C.E.S.C. LTD. ETC. versus SUBHASH CHANDRA BOSE AND ORS.

Citation: [1991] SUPP. 2 S.C.R. 267 · Decided: 15-11-1991 · Supreme Court of India · Bench: RANGANATH MISRA · Disposal: Dismissed
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Judgment (excerpt)

C.E.S.C. LTD. ETC. 
v. 
SUBHASH CHANDRA BOSE AND OR:i. 
NOVEMBER 15,1991 
A 
[RANGANATH MISRA, CJ., MADAN MOHAN 
B 
PUNCHHI AND K. RAMASWAMY, JJ.] 
Employees' State Insurance Act, 1948-Section 2 (9)-"Employee" 
-Definition--Employees of contractor JJnder works contract-Whether 
covered under-Right of principal employer to reject or accept work done 
by contractor through his employees whether includes "supervision". 
C 
Employees' State .Insurance Act, 1948-0bject and purpose of 
Interpretation of Statutes-Constitution of India, 1950 (Preamble, 
Chapter JV) and Employees' State Insurance Act, 1948 [Section 2(9)]-Con-
strnction of-Strict interpretation when leads to unjust situation, duty of D 
Judges, indicated. 
Constitution of India, 1950-Artic/es 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. 
E 
Indian Contract Act, 1872-Sections 182, 184, 23-"Agent", 
"Principal "-Meaning-'Agent' u/s. 2(9) (ii) of the Employees' State In-
surance Act, 1948-Constrnction-Method indicated-Contractor under 
F 
a works contract whether agent of Corporation. 
The appellant-Corporation engaged the respondents-contrac-
tors to carry out work of excavation, conversion of over-head elec-
tric lines and laying of underground cables under public roads and 
for repair and maintenance. 
G 
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 respondents-contractors, 
would come under the provisions of Section 2(9) of the Employees' 
St\\te Insurance Act, 1948. 
H 
267 
268 
SUPREME COURT REPORTS 
[1991] SUPP. 2 S.C.R. 
A 
The appellant directed the representative body of •he 
contractorir--respondents' Association--to comply with the provi-
sions of the Act immediately, failing which a lumpsum of 7% woulrt 
be deducted from their bills. When the respondents' Association 
refused to carry out such obligation, the appellant started to deduct 
the E.S.I. contribution amount at the rate of 10% from their bills 
B 
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 that 
for carrying out their contracts, the respondents were not super-
vised by the appellant, the principal employer and they were carry-
C 
ing out the allotted work under the contracts of sites outside the 
factory establishment of the appellant and that the employees of the 
respondents did not come within the definition of the term, 'em-
ployee' under section 2(9) of the Act. 
On 23.3.1984, the Single Ju~ge of the High Court passed an 
D 
interim order permitting the appellant to r:_espond to the notice is-
sued by the E.S.I.C. and staying the realisation of the E.S.I. contri-
bution from the respondent-contradors. 
On 30.3.1985, under section 45-A of the Act, the Regional Di-
rector, E.S.I.C. held that the appellant was liable to pay the E.S.I. 
E 
contribution in respect of the employees of its contractors and di-
rected to pay the same. 
F 
G 
H 
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 together, dis-
missed 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 specia• Jeave 
were made to this Court posing the question--whether on the facts, 
the right of the principal employer to reject or accept ~ork on 
C.E.S.C. v. SUBHASH BOSE 
269 
completio~, on scrutinizing. compliance with job requirements,· as 
A 
accomplished by a contractor, the immediate employer, 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
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