VERY IMPORTANT POINT
Equipment maintenance department of Medical College hospital is covered by term factory within the meaning of the ESI Act and as such covered by ESI Act.

JUDGMENT

S.N. Variava, J.-This Appeal is against an Order dated 25th July, 1997 passed in a Letters Patent Appeal filed by the Appellant.

2. Briefly stated the facts are as follows:

The Appellant is a Hospital which is part of a Medical College. The Appellant has a department, which is called the Equipment Maintenance Department. This department maintains the equipment in the hospital such as X-ray, ECG and Radiation equipment, Kidney dialysis, heart and lung machine, operating table equipment etc. In effect this department, inter alia, repairs the equipment which is being used in the hospital. Admittedly, in this department there are 45 persons working.

3. In 1978 the Respondent issued a notice to the Appellant stating that the Equipment Maintenance Department fell within the purview of Section 2(12) of the Employees State Insurance Act, 1948 (hereinafter referred to as the ESI Act) and that the Appellant should comply with the provisions of the Act with retrospective effect. The Appellant represented that the ESI Act would not apply to the Equipment Maintenance Department, inter alia, on the ground that this department was part and parcel of the Appellant College. The Respondent did not accept this explanation and threatened the Appellant with legal action. The Appellant filed a Petition under Section 75 of the ESI Act before the District Court, Vellore. By a Judgment dated 4th May, 1985 the District Judge held that the Equipment Maintenance Department was not separate and distinct from the Appellant Hospital and that it was just a limb of the hospital. It was held that the Equipment Maintenance Department was not amenable to the provisions of the ESI Act and that the Respondent was not entitled to apply the provisions of the ESI Act or to demand any contribution.

4. The Respondent filed an Appeal before the High Court. That Appeal came to be dismissed on 27th June, 1994. The learned single Judge held that the Equipment Maintenance Department was just a limb of the Medical College and it could not be separated from the main Institution. It was held that the primary and paramount character of the Appellant Institution was to teach medicines to the students. It was held that this department was merely maintained for proper functioning of the main institution and it, therefore, could not be considered to be a factory, even assuming manufacturing process was carried on there.

5. The Respondent then filed a Letter Patent Appeal which was allowed by the impugned Judgment dated 27th July, 1997. Then learned Judges of the High Court relied upon the decision of this Court in the case of Andhra University v. R.P.F. Commissioner of A.P.1. In this case the question was whether the Departments of Publication and Press run by the Andhra University and the Osmania University were liable for coverage under the Employees Provident Funds and Miscellaneous Provisions Act. Relying upon Section 2-A of that Act it had been submitted that for the purposes of determining the applicability of the Act the entire University must be treated as an establishment. It had been submitted that if the University cannot be said to be a factory, then a Department of that University could not also be covered by the Act. This Court held as follows :

"7. We are unable to see how this provision is of any assistance to the appellants. Section 2-A was inserted in the Act merely for the purposes of clarifying the position that the Act applies to composite factories. It is not the intendment of the section to lay down even by remotest implication that an establishment, which is a factory engaged in an industry specified in Schedule I will not be liable for coverage under the Act merely because it is part of a larger organisation carrying on some other activities also which may not fall within the scope of the Act. In construing the provisions of the Act, we have to bear in mind that it is a beneficent piece of social welfare legislation aimed at promoting and securing