Regional Director, Employees' State Insurance Corporation v. Diagnostic Services Medical College

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** **THE HONOURABLE MR.JUSTICE C.T.RAVIKUMAR** ## **&** **THE HONOURABLE MRS. JUSTICE MARY JOSEPH** **FRIDAY ,THE 09TH DAY OF MARCH 2018 / 18TH PHALGUNA, 1939** **Ins.APP.No. 67 of 2011** **AGAINST THE ORDER/JUDGMENT IN IC 51/2003 of E.I.COURT, KOLLAM DATED 22-02-2011** ## **APPELLANT/RESPONDENT:** **THE REGIONAL DIRECTOR, EMPLOYEES' STATE INSURANCE CORPORATION,, PANCHDEEP BHAVAN, NORTH SWARAJ ROUND,, THRISSUR.** **BY ADV. SRI.T.V.AJAYAKUMAR** ## **RESPONDENT/APPELLANT:** **M/S. DIAGNOSTIC SERVICES MEDICAL COLLEGE P.O. THIRUVANANTHAPURAM, PIN-695 011,,** **BY ADVS. SMT.LATHA ANAND SRI.K.ANAND (SR.)** **THIS INSURANCE APPEAL HAVING BEEN FINALLY HEARD ON 09.03.2018, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** Ins. App. No.67 of 2011 2 ## C.T. RAVIKUMAR & MARY JOSEPH, JJ. ========================= Ins. App. No.67 of 2011 ========================= Dated this the 09[th ] day of March, 2018 ## J U D G M E N T ## C. T. Ravikumar, J. This appeal is directed against the judgment dated 22.02.2011 passed by the Employees Insurance Court, Kollam in IC No.51/2003. The appellant was the respondent and the respondent herein was the applicant therein. The said application was filed under Section 75 of the Employee's State Insurance Act, 1948 (for brevity 'the Act' only) virtually challenging the applicability and coverage of the applicant's establishment under the provisions of the Act. For the sake of convenience, the parties are referred to hereinafter in accordance with their status in this appeal. The short facts relevant for disposal of the appeal are as follows. Ins. App. No.67 of 2011 3 2. The respondent establishment (M/s. Diagnostic Services) provide services to patients who approach it for getting laboratory reports and results on the basis of tests conducted on blood or other specimen collected from them, so as to facilitate the Doctors in diagnosis and treatment. In that regard, small quantities of blood or other samples are being collected from patients and they would be subjected to analysis for getting results. It is contended in the application that after such analysis for the aforesaid purpose, the whole specimen collected from such persons would be discarded and results alone would be handed over to the patients. Such contentions were raised in the application in a bid to assail the action on the part of the appellant herein in bringing the respondent within the purview of Section 2(12) of the Act treating it as a factory. After taking it as a factory the appellant corporation issued notice to the respondent to comply with the provisions of the Act with effect from 01.07.1997 and an order was also passed determining the amount Ins. App. No.67 of 2011 4 payable from the period from July 1997 to September 2007. A notice was issued proposing to determine and recover contribution for the period from October 1997 to March 2003 for an amount of `1,84,041/-. It is in the said circumstances that the aforementioned application has been filed essentially challenging the very action on the part of the appellant in bringing the respondent establishment within the purview of Section 2(12) of the Act. 3. The appellant corporation resisted the contentions raised in the application. Virtually, it took up a contention that the respondent establishment is estopped from raising such contentions in the light of the judgment in IC No.33/1999. IC No.33/1999 was filed earlier by the respondent establishment at a time when the respondent establishment was brought within the purview of Section 2(12) of the Act and it was required to comply with the provisions under the Act with effect from 01.07.1997 and when an order was passed determining Ins. App. No.67 of 2011 5 the amount payable for the period from July 1997 to September 1997. However, the respondent establishment contended that the said judgment in IC No.33/1999 could not act as _res judicata_ as there was no adjudication on the issue and the case happened to be dismissed only for default. In short, the contention was that whether the respondent establishment could be brought within the purview of Section 2(12) or not was not at all determined in IC No.33/1999. Evidently the said question was considered by the Employees Insurance Court and it was decided in favour of the respondent establishment. There can be little doubt with respect to the position that to operate as _res judicata_ there must be an adjudication of an issue by a competent court. It is not disputed before us that on the question whether the respondent establishment is a factory so as to bring within the purview of the Employees Insurance Act was not at all adjudicated by the Employees Insurance Court in IC No.33/1999. Admittedly, the said case was dismissed for Ins. App. No.67 of 2011 6 default. Taking note of the fact that there was no adjudication of the issue and Ext.B1 judgment is only a dismissal for default, the issue was decided in favour of the respondent establishment. It is to be noted that the said finding is not at all under challenge in this appeal. In fact, we are of the considered view that the said issue was decided by the Employees Insurance Court in tune with the enunciation of law, by this Court and also by the Hon'ble Apex Court on the said issue. 4. As per the impugned judgment the Employees Insurance Court allowed the application. It was made clear that the judgment would not stand in the way of covering and assessing contribution if the conditions as per the subsequent notification (G.O(P) No.116/2007/LBR dated 6/9/2007) are satisfied. 5. The learned counsel appearing for the appellant submitted that the impugned judgment cannot be sustained for more than one reason. It is contended that the respondent establishment viz., the applicant before Ins. App. No.67 of 2011 7 the Employees Insurance Court had not adduced any evidence as to what exactly are the activities being carried out, by it. It is further submitted that the contention of the respondent establishment that the process carried out in the establishment is not a manufacturing process was specifically denied by the appellant before the Employees Insurance Court. In such circumstances, it is contended that the burden of proof that, it was not manufacturing process was on the respondent establishment in terms of the provision under Section 101 of the Evidence Act. It is further contended that the fact that more than 10 employees were engaged for wages is not in dispute. It is the specific contention that the processes like conducting blood tests, collection, tapping and cross matching etc. were being done in the respondent establishment with the aid of power. It is contended that in such circumstances and taking note of the fact that what is going on there is nothing but a manufacturing process, the respondent establishment was not justified in contending that it would Ins. App. No.67 of 2011 8 not fall within the definition of factory for the purpose of Section 2(12) of the Employee's State Insurance Act. Shortly stated, it is contended that in such circumstances the respondent establishment was liable to comply with the provisions of the Act and that the contra finding of the Employees Insurance Court is palpably unsustainable. The nub of the contentions in the circumstances, is that the Employees Insurance Court went wrong in not taking into consideration the decision of the High Court of Gujarat in _**Subodh Sha v. Foods and Drugs**_ [AIR 1997 Gujarath 83]. It is contended in similar circumstances. The High Court of Gujarat held that an establishment where such activities are going on, would fall within the definition of 'factory' as such activities would amount to manufacturing in terms of Section 2(K) of the Factories Act, 1948. Per contra, the learned counsel appearing for the respondent contended that there is absolutely no illegality or irregularity in the order passed by the Employees Insurance Court. It is submitted that even in Ins. App. No.67 of 2011 9 the absence of the evidence the appellant is not justified in taking up the contention that the activities referred to herein-before, as specifically mentioned in the application, are activities which could be termed as manufacturing process. Evidently, it is submitted that since the activities that are going on in the respondent establishment are nothing but collection of blood and other specimen from patients and subjecting them to analysis for the purpose of facilitating the Doctors in the diagnosis and treatment, it is absolutely untenable to say that such a process or such activities would be sufficient to bring within the expression 'manufacturing process' 5. Having considered the rival contentions and going through the impugned judgment, it is evident that none of the parties had virtually adduced evidence with respect to the actual activities carried out in the respondent establishment. True that in the pleadings, it is vividly explained the activities which are being carried out in the establishment. But it is to be noted that the Ins. App. No.67 of 2011 10 contention of the respondent establishment to the effect that such activities would not and could not fall within the expression 'manufacturing process' was stoutly denied by the appellant herein and the precise case of the appellant was that such activities would fall within the expression manufacturing process and therefore, the establishment would fall within the expression 'factory'. A perusal of the appendix to the judgment would reveal that only the judgment in IC No.33/1999 was legally brought on records. The learned counsel for the parties submitted that certain other documents were actually produced before the Employees Insurance Court. As noticed hereinbefore no evidence was let in as to what exactly are the activities being carried out by the respondent establishment so as to decide the crucial aspect as to whether such activities could be termed as manufacturing process so as to bring the respondent establishment within the definition of 'factory'. In the said circumstances, we find substance in the contention of the Ins. App. No.67 of 2011 11 appellant that Employees Insurance Court ought not to have arrived at a finding that the process being carried out in the respondent establishment was not a manufacturing process in view of the absolute absence of any evidence in that regard. 6. We are of the view that the impugned judgment invites interference on another score as well. In the impugned judgment itself the Employees Insurance Court referred to the decision of the Hon'ble Apex Court reported in _**Fertilizers and Chemicals Travancore Ltd. v. Employee's State Insurance Corporation**_ [2009 (3) KLT 946 SC]. After referring to the said decision the Employees Insurance Court accepted the contention of the respondent establishment that there was absolutely no necessity to implead the workers as parties to the lis since the respondent establishment is challenging the very applicability of the Act in diagnostic centres and laboratories. We are afraid, the said reason assigned by the Employees Insurance Court to accept the contention Ins. App. No.67 of 2011 12 of the respondent establishment would go against the enunciation of law by the Hon'ble Apex Court in the aforesaid decision. In unambiguous terms, the Hon'ble Apex Court held that in all cases under Section 11 of the statute, the workman or some of them in a representative capacity or a trade union representing workmen concerned, must be made a party. It is to be noted that the Hon'ble Apex Court was dealing with a case falling under the Employees State Insurance Act in an application filed by the employer concerned under Section 75 of the said Act. The Hon'ble Apex Court held that in an application filed by the employer under Section 75 the employer was not only to implead Corporation but also to implead atleast some of the workers in representative capacity or the Trade Union representing the said workers. When that be the exposition of law by the Hon'ble Apex Court, the Employees Insurance Court was not at all justified in accepting the contention of the respondent establishment and in not insisting the respondent Ins. App. No.67 of 2011 13 establishment to implead atleast some of the workers in a representative capacity or to implead the Trade Union, if any, representing such workers if available in the establishment. When such a declaration was made by the Hon'ble Apex Court, the Employees Insurance Court ought not to have deviated from the dictum assigning such a reason. The said action on the part of the Employees Insurance Court, cannot be appreciated. In such circumstances, in the light of the decision in _**Fertilizers and Chemicals Travancore Ltd.'** s_ case (supra) the respondent establishment which was the applicant before the Employees Insurance Court should have been insisted to implead atleast some of their workers in a representative capacity or Trade Union representing such workers if such a Trade Union was there in the establishment, as party in addition to the workers. This is essential because in any establishment it is such workers who are actually carrying out the activities and they would be in a better position to explain what are the actual Ins. App. No.67 of 2011 14 activities being carried out in the establishment concerned. That apart, if the provisions of the Act is brought or if the establishment is brought within the purview of the Act, the ultimate beneficiaries would be such workers. Therefore, there can be little doubt with respect to the position that they are necessary parties and by not insisting to make atleast some of them as parties in a representative capacity, an opportunity of being heard was virtually deprived to them as well. 7. Reverting to the earlier issue whether it is required to call upon the parties to adduce evidence taking into account the nature of the dispute involved in this case, we have no hesitation to hold that the parties ought to have been called upon to adduce evidence, if they so desire. In such eventuality, the failure to adduce evidence, subject to the rule of evidence, could have appreciated in the true perspective to arrive at proper decision. The very decision whether the establishment could be said to be a factory or not, would depend upon various factors such as number of Ins. App. No.67 of 2011 15 workers engaged, nature of the process involved or being carried out and also the question that in carrying out such activities whether there is aid of power or not, etc. All such questions could have been answered to arrive at a proper decision on the question whether the establishment is a 'factory' only if parties were permitted to let in evidence. This is essential because only if such materials are adduced the Employees Insurance Court would be getting sufficient materials to decide whether the bringing of the establishment concerned within the purview of the Act treating it as a factory is correct or not. The long and short of the aforesaid discussion is that the impugned judgment cannot be sustained. Consequently, the impugned judgment is set aside. The matter is remanded to the Insurance Court concerned for a fresh consideration in the light of the subsequent notification. The court concerned shall afford opportunity to all the parties to let in evidence. Needless to say that before proceeding with the case further in that regard the Ins. App. No.67 of 2011 16 respondent establishment which is the applicant in IC No.51/2003 shall be called upon to implead workers or some of workers or Trade Unions in tune with the dictum laid down by the Hon'ble Apex Court in the _**Fertilizers and**_ _**Chemicals Travancore Ltd.'** s_ case (supra). The learned counsel appearing for both sides submitted that the court which is now competent to consider this matter on remand is Employees Insurance Court, Thiruvananthapuram. In such circumstances, the Registry shall transfer the records along with a copy of this judgment to the Employees Insurance Court, Thiruvananthapuram. The appeal is disposed of as above. Sd/- ## C.T. RAVIKUMAR, JUDGE Sd/- MARY JOSEPH, JUDGE SKK/ad