M/S. HOTEL NEW NALANDA versus REGIONAL DIRECTOR, E.S.I. CORPORATION

Citation: [2009] 10 S.C.R. 995 · Decided: 15-07-2009 · Supreme Court of India · Bench: TARUN CHATTERJEE · Disposal: Appeal(s) allowed

Judgment (excerpt)

[2009] 10 S.C.R. 995 
..__,, 
MIS. HOTEL NEW NALANl)A 
A 
v. 
REGIONAL DIRECTOR, E.S.I. CORPORATION 
(Civil Appeal No. 7050 of 2002) 
JULY 15, 2009 
B 
[TARUN CHATIERJEE AND AFTAB ALAM, JJ.] 
'( 
f 
~ 
Employees State Insurance Act, 1948: s.2(12) - Factory 
- Presence of refrigerator and grinder in an establishment 
even though connected to the main power line would not in c 
itself lead to an inference that the establishment was a factory 
as defined under s.2(12) - For holding an establishment to 
be a 'factory' within the meaning of said section, it must be 
i 
established that some work or process was carried on in any 
part of the establishment that amounted to 'manufacturing D 
process' as defined under s.2(k) of the Factories Act, 1948. 
The officers of the E.S.I. Corporation conducted 
inspection in the appellant-hotel. They found that 15 
persons were working in the hotel and that a refrigerator 
E 
and electric grinder was in use. The inspection party was 
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of a view that appellant was a factory within the meaning 
of s.2(12) of Employees State Insurance Act, 1948 and 
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directed the appellant to comply with the provisions of 
the Act w.e.f. date of inspection. Aggrieved appellant filed 
F 
application u/s.75 r.w. s.77 of the Act seeking declaration 
that the establishment in question was not covered by the 
Act. 
The Insurance. Court pointed out that in the 
inspection report it was simply stated that a Kelvinator G 
__ J 
fridge and a one litre grinder were used in the 
manufacturing process. But the report was completely 
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silent in regard to the activities that were termed as 
'manufacturing process' and the purpose for which the 
995 
H 
996 
SUPREME COURT REPORTS [2009] 10 S.C.R. 
A two electrical appliances were used. The report left it 
completely for the court to presume that the cooking of 
food was the 'manufacturing process' and the two 
appliances were used in that connection. The Insurance 
Court also observed that both PW1, the Managing 
B Director and PW3, the person who was named in the 
inspection report as operating the grinder, in their 
deposition before the court denied the use and even 
presence of the two appliances in the establishment But 
neither of them was even cross-examined on that issue. 
c 
Insurance Court held that there was no evidence that 
the refrigerator and a grinder was used in any 
manufacturing process carried on in the establishment 
and so the establishment was not a factory u/s.2(12) of 
the Act and was not covered by the Act. On appeal, High 
D Court observed that the inspection report, showed the 
presence of a grinder and a refrigerator in the 
establishment and it was sufficient to hold that there was 
use of power in the manufacturing process. The review 
petition filed thereagainst was also dismissed. 
E 
F 
The question which arose for consideration in the 
present appeal was whether the findings recorded by the 
Insurance company can be said to be perverse and fit to 
be interfered with, in appeal u/s.82(2) of the Act. 
Allowing the appeal, the Court 
HELD: 1. The High Court seems to have taken the 
inspection report Exhibit 02 and the testimony of the 
Insurance Inspector DW1 as non-rebuttable, conclusive 
G pieces of evidence. Further, it took recourse to presuming 
that the establishment must have kitchen where food 
would be cooked using the two appliances running with 
the aid of power. The High Court did not even advert to 
the reasons given by the Insurance Court for not 
H 
Y· 
HOTEL NEW NALANDA v. REGIONAL DIRECTOR, 997 
E.S.I. CORPORATION 
accepting the Corporation's case on that issue. The 
A 
'--t 
Insurance Court rightly pointed out that the inspection 
report did not state the process or the work that was 
called 'the manufacturing process'. It did not even say 
that the refrigerator and the grinder were used in 
connection with cooking food in the establishment. [Para 
B 
11] [1003-G-H; 1004-A-C] 
·""! 
2. For holding an establishment to be a 'factory' 
within the meaning of section 2(12) of the Act it must first 
be established that some work or process is carried on c 
in any part of the establishment that amounts to 
'fiTlanufacturing process' as defined under section 2(k) of 
the Factories Act, 1948. In case the number of persons 
employed in the establishment is less than twenty but 
.,.,:4 
more than ten then it must further be established that the 
manufacturing process in the establishment is being 
D 
carried on with the aid o

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