KIRLOSKAR BROTHERS LTD VS EMPLOYEES’ STATE INSURANCE

CORPORATION 1996

Subject- Labour Law II

Submitted by: Submitted to:

Harshita Kushwaha Mr. Atul S. Jaybhaye
Semester V Assistant Professor
Section C Labor Law
Roll No. 66, Id No. 21/2021/2512 HNLU, Raipur

HIDAYATULLAH NATIONAL UNIVERSITY

RAIPUR, CHHATTISGARH

Date of Submission: 7th September 2023

 TABLE OF CONTENT

Case Detail.................................................................................................................................1

Factual Background-..................................................................................................................2

Appellant’s Contentions-............................................................................................................3

State’s Contentions-...................................................................................................................3

Legal Issue-................................................................................................................................3

Legal Frame work-.....................................................................................................................4

Cases Referred-..........................................................................................................................5

Judgement-.................................................................................................................................6

Critical Analysis.........................................................................................................................6
 CASE DETAIL

Appelllant “Kirloskar Brothers Ltd.

Respondent Employees’ State Insurance Corporation

Case Type CIVIL APPEAL NO. 147 OF 1980

Date of Judgement 24th January 1996

Bench J. Ramaswamy. K.
J. Ahmad Saghir
J. G.B. Pattanaik

Equivalent Citation JT 1996 (2), 159 1996 SCALE (2)1, AIR 1996 SC 3261

Relevant Section Section 2(9), Section 39, Section 2(17), Section 2(15) of

Employees’ State Insurance Act, 1948”

1
FACTUAL BACKGROUND-

1. The appellant i.e.. Kirloskar Brothers Ltd, had established its registered office in Poona
for the sale and distribution of its products from three factories: one in Kirloskarvadi, one
in Karad in Maharashtra, and one in Deewas in Madhya Pradesh. Also, the appellant had
regional offices at Secunderabad in Andhra Pradesh and Bangaluru in Karnataka.

2. The short question in these appeals is whether the Employees’ State Insurance Act, 1948
would apply to the appellant’s regional offices in Secunderabad, Andhra Pradesh, and
Bangalore, Karnataka. To be sure, Maharashtra industries are not covered by the Act.

3. The governments of Andhra Pradesh and Karnataka have applied the provisions of
Section 2(9) of the Act to the aforementioned regional offices in Secunderabad and
Bangalore, respectively, and the respondent has issued a notice under Section 39 of the
Act requiring them to contribute their share of the workers’ health insurance in the
respective regional offices.

4. The Court determined that the appellant’s regional branches are bound by the Act’s
provisions and mandated them to fulfill their contributions. These directives have been
upheld by the High Courts of Andhra Pradesh and Karnataka.

5. When a similar question arose in the Orissa High Court, in Misc. Appeal No.187 of 1982,
by an order dated March 5, 1987, the learned single Judge held that because the
percentage of sales from Deewas at the Bhubaneswar regional office is not predominantly
higher but is only incidental, it is not covered by the Act. As a result, the appellant is not
required to contribute to the workers’ compensation insurance.

2
APPELLANT’S CONTENTIONS-
Shri R.F. Nariman, distinguished senior counsel for the appellant, advanced two arguments.

 “According to the information on file, the regional offices in Secunderabad and Bangalore
are conducting business with Deewas manufacturing items ranging from 3% to 33%. It is
not primarily the products of the Deewas factory, and the other factories are not covered
by the Act. As a result, the Orissa High Court’s reading of the law is valid, whereas that of
the High Courts of Andhra Pradesh and Karnataka is erroneous.
 It is also argued that the decision of the High Court of Orissa between the same parties
becomes final and act as res judicata. As a result, the appellant is entitled to be exempt
from the Act’s provisions.”1

STATE’S CONTENTIONS-
 “Shri V.C. Mahajan, the learned senior counsel standing for the State, maintained that
because the appellant created regional offices in several locations to market or distribute
their products, the amount of commercial transaction is irrelevant. Similarly, the major
commercial turnover of Deewas factory’s items is not a crucial aspect. The criteria
established in the Hyderabad Asbestos Cement Products Ltd. case2, namely, control by
the major employer over the sale or distribution of the appellant’s products, is relevant.
 As a result, the test established by the learned Judge of the Orissa High Court is incorrect;
the test established by the Andhra Pradesh and Karnataka High Courts, on the other hand,
is correct and must be accepted. It is further argued that the principle of res judicata
cannot be used in this case because the entire problem has already been resolved.”3

LEGAL ISSUE-
The issue to be resolved is whether the Act extends to the different regional offices.

1
Kirloskar Brothers ltd. v. Employees State Insurance Corporation, AIR 1996 SC 3261 Para [3]
2
Hyderabad Asbestos Cement products Ltd. case [1969] 24 STC 487
3
[Para4]

3
LEGAL FRAME WORK-
1. Section 2(9) of the Act defines ‘employee’ to “mean any person employed for wages in
or in connection with the work of a factory or establishment to which this Act applies and
includes any person employed for wages on any work connected with the administration
of the factory or establishment or any part, department or branch thereof or with the
purchase of raw materials for, or the distribution or sale of the products of, the
factory .......(Emphasis supplied).”4
2. ‘Occupier’ of the factory under Section 2(15) shall have the “meaning assigned to it in
the Factories Act.”5
3. ‘Principal employer’ defined in Section 2(17) means, “in a factory, the owner or
occupier of the factory and includes the managing agent of such owner or occupier, the
legal representative or a deceased owner or occupier, and where a person has been named
as the manager of the factory under the Factories Act, 1948, the person so named; in any
establishment under the control of any department of any Government in India, the
authority appointed by such Government in this behalf or where no authority is no
appointed the Head of the Department; in any other establishment, any person responsible
for the supervision and control of the establishment.”6
4. Section 39 of the Act “enjoins upon the employer to make payment of contribution and
deduction of the contribution of the employees from their wages at the rates specified in
the First Schedule to the Act and to credit the same to their account. The employees
covered under the Act in return would receive treatment for sickness, maternity, payment
for employment injury etc.”7

4
“Employees’ State Insurance Act, 1948, § 2 cl. 9, No. 34, Acts of Parliament, 1948 (India).”
5
“Employees’ State Insurance Act, 1948, § 2 cl. 15, No. 34, Acts of Parliament, 1948 (India).”
6
“Employees’ State Insurance Act, 1948, § 2 cl. 17, No. 34, Acts of Parliament, 1948 (India).”
7
“Employees’ State Insurance Act, 1948, § 39, No. 34, Acts of Parliament, 1948 (India).”

4
CASES REFERRED-
1. In “C.E.S.C. Limited v. Subhash Chandra Bose”8- The Court examined different roles
of the government in safeguarding workers' safety and well-being. It highlighted the
importance of offering healthcare to workers for disease prevention and enhancement of
overall health conditions, in alignment with human respect and the right to personal
privacy. It was argued that “medical facilities are, therefore, part of social security and life
gilt-edged security, it would yield an immediate return to the employer in increased
production and would reduce absenteeism on the grounds of sickness, etc.” As a result, it
would save important manpower and save human resources.
As per the understanding of the Act's clauses, the Act aims to shield workers from risks
related to health and work environment. Interpreting the law doesn't ensure societal
harmony or human relationships.
2. In “Consumer Education & Research Centre & Ors. v. Union of India & Ors” 9.-A
panel of three Judges from this Court ruled that “the legal principles regarding individual
identity or the philosophical concept of the right to life, as outlined in Article 21 of the
Constitution, broaden its scope to include the complete development of human character
along with robust well-being.” This state of health is a valuable asset for workers to earn
their livelihood, uphold personal dignity, and lead a life marked by respect and equality.

8
(1992) 1 SCC 441 at 463
9
(1995) 3 SCC 42

5
JUDGEMENT-
“The Act becomes applicable when a connection exists between the factory and the end
products that are promoted or dispensed through regional branches or facilities, and when the
primary employer holds sway over the workforce.” 10 The precedent set by the Orissa High
Court, which stipulates the leading business endeavor as the key factor, such as the selling or
dispersal of goods produced at the Deewas plant, is erroneous. While it is true that this court
rejected authorization in the special leave petition prompted by the Orissa High Court's
decision, it did so by referencing particular considerations.

The court concluded that “As a result, we believe that the views stated by the Andhra Pradesh
and Karnataka High Courts are legally accurate. As a result, under Section 39 read with the
first schedule to the Act, the appellant is obligated to make contribution from the
corresponding date of demand in Andhra Pradesh, and from the respective date in
Karnataka.”11

CRITICAL ANALYSIS
o Interpretation of ‘Principal Employer’- This case suggested that the principal employer
is the exclusive owner or occupier of the factory and includes the managing agent of the
owner of occupier or where a person has been named as the manager of the factory under
the Factories Act the person so named or any other person responsible for the supervision
and control of the establishment etc., is the principal employer.
Having established the regional offices at the respective places, the person who keeps
control or is responsible for the supervision of the establishment at the respective regional
offices in connection with factory whose finished products are distributed or sold, would
be the principal employer for the purpose of the Act. The person appointed for sale or
distribution of the products in the regional office is the employee covered under the Act.

o Comparative Precedent- The judgement of Orissa High Court was based on the
argument that the factories in Secunderabad and Bangalore are not manufacturing the
primary products of the Deewas factory and hence, shall not be subjected to the act.

10
[Para11]
11
[Para 12]

6
 Whereas the judgement of Karnataka and Andhra Pradesh High Courts didn’t consider the
amount of commercial transactions as irrelevant.

o Applying labour laws, including the Act, to regional offices involves a complicated
balance of policy factors. These factors are centred on larger aims like taking care of
employees, providing health insurance, safeguarding labour rights, and achieving social
security goals. Making sure that employees are well taken care of and have access to
health insurance not only supports these broader goals but also mirrors how labour laws
are adapting to changes in the way we work and the expectations of society.