High Court of KeralaSingle Judge2010-11-19Remanded for fresh determination of coverage by...

M/s. Nainans Garments & Handlooms vs Employees' State Insurance Corporation

Case / Petition Number:Ins.App.No.8 of 2010

Case Details & Bench

Court: High Court of Kerala
Hon'ble Judges: M.N. Krishnan
Judgment Date: 2010-11-19
Court Decision / Holding: Remand to ESIC for fresh determination of coverage. ESIC is to consider afresh, permit documentary and oral evidence, issue notices for hearing, and dispose of the matter in accordance with law, with natural justice applied. The court clarifies that the prior observations should not bind the ESIC and allows the establishment to recover its records for new consideration.
Final Disposition: Remanded for fresh determination of coverage by ESIC with permission to adduce fresh evidence and to proceed in accordance with law and natural justice; records to be returned and notices issued to the applicant-establishment for hearing.

Parties to the Case

Appellants / Petitioners

M/s. Nainans Garments & Handlooms (Proprietary concern) represented by its proprietor T. M. Iqbal
T. M. Iqbal

Respondents

Employees' State Insurance Corporation (represented by its Regional Director)

Legal Representation & Advocates

Counsels for Petitioners

• Adv. N. M. Mohammed Ayub

Counsels for Respondents

• Sri. T. V. Ajayakumar, SC.

Case Synopsis & Summary

This Kerala High Court appeal arises from an Employees' Insurance Court (Alappuzha) IC 14/2005, where the proprietor of a proprietary concern, M/s Nainans Garments & Handlooms, challenged coverage under the Employees' State Insurance Act (ESI Act). The establishment contends it never employed more than 16 workers and thus falls outside ESI coverage, while ESIC asserts 20 employees were or should be counted, justifying coverage. The trial court had noted additional personnel—Basheer, Yahiya, Ansar, and a security guard—potentially bringing the workforce over the threshold. The establishment argues Basheer (the proprietor’s brother) is paid salary as a relative but not as a genuine employee; the security guard was engaged through a supplier and should not be clubbed into the establishment’s strength; Yahiya’s status is disputed; Ansar purportedly appeared in muster rolls until 31.3.2002 but not after, raising questions about continuous employment. The High Court cautions against basing conclusions on conjecture, requiring positive material and allowing ESIC to decide afresh after permitting evidence. It directs fresh inquiry by ESIC, with notice and documentary/oral evidence from the parties, and clarifies that the matter may be reviewed in light of law and natural justice, without being bound by earlier observations. The case thus settles as a remand for reconsideration of coverage.”

Provisions of Law Cited

Employees' State Insurance Act

Legal Doctrines & Maxims

Principles of natural justice
Well settled principle that security personnel can be tacked to employment strength if not covered by the supplier-establishment

Submissions & Arguments

Contentions of Appellants / Petitioners

The appellants contend that the establishment has never employed more than 16 persons, hence not destined for ESI coverage. They challenge inclusion of Basheer (the proprietor’s brother) and Yahiya as employees, noting Basheer’s remuneration of Rs. 5,000 monthly; argue that Basheer cannot be treated as an employee merely due to remuneration when there is no direct management role. The security guard, claimed to be supplied by a third party, cannot be clubbed into the establishment’s strength. Ansar’s muster-roll presence until 31.3.2002 is disputed; no conclusive evidence of continued employment after that date is produced. They rely on previous decisions (citing Cochin Cadalac Pvt. Ltd. v. E.S.I. Corporation as not applicable) and urge fresh evidence and fresh determination by ESIC, maintaining natural justice requires a re-evaluation of coverage. Fresh documentary and oral evidence should be permitted, with records returned to ESIC for proper disposal of the matter.”,

Contentions of Respondents

ESIC contends that the establishment had 20 (potentially 22 with some additions) employees, thus falling under the ESI Act. It maintains Basheer, Yahiya and one or two other persons are or should be treated as employees; the security guard, though employed by a supplier, can be joined to the establishment’s strength if necessary. The muster rolls, inspector’s findings, and past practice indicate continuous employment for a substantial period, including Ansar, who worked for many years, even though his name disappeared from muster rolls post-2002. The respondents urge the ESIC to conduct a thorough fresh assessment, taking into account all documents and evidence, and to decide the matter in accordance with law, relying on established ESI principles. The need for positive material and proper legal procedure is emphasized, with a request for orderly, lawfully guided re-evaluation.”},

Cited Precedents (1)

Case Name	Citation	Treatment	Explanation
Cochin Cadalac Pvt. Ltd. v. E.S.I. Corporation	2001 (1) ILR Kerala 10	Distinguished	The court notes that this decision cannot rescue the appellant; its circumstances differ and it is distinguished from the present case.

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Extracted Judgment Text

Exact text extracted from official judgment records.

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** **PRESENT :** **THE HONOURABLE MR. JUSTICE M.N.KRISHNAN FRIDAY, THE 19TH NOVEMBER 2010 / 28TH KARTHIKA 1932** **Ins.APP.No. 8 of 2010()** **----------------------(IC.14/2005 of EMPLOYEES' INSURANCE COURT, ALAPPUZHA. ....................** ## **APPELLANT/APPLICANT** **---------------------------------------** **1. M/S.NAINAS GARMETS & HANDLOOMS, (A PROPRIETARY CONCERN), GOPALA PRABHU ROAD, ERNAKULAM, KOCHI-35, REPRESENTED BY ITS PROPRIETOR, T.M.IQBAL.** **2. T.M.IQUBAL, AGED 42, S/O.MARAKKAR, PROPRIETOR, M/S.NAINAS GARMENTS & HANDLOOMS, GOPALA PRABHU ROAD, ERNAKULAM, KOCHI-35.** **BY ADV. SRI.N.M.MOHAMMED AYUB** ## **RESPONDENT/OPPOSITE PARTY** **-----------------------------------------------** **EMPLOYEES STATE INSURANCE CORPORATION, REPRESENTED BY ITS REGIONAL DIRECTOR, PANCHADHEEP BHAVAN, N.S.ROUND, TRICHUR-20.** **BY SRI. T .V .AJAYAKUMAR, SC.** **THIS INSURANCE APPEALS HAVING BEEN FINALLY HEARD ON 19.11.2010 , THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** **VK** ## **M.N. KRISHNAN, J.** ........................................... Ins.A.NO.8 OF 2010 ............................................. Dated this the 19[th] day of November, 2010. ## **J U D G M E N T** This is an appeal preferred against the judgment of the Employees' Insurance Court, Alappuzha in I.C.No.14/2005. Applicant before the court is an establishment by name M/s. Nainans Garments & Handlooms which is a proprietary concern. 2. It is the contention of the establishment that it has never employed more than 16 persons and therefore it is not liable to be covered under the Employees' State Insurance Act. On the contra, the Employees' State Insurance Corporation's definite stand is that there are 20 employees and therefore they are liable to be covered under the Act. 3. When the trial court wrote the order, it made a further observation by stating that the establishment had employed at least two more headload workers making the total number of employees as 22. Such a case was not pleaded by any of the parties at the time of contesting the case. To make it short, the dispute is with respect to : 2 : ## Ins.A.NO.8 OF 2010 employment of 4 persons namely Basheer, Yahiya, Ansar and a security person. Basheer and Yahiya are brothers of the proprietor and according to the establishment, Ansar was employed till 31.3.2002 and the security person was employed by the person who had supplied him and therefore all these persons are to be excluded. If all these persons are excluded, then definitely there cannot be any coverage. So far as Basheer is concerned, he is a brother of the proprietor. But it is seen that he has been paid salary of Rs.5,000/= per month. It has to be stated that he is receiving the remuneration. It is not a partnership concern. He is not holding the post of Managing Director or Director by virtue of the provisions of the partnership and gets remuneration for being so. Therefore in a proprietary concern when a person receives remuneration, it shall be only as an employee and not otherwise. Therefore, the decision cited by the learned counsel for the appellant reported in **Cochin Cadalac Pvt. Ltd. v. E.S.I. Corporation** (2001 (1) ILR Kerala 10) may not come to the rescue of the appellant. Ins.A.NO.8 OF 2010 : 3 : 4. Next, I will consider about the security personal. It is the well settled principle now that security person's employment can be tacked on to the employment strength provided he is not covered by the establishment which supplies him. Here there is no case that he is already a covered employee under the Employees' State Insurance Corporation. Therefore the case of the security person also cannot be dealt with in favour of the appellant. 5. Now comes the question of Yahiya. Yahiya is also a brother of the proprietor. He was seen sitting in the Cashier's chair when the Inspector visited the premises on 9.4.2002. The establishment would contend that he was just sitting and helping and he has no sort of employment and that he is already running another concern. None of the documents produced in this case would reveal that Yahiya is working as an employee under the establishment or there is no document which pinpoints just like in the case of Basheer that he is paid wages or salary. So just because a person was found to be sitting on a particular day in a chair one cannot jump to the conclusion that he is an : 4 : ## Ins.A.NO.8 OF 2010 employee especially when we take into consideration the relationship between the parties as brothers. It is a matter which requires deeper consideration and for that purpose it can be sent to the E.S.I Corporation to decide after permitting the parties to adduce evidence. 6. Then comes the question of Ansar. The definite case of the establishment is that Ansar was in their roll from 1997 to 31.3.2002 and when the Inspector visited the premises on 9.4.2002, he was not available and that the muster roll maintained during that period does not indicate his name after 31.3.2002. The learned Employees Insurance Court held that since he was an employee for a quite long time and as there is nothing to show about his dismissal or retrenchment, it must be deemed that he is continuing and therefore his name has to be included. 7. I think these type of findings cannot be arrived on the basis of conjectures and surmises. There must be some positive materials to hold so. It is also a matter which can be considered by the Employees' State Insurance Corporation. : 5 : ## Ins.A.NO.8 OF 2010 8. Lastly regarding the two other persons said to be employed by the establishment by the court. I do not want to elaborate on that since the contention is seen answered or raised by the court itself. It is desirable if the Employees State Insurance Corporation is able to furnish details regarding the persons concerned, that also may be considered and orders be passed. It has also to be stated that fresh evidence may be permitted to be adduced on all these points and the Employees State Insurance Corporation is directed to consider the question of coverage afresh taking into consideration the fact that whether there is sufficient materials to show that Yahiya, Ansar and two other persons named in the order are the employees of the establishment. For that purpose the applicant should be permitted to adduce documentary as well as oral evidence and the concerned officer is directed to decide the matter untrammelled by the observations contained in any of the judgment including this judgment and dispose it of in accordance with law. The official of the Employees' State Insurance Corporation is directed to send a notice to the : 6 : ## Ins.A.NO.8 OF 2010 applicant establishment informing the date of hearing. I make it very clear that principles of natural justice has to be complied with. I also make it clear that if the Employees' State Insurance Corporation wants to furnish any materials, let that also be permitted to be furnished so that the entire matter can be worked out. The establishment is permitted to take back the records produced from the Employees' Insurance Court and then produce it before the E.S.I official for proper disposal of the matter. It is also stated that this Court has not considered anything on the question of clubbing. Disposed of accordingly. ## **M.N. KRISHNAN, JUDGE.** ## **cl** : 7 : ## Ins.A.NO.8 OF 2010 ## **M.N. KRISHNAN, J.** ........................................... A.S.NO.389 OF 2001 ............................................. 11[th] day of November, 2010. **J U D G M E N T**