Important Point
ESI Act would apply to an establishment only when number of employees is 20 or more and all those employees answer the description of employees contained in Section 2(9).

Headnote:Employees State Insurance Act, 1948-Section 2(9) and 2(12) read with Section 1(5) - Employee -Meaning of-Word employee is applicable to those who are not officers - 20 or more persons should be those who fall within definition of ‘employee’ as given in Section 2(9) getting wages as prescribed therein-Even if employees are more than 20 if employees receiving salary within definition of Section 2(9) are less than 20 Act would not apply.
       Held : One view is that for Act to be applicable to an establishment total number of employees should be 20 or more (now it is 10 or more) irrespective of the fact whether all the employees fall within the definition of ‘employee’ as given in Section 2(9) meaning thereby that drawing of any amount of wages is immaterial. Other view is that these 20 or more persons should be those who fall within the definition of ‘employee’ as given in Section 2(9) of the Act getting wages as prescribed therein. As to what ‘wages’ means has also been defined. Second view commends to us. It was submitted that if there are 18 employees drawing the amount of wages prescribed and only two or more are drawing more than that, the Act should be applicable as in any case this is beneficial legislation. Section 2(12), no doubt, uses the words “persons are employed or were employed for wages”. Stress was, therefore, on the word ‘persons’ and it is submitted that for the Act to be applicable only criteria is to see if the establishment has 20 or more persons in its employment. This interpretation ignores the fact of wages as defined in Section 2(22). If we refer to the definition of ‘factory’ when the Act came into force or at least till 1968 when the Act was amended by amending Act 44 of 1966, ‘factory’ meant any premises “wherein 20 or more persons are working”. This definition of ‘factory’ was changed and at the relevant time it was substituted by the words “employed for wages”. The exact amendment we have already noticed above. When the word ‘wages’ is specifically introduced in the Section it can only mean to have reference to what ‘wages’ mean in Section 2(22) of the Act. It cannot be given any other meaning as has been done by the Andhra Pradesh High Court. In our view, therefore, the Act would apply to an establishment only when number of employees is 20 or more and all those employees answer the description of employee contained in Section 2(9) of the Act. (Para 5)
       To controvert the argument that even though majority of the persons employed are ‘employees’ and their number is less than 20 they should not be deprived of the benefit under the Act, it was submitted that what will happen when the ‘employees’ falling within the definition of Section 2(9) of the Act are only 2 or 3 though the total strength in the establishment is more than 20. How can it be said in that case that the Act should nevertheless apply to such an establishment? The answer is obviously in negative that Act cannot apply. (Para 6)
       The High Court was of the view that “the word `employee’ is applicable to those who are not officers. In the instant case, there are five officers and the balance of the workers are less than 20". High Court was, thus, of the view that the notification was not applicable in the case of the respondent. We, uphold the impugned judgment of the High Court that since in the establishment of the respondent the employees number less than 20 the notification dated September 30, 1988 extending the Act to the establishment of the respondent is not applicable. (Paras 4 & 10)

Judgment

D.P. Wadhwa, J.-Dissatisfied with the judgment of Delhi High Court holding that the notification dated September 30, 1988 issued under sub-section (5) of Section 1 of the Employees’ State Insurance Act, 1948 (for short, the ‘Act’) was inapplicable to the establishment of the respondent, Employees’ State Insurance Corporation (ESIC) has filed the present appeal after obtaining leave from this Court.

2. Under sub-section (5) of Section 1 of the Act, notification was issued, after complying with necessary formalities, extending the provision of the Act to ‘shops’. It is not disputed that respondent is a shop and that the notification would be applicable to it if other conditions for application of the Act are fulfilled. The notification is as under:

“Delhi Administration

(Labour Department)

Dated : 30.9.1988

Notification

In exercise of power conferred by sub-section (5) of Section 1 of the Employees’ State Insurance Act, 1948 (34 of 1948), read with the Ministry of Labour, Government of India, Notification No. 55.122(2) dated the 14h Dec., 1949 the Lt. Governor of the Union Territory of Delhi in consultation with the approval of the Central Government, and having previously given the requisite notice vide this Administration’s Notification No. F.28 (2)87/TMP/LC/Lab dated the 9th Feb. 1988 published in the Delhi Gazette (extra ordinary) Part-IV dated the 9th Feb., 1988 hereby extends the provisions of the said Act to the classes of establishments specified in column I of the Schedule below w.e.f. the 2nd day of Oct., 1988.

Schedule

Description of establishment Area in which the establish- ments are situated

The following establish- ments wherein twenty or more persons are employed or were emp- loyed for wages on any day of the preceding twelve months namely :

“SHOPS” In the Union Territory of Delhi.

By Order and in the name of the Lt. Governor of the Union Territory of Delhi.

Sd/-

(Mrs. M. Bassi)

Deputy Secretary (Labour)

Delhi Administration, Delhi”

3. Provisions of the Act apply to factories. ‘Factory’ is defined under clause (12) of Section 2 of the Act. It reads as under :

“‘factory’ means any premises including the precincts thereof-

(a) whereon ten 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 with the aid of power or is ordinarily so carried on, or

(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,

but does not include a mine subject to the operation of the Mines Act, 1952 (35 of 1952) or a railway running shed.”

This definition of ‘factory’ was introduced w.e.f. October 20, 1989. Definition of ‘factory’ as it originally existed prior to amendment by Act 44 of 1966 (w.e.f. 28.1.1968) was as under :

“`factory’ means any premises including the precincts thereof wherein twenty or more persons are working or were working on any day of the preceding twelve months and in any part of which a manufacturing process is being carried on with the aid of power or is ordinarily so carried on but does not include a mine subject to th

Click Here to Read the rest of this document

1998 Supreme(SC) 1093

Important PointESI Act would apply to an establishment only when number of employees is 20 or more and all those employees answer the description of em­ployees contained in Section 2(9).

Cases Referred (2)

Important Point
ESI Act would apply to an establishment only when number of employees is 20 or more and all those employees answer the description of employees contained in Section 2(9).