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The Regional Director v. K.V.B. Rajeswaran - C.M.A. No.890 of 1997 [2005] RD-TN 120 (11 February 2005)


DATED: 11/02/2005




The Regional Director,

ESI Corporation,

143, Sterling Road,

Madras 34. ..Appellant. -Vs-

K.V.B. Rajeswaran,

Prop: Ezhil Achagam,

8, Kakkathope Street,

Madurai. ..Respondent. PRAYER: This Civil Miscellaneous Appeal is directed against the order of the learned II Additional District Judge, Madurai (The Employees State Insurance Judge, Madurai) dated 31.05.1993 and made in ESIOP No. 32/1989.

For Appellant :: Mr.J.S.Murali

For Respondent :: No appearance

:J U D G M E N T

(The Judgment of the Court was delivered by The Honble The Chief Justice)

This Civil Miscellaneous Appeal has been filed under Section 82 of the ESI Act, against the order of the Employees State Insurance Court, Madurai dated 31.05.1993.

2. We have heard the learned counsel for the appellant. The respondent has been served and the name of the respondent has also been printed in the cause list, but neither the respondent appeared nor any representation is made on behalf of the respondent.

3. The case of the respondent herein in this Civil Miscellaneous Appeal is that he was running a Printing Press in the name and style of Ezhil Achagam, in which, the respondent has employed 5 or 6 persons only and never employed 10 or more persons, at any time and hence, the provisions of the ESI Act are not attracted. The respondent received a notice dated 08.04.1988 from the ESI Corporation, fixing the date of personal hearing as 14.06.1988. Subsequently, the respondent received an order dated 24.04.1989, passed under Section 45A of the ESI Act, determining the employees contribution amount for the period from 27.5.1984 to 30.8.1986. It is alleged that this order is not valid and that the respondent never refused to furnish any particulars nor obstructed any officials of the Corporation and there was no justification for invoking Section 45A of the ESI Act. It is also alleged that the principles of natural justice have been violated and the calculation of contribution is not correct.

4. The Corporation filed a written statement before the ESI Court, alleging that the respondent was running a Printing Press at Madurai using Power (4 U.P.) and employing about 18 persons (13 persons for composing and 5 persons for printing). The respondent seems to have his Press from 1979. On inspection of their accounts and other documents, it was found that the respondent is covered by the Act from 27.5.19 84. The respondent did not produce the ledgers, when called to do so. The Corporation issued show cause notices, dated 14.10.1986 and 13.3 .1987, proposing to determine the contribution. It was served on him on 21.04.1987 and the respondent was given a reasonable opportunity to represent his case. It is denied that there is any violation of the principles of natural justice.

5. The ESI Court, after discussing all the material placed before it, has held that the Corporation had wrongly clubbed the two establishments and had wrongly arrived at the conclusion that the establishment of the respondent is attracted by the provisions of the ESI Act, and the ESI Court allowed the petition filed by the respondent.

6. The short question, that is to be decided in this appeal is:- Whether there was one establishment or there were two establishments?

7. The respondent in this appeal had contended before the E.S.I. Court that there were two separate establishments, one for printing work and the other for composing work. We do not agree with this submission. As held in the decision of the Division Bench of this Court in The Regional Director, ESI Corporation, Madras and Another Vs. Aruna Stores, Proprietrix J.Shantha and Another, 2005 (1) MLJ 354, the concept of functional integrality is a well known concept in industrial law, and two units can be treated as one unit for the purpose of industrial law although it may be that for the purpose of sales tax, etc., or under the general principles of law, they may be treated as two separate units. As observed in the aforesaid decision, if ostensibly they are two units, but, there is functional integrality in the two, then for the purpose of industrial law, they should be treated really as one unit.

8. In the above said decision, it was further held that the concept of functional integrality has been referred to in several decisions of the Supreme Court, where it was considering, whether two units were really one establishment, e.g.,

(1)Indian Cable Company Limited Vs. Its Workmen, 1962 (1) LLJ 409 (2)Associated Cement Companies Limited Vs. Their Workmen, 1960 (1) LLJ 1 (3)South India Mill Owners Association Limited Vs. Coimbatore District Textile Workers Union, 1962 (1) LLJ 223 (SC)

(4)Western India Match Company Limited Vs. Their Workmen, 1963 (2) LLJ 459 (SC)

(5)National Iron and Steel Company Limited Vs. State of West Bengal, 1967 (2) LLJ 23 (SC)

(6)Pratap Press Vs. Their Workmen, 1960 (1) LLJ 388 (SC) (7)Wenger & Company Vs. Their Workmen, 1963 (2) LLJ 403 (SC) (8)Workmen of Straw Board Manufacturing Company Limited Vs. Company, 1974 (1) LLJ 499 (SC)

(9)Fine Knitting Company Limited Vs. Industrial Court, 1962 (1) LLJ 2 75 (SC)

9. Thus, in Associated Cement Companies Ltd., Vs. Their Workmen, 1960 (1) LLJ 1, the Supreme Court observed:-

It is, perhaps, impossible to lay down any one test as an absolute and invariable test for all cases. The real purpose of these tests is to find out the true relation between the parts, branches, units, etc. If, in their true relation, they constitute one integrated whole, we say that the establishment is one; if, on the contrary, they do not constitute one integrated whole, each unit is then a separate unit. How, the relation between the units will be judged must depend on the facts proved, having regard to the scheme and object of the statute which gives the right of unemployment compensation and also prescribes a disqualification therefor. Thus, in one case, the unity of ownership, management and control may be the important test; in another case functional integrality or general unity may be the important test; and in still another case, the important test may be the unity of employment. Indeed, in a large number of cases several tests may fall for consideration at the same time. The difficulty of applying these tests arises because of the complexities of modern industrial organization; many enterprises may have functional integrality between factories, which are separately owned; some may be integrated in part with units or factories having the same ownership and in part with factories or plants which are independently owned. In the midst of all complexities, it may be difficult to discover the real thread of unity.

10. In Pratap Press Vs. Their Workmen, 1960 (1) LLJ 388, the Supreme Court has observed:-

"The question, whether the two activities, in which the single owner is engaged, are one industrial unit or two distinct industrial units is not always easy of solution. No hard-and-fast rule can be laid down for the decision of the question and each case has to be decided on its own peculiar facts. In some cases, the two activities each of which by itself comes within the definition of industry are so closely linked together that no reasonable man would consider them as independent industries. There may be other cases where the connection between the two activities is not by itself sufficient to justify an answer one way or the other, but the employers own conduct in mixing up or not mixing up the capital, staff and management may often provide a certain answer".

11. Applying the aforesaid principles, in the present case, we are of the clear opinion that there is functional integrality between the composing unit and the printing unit. The composing work is being done in the 1st floor, whereas the printing is being done on the ground floor. This is a common practice in many printing press establishments, and hence we cannot say, by any stretch of imagination, that the composing work must be treated as a separate unit and an independent establishment, apart from the printing work. In our opinion, there is clear functional integrality between the two. It may be that for the purpose of reducing sales tax liability and for avoiding being covered by various labour statutes, the respondent sought to create an impression that there were two units. However, in view of the concept of functional integrality, we are not inclined to accept the version of the employer. In view of the above, we are of the opinion that there was only one unit and not two units. Hence, the respondent is attracted by the provisions of the ESI Act.

12. In the result, this Civil Miscellaneous Appeal is allowed and the impugned order is set aside. No costs.

Index: Yes

Website: Yes


Copy to:

1.The II Additional District Judge, Madurai (The Employees State Insurance Judge, Madurai).

2. The Record Keeper, VR Section, Madurai Bench of the Madras High Court 


Reproduced in accordance with s52(q) of the Copyright Act 1957 (India) from judis.nic.in, indiacode.nic.in and other Indian High Court Websites


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