Supreme Court

The ESI Corporation vs. Radhika Theatre

MANU/SC/0055/2023

20.01.2023

Insurance

A factory or an establishment shall be governed by the ESI Act irrespective of number of persons employed

The ESI Corporation has preferred the present appeal feeling aggrieved and dissatisfied with the impugned judgment, passed by the High Court by which, the High Court has allowed the said appeal and has set aside the order passed by the Employees Insurance Court (EI Court) dismissing EIC in which the Respondent challenged the demand notice dated 31th August, 1994 issued by the ESI Corporation.

The short question which is posed for consideration of this Court is whether with respect to the demand notices post 20th October, 1989 a factory or an establishment, established prior to 20th October, 1989 shall be governed by the ESI Act notwithstanding that the number of persons employed therein at any time falls below the limit specified by or under the ESI Act?

The ESI Act being a social welfare legislation, any interpretation which would lean in favour of the beneficiary should be given. ESI Act should be given liberal interpretation and should be interpreted in such a manner so that social security can be given to the employees.

Prior to insertion of Sub-section (6) of Section 1 of the ESI Act, only those establishments/factories engaging more than 20 employees were governed by the ESI Act. However, thereafter, Sub-section (6) of Section 1 of the ESI Act has been inserted on 20th October, 1989, and after 20th October, 1989, there is a radical change and under the amended provision, a factory or establishment to which ESI Act applies would be governed by the ESI Act notwithstanding that the number of persons employed therein at any time falls below the limit specified by or under the ESI Act. Therefore, on and after 20.10.1989, irrespective of number of persons employed, a factory or an establishment shall be governed by the ESI Act.

Therefore, for the demand notices for the period after 20th October, 1989, there shall be liability of every factory or establishment irrespective of the number of persons employed therein. The High Court has committed a very serious error in observing that even for the demand notices for the period subsequent 20th October, 1989 i.e., subsequent to inserting Sub-section (6) of Section 1, the said provision is applied retrospectively and the High Court has erred in allowing the appeal and setting aside the demand notices even for the period subsequent to 20th October, 1989.

Sub-section (6) of Section 1 therefore, shall be applicable even with respect to those establishments, established prior to 31st March, 1989/20.10.1989 and the ESI Act shall be applicable irrespective of the number of persons employed or notwithstanding that the number of persons employed at any time falls below the limit specified by or under the ESI Act. The impugned judgment and order passed by the High Court is set aside and the demand notices for the period post 20.10.1989 are restored. Appeal allowed.

Tags : Demand Notices Legality

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