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Civil Appeal Nos. 49/2006 etc.                        1

Reportable IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.49 OF 2006

Royal Western India Turf Club Ltd.            … Appellant Vs. E.S.I. Corporation & Ors.          … Respondents

[With C.A. No.1575/2006, C.A. No.3421/2012, and C.A. No.3422/2012].

J U D G M E N T

ARUN MISHRA, J.

1. The questions involved for decision in these appeals are whether  

casual workers are covered under definition of employee as defined in  

Section  2(9)  of  the  Employees  State  Insurance  Act,  1948 (hereinafter  

referred to as ‘ESI Act’) and pertaining to period for which Turf  Club  is  

liable to pay from  1978-79 or from 1987.

2. The main question involved in the present appeals whether the ESI  

Act  is  applicable  to  Royal  Western  India  Turf  Club  Ltd.  has  been  

concluded by a 3-Judge Bench decision of this Court vide judgment dated  

31.7.2014.  It  has  been  held  that  the  Turf  Club  would  fall  within  the  

meaning of the word ‘shop’ as mentioned in the notification issued under  

the ESI Act. Therefore, the provisions of ESI Act would extend to the  

appellant also. Thereafter the matters have been placed before a Division  

Bench to consider other questions on merit.

3. It was submitted on behalf of Royal Western India Turf Club Ltd.  

that temporary staff engaged on race-days for issue of tickets, would not

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be covered by the definition of the “employee” under Section 2(9) of the  

Employees State Insurance Act, 1948. It was also submitted that in view  

of the consent terms filed in Application No.16/1976 by the Turf Club  

before the ESI Court, Bombay, the casual labour engaged on race track  

were not to be covered under the ESI Act. It was further submitted that in  

view of  Rule  2A of  the  Employees’ State  Insurance  (Central)  Rules,  

1950,  contribution  is  required  to  be  made  for  a  period  as  may  be  

prescribed in the Regulations and in view of Regulations 29 and 31 of the  

Employees’ State  Insurance  (General)  Regulations,  1950,  it  would  be  

difficult  to  calculate  the  contribution  for  the  employees  who  work  

casually on the racing days. It was also submitted that the direction issued  

by the High Court not to recover the amount before 1987 does not call for  

any  interference  in  the  appeal  filed  by  ESI  Corporation,  for  which  

reliance has been placed on a decision of this Court in Employees State   

Insurance Corporation v. Hyderabad Race Club (2004) 6 SCC 191.  

4. Whereas it was contended on behalf of the ESI Corporation that in  

view of the specific notification dated 18.9.1978 so far as Royal Western  

India Turf Club Ltd. is concerned in Maharashtra, position was clear as to  

applicability of ESI Act. The consent terms which have been relied upon  

related to the earlier  period in which other establishments of  the Turf  

Club  were  covered.   In  the  notification  issued  on  18.9.1978,  the  

departments in question of the Turf Club were also covered. Even the

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consent  term reflects  that  there  was no doubt  that  the Turf  Club was  

covered under provisions of the ESI Act w.e.f. 1968.

5. First  we  take  up  the  question  whether  casual  employees  are  

covered within the purview of ESI Act. Section 2(9) defines “employee”,  

the provision is extracted hereunder :

“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 incidental 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 elsewhere; or  (ii) who is employed by or through an immediate employer,   on the premises of the factory or establishment or under the   supervision 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;  and includes any person employed for wages on any work   connected  with  the  administration  of  the  factory  or   establishment or any part, department or branch thereof or   with the purchase of raw materials for, or the distribution or   sale of the products of, the factory or establishment or any   person  engaged  as  apprentice,  not  being  an  apprentice   engaged under the Apprentices Act, 1961 (52 of 1961), and   includes such person engaged as apprentice whose training   period is extended to any length of time but does not include   —  (a) any member of [the Indian] naval, military or air forces;   

or  

(b)  any  person  so  employed  whose  wages  (excluding  remuneration for overtime work) exceed such wages as may  

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be prescribed by the Central Government a  month:  

Provided  that  an  employee  whose  wages  (excluding   remuneration for overtime work) exceed such wages as may   be prescribed by the Central Government at any time after   (and not before) the beginning of the contribution period,   shall  continue  to  be  an  employee  until  the  end  of  that   period;”

The  definition  of  “employee”  is  very  wide.  A person  who  is  

employed for wages in the factory or establishment on any work of, or  

incidental or preliminary to or connected with the work is covered. The  

definition brings various types of employees within its ken. The Act is a  

welfare  legislation  and  is  required  to  be  interpreted  so  as  to  ensure  

extension of benefits to the employees and not to deprive them of the  

same which are available under the Act.  

6. Section 39 deals with the contribution payable under the Act with  

respect to the employee in respect of each “wage period” shall ordinarily  

fall due on the last day of the wage period, and where an employee is  

employed for  “part”  of  the wage period or  is  employed under two or  

more employers during the same wage period, the contributions shall fall  

due on such days as may be specified in the Regulations. Section 39 is  

extracted hereunder :

“39.  Contributions. — (1) The contribution payable under   this  Act  in  respect  of  an  employee  shall  comprise   contribution payable by the employer (hereinafter referred   to as the employer’s contribution) and contribution payable   by the employee (hereinafter referred to as the employee’s   contribution) and shall be paid to the Corporation.

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(2) The contribution shall be paid at such rates as may be   prescribed by the Central Government:  Provided that the rates so prescribed shall not be more than   the  rates  which  were  in  force  immediately  before  the   commencement  of  the  Employees’  State  Insurance   (Amendment) Act, 1989. (3) The wage period in relation to an employee shall be the   unit in respect of which all contributions shall be payable   under this Act.  (4)  The  contributions  payable  in  respect  of  each  [wage   period]  shall  ordinarily  fall  due  on  the  last  day  of  the   [wage period], and where an employee is employed for part   of  the [wage period],  or  is  employed under  two or more   employers during the same [wage period], the contributions   shall  fall  due  on  such  days  as  may  be  specified  in  the   regulations.  (5)(a) If any contribution payable under this Act is not paid   by  the  principal  employer  on  the  date  on  which  such   contribution  has  become  due,  he  shall  be  liable  to  pay   simple interest at the rate of twelve per cent per annum or at   such higher rate as may be specified in the regulations till   the date of its actual payment:  

Provided  that  higher  interest  specified  in  the   regulations  shall  not  exceed  the  lending  rate  of  interest   charged by any scheduled bank.  (b)  Any  interest  recoverable  under  clause  (a)  may  be   recovered as an arrear of land revenue or under section 45C   to section 45-I.”

It is apparent from section 39 that an employee who is employed  

for  a  part  of  the  wage  period  is  also  covered  for  the  purposes  of  

contribution. The definition of the term “employee” in section 2(9) is also  

wide enough to cover casual employees who are  employed for part of  

wage period.  It is also provided in section 39(5) that in case contribution  

is not paid, it shall carry 12% interest per annum or such higher rate as  

may be specified in the Regulations till the date of actual payment and

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the amount is recoverable as arrears of land revenue.  

7. Section  42  deals  with  the  general  provisions  as  to  payment  of  

contributions. It is provided in section 42 that no employee’s contribution  

shall  be payable by or on behalf of an employee whose average daily  

wages  are  below  such  wages  as  may  be  prescribed  by  the  Central  

Government.  Sub-section  (2)  of  section  42  again  provides  that  

contribution of the employer as well as the employee shall be payable by  

the principal employer for the wage period in respect of the whole or part  

of which wages are payable to the employee and not otherwise.   The  

provision does not prescribe that employee has to work for a particular  

period for availing benefit of the said provision.

8. Reliance  has  been  placed  on  behalf  of  the  Turf  Club,  on  the  

definitions of wages and wage period. Sections 2(22) and 2(23) dealing  

with wages and wage period are as follows :

“2(22).  “wages” means all remuneration paid or payable   in  cash  to  an  employee,  if  the  terms  of  the  contract  of   employment, express or implied, were fulfilled and includes   any  payment  to  an  employee  in  respect  of  any  period  of   authorised  leave,  lock-out,  strike  which  is  not  illegal  or   layoff  and  other  additional  remuneration,  if  any,  paid  at   intervals not exceeding two months, but does not include —  (a) any contribution paid by the employer to any pension   

fund or provident fund, or under this Act;  (b) any travelling allowance or the value of any travelling   

concession;  (c) any sum paid to the person employed to defray  special   

expenses  entailed  on  him  by  the  nature  of  his   employment; or  

(d) any gratuity payable on discharge ; (23) “wage period” in relation to an employee means the  

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period in respect of which wages are ordinarily payable to   him whether in terms of the contract of employment, express   or implied or otherwise;”

A bare reading of the aforesaid provisions makes it  clear that it  

would  cover the “casual employees” employed for a few days on a work  

of  perennial  nature  and  wages  as  defined  in  section  2(22)  and  wage  

period as defined in section 2(23) does not exclude the wages payable to  

casual workers. They cannot be deprived of the beneficial provisions of  

the Act.

9. Reliance was placed on behalf of the Turf Club on the provisions  

contained in  Rule 2(2A) which defines contribution period means the  

period not exceeding six consecutive months as may be specified in the  

Rules. The same is extracted hereunder:

“2(2A) “Contribution period” means the period not   exceeding six consecutive months, as may be specified in the   regulations;”

The aforesaid Rule provides period not exceeding six consecutive  

months as “contribution period” no minimum period has been prescribed.  

The Rule 2(2A) cannot be interpreted to mean that if an employee has  

worked for a lesser period he is not entitled for the coverage under the  

Act.  

10. Similarly,  reliance upon Regulations 26 to 31 of  Regulations of  

1950 is also of no avail as the Regulations make it clear that for the wage  

period,  contribution  has  to  be  made  by  the  employer  as  provided  in

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Regulation 31 otherwise he is  liable  to make payment  as  provided in  

Regulation 31A and amount carry interest, which is recoverable as arrears  

of  land  revenue.  It  is  also  settled  that  interest  cannot  be  waived.  

Regulation 36 also makes it clear that when an employee is employed by  

an employer for a part of the wage period, the contribution in respect of  

such wage period shall fall due on the last date of the employment in that  

wage  period.  The  intendment  of  regulation  is  clear  to  cover  work  

rendered in part of wage period.  

11. This  Court  in  Regional  Director,  Employees’ State  Insurance   

Corporation, Madras v. South India Flour Mills (P) Ltd. [AIR 1986 SC  

1686] has overruled the decision of the Madras High Court in Employees’  

State Insurance Corporation v. Gnanambikai Mills Ltd. (1974) 2 Lab.  

Law Journal 530 (Mad.) in which the High Court laid down that though  

casual employee may come within the definition of the term “employee”  

under section 2(9) of the Act, yet they may not be entitled to sickness  

benefits  in  case  their  employment  is  less  than  the  benefit  period  or  

contribution period and that it does not appear from the Act that casual  

employee  should  be  brought  within  its  purview.  This  Court  while  

overruling decision of High Court held thus :

“8. Section 39 provides for contributions payable under the   Act. Sub-section (4) of Section 39 provides as follows:

“The contributions payable in respect of each week   shall ordinarily fall due on the last day of the week,   and where an employee is employed for part of the   week, or is employed under two or more employers  

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during the same week, the contributions shall fall due   on such days as may be specified in the regulations.”

9. Sub-section (4) clearly indicates employment of a casual   employee  when  it  provides  “and  where  an  employee  is   employed  for  part  of  the  week”.  When  an  employee  is   employed  for  part  of  a  week,  he  cannot  but  be  a  casual   employee. We may also refer to sub-section (3) of Section 42   relating  to  general  provisions  as  to  payment  of   contributions. Sub-section (3) reads as follows:

“Where  wages  are  payable  to  an  employee  for  a   portion of the week, the employer shall be liable to   pay  both  the  employer’s  contribution  and  the   employee’s contribution for the week in full but shall   be  entitled  to  recover  from  the  employee  the   employee’s contribution.”

10. Sub-section (3), inter alia, deals with employer’s liability   to  pay  both  employer’s  contribution  and  the  employee’s   contribution where wages are payable to an employee for a   portion of the week. One of the circumstances when wages   may be payable to an employee for a portion of the week is   that an employee is employed for less than a week, that is to   say,  a  casual  employee.  Thus  Section  39(4)  and  Section   42(3)  clearly  envisage  the  case  of  casual  employees.  In   other words,  it  is  the intention of the Legislature that the   casual employees should also be brought within the purview   of  the Act.  It  is  true  that  a  casual  employee  may not  be   entitled  to  sickness  benefit  as  pointed  out  in  the  case  of   Gnanambikai Mills (1974 Lab.IC 798)(Mad) (supra). But, in   our opinion, that cannot be a ground for the view that the   intention of the Act is that casual employees should not be   brought within the purview of the Act. Apart from sickness   benefit  there  are  other  benefits  under  the  Act  including   disablement  benefit  to  which  a  casual  employee  will  be   entitled under Section 51 of the Act. Section 51 does not lay   down any benefit period or contribution period. There may   again be cases when casual employees are employed over   the  contribution  period  and,  in  such  cases,  they  will  be   entitled to even the sickness benefit. In the circumstances,   we hold that casual employees come within the purview of   the  Act.  In  Andhra  Pradesh  State  Electricity  Board v.   Employees’  State  Insurance  Corporation,  Hyderabad,   (1977) 1 LabLJ 54,  Regional Director, ESIC, Bangalore v.   Davangere  Cotton  Mills,   (1977)  2  LabLJ  404,  and  Employees’ State  Insurance  Corporation,  Chandigarh.  v.  

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Oswal  Woollen Mills  Ltd.,  1980 LabIC 1064, the Andhra  Pradesh High Court, Karnataka High Court and the Punjab   and Haryana High Court have rightly taken the view that   casual employees are employees within the meaning of the   term “employee” as defined in Section 2(9) of the Act and,   accordingly, come within the purview of the Act. 11. Indeed  Dr.  Chitaley,  learned  counsel  appearing  on   behalf of the respondent company in Civil Appeal No. 819   (NL) of 1976, frankly concedes that it will be difficult for   him to contend that casual workers are not covered by the   definition of the term “employee” under Section 2(9) of the   Act. He, however, submits that in the instant case the work   in  which  the  casual  workers  were  employed  by  the   respondent  company,  namely,  Shri  Shakthi  Textiles  Mills   Pvt. Ltd., not being the work of the factory or incidental or   preliminary to or connected with the work of  the factory,   such workers cannot be employees within the meaning of   Section  2(9)  of  the  Act.  The  contention  of  the  learned   counsel is that the work of the factory being “weaving”, an   employee  within  the  meaning  of  Section  2(9)  must  be   employed  on  any  work  incidental  or  preliminary  to  or   connected with the work of weaving that is carried on in the   mill  or  factory.  Counsel  submits  that  the  work  of   construction of  factory buildings cannot be said to be an   activity  or  operation  incidental  to  or  connected  with  the   work  of  the  factory,  which  is  weaving.  Mr  D.N.  Gupta,   learned  counsel  appearing  on  behalf  of  the  respondent   companies in the other cases adopts the contention of Dr.   Chitaley  and  submits  that  the  workers  employed  for  the   construction of the factory buildings do not come within the   purview of the definition of “employee” under Section 2(9)   of the Act.”

 In view of the aforesaid decision it is apparent that the submission  

raised  by Royal Turf Club that casual workers are not covered under the  

ambit of ESI Act is too tenuous for its acceptance.

12. Mr.  Cama,  learned  senior  counsel  has  pressed  into  service  a  

decision of this Court in  Employees’ State Insurance Corpn. v. Premier  

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Clay Products (1994) Supp. 3 SCC 567. In the said case the work itself  

was of a sporadic nature. The coolies were available for work to others  

and on the very day worked for several others who also engaged them for  

loading and unloading of goods. Thus it was held that coolies could not  

be said to be casual workmen under the ESI Act.  The said decision has  

absolutely no application to the fact situation of the instant case where  

work is not sporadic in nature. The employees’ work for the day of racing  

which  is  perennial  activity  of  Royal  Turf  Club  and  in  view  of  the  

provisions  of  the  Act,  Rules,  Regulations  and  notification  dated  

18.9.1978,  there  is  no  doubt  that  such  employees  are  covered  and  

consequently are entitled for benefit of the Act.

13. Coming to the submission that the ESI Corporation should be held  

bound  by  the  consent  terms,  the  submission  is  factually  incorrect,  

misconceived,  legally  untenable  and  otherwise  also  devoid  of  the  

substance. In Application (ESI) No.16/1976 filed by the Turf Club, the  

ESI  Corporation  agreed  on  the  basis  of  Inspection  Report  dated  

29.11.1975 and in Memorandum dated 14.4.1976 it was mentioned that  

employees of the Turf Club in the electrical and mechanical workshop,  

factory division,  general  department  -  motor-garage  (factory division),  

security department, carpentry shop, personnel department and accounts  

department  would  be  covered  under  the  ESI  Act  with  effect  from  

28.1.1968.  It  was  agreed  that  such  employees  of  the  Turf  Club  have

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already been covered and shall continue to be covered as before and the  

employees of Racing Administration Department, casual labour engaged  

on  race  track,  temporary  staff  engaged  on  race  days  for  issue  of  

tickets/dividends  were  not  covered.  In  the  aforesaid  case  the  period  

involved was as specified in the notification dated 26.2.1976 which was  

prior  and  not  related  to  the  period  in  question  1978-79  to  1982-83  

involved  in  C.A.  No.49/2006  and  in  other  appeals  also  the  period  is  

subsequent thereto. After issuance of the notification dated 18.9.1978 by  

the Government of Maharashtra, the remaining departments of Turf Club  

which were left out earlier were specifically covered under the purview  

of  the ESI Act. Thus, the demand in the instant case is based upon the  

notification dated 18.9.1978 which left no room to entertain any doubt  

that the establishments of the aforesaid department in question were also  

covered  under  the  ESI  Act.  Thus,  no  benefit  can  be  derived  by  the  

consent terms which related to the earlier period when notification dated  

18.9.1978  had  not  been  issued.  Notification  has  statutory  force  and  

agreement cannot supersede it. It is also clear that several departments of  

race club were covered under the notification issued in 1968. Thus, the  

submission raised on the basis of consent terms is hereby rejected.

14. Coming  to  the  appeal  preferred  by  the  ESI  Corporation  raising  

question  that  the payment  should have been ordered with effect  from

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1978-79  onwards  instead  of  1987  as  in  view  of  notification  dated  

18.9.1978, there was no room to doubt that departments in question of the  

Turf  Club  were  also  covered  under  ESI  Act.  In  our  opinion,  the  

notification of 1978 is clear and has to be given full effect, for earlier  

period also the consent terms indicated that various other departments of  

Turf Club were covered under the notification of 1968. Reliance on the  

decision of  this  Court  in  Hyderabad Race  Club case (supra)  so as  to  

waive  the  contribution  from 1975  to  1986,  is  not  available  as  in  the  

instant case there was no doubt as to applicability of ESI Act in view of  

the specific notification issued in 1978.  The provisions of ESI Act were  

applied to various departments of Turf Club w.e.f. 1968. The decision in  

Hyderabad Race Club case (supra) turned on its  own different factual  

matrix.  In this  case,  it  was clear  from 1968 itself  that  Turf  Club was  

covered  under  ESI  Act  as  is  apparent  from  consent  terms.  The  

notification dated 18.9.1978 included other left out departments of race  

club.  The provisions of ESI Act were complied with by Turf Club w.e.f.  

1968. The High Court on the facts of the case has erred in quashing the  

demand for the contribution with effect from 1978 till 1987.

15. In our opinion, the Turf Club is liable to make the contribution as  

per  notification  dated  18.9.1978  along  with  interest  at  such  rate  as  

provided in the Act and the Rules till the date of actual payment. Let the  

amount  be  contributed  within  a  period  of  three  months  from  today.

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Consequently, the appeals preferred by ESI Corporation are allowed and  

the ones preferred by Turf Club are dismissed with costs of Rs.2 lakhs  

payable to the ESI Corporation.

……………………..J. (V. Gopala Gowda)

New Delhi; …………………….J. February 29, 2016. (Arun Mishra)