ESI Act, 1948

Object of this Act is to provide for certain benefits

to employees in case of sickness, maternity and
employment injury and to make provision for
certain other matters in relation thereto
This is the legislation meant for providing social and
economic justice to the working class in India. The Act
provides for payment of economic assistance to the insured
persons in the form of sickness benefit, maternity benefit,
disablement benefit, dependents benefit etc., to the workers
employed in the notified industrial establishments. The
Act provides for the establishment of Employees State
Insurance Corporation, Medical Benefit Council, ESI
Hospitals, and also the ESI Courts. Any employer who
does not remit the contribution to the ESI fund within the
stipulated time for the employees working under him, is an
offence punishable under this Act.
Application of the Act
 This Act may not be applicable at once. For the application of this
different dates may be given for different parts(Sec1(3) )
 Factories in manufacturing process and employing 10 or more persons for
wages, irrespective of aid of power; (Sec1(4));
 Employees of covered units and establishments under this Act(applies to
shops, Hotels and Restaurants, clubs, cinemas, including preview theatres,
News paper establishments, Road and Transport undertakings, agricultural
etc.,)(Sec.1(5);
 A factory or establishment to which this Act applies shall continue
irrespective of the number of employees continuing in it. (Sec.1(6))
Exceptions:---
 Seasonal factories;
 Government can exempt a factory or establishment from ESI Act, if the
employees are getting better medical facilities
Basant Kumar Sarkar and Ors.Vs.Eagle Rolling
Mills Ltd. and Ors. AIR1964SC1260– constitutional
validity of Sec.1(3) was challenged by SLP-- it was
held that Section 1(3) of the Act purports to authorize the
Central Government to establish a Corporation for the
administration of the scheme of Employees' State
Insurance by a notification. In other words, when the
notification should be issued and in respect of what
factories it should be issued, has been left to the
discretion of the Central Government and that is
precisely what is usually done by conditional legislation
M/s.Hindu Jea Band, Jaipur v. Regional Director, ESI,
Jaipur and State of Rajasthan, (1987) I LLJ 502(SC) –
Sec.1(5) of the Act was challenged – the word ‘shop’
defined in broader sense to provide benefits to it
employees– it is not violation of Art.14
What is Employment Injury?
Sec.2(8) Employment Injury:
Components—
(a) injury must be personal to an employee;
(b) the injury must be caused by an accident or
occupational disease;
(c) the accident must arise out of and in the course of
employment;
(d) the employment must be insurable
Rajappa v. ESIC(1992) II LLJ 714 (Karn):
In employment injuries, generally the doctrine of
notional extension has to be applied to the factual
situation pertaining to the case. "The expression
'arising out of employment' is again not confined to the
mere nature of the employment. The expression
applies to employment as such to its nature, its
conditions, its obligations and its incidents."
In M. Mackenzie v. I. M. Issak(1970-I-LLJ-16), the Apex
Court has observed :-
"There must be a casual relationship between the accident and
the employment."
Further, it is observed that :-
"The expression 'arising out of employment' is again not
confined to the mere nature of the employment. The
expression applies to employment as such to its nature, its
conditions, its obligations and its incidents."
The facts of this case fails to prove that there was a nexus
between the assault causing injury to the employee and the
employment.
Regional Director, ESIC v. L.Ranga Rao, (1982) I LLJ
29(Karn)—The Act is designed to confer benefits on
the disabled employees and their dependents in
distress. The machinery for implementing the scheme
of State Insurance is provided in the shape of the
Corporation and subsidiary agencies. The benefits due
to the employees and their dependents have to be
promptly worked out and delivered to them and it
should be the primary concern of the Corporation.
The Supreme Court in B.E.S.T. Undertaking v. Agnes, [1963-II
L.L.J. 615], said thus :
"The question, when does an employment begin and when does
it cease depends upon the facts of each case. But the Courts have
agreed that the employment does not necessarily end when the
'down tool' signal is given or when the workman leaves the
actual workshops where he is working. There is a notional
extension of both the entry and exist by time and space. The
scope of such extension must necessarily depend on the
circumstances of a given case. An employment may end or may
begin not only when the employee begins to work or leaves his
tools but also when he uses the means of access and egress to
and from the place of employment."
Sec.2(9) Employee means ‘any person employed for
wages in or in connection with the work of a factory or
establishment and—
(i) who is directly employed by the principal employer
or any work of or incidental ……..
(ii) who is employed by or through an immediate
employer on the premises of the factory or establishment
or under the supervision of the employer…..
(iii) whose services are temporarily lent or let on hire to
the principal employer….
M.D.,Hassan Coop.Milk ... vs Asstt. Regnl.Director,
E.S.I.C on 26 April, 2010—
Employees are not covered by the definition of
`employee' under Section 2(9) of the Act, where the
principal employer had no knowledge about the
number of persons engaged by the contractors or the
other details of such persons and the lack of
supervision of the principal employer.
M/S Padmini products, Bangalore v. The Regional
Director, ESIC ILR 2000 Karn 2370– although
persons were employed through the immediate
employer, as long as those employees work under the
supervision of the principal employer and for
incidental work related to the manufacturing process,
those persons employed could be termed as employees
to the principal employer as per the ESI Act, 1948.
What is Factory?
Sec.2(12) Factory— Means any premised including the precincts
thereof:
(a) whereon ten or more persons are employed or were employed on
any day of the preceding twelve months, and in any part of which a
manufacturing process is being carried n or is ordinarily so carried
on;
(b) whereon twenty or more persons are employed or were
employed for wages on any day of the preceding twelve months,
and in any part of which a manufacturing process is being carried on
without the aid of power or is ordinarily so carried on—
Exceptions:
(a) a mine subject to the operation of the Mines Act, 1952, or
(b) a railway running shed.
Prerequisites of Sec.2(12)
Requisite member of employees:
Premises means building as well as land and includes
precincts shows that there maybe some premises
within precincts and some premises without precincts
and does not exclude land.
Manufacturing process is being carried on without the
aid of power or is ordinarily so carried on
"manufacturing process" means any process for –
(i) making, altering, repairing, ornamenting, finishing, packing,
oiling, washing, cleaning, breaking up, demolishing, or otherwise
treating or adapting any article or substance with a view to its use,
sale, transport, delivery or disposal, or
(ii) pumping oil, water, sewage or any other substance; or;
(iii) generating, transforming or transmitting power; or
 (iv) composing types for printing, printing by letter press,
lithography, photogravure or other similar process or book binding; or
(v) constructing, reconstructing, repairing, refitting, finishing or
breaking up ships or vessels; (Inserted by the Factories (Amendment)
Act,1976, w.e.f. 26-10-1976.)
(vi) preserving or storing any article in cold storage;
M/S. Hotel New Nalanda vs Regional Director, E.S.I.
Corpn, (2009) 14 SCC 558. --- The Apex Court held that or
holding an establishment to be a `factory' within the
meaning of section 2(12) of the Act, it must first be
established that some work or process is carried on in any
part of the establishment that amounts to `manufacturing
process' as defined under section 2(k) of the Factories Act,
1948;
Mohd Arif vs Employees State Insurance Corp on 25
October, 2010-- . Mere usage of Refrigerator in hotels and
lodging houses with the aid of electricity could not be
measured for the application of this Act.
Bombay Anand Bhavan Restaurant v. E.S.I.
Corporation, C.A. No. 5640 of 2004 SC;
The establishment involves a manufacturing process
with the aid of L.P.G. gas, which can now be termed as
power, the establishment of the appellants can be
termed as factories
In New Tajmahal Café Ltd, Mangalore v. Inspector of
Factories, Mangalore, (AIR V 43 C 190 Nov.) where a
restaurant using refrigerator was not considered as
factory for the purpose of covering it under the ESI
Act
The Assistant Director vs M/S. Western Outdoor
Interactive ----- on 11 July, 2012 “The ESI Act is
welfare legislation and the application of ESI Act is
not a regressive but a progressive step. To think that if
ESI Act is made applicable then it will affect IT
industry adversely is a futile fear”
Who is Insured Person
Insured Person-Sec.2(14):

'Insured person' means a person who is or was an

employee in respect of whom contributions are or were
payable under this Act and who is, by reason thereof,
entitled to any of the benefit provided by this Act."
Bharagath EngineeringVs.R. Ranganayaki and Anr. (2003)2SCC138, -- The deceased
employee was clearly an 'insured person', as defined in the Act. As the deceased employee
has suffered an employment injury as defined under Section 2(8) of the Act and there is no
dispute that he was in employment of the employer, by operation of Section 53 of the Act,
proceedings under the Compensation Act were excluded statutorily.

Employees' State Insurance Corporation v. Harrisons Malayalam Limited

MANU/SC/1655/1998; (1999)ILLJ284SC That being the position, the date of payment
of contribution is really not very material. In fact, Section 38 of the Act imposes a
statutory obligation on the employer to insure its employees. That being a statutory
obligation, the date of commencement has to be from the date of employment of the
concerned employee.

 E.S.I. Corporation v. Hotel Kalpaka International MANU/SC/0244/1993 :

(1993)ILLJ939 SC , it was held that the employer cannot be heard to contend that since
he had not deducted the employee's contribution on the wages of the employees or that the
business had bene closed, he could not be made liable
What is Seasonal Factory(Sec.2(19-A)?
Seasonal Factory(Sec.2(19-A))—
Section 1(4) excluded "seasonal factory" from the scope of the Act. The
"seasonal factory" is defined under the Act which is extracted hereunder:
 Seasonal factory means “a factory which is exclusively engaged in one or
more of the following manufacturing processes, namely, cotton, ginning,
cotton or jute pressing, decortications of groundnuts, the manufacture of
coffee, indigo, lac, rubber, sugar (including gur) or tea or any
manufacturing process which is incidental to or connected with any of the
aforesaid processes”; and includes
 A factory which is engaged for a period not exceeding seven months in a
year—
 (a) in any process of blending, packing or repacking of tea or coffee; or
 (b) in such other manufacuring process as ;the Central Government may,
by notification in the official Gazette
E.S.I.C., Bangalore vs Brooke Bond India Ltd, (1982)
IILLJ 395 Kant--The Court held that the present
factory in question is engaged in manufacturing
process of coffee (throughout the year and not only for
seven months or less) which certainly falls within the
ambit of seasonal factory, without even looking into
inclusive definition.
The Regional Director, Employees'State Insurance
CorporationVs.M/s. High Land CoffeeWorks of
P.F.X. Saldanha & Sons and another AIR1992SC129,--
The word "include" in the statutory definition is
generally used to enlarge the meaning of the preceding
words and it is by way of extension, and not with
restriction and when it is so used, these words or phrases
must be construed as comprehending, not only such
things as they signify according to their natural import
but also those things which the interpretation clause
declares that they shall include.
 CORPORATION (Sec.3-7)
Sec.3-Establishment ;
Sec.4-Constitution;
Sec.5 term of office;
Sec.6– eligibility for re-nomination or re-election;
Sec.7- Authentication of orders, decisions, etc.
Powers of the ESI Corporation

Sec.17-- To employ staff of officers and servants;

Sec.19 – To promote measures for health, etc., of
insured person;
Sec.25- To appoint Regional Boards, Local
Committees, Regional and Local Medical Benefit
Council;
Sec.29 – Holding of Property;
Sec.45– Appointment of Social Security Officers;
Sec.45-A—To determine the amount of contribution
payable in respect of the employees.
Sec.45-B– Power to recover contributions
Duties of the ESI Corporation
Sec.32– to submit copy of the budget for the approval
of the Central Government
Sec.33; to maintain accounts;
Se.34; audit of accounts
Sec.35; submission of Annual report to the Central
Government
Sec.36 – audited accounts and the annual report to be
placed before the parliament
Sec.37 –valuation of assets and liabilities of the
corporation
STANDING COMMITTEE (Sec.8 & 9)
Sec.8-constitution of the Committee;
Sec.9– Term of office;
Sec.6– eligibility for re-nomination or re-election;
Sec.18– Powers of the Standing Committee
MEDCAL BENEFIT COUNCIL(Sec.10)
Sec.10(1)—Constitution of the Council;
Se.10(2) – Term of office;
Sec.6– eligibility for re-nomination or re-election;
Sec.22- Duties of the Medical Benefit Council.