Holding

The premises are a "shop" and are covered by the Employees' State Insurance Act.

Summary

International Ore & Fertilizers (India) Pvt. Ltd., which imports fertilizers and acts as an agent for foreign principals, employed more than 20 workers at its Secunderabad premises. The Andhra Pradesh Government, under section 1(5) of the Employees' State Insurance Act, 1948, extended the Act to "shops" with 20 or more employees. The company argued that its premises were not a "shop" because no goods were delivered there, while the Employees' State Insurance Corporation contended it was. The Employees' Insurance Court held the premises were not a shop, but the Andhra Pradesh High Court reversed that decision, holding the premises to be a shop. On special leave, the Supreme Court affirmed the High Court, interpreting "shop" in its ordinary sense to include any place where buying and selling activities are carried out, even if delivery occurs elsewhere, and applied a liberal construction to the welfare legislation. Consequently, the petitioner was held liable to comply with the Act and the petition was dismissed.

Issues considered

Whether the premises of International Ore & Fertilizers constitute a "shop" within the meaning of the Employees' State Insurance Act, 1948 and the Andhra Pradesh notification.
Whether the absence of physical delivery of goods at the premises precludes it from being a "shop".
Whether a liberal construction of welfare legislation applies to the interpretation of "shop".

Legislation cited

Employees' State Insurance Act, 1948s. 1(5), s. 75, s. 82

Subjects

Employees' State Insurance Actshop definitionstatutory interpretationwelfare legislationliberal constructionemployer liabilityimport businesstrading activities

Judgment

INTERNATIONAL ORE & FERTILIZERS
A
(INDIA) PVT. LTD.
v.
EMPLOYEES' STATE INSURANCE CORPORATION

AUGUST 18, 1987
B
[E.S. VENKATARAMIAH AND K.N. SINGH, JJ.}

Employees' State Insurance Act, 1948: Sections 1(5) and 75 and '
Andhra Pradesh State Government Notification dated March 25,

- {
1975-'Shop'-What is.

Interpretation of Statutes: Welfare legislation-Liberal construc-
c
tion-Necessity for.

Words & Phrases: 'Shop'-Meaningof.

The petitioner, a limited company, having central office at Secun- D
derabad was carrying on business of importing fertilizers and represen-
ted some foreign principals for the sale of their products in India.
'
The Government of Andhra Pradesh after giving six months
notice, vide its gazette notification No. 788 Health dated 25-9-74 as

- ·-.,
required under section 1(5) of the Employees' State Insurance Act, 1948
lo'-- extended the provisions of the Act with effect from 30-3-75 to the
establishments mentioned therein in which 20 or more persons were
employed for wages on any day of the preceding 12 months by Notifica-
tion G.O.M.S. No. 297, Health, dated 25th March, 1975. Item 3(iii) in the
E

list of establishments in that notification to which the Act was so ex-
tended by the State Government was "shops". F
I
On inspection of the premises of the petitioner-company at Secun-
derabad on 28-4-75, the Employees' State Insurance Inspector found
that the petitioner had employed persons ranging from 27 to 29 for
wages and was carrying on the business of import of fertilizers, and the
Y petitioner was asked to comply with the provisions of the Employees' G
State Insurance Act. The petitioner agreed and submitted contribution
forms of its employees to th• office of the Corporation.

After complying with the provisions of the Act for a period of four
years the petitioner instituted a case under Section 75 of the Act before
the Employees' Insurance Court for a declaration that the establish- H

• 981
982 SUPREME COURT REPORTS [1987] 3 S.C.R.

A ment in which the petitioner was carrying on its business was not a
"shop", and, therefore, it was not covered by the aforesaid notification
and that the petitioner was not liable to comply with the provisions of
the Act. On behalf of the Corporation it was submitted that the estab-
lishment being run by the petitioller was a "shop" and, therefore,
liable to comply with the provisions of the Act. The Employees" Insu- i
B ranee Court upheld the plea of the petitioner and declared that the
estab~shment was not covered by the Act. f
The High Court allowed the appeal of the Corporation and held
that the establishment was a "shop" to which the Act was applicable by
virtue of the State Government's notification. -
c
In the Special Leave Petition, on behalf of the petitioner i1t was
urged that since no goods were actually being delivered in the premises
in which the petitioner was having its establishment, the said establish-
ment could not be treated as a 'shop' which was referred to in item 3(iii)
of the Government's notification.
D
Dismissing the Special Leave Petition, this Court,

HELD: l. The petitioner-company is bound to comply with the
provisions of the Act as, at all relevant times, the company had engaged
more than 20 persons for wages at.its place of business. [986E]
E
2.1 The word "shop" is not defined in the Act or in the notifica-
tion issued by the Government. [9850]

2.2 In ordinary parlance a "shop" is a place where the actMties "<
connected with the buying and selling of goods are carried on. [985E]
·p
2.3 It is not actually necessary that the delivery of the goods to the
purchaser should take place at the premises in which the business of
buying or selling is carried on to constitute the said premises into a
"shop". The delivery of the goods sold to the purchaser is only one
aspect of trading activities. Negotiation of the terms of sale, carrying on Y
G of the survey of the goods imported, arranging for the delivery.of the
goods sold, collection of the price of the goods sold etc. are all trading
activities. [985H, A]

In the instant case, the premises where business is carried on by
the petitioner is undoubtedly a "shop" as the activities that are carried
H on there relate only to the sale of goods which are imported into India.
INTERNATIONAL ORE v. E.S.l. CORPN. [VENKATARAMIAH. J.] 983

The petitioner acts as the agent of its foreign principals who are the A
sellers. The petitioner directs and controls all its activities from the
premises in question. If orders are received at a place·which ultimately
fructify into sales and the resulting trading activity is directed from
there, that place comes to he known as a "shop". [986B·CJ

3. The High Court was right in holding that while construing a B
welfare legislation like the Act and the notification issued thereunder a
.\- liberal construction should be placed on their provisions so that the
I
purpose of the legislation may he allowed to be achieved rather than
frustrated or stultified. [986D J

- ../I
CIVIL APPELLATE JURISDICTION: Special Leave Petition
(Civil) No. 6765 of 1985 .
c
From the Judgment and Order dated 11.12.1984 of the Andhra
Pradesh High Court in C.M.A. No. 244of 1981.

D.N. Gupta and Vi jay Kumar Verma for the Petitioner. D

The Order of the Court was delivered by

VENKATARAMIAH, J. This petition is filed under Article 136
of the Constitution for special leave to appeal against the judgment of
the High Court of Andhra Pradesh dated 11. 12.84 allowing an appeal E
filed against the judgment dated 31.12.80 in E.l. case No. 4 of 1980 on
the file of the Employees' Insurance Court at Hyderabad.

The petitioner is a limited company carrying on business at
Secunderabad and at some other places in India. The petitioner is
engaged in the business of importing fertilizers. It represents some F
foreign principals for the sale of their products in India. The petitioner
imports fertilizers into India which is an item purchased by the Central
Government through the State Trading Corporation/Minerals and
Metals Trading Corporation of India. In the course of its business the
petitioner obtains the tenders from the State Trading Corporation
Minerals and Metals Trading Corporation of India and passes them on G
to its principals abroad. Thereafter negotiations are carried on directly
between the State Trading Corporation/Minerals Metals and Trading
Corporation of India and the foreign principals. After the deal is
completed and the fertilizers arrive at the Indian ports the fertilizers
are delivered to the Central Government at the ports. Before deliver-
ing the goods to the Central Government the petitioner supervises the H
984 SUPREME COURT REPORTS [1987] 3 S.C.R.

unloading of the goods and conducts the survey of the goods imported
A
to ascertain the condition of the goods and to find out whether there
are any shortages in the consignments so that there may be no disputes
later on about the quality and quantity of the goods delivered. The
petitioner-company has its branch offices in Bombay, Calcutta and
Madras for supervising its work at the ports and to attend to o:her
B matters relating to clearing of shipments and in Delhi for securing
payments of bills. Its central office is at Secunderabad.

The Government of Andhra Pradesh after giving six months
notice vide its gazette notification No. 788 Health dated 25.9.7'· as
required under section 1(5) of the Employees' State Insurance Act,
1948 (hereinafter referred to as 'the Act') extended the provisiorn; of
c the Act with effect from 30.3.75 among others to the establishments
-
mentioned therein in which 20 or more persons were employed for
wages on any day of the preceding 12 months by Notification G.O.M.
S. No. 297, Health dated 25th March, 1975 published in the Andhra
Pradesh Gazette dated March 26, 1975. Item 3(iii) in the list of
D establishments in that notification to which the Act was so extended by
the State Government was "shops". On inspection by the Insurance
Inspector of the premises in which the petitioner was carrying on its
business at Secunderabad it was found on 28.4. 75 that the petitioner
had employed persons ranging from 27 to 29 for wages within the
relevant period ~nd was carrying on the business of import of fertili-
E zers. On being asked by the Employees' State Insurance Corporation
to comply with the provisions of the Act the petitioner agreed that its
business was covered by the Act in view of the notification issued by
the State Government as it happened to be a "shop" and submitted
contribution forms of its employees to the office of the Employees'
State Insurance Corporation. After complying with the provisions of
F the Act for a period of four years the petitioner raised a dispute about
its liability to pay the contributions payable under the Act and insti-
tuted under section 75 of the Act tbe case out of which tbis petition
arises before the Employees' Insurance Court at Hyderabad for a
declaration that the establishment in which the petitioner was carrying
on its business was not a "shop" and therefore it was not covered by
G the notification issued by the State Government and that the petitioner
was not liable to comply with the provisions of the Act. The above
petition was resisted by the Regional Director, Employees' State
Insurance Corporation. It was pleaded on his behalf that the establish-
ment which was being run by the petitioner was a "shop" and there-
fore it was liable to comply with the provisions of the Act. The
H Employees' Insurance. Court upheld the plea of the petitioner and
INTERNATIONAL ORE v. E.S.I. CORPN. [VENKATARAMIAH, J.J 985

declared that the establishment of the petitioner was not covered by A
the Act. Aggrieved by the decision of the Employees' Insurance
Court, the Regional Director of the Employees' State Insurance
Corporation filed an appeal before the High Court under section 82 of
the Act. The High Court allowed the appeal, reversed the decision of
~ the Employees' Insurance Court and dismissed the petition filed by the
. petitioner under section 75 of the Act. The High Court was of the view B
that the establishment of the petitioner at Secunderabad was a "shop"
to which the Act was applicable by virtue of the notification issued by
the State Government. Aggrieved by the decision of the High Court
the petitioner has filed this petition under Article 136 of the Constitu-

- tion requesting this Court to grant special leave to appeal against the
decision of the High Court. c
On behalf of the petitioner it is urged before us that since no
goods were. actually being delivered in the premises in which the
petitioner was having its establishment the said establishment could
not be treated as a shop which is referred to in item 3(iii) of the
.... Government's notification. The word "shop" is not defined in the Act D
or in the notification issued by the State Government. According to
the Shorter Oxford English Dictionary the expression "shop" means
"a house or building where goods are made or prepared for sale and
sold". It also means a "place of business" or "place where one's ordi-
nary occupation is carried on". In ordinary parlance a "shop" is a

- .r
I. place where the activities connected with th~ buying and selling of E
goods are carried on. The evidence produced in the case shows that the
petitioner is carrying on its business at its business premises in
Secunderabad. At that place the petitioner carries on the commercial
'>" activity facilitating the emergence of contracts of sale of goods
between its foreign principals and the State Trading Corporation·
Minerals and Metals Trading Corporation of India. It arranges for the F
unloading of the goods under its supervision and for the survey of the
goods despatched by its foreign principals at the ports on behalf of its
foreign principals and on the goods being delivered to the Central
Government it collects the price payable by the Government and
remits it to its foreign principals. All these activities are directed and
'Y controlled from its premises at Secunderabad. It is thus clear that the G
activities carried on by the petitioner constitute trading activities
although the goods imported from abroad are not actually brought to
the said premises and delivered to the purchaser there. In our opinion
it is not actually necessary that the delivery of the goods to the purcha-
ser should take place at the premises in which the business of buying
or selling is carried on to constitute the said premises into a "shop". H
986 SUPREME COURT REPORTS (1987] 3 S.C.R.

A The delivery of the goods sold to the purchaser is only one aspect of
trading activities. Negotiation of the terms of sale, carrying on of the
survey of the goods imported, arranging for the delivery of the goods
sold, collection of the price of the goods sold etc. are all trading
activities. The premises where business is carried on by the petitioner
is undoubtedly a shop as the activities that are carried on there relate ~
B only to the sale of goods which are imported into India. The petitioner
acts as the agent of its foreign principals who are the sellers. The . >I
petitioner directs and controls all its activities from the premises in 1
question. If orders are received at a place which ultimately fructify into
sales and the resulting trading actiyity is directed from there that place
comes to be known as a "shop". In our view the Employees' Insurance
C Court placed a very narrow interpretation on the expression "shop"
while upholding the contenion of the petitioner by confining "shop" to \.-
-
a place where goods are actually stored and delivered pursuant to a
sale. We agree with the decision of the High Court that while constru-
ing a welfare legislation like the Act and the notification issued there-
under a liberal construction should be placed on their provisions so
D that the purpose of the legislation may be allowed to be achieved
rather than frustrated or stultified. There is no doubt that the estab- )<
lishment of the petitioner at Secunderabad is a "shop" where selling
activity is carried on and by virtue of the notification issued by the
State Government the Act became applicable to it. The petitioner is
bound to comply with the provisions of the Act as admittedly at all
E relevant times the petitioner had engaged more than 20 persons for
wages at its place of business. There is no ground to interfere with the -\ , .
judgment of the High Court.

In the result this petition fails and is dismissed. '(

N.P.V. Petition dismissed.