Holding

Workers employed by contractors are deemed employees of the principal employer where the work is performed under the principal's effective supervision, making the contractors' workers covered by Section 2(9)(ii) of the Employees' State Insurance Act.

Summary

The Calcutta Electricity Supply Corporation (C.E.S.C.) engaged private contractors to excavate, lay and maintain electric lines. The Employees' State Insurance Corporation (E.S.I.C.) directed C.E.S.C. to deduct E.S.I. contributions for the contractors' workers, asserting they were "employees" under Section 2(9) of the Employees' State Insurance Act, 1948. The contractors challenged the deductions, arguing that the work was performed under their own supervision and outside C.E.S.C.'s premises, so the workers were not covered by the Act. The High Court held that the contractors were agents of C.E.S.C. and that supervision by the principal employer existed, making the workers employees. The Division Bench reversed this view. The Supreme Court, interpreting "supervision" and "agent" purposively and in light of constitutional social‑security goals, held that the contractors' work was performed under the effective supervision of C.E.S.C., making the workers employees of the principal employer and liable for E.S.I. contributions. The appeals were allowed, confirming the High Court’s decision and rejecting the contractors' claim.

Issues considered

The meaning of "supervision" under Section 2(9)(ii) of the Employees' State Insurance Act, 1948.
Whether the contractors acted as agents of the principal employer (C.E.S.C.) for the purposes of the Act.
Whether the workers employed by the contractors fall within the definition of "employee" under the Act.
The appropriate method of statutory interpretation in social‑security legislation.

Legislation cited

Constitution of Indias. Article 21, s. Article 39
Employees' State Insurance Act, 1948s. 2(9), s. 45-A
Indian Contract Act, 1872s. 182, s. 184, s. 23
Indian Electricity Act, 1910s. 12, s. 15, s. 20, s. 3
Indian Electricity Rules, 1956s. Rule 36, s. Rule 45, s. Rule 51, s. Rule 64

Subjects

Employees' State InsuranceSupervisionPrincipal employerContractorAgency lawStatutory interpretationSocial securityConstitutional lawLabor law

Judgment

C.E.S.C. LTD. ETC. A
v.
SUBHASH CHANDRA BOSE AND OR:i.

NOVEMBER 15,1991

[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 ofprincipal 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
E
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 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.

The appellant challenged that order under Article 226 of the
Constitution of India by filing another writ petition.

F 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 -
G 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,
H 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 in error in
giving a restricted meaning to the word, 'supervision', occurring in B
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. C

1. The legislative intention should have been brought out more
clearly by undertaking appropriatelegislation once this Court took
a different view. The legislation is beneficial and if by interpreta-
tion put by the Court the intention is not properly brought out it
b_ecomes a matter for the legislature to attend to. [278 E) D

Per M.M. Punchhi. J.

1. In whatever manner the word 'employee' under Section
2(9) be construed, liberally or restrictidly, the construction cannot
go to the extent of ruling out the function and role of the immediate E
employer or obliterating the distance between the principal em• ·
ployer 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
princi~I employer to the employee, directly employed under him. F
If the work by the employee is conducted under the immediate gaze
or overseeing of the priincipal employer, or his agent, subject to
other conditions as envisaged being fulfilled, he would be an em-
ployee for the purpose of section 2(9). [284 B~DJ

2. In the ordinary dictional sense "to supervise" means to G
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 -t'.onstrued so broadly to be the final act of H
270 SUPREME COURT REPORTS (1991) SUPP.2 S.C.R.

A acceptance or rejection of work, nor so narrowly so as to be super-
vision at all times and at each and every step of the work. A harmo-
nious 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
B of the principal employer, or his agent, where he can be watched
secretly, accidently, or occasionally, while the work is in progress,
so Ifs to scrutinise the quality thereof and to detect faults therein, as
also put to timely remedial measures by directions given, finally
leading to the satisfactory·completion and acceptance of the work,
that would be supervision for the purposes of Section 2(9) of the
c 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
D d~aling with third persons, the person for whom such act is done, or
is. so represe~ted is called the "principal". 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. [288 E]
E
5. 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 con-
tractor with that of the principal (C.E.S.C.) by undertaking to pro-
vide adequate supervision for the purposes of the Act, on behalf of
F the C.E.S.C. The agreement no doubt provides that the electrical
contractor would provide adequate supervision while carrying on
with the work, th·e purpose dominant is to safeguard obtaining qual-
ity work and safety safeguards and fo conform to the provisions of
the Electricity Supply Act. [288 E-G]

G. 6. The creation or deduction of principal-agent. relationship
throws one ·towards the statutory scheme of keeping distinct the
concept of the principal and immediate employer, because of di-
verse and distinct roles. [285 DJ

1; The electrical contractor is obliged to provide competent
H supervision while carrying out the work. The electrical contractor
C.E.S.C. v. SUBHASH BOSE 271

is othtirwise a licensee under the Indian Electricity Act and the A
Rules made thereunder. [286 CJ

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 em- B
ployer. If such a relationship is permitted to be established, it would,
not only .obliterate the distinction between the two, but would vio-
late the provisions of the Act as well as the contractual principle
that a contractor and a contractee cannot be the same person. (285
. B-CJ
9. Checking of work after the same is completed and supervi-
c
sion of work while in progress is not the same. These have different
perceptions. Checking of work on its completion is an activity, the
purpose of which is to finally accept or reject the work, on the
touchstone of job specifications. Thereafter if accepted, it has to be
paid on the acceptance of the work. This step by no means is super-
D
vision 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 certificates
of competency for which a register of supervision was required un-
der the licence to be maintained. (289 CJ E
11. Under the contracts, the electrical contractors cannot in
one breath be termed as agents of the C.E.S.C. undertaking super-
vision 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] F
12. Even if, the terms of the contract and the terms and condi-
tions 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 G
C.E.S.C. in favour of the electrical contractor appointing him to
supervise 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 contractor. [288 C-D]

13. On the terms of the contract read with or without the H
terms of the licence, no such agency, factually or legally, stood ere-
272 SUPREME COURT REPORTS (1991] SUPP. 2 S.C.R.

A ated on behalf of the C.E.S.C. in favour of the electrical contrac- f
tors; and none could be, as that would violate the statutory scheme l
of distinction well marked under Section 2(9) of the Act. The super-
vision taken was to fulfil a contractual obligation simplicitor. [289
D)
B 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)

MG. Beedi Works v. Union of India, AIR 1974 SC 1952; Royal
C Talkies v. E.S.lC., [1979) 1SCR80; Regional Director, E.S.lC., Trichur
v. Ramanuja Match Industries, (1985) 2 SCR 119; Mis. P.M. Patel &
Sons & Others v.. Union of India & Ors. [1986) 1 SCC 32; The Superin-
tendent of Post Offices etc.etc., v. P.K. Rajamma etc.etc., AIR 1977 SC
1677, referred to.

D Halsbury's Laws of England (Hailsham Edition) Vol-I at page
193, referred to.

Per K. Ramaswamy, J. (Dissenting)

1. The Employees' State Insurance Act, 1948 seeks to serve
E the twin objects namely, social security, i.e., medical benefits in
case of sickness, maternity and employment injury and other mat-
ters r-elating thereto and to augment the efficient performance of
the duty. [289 H-290 A)

2. Section 2(9) of the Act eacompasses employees employed
F for wages in or in connection with the work of a factory or estab-
lishment to which the Act applies (i) who are directly employed by
the principal employer or (ii) employed by or through "an immedi-
ate employer"; 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. [293 B-C]
G
3. Clause 2(9)(ii) (applicable to the facts on hand) attracts a
person employed by or through an iR1mediate employer as an em-
ployee of the principal employer provided the following conditions
are satisfied, namely, (1) the immediate employer employs an em-
ployee on the premises of the factory or establishment of the prin-
H cipal employer; (2) or "under the supervision of the principal em-
ployer", (3) "his agent" on work which is ordinarily part of the
C.E.S.C. v. SUBHASH BOSE 273

work of the factory or establishment or which is preliminary to the A
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 socia .. justice is a· fundamental right. Right to livelihood springs B
from the right to life guaranteed 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 lib-
erty available for all. Right to human dignity, development of per-
sonality, social protection, right to rest and leisure as fundamental C
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 political 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] D

S. The Universal Declaration of Human Rights, International
Conventions of Economic, 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 secu-
rity, right to physical or mental health, protettion of their families E
as integral part of the right to life. Our Constitution in the Pream-
ble 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 BJ

6. The term 'health' implies more than an absence of sick- F
ness. Medical care and health facilities not only project against sickness
but also ensures stable man power for economic development. Fa-
cilities of health and mcdic,?I care generate devotion and dedication
to give the workers' best, physically as well as mentally in produc-
tivity. lt enables the worker to enjoy the fruit of his lahour, to keep
him physically fit and mentally alert for leading a successful, eco- G
nomic, social and cultural life. The medical facilities, arc therefore,
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, mental and social well being. and not merely the
absence of disease or infirmity. (294 E-GI H
jl

274 SUPREME COURT REPORTS (1991] SUPP. 2 S.C.R.

A 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 by many social and economh
factors. Just and favourable condition of work implies to ensure
safe and healthy working conditions to the workmen. The periodical
medical treatment invigorates the healtfl: of the workmen and har-
B 'esses their buma.n resources. Prevention of occupational disabili-
ties generates devotion and dedication to duty and enthuse the workmen
to render efficient service which is a valuable asset for greater pro-
ductivity to the employer and national production to the State. (294
H - 295 B]
C 8.The Employees' State Insurance Act aims at relieving the
employees from· health and occupational hazards. The interpreta-
tion calls for in this case is of the meaning of the meanings 'supervi- '
.
sion' and 'agent' in s.2(9)(ii) of the Act. The legal interpretation is
not an activity sui generis. The purpose of the enactment is the
touch-stone of interpretation and every effort would be to give ef-
D feet to it. The judge acts as a vehicle of communication between the
authors and the recipients. The end result is to promote rule .-(law
and to enliven social order and humane relations. (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
E 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 rem-
edy 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
F interpretation and may be enlarged or restr!cted in order to harmo-
nise 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 consti.tutional scheme
and to alongate the legislative purpose, harmonising the individual
G interest with the community good so as to effectuate social transfor-
mation 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 dur-
ing work supervised or his devotion thereto if only time necessary
to see that it complies. with contract specifications, advise as to
H details, prepare necessary sketches and drawings," etc. (298 C]
C.E.S.C. v. SUBHASH BOSE 275

11. Th~ Employees' State Insurance Act does no~ give its own A
definition of the word "supervision". Therefore, it must be con-
strued in the ,,con text the ultimate purpose the Act aims to serve and
the object behind the Act, i.e. to extend sickr;ess 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 perform the B
acts and duties contemplated thereunder to lay overhead lines, un.,
derground cables, their repairs and maintenance there of, etc. lt
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 pur•
pose. It is not a sporadic work but a constant and an ongoing proc- C
ess, so long as the licencee generates, transmits and supplies electri-
cal energy to the consumers of their supply area. Had the principal
employer performed those acts an·d 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 author- D
ises the respondents as its contractors under contracts the need for
constant supervision is obviated relegating that function to its im-
mediate employers. Otherwise the need for contracts would be re-
dundant. 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 immediate employer, E
subject to overall supervision by the Electrical Inspector, on behalf
of the State Government. The supervision in the fact 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 em- F
ployer. It would supply the needed unifying or connecting 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 corpora- G
tion 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.
(301 C-302 BJ ·.
12. In the context of the statutory interpretation of "supervi- H
sion" under the Act of the works undertaken under the contract, the
276 SUPREME COURT REPORTS (1991) SUPP.2 S.C.R.

A 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 effec-
tuate the statutory animation, namely, social security. The literal
interpretation would feed injustice in perpetuity denying to the em-
ployees of sickness benefit etc. under the Act, which would be avoided,
B 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 respondents and the
corporation, perhaps, does not encompass agency in strict sense un-
der the Act. But public policy of the Act, the constitutional and
c 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
contradistinction with the bilateral stipulations under the contract.
In this regard public policy interposes and plays a vital role to read
hit.o the contracts the extended meaning of agency to bring about
·o connecting links between the respondents and the licencee corpora-
tion. Lest the contract, if intended to deny welfare benefits to work-
men, 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]
E
14. The contractors, respondents, knew t~t the date of the agree-
ments that the Corporation, as principal employer, is under statu-
tory obligation to execute or keep executed the works and keep
them repaired and maintained as an integral activity of generation,
transmission and distribution of the electrical energy to. the. con-
F
sumers within their area of supply. On authorisation, the respond-
ents execute and keep executed the works and. repairs or kept them
repaired and the maintenance thereof effected through their em-
ployees, which in law is on behalf of the Corporation, principal
employer. The genesis and aim of the transaction was to act on
G behalf of the Corporation. The agency of the respondent with the
Corporation, thus, springs into being. The prohibition of the quali-
fied supervisors, while in service of the respondents, to disengage
themselves with t~ird 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 the respondents are agen_ts to
H the Corporation as immediate employers. (303 F-H]
C.E.S.C. v. SUBHASH BOSE 277

15. The employees working under the respondents perform their A
duties in 'execution of the works, repairs and maintenance thereof in
connection with the generation, transmission and distribution of the
electrical energy by the Corporation licensee. The Corporation is
the principal employer. The respondents' immediate employers ex-
ecute the work etc. under the supervision of the Corporation as its
agents. Their employees, in law, work un~er the supervision of the B
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 Narayan Chopra & Ors., c
(1962) 3 SCR 146 at p. 156; M Pentiah & Ors. v. 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
(Builders) Ltd., 1962(1) Weekly Law Reports 933; Regional Director,
E.S.I.C. v. South India Flour Mills (P) Ltd., 1986 (69) F.J.R. 77; A.P.State D
·Electricity Board v. E.S.I.C., Hyderabad, (1977) 51 FJR 171(A.P.); Re-
gional Director, E.S.I.C., Bangalore v. Davangere Cotton Mills, (1977) 2
LLJ 404; E.S.I.C. Chandigarh v. Oswal Woollen Mills Ltd., (1980] 57
FJR 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 & E
Power Co. Ltd. v. Regional Director E.S.l.C., [1967) 3 SCR Reprint 92;
Kir/oskar, Pneumatic 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; MIS.
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. F

World Labour Report - 2, at Chapter 9 (Safety and Health); Law-
yer Oct. 1987 Page 5; Report of the Committee on Labour Welfare, 1969
in paragra.ph 5.77 of Chapter S; Webster Comprehensive Dictionary
{International Edition) at page 1260, in Vol, II; Corpus Juris Secundum,
Vol. 83 at page 900; The Words and Phrases. Permanent Edition, Vol.
G
40A; Halsbury 's Laws of England (Hailsham Edition); Chitty on Con-
tracts. 26th Edition, paragraph 2502 at page 4, A.G.Guest: Alison::;
Law of Contract, 26th Edition, at page 308 - referred to.
278 SUPREME COURT REPORTS (1991) SUPP.2 S.C.R.

A CIVIL APPELLATE JURISDICTION: Civil Appeal No. 3197-98
of 1988.

From the Judgment and Order dated 4.4.1988 of the Calcutta High
Court in Appeal Nos. 16 and 438 of 1986.

B P.P. Rao, M.K. Ramamurthy, S.S. Ray, Raj Kumar Gupta, V.J. Francis,
N.M. Popli, S.K. Nandy, P.K. Dutta and A.D. Sikri for the appearing
parties.

The Judgment of the Court was delivered by

C RANGANATH MISRA, CJ. I have had the :\dvantage of perusing
the draft judgments prepared by my learned brethren Purichhi and
Ramaswamy, JJ. While Justice Punchhi has gone by the literal construc-
tion 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 ~onstruction different from the reported decision of this
D Court.

I agree with Justice Punchhi that the appeals should be dismissed
and the judgment of the Divi~joh)J!lnch'should be sustained. At the same
time, I would like to add that the fegisiaiive intention should have been
brought out more clearly by undertaking appropriate legislation once this
E 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
legislature to attend to.

PUNCHHI, J. The sole question which falls for determination in
F these appeals is, whether on the facts found, the right of the Principal
employer to reject or accept work on completion, on scrutinizing compli-
ance with job requirements, as accomplished by a contractor, the immedi-
ate employer, through his employees, is in itself an effective and mean-
ingful "supervision" as envisaged under Section 2(9) of the Employees'
State Insurance Act, 19•!8 (for short the Act)? The said provision, as it
G stood at the relevant time, is set out below, as is relevant for our purpose:-

"2(9) - 'employee' means any person employed for wages
1
in or in connection with the work of a factory or establishment
to which this Act applies and - I
(i) who is directly employed by the principal employer on
H
any work of, or incidental or preliminary to or connected )

!
C.E.S.C. v. SUBHASH BOSE [PUNCHHI, J. J 279

with the work of, the factory or establishment, whether A
such work is done by the employee in the factory or
establishment or elsewhere; or
(ii) who is employed by or through an immediate employer
on the premises of the factory or establishment or under
the superyision of the principal employer or his agent on
work which is ordinarily part of the work of the factory or
B
establishment or which is preliminary to the work c<d'ried
on in or incidental to the purpose of the factory or estab-
lishment; or
(iii) whose services are temporarily lent or let on hire to the
principal employer by the person with whom the person C
whose ser\!ices 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 various contractors to carry out work
of excavation, conversion of overhead electric lines and laying of under- D
ground cables under public roads, as well as for repair and maintenance of
the aforesaid works. Subhash Chandra Bose & some others, the private
respondents herein, were given sµch 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 Corpo-
E
ration (for short 'E.S.l.C. ') by means of communication dated 26 August,
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 mentioned 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
F
are parties respondents herein, requiring them to comply with the provi-
sions of the said Act immediately or else it will deduct a lumpsum of 7%
from their bills. The Association questioned the move and strongly refuted
such obligation. After ·indulging in some correspondence on the subject,
the C.E.S.C. started making deductions from their bills on account of
contribution to the Employees State Insurance Fund on and from 1984 and G
continued deducting till 1985 at the rate of I 0%. Some more correspond-
ence 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 a8 also the C.E.S.C. as H
280 SUPREME COURT REPORTS (1991) SUPP.2 S.C.R.

A 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 establishment of the C.E.S.C.
Claiming that there employees did not come within the definition of the
B 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 entertained by the High Court and was lteard on affidavits. The
dispute necessarily centred ro\llld as to whether the C.E.S.C. exercised
any supervision while the contracts were being executed, and as to whether
c the terms thereof, assuming that. they were faithfully 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.l.C. and avail of the opportunity of
D 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.l.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
accow1t of contribution to the Employees State Insurance in resp~ct of
employees of its contractors and asked it to pay the same within the time
E allotted. This order of the Regional Director of the E.S.l.C. gave legiti-
macy to the deductions from the bills of the private electrical contractors
already made by the C.E.S.C. But since it was otherwise aggrieved of the
foisting of the obligation, it moved another writ petition of its own u.nder
Article 226 of the Constitution against the E.S.l.C. and others claiming
that it was not obliged to demand contributions on account of insurance in
F respect of the employees of the electrical contractors.

These two writ petitions were heard together and were dismissed by
a learned S!.ngle Judge of the High Court O'l January 11, 1986. The learned
Single Judg~ .construed t~ .'·~oniracts between the electrical contractors
and the c.'s.E.C., whereuncer the contractors were obliged to supervise on
G their own the work undertaken, so as to held that in the facts and circum-
stances of the case the ultimate supervision was that of the E.S.I.C.,and
hence the Act was applicable. The learned Single Judge also took the
view that the Act being a beneficial piece of legislation, enacted for the
f>rotection and benefit. of workers, required liberal interepretation, as was
held by this Court in MG. Beedi Works v. Union of India. AIR 1974 SC
H 1952, and then proceeded to hold that the contractors as supervj~ors were
I
in the nature of agents of the C.E.S.C., the principal employer. The learned
,(
!
C.E.S.C. v. SUBHASH BOSE [PUNCHHI, J.] 281

Single Judge also took the view that since ultimate energising of the A
transmission lines was invariably effected by the C.E.S.C. after proper
checks were effected for laying of cables or other maintena1'ce 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 speci-
fied that work was to be done under the supervision of the electrical
contractor the C.E.S.C. retained the ultimate rower or supervision and in B
fact did supervise the work executed by the contractors. It is then that the
learned Single Judge abruptly come to the conclusion that the principal
employer could not escape the liability for the works of his contractors, as
the latter was acting as the agent of the principal, and in sense confinned
the view of the Regional Director of the E.S.l.C.
c
Two appeals were filed against the dismissal of the two writ peti-
tions before the Division Bench of the High Court who, after re-consider-
ing 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.l.C. drew
D

deductions of facts in his impugned order dated March 30, 1985 in this
manner:

"The job which is perfonned by these employees engaged through
the contractors, was principally maintenance and distribution E
of electricity generated by the C.E.S.C. and also consumers'
service. It was conceded during the course of hearing that after
the work entrusted 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 tlie
C.E.S.C. It cannot therefore be argued that ~erely because F
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 therefore with the argwnent 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 G
fact that C.E.S. C. was executing its own job through tire agency
<?f the contractors engaged by them. The C.E.S.C. 's contention
that they have acted upon the guidelines as provided in the
letter dated 26.8. 7 5 does not hold good as the letter datcid ·
1
26.8.75, Annexure E, issued by the Regional Director of E.S .I.
Corporation. does not hold good as the said \etter only con- H
282 SUPREME COURT REPORTS [1991] SUPP. 2 S.C.R.

A tained broad guidelines regarding provisions of the E.S.I. Act
and the truth has to be ascertained from the realities of the
situation". [underlining ours]
In place thereof the Division Bench of the High Court taking stock
of the admitted facts opined as follows:
B "There is no dispute that respondent no.4 (ESIC) is the princi-
pal employer in respect of the said work and that the appel-
lants (electrical contractors) are the immediate employers of
the said employees in connection with the said work. There is
no dispute that the empioyees of the appellants are not directly
employed by the respondent no.4 (ESIC). There is also no
c dispute that the employees of the appellants (electrical con-
tractors) do not carry out the aforesaid work either in the premises
or the factory or establishment of respondent no. 4 (E.S.l.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 ordinarily part of the work of the respondent no.4
D (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 re-
spondent no.4 (E.S.I.C.) or its agents." [bracketing ours]
Commenting on the impugned order of the Regional Director of the
E E.S.I.C. da.ted March 30, 1985 afore-extracted, the Division Bench ob-
served as follows:

"It has not been found by the respondent no.2 (Regional Direc-
tor) as a fact that in carrying out the aforesaid work the em-
ployees of the appellants are under the supervision of the re-
.F spondent no.4 or its agents. All that has been found is that
after the works which are entrusted to the appellants are com-
pleted, 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 re-
spondent 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 supervision 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
H the person who ordered the same to be done so that the work·

-
C.E.S.C. v. SUBHASH BOSE [PUNCHHI, J.) 283

can be finally accepted and payment made therefor. After the A
work is completed, a further checking cannot mean or imply
any or 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 acceptance of work from the purview of that word. Strong B
reliance was placed on a decision of this Court in Royal Talkies v. E. S.I. C.,
[1979] l 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
c
belong to the employees and are intended to embrace as extensive a circle
. as is feasible, the social orientation, protective purpose and human cover-
age of the Act were important considerations in the statutory construction,
more weighty than mere logomachy or grammatical nicety. Reliance also
was placed on Regional Director, E.S.I. C., Trichur v. Ramanuja Match
D
Industries, [1985] 2 SCR 119 in which it was ruled that beneficial legisla-
tion 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 univer-
sal converage, the negatives in the Act, one of them being that the Act did
E
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 employee as he would be a person who would not answer
the definition.

A judgment of this Court in Mis. P.M. Patel & Sons & Others v. F
Union of India & Ors., [1986] l SCC 32 rendered in the context of the
Employees Provident Fund and Miscellaneous Provisions Act, 1952 was
pressed into service on behalf of the appellants to contend that when
rolled beedis, prepared by the worker elsewhere, were placed for accept-
ance or rejection, conforming to the standards envisaged' by the manufac- ,
· turers, that in itself was held constituting an effective decree of supervi- G
sion and control. The benefit of the said Act was extended to beedi work-
ers employed through contractors and the quesffon ·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 connec-
tion with work of the establishment, which words ~ere held wide enough H
284 SUPREME COURT, REPORTS (1991) SUPP.2 S.C.R.

A to include work performed elsewhere than· the factory itself, including the
dwelling house of a home worker, as also that the manufacturing opera-
tion, simple as it was, performed by illiterate workers, young and old,

.
subjecting to rejection and acceptance, was by itself an effective degree of
· supervision and control, establishing the relationship of master and serv-
ant.
.

B
In whatever manner the word 'employee' under Section 2(9) be
construed, liberally or restrictedly, the construction cannot go to the ex-
tent of ruling out the function and role of the immediate employer or
obliterating the distance between the principal employer and the immedi-
ate employer. In some situations he is the cut-off. He is the one who
C 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, di-
rectly 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
D be an employee for the purpose of section 2(9). Thus besides the question
afore-posed with regard to supervision of the principal employer the sub-
sidiary question is whether instantly the contractual supervision exercised
by the immediate employer (the electrical contractors) over his employee
was exercised, on the terms of the contract, towards fulfilling a self-
obligation or in discharge of duty as an agent of the principal employer.
E
P.M Patel's case can also be no help to interpret the word 'supervi-
sion' herein. The word as such is not found employed in Section 2(f) 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
F having regard to the nature of work ;>erformed. 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 construc-
tion. 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
G immediately direct a corrective and tender advice. In the textual sense
'supervision' of the principal employer or his agent is ·on 'work' at tl}e
places envisaged and the word 'work' can nei.ther be construed so b_roadly
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 carrry out the purpose of the
H Act, which would mean moderating the two extremes. When the
C.E.S.C. v. SUBHASH BOSE [PUNCHHI, J.] 285

employeefis put to work under the eye and gaze of the principal employer, A
or his agent, where he can be watched secretly, accidently, or occasion-
ally, 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 satisfactory compl¢tion and accept-
ance of the work, that would in our\1ie'o/ be supervision fo~ the purposes
of Section 2(9) of the Act. It is the"'consistency of :vigil, the proverbial 'a B
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, in-
stantly, the electrical contractors, can by statutorily compulsion never be
the agent of the principal employer. If such a relationship is permitted to C
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.l.C. claims establishment of such agency on the terms of the
contract, a relationship express or implied. But, as is evident; the creatfon
or deduction of such relationship throws one towards the statutory scherile D
of keeping distinct the concept of the principle and immediate employer,
because of diverse and distinct roles. The definition is well drawn in
Hals bury 's Laws of England (Hailsham Edition) Vol. I at page 193 as

- follows:

"An agent is to be distinguished on the one hand from a serv- E
ant, and on the other from an independent contractor. A serv-
ant acts under the direct control and supervision of his master
and is bound to co.nfonn to all reasonable orders given to him
in this course of his work; an independent contractor, on the
other hand, is entirely independent of any control or interfer-
ence and merely undertakes to produce a specified result, em- F
ploying 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 principal, is not subject to its exercise to the direct control
and supervision of the principal". ... '
G
AND this statement of law was used with approval by this Court in
AIR 1977 SC 1677 titled as The Superintendent of Post Of(lces 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 between one of the electrical . H
contractors and the C.E.S.C. The material portion thereof is as follows:
286 SUPREME COURT REPORTS [1991] SUPP. 2 S.C.R.

A "The said contract relates to laying of new undergound cables
and conversion of ovehead mains and service to underground
system at Barrackpore Trunk Road between Paikpare Junction
to D.F.1/6 and from Baranagar P/T to D.Fl/67.
Please note that you will have to provide competent supervi-
sion while carrying out the work in accordance with the provi-
B sions of the Indian Electricity Rules, 1956. You will also have
to provide adequate watch and ward arrangement for the safe
custody of the materials till such time and complete installa-
tion is handed over to us. You will be required to insure against
theft and pilferage of all materials while held in your site
godown".
c
The obligation embodied, as is plain, is for the electrical contractor
to provide competent supervision while carrying out the work. The electri·
cal contractor is otherwise a licensee under the Indian Electricity Act and
the Rules ~ade thereunder and the conditions of his licence read as fol-
lows:
D
"Mr./Messrs. Eastern Engineers & Constructions is/are hereby
authorised to carry out electrical installation work in the State
of West Bengai. This licence is issued subject to the compli-
ance with the conditions set out on the reverse, and also to the
continued compliance with the conditions set out in Regula-
E tion 24 of the Regulations under Rule 45(1) of the Indian
Electricity Rules, 1956.
(I) All electrical i.tistallation work coming within the pur-
view of Rule 45 (I) of the Indian Electricity Rules, 1956
undertaken by the holder of this licence, shall be carried
F out under the direct supervision of a· person holding a
valid certificate of competency ...
(2) The holder of this. licence shall mai.titain a register of
supervision and workmen in the form below and shall
produce the register for inspection on demand by an Elec-
trical Inspector or other person authorised in this behalf
G the Licensing Board.
(3) On the completion of any electrical i.tistallation work comi.tig
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
H Secretary. The report shall be signed by the supervisor
under whose supervision the work has been carried out,
C.E.S.C. v. SUBHASH BOSE [PUNCHHI, J.] 287

and countersigned by the holder of this licence, who shall A
be wholly responsible for the due execution of the work.
(4) Ifthe holder of this licence ceases to be in possession of a
valid supervisor's certificate of competency, ceases to re-
tain in his said employment at least one supervisor hold-
ing valid certificate of competency, this licence shall be
invalid. B

(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 Electricity Rules,
1956 this licence shall be invalid and the holder shall c
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 okompetency. For that
purpose the licensee shall maintain a register of supervision. Such register D
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 lic.ensee 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 E
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 invali-
dated. 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 installation work of the kind mentioned. In that situation, the F
license is to be returned to the Secretary for 'Cancellation.

On the conjoint reading of the contract with the C.E.S.C. and the
terms and conditions of the licence, assuming the terms were to be faith-
fully obeyed, could it otherwise be held that the C.E.S.C. could'appoint
the electrical contractor as its agent to have the work carried out under the G
latter's supervision, in place of C.E.S.C. As is evident, the contract
relates to laying of new underground cables, conversion of overhead mains
and service and maintenance to the underground system. The work being
highly sophisticated in nature, requiring special skill and expertise, 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- H
288 SUPREME COURT REPORTS [1991] SUPP. 2 S.C.R.

cordance with the provisions of the Indian Electricity Rules, l 956, which,
in the larger interest of the electrical network and community and its
safeguards, require an electrical contractor obtaining a licence to carry out -
electrical installation work of the kind mentioned. Then the Rules obligate
him to take in his services a person holding a valid certificate of compe-
tency under whose direct supervision the work is required to be carried
B out, and on completion 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 invalid or liable for canc.:ellation due to non-
employment 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
c 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 supervise work as envisaged under
Section 2(9) of the Act, and thus to have established a direct link between
D 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 d.) 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 "principal". 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 fic-
tional identity with his principal in the other. Th~ agreement nowhere
amalgamates the identity of the electrical contractor with that of the prin-
F cipal (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 provi-
sions of the Electricity Supply Act. To the Division Bench of the High
G Court it was obvious that the Regional Director of the E.S.I.C. had no-
where 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 employ-
ees 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 aft~r the same is completed and supervisio1i of work
H while in progress is not the same. These have different perceptions. Checkii;ig
C.E.S.C. v. SUBHASH BOSE (RAMASWAMY, J.] 289

of work on its completion is an activity, the purpose of which is to finally A
· accept or reject the work, on the touchstone of job specifications. Thereaf-
ter, .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 be-
come business-like. Besides, the High Court has found that the work done B
by employees was under the exclusive supervision of the electrical con-
tractors or competent supervisors engaged by them under the terms of the
contract ~d the licence. By necessary 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 supervi-
sion was required under the licence to be maintained. Under the contracts, C
the electrical contractors cannot in one breath be termed as agents of the
C.E.S.C., undertaking supervision of the work ofJheir 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. D
in favour of the electrical contractors, and none could be, as •hat would
the
violate 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 E
question must be answered against the ESIC holding that the employees
of the electrical contractors, on facts and cricumstances, established be-
fore 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 regard. F
The appeals are accordingly dismissed. In· the circumstances, how-
ever, 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 G
breeze generated by the draft judgment of brother Punchhi, J., given my
anxious reflections of its consequences and with due respect, I express my
inability to fall 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 H
290 SUPREME COURT REPORTS (1991) SUPP. 2 S.C.R.

A benefits in case of sickness, maternity and employment injury and other
matters relating thereto and to augment the efficient performance of the
dyty. The respondents (immediate employers) had contracts with the Cal-
cutta 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
B their repairs and maintenance. 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 medical assistance etc. to the em-
ployees. In consequence there would be cut, to the extent of I 0% or as
may be specified from time to time, in the "profit packet" of the immedi-
c ate 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 employers and their employees gave rise to the lis.
The immediate 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 super-
D vision or agency with the Corporation 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 efficient service
on receiving medical treatment ?" The employees request the social engi-
neer to sharpen his forensic skills of his instruments to ?rovide thein
E social security from health and occupational hazards fastering a part of the
liability on the immediate employers whom they serve. Whether the social
engineer would avoid unjust result like Portio'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 adopted by purposive approach as to do what justice and equity re-
F quired ? The result of the combat between the gramarian 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 Elec-
G tricity Act 9 of 1910 (for short the 'Electricity Act') to generate, transmit
and supply electrical energy to the consumers of the area. The Corpora-
ti.on is enjoined to erect electric supply lines and also overhead lines,
service lines, underground 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 ca-
H bles, to erect overhead lines, their repairs and maintenance and, for execu-;,
tion thereof employed their own employees.
C.E~S.C. v. SUBHASHBOSE [RAMASWAMY, J.) 291

The Elecricity Act empowers the Corporation as licensee, under s. A
12 t ereof, to open and break tip the soil etc. and lay down electricity
supp y lines and other works, repair, alter or remove the same and do. all
othe acts necessary for due supply of energy. Ii also empowers under Sec.
13 t execute new works in compliance of that section. Under Secs. 14 &
15 · is empowered alteration of the pipes or wires. Sec. I 0 empowers a
Ii nseeto place any overhead lines along or across any street etc. Sec. 20 B
1•·• empowers the licensee 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 me-
ters, fittings, works ,and apparatus for the supply of energy belonging to c
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. 3 (2) (b) of the Electricity Act and Clause D
(l) (a) of the Schedule shows that the licensee 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 (I) (c) (i) is entitled to revoke the licence. In terms
of s. 15(1) "the duly authorised persons" of the licensee is to operate E
under the Act to lay new electric supply lines or other works etc. Equally
Clause V (I) 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 proce-
dure in this regard. Rule 36 adumberates handling of electric supply lines, F
apparatus, only "by authorised person" 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 appa-
ratus and no person shall assist such person on such work, G
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, licensed in this behalf by the
H
292 SUPREME COURT REPORTS [1991) SUPP.2 S.C.R.

A State Govt., appoints a person holding a-certificate of competency and a
"rmit in this behalf issued or recognised by the State Govt., the contrac-
tor shall not be entitled to undertake any installation work etc. Rule 51
provides certain safety measures to be taken to the satisfaction of the
Inspector so as to prevent danger. Rule 64 requires an authorised person to
ca,lry out the acts mentioned therein subject to the supervision provided in
B Clause (b) thereof by the Electrical Inspector. Rule 123(4) speaks of ex-
amination of flexible cables by authorised persons and Rule 125(8) en-
joins 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 licensee is empow-
c ered and enjoined to lay the works production, transmission and distribu-
tion 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 ut1der the Act and the Rules. The
contractor in tum appoint a qualified supervisor to have works executed
and maintained or repaired, subject to inspection and supervision by the
D 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 duly author-
ises the contractor to have these works done, repaired or maintained, on
its behalf, though the media of contract. The question emerges whether
the respo."dents are not immediate employers executing the works etc.
E under the supervision of the Principal employer or as its agents ? From the
above backdrop of ~tatutory 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
F which this Act applies and -

(i) who is directly employed by the principal employer on
any work of, or incidental 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
G 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 supervision 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
C.E.S.C. v. SUBHASH BOSE [RAMASWAMY, J.] 293

on in or incidental to the purpose of the factory or estab- A•
Iishment; 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."
B
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 immediate 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 c
the facts on hand) in tum attracts a person employed by or through an
immediate employer as an employee of the principal employer provided
the following conditions are satisfied, namely, (I) the immediate em-
ployer employs an employee on the pr~mises of the factory or establish-
ment of the principal employer; (2) "or under the supervision of the prin-
cipal employer" ; (3) this agent on work which is ordinarily part of the D
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 E
and well being of himself and of his family .... including medical care,
sickness, disability..... Art. 7(b) of the International Convention on Economic,
Social and Cultural Rights, J966 recognises the right of everyone to the
enjoyment of just and favourable conditions of work which ensure, in
particular, safe and healthy working conditions. Article 39(e) of the
Constitution enjoins the State to direct its policies to secure the health and F
strength of workers. The right to social justice is a fundamental 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 mak.e liberty available
for all. Right to human dignity, development of personality; social protection, G
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 H
Declaration of Human Rights, International Conventions of Economic,
294 SUPREME COURT REPORTS [1991] SUPP. 2 S.C.R.

A 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,
protection or their families as integral part of the right to life. Our Constitution
in the Preamble and Part IV reinforce them compendiously as socio-
economic justice, a bed-rock to an egalitarian social order~ The right to
B social and economic 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 at least three workers are injured". In
India on· an average. every day 1100 workers 31J injured and three are
C killed "in industrial establishments" vide (Lawyer Oct. 1987 page 5). In
26th LL.O. Convention held in Pliiladephia in April 1944, recommenda-
tion No. 69 laid down norms for medical care for workers. In Octobet
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
D 1947, 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 considered as of alinost importance. The Act
had culminated in its birth of these recommendations providing in a lim-
ited .area social security to the employees from health and occupational
hazards.
E
The tenn heal~h implies more than an absence of sickness. 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
F 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 absenteeism on grounds of sickness, etc. Health is thus a state of
complete physical, mental and social well being and not merely the ab-
G sence of disease or infirmity. In the light of Arts. 22 to 25 of the Universal
Declaration of Human Rights, International Convention on Es;onomic,
Social . and Cultural Rights, and in the light of socio-econo"'fo ju~tice
assured in our Constitution, right to health is a fundamental hlilnan right
to workmen. The maintenance of health is a most imperativ" constitu-
tional goal whose realisation requires interaction by many social and eco-
H nomic factors. Just and favourable condition of work implies to ensure
C.E.S.C. v. SUBHASH"BOSE [RAMASWAMY, J.] 295

safe and healthy working conditions to the workmen. The periodical medicai A
treatment invigorates the health of the workmen aaid harnesses their hG-
man resources. Prevention of occupational disabilities generatesidevoiion
and dedication to duty and enthuse the workmen to render efficient' serv-
ice which is a valuable asset for greater productivity to the ~ntpfoyer and
national production to the State. Yet in. ~--~port of the Committee on
· Labour Welfare, 1969 in paragraph. 5. 'fr-Of ¢hapter 5, reveals that, pri- B
vate employers generally feel that this burden shall not be cast upon
them".

The Act aims at relieving the employees from health ruid· occupa-
tional 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 C
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 huinane relations.
D
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 modem progressive society it would be unreasonable to
confine the intention of a Legislature to the meaning attribut- E
able to the word used at the time the law was made, for a
modem 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 revohitionary changes brought about in so-
cial, economic, political and scientific and other fields of hu- F
man activity. Indeed, unless a contrary intention appears, an
interpretation should be given to the words used to take in new
facts and situations, ifthe words are capable of comprehending
them."
In M Pentiah & Ors. v. Muddala Veermallappa & Ors., [1961] 2 G
SCR 295 at p. 313 in a separate but concurrent judgment, Sarkar,~· held
thus:

"Where the language of a statue, in its ordinary _meaning and
grammatical construction,. leads to a manifest, contradiction of
the apparent purpose of the enactment, or to some inconven- H ,
296 SUPREME COURT REPORTS [1991) SUPP. 2 S.C.R.

A ience or absurdity, hardship or injustice, presumably not in-'
tended, 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,
B "When a defect appears a judge cannot simply fold his hands
and blame the draftsman. He must set to work on the construc-
tive task of finding the intention of Parliament...... and then he
must supplement the written word so as to give "force and
life" to the intentions of the legislature ..... A judge should ask
himself the question how, if the makers of the Act had them-
c selves 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 intractability of the language Used, as to
D make it carry out the obvious intention of the legislature".
In Massachusetts Bonding & Insurance Co. v. United States ofAmerica,
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:

E "On more than one occasion, but evidently not frequently enough,
Judge Learned Hand has warned against restricting the mean-
atg 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
ascertain its meaning, but one does not end with them. The
F
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 long after its brains
are knocked out." One would suppose that this particular theory
of statutory construction had had its brains knocked out in
G Boston Sand & Gravel C. v. United States, [278 US 41, 48, 73
Led 170, 177, 49 S Ct 52]. The words of this legislation are as
· plain as the Co.urt finds them to be only if the 1947 amend-
ment is read in misleading isolation. An amendment is not a
repeal. An amendment is part of the legislation it amends. The
1947 amendment to the Federal Tort Claims Act of 1946 must
H be read to harmonise with the central purpose of the original
C.E.S.C. v. SUBHASH BOSE [RAMASWAMY, J.] 297

Act. The central purpose of the original Act was to allow A
recovery against the United States on the basis and to the
extent ofrecoveries for like torts committed by private tortfeasors
in the State in which the act or omission giving rise to the
claim against the United Statt>s occurred. The 1947 amend-
ment filled the gap, a very small gap, that was disclosed in the
scheme formulated by the 1946 Act". B
In Atma Ram Mittal v. Ishwar Singh Punia, [1988)4 SCC 284, this
Court held that the purpose of interpretation in a social'amelioration legis-
lation is an imperative irrespective of anything else. It was further held
that the contents, 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".
c
(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
D
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 ~tatute may be
mended in the laborynth of interpretation and may be. enlarged or re-
E
stricted in order to harmonise them with the legislative intention of the
entire statute. The spirit of the statute would prevail over the literal mean-
ing. 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 envi- F
sioned in the preamble of the Con~titution.

Let me, therefore, consider the ambit of the word 'supervision' un-
·der s.2(9) (ii) of the Act. In Webster Comprehensive Dictionary (Interna-
tional Edition) the word 'supervision' has been defined at page 1260 in
Vol. II as "authority to direct or supervise", supervise means - have a G
"general oversight of'. "In Corpus Juris Secundum", Vol 83 at page 900 it
is stated that The word "supervision" ~.not of the precise import and
when not limited by the context is broad enough to cover mo.re than one
subject. It implies oversight and direction, and does not necessarily ex-
clude the doing of all manual labOur, but may properly include the taking
~of an .active part in the work". "Supervision" is defined as meaning "the H
298 SUPREME COURT REPORTS [I 991] SUPP. 2 S.C.R.

A act of oyerseeing or supervising; having general oversight of, especially as
an officer vested with authority; inspection; oversight; superintendence."
The Words and Phrases, Pennanent Edition, Vol. 40A defines that the
"Supervision" means oversight, an act of occupation of supervision; in-
spection. "Supervision" is an act of overseeing or supervision; having
general oversight of, especially as an officer vested with authority; inspec-
B tion; oversight; superintendence, "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 employment 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
c 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 (Builders) Ltd., [1962] I Weekly Law Reports 933 the Court of
D 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 required in the circumstance of the case
being considered? If every move was fraught with danger, then clearly
E 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. Upjohn,
LJ., as he then was, .while agreeing held that the real question is whether
F there was a supervision for the purposes of the regulation and was that a
proper or adequate supervision? The regulations are fonnulated for the
protection 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 falling within regula-
G tion 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 supervi-
sor must give a constant supervision during that time. But there will be
other times where the particular 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
H other groups. All depends on the fact of each case.
C.E.S.C. v. SUBHASH BOSE [RAMASWAMY, J.) 299

In Regional Director, E.S.l.C. v . South India Flour Mills (P) Ltd. A
(1986) 69 FJR 77, this Court held that the defintion of the teirn'emplo1yee'
under s.2(9) of the Employees' Stat.e Insurance Act, 1948 is "very wide
and includes within it any person employed! on any woric incidental or
preliminary to or connected with the work of a factory or establisbn,1ent".
Any work that is conducive to the work of the factory or establisbm1~nt or
that is necessary for the augmentation of the work of the factory or estab- B
lisbment 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 Ac1t. 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 At;t is a piece of social security legislation enacted to provide for C
certain benefits to the employees in case of sickness, etc. It w:as further
held that the endeavour of the Court should be to interpret the provisions
liberally in favour of the persons for whose benefits the enactment has
been made. This Court upheld the view taken by A.P., Ka.rmttaka and
Punjab and Haryana High Courts in A.P. State Electricity Boar</. v. Em-
ployee's State Insurance Corporation, Hyderabad, [1977] 51 FJR 171 AP; D
Regional Director, Bangalore v. Davangere Cotton Mills, (1977) '.2 L.L.J.
404 and E.S.I.C., Chandigarh v. Oswal Woollen Mills Ltd., (1980) 57
F.J.R. 171 (P & H) (F.B.). that casual employees are employe:es within the
meaning of the term "employee" defined in s.2(9) of the Act.

In Birohichand Shanna v. First Civil Judge, Nagpur & Ors., [1961] E
3 SCR 161 this Court considered whether the piece rate worker is a
worker within the meaning ofs.2(1) of the Factories Act, 194:~. The facts
found were that there was no fixed hours. They made payment 1to 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 manage-
ment bad "the right to reject" (emphasis supplied) the Bi.dis prepared by . F
them, if the Bidis do not come upto the proper Standard. On those facts, it
was held "the right of rejection is a supervision" conne,cting the work and
the employment. Accord~ly it was held them to be workmen. The same ·
ratio was followed in n;c ·Dewan Mohideen Sahib&! .Sons v. Thie Indus-
trial Tribunal Madras., (1964] 7 SCR 646. In Nagpur Electric· Light &
Power Co. Ltd. v. Regional Director, E.S.'f.C. (l96H] 3 SCR Reprint 92 G
the employees employed outside the factory or e:;;tablisbment as Cable
· Jointer, Mistri, Lineman, Coolies and Vanman tbr inspection of lines, ·
. digging the pits, erection, distribution and servitt. ~ 1irie were held to ~t>e
employees within the meanin.g of s. 2(~) (i) of th~tAct,

In Kfrloskar Pneumatic Co. t(d,c:·v. Employees' State Insurante .Cor· H
300 SUPREME COURT REPORTS (1991) SUPP. 2 S.C.R.

A poration. {1987] 70 FJR 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, construction of buildings, etc. of the principal employer are
employees within the meaning of s.2.(9) of the Act. In Royal Talkies,
Hyderabad & Ors. v. Employees State Insurance Corporation, [1979] I
B 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 chstomers and improve-
ments of business in Cinema~ Tp.e 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
C 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 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
D establishment.

The case Mis P.M Patel & Sons & Ors. v. Union of India & Ors.,
[1986] I SCC 32 though arose under the Employees Provident Funds 3.!J.d
Miscellaneous Provisions Act, 1952, the principle laid therein applies on
all fours fo the facts of the case. The appellants therein were engaged in
E the manufacture and sale of Bidis. The work of rolling Bidis was entrusted
to the contractors who in turn got the work prepared at workers homes;
after obtaining materials either directly from the manufacturer or through
the contractors. The contractors treated the workers as their own employ-
ees and get their work done at the workers' premises or contractors'
premises. It was ·contended that the workers engaged by the contractors
F were not their workmen under that Act. This Court by a Bench of three
Judges negatived their r.ontention and held that in the context of condi-
tions and the circumstances in which the home workers or manufacturer
go about their work including receiving of raw materials, rolling of Bidis
3t home and delivering them to the manufacturer subject to the right of
rejection, there is sufficient-evidence of the requisite "degree of control
G and supervision" for e'Stablishing relationship of master and servaQ{ be-
tween the manufacturer and the home workers. This ratio does suppJrt the
conciusion that a connectin~ link t>etween the finished product lifid the
work of the establishment is··~fficient; neit.her the manner of acty'al per-
fonnance of the duties deci'Srve nor the.actual control or the superv'ision of
the work a material ingredie:nt. Inc'lden~ connection with the ultimate
H ·b.usiness activities of the manufacture.ts and right to rejection is the con-
C.E.S.C. v. SUBHASH BOSE [RAMASWAMY, J.) 301

trol and would be the balancing wheel to attract the provisions therein. A
The extended purposive construction was applied to give effect to the
social security provided under the Employees Provide1it Fund and Miscel-
laiieous Provisions Act, 1952.

In Spperintendent of Post q[fice v. P. K. Rajamma, [ 1977] 3SCR 678
the quesfion was whether the extra departmental agents serving in Post B
·and Telegraph Department were agents or held civil post within the mean-
ing of Art. 311 (2) of the Constitution. This Court wh~le holding that they
held civil post attracting Art.311(2) of the Constitution approved the pas-
sage from Halsbury's Laws of England (Hailsham edition) of the distinc-
tion between agents, servants or independent contractors. The contractual
relation therein inter se does not apply to the facts of this case. ·C

The 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 occupational hazards consistent
with the constitutional and human rights scheme. Under the Electricity D
Act and the Rules, the Corporation, licencee, is enjoined to perfonn the
acts and duties contemplated thereunder to lay overhead lines, under-
ground 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 E
work but a constant and on going process, so long as the licencee gener-
ates, transmits and supplies electrical energy to the consumers of their
supply area. Had the principal employer perfonned those acts and 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 F
authorises the respondents as its contractors under contracts the need for
·constant supervision is obviated 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 re-
jection of the work done or supervision effected in maintenance of the
work got done by the immediate employer, subject to over all supervision G
by the Electrical Inspector, on behalf of the State Government. The super-
vision in the fact situation is not the day to day supervision but legal
control, i.e. right to accept or reject the work done or maintenance ef-
fected. The exercise of right of acceptance or rejection is the supervision
as envisaged in the contract between the principal employer and the im-
mediate employer. It would supply the needed w1ifying or c6W)ecting H
302 SUPREME COURT REPORTS (1991) SUPP. 2 S.C.R.

A thr'ad between. the constitutional creed of social justice i.e. social security
un,der the Act and supervision of the acts or duties by the principal em-
ployer vis-a-vis the employees of the immediate employer under the con-
tract who ultimately perform them on behalf of the principal employer.
Undoubtedly in a bilateral contract between the corporation and the re-
spondents qua their rights and liabilities under the contracts, strict inter-
B pretation of the words engrafted therein, be of paramou'nt relevance and
call for attention as per Contract Act. But in the context of the statutory. ·
interpretation of "supervision" under the Act of the works undertaken
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 ·
c effectuate the statutory animation, namely, social security. The literal
interpretation would,feed injustice in perpetuity denying to the employees
of skkness benefit l!tc. under the Act which should be avoided, lest the
purpose of the Act would be frustrated.

The contention that the respondents being independent contractors
D are not agents of the licencee, corporation, is also devoid of force. It is
seen that under ss. 15 & 20 etc. and the relevant mies the authorisation
given by the corporation through the media of the contracts enabled the
respondents to step into its shoes to do the acts or perform the duties
under the Electricity Act and Rules which are ordinarily of the Corpora-
tion. The contract is an authorisation to do those acts on behalf of the
E principal employer.

The application of the golden rule to the word "agency" under ihe
Indian Contract Act between the respondents and the corporation, per-
haps, 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 seclirity to protect the health and strength of the workers
F
must be kept at th'! back ofthe mind to construe the word "agent" under
s.2(9) (ii) of the Act, in contra distinction 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 respondents and the licencee corpora-
tion. Lest the contract, if intended to deny welfare benefits to workmen,
G
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 contiqct the extended meaning of agency but not fiduciary. Chitty
on Contracts, ·26th Edition, in paragraph· 2502 at page 4 stated of the use
oftfM:;Jerms agent and agency. Some persons who describe themselves or
are .described by others as agents are not really such in any legal sense of
H
C.E.S.C. v. SUBHASH BOSE [RAMASWAMY, J.] 303

the word, but rather independent merchants, dealers, consultants or inter- A
mei:d"·es. Oth~rs may be agents in the sense that they owe the internal
dutie of the agent to his principal (mainly the fiduciary duties) .... The
s~b tt~nce 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. 1(emplias1s sµp-
plied). In A.G. Guest Anson's Law of Contract, 26th Edlition, at page308 B
it is stated that the application of cannons of 'public p1:>licy 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 1to 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 C
world, that is true; but the same is true of the principles of the common
law generally.'

In Prenn v. Simmonds, l97i (I) Weekly Law Reports 1381 (H.L.)
Lord Wilberforce laid the rule that in construing a written agreement
evidence of negotiations or of the parties' intentions ought not to be D
received by the court, and that evidence should be restricted to evidence
of factual background known. to the parties at or ~ore the date of the
contract, including evidence of the "genesis" and objectively the "aim" of
the transaction.

The contractors, respondents, knew at the date of the agreements E
that the Corporation, as Principal employer, is under statutory obliga'.tion
to execute or keep executed the works and keep them repaired and main-
tained as an intP.gral 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 executing the works and
repairs or kept them repaired and the maintenance thereof effected through F
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 prohibition 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 G
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 e1t1.ployees working under the respondent
perform their duties in execution of ·the works, repairs and maintenance
thereof in connection with the generiid~tt transmission and distribution of H
304 SUPREME COURT REPORTS (1991] SUPP. 2 S.C.R.
L
A thP.· deetrical energy by the Corporation f.tensee. The Corporation is the
PriQ'.¢tpal employer The respondents iJt:ih)ediate employers execute the
wntk etc. under the supervision of the Corporation as its agents. Their
employees, in law, w9rk under the supervision of the principal employer,
corporation. They are cov~red under s.2.(9) (ii) of the Act entitling them
to the sickness benefits, etc. envisaged therein·, and the respondents are
B liable to make their contribution to the Employees Irisurance Fund.

The appeals are accor9,ingly allowed. The writ appeal Nos. 16 &
43 8/86 and matter No.1650 Of 1985 dated April 4, 1988 in the C.alcutta
High Court stand dismissed confirming the order M the learned single
Judge dated December 11, 1986, but ii) the circumstances parties are
C directed to bear their own costs.

V.P.R. Appeals dismissed.

L