Kirloskar Brothers Ltd. v. Employees State Insurance Corp.

Kirloskar Brothers Ltd., the Appellant, had its registered office in Maharashtra with regional offices in Karnataka and Andhra Pradesh. The Employees State Insurance Corporation, the Respondent, required the Appellant to contribute their share for their workmen’s health insurance, as required by Section 3(9) of the Employees’ State Insurance Act, 1948 (the Act). Disputing the liability, the Appellant went to the Insurance Court which held that the regional offices were covered under the Act and therefore Appellant’s were directed to contribute their share. The decision of the Court was upheld in the High Courts of Andhra Pradesh and Karnataka.

The Appellants, thereafter, filed the petition in the Supreme Court under Article 136 of the Constitution (Special leave to appeal by the Supreme Court). The issue before the Court was “whether the Act applies to the respective regional offices.”

As to the object of the Act, the Court held that the Act was legislated so as to benefit employees in certain situations such as maternity, sickness, etc. It further held that the Act aimed at “relieving the employees from health and occupational hazards.”

Establishing a link between the Act and constitution obligation of the state, the Court held that the Act furthered the state’s obligations under the Directive Principles of State Policy in the Constitution, especially Articles 39(e) (state’s obligation to secure the health of its workers), 42 (provision for just and humane conditions of work) and 47 (duty of the state to improve public health). It therefore held that the duty of the state lay in ensuring that welfare measures were implemented effectively.

On the role of employers in a welfare state, the Court further held that employers had a duty to ensure that their employees can lead a meaningful life and therefore “must be an equal participant in evolving and implanting welfare schemes.” The Court placed reliance on Consumer Education & Research Center & Ors. v. Union of India & Ors. ((1995) 3 SCC 42), to hold that a workman’s right to life under Article 21 of the Constitution included the right to health and that health insurance while in service or after retirement was included in its ambit. It held that even private industries were under a constitutional mandate to provide health facilities to its employees.

Regarding the issue whether the regional offices were covered within the ambit of the Act, the Court held that the principal test to connect the workman with the employer was whether the employee is connected with the work of the factory. It held that the “true test is control by the principal employer over the employee.” It therefore held that the regional offices were covered by the Act and directed the Appellant liable to contribute towards its employees’ health insurance.

“Medical facilities, therefore, is a fundamental and human right to protect…health. In that case health insurance, while in service or after retirement [is a] fundamental right and even private industries are enjoined to provide health insurance to the workman and to live a life with dignity and equality.” Page 5.

“Part IV of the Constitution enjoins not only the State and its instrumentalities but even private industries to ensure safety to the workman and to provide facilities and opportunists for health and vigor of the workman assured in relevant provision in part IV which are integral part of right to equality under Article 21 which are fundamental rights to the workman.” Page 5.

“The principal test to connect the workmen and employer under the Act [is whether] the employee is engaged in connection with the work of the factory. The test of predominant business activity or too remote a connection is not relevant. The employee need not necessarily be the one integrally or predominantly connected with the entire business or trading activities. The true test is control by the principal employer over the employee.” Page 5.