational disabilities generates devotion and  dedication to duty and enthuse the workmen to render efficient  service which  is a valuable asset for greater productivity  to  the employer  and national production to the State. Yet  in  the report of the Committee on Labour Welfare, 1969 in paragraph 5. 77of Chapter 5, reveals that, private employers generally feel that this burden shall not be cast upon them."     The Act aims at relieving the employees from health  and occupational  hazards. The interpretation calls for in  this case  is  of the meaning of the meanings  ’supervision’  and ’agent’ in s.2(9) (ii) of the Act. The legal interpretations is not an activity sui generis. The purpose of the enactment is the touch-stone of interpretation and every effort  would be  to  give effect to it. The judge acts as  a  vehicle  of communication  between the authors and the  recipients.  The end  result is to promote rule of law and to enliven  social order and humane relations.     In  Senior Electric Inspector & Others v. Laxmi  Narayan Chopra & Ors., [1962] 3 SCR 146 at p. 156, K. Subba Rao,  J. (as he then was) for unanimous Court held thus:               "In  a modern progressive society it would  be               unreasonable  to  confine the intention  of  a

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 23 of 30  

             Legislature to the meaning attributable to the               word used at the time the law was made, for  a               modern  Legislature  making laws to  govern  a               society which is fast moving must be  presumed               to  be aware of an enlarged meaning  the  same               concept  might attract with the march of  time               and  with  the revolutionary  changes  brought               about  in  social,  economic,  political   and               scientific and other fields of human activity.               Indeed,  unless a contrary intention  appears,               an interpretation should be given to the words               used  to take in new facts and situations,  if               the words are capable of comprehending them."     In  M.  Pentiah & Ors. v. Muddala Veermallappa  &  Ors., [1961]  2  SCR 295 at p. 313 in a  separate  but  concurrent judgment, Sarkar, J. held               "Where the language of a statue, in its  ordi-               nary  meaning  and  grammatical  construction,               leads  to  a  manifest  contradiction  of  the               apparent purpose of the enactment, or to  some               inconven-               296               ience  or  absurdity, hardship  or  injustice,               presumably not intended, a construction may be               but upon it which modifies the meaning of  the               word, and even the structure of the sentence".               This court approved the ratio in Seaford Court               Estates Ltd. v.Asher, [1949] 2 All E.R. 155 at               164, Denning, L.J. who said,               "When  a defect appears a judge cannot  simply               fold  his  hands and blame the  draftsman.  He               must  set to work on the constructive task  of               finding  the intention of  Parliament   ......               and  then he must supplement the written  word               so  as to give "force and life" to the  inten-               tions  of  the  legislature   .....   A  judge               should  ask himself the question how,  if  the               makers  of the Act had themselves come  across               ’his ruck in the texure of it, they would have               straightened it out ? He must then do as  they               would  have done. A judge must not  alter  the               material of which the Act is woven, but he can               and should iron out the creases".               I conceive it my duty, therefore, so read  the               new Act, unless I am prevented by the  intrac-               tability  of the language used, as to make  it               carry out the obvious intention of the  legis-               lature".     In  Massachusetts  Bonding  & Insurance  Co.  v.  United States of America, 352 U.S. 128 ed 2d 189; Frankfurther, J., speaking  per himself, joined by Reed, Clark,  and  Brennan, JJ. held at headnotes 8 & 9 thus:               "On more than one occasion, but evidently  not               frequently  enough,  Judge  Learned  Hand  has               warned against restricting the mean-               of  a  statute to the meaning of  its  "plain"               words.               "There is no surer way to misread any document               than  to read it literally...." Of course  one               begins  with the words of a statute to  ascer-               tain  its meaning, but one does not  end  with               them. The notion that the plain meaning of the               words of a statute defines the meaning of  the               statute  reminds  one of  T.H.  Huxley’s  gray               observation  that at times "a theory  survives

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 24 of 30  

             long  after its brains are knocked  out."  One               would  suppose that this particular theory  of               statutory  construction  had  had  its  brains               knocked  out  in  Boston Sand  &  Gravel  C.v.               United  States,  [278 US 41, 48, 73  Led  170,               177,  49 S Ct 52]. The words of this  legisla-               tion  are as plain as the Court finds them  to               be  only  if  the 1947 amendment  is  read  in               misleading  isolation. An amendment is  not  a               repeal.  An amendment is part of the  legisla-               tion  it  amends. The 1947  amendment  to  the               Federal  Tort Claims Act of 1946 must be  read               to  harmonise with the central purpose of  the               original               297               Act.  The central purpose of the original  Act               was  to  allow  recovery  against  the  United               States  on  the  basis and to  the  extent  of               recoveries for like torts committed by private               tortfeasors  in the State in which the act  or               omission giving rise to the claim against  the               United  States occurred. The   1947  amendment               filled  the  gap, a very small gap,  that  was               disclosed in the scheme formulated by the 1946               Act".     In  Atma Ram Mittal v. Ishwar Singh Punia, [1988] 4  SCC 284, this Court held that the purpose of interpretation in a social  amelioration legislation is an imperative  irrespec- tive  of  anything else. It was further held that  the  con- tents,  subject matter, the effects and consequences or  the spirit  and reason of the law shall be taken  into  account. The words must be construed with the imagination "of purpose behind them". (emphasis supplied)     Therefore,  in an attempt to construe the provisions  of the  statute construction, as a balancing wheel,  should  be meaningful  so  as to make the statute workable and  not  to render it futile or sterile. Whenever strict  interpretation of  the statute gives’ rise to unjust situation or  results, the  Judges  can  ensure their good sense to  remedy  it  by reading words in, if necessary, so as to do what  Parliament would  have  done had they had the situation  in  mind.  The meaning of the same words in a statute may be mended in  the laborynth of interpretation and may be enlarged or restrict- ed in order to harmonise them with the legislative intention of  the  entire  statute. The spirit of  the  statute  would prevail  over  the literal meaning.  The  jurisprudence  and principle,  therefore,  in such a situation,  would  be  the contextual  interpretation  to subserve  the  constitutional scheme and to alongate the legislative purpose,  harmonising the  individual  interest with the community good so  as  to effectuate social transformation envisioned in the  preamble of the Constitution.     Let  me,  therefore,  consider the arebit  of  the  word ’supervision’  under  s.2(9)  (ii) of the  Act.  In  Webster Comprehensive  Dictionary (International Edition)  the  word ’supervision’  has been defined at page 1260 in Vol.  II  as "authority to direct or supervise", supervise means - have a "general  oversight of’. "In Corpus Juris Secundum", Vol  83 at page 900 it is stated that The word "supervision" is  not of the precise import and when not limited by the context is broad  enough  to cover more than one  subject.  It  implies oversight  and direction, and does not  necessarily  exclude the doing of all manual labour, but may properly include the taking  of  an active part in the  work".  "Supervision"  is

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 25 of 30  

defined as meaning "the 298 act  of overseeing or supervising; having general  oversight of, especially as an officer vested with authority;  inspec- tion;  oversight; superintendence." The Words  and  Phrases, Permanent  Edition, Vol. 40A defines that the  "Supervision" means  oversight, an act of occupation of  supervision;  in- spection. "Supervision" is an act of overseeing or  supervi- sion; having general oversight of, especially as an  officer vested  with authority; inspection; oversight;  superintend- ence,  "Control"  is  the act of  superintending;  care  and foresight  for  purpose of directing and with  authority  to direct; power or authority to check or restrain; restraining or  directing influence; regulating power. Contract  of  em- ployment  to "supervise" construction of power plant,  steam distribution  system held to require time and attention   to work  needed to see that it was properly and promptly  done, regardless of number of hours spent there on. The word "supervision" is not  one  of precise import and is broad enough  to  require either supervisor’s constant presence during work supervised or  his devotion thereto if only time necessary to see  that it  complies  with  contract specifications,  advise  as  to details,  prepare necessary sketches and drawings,  etc.  In Owen  v. Evans & Owen (Buuilders) Ltd., [1962] 1 Weekly  Law Reports 933 the Court of Appeal was called upon to  consider the  meaning  of  the words  "immediate  supervision"  under Building  (Safety,  Health and Welfare)  Regulations,  1948. Whether  the presence of the supervisor is necessary at  all times? It was held no. Ormerod, L.J. held that in each  case the  question  must be decided how much supervision  is  re- quired in the circumstance of the case being considered?  If every move was fraught with danger, then clearly supervision of the most constant kind would be demanded, and the  super- visor  must be there all the time. On the other hand,  there may  be certain parts of the work, if not the Whole  of  it, which  do  not give rise to any foreseeable danger,  and  in those circumstances it may well be that the intention of the regulation  is that supervision need not be so  strict.  Up- john,  L.J.,  as he then was, while agreeing held  that  the real  question  is whether there was a supervision  for  the purposes of the regulation and was that a proper or adequate supervision? The regulations are formulated for the  protec- tion  of  the workman, but, at the same time, they  must  be given  a  practical effect. The degree of  supervision  must entirely depend upon the task, and it cannot mean that there must always be a constant supervision throughout. There  may be times during a demolition failing within regulation 79(5) where a particular operation is a dangerous one. That cannot always  be  avoided, and it may be that the danger  is  such that the supervisor must give a constant supervision  during that time. But there will be other times where the  particu- lar  operation  is a simple one, involving no  danger  to  a building labourer. Then the supervisor may properly go  away and  perform other tasks. He may answer to the telephone  or supervise  other  groups. All depends on the  fact  of  each case. 299      In  Regional  Director, E.S.I.C v.  South  India  Flour Mills  (P) Ltd. (1986) 69 FJR 77, this Court held  that  the defintion of the term’employee’ under s.2(9) of the  Employ- ees’  State Insurance Act, 1948 is "very wide  and  includes within  it  any person employed on any  work  incidental  or preliminary  to or connected with the work of a  factory  or establishment".  Any work that is conducive to the  work  of

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 26 of 30  

the  factory or establishment or that is necessary  for  the augmentation  of  the work of the factory  or  establishment will be incidental or preliminary to or connected within the work  of the factory or establishment. The casual  employees shall  also  be  brought within it and held  that  they  are entitled  to the benefits under the Act. The  casual  labour employed to construct additional buildings for expansion  of the factory were held to be employees under the Act. It  was also held that the Act is a piece of social security  legis- lation  enacted to provide for certain benefits to  the  em- ployees  in case of sickness, etc. It was further held  that the endeavour of the Court should be to interpret the provi- sions liberally in favour of the persons for whose  benefits the  enactment  has been made. This Court  upheld  the  view taken by A.P., Karnataka and Punjab and Haryana High  Courts in A. P. State Electricity Board v. Employee’s State  Insur- ance Corporation, Hyderabad, [1977] 51 FJR 171 AP;  Regional Director,  Bangalore  v. Davangere Cotton  Mills,  (1977)  2 L.L.J.  404 and E.S.I.C, Chandigarh v. Oswal  Woolien  Mills Ltd.,   (1980)   57 F.J.R. 171 (P & H) (F.B.).  that  casual employees  are  employees  within the meaning  of  the  term "employee" defined in s.2(9) of the Act.     In  Birohichand  Sharma v. First Civil Judge,  Nagpur  & Ors.,  [1961] 3  SCR 161 this Court considered  whether  the piece  rate worker is a worker within the meaning of  s.2(1) of the Factories Act, 1948. The facts found were that  there was  no fixed hours. They made payment to the work  done  at piece  rate. It was open to the workmen to absent from  work without  leave. They were not given any specific  work,  but the management had "the right to reject" (emphasis supplied) the  Bidis prepared by them, if the Bidis do not  come  upto the proper standard. On those facts, it was held "the  right of  rejection is a supervision" connecting the work and  the employment. Accordingly it was held them to be workmen.  The same ratio was followed in D.C. Dewan Mohideen Sahib &  Sons v.  The  Industrial Tribunal Madras., [1964] 7 SCR  646.  In Nagpur Electric Light & Power Co. Ltd. v. Regional Director, E.S.I.C  [1967]  3  SCR Reprint 92  the  employees  employed outside  the  factory  or establishment  as  Cable  Jointer. Mistri, Lineman, Coolies and Vanman for inspection of lines, digging the pits, erection, distribution and service  .-line were  held to be employees within the meaning of s.2(9)  (i) of the Act, In  Kirloskar Pneumatic Co. Ltd. v. Employees’ State  Insur- ance Cor- 300 poration, [1987] 70 F JR 199 a division Bench of the  Bombay High Court, speaking through my learned brother P.B. Sawant, J.,  as he then was, also took the same view and  held  that the employees engaged for repairs, site clearing,  construc- tion  of buildings, etc. of the principal employer  are  em- ployees  within the meaning of s.2.(9) of the Act. In  Royal Talkies,  Hvderabad  &  Ors. v.  Employees  State  Insurance Corporation, [1979] 1 SCR 80 interpreting s.2(9) (ii) of the Act, this Court held that the Cycle Stand or Canteen are for better amenities to the customers and improvements of  busi- ness in Cinema. The appellant, as the owner, leased out  the Cycle  Stand and Canteen under instrument of leases  to  the contractors,  who  employed their own employees to  run  the Canteen and the Cycle Stand. It was held that vis-a-vis  the employees  of the Contractors, the cinema owner was held  to be  the principal employer. It was further held that  it  is enough  if the employee does some work which is  ancilliary, incidental  or has relevance or linked with the job  of  the establishment, amenities or facilities to the cine goers has

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 27 of 30  

connection with the work of the establishment. The employees of  the Canteen and the Cycle Stand were held to  have  been employed in connection with the work of the establishment.     The case M/s P.M. Patel & Sons & Ors. v. Union of  India &  Ors.,  [1986] 1 SCC 32 though arose under  the  Employees Provident Funds and Miscellaneous Provisions Act, 1952,  the principle laid therein applies on all fours to the facts  of the  case. The appellants therein were engaged in the  manu- facture  and  sale of Bidis. The work of rolling  Bidis  was entrusted  to the contractors who in turn got the work  pre- pared  at  workers homes, after obtaining  materials  either directly  from the manufacturer or through the  contractors. The  contractors treated the workers as their own  employees and get their work done at the workers’ premises or contrac- tors’ premises. It was contended that the workers engaged by the contractors were not their workmen under that Act.  This Court by a Bench of three Judges negatived their  contention and  held that in the context of conditions and the  circum- stances  in which the home workers or manufacturer go  about their work including receiving of raw materials, rolling  of Bidis  at home and delivering them to the manufacturer  sub- ject to the right of rejection, there is sufficient evidence of  the  requisite "degree of control and  supervision"  for establishing relationship of master and servant between  the manufacturer  and the home workers. This ratio does  support the  conclusion that a connecting link between the  finished product  and  the work of the establishment  is  sufficient; neither  the  manner  of actual performance  of  the  duties decisive  nor the actual control or the supervision  of  the work  a material ingredient. Incidental connection with  the ultimate business activities of the manufacturers and  right to rejection is the con- 301 trol and would be the balancing wheel to attract the  provi- sions  therein.  The  extended  purposive  construction  was applied to give effect to the social security provided under the Employees Provident Fund ,’red Miscellaneous  Provisions Act, 1952.     In Superintendent of post Office v. P.K, Rajamma, [1977] 3SCR  678  the question was whether the  extra  departmental agents serving in Post and Telegraph Department were  agents or held civil post within the meaning of Art. 31112) of  the Constitution. This Court while holding that they held  civil post attracting Art.311(2) of the Constitution approved  the passage  from Halsbury’s Laws of England (Hailsham  edition) of  the distinction between agents, servants or  independent contractors. The contractual relation therein inter se  does not apply to the tacts of this case.     The  Act  does not give its own definition of  the  word "supervision".  Therefore, it must be construed in the  con- text  the  ultimate purpose the Act aims to  serve  and  the object behind the Act, i.e. to extend sickness benefits  and to relieve the employee from occupational hazards consistent with  the constitutional and human rights scheme. Under  the Electricity Act and the Rules, the Corporation, licencee, is enjoined to performthe acts and duties contemplated thereun- der to lay overhead lines, underground cables, their repairs and  maintenance  thereof,  etc. It  authorised,  under  the contract, the immediate employer to perform, on its  behalf, those acts and duties. The immediate employer would get  the work done through their employees employed for that purpose. It is not a sporadic work but a constant and on going  proc- ess,  so long as the licencee generates, transmits and  sup- plies  electrical  energy to the consumers of  their  supply area.  Had the principal employer performed those  acts  and

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 28 of 30  

duties through its employees, indisputably. their  employees would be covered under  the Act, though the work was got done at highways  or at places other than the factory or the establishment.  When the  principal  employer authorises the respondents  as  its contractors  under contracts the need for constant  supervi- sion  is obviated relegating that function to its  immediate employers. Otherwise the need for contracts would be  redun- dant.  The  Corporation retained, under  the  contract,  the power of acceptance or rejection of the work done or  super- vision  effected in maintenance of the work got done by  the immediate  employer, subject to over all supervision by  the Electrical Inspector, on behalf of the State Government. The supervision  in  the I,act situation is not the day  to  day supervision  but  legal  control, i.e. right  to  accept  or reject  the work done or maintenance effected. The  exercise of  right of acceptance or rejection is the  supervision  as envisaged in the contract between the principal employer and the immediate employer. It would supply the needed  unifying or connecting 302 thread  between the constitutional creed of  social  justice i.e.  social security under the Act and supervision  of  the acts  or  duties  by the principal  employer  vis-a-vis  the employees  of the immediate employer under the contract  who ultimately perform them on behalf of the principal employer. Undoubtedly in a bilateral contract between the  corporation and  the respondents qua their rights and liabilities  under the contracts, strict interpretation of the words  engrafted therein, be of paramount relevance and call for attention as per Contract Act. But in the context of the statutory inter- pretation of "supervision" under the Act of the works under- taken under the contract, the interest of the workmen or the welfare  schemes for the employees under the Act  interposed and call attention to and need primacy. In its  construction the courts must adopt contextual approach to effectuate  the statutory  animation, namely, social security.  The  literal interpretation would feed injustice in perpetuity denying to the  employees of sickness benefit etc. under the Act  which should  be  avoided, lest the purpose of the  Act  would  be frustrated.     The  contention that the respondents  being  independent contractors are not agents of the licencee, corporation,  is also devoid of force. It is seen that under ss. 15 & 20 etc. and the relevant rules the authorisation given by the corpo- ration  through the media of the contracts enabled  the  re- spondents  to step into its shoes to do the acts or  perform the  duties  under the Electricity Act and Rules  which  are ordinarily of the Corporation. The contract is an authorisa- tion to do those acts on behalf of the principal employer.     The application of the golden rule to the word  "agency" under  the Indian Contract Act between the  respondents  and the  corporation,  perhaps,  does not  encompass  agency  in strict  sense under the Act. But public policy of  the  Act, the  constitutional and human right’s philosophy to  provide social  security to protect the health and strength  of  the workers must be kept at the back of the mind to construe the word  "agent" under s.2(9) (ii) of the Act, in  contra  dis- tinction with the bilateral stipulations under the contract. In  this regard public policy interposes and plays  a  vital role  to  read into the contracts the  extended  meaning  of agency to bring about connecting links between the  respond- ents  and  the licencee corporation. Lest the  contract,  if intended  to  deny  welfare benefits to  workmen,  would  be opposed to public policy and would become void under s.23 of

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 29 of 30  

the Indian Contract Act. Such an intention would be  avoided by reading into the contract the extended meaning of  agency but  not fiduciary. Chitty on Contrac; is, 26th Edition,  in paragraph  2502  at page 4 stated of the use  of  the  terms agent  and agency. Some persons who describe  themselves  or are described by others as agents are not really such in any legal sense of 303 the  word, but rather independent merchants,  dealers,  con- sultants  or  intermediaries. Others may be  agents  in  the sense that they owe the internal duties of the agent to  his principal (mainly the fiduciary duties)  ....  The substance of  the  matter prevails over the form and the  use  of  the words  "agent" or "agency ", or even a denial that they  are applicable,  is not conclusive that any particular  type  of relationship  exists.  (emphasis supplied).  In  A.G.  Guest Anson’s  Law  of Contract. 26th Edition, at  page308  it  is stated that the application of cannons of ’public policy  to particular instances necessarily varies with the progressive development  of ’public opinion and morality, but,  as  Lord Wright  has  said extra-judicially: Public policy  like  any other branch of the common law ought to be, and I think  is, governed by the judicial use of precedents... If it is  said that rules of. public policy have to be moulded to suit  new conditions  of a changing world, that is true; but the  same is true of the principles of the common law generally.’     In  Prenn v. Simmonds, 1971 (1) Weekly Law Reports  1381 (H.L.)  Lord Wilberforce laid the rule that in construing  a written  agreement evidence of negotiations or of  the  par- ties’ intentions ought not to be received by the court,  and that  evidence should be restricted to evidence  of  factual background known to the parties at or before the date of the contract, including evidence of the "genesis" and objective- ly the "aim" of the transaction.     The  contractors, respondents, knew at the date  of  the agreements  that the Corporation, as Principal employer,  is under  statutory obligation to execute or keep executed  the works  and keep them repaired and mainrained as an  integral activity of generation, transmission and distribution of the electrical  energy  to the consumers within  their  area  of supply. On authorisation, the respondents executed and  kept executiug  the works and repairs or kept them  repaired  and the  maintenance thereof effected through  their  employees, which  in  law is on behalf of  the  Corporation,  principal employer. The genesis and aim of the transaction was to  act on  behalf of the Corporation. The agency of the  respondent with the Corporation, thus, springs into being. The prohibi- tion  of the qualified supervisors, while in service of  the respondents,  to disengage themselves with third parties  in terms  of  the contract was only to  extract  unstinted  and exclusive  devotion to duty and no further. It stands as  no impediment  to construe that the respondents are  agents  to the Corporation as immediate employers.     Accordingly I hold that the employees working under  the respondent  perform their duties in execution of the  works, repairs  and  maintenance  thereof in  connection  with  the generation, transmission and distribution of 304 the  electrical  energy  by the  Corporation  ficensee.  The Corporation is the Principal employer The respondents  imme- diate employers execute the work etc. under the  supervision of  the Corporation as its agents. Their employees, in  law, work under the supervision of the principal employer, corpo- ration.  They  are  covered under s.2.(9) (ii)  of  the  Act entitling  them  to the sickness  benefits,  etc.  envisaged

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 30 of 30  

therein.  and the respondents are liable to make their  con- tribution to the Employees Insurance Fund.     The  appeals  are accordingly allowed. The  writ  appeal Nos.  16 & 438/86 and matter No.1650 of 1985 dated April  4, 1988  in the Calcutta High Court stand dismissed  confirming the  order  of the learned single Judge dated  December  11, 1986, but in the circumstances parties are directed to  bear their own costs. V.P.R.                                        Appeals   dis- missed. 305