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PETITIONER:

C.E.S.C. LTD. ETC.

Vs.

RESPONDENT:

SUBHASH CHANDRA BOSE AND ORS.

DATE OF JUDGMENT15/11/1991

BENCH:

MISRA, RANGNATH (CJ)

BENCH:

MISRA, RANGNATH (CJ)

PUNCHHI, M.M.

RAMASWAMY, K.

CITATION:

1992 AIR 573 1991 SCR Supl. (2) 267

1992 SCC (1) 441 JT 1991 (6) 373

1991 SCALE (2)996

ACT:

Employees'State Insurance Act, 1948----Section

2(9)--"Employee" ---Definition---Employees of contractor

under works contract--Whether covereel under Right of

principal employer to reject or accept work done by contrac-

tor through his employees whether includes "supervision"

Emplovees'State Insurance Act, 1948---Object and purpose of

Interpretation of Statutes---Constitution of India, 1950

(preamble. Chapter IV) and Employees'State Insurance Act,

1943 [Section 2(9)]---Construction of-strict interpretation

when leads to unjust situation, duty of Judges, indicated.

Constitution of India, 1950---Articles 39,21--Health and

strength of workers--Medical care and

health.facilities---Purpose of--Right to social

justice--Whether fundamental--Right to health Nature of.

Words and phrases--"Health ", "Supervision ", "To super.

vise "--Construction.

Indian Contract Act, 1872--Sections 182, 184,

23--"Agent", "Principal" Meaning--'Agent' u/s. 2(9) (ii) of

the Employees'State Insurance Act,

1948--Construction---Method indicated--Contractor under a

works contract whether agent of Corporation.

HEADNOTE:

The appellant-Corporation engaged the respondents-con-

tractors to carry out work of excavation, conversion of

over-head electric lines and laying of underground cables

under public roads and for repair and maintenance.

On 26.8.1975, the Regional Director of the Employees'

State Insurance Corporation noticed the appellant that the

employees, whose wages were being paid through the respond-

ents-contractors, would come under the provisions of Section

2(9) of the Employees' State Insurance Act, 1948.

268

The appellant directed the representative body of the

contractors--respondents' Association-to comply with the

provisions of the Act immediately, failing which a lumpsum

of 7% would be deducted from their bills. When the respond-

ents' Association refused to carry out such obligation, the

appellant started to deduct the E.S.I. contribution amount

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at the rate of 10% from their bills from 1984 and continued

deducting till 1985.

The respondents-contractors challenged the deductions

from bills by filing a writ petition before the High Court,

contending thai for carrying out their contracts, the re-

spondents were not supervised by the appellant, the princi-

pal employer and they were carrying out the allotted work

under the contracts of sites outside the factory establish-

ment of the appellant and that the employees of the respond-

ents did not come within the definition of the term, 'em-

ployee' under section 2(9) of the Act.

On 23.3.1984, the Single Judge of the High Court passed

an interim order permitting the appellant to respond to the

notice issued by the E.S.I.C. and staying the realisation of

the E.S.I. contribution from the respondent-contractors.

On 30.3.1985, under section 45-A of the Act, the Region-

al Director, E.S.I.C. held that the appellant was liable to

pay the E.S.I. contribution in respect of the employees of

its contractors and directed to pay the same.

The appellant challenged that order under Article 226 of

the Constitution of India by filing another writ petition.

The Single Judge hearing both the writ petitions togeth-

er, dismissed them, holding that the ultimate supervision

was that of the appellant and hence the Act was applicable.

Following the decision of this Court in M.G. Beedi Works

case (AIR 1974 SC 1952), the Single Judge further held that

the respondents-contractors were agents of the

appellant--the principal employer, and that the appellant

the principal employer could not escape the liability for

the works of its agents - the respondents - contractors.

The Division Bench, in appeal, reversed the judgment of

the Single Judge, against which the present appeals by

special leave were made to this Court posing the

question--whether on the facts, the right of the principal

employer to reject or accept work on

269

completion, on scrutinizing compliance with job require-

ments, as accomplished by a contractor, the immediate em-

ployer, through his employees, is in itself an effective and

meaningful 'supervision' as envisaged under section 2(9) of

the E.S.I. Act, 1948?"

The appellants contended that the High Court fell in

error in giving a restricted meaning to the word, 'supervi-

sion', occurring in section 2(9) of the Act and in taking

out the final act of rejection or acceptance of work from

the purview of that word.

Dismissing the appeals, this Court,

HELD: Per Ranganath Misra, CJ.

1. The legislative intention should have been brought

out more clearly by undertaking appropriate legislation once

this Court took a different view. The legislation is benefi-

cial and if by interpretation put by the Court the intention

is not properly brought out it becomes a matter for the

legislature to attend to. [278 E]

Per M.M. Punchhi. J.

1. In whatever manner the word 'employee' under Section

2(9) be construed, liberally or restrictidly, the construc-

tion cannot go to the extent of ruling out the function and

role of the immediate employer or obliterating the distance

between the principal employer and the immediate employer.

In some situations he is the cut-off. He is the one who

stumbles in the way of direct nexus being established,

unless statutorily fictioned, between the employee and the

principal employer. He is the one who in a given situation

is the principal employer to the employee, directly employed

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under him. If the work by the employee is conducted under

the immediate gaze or overseeing of the principal employer,

or his agent, subject to other conditions as envisaged being

fulfilled, he would be an employee for the purpose of sec-

tion 2(9). [284 B-D]

2. In the ordinary dictional sense "to supervise" means

to direct or over-see the performance or operation of an

activity and to over-see it, watch over and direct. It is

work under eye and gaze of someone, who can immediately

direct a corrective and tender advice. In the textual sense

'supervision' of the principal employer or his agent is on

'work' at the places envisaged and the word 'work' can

neither be construed so broadly to be the final act of

270

acceptance or rejection of work, nor so narrowly so as to be

supervision at all times and at each and every step of the

work. A harmonious construction alone would help carry out

the purpose of the Act, which would mean moderating the two

extremes. [284 G-H]

3. When the employee is put to work under the eye and

gaze of the principal employer, or his agent, where he can

be watched secretly, accidently, or occasionally, while the

work is in progress, so as to Scrutinise the quality thereof

and to detect faults therein, as also put to timely remedial

measures by directions given, finally leading to the satis-

factory,completion and acceptance of the work, that would be

supervision for the purposes of Section 2(9) of the Act. It

is the consistency of vigil, the proverbial 'a stich in time

saves nine'. The standards of vigil would of course depend

on the facts of each case. [284 H-285 B]

4. Section 182 of the Indian Contract Act, 1872 defines

"agent" as a person employed to do any act or to represent

another in dealing with third persons, the person for whom

such act is done, or is so represented is called the "prin-

cipal". Section 184 of the said Act further provides that as

between Principal and the third person any person may become

a, agent so as to be responsible to his principal. [288 E]

5. The agent has an identity distinct from his Princi-

pal in one sense and a fictional identity with his Principal

in the other. The agreement nowhere amalgamates the identity

of the electrical contractor with that of the principal

(C.E.S.C.) by undertaking to provide adequate supervision

for the purposes of the Act, on behalf of the C.E.S.C. The

agreement no doubt provides that the electrical contractor

would provide adequate supervision while carrying on with

the work, the purpose dominant is to safeguard obtaining

quality work and safety safeguards and to conform to the

provisions of the Electricity Supply Act. [288 E-G]

6. The creation or deduction of principal-agent rela-

tionship throws one towards the statutory scheme of keeping

distinct the concept of the principal and immediate employ-

er, because of diverse and distinct roles. [285 D]

7. The electrical contractor is obliged to provide

competent supervision while carrying out the work. The

electrical contractor

271

is otherwise a licensee under the Indian Electricity Act and

the Rules made thereunder. [286 C]

8. The principal employer can not delegate the function

of supervision to his agent who in the eye of law is his

second self, i.e., a substitute of the principal employer.

The immediate employer can by statutory compulsion never be

the agent of the principal employer. If such a relationship

is permitted to be established, it would, not only obliter-

ate the distinction between the two, but would violate the

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provisions of the Act as well as the contractual principle

that a contractor and a contractee cannot be the same per-

son. [285 B-C]

9. Checking of work after the same is completed and

supervision of work while in progress is not the same. These

have different perceptions. Checking of work on its comple-

tion is an activity, the purpose of which is to finally

accept or reject the work, on the touchstone of job specifi-

cations. Thereafter if accepted, it has to be paid on the

acceptance of the work. This step by no means is supervision

exercised. It cannot be the terminating point of an agency

when the interests of the so called principal and the so

called agent become business-like. [288 H-289 B]

10. Supervision rested with persons holding valid cer-

tificates of competency for which a register of supervision

was required under the licence to be maintained. [289 C]

11. Under the contracts, the electrical contractors

cannot in one breath be termed as agents of the C.E.S.C.

undertaking supervision of the work of their employees and

innately under the licence to have beforehand delegated that

function to the holder of the certificate of competency.

[289 C-D]

12. Even if, the terms of the contract and the terms and

conditions of the licence, the first being at the behest of

the C.E.S.C. and the second being at the behest of the

Government, be suggested to be complementing each other,

still these cannot be so interplayed to mean that an agency,

express or implied, has been created by the C.E.S.C. in

favour of the electrical contractor appointing him to super-

vise work as envisaged under Section 2(9) of the Act, and

thus to have established a direct link between the employee

and the C.E.S.C. to the exclusion of the electrical contrac-

tor. [288 C-D]

13. On the terms of the contract read with or without

the terms of the licence, no such agency, factually or

legally, stood ere-

272

ated on behalf of the C.E.S.C. in favour of the electrical

contractors, and none could be, as that would violate the

statutory scheme of distinction well marked under Section

2(9) of the Act. The supervision taken was to fulfil a

contractual obligation simplicitor. [289 D]

14. The employees of the electrical contractors, on the

facts and circumstances do not come in the grip of the Act

and thus all demands made towards ESI contribution made

against the C.E.S.C. and the electrical contractors were

invalid. [289 E-F]

M.G. Beedi Works v. Union of lndia, AIR 1974 SC 1952;

Royal Talkies v. E.S.I.C, [1979] 1 SCR 80; Regional Director

E.S.I.C. Trichur v. Ramanuja Match Industries, [1985] 2 SCR

119; M/s. P.M. Patel & Sons & Others v. Union of India &

Ors. [1986]1 SCC 32; The Superintendent of Post Offices etc.

etc., v.P.K. Rajamma etc. etc., AIR 1977 SC 1677, referred

to.

Halsbury's Laws of England (Hailsham Edition) Vol-1 at

page 193, referred to.

Per K. Ramaswamy, J. (Dissenting)

1. The Employees' State Insurance Act, 1948 seeks to

serve the twin objects namely, social security, i.e., medi-

cal benefits in case of sickness, maternity and employment

injury and other matters relating thereto and to augment the

efficient performance of the duty. [289 H-290 A]

2. Section 2(9) of the Act encompasscs employees em-

ployed for wages in or in connection with the work of a

factory or establishment to which the Act applies (i) who

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arc directly employed by the principal employer or (ii)

employed by or through "an immediate employer"; and whose

services are temporarily lent or let on hire to the princi-

pal employer by the person with whom the person is entered

into a contract of service. [293 B-C]

3. Clause 2(9)(ii) (applicable to the facts on hand)

attracts a person employed by or through an immediate em-

ployer as an employee of the principal employer provided the

f. flowing conditions are satisfied, namely, (1) the immedi-

ate employer employs an employee on the premises of the

factory or establishment of the principal employer; (2) or

"under the supervision of the principal employer". (3) "his

agent" on work which is ordinarily part of the

273

work of the factory or establishment or which is preliminary

to the work carried out in or incidental to the purpose of

the factory or establishment. [293 C-D]

4. Article 39(2) of the Constitution enjoins the State

to direct its policies to secure the health and strength of

workers. The right to social justice is a fundamental right.

Right to livelihood springs from the right to life guaran-

teed under Art. 21. The health and strength of a worker is

an integral facet of right to life. The aim of fundamental

rights is to create an egalitarian society to free all

citizens from coercion or restrictions by society and to

make liberty available for all. Right to human dignity,

development of personality, social protection, right to rest

and leisure as fundamcntal human rights to common man mean

nothing more than the status without means. To the tillers

of the soil, wage earners, labourers, wood cutters, rickshaw

pullers, scavengers and hut dwellers, the civil and politi-

cal rights are 'mere cosmetic" rights. Socio-economic and

cultural rights are their means and relevant to them to

realise the basic aspirations of meaningful right to life.

[293 F-H]

5. The Universal Declaration of Human Rights, Interna-

tional Conventions of Economic, Social and Cultural Rights

rccognise their needs which include right to food, clothing,

housing, education, right to work, leizure, fair wages,

decent working conditions, social security, right to physi-

cal or mental health, protection of their families as inte-

gral part of the right to life. Our Constitution in the

Preamble and Part IV reinforce them compendiously as social

economic justice, a bed-rock to an egalitarian social order.

The right to social and economic justice is thus fundamental

right. [293 H-294 B]

6. The term 'health' implies more than an absence of

sickness. Medical care and health facilities not only

project against sickness but also ensures stable man power

for economic development. Facilities of health and medical

care generate devotion and dedication to give the workers'

best, physically as well as mentally in productivity. It

enables the worker to enjoy the fruit of his labour, to keep

him physically fit and mentally alert for leading a success-

ful, economic, social and cultural life. The medical facili-

ties, arc thcrefore, part of social security and like gilt

edged security, it would yield immediate return in the

increased production or at any rate reduce absenteeism on

grounds of sickness, etc. health is thus a state of complete

physical, menial and social well being and nut merely the

absence of disease or infirmity. [294 E-G]

274

7. Right to health is a fundamental human right to

workmen. The maintenance of health is a most imperative

constitutional goal whose realisation requires interaction

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by many social and economic factors. Just and favourable

condition of work implies to ensure safe and healthy working

conditions to the workmen. The periodical medical treatment

invigorates the health of the workmen and harnesses their

human resources. Prevention of occupational disabilities

generates devotion and dedication to duty and enthuse the

workmen to render efficient service which is a valuable

asset for greater productivity to the employer and national

production to the State. [294 H - 29S B]

8.The Employees' State Insurance Act aims at relieving

the employees from health and occupational hazards. The

interpretation calls for in this case is of the meaning of

the meanings 'supervision' and 'agent' in s.2(9)(ii) of the

Act. The legal interpretation is not an activity sui gener-

is. The purpose of the enactment is the touch-stone of

interpretation and every effort would be to give effect to

it. The judge acts as a vehicle of communication between the

authors and the recipients. The end result is to promote

rule of law and to enliven social order and humane rela-

tions. [295 C-D]

9. In an attempt to construe the provisions of the

statute, construction, as a balancing wheel, should be

meaningful so as to make the statute workable and not to

render it futile or sterile. Whenever strict interpretation

of the statute gives rise to unjust situation or results,

the Judges can ensure their good sense to remedy it by

reading words in, if necessary, so as to do what Parliament

would have done had they had the situation in mind. The

meaning of the same words in a statute may be mended in the

laborynth of interpretation and may be enlarged or restrict-

ed in order to harmonise them with the legislative intention

of the entire statute. The spirit of the statute would

prevail over the literal meaning. The jurisprudence and

principle, therefore, in such a situation, would be the

contextual interpretation to subserve the constitutional

scheme and to alongate the legislative purpose, harmonising

the individual interest with the community good so as to

effectuate social transformation envisioned in the preamble

of the Constitution. [297 D-F]

10. The word "supervision" is not one of precise import

and is broad enough to require either supervisor's constant

presence during work supervised or his devotion thereto if

only time necessary to see that it complies with contract

specifications, advise as to details, prepare necessary

sketches and drawings, etc. [298 C]

275

11. The Employees' State Insurance Act does not give its

own definition of the word "supervision". Therefore, it must

be construed in the context the ultimate purpose the Act

aims to serve and the object behind the Act, i.e. to extend

sickness benefits and to relieve the employee from occupa-

tional hazards consistent with the constitutional and human

rights scheme. Under the Electricity Act and the Rules, the

Corporation, licencee, is enjoined to perform the acts and

duties contemplated thereunder to lay overhead lines, under-

ground cables, their repairs and maintenance there of, etc.

It authorised, under the contract, the immediate employer to

perform, on its behalf, those acts and duties. The immediate

employer would get the work done through their employees

employed for that purpose. It is not a sporadic work but a

constant and an ongoing process, so long as the licencee

generates, transmits and supplies electrical energy to the

consumers of their supply area. Had the principal employer

performed those acts and duties through its employees,

indisputably, their employees would be covered under the

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Act, though the work was got done at highways or at places

other than the factory or the establishment. When the prin-

cipal employer authorises the respondents as its contractors

under contracts the need for constant supervision is obviat-

ed relegating that function to its immediate employers.

Otherwise the need for contracts would be redundant. The

Corporation retained, under the contract, the power of

acceptance or rejection of the work done or supervision

effected in maintenance of the work got done by the immedi-

ate employer, subject to overall supervision by the Electri-

cal Inspector, on behalf of the State Government. The super-

vision in the fact situation is not the day to day supervi-

sion but legal control, i.e. right to accept or reject the

work done or maintenance effected. The exercise of right of

acceptance or rejection is the supervision as envisaged in

the contract between the principal employer and the immedi-

ate employer. It would supply the needed unifying or con-

necting thread between the constitutional creed of social

justice i.e., social security under the Act and supervision

of the acts or duties by the principal employer vis-a-vis

the employees of the immediate employer under the contract

who ultimately perform them on behalf of the principal

employer. Undoubtedly in a bilateral contract between the

corporation and the respondents qua their rights and liabil-

ities under the contracts, strict interpretation of the

words cngrafted therein, be of paramount relevance and call

for attention as per Contract Act. [301 C-302 B]

12. In the context of the statutory interpretation of

"supervision" under the Act of the works undertaken under

the contract, the

276

interest of the workmen or the welfare schemes for the

employees under the Act interposed and call attention to and

need primacy. In its construction the courts must adopt

contextual approach to effectuate the statutory animation,

namely, social security. The literal interpretation would

feed injustice in perpetuity denying to the employees of

sickness benefit etc. under the Act, which would be avoided,

lest the purpose of the Act would be frustrated. [302 B-C]

13. The application of the golden rule to the word

"agency" under the Indian Contract Act between the respond-

ents and the corporation, perhaps, does not encompass agency

in strict sense under the Act. But public policy of the Act,

the constitutional and human right's philosophy to provide

social security to protect the health and strength of the

workers must be kept at the back of the mind to construe the

word "agent" under s. 2 (9) (ii) of the Act, in contradis-

tinction with the bilateral stipulations under the contract.

In this regard public policy interposes and plays a vital

role to read into the contracts the extended meaning of

agency to bring about connecting links between the respond-

ents and the licencee corporation. Lest the contract, if

intended to deny welfare benefits to workmen, would be

opposed to public' policy and would become void under s. 23

of the Indian Contract Act. Such an intention would be

avoided by reading into the contract the extended meaning of

agency but not fiduciary. [302 E-G]

14. The contractors, respondents, knew at the date of

the agreements that the Corporation, as principal employer,

is under statutory obligation to execute or keep executed

the works and keep them repaired and maintained as an inte-

gral activity of generation, transmission and distribution

of the electrical energy to the consumers within their area

of supply. On authorisation, the respondents execute and

keep executed the works and repairs or kept them repaired

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and the maintenance thereof effected through their employ-

ees, which in law is on behalf of the Corporation, principal

employer. The genesis and aim of the transaction was to act

on behalf of the Corporation. The agency of the respondent

with the Corporation, thus, springs into being. The prohibi-

tion of the qualified supervisors, while in service of the

respondents, to disengage themselves with third parties in

terms of the contract was only to extract unstinted and

exclusive devotion to duty and no further. It stands no

impediment to construe that/he respondents are agents to the

Corporation as immediate employers. [303 F-H]

277

15. The employees working under the respondents perform

their duties in execution of the works, repairs and mainte-

nance thereof in connection with the generation, transmis-

sion and distribution of the electrical energy by the Corpo-

ration licensee. The Corporation is the principal employer.

The respondents' immediate employers execute the work etc.

under the supervision of the Corporation as its agents.

Their employees, in law, work under the supervision of the

principal employer, corporation. They are covered under

s.2(9) (ii) of the Act entitling to the sickness benefits,

etc. envisaged therein and the respondents are liable to

make their contribution to the Employees' Insurance Fund.

[304 A-B]

Senior Electric Inspector & Ors. v. Laxmi Naravan Chopra

JUDGMENT:

Muddala Veeramallapa & Ors., [1961] 2 SCR 295 at p. 313;

Massachusetts Bonding & Insurance Co. v. United States of

America, 352 US 128, 1 Led 2d 189; Atma Ram Mittal v. Ishwar

Singh Punia, [1988] 4 SCC 284; Owen v. Evans & Owen (Build-

ers) Ltd., 1962(1) Weekly Law Reports 933; Regional Direc-

tor, E.S.I.C v. South India Flour Mills (P) Ltd., 1986 (69)

F.J.R. 77; A.P. State Electricitv Board v.E.S.I.C, Hydera-

bad, [1977] 51 F JR 171(A.P.); Regional Director. E.S.I.C,

Bangalore v. Davangere Cotton Mills, [1977] 2 LLJ 404;

E.S.I.C Chandigarh v. Oswal Woolien Mills Ltd., [1980] 57 F

JR 171 (P&H) (F.B.); Birohichand Sharma v. First Civil

Judge, Nagpur & Ors., [1961] 3 SCR 161; D.C Dewan Mohideen

Sahib & Sons v. The Industrial Tribunal. Madras, [1964] 7

SCR 646; Nagpur Electric Light & Power Co. Ltd. v. Regional

Director E.S.I.C, [1967] 3 SCR Reprint 92; Kirloskar, Pneu-

matic Co. Ltd. v.E.S.I.C, [1987] 70 FJR 199 (Bom.); Royal

Talkies, Hyderabad & Ors. v.E.S.I.C, [1979] 1 SCR 80; M/S.

P.M. Patel & Sons & Ors. v. Union of India & Ors., [1986] 1

SCC 32, Superintendent of Post Office v.P.K. Rajamma, [1977]

3 SCR 678; Prenn v. Simmonds, 1971 (1) Weekly Law Reports

1381 (H.L.), referred to.

World Labour Report - 2, at Chapter 9 (Safety and

Health); Lawyer Oct. 1987 Page 5; Report of the Committee on

Labour Welfare, 1969 in paragraph 5.77 of Chapter 5; Webster

Comprehensive Dictionary (International Edition) at page

1260, in Vol, 1I; Corpus Juris Secundum, Vol. 83 at page

900; The Words and Phrases. Permanent Edition, Vol. 40A;

Halsbury's Laws of England (Hailsham Edition); Chitty on

Contracts, 26th Edition, paragraph 2502 at page 4,

A.G.Guest:Anson's Law of Contract, 26th Edition, at page 308

- referred to.

278

&

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 3197-98

of 1988.

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From the Judgment and Order dated 4.4.1988 of the

Calcutta High Court in Appeal Nos. 16 and 438 of 1986.

P.P. Rao, M.K. Ramamurthy, S.S. Ray, Raj Kumar Gupta,

V.J. Francis, N.M. PopIi, S.K. Nandy, P.K. Dutta and A.D.

Sikri for the appearing parties.

The Judgment of the Court was delivered by

RANGANATH MISRA, CJ. I have had the advantage of perus-

ing the draft judgments prepared by my learned brethren

Punchhi and Ramaswamy, JJ. While Justice Punchhi has gone by

the literal construction of the statute, brother Ramaswamy

has tried to find out the spirit of the legislation and with

a view to conferring the benefit on the workmen, has adopted

a construction different from the reported decision of this

) Court.

I agree with Justice Punchhi that the appeals should be

dismissed and the judgment of the Division Bench should be

sustained. At the same time, 1 would like to add that the

legislative intention should have been brought out more

clearly by undertaking appropriate legislation once this

Court took a different view in the decision referred to in

brother Punchhi's judgment. The legislation is beneficial

and if by interpretation put by the Court the intention is

not properly brought out it becomes a matter for the legi-

siatture to attend to.

PUNCHHI, J. The sole question which falls for determi-

nation in these appeals is, whether on the facts found, the

right of the Principal employer to reject or accept work on

completion, on scrutinizing compliance with job require-

ments, as accomplished by a contractor, the immediate em-

ployer, through his employees. is in itself an effective and

meaningful "supervision" as envisaged under Section 2(9) of

the Employees' State Insurance Act, 19,;8 (,for short the

Act)? The said provision, as it stood at the relevant time,

is set out below, as is relevant for our purpose:-

"2(.9') - 'employee' means any person em-

ployed 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 inciden-

tal or preliminary to or connected

279

with the work of, the factory or establish-

ment, whether such work is done by the employ-

ee in the factory or establishment or else-

where; or

(ii) who is employed by or through an

immediate employer on the premises of the

factory or establishment or under the supervi-

sion 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;

The Calcutta Electricity Supply Corporation (India)

Ltd., hereinafter referred to as the C.E.S.C. engages var-

ious contractors to carry out work of excavation, conversion

of overhead electric lines and laying of underground cables

under public roads, as well as for repair and maintenance of

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the aforesaid works. Subhash Chandra Bose & some others, the

private respondents herein, were given such contracts, terms

and conditions in respect of each were reduced to writing.

They would be adverted to at the appropriate time common as

they are to all. The C.E.S.C. was on notice alerted by the

Regional Director of the Employees State Insurance Corpora-

tion (for short 'E.S.I.C. ') by means of communication dated

26August,1975 that the employees whose wages were being paid

through such a contractor would fall within the scope of

Section 2(9) of the Act and for reasons and details men-

tioned in the communication. Thereupon the C.E.S.C. on its

part engaged in correspondence with the Association of

Electrical Contractors of Eastern India, a representative

body of the contractors who are parties respondents herein,

requiring them to comply with the provisions of the said Act

immediately or else it will deduct a lumpsum of 7% from

their bills. The Association questioned the move and strong-

ly refuted such obligation. After indulging in some corre-

spondence on the subject, the C.E.S.C. started making deduc-

tions from their bills on account of contribution to the

Employees State Insurance Fund on and from 1984 and contin-

ued deducting till 1985 at the rate of 10%. Some more corre-

spondence ensued, but in vain.

The electrical contractors then moved the High Court of

Calcutta on December 6, 1985 by means of a writ petition

under Article 226 of the Constitution against the E.S.I.C.

and its officers as also the C.E.S.C. as

280

well as the Union of India so as to have the entire basis of

the demand and deductions from bills annulled. It was the

categoric stand of the writ petitioners that for carrying

out their contracts they were not supervised by the

C.E.S.C., the principal employer, and they were carrying out

works allotted to them at sites outside the factory estab-

lishment of the C.E.S.C. Claiming that there employees did

not come within the definition of the; term 'employee' in

Section 2(9) of the Act, they required of the High Court to

determine this jurisdictional fact and issue the asked for

writ, direction or order appropriate in the case to have it

nipped in the bud. The matter was enter`ained by the High

Court and was heard on affidavits. The dispute necessarily

centred round as to whether the C.E.S.C. exercised any

supervision while the contracts were being executed, and as

to whether the terms thereof, assuming that they were faith-

fully observed. amounted to work being carried out under the

supervision and gaze of the C.E.S.C. The respective parties

put in supportive affidavits to their respective stands. A

learned Single Judge of the High Court, when seized of the

matter, on March 23, 1984, passed an interim order, giving

leave to the C.E.S.C. to respond to the notice issued by the

E.S.I.C. and avail of the opportunity of being heard. as

required by law, and till then stayed the realisation of the

contribution. The matter was then thrashed by the Regional

Director of the E.S.I.C., who on March 30, 1985, passed an

order under Section 45-A of the Act holding that the

C.E.S.C. was liable to pay Rs. 16,21,564.05 on account of

contribution to the Employees State Insurance in respect of

employees of its contractors and askedil to pay the same

within the time allotted. This order of the Regional Direc-

tor of the E.S.I.C. gave legitimacy to the deductions from

the bills of the private electrical contractors already made

by the C.E.S.C. But sinceil was otherwise aggrieved of the

foisting of the obligation, it moved another writ petition

of its own under Article 226 of the Constitution against the

E.S.I.C. and others claiming that it was not obliged to

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demand contributions on account of insurance in: respect of

the employees of the electrical contractors.

These two writ petitions were beard together and were

dismissed by a learned Single Judge of the High Court on

January 11, 1986. The learned Single Judge construed the

contracts between the electrical contractors and ire

C.S.E.C., whereunder the contractors were obliged to super-

vise on their own the work undertaken, so as to held that in

the facts and circumstances of the case the ultimate super-

vision was that of the E.S.I.C.,and hence the Act was ap-

plicable. The learned Single Judge also took the view that

the Act being a beneficial piece of legislation, enacted for

the protection and benefit of workers, required liberal

interepretation, as was held by this Court in M.G. Beedi

Works v. Union of India, AIR 1974 SC 1952, and then proceed-

ed to hold that the contractors as supervisors were in the

nature of agents of the C.E.S.C., the principal employer.

The learned

281

Single Judge also took the view that since ultimate energis-

ing of the transmission lines was invariably effected by the

C.E.S.C. after proper checks were effected for laying of

cables or other maintenance work, that step by itself was

"supervision' so as to attract the provisions of the Act.

Such finding was based on the fact that even though the

agreement specified that work was to be done under the

supervision of the electrical contractor the C.ES.C. re-

tained the ultimate power or supervision and in fact did

supervise the work executed by the contractors. It is then

that the learned Single Judge abruptly come to the conclu-

sion that the principal employer could not escape the li-

ability for the works of his contractors, as the latter was

acting as the agent of the principal, ,'red in sense contin-

ued the view of the Regional Director of the E.S.I.C.

Two appeals were filed against the dismissal of the two

writ petitions before the Division Bench of the High Court

who, after re-considering the matter, reversed the learned

Single Judge, which has given cause for these appeals by

special leave and the poser of the question mentioned at the

outset.

Now it is noteworthy that the Regional Director of the

E.S.I.C. drew deductions of facts in his impugned order

dated March 30,1985 in this manner:

"The job which is performed by these employees

engaged through the contractors. was princi-

pally maintenance and distribution of elec-

tricity generated by the C.E.S.C. and also

consumers' service. It was conceded during the

course of hearing that after the work entrust-

ed to such contractors was completed, it was

subject to checking by C.E.S.C. for compliance

with their job specifications and the work

related to main business of the C.E.S.C. It

cannot therefore be argued that merely because

such job was performed outside the factory

premises as stated, it did not concern the

C.E.S.C. The definition of the term 'premises'

includes such work site where the job of the

factory is being done. 1 cannot agree there-

fore with the argument that such .job was not

done for the factory and/or that there was no

supervision of the C.E.S.C. over such job. It

could not but be a fact that ( E. ,S. C. was

executing its own job through lite agency of

the coontractors engaged by them. The

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C.E.S.C's contention that they have acted upon

the guidelines as provided in the letter dated

26.8.75 does not hold good as the letter dated

26.8.75, Annexure E, issued by the Regional

Director of E.S'.I. Corporation. does not hold

good as the said letter only con-

282

tained broad guidelines regarding provisions

of the E.S.I. Act and the truth has to be

ascertained from the realities of the situa-

tion". [underlining ours]

In place thereof the Division Bench of the High Court

taking stock of the admitted facts opined as follows:

"There is no dispute that respondent no.4

(ESIC) is the principal employer in respect of

the said work and that the appellants (elec-

trical contractors) are the immediate employ-

ers of the said employees in connection with

the said work. There is no dispute that the

employees of the appellants are not directly

employed by the respondent no.4 (ESlC). There

is also no dispute that the employees of the

appellants (electrical contractors) do not

carry out the aforesaid work either in the

premises or the factory or establishment of

respondent no. 4 (E.S.I.C.). It is also not

disputed that the work which is carried out by

the employees of the appellants (electrical

contractors) can be stated to be work ordi-

narily part of the work of the respondent no.4

(ESIC) or preliminary or incidental to such

work. The only dispute appears to be whether

there is any supervision of the employees of

the appellants (electrical contractors) by the

respondent no.4 (E.S.I.C.) or its agents."

[bracketing ours]

Commenting on the impugned order of the Regional

Director of the E.S.I.C. dated March 30, 1985 afore-extract-

ed, the Division Bench observed as follows:

"It has not been found by the respondent no.2

(Regional Director) as a fact that in carrying

out the aforesaid work the employees of the

appellants are under the supervision of the

respondent no.4 or its agents. All that has

been found is that after the works which are

entrusted to the appellants axe completed, the

same are checked by the respondent no.4. From

the aforesaid it is obvious that it has not

been found by the ESI Authorities that there

is actual supervision by the respondent no.4

or its agents of the aforesaid works which are

performed by the employees of the appellants.

All that has been found is that after the

aforesaid work is completed the respondent

no.4 checks the same. In our view, checking of

a work after the same is completed and super-

vision of the same while the same is being

performed are entirely different. Checking of

a work after its completion is always done in

every case by the person who ordered the same

to be done so that the work

283

can be finally accepted and payment made

therefor. After the work is completed, a

further checking cannot mean or imply any or

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any further supervision."

Vehemently was it urged on behalf of the appellants that

the High Court fell in error in giving a restricted meaning

to the word 'supervision' occurring in Section 2(9) of the

Act and in taking out the final act of rejection or accept-

ance of work from the purview of that word. Strong reliance

was placed on a decision of this Court in Royal Talkies

v.E..S.I. C, [1979] 1 SCR 80, to project that this Court has

spelled out that the main aim of the Act was to insure all

employees in factories or establishments against sickness

and allied disabilities, but the funding. to implement the

policy of insurance was by contribution from the employers

and the employees. In the same breath it was observed that

since the benefits belong to the employees and are intended

to embrace as extensive a circle as is feasible, the social

orientation, protective purpose and human coverage of the

Act were important considerations in the statutory construc-

tion, more weighty than mere logomachy or grammatical nice-

ty. Reliance also was placed on Regional Director, E.S.I.C,

Trichur v. Ratnanuja Match Industries, [1985] 2 SCR 119 in

which it was ruled that beneficial legislation such as the

Act is to receive a liberal interpretation. The Court yet

ruled that it could not travel beyond the scheme of the

statute and extend the scope of it on pretext of extending

statutory benefits to those not covered by the scheme of the

statute. The Act being not meant for universal converage,

the negatives in the Act, one of them being that the Act did

not apply to factories or establishments with less than 20

employees, was taken into account to rule that liberal

construction would not go to hold a partner to be an employ-

ee as he would be a person who would not answer the defini-

tion.

A judgment of this Court in M/s. P.M. patel & Sons &

Others v. Union of India & Ors., [1986] I SCC 32 rendered in

the context of the Employees Provident Fund and Miscellane-

ous Provisions Act, 1952 was pressed into service on behalf

of the appellants to contend that when rolled beedis, pre-

pared by the worker elsewhere, were placed for acceptance or

rejection, conforming to the standards envisaged by the

manufacturers, that in itself was held constituting an

effective decree of supervision and control. The benefit of

the said Act was extended to beedi workers employed through

contractors and the question arose whether such workers came

within the definition of 'employee' in Section 2(f) of the

said Act. The definition of the word 'employee' provided

that it shall include any person employed by or through a

contractor, in or in connection with work of the establish-

ment, which words were held wide enough

284

to include work performed elsewhere than the factory itself,

including the dwelling house of a home worker, as also that

the manufacturing operation, simple as it was, performed by

illiterate workers, young and old, subjecting to rejection

and acceptance, was by itself an effective degree of super-

vision and control, establishing the relationship of master

and servant.

In whatever manner the word 'employee' under Section

2(9) be construed, liberally or restrictedly, the construc-

tion cannot go to the extent of ruling out the function and

role of the immediate employer or obliterating the distance

between the principal employer and the immediate employer.

In some situations he is the cut-off. He is the one who

stumbles in the way of direct nexus being established,

unless statutorily fictioned, between the employee and the

principal employer. He is the one who in a given situation

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is the principal employer to the employee, directly employed

under him. If the work by the employee is conducted under

the immediate gaze or overseeing of the principal employer,

or his agent, subject to other conditions as envisaged being

fulfilled, he would be an employee for the purpose of sec-

tion 2(9). Thus besides the question afore-posed with regard

to supervision of the principal employer the subsidiary

question is whether instantly the contractual supervision

exercised by the immediate employer (the electrical contrac-

tors) over his employee was exercised, on the terms of the

contract, towards fulfilling a selfobligation or in dis-

charge of duty as an agent of the principal employer.

P.M Patel's case can also be no help to interpret the

word 'supervision' herein. The word as such is not found

employed in Section 2(1) of The Employees Provident Fund and

Miscellaneous Provisions Act, 1952 but found used in the

text of the judgment. It appears to have been used as a

means to establish connection between the employer and the

employee having regard to the nature of work performed. But

what has been done in Patel's case cannot ipso facto be

imported in the instant case since the word 'supervision' in

the textual context requires independent construction. In

the ordinary dictional sense "to supervise" means to direct

or over-see the performance or operation of an activity and

to over-see it, watch over and direct. It is work under eye

and gaze of someone who can immediately direct a corrective

and tender advice. In the textual sense 'supervision' of the

priucipal employer or his agent is on 'work' at the places

envisaged and the word 'work' can neither be construed so

broadly to be the final act of acceptance or rejection of

work, nor so narrowly so as to be supervision at all

times and at each and every step of the work. A harmonious

construction alone would help carry out the purpose of the

Act. which would mean moderating the two extremes. When the

285

employee'is put to work under the eye and gaze of the prin-

cipal employer, or his agent, where he can be watched se-

cretly, accidently, or occasionally, while the work is in

progress, so as to scrutinise the quality thereof and to

detect faults therein, as also put to timely remedial meas-

ures by directions given, finally leading to the .satisfac-

tory completion and acceptance of the work, that would in

our view be supervision for the purposes of Section 2(9) of

the Act. It is the consistency of vigil, the proverbial 'a

stitch in time saves nine'. The standards of vigil would of

course depend on the facts of each case. Now this function,

the principal employer, no doubt can delegate to his agent

who in the eye of law is his second self, i.e., a substitute

of the principal employer. The immediate employer, instant-

ly, the electrical contractors, can by statutorily compul-

sion never be the agent of the principal employer. If such a

relationship is permitted to be established it would not

only obliterate the distinction between the two, but would

violate the provisions of the Act as well as the contractual

principle that a contractor and a contractee cannot be the

same person. The E.S.I.C. claims establishment of such

agency on the terms of the contract, a relationship express

or implied. But, as is evident, the creation or deduction of

such relationship throws one towards the statutory scheme of

keeping distinct the concept of the principle and immediate

employer, because of diverse and distinct roles. The defini-

tion is well drawn in Halsbury's Laws of England (Hailsham

Edition) Vol. 1 at page 193 as follows:

"An agent is to be distinguished on the one

hand from a servant, and on the other from an

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independent contractor. A servant acts under

the direct control and supervision of his

master and is bound to conform to all reasona-

ble orders given to him in this course of his

work; an independent contractor, on the other

hand, is entirely independent of any control

or interference and merely undertakes to

produce a specified result, employing his own

means to produce that result. An agent, though

bound to exercise his authority in accordance

with all lawful instructions which may be

given to him from time to time by his princi-

pal, is not subject to its exercise to the

direct control and supervision of the princi-

pal".

AND this statement of law was used with approval by this

Court in AIR 1977 SC 1677 titled as The .Superintendent of

post Offices etc. etc. v. P.K. Rajamma etc. etc.

Now coming to the subsidiary question the High Court

took up one particular contract dated January 20,1984 be-

tween one of the electrical contractors and the C.E.S.C. The

material portion thereof is as follows:

286

"The said contract relates to laying of new

undergound cables and conversion of overcad

mains and service to underground system at

Barrackpore Trunk Road between Paikpare Junc-

tion to D.F. 1/6 and from Baranagar P/T to

D.FI/67.

Please note that you will have to provide

competent supervision while carrying out the

work in accordance with the provisions of the

Indian Electricity Rules, 1956. You will also

have to provide adequate watch and ward ar-

rangement for the safe custody of the materi-

als till such time and complete installation

is handed over to us. You will be required to

insure against theft and pilferage of all

materials while held in your site godown".

The obligation embodied, as is plain, is for the elec-

trical contractor to provide competent supervision while

carrying out the work. The electrical contractor is other-

wise a licensee under the Indian Electricity Act and the

Rules made thereunder and the conditions of his licence read

as follows:

"Mr./Messrs. Eastern Engineers & Constructions

is/are hereby authorised to carry out electri-

cal installation work in the State of West

Bengal. This licence is issued subject to the

compliance with the conditions set out on the

reverse, and also to the continued compliance

with the conditions set out in Regulation 24

of the Regulations under Rule 45(,1) of the

Indian Electricity Rules, 1956.

(1) All electrical installation work

coming within the purview of Rule 45 (1) of

the Indian Electricity Rules, 1956 undertaken

by the holder of this licence, shall be car-

ried out under the direct supervision of a

person holding a valid certificate of compe-

tency...

(2) The holder of this licence shall

maintain a register of supervision and workmen

in the form below and shall produce the regis-

ter for inspection on demand by an Electrical

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Inspector or other person authorised in this

behalf the Licensing Board.

(3) On the completion of any electrical

installation work coming within purview of

rule 45(1) of the Indian Electricity Rules,

1956, a test report in the form prescribed by

the Board shall be submitted by the holder of

this licence to the Secretary. The report

shall be signed by the supervisor under whose

supervision the work has been carried out,

287

and countersigned by the holder of this li-

cence, who shall be wholly responsible for the

due execution of the work.

(4) If the holder of this licence ceases

to be in possession of a valid supervisor's

certificate of competency, ceases to retain in

his said employment at least one supervisor

holding valid certificate of competency, this

licence shall be invalid.

(5) If the holder of this licence accepts

an employment under any other firm or person

for the purpose of carrying out or supervising

any electrical installation work coming within

the purview of rule 45(1) of the Indian Elec-

tricity Rules, 1956 this licence shall be

invalid and the holder shall return the same

to the Secretary for cancellation.

The terms and conditions of the licence postulate the

licensee to carry out the installation work of the kind

mentioned under the direct supervision of a person holding a

valid certificate of competency. For that purpose the licen-

see shall maintain a register of supervision. Such register

is open to inspection on demand by an electrical inspector

or other person authorised in this behalf by the Licensing

Board. On completion of the installation work of the kind

mentioned, a test report shall be submitted by the licensee

to the Secretary, which report shall first be signed by the

supervisor under whose supervision the work had been carried

out and then countersigned by the licensee who shall be

wholly responsible for the due execution of the work. The

licence further enjoins the licensee either to retain a

valid supervisory certificate of competency or keep one such

person retained in his employment failing which the licence

can be invalidated. Same is the position if the licensee

accepts employment under any other firm or person for the

purpose of carrying out or supervision any electrical in-

stallation work of the kind mentioned. In that situation,

the license is to be returned to the Secretary for cancella-

tion.

On the conjoint reading of the contract with the

C.E.S.C. and the terms and conditions of the licence, assum-

ing the terms were to be faithfully obeyed, could it other-

wise be held that the C.E.S.C. could appoint the electrical

contractor as its agent to have the work carried out under

the latter's supervision, in place of C.E.S.C. As is evi-

dent, the contract relates to laying of new underground

cables, conversion of overhead mains and service and mainte-

nance to the underground system. The work being highly

sophisticated in nature, requiring special skill and exper-

tise, is given by the C.E.S.C. to the contractor on the

condition that the latter will have to provide competent

supervision while the work progresses, in ac-

288

cordance with the provisions of the Indian Electricity

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Rules, 1956, which, in the larger interest of the electrical

network and community and its safeguards, require an elec-

trical contractor obtaining a licence to carry out electri-

cal installation work of the kind mentioned. Then the Rules

obligate him to take in his services a person holding a

valid certificate of competency under whose direct supervi-

sion the work is required to be carried out, and on comple-

tion its final report being first signed by the supervisor

supervising the work and then countersiged by the holder of

the licence, who will be responsible for the due execution

of the work. The licence is capable of being rendered in-

valid or liable for cancellation due to nonemployment of a

supervisor given in the terms and conditions. Even if, the

terms of the contract and the terms and conditions of the

licence, the first being at the behest of the C.E.S.C and

the second being at the behest of the Government of West

Bengal, be suggested to be complementing each other, still

these cannot be so interplayed to mean that an agency,

express or implied, has been created by the C.E.S.C. in

favour of the electrical contrator appointing him to super-

vise work as envisaged under Section 2(9) of the Act, and

thus to have established a direct link between the employee

and the C.E.S.C. to the exclusion of the electrical contrac-

tor.

Section 182 of the Indian Contract Act, 1872 defines

"agent" as a person employed to d3 any act or to represent

another in dealing with third person, the person for whom

such act is done, or is so represented is called the "prin-

cipal". Section 184 of the said Act further provides that as

between principal and the third person any person may become

an agent so as to be responsible to his principal. Now it is

to be understood that the agent has an identity distinct

from his principal in one sense and a fictional identity

with his principal in the other. The agreement nowhere

amalgamates the identity of the electrical contractor with

that of the principal (C.E.S.C) by undertaking to provide

adequate supervision for the purposes of the Act, on behalf

of the C.E.S.C. The agreement no doubt provides that the

electrical contractor would provide adequate supervision

while carrying on with the work, the purpose dominant is to

safeguard obtaining quality work and safety safeguards, and

to conform to the provisions of the Electricity Supply Act.

To the Division Bench of the High Court it was obvious that

the Regional Director of the E.S.I.C. had nowhere found that

there was actual supervision, either by the C.E.S.C or its

duly appointed agents, over works which were performed by

the employees of the electrical contractors. All that has

been found is that the said works on completion were checked

by the C.E.S.C. and then accepted. Checking of work after

the same is completed and supervision of work while in

progress is not the same. These have different perceptions.

Checking

289

of work on its completion is an activity, the purpose of

which is to finally accept or reject the work, on the touch-

stone of job specifications. Thereafter, if accepted, it has

to be paid for. Undisputably electrical contractors had to

be paid on the acceptance of the work. This step by no means

is Supervision exercised. Neither can it be the terminating

point of an agency when the interests of the so called

principal and the so called agent become business-like.

Besides, the High Court has found that the work done by

employees was under the exclusive supervision of the elec-

trical contractors or competent supervisors engaged by them

trader the terms of the contract and the licence. By neces-

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sary implication supervision by the C.E.S.C. or its agents

stood excluded. Supervision rested with persons holding

valid certificates of competency for which a register of

supervision was required under the licence to be maintained.

Under the contracts, the electrical contractors cannot in

one breath be termed as agents of the C.E.S.C., undertaking

supervision of the work of their employees and innately

under the licence to have beforehand delegated that function

to the holder of the certificate of competency. Thus we hold

that on the terms of the contract read with or without the

terms of the licence, no such agency, factually or legally,

stood created on behalf of the C.E.S.C. in favour of the

electrical contractors, and none could be, as 'hat would

violate the statutory scheme of distinction well marked

under Section 2(a) of the Act. The supervision taken was to

fulfil a contractual obligation simplicitor and we leave it

at the level.

Thus on both counts, the principal question as well as

the subsidiary question must be answered against the ESIC

holding that the employees of the electrical contractors, on

facts and cricumstances, established before the Division

Bench of the High Court, do not come in the grip of the Act

and thus all demands made towards ESI contribution made

against the C.E.S.C. and the electrical contractors were

invalid. We affirm the view of the High Court in that re-

gard.

The appeals are accordingly dismissed. In the circum-

stances, however, we make no order as to costs.

K. RAMASWAMY, J. From the midst of personal warmth 1 am

enjoying with my learned brethren, I have to cool off from

the discomfortable breeze generated by the draft judgment of

brother Punchhi, J., given my anxious reflections of its

consequences and with due respect, 1 express my inability to

fail in line with.

The Employees' State Insurance Act 34 of 1948 (for short

'the Act') seeks to serve the twin objects namely, social

security i.e. medical

290

benefits in case of sickness, maternity and employment

injury and other matters relating thereto and to augment the

efficient performance of the duty. The respondents (immedi-

ate employers) had contracts with the Calcutta Electricity

Corporation (India) Ltd. (for short 'the Corporation'), the

Principal employer, to carry out excavation, erection of

overhead electric lines and laying of underground cables

beneath public roads as well as their repairs and mainte-

nance. The Act enjoins the employer to contribute his 50%

share towards medical reimbursement with a proportionate cut

from the wages of the employees and to debit it to the

Employees' State Insurance Corporation fund to render medi-

cal assistance etc. to the employees. In consequence there

would be cut, to the extent of 10% or as may be specified

from time to time, in the "profit packet" of the immediate

employers. For some time, it was complied with but late

assailed their liability under Art. 226 of the Constitution.

The conflagration of the claims between the immediate em-

ployers and their employees gave rise to the lis. The imme-

diate employers arming themselves with independent contrac-

tor's clout summon the services of the "gramarian" and tells

him that "our contracts with the Corporation are bilateral

untramelled by routine supervision or agency with the Corpo-

ration under s. 2(9) of the Act and tell us whether your

"golden rule" does not apply to us? Like Shylock, are we not

entitled to prevent inroad into our profit pocket not even a

farthing from minimal of 10%, though the workman may give us

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efficient service on receiving medical treatment ?" The

employees request the social engineer to sharpen his foren-

sic skills of his instruments to provide them social secunty

from health and occupational hazards fastering a part of the

liability on the immediate employers whom they serve. Wheth-

er the social engineer would avoid unjust result like Port-

jo's judgment ? Whether the words in the contract would be

masters by golden rules ? Whether the words "Supervision" or

"agent" in s.2(9) of the Act would be so construed or adopt-

ed by purposive approach as to do what justice and equity

required ? The result of the combat between the granmarian

and the social engineer would provide the answer to these

searching questions.

Before adverting to angle into their perceptions, it is

of utility to keep abreast the brass facts that lie in a

short compass. The Corporation had from the State Govt.

Licensor, licence under s.3 of the Indian Electricity Act 9

of 1910 (for short the 'Electricity Act') to generate,

transmit and supply electrical energy to the consumers of

the area. The Corporation is enjoined to erect electric

supply lines and also overhead lines, service lines, under-

ground cables through which energy is to be supplied to the

either distributing main or immediately from the suppliers'

premises etc. It entered into contracts with the respondents

to lay undergound cables, to erect overhead lines, their

repairs and maintenance and for execution thereof employed

their own employees.

291

The Elecricity Act empowers the Corporation as licensee,

under s. 12 thereof, to open and break Up the soil etc. and

lay down electricity supply lines and other works, repair,

alter or remove the same and do all other acts necessary for

due supply of energy. It also empowers under Sec. 13 to

execute new works in compliance of that section. Under Sec.

14 & 15 it is empowered alteration of the pipes or wires.

Sec. 10 empowers a licensee to place any overhead lines

along or across any street etc. Sec. 20 empowers the licen-

see or "any person duly authorised by a licensee" to enter

upon any premises, at reasonable time on prior intimation to

the occupier of any premises or land etc. upon which the

electricity supply line or other works have been lawfully

placed for the purpose of (a) inspecting, testing, repairing

or altering the electricity supply, lines meters, fittings,

works and apparatus for the supply of energy belonging to

the licensee etc. Thus, the Corporation, as a licensee, is

ordinarily and as an integral scheme, to execute the works

or duly authorise on its behalf any other person to execute

any of the works enumerated herinbefore or inspection,

repair, testing or alteration of the works and maintenance

thereof.

A conjoint reading of s. s. 3 (2) (b) of the Electricity

Act and Clause (1) (a) of the Schedule shows that the licen-

see is required to show to the "satisfaction of the State

Government that the Corporation is in a position to fully

and efficiently discharge the duties and obligations imposed

upon him by the licence throughout the area of the supply.

On its failure, the State Govt. under s. 4 (1) (c) (i) is

entitled to revoke the licence. In terms of s. 15(1) "the

duly authorised persons" of the licensee is to operate under

the Act to lay new electric supply lines or other works etc.

Equally Clause V (1) of the Schedule provides to lay down

distributing mains for public lighting of any street on a

requisition made by two or more owners of occupiers of the

premises. The Indian Electricity Rules, 1956 (for short 'the

Rules') made under s. 37 of the Electricity Act provides the

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procedure in this regard. Rule 36 adumberates handling of

electric supply lines. apparatus. only "by authorised per-

son" who is required to take safety measures "approved by

the electrical Inspector", appointed under s. 36 of the

Electricity Act. Sub-rule (2) of Rule 36 provided thus:

"No person shall work on any live electric

supply line or apparatus and no person shall

assist such person on such work, unless he is

authorised in that behalf and takes the safety

measures approved by the Inspector".

Rule 45 provides precautions to be taken by electrical

workmen, suppliers etc. Unless electrical contractor, li-

censed in this behalf by the

292

State Govt., appoints a person holding a certificate of

competency and a permit in this behalf issued or recognised

by the State Govt., the contractor shall not be entitled to

undertake any installation work etc. Rule 51 provides cer-

tain safety measures to be taken to the satisfaction of the

Inspector so as to prevent danger. Rule 64 requires an

authorised person to carry out the acts mentioned therein

subject to the supervision provided in Clause (b) thereof by

the Electrical Inspector. Rule 123(4) speaks of examination

of flexible cables by authorised persons and Rule 125(8)

enjoins that all apparatus to be operated only by those

persons who are authorised for the purpose.

It could, thus, be seen that the Corporation as a licen-

see is empowered and enjoined to lay the works production,

transmission and distribution of electrical energy to the

consumers within the area of supply. It is also authorised

to entrust, any person authorised by it in this behalf, to

perform the duties of the licensee under the Act and the

Rules. The contractor in turn appoint a qualified supervisor

to have works executed and maintained or repaired, subject

to inspection and supervision by the Electrical Inspector of

the State Govt. The primary duty and responsibility is that

of the Corporation as the Principal employer to have the

works etc. executed, repaired and maintained through its

employees. It duty authorises the contractor to have these

works done, repaired or maintained, on its behalf, though

the media of contract. The question emerges whether the

respondents are not immediate employers executing the works

etc. under the supervision of the Principal empleyer or as

its agents ? From the above backdrop of statutory operation,

the scope of s. 2(9) is to be gauged which reads thus:-

"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 inciden-

tal 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 elswhere; or

(ii) who is employed by or through an

immediate employer on the premises of the

factory or establishment or under the supervi-

sion 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

293

on in or incidental to the purpose of the

factory or establishment; or

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(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 ."

It encompasses employees employed for wages in or in

connection with the work of a factory or establishment to

which the Act applies (i) who are directly employed by the

principal employer or (ii) employed by or through "an imme-

diate employers"; and whose services are temporarily lent or

let on hire to the principal employer by the person with

whom the person is entered into a contract of service.

Clause 2(9)(ii) (applicable to the facts on hand) in turn

attracts a person employed by or through an immediate em-

ployer as an employee of the principal employer provided the

following conditions are satisfied, namely, (1) the immedi-

ate employer employs an employee on the premises of the

factory or establishment of the principal employer; (2) "or

under the supervision of the principal employer"; (3) this

agent on work which is ordinarily part of the work of the

factory or establishment or which is preliminary to the work

carried out in or incidental to the purpose of the factory

or establishment. Clauses (i) and (iii) of s. 2(9) are

inapplicable to the facts.

Article 25(2) of Universal Declaration of Human Rights,

1948 assures that everyone has the right to a standard of

living adequate for the health and well being of himself and

of his family ....including medical care, sickness, disa-

bility ..... ,Art. 7(b) of the International Convention on

Economic,

Social and Cultural Rights, 1966 recognises the right of

everyone to the enjoyment of just and favourable conditions

of work which ensure, in particular, safe and healthy work-

ing conditions. Article 39(e) of the Constitution enjoins

the State to direct its policies to secure the health and

strength of workers. The right to social justice is a funda-

mental right. Right to livelihood springs from the right to

life guaranteed under Art.21. The health and strength of a

worker is an integral fact of right to life. The aim of

fundamental rights is to create an egalitarian society to

free all citizens from coercion or restrictions by society

and to make liberty available for all. Right to human digni-

ty, development of personality, social protection, right to

rest and leisure as fundamental human rights to common man

mean nothing more than the status without means. To the

tillers to the soil, wage earners, labourers, wood cutters,

rickshaw pullers, scavengers and hut dwellers the civil and

political right are 'mere cosmetic' rights. Socio-economic

and cultural rights are their means and relevant to them to

realise the basic aspirations of meaningful right to life.

The Universal Declaration of Human Rights, International

Conventions of Economic,

294

Social and Cultural Rights recognise their needs which

include right to food, clothing, housing, education, right

to work, leizure, fair wages, decent working conditions,

social security, right to physical or mental health, protec-

tion or their families as integral part of the right to

life. Our Constitution in the Preamble and Part IV reinforce

them compendiously as socioeconomic justice, a bed-rock to

an egalitarian social order. The right to social and econom-

ic justice is thus fundamental right.

In World Labour Report - 2, at Chapter 9 (Safety and

Health) it is stated that "in every three minutes somewhere

in the world one worker dies and in every second that passes

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at least three workers are injured". In India on an average

every day 1100 workers are injured and three are killed "in

industrial establishments" vide (Lawyer Oct. 1987 page 5).

In 26th I L.O. Convention held in Philadephia in April 1944,

recommendation No. 69 laid down norms for medical care for

workers. In October 1943, the Government of India appointed

Health Survey and Development Committee known as Sir Joseph

Bhore Committee which laid emphasis on "Preventive Schemes".

I.L.O. Asian Regional Conference held in Delhi in 3947,

resolved that in very scheme for medical care in any Asian

country the need for the prevention of disease and the

improvement of the general standard of health must be con-

sidered as of almost importance. The Act had culminated in

its birth of these recommendations providing in a limited

area social security to the employees from health and occu-

pational hazards.

The term health implies more than an absence of sick-

ness. Medical care and health facilities not only protect

against sickness but also ensures stable man power for

economic development. Facilities of health and medical care

generate devotion and dedication to give the workers' best,

physically as well as mentally, in productivity. It enables

the worker to enjoy the fruit of his labour, to keep him

physically fit and mentally alert for leading a successful

economic, social and cultural life. The medical facilities

are, therefore, part of social security and like gilt edged

security, it would yield immediate return in the increased

production or at any rate reduce absentecism on grounds of

sickness, etc. Health is thus a state of complete physical,

mental and social well being and not merely the absence of

disease or infirmity. In the light of Arts. 22 to 25 of the

Universal Declaration of Human Rights, International Conven-

tion on Economic, Social and Cultural Rights, and in the

light of socio-economic justice assured in our Constitution,

right to health is a fundamental hUman right to workmen. The

maintenance of health is a most imperative constitutional

goal whose realisation requires interaction by many social

and economic factors. Just and favourable condition of work

implies to ensure

295

safe and healthy working conditions to the workmen. The

periodical medical treatment invigorates the health of the

workmen and harnesses their human resources. Prevention of

occupational disabilities generates devotion and dedication

to duty and enthuse the workmen to render efficient service

which is a valuable asset for greater productivity to the

employer and national production to the State. Yet in the

report of the Committee on Labour Welfare, 1969 in paragraph

5. 77of Chapter 5, reveals that, private employers generally

feel that this burden shall not be cast upon them."

The Act aims at relieving the employees from health and

occupational hazards. The interpretation calls for in this

case is of the meaning of the meanings 'supervision' and

'agent' in s.2(9) (ii) of the Act. The legal interpretations

is not an activity sui generis. The purpose of the enactment

is the touch-stone of interpretation and every effort would

be to give effect to it. The judge acts as a vehicle of

communication between the authors and the recipients. The

end result is to promote rule of law and to enliven social

order and humane relations.

In Senior Electric Inspector & Others v. Laxmi Narayan

Chopra & Ors., [1962] 3 SCR 146 at p. 156, K. Subba Rao, J.

(as he then was) for unanimous Court held thus:

"In a modern progressive society it would be

unreasonable to confine the intention of a

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Legislature to the meaning attributable to the

word used at the time the law was made, for a

modern Legislature making laws to govern a

society which is fast moving must be presumed

to be aware of an enlarged meaning the same

concept might attract with the march of time

and with the revolutionary changes brought

about in social, economic, political and

scientific and other fields of human activity.

Indeed, unless a contrary intention appears,

an interpretation should be given to the words

used to take in new facts and situations, if

the words are capable of comprehending them."

In M. Pentiah & Ors. v. Muddala Veermallappa & Ors.,

[1961] 2 SCR 295 at p. 313 in a separate but concurrent

judgment, Sarkar, J. held

"Where the language of a statue, in its ordi-

nary meaning and grammatical construction,

leads to a manifest contradiction of the

apparent purpose of the enactment, or to some

inconven-

296

ience or absurdity, hardship or injustice,

presumably not intended, a construction may be

but upon it which modifies the meaning of the

word, and even the structure of the sentence".

This court approved the ratio in Seaford Court

Estates Ltd. v.Asher, [1949] 2 All E.R. 155 at

164, Denning, L.J. who said,

"When a defect appears a judge cannot simply

fold his hands and blame the draftsman. He

must set to work on the constructive task of

finding the intention of Parliament ......

and then he must supplement the written word

so as to give "force and life" to the inten-

tions of the legislature ..... A judge

should ask himself the question how, if the

makers of the Act had themselves come across

'his ruck in the texure of it, they would have

straightened it out ? He must then do as they

would have done. A judge must not alter the

material of which the Act is woven, but he can

and should iron out the creases".

I conceive it my duty, therefore, so read the

new Act, unless I am prevented by the intrac-

tability of the language used, as to make it

carry out the obvious intention of the legis-

lature".

In Massachusetts Bonding & Insurance Co. v. United

States of America, 352 U.S. 128 ed 2d 189; Frankfurther, J.,

speaking per himself, joined by Reed, Clark, and Brennan,

JJ. held at headnotes 8 & 9 thus:

"On more than one occasion, but evidently not

frequently enough, Judge Learned Hand has

warned against restricting the mean-

of a statute to the meaning of its "plain"

words.

"There is no surer way to misread any document

than to read it literally...." Of course one

begins with the words of a statute to ascer-

tain its meaning, but one does not end with

them. The notion that the plain meaning of the

words of a statute defines the meaning of the

statute reminds one of T.H. Huxley's gray

observation that at times "a theory survives

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long after its brains are knocked out." One

would suppose that this particular theory of

statutory construction had had its brains

knocked out in Boston Sand & Gravel C.v.

United States, [278 US 41, 48, 73 Led 170,

177, 49 S Ct 52]. The words of this legisla-

tion are as plain as the Court finds them to

be only if the 1947 amendment is read in

misleading isolation. An amendment is not a

repeal. An amendment is part of the legisla-

tion it amends. The 1947 amendment to the

Federal Tort Claims Act of 1946 must be read

to harmonise with the central purpose of the

original

297

Act. The central purpose of the original Act

was to allow recovery against the United

States on the basis and to the extent of

recoveries for like torts committed by private

tortfeasors in the State in which the act or

omission giving rise to the claim against the

United States occurred. The 1947 amendment

filled the gap, a very small gap, that was

disclosed in the scheme formulated by the 1946

Act".

In Atma Ram Mittal v. Ishwar Singh Punia, [1988] 4 SCC

284, this Court held that the purpose of interpretation in a

social amelioration legislation is an imperative irrespec-

tive of anything else. It was further held that the con-

tents, subject matter, the effects and consequences or the

spirit and reason of the law shall be taken into account.

The words must be construed with the imagination "of purpose

behind them".

(emphasis supplied)

Therefore, in an attempt to construe the provisions of

the statute construction, as a balancing wheel, should be

meaningful so as to make the statute workable and not to

render it futile or sterile. Whenever strict interpretation

of the statute gives' rise to unjust situation or results,

the Judges can ensure their good sense to remedy it by

reading words in, if necessary, so as to do what Parliament

would have done had they had the situation in mind. The

meaning of the same words in a statute may be mended in the

laborynth of interpretation and may be enlarged or restrict-

ed in order to harmonise them with the legislative intention

of the entire statute. The spirit of the statute would

prevail over the literal meaning. The jurisprudence and

principle, therefore, in such a situation, would be the

contextual interpretation to subserve the constitutional

scheme and to alongate the legislative purpose, harmonising

the individual interest with the community good so as to

effectuate social transformation envisioned in the preamble

of the Constitution.

Let me, therefore, consider the arebit of the word

'supervision' under s.2(9) (ii) of the Act. In Webster

Comprehensive Dictionary (International Edition) the word

'supervision' has been defined at page 1260 in Vol. II as

"authority to direct or supervise", supervise means - have a

"general oversight of'. "In Corpus Juris Secundum", Vol 83

at page 900 it is stated that The word "supervision" is not

of the precise import and when not limited by the context is

broad enough to cover more than one subject. It implies

oversight and direction, and does not necessarily exclude

the doing of all manual labour, but may properly include the

taking of an active part in the work". "Supervision" is

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defined as meaning "the

298

act of overseeing or supervising; having general oversight

of, especially as an officer vested with authority; inspec-

tion; oversight; superintendence." The Words and Phrases,

Permanent Edition, Vol. 40A defines that the "Supervision"

means oversight, an act of occupation of supervision; in-

spection. "Supervision" is an act of overseeing or supervi-

sion; having general oversight of, especially as an officer

vested with authority; inspection; oversight; superintend-

ence, "Control" is the act of superintending; care and

foresight for purpose of directing and with authority to

direct; power or authority to check or restrain; restraining

or directing influence; regulating power. Contract of em-

ployment to "supervise" construction of power plant, steam

distribution system held to require time and attention to

work needed to see that it was properly and promptly done,

regardless

of number of hours spent there on. The word "supervision" is

not one of precise import and is broad enough to require

either supervisor's constant presence during work supervised

or his devotion thereto if only time necessary to see that

it complies with contract specifications, advise as to

details, prepare necessary sketches and drawings, etc. In

Owen v. Evans & Owen (Buuilders) Ltd., [1962] 1 Weekly Law

Reports 933 the Court of Appeal was called upon to consider

the meaning of the words "immediate supervision" under

Building (Safety, Health and Welfare) Regulations, 1948.

Whether the presence of the supervisor is necessary at all

times? It was held no. Ormerod, L.J. held that in each case

the question must be decided how much supervision is re-

quired in the circumstance of the case being considered? If

every move was fraught with danger, then clearly supervision

of the most constant kind would be demanded, and the super-

visor must be there all the time. On the other hand, there

may be certain parts of the work, if not the Whole of it,

which do not give rise to any foreseeable danger, and in

those circumstances it may well be that the intention of the

regulation is that supervision need not be so strict. Up-

john, L.J., as he then was, while agreeing held that the

real question is whether there was a supervision for the

purposes of the regulation and was that a proper or adequate

supervision? The regulations are formulated for the protec-

tion of the workman, but, at the same time, they must be

given a practical effect. The degree of supervision must

entirely depend upon the task, and it cannot mean that there

must always be a constant supervision throughout. There may

be times during a demolition failing within regulation 79(5)

where a particular operation is a dangerous one. That cannot

always be avoided, and it may be that the danger is such

that the supervisor must give a constant supervision during

that time. But there will be other times where the particu-

lar operation is a simple one, involving no danger to a

building labourer. Then the supervisor may properly go away

and perform other tasks. He may answer to the telephone or

supervise other groups. All depends on the fact of each

case.

299

In Regional Director, E.S.I.C v. South India Flour

Mills (P) Ltd. (1986) 69 FJR 77, this Court held that the

defintion of the term'employee' under s.2(9) of the Employ-

ees' State Insurance Act, 1948 is "very wide and includes

within it any person employed on any work incidental or

preliminary to or connected with the work of a factory or

establishment". Any work that is conducive to the work of

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the factory or establishment or that is necessary for the

augmentation of the work of the factory or establishment

will be incidental or preliminary to or connected within the

work of the factory or establishment. The casual employees

shall also be brought within it and held that they are

entitled to the benefits under the Act. The casual labour

employed to construct additional buildings for expansion of

the factory were held to be employees under the Act. It was

also held that the Act is a piece of social security legis-

lation enacted to provide for certain benefits to the em-

ployees in case of sickness, etc. It was further held that

the endeavour of the Court should be to interpret the provi-

sions liberally in favour of the persons for whose benefits

the enactment has been made. This Court upheld the view

taken by A.P., Karnataka and Punjab and Haryana High Courts

in A. P. State Electricity Board v. Employee's State Insur-

ance Corporation, Hyderabad, [1977] 51 FJR 171 AP; Regional

Director, Bangalore v. Davangere Cotton Mills, (1977) 2

L.L.J. 404 and E.S.I.C, Chandigarh v. Oswal Woolien Mills

Ltd., (1980) 57 F.J.R. 171 (P & H) (F.B.). that casual

employees are employees within the meaning of the term

"employee" defined in s.2(9) of the Act.

In Birohichand Sharma v. First Civil Judge, Nagpur &

Ors., [1961] 3 SCR 161 this Court considered whether the

piece rate worker is a worker within the meaning of s.2(1)

of the Factories Act, 1948. The facts found were that there

was no fixed hours. They made payment to the work done at

piece rate. It was open to the workmen to absent from work

without leave. They were not given any specific work, but

the management had "the right to reject" (emphasis supplied)

the Bidis prepared by them, if the Bidis do not come upto

the proper standard. On those facts, it was held "the right

of rejection is a supervision" connecting the work and the

employment. Accordingly it was held them to be workmen. The

same ratio was followed in D.C. Dewan Mohideen Sahib & Sons

v. The Industrial Tribunal Madras., [1964] 7 SCR 646. In

Nagpur Electric Light & Power Co. Ltd. v. Regional Director,

E.S.I.C [1967] 3 SCR Reprint 92 the employees employed

outside the factory or establishment as Cable Jointer.

Mistri, Lineman, Coolies and Vanman for inspection of lines,

digging the pits, erection, distribution and service .-line

were held to be employees within the meaning of s.2(9) (i)

of the Act,

In Kirloskar Pneumatic Co. Ltd. v. Employees' State Insur-

ance Cor-

300

poration, [1987] 70 F JR 199 a division Bench of the Bombay

High Court, speaking through my learned brother P.B. Sawant,

J., as he then was, also took the same view and held that

the employees engaged for repairs, site clearing, construc-

tion of buildings, etc. of the principal employer are em-

ployees within the meaning of s.2.(9) of the Act. In Royal

Talkies, Hvderabad & Ors. v. Employees State Insurance

Corporation, [1979] 1 SCR 80 interpreting s.2(9) (ii) of the

Act, this Court held that the Cycle Stand or Canteen are for

better amenities to the customers and improvements of busi-

ness in Cinema. The appellant, as the owner, leased out the

Cycle Stand and Canteen under instrument of leases to the

contractors, who employed their own employees to run the

Canteen and the Cycle Stand. It was held that vis-a-vis the

employees of the Contractors, the cinema owner was held to

be the principal employer. It was further held that it is

enough if the employee does some work which is ancilliary,

incidental or has relevance or linked with the job of the

establishment, amenities or facilities to the cine goers has

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connection with the work of the establishment. The employees

of the Canteen and the Cycle Stand were held to have been

employed in connection with the work of the establishment.

The case M/s P.M. Patel & Sons & Ors. v. Union of India

& Ors., [1986] 1 SCC 32 though arose under the Employees

Provident Funds and Miscellaneous Provisions Act, 1952, the

principle laid therein applies on all fours to the facts of

the case. The appellants therein were engaged in the manu-

facture and sale of Bidis. The work of rolling Bidis was

entrusted to the contractors who in turn got the work pre-

pared at workers homes, after obtaining materials either

directly from the manufacturer or through the contractors.

The contractors treated the workers as their own employees

and get their work done at the workers' premises or contrac-

tors' premises. It was contended that the workers engaged by

the contractors were not their workmen under that Act. This

Court by a Bench of three Judges negatived their contention

and held that in the context of conditions and the circum-

stances in which the home workers or manufacturer go about

their work including receiving of raw materials, rolling of

Bidis at home and delivering them to the manufacturer sub-

ject to the right of rejection, there is sufficient evidence

of the requisite "degree of control and supervision" for

establishing relationship of master and servant between the

manufacturer and the home workers. This ratio does support

the conclusion that a connecting link between the finished

product and the work of the establishment is sufficient;

neither the manner of actual performance of the duties

decisive nor the actual control or the supervision of the

work a material ingredient. Incidental connection with the

ultimate business activities of the manufacturers and right

to rejection is the con-

301

trol and would be the balancing wheel to attract the provi-

sions therein. The extended purposive construction was

applied to give effect to the social security provided under

the Employees Provident Fund ,'red Miscellaneous Provisions

Act, 1952.

In Superintendent of post Office v. P.K, Rajamma, [1977]

3SCR 678 the question was whether the extra departmental

agents serving in Post and Telegraph Department were agents

or held civil post within the meaning of Art. 31112) of the

Constitution. This Court while holding that they held civil

post attracting Art.311(2) of the Constitution approved the

passage from Halsbury's Laws of England (Hailsham edition)

of the distinction between agents, servants or independent

contractors. The contractual relation therein inter se does

not apply to the tacts of this case.

The Act does not give its own definition of the word

"supervision". Therefore, it must be construed in the con-

text the ultimate purpose the Act aims to serve and the

object behind the Act, i.e. to extend sickness benefits and

to relieve the employee from occupational hazards consistent

with the constitutional and human rights scheme. Under the

Electricity Act and the Rules, the Corporation, licencee, is

enjoined to performthe acts and duties contemplated thereun-

der to lay overhead lines, underground cables, their repairs

and maintenance thereof, etc. It authorised, under the

contract, the immediate employer to perform, on its behalf,

those acts and duties. The immediate employer would get the

work done through their employees employed for that purpose.

It is not a sporadic work but a constant and on going proc-

ess, so long as the licencee generates, transmits and sup-

plies electrical energy to the consumers of their supply

area. Had the principal employer performed those acts and

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duties through its employees, indisputably. their employees

would be covered

under the Act, though the work was got done at highways or

at places other than the factory or the establishment. When

the principal employer authorises the respondents as its

contractors under contracts the need for constant supervi-

sion is obviated relegating that function to its immediate

employers. Otherwise the need for contracts would be redun-

dant. The Corporation retained, under the contract, the

power of acceptance or rejection of the work done or super-

vision effected in maintenance of the work got done by the

immediate employer, subject to over all supervision by the

Electrical Inspector, on behalf of the State Government. The

supervision in the I,act situation is not the day to day

supervision but legal control, i.e. right to accept or

reject the work done or maintenance effected. The exercise

of right of acceptance or rejection is the supervision as

envisaged in the contract between the principal employer and

the immediate employer. It would supply the needed unifying

or connecting

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thread between the constitutional creed of social justice

i.e. social security under the Act and supervision of the

acts or duties by the principal employer vis-a-vis the

employees of the immediate employer under the contract who

ultimately perform them on behalf of the principal employer.

Undoubtedly in a bilateral contract between the corporation

and the respondents qua their rights and liabilities under

the contracts, strict interpretation of the words engrafted

therein, be of paramount relevance and call for attention as

per Contract Act. But in the context of the statutory inter-

pretation of "supervision" under the Act of the works under-

taken under the contract, the interest of the workmen or the

welfare schemes for the employees under the Act interposed

and call attention to and need primacy. In its construction

the courts must adopt contextual approach to effectuate the

statutory animation, namely, social security. The literal

interpretation would feed injustice in perpetuity denying to

the employees of sickness benefit etc. under the Act which

should be avoided, lest the purpose of the Act would be

frustrated.

The contention that the respondents being independent

contractors are not agents of the licencee, corporation, is

also devoid of force. It is seen that under ss. 15 & 20 etc.

and the relevant rules the authorisation given by the corpo-

ration through the media of the contracts enabled the re-

spondents to step into its shoes to do the acts or perform

the duties under the Electricity Act and Rules which are

ordinarily of the Corporation. The contract is an authorisa-

tion to do those acts on behalf of the principal employer.

The application of the golden rule to the word "agency"

under the Indian Contract Act between the respondents and

the corporation, perhaps, does not encompass agency in

strict sense under the Act. But public policy of the Act,

the constitutional and human right's philosophy to provide

social security to protect the health and strength of the

workers must be kept at the back of the mind to construe the

word "agent" under s.2(9) (ii) of the Act, in contra dis-

tinction with the bilateral stipulations under the contract.

In this regard public policy interposes and plays a vital

role to read into the contracts the extended meaning of

agency to bring about connecting links between the respond-

ents and the licencee corporation. Lest the contract, if

intended to deny welfare benefits to workmen, would be

opposed to public policy and would become void under s.23 of

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the Indian Contract Act. Such an intention would be avoided

by reading into the contract the extended meaning of agency

but not fiduciary. Chitty on Contrac; is, 26th Edition, in

paragraph 2502 at page 4 stated of the use of the terms

agent and agency. Some persons who describe themselves or

are described by others as agents are not really such in any

legal sense of

303

the word, but rather independent merchants, dealers, con-

sultants or intermediaries. Others may be agents in the

sense that they owe the internal duties of the agent to his

principal (mainly the fiduciary duties) .... The substance

of the matter prevails over the form and the use of the

words "agent" or "agency ", or even a denial that they are

applicable, is not conclusive that any particular type of

relationship exists. (emphasis supplied). In A.G. Guest

Anson's Law of Contract. 26th Edition, at page308 it is

stated that the application of cannons of 'public policy to

particular instances necessarily varies with the progressive

development of 'public opinion and morality, but, as Lord

Wright has said extra-judicially: Public policy like any

other branch of the common law ought to be, and I think is,

governed by the judicial use of precedents... If it is said

that rules of. public policy have to be moulded to suit new

conditions of a changing world, that is true; but the same

is true of the principles of the common law generally.'

In Prenn v. Simmonds, 1971 (1) Weekly Law Reports 1381

(H.L.) Lord Wilberforce laid the rule that in construing a

written agreement evidence of negotiations or of the par-

ties' intentions ought not to be received by the court, and

that evidence should be restricted to evidence of factual

background known to the parties at or before the date of the

contract, including evidence of the "genesis" and objective-

ly the "aim" of the transaction.

The contractors, respondents, knew at the date of the

agreements that the Corporation, as Principal employer, is

under statutory obligation to execute or keep executed the

works and keep them repaired and mainrained as an integral

activity of generation, transmission and distribution of the

electrical energy to the consumers within their area of

supply. On authorisation, the respondents executed and kept

executiug the works and repairs or kept them repaired and

the maintenance thereof effected through their employees,

which in law is on behalf of the Corporation, principal

employer. The genesis and aim of the transaction was to act

on behalf of the Corporation. The agency of the respondent

with the Corporation, thus, springs into being. The prohibi-

tion of the qualified supervisors, while in service of the

respondents, to disengage themselves with third parties in

terms of the contract was only to extract unstinted and

exclusive devotion to duty and no further. It stands as no

impediment to construe that the respondents are agents to

the Corporation as immediate employers.

Accordingly I hold that the employees working under the

respondent perform their duties in execution of the works,

repairs and maintenance thereof in connection with the

generation, transmission and distribution of

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the electrical energy by the Corporation ficensee. The

Corporation is the Principal employer The respondents imme-

diate employers execute the work etc. under the supervision

of the Corporation as its agents. Their employees, in law,

work under the supervision of the principal employer, corpo-

ration. They are covered under s.2.(9) (ii) of the Act

entitling them to the sickness benefits, etc. envisaged

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therein. and the respondents are liable to make their con-

tribution to the Employees Insurance Fund.

The appeals are accordingly allowed. The writ appeal

Nos. 16 & 438/86 and matter No.1650 of 1985 dated April 4,

1988 in the Calcutta High Court stand dismissed confirming

the order of the learned single Judge dated December 11,

1986, but in the circumstances parties are directed to bear

their own costs.

V.P.R. Appeals dis-

missed.

305