The Joint Director, Sub-Regional Office, Employees State Insurance Corporation & Anr. vs M/s. Central India Engineers

Heard Mr. B.P. Maldhure, learned counsel appearing for the appellants and Mr. H.V. Thakur, learned counsel appearing for the respondent at length.

By the present appeal under Section 82 (2) of the Employees’ State Insurance Act, 1948 (for short, “the ESI Act”), the appellants – ESI Authority take exception to the judgment and order dated 13.07.2010 passed in E.S.I. Case No.3/2005 by the learned Employees Insurance Court, Chandrapur, thereby held that, the provisions of the ESI Act, 1948, are not applicable to the respondent/employee, hence, the respondent is not liable to pay contribution under the provisions of the said Act.

In short, the facts giving rise to the present appeal are that, on 25.03.2005, the appellants through its Officer, inspected the Industrial Unit of the respondent and prepared a report. The Officer of the appellant reported he inspected industrial establishment of the Respondent and examined the Muster-cum-Wage Register and found that the two industrial units i.e. (i) M/s.Powertech Engineers and (ii) M/s. Central India Engineers are running at Plot Nos.E-54 and E-55, MIDC, Chandrapur. Both Industrial Units are co-related with each other and carrying manufacturing activities jointly. Further, both the Industrial Units are clubbed jointly and running the same under the one and same management. Both the Industrial Units engaged more than 10 employees. Therefore, it is necessary on part of the respondent-Industrial Unit to pay contribution under the ESI Act. Accordingly, the order was communicated to the respondent-Unit, which was assailed before the ESI Court, under Sections 75 read with Sec.77 of the Act. On 13.07.2010, the learned ESI Court has passed the impugned order holding that, both the Industrial Units i.e. i.e. M/s. Powertech Engineers and M/s. Central India Engineers, are separate and does not have functional integrality.

On 10.12.2025, this Court framed the following substantial question of law:

Mr. Maldhure, the learned counsel appearing for the appellants submits that, the appellants/ESI filed their written statement and specifically pleaded that, Shri Jayant Ganpat Sawargaonkar is a partner of the M/s. Central India Engineers, with effect from 01.04.1992 and that, he has also holding another unit, M/s.Powertech Engineers since March 1997. In the month of April 1997, Shri Jayant Ganpat Sawargaonkar replaced his wife as a partner. During the inspection of both the industrial units i.e. M/s. Powertech Engineers and M/s. Central India Engineers, the Inspector of ESI found that, though two industrial units are running on two industrial plots but some employees are common in both the industrial units. The common muster register in respect of workers is maintained. As per Muster-Register total 12 employees are working with the Industrial Unit of the respondent. Further common family members are running common Industrial units, hence, it is necessary on part of the Respondent to pay contribution.

It is further canvassed on behalf of the appellant that, Shri Santoshkumar Rajendra Panjiyara filed evidence-affidavit at Exhibit-40 and categorically deposed in tune with the inspection report. Therefore, the appellants-ESI have proved that, the respondent industrial unit is liable to pay contribution under the provisions of ESI Act. However, learned Trial Court passed the impugned judgment and order holding that, the provisions of ESI Act are not applicable to the respondent unit.

To buttress this submission, the learned counsel appearing for the appellants placed reliance on the case of Associated Cement Cos. Vs. Their Workmen, AIR 1960 Supreme Court 56, wherein the Hon’ble Supreme Court held as under:-

He further relied on the judgment dated 18.09.2019 passed by this Court in First Appeal (ESI) No.347/2006 (M/s. New Power Supply Vs. The Deputy Regional Director and another), wherein it has been held that, “two businesses were carried on one and same plot No.S-42/1. The electric meter was common for both the units. So also the partners are common of both the units. Under these circumstances, it has been held that, employees of both units were common, hence, there is functional unit and common management”.

Per contra, the learned counsel appearing for the respondent submitted that, the appellant ESI Authority specifically claimed about existence of two industrial units i.e. M/s. Powertech Engineers and M/s. Central India Engineers both are having functional integrality, however, both the Industrial units are standing on two separate plots and there is no common proximity and common manufacturing between both units. The employees of the two units are distinct and separate. Both the Industrial Units are maintaining Separate Muster Rolls for their employees. The employees of both the Units works with their respective establishments independently. The employees of both the Units are drawing separate wages/salaries. Therefore, merely because one Security Guard is functioning to monitor security of both the units, it is not sufficient to held that there is functional integrality between the two Industrial Units despite fact that, both the units are engaged in common manufacturing activities. Therefore, considering the evidence available on record, the learned Trial Court under ESI Act passed the impugned judgment and order and held that the appellants - ESI Authority failed to prove inter-link between the two industrial establishments so as to constitute a single unit. Hence, he prayed for dismissal of the appeal.

In support of his submissions, the learned counsel appearing for the respondent has placed reliance on the case of PIEM Hotels Ltd. and another Vs. Regional Provident Fund Commissioner, reported in 2011(2) Mh.L.J.763, wherein this Court held that, the two industrial units as under:-

Having regard to rival submissions canvassed on behalf of both the side, I have gone through the record. On perusal of the record and on re-appreciation of the evidence, it prima facie appears that, the two units namely, M/s.Powertech Engineers and M/s. Central India Engineers, are running on two different industrial plots bearing Nos.E-54 and E-55. Both the plots are possessed by husband and wife of the Lakhe family. The details of partners, commencement of the industrial establishments, and employees working with both units are as under:-

As per the Inspection Report, two employees namely, Ahfaz Khan and Yogesh Sorte, are working in the administration of both the units. One Shri Ramchandra Badge, is working as a Security Guard for both the units. The Appellant ESI Authority fail to bring any documentary evidence on record to show that, Mr. Ahfaz Khan and Yogesh Sorte are commonly working in the administration of M/s. Powertech Engineers and M/s. Central India Engineers. Needless to say that, merely because one Security Guard is deployed for security of both the units, it does not constitute any functional integrality between the two units. Nonetheless, merely because the two units are engaged in manufacturing of one and same product, it cannot automatically proves that, there is functional integrality between the two establishments. In case of Associated Cement Cos. Vs. Their Workmen and in PIEM Hotels Ltd. And another Vs. Regional Provident Fund Commissioner (both cited supra), if one unit is dependent upon the supply of a product of another unit and there could have been common management, supervision and control over the units, including finance and employment, unity of labour and conditions of service of workmen and functional integrality, the same can be connected.

In the case in hand, it prima facie proves that, the industrial unit run by the respondent is an independent than the industrial unit of M/s.Powertech Engineers. The partners and employees of both the units are independent. Merely because two sets of family members are running the businesses under two identities, it does not automatically prove that, the two establishments have functional integrality. The learned Trial Court, upon considering the evidence available on record has rightly held that, the provisions of the Employees’ State Insurance Act, 1948 are not applicable to the respondent-unit, and consequently, the respondent is not liable to pay contribution thereunder. Therefore, I do not find that the impugned judgment and order is perverse, illegal, bad in law and no any grounds have been set out to interfere with the said findings.

Accordingly, the appeal stands dismissed.