C.E.S.C. Ltd. v. Subhash Chandra Bose and Ors

Calcutta Electricity Supply Corporation (India) Ltd. (CESC), the Appellant, engaged contractors (the Respondents), including Mr. Subhash Chandra Bose, to provide “excavation, conversion of overhead electric lines and laying of underground cables under public roads, as well as for repair and maintenance.”

The Regional Director of the Employees State Insurance Corporation (ESIC) notified the Appellant that “employees whose wages were being paid through such a contractor would fall within the scope of Section 2(9)” of the Employee State Insurance Act, 1948 (the Act).

The Appellant corresponded with the representative body for contractors, Association of Electrical Contractors of Eastern India (Contractor’s Association), and began deducting 10% of their contractor’s bill, for the purposes of paying the subsequent contractor’s employment insurance costs.

The Respondents filed a writ petition, in the High Court, under Article 226 of the Constitution (original jurisdiction of the High Court) to have the deductions annulled. They maintained that their employees were not covered by the definition of “employee” under Section 2 (9) of the Act. The Appellant also filed a writ petition in the High Court against ESIC contending that it was under no obligation to demand contributions for insurance in respect of the employees of the electrical contractors.

The question before the Supreme Court was what should be the applicable interpretation of “supervision” as used in Section 2(9) of the Act.

Majority Judgment

The Court applied the principle of harmonious interpretation in explaining what constituted supervision under the Act. It defined supervision as were the employee is closely watched, is issued corrective directives and has his work scrutinized in a way which affects its quality. The Court thus held that there was no actual supervision by CESC or by its agents. The Court affirmed the High Court’s finding that CESC was only checking the work for completion and was not supervising the work while it was in progress. The criterion of supervision as mentioned in Section 2 (9) of the Act not being fulfilled, the Court held that the workers were not employees of CESC.

Undertaking an analysis on whether the independent electrical contractors were agents of CESC, the Court held that on account of the statute, a contractor could never be an agent of the principal. It further held that viewing the contractor as an agent of the principal would be contradictory to the principle of contracts that a contractor and contractee can never be the same person.

The Court, upholding the judgment of the High Court, held that supervision by the contractors was to “fulfill a contractual obligation simplicitor” and the contractors were not acting as agents of the principal employer.

Minority Opinion

According to the minority, the Act sought to achieve the twin objects of “social security i.e. medical benefits” and increasing the efficient performance of one’s duty. It further opined that right to health was a fundamental right of the workman. According to the minority, the Act should therefore be looked at in this context and to further socio-economic justice, which was also a fundamental right.

The minority was of the opinion that a worker who performs incidental or ancillary work connected with the main work of the establishment would fall within the ambit of Section 2 (9) of the Act. In construing the meaning of “supervision”, the minority adopted a contextual and purposive interpretation. In its opinion, such an interpretation furthered the purpose behind the Act, which was to advance social security and effectuate the “social transformation envisioned in the preamble of the Constitution.”

In the minority’s view, the Appellant supervised the workers as it had the ultimate right to reject or accept their work. The relationship between the Respondents and the Appellant, the minority opined, was in the nature of a principal-agent relationship since the Respondents were authorized by CESC to undertake work on its behalf.

Majority Judgment
“When the employee is put to work under the eye and gaze of the principal employer, or his agent, where he can be watched secretly, accidently, or occasionally, while the work is in progress, so as to scrutinize 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 in our view be supervision for the purposes of Section 2(9) of the Act.” Para. 12.

Minority Opinion
“Article 39(e) of the Constitution enjoins the State to direct its policies to secure the health and 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.” Para. 24.

“In the light of Arts. 22 to 25 of the Universal Declaration of Human Rights, International Convention on Economic, Social and Cultural Rights, and in the light of socio-economic justice assured in our Constitution, 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 economic factors.” Para. 26.

“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.” Para. 33.