Employees’ State Insurance Act, 1948

Introduction

• The ESI Scheme is an integrated measure of “Social Insurance” come to the life through the Employees' State Insurance Act - 1948, and is designed to complete the task of protecting “Employees” as defined in the ESI Act – 1948, against the hazards of Sickness, Maternity, Disablement or Death due to Employment injury and to provide full Medical care to insured persons and their families

Applicability

• The ESI Act is applicable across the length and breadth of the India.

• The Act is applicable to the “non seasonal Factories” employing 10 (Ten) or more persons irrespective of whether power is used in the process of manufacturing or not.

• Under Section 1(5) of the Act, the Scheme has been extended to Shops, Hotels, Restaurants, Cinemas including preview Theatre, Road motor transport undertakings and Newspaper establishment employing 20 (Twenty) or more persons.

• Further, u/s 1(5) of the Act, the Scheme has been extended to Private Medical Institution and Educational Institutions employing 20 (Twenty) or more persons in certain States .

The existing wage-limit for coverage under the Act, is Rs. 21,000/- per month (excluding remuneration for overtime) w. e. f:- May 01, 2017.

Applicability

Seasonal factory- exclusively engaged in one or more of following manufacturing processes, namely, cotton

ginning, cotton or jute pressing, ground nuts, manufacture of coffee, idigo, lac, rubber, sugar or tea

and includes a factory which is engaged for a period not exceeding 7 months in a year

ESIC Coimbatore v N. Marappan and another 2010

Facts of the case The employee suffered injury during the course of employment. He has crossed the

salary ceiling on the date of accident. Question arose about his entitlement of disablement benefit from ESIC. ESI court allowed his claim and appeal filed.

Decision Held Since the salary of employee had crossed the statutory limit much earlier to the date of accident, disablement benefit under ESI Act will not be available to the employee

who has received injuries and rendered disabled on the date when his salary was more than the prescribed limit.

Coverage of Cooperative Societies Regional Director, ESIC v Tulsiani Chambers Premises

Cooperative Society 2008

Facts of the case The appellant is a Corporation incorporated under 'ESI Act'). The respondent is a Co-operative Society incorporated and registered under the Maharashtra Co-operative Societies Act, 1960 having its registered office at Bombay. It is rendering services to the members like operating lifts, water supply, electricity, cleaning and security. On

10-1-1989, the appellant issues a letter to the respondents informing them that they are covered by the ESI Act and requesting immediate compliance.

Decision Held The cooperative society rendering services to the members are domestic in nature like operating lifts, water supply, electricity, cleaning and security that are essential

for existence. Mere rendering of Service by Society to its members cannot be said to be either business or trade or commercial activity. The notification issued u/s 1(5)

provides the word “shop” and not the “society”. Society cannot be held to be Industry or shop and at the highest it can be stated that employees of the society

are rendering personal services to the members of the society.

Pithavadian & Partners v Deputy Director, Regional Office ESIC 2010

Facts of the case The petitioner is a partnership firm consisting of professional Architects. Despite

objection by the petitioner firm, the respondent directed the petitioner to pay a sum of Rs.2,77,974/- towards ESI Contribution.

Decision Held Architects are governed by the Architects Act, 1972. They are also further governed

by the Architects (Professional Conduct)Regulation, 1980. Under the Act, an architect is a professional and he is neither a businessman nor a trader. Person who is

rendering professional service cannot be termed as a businessman so as to bring his office within the ambit of the term 'shop’ .

Coverage of CA firm Singhvi Dev and Unni Chartered Accountants v Regional

Director, ESIC & Ors. 2010

Facts of the case Whether a Chartered Accountant's firm comes within the expression "shop" for the purpose of Employees' Insurance Act, is the question that has arisen in this appeal.

Decision Held Shop include an activity which is associated with carrying on trade or commerce and cannot take in premises where professional services are rendered. Hence, office of

CA firm is not the “shop”.

ESIC v Manipal Sowbhagya Nidhi Ltd. 2007

Facts of the case The question that is involved in this appeal is whether "Manipal Sowbhagya Nidhi Ltd.", a public limited company under the provisions of the Companies Act 1956, is a 'shop' coming within the purview of Section 1(4) of the Employees State Insurance Act, 1948 (the Act' for short), or under any notification issued under Section 1(5) of the Act, including the Government notification dated 9.1.1987. The company is carrying on the activities of rendering service to its members in the form of giving loans and accepting deposits against interest rate.

Decision Held Respondent is carrying on the activities of rendering service to its members in the form of giving loans and accepting deposits and more importantly, the said service being rendered for a price, which price is the interest that is levied on the loans taken by the members, all in all, the activities carried on by the respondent-company brings it within the fold of an establishment carrying on a systematic commercial or financial activities. The very fact that as many as 40 branches are spread over the entire State of Karnataka and the respondent carries on its activities through good number of employees, which is not less than 20, all the necessary ingredients are satisfied in the instant case so as to attract the provisions of the Act. Since the respondent-company comes within the expression 'Shop' as per the Government notification dated 9.1.1987 and in view of Section 1(5) of the Act, the application of the provisions of the Act to the respondent-company cannot be prevented.

Clubbing of Units M’s Sumangali v Regional Director ESIC 2008

Facts of the case The Corporation clubbed Jos Textiles and Jos Cut Piece Centre, two proprietary concerns of two brothers both functioning in the same building at Broadway, Ernakulam, for the purpose of ESI coverage and issued notice as there were 20 or more employees at a time when the inspection was conducted. Notice was issued clubbing the above establishments. The order was challenged, as noted above, before the E.I. Court. The Corporation also clubbed M/s. Rose Fabrics, Jos Brothers Silk and Sarees and M/s. Jos Associates and issued notice claiming coverage. All these three establishments were functioning in Jos Annex Building, Ernakulam. M/s. Jos Associates was functioning on the 5th floor of the same building whereas the other two establishments were functioning in the same premises. The inspection conducted in November 1990 revealed that there were 12 employees working in M/s. Rose Fabrics, 13 employees in Jos Brothers Silk and Sarees and 9 employees in M/s. Jos Associates. The above order clubbing the three establishments were challenged by M/s. Rose Fabrics in I.C.44/91 before the E.I. Court, Alleppey.

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Decision Held

To be considered as "single establishments" for the purpose of coverage under the ESI Scheme as there was functional integrality, unity in management, financial unity, geographical proximity, unity in supervision and control and general unity of purpose. Even if each unit was an establishment having separate registration under the Sales Tax Act, Shops and Establishments Act and the Income-Tax Act, all the units were interdependent and were supplementary and complementary to each other for the sake of their textile business.

Clubbing of Units ESIC Kanpur c M/s Tops food Products 2008

Clubbing of Units ESIC Kanpur c M/s Tops food Products 2008

Decision Held Both the firms in question are separate and none of them carries more than 10 employees, and as such, no contribution can be recovered from the applicant and recovery against applicant is null and void

Assistant RD ESIC v Kohlapur Motor Malak Sangh 2007

Respondent was running two petrol pumps; one at Pune Bangalore Highway and the other at Kolhapur viz. Shivaji Udyamnagar Petrol Pump. The salaries of employees working at both the Units were paid by the respondent company and that the accounts of both the Petrol Pumps were consolidated while preparing the balance sheets of the company. He further admitted that though the profit and loss accounts were drawn separately, later on, they were consolidated. Both the Petrol Pumps have purchased their spare parts from the Head Office and the raw material and petrol was also purchased by the company and, thereafter, it was sold at respective shops. The Employees State Insurance Inspector visited the respondent company and the respondent company was called upon to make payment of contribution towards the ESI Scheme.

Decision Held Held, the 2 petrol pumps owned by same owner, though located at different places but having functional integrity, will be treated as single entity to be clubbed together for coverage of ESIC Act

RD ESIC Mardas v Aruna Stores Proprietor J Shanta 2005

Contribution

Employee’s

Contribution (1.75% of Gross

Salary)

Employer’s Contribution

(4.75% of Gross Salary)

Total Contribution (6.5% of Gross

Salary)

Employment Injury (section 2(8)

Means a personal injury to an employee caused by accident or an occupational disease arising out of and in the course of his employment, being an insurable employment, whether the accident occurs or the occupational disease is con-tracted within or outside the territorial limits of India

Notional Extension of Employment

Disablement

• rendering an insured person incapable of work temporarily and necessitating medical treatment

Temporary disablement

• reducing the earning capacity of the insured person.

•Permanent Partial disablement

• totally depriving the insured person of the power to do any work.

Permanent Total disablement

bo

Example

Facts of the case X, an employee of a factory, after finishing his work for the day was going to cash section for collecting his pay which was situated on the other side of the road within the premises. On the way, he was knocked by a speeding bus and he died.

Decision Held The movement of X from the factory to cash section is deemed to be in the course of employment. As such the death occurred during the course of employment, the employer is liable to pay compensation to the legal representative of deceased.

Regional Director ESIC v Hasinaben Azizbhai Shaikh Ors. 2010

Facts of the case The workman died while in service when he had fallen down from staircase of 40 ft. The medical report showed that death was due to cardiac respiratory failure.

Decision Held The EI court is not bound by any medical report and it has to enquire independently whether employment injury has been caused to concerned employee. Since the injury received by deceased was having direct nexus and proximate cause for death of deceased, dependents will be entitled to compensation.

bo

Regional Director ESIC v Shakeena Bibi Munarashkan Pathan and another 2010

Facts of the case Claimant’s husband was working as a night watchman in Roopam Cinema. While he was on duty between 9 pm to 7 am, found murdered by unknown person in early morning. The dead body was found at work place and during daily hours. Question before the court is whether murder of deceased is covered by the definition of ‘employment injury’ u/s 2(8) of the Act.

Decision Held Since the dead body of deceased was found at work place and during duty hours presumption u/s 51 A of the Act applicable in this case. Since the injury received by deceased was having direct nexus and proximate cause for death of deceased, dependents will be entitled to compensation.

bo

ESIC v C.M. Sasi 2002

Facts of the case In this case the employee was assaulted by some persons near the bus stop adjacent to the factory while he was returning to his house. The only question to be considered is whether the injury sustained by the employee is an employment injury as defined under Section 2(8) of the E.S. I. Act.

Decision Held Since the assault was at the bus stop, the injury caused by strangers could not be treated as an employment injury. There is no connection between the accident and the employment.

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Chandra Matti v ESIC 2003

Facts of the case In this case the deceased was milk vendor for the distribution of milk by riding cycle. He sustained chest pain and fell down from his cycle on which he was carrying milk. While in hospital, he died due to heart attack.

Decision Held Held, deceased died on account of employment injury. There is a connection between the accident and the employment.

bo

Mummi Dipalli Syamala Devi v ESIC 2003

Facts of the case Deceased workman was staying in the quarters in factory premises. Residents of quarter used to carry water from the bore well which was situated within factory premises. In the early hours, deceased died due to electrocution at the bore well. He had not commenced work on that day.

Decision Held Held, doctrine of notional extension cannot be applied in this case as there is no connection between the death and the employment.

Employee(section 2(9)

• “Employee” means any person employed for wages in or in connection with the work of a factory or establishment to which this Act applies and—

• (i) who is directly employed by the principal employer, on any work of, or incidental or preliminary to or connected with the work of, the factory or establishment, whether such work is done by the employee in the factory or establishment or elsewhere; or

• (ii) who is employed by or through an immediate employer, on the premises of the factory or establishment or under the supervision of the principal employer or his agent on work which is ordinarily part of the work of the factory or establishment or which is preliminary to the work carried on in or incidental to the purpose of the factory or establishment; or

• (iii) whose services are temporarily lent or let on hire to the principal employer by the person with whom the person whose services are so lent or let on hire has entered into a contract of service

Employee(section 2(9)

• Does not include:

• Any member of Indian Naval, military or air forces, or

• Any person whose wages exceed the limit as prescribed by Central Government

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Managing Director Hassan Cooperative Milk Producers Society Union Limited V Assistant Regional Director ESIC 2010

Facts of the case HCMPSU Ltd. is a federal society. Its main business is purchasing milk and pasteurization of the same. The milk procured by member societies is transported in lorries/vans to the appellant's dairy. For that purpose, contract is awarded on the basis of rate per kilometer to the lowest bidder. The contractor collects the milk from the various societies in cans on specified routes and transports to the appellant's dairy. The empty cans are re transported and returned to the respective member societies. On September 23, 1994, a show cause notice was issued by the Assistant Regional Director, Employees' State Insurance Corporation, Bangalore to the HCMPSU Ltd. calling upon them to furnish explanation and show cause as to why action should not be taken against them for non-payment of contribution under ESIC Act, 1948

Decision Held The employees as engaged by contractors would not be treated as employees of the principal employer engaged in the business of purchasing milk, particularly when there is no control or supervision upon them by principal employer. It will not come under definition of employee u/s 2(9) of the Act

Decision Held

bo

AIR Ltd v ESIC 1985

Facts of the case Book Binders engaged by a contractor who has been entrusted the binding work by a company engaged In the business of printing and book binding within

the employer’s premises

Decision Held Yes they will be covered

bo

Deputy Director ESIC v Proprietor, M/s summer palace restaurant, 2007

Facts of the case Security personnel hired from Security Service

Agency deployed at respondent's establishment

Decision Held Yes they will be covered

Contribution Period and Benefit Period

Contribution Period Benefit Period

1 1st April to 30th September 1st January to 30th June in the following year

2 1st October to 31st March Following 1st July to 31st December of calendar year

An employee whose wages exceed such wages as may be prescribed by the Central Government] at any time after (and not before) the beginning of the contribution period, shall continue to be an

employee until the end of that period

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Facts of the case The petitioner was employed as porcelain moulder in the respondent company as a permanent worker. On 21.12.1991, while he was in employment, he met with an accident. While he was working in Hydraulic Press at Procelain Section, he suffered crush injury in his left hand and was immediately removed to Sri Ramakrishna Hospital, Coimbatore. On 25.12.1991, the crushed parts of the left hand were removed and the left hand was amputated below elbow. The permanent disablement is due to the amputation below elbow of the left hand. He submitted accident report on 21.12.1991 itself to the first respondent (ESI Corporation). He approached the E.S.I. Local office, for sanction of permanent disablement benefit. But they refused. On 30.06.1992 a reply was sent by the Corporation that he was not an employee under Section 2(9) of the E.S.I. Act on the date of accident i.e., on 21.12.1991. The Management also sent a letter to him that he was not employee, as his monthly wages exceeded Rs. 1,600/- per month since 1.4.1991.

Decision Held The fact that such an employee had made contribution during the preceding

contribution period and would be entitled to the sickness, maternity and other benefits provided under the other sub-clause of Section 46(1) would not on that

score enable that employee to claim the disability benefit as well for an employment injury sustained during the benefit period

For 91 days @ 70% of wages

For 26 weeks @ 100% of wages

@ 90% of wages

@ 90% of wages in form of monthly payments

@ 10,000/-

Self and dependant, no cap

Some Recent Highlights

• The existing wage-limit for coverage under the Act, is Rs.

21,000/- per month w. e. f:- May 01, 2017.

• There is no wage ceiling for availing the ESI benefits for

PWD employees

• Government plans to pay companies’ share of ESI for new

recruits

• Workers can soon chose insurance plans other than ESI

Case study

• Do you think that the case of sub normal eye sight or loss of required vision to work as a driver may be considered as an employment injury?

• Do you think that termination of employees amounts to retrenchment which is illegal?

• Can these workmen be compensated in any way?

Decision Held

Supreme Court itself evolved a scheme for giving relief to the workmen-drivers keeping in view the points (i) that the workmen concerned are incapacitated to work only as drivers and are not rendered incapable of taking any other job either in the Corporation or outside; (ii) that the workmen are at an advanced age of their life and it would be difficult for them to get a suitable alternative employment outside. Accordingly, the Supreme Court directed that the Corporation shall in addition to giving each of the retired workmen his retirement benefits, offer him any other alternative job which may be available and which he is eligible to perform and in case no such alternative job is available each of the workman shall be paid along with his retirement benefits an additional compensatory amount proportionate to the length of service rendered by the employees and the balance of their service.

Administration of ESI Scheme

ESI Corporation

Chairman- Union Minister for Labour

Vice Chairman- Secretary to GOI Ministry of Labour

Standing

Committee

To advise ESIC and SC Medical Benefit

Council

Executive body