THE EMPLOYEES STATE INSURANCE CORPORATION & ORS VS M/S KEY DEE COLD STORAGE PVT. LTD. CASE

THE EMPLOYEES STATE INSURANCE CORPORATION & ORS VS M/S KEY DEE COLD STORAGE PVT. LTD. CASE

Landmark Cases of India / सुप्रीम कोर्ट के ऐतिहासिक फैसले



[REPORTABLE]
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 4159 OF 2022
(Arising out of SLP(C) No.17162 of 2017)
THE EMPLOYEES STATE INSURANCE
CORPORATION & ORS. APPELLANT(S)
VERSUS
M/S KEY DEE COLD STORAGE PVT. LTD. RESPONDENT(S)
J U D G M E N T
Hrishikesh Roy, J.
Leave granted.
2. Heard Mr. Santosh Krishnan, the learned counsel
appearing for the appellants. The respondent is
represented by Mr. Parthiv K. Goswami, the learned
counsel.
3. The challenge in this appeal is to the judgment and
order dated 1.12.2016 in the RFA No. 82/2006 whereby the
Page 1 of 26
Guwahati High Court has allowed the appeal of the
respondent and set aside the order dated 28.4.2006
passed in favour of the appellants by the Employees
Insurance Court. Under the impugned judgment, it has
been held that Village Tarapur, where the factory of the
respondent is located, falls outside the municipal
limits of Silchar and is therefore not covered under the
notification dated 21.7.1999 (Annexure P-I) issued by
the appellants under sub-Section (3) of Section 1 of the
Employees’ State Insurance Act, 1948 (hereinafter
referred to as the “ESI Act”). The other finding of
the High Court to the effect that the business of cold
storage run by the respondent is covered within the
meaning of ‘manufacturing process’ as defined under
Section 2(14AA,) is however not challenged in this
appeal by the appellants.
4. The issue to be decided here is whether the High
Court was correct in its interpretation of the
notification dated 21.7.1999 and holding that the
notification covers only the areas within the Silchar
Municipal Board, although the notification additionally
Page 2 of 26
mentions names of other areas/villages including the
Village of Tarapur, where the respondent’s factory is
located.
5. The Village Tarapur is subdivided into many segments
and part of the village area falls within the Silchar
Municipal Corporation and other parts, within the
Silchar Revenue Circle. The respondent company set up
its cold storage factory at Ramnagar, Village Tarapur.
6. On 21.7.1999, the notification was issued under subsection (3) of Section 1 of the ESI Act, notifying
1.8.1999 as the date on which certain provisions of the
ESI Act shall come into operation in the following areas
in the State of Assam namely :-
“Areas under Silchar Municipal
Corporation falling within Silchar
Revenue Circles including the Revenue
Village – Silchar Town, Ambicapur, Uttar
Krishnapur, Kanakpur, Ukilbazar, Tarapur,
Rangpur, Durganagar, Gosaipur, Srikona,
Under Mouza-Barakpur, Tarapur, PhBarakpur, Rang Ph-Barakpur, Udharbond,
Rajnagar.”
Page 3 of 26
7. Thereafter, the Regional Director of the Employees
State Insurance Corporation informed the respondent
about the notification and that the provisions of the
ESI Act are now made applicable, to all factories
situated within the notified areas and as such, the
respondent’s factory at Ramnagar, Village Tarapur would
be covered under the ESI Act, with effect from 1.8.1999.
Since the respondent failed to take necessary steps for
registration under the ESI Act and to pay the requisite
contribution for the employees in their establishment, a
show cause notice was issued to the respondent to remit
contribution for the months of April to September, 2000,
on ad hoc basis. This was followed by a notice by the
competent authority for recovery of Rs. 17,068 from the
respondent.
8. The respondent then moved the Employees Insurance
Court, Guwahati (hereinafter referred to as the “EI
Court”) to challenge the show cause notice and the
consequent steps for recovery of contribution. The say
of the respondent was that the area in which their
Page 4 of 26
factory is located is not covered by the 21.7.1999
notification. The Regional Director of the ESI
Corporation however contended that the 21.7.1999
notification, extending the provisions of the ESI Act,
also covers the area where the factory of the respondent
is located. The EI Court considered the testimony of the
witnesses and the documents relied upon by the parties
and concluded that the notification extends to Tarapur
and therefore, the factory of the respondent, located in
Tarapur, is brought under the coverage of the ESI Act.
Accordingly, the respondent is required, under the ESI
Act, to make the contribution, and the authorities had
correctly assessed the quantum of contribution payable
for the employees in the establishment.
9. The relevant findings of the EI Court are extracted
below:-
“ **** **** **** ****
11. The Notification Ext. 2 issued by
the Government of India on 21.7.99
includes areas under Silchar Municipal
Corporation falling within Silchar
revenue circles including the revenue
village, Silchar Town, Ambicapur, Uttar
Krishnapur, Kanakpur, Ukil bazar,
Page 5 of 26
Tarapur, Rongpur, Durganagar, Gosaipur,
Srikona, under Mouza-Borakpur, Tarapur
etc.
12. From evidence on record it is
clear that Lamargram, Ramnagar is
situated within the Tarapur Village in
between Tarapur and Srikona. Several
part villages are included in the
Tarapur villages area and Lamargram,
Ramnagar is included in the Tarapur
Village, in the Notification Tarapur has
been included as a whole. This being
so, I hold that M/s. Kay Dee Cold
Storage Pvt. Ltd. – the petitioner was
included under the coverage of E.S.I.
Act vide Notification Ext. 2.
**** **** **** ****”
10. An appeal was then preferred under Section 82 of
the ESI Act before the Guwahati High Court to challenge
the decision of the EI Court. In RFA 82/2006, the
learned Judge framed, inter alia, the following
substantial question of law to be answered in the
proceeding:-
“i. Whether the establishment of the
appellant is covered within the area as
notified vide notification dated 21st
July, 1999 (Ext.2)?
11. In the impugned judgment, the High Court concluded
that the establishment of the respondent is not covered
by the 21.7.1999 notification and the RFA was
Page 6 of 26
accordingly allowed by setting aside the judgment dated
28.4.2006 of the E.I. Court. Answering the substantial
question No. (i), the Court opined that “only the area
under Silchar Municipal Board is the overall area sought
to be covered by the notification, and therefore, only
the areas falling within the Silchar Revenue Circle,
inclusive of the areas mentioned therein that falls
within the jurisdiction of Silchar Municipal Board can
be said to be covered by the notification dated
21.7.1999”
12.1 Assailing the above, Mr. Santosh Krishnan, the
learned counsel for the appellants, would contend that
the 21.7.1999 notification while setting out that it
applies to areas under the Silchar Municipal
Corporation, also goes on to specifically name certain
areas/villages including the Tarapur Village where the
respondent’s factory is located. The village Tarapur is
constituted by several parts and in the Para Lamar Gram
of Tarapur Part III, the Cold factory Storage of the
respondent is situated. The Village Tarapur partially
falls under Silchar Municipal Corporation and also under
Page 7 of 26
the Silchar Revenue Circle and since Village name is
mentioned twice in the notification, the entire village
area of Tarapur would be covered by the notification
dated 21.7.1999. According to Mr. Santosh Krishnan, the
learned counsel, on correct understanding of the areas
covered by the 21.7.1999 notification, the area where
the cold storage factory is located, could not have been
excluded by the High Court by placing reliance on the
Certificate dated 5.7.2004 (Ext. 16), which had
certified that the respondent’s factory at Ramnagar,
Tarapur is situated outside the limits of Silchar
Municipal Board.
12.2 As the respondent has not challenged the
notification dated 21.7.1999 issued under Section 1(3)
of the ESI Act, the High Court, according to the
appellants, fell into an error in giving a restrictive
interpretation of the notification dated 21.7.1999.
12.3 The exclusion of the areas of Ramnagar, Tarapur
from the purview of the 21.7.1999 notification would,
according to the appellant’s counsel, have far reaching
Page 8 of 26
consequences, inasmuch as others in the area would then
claim that they are outside the purview of the coverage
under the ESI Act, and this consequently will be
detrimental to the interests of the employees working in
the establishments covered by the ESI Act.
12.4 The appellants also argue that in the proceedings
before the E.I. Court, the respondent should have
impleaded the factory’s workmen as also the Union of
India, to facilitate participation of these necessary
stakeholders and since this was not done, the finding in
favour of the respondent is a nullity and it should be
understood accordingly.
13.1 Per contra Mr. Parthiv K. Goswami, the learned
counsel for the respondent would point out that the
factory of the respondent does not fall within the
limits of the Silchar Municipal Corporation and the
Silchar Revenue Circle but is located in Ramnagar
Tarapur Gram Panchayat, and therefore it is outside the
coverage of the ESI Act, in terms of the notification
dated 21.7.1999.
Page 9 of 26
13.2 According to Mr. Goswami, the learned counsel,
since the authority of the Silchar Municipal Board had
issued the certificate on 5.7.2004 (Ext. 16) certifying
that the respondent’s cold storage factory at Ramnagar
Tarapur is outside the municipal limits, the coverage of
the said factory under the ESI Act, is not warranted.
13.3 Adverting to the penal implications under the ESI
Act, Mr. Goswami submits that the expanded
interpretation of the notification is not warranted and
the High Court, according to the learned counsel,has
correctly interpreted the notification dated 21.7.1999
in favour of the respondent.
14. At this stage, it would be appropriate to identify
the location of the respondent’s establishment. Silchar
is one of the sub-divisions of Cachar District in Assam
and it is comprised of five revenue circles (Tehsils)
namely Silchar, Lakhipur, Sonai, Udharbond and
Katigorah. There are 245 revenue villages within the
jurisdiction of the Silchar Sadar Revenue Circle. The
Page 10 of 26
records show that Part I to Part VIII segments of
Tarapur and the Tarapur Part VIII “B” town segment are
located within Barakpur Pargana. The respondent’s cold
storage factory is situated in Tarapur III, Lamar Gram,
Ramnagar and this segment is outside the limits of the
Silchar Municipal Corporation. Only Tarapur Part VII
and Tarapur Part VIII segments are partially within the
Silchar Municipal Corporation area. It can therefore be
appreciated that one part of village Tarapur falls
within the limits of Silchar Municipal Corporation and
another segment of same village falls within the Silchar
Revenue Circle.
15. The 21.7.1999 notification issued by the Central
Government specifies the areas to which the ESI Act is
made applicable and significantly, apart from stating
that it applies to areas under the Silchar Municipal
Corporation, it goes on to specifically name additional
areas/villages, including the village of Tarapur. It is
therefore not difficult to comprehend that the
notification would extend to areas well beyond the
Page 11 of 26
limits of the Silchar Municipal Corporation. If the
area of coverage of the ESI Act was intended to be
restrictive, there was no need to mention other areas by
name in the said notification. The logical
interpretation would then be that the entire village
area of Tarapur is notified for coverage as the name of
Tarapur village is mentioned twice in the notification.
The significance of this must be given due weightage.
16. The notification issued under Section 1(3) of the
ESI Act is a statutory notification and the same should
be treated as a part of the statute, both for the
purposes of construction and also for the obligations
arising therefrom, as if, they are contained in the Act.
The principles of interpretation of subordinate
legislation are applicable for interpretation of such
statutory notification. If the words used are
unambiguous, the cardinal principle of interpretation is
that effect has to be given to every word in the subject
notification.[See. South Central Railway Employees
Cooperative Credit Society Employees’ Union,
Page 12 of 26
Secunderabad vs. Registrar of Cooperative Societies and
Ors1 and National Highways Authority of India vs.
Pandarinathan Govindarajulu and Anr.
2]
17. Guided by the above, let us now examine whether the
statutory notification was intended to cover only those
areas falling within the jurisdiction of the Silchar
Municipal Board as was decided in the impugned judgment.
Such an interpretation would mean that all the other
areas specifically mentioned in the notification, which
are otherwise beyond the limits of the Silchar Municipal
Corporation, would be excluded from the purview of the
statutory notification. If this is accepted, there will
be departure from the cardinal principle of
interpretation of giving full effect to every word of
the notification. This would then be contrary to what
is repeatedly laid down by this Court, including in the
case of South Central Railway Employees Cooperative
Credit Society Employees’ Union (supra) and National
Highways Authority of India (supra).
1(1998) 2 SCC 580
2(2021) 6 SCC 693
Page 13 of 26
18. The Central Government notification makes reference
to several areas beyond the limits of the Silchar
Municipal Board. This is discernible from the fact that
reference to Tarapur is made twice, firstly in reference
to the Silchar Municipal Corporation and secondly with
reference to Mouza-Barakpur. The reference to the
Udharbond Revenue Circle (outside the limits of Silchar
Municipal Corporation) and likewise to Rajnagar, which
is another revenue unit, distinct from Barakpur (which
comprises the Silchar Town), would suggest that the
Central Government intended to extend the operation of
the ESI Act to areas well beyond the limits of the
Silchar Municipal Corporation. The concerned
establishment is located in Tarapur Part III falling
within Barakpur, which is otherwise outside the Silchar
Municipal Area. Significantly, Mouza-Barakpur by name is
mentioned in the notification. Therefore, the High
Court’s constrictive interpretation of the 21.7.1999
notification, for application of the ESI Act to the
Page 14 of 26
smaller areas within the limits of Silchar Municipal
Corporation, cannot be countenanced by us.
19. That apart, the notification which obviously could
have been better drafted, is punctuated by several
commas. This would suggest that the areas mentioned
after the punctuation marks should be read disjunctively
and should not be read in reference to the Silchar
Municipal Corporation which is the first area mentioned
in the notification. Here we may benefit by referring to
Dr. M.K Salpekar Vs. Sunil Kumar Shamsunder Chaudhari
and Ors.3 In this case, Justice L.M Sharma writing for
the Division Bench, while adverting to the use of
punctuation, opined that “punctuation “comma” in the
sub-clause after “alternate accommodation” and before
the rest of the sentence indicates that the last part of
the sub-clause, namely, ”and does not reasonably need
the house” governs only the second part of the subclause.” When we look at the punctuation marks in the
notification dated 21.7.1999, and what follows
thereafter, our finding is that the notification
3 (1988)4 SCC 21
Page 15 of 26
intended to cover several areas beyond the areas within
the Silchar Municipal Corporation. The notification
issued under Section 1(3) of the ESI Act, after
initially adverting to areas under Silchar Municipal
Corporation falling within Silchar Revenue Circles,
significantly uses the word “including” which would
suggest the intention of the writer of the notification,
to enlarge the coverage area, well beyond the limits of
the Silchar Municipal Corporation. The other areas
specifically mentioned after the word “including”, would
suggest that the area of coverage under the ESI Act,
must not be restricted to the territorial limits of the
Silchar Municipal Corporation.
20. Confronted with a situation where interpretation had
to be made on usage of the word “includes” in Ramanlal
Bhailal Patel and Ors. vs. State of Gujarat4
, Justice
R.V. Raveendran, speaking for the Division Bench, had
the following to say:-
“23. The word “person” is defined in
the Act, but it is an inclusive
definition, that is, “a person includes
4 (2008) 5 SCC 449
Page 16 of 26
a joint family”. Where the definition
is an inclusive definition, the use of
the word “includes” indicates an
intention to enlarge the meaning of the
word used in the statute. Consequently,
the word must be construed as
comprehending not only such things
which they signify according to their
natural import, but also those things
which the interpretation clause
declares that they shall include. Thus,
where a definition uses the word
“includes”, as contrasted from “means”,
the word defined not only bears its
ordinary, popular and natural meaning,
but in addition also bears the extended
statutory meaning (see S.K.
Gupta v. K.P. Jain [(1979) 3 SCC 54 :
AIR 1979 SC 734]
following Dilworth v. Commr. of
Stamps [1899 AC 99 : (1895-99) All ER
Rep Ext 1576 : 79 LT 473]
and Jobbins v. Middlesex Country
Council [(1949) 1 KB 142 : (1948) 2 All
ER 610 (CA)] ).”
21. At this stage, it would also be apposite to refer to
the opinion written for the Constitution Bench by
Justice G.B. Pattanaik in Union of India and Anr. vs.
Hansoli Devi and Ors.5 , where it has been rightly held
that “it is not a sound principle of construction to
brush aside words in a statute as being inapposite
surplusage, if they can have appropriate application in
5(2002) 7 SCC 273
Page 17 of 26
circumstances conceivably within the contemplation of
the statute.” It must be remembered that “the
legislature is deemed not to waste its words or to say
anything in vain6 ” and a construction which attributes
redundancy to a statute cannot be accepted except under
compelling circumstances.
22. Proceeding with the above understanding, let us now
examine the impugned judgment. The High Court has
restricted the application of the statutory notification
to the limits of the Silchar Municipal Corporation,
which would imply that all the other areas mentioned
beyond “including” would be taken out of the purview of
the ESI Act. This could not have been the intention of
the Union Government.
23. This Court in Delhi Gymkhana Club Limited vs.
Employees’ State Insurance Corporation7
, through the
opinion of Justice R. Banumathi, noted that the object
of the ESI Act is to provide benefits to the employees
and also to make provisions for certain other matters in
6Quebec Railway, Light, Heat & Power Co. V. Vandry, AIR 1920 PC 181
7 (2015) 1 SCC 142
Page 18 of 26
relation thereto. As the ESI Act is a beneficial piece
of social welfare legislation aimed at securing the
well-being of the employees, a restrictive
interpretation which will have the effect of defeating
the objects of the beneficial legislation, should be
eschewed by the Court.
24. In the present matter, the respondent while
challenging the show cause notice in the EI Court,
failed to implead the factory’s employees either
individually or in representative capacity. Even the
Union of India which issued the notification under
Section 1(3) of the ESI Act expanding coverage of the
beneficial legislation to the area where the factory of
the respondent is located, was not arrayed as a party in
the proceeding. In such circumstances, the decision of
this Court in Employees’ State Insurance Corporation vs.
Bhakra Beas Management Board and Anr.8 and Fertilizers
and Chemicals Travancore Ltd. vs. Regional Director,
8 (2009) 10 SCC 671
Page 19 of 26
Employees’ State Insurance Corporation and Ors.9 would
come into play.
25. In Employees’ State Insurance Corporation (supra)
the necessity of impleading the employees of the
concerned establishment in a proceeding under the ESI
Act was emphasized by this court in the following
opinion:-
“4. This Court has recently held
in Fertilizer & Chemicals Travancore
Ltd. v. ESI Corpn. [(2009) 9 SCC 485 :
(2009) 2 SCC (L&S) 693 : (2009) 11 Scale
766] as under: (SCC pp. 487-88, paras 5-10)
“5. It may be noted that in its
petition before the Employees'
Insurance Court, the appellant
herein only impleaded the Employees'
State Insurance Corporation and the
District Collectors of Alleppey,
Palaghat and Cannanore as the
respondents but did not implead even
a single workman as a respondent.
Labour statutes are meant for the
benefit of the workmen. Hence,
ordinarily in all cases under labour
statutes the workmen, or at least
some of them in a representative
capacity, or the trade union
9 (2009) 9 SCC 485
Page 20 of 26
representing the workmen concerned
must be made a party. Hence, in our
opinion the appellant (petitioner
before the Employees' Insurance
Court) should have impleaded at
least some of the persons concerned,
as respondents.
 **** **** **** ****
 **** **** **** ****
8. In our opinion, wherever any
petition is filed by an employer
under Section 75 of the Act, the
employer has not only to implead
ESIC but has also to implead at
least some of the workers concerned
(in a representative capacity if
there are a large number of workers)
or the trade union representing the
said workers. If that is not done,
and a decision is given in favour of
the employer, the same will be in
violation of the rules of natural
justice. After all, the real parties
concerned in labour matters are the
employer and the workers. ESI
Corporation will not be in any way
affected if the demand notice sent
by it under Sections 45-A/45-B is
quashed.”
26. Likewise this court in Fertilizers and Chemicals
Travancore Ltd. (supra), made the following pertinent
observation on impleadment of the employees:-
Page 21 of 26
“10. In the present case the workmen
concerned were not made parties before
the Employees' Insurance Court, nor was
notice issued to them by the said court.
Also, the order of the Employees'
Insurance Court dated 4-2-1993, relevant
portion of which we have quoted, is not a
very happy one as no proper determination
has been made therein as to whether the
workmen concerned are the employees of
the appellant and whether they are
entitled to the benefit of the Act.
xxx xxx xxx xxx xxx
12. In our opinion, the Employees'
Insurance Court should have itself made a
proper investigation of the facts after
getting evidence from the parties,
including the workmen concerned, and
after impleading them as party in the
petition, it should have determined the
question as to whether the persons
concerned were the employees of the
appellant or not.
xxx xxx xxx xxx xxx
14. Needless to say, the Employees'
Insurance Court will grant an opportunity
to all the parties, including the alleged
workmen, to lead documentary evidence or
oral evidence and thereafter proceed in
accordance with law. We make it clear
that nothing stated hereinabove shall be
construed as an expression of opinion on
the merits of the controversy involved.
Page 22 of 26
All questions of law and fact are left
open for the parties to be raised before
the Insurance Court.”
27. The above judgments suggest that for non-joinder of
necessary parties, the proceeding at the instance of the
respondent would not be legally maintainable. Such a
plea was specifically raised by the appellants before
the High Court but this was rejected with the
observation that the issue ought to have been raised
before the trial court. In this context, it is necessary
to keep in mind that the Supreme Court judgment i.e.
Employees’ State Insurance Corporation (supra) was
rendered on 17.9.2009 whereas the judgment in favour of
the appellants was rendered by the EI Court much earlier
on 21.6.2006. Therefore, for the appellants, it would
have been impossible to rely on the ratio in the
subsequent judgment of the Supreme Court to argue on the
non-maintainability of the respondent’s proceeding, for
non-impleadment of the concerned employees.
Page 23 of 26
28. In any case, non-joinder of a necessary party goes
to the root of the matter and could also be fatal to a
legal proceeding. For this we can usefully read the
opinion of this court in Khetrabasi Biswal vs. Ajaya
Kumar Baral and Ors.10 where it was held as follows:-
“6. The procedural law as well as the
substantive law both mandates that in the
absence of a necessary party, the order
passed is a nullity and does not have a
binding effect.”
29. Let us now deal with the specific submission of the
learned counsel for the respondent. The argument is that
since penal consequences are provided under the ESI Act,
strict interpretation of the notification on the
applicability of the Act to the respondent’s
establishment, must be made. On this aspect, it needs
to be said that the name of village Tarapur is mentioned
twice in the 21.7.1999 notification and therefore a
strained interpretation is not at all necessary to bring
the establishment of the respondent, within the ambit of
coverage of the ESI Act. The respondent’s failure to
conform to the requirement of the ESI Act may perhaps
10 (2004) 1 SCC 317
Page 24 of 26
invite penal action envisaged by the legislation. But
this by itself does not persuade us to interpret the
statutory notification in a particular manner, to suit
the purpose of the respondent.
30. As we find, the High Court erred in holding that
since the Village Tarapur, where the factory of the
Respondent is situated, falls outside the municipal
limits of Silchar, the establishment of the respondent
is not covered by the notification (21.07.1999). Such
faulty interpretation adopted by the High Court cannot
be countenanced. The word “including” in the
Notification, is used as a word of enlargement, so as to
make the territorial application of the ESI Act
extensive. The notification is certainly not confined to
“only the area under the Silchar Municipal Board”, but
includes various areas mentioned therein, in addition to
the areas under the Silchar Municipal Board. That being
the case, the respondent’s establishment, is found to be
covered under the purview of the ESI Act.
Page 25 of 26
31. The terms of the notification cannot be any clearer
and the language used admits no exceptions of the kind
argued by the respondents. There is definite and
unambiguous reference to the areas beyond the
territorial limits of the Silchar Municipal Board.
Furthermore, the village Tarapur (where the factory of
the respondent is situated), is mentioned a second time.
The words used are not surplusage and emphatically
proclaim the drafter’s intention to include wider areas
within the purview of the notification and thereby the
ESI Act. The plain language of the notification settles
the issue against the respondent.
32. In the result the impugned decision is set aside.
The Appeal accordingly stands allowed without any order
on costs.
………………………………………………………J.
 [K.M. JOSEPH]
………………………………………………………J.
 [HRISHIKESH ROY]
NEW DELHI
MAY 19, 2022
Page 26 of 26

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