IMPORTANT POINTS
(1) ESI Act should be given liberal interpretation and should be interpreted in such a manner so that social security can be given to employees.
(2) ESI contributions – For demand notices for period after 20.10.1989, there shall be liability of every factory or establishment irrespective of number of persons employed therein.

JUDGMENT :

M.R. Shah, J.

1. Feeling aggrieved and dissatisfied with the impugned judgment and order dated 17.02.2021, passed by the High Court for the State of Telangana at Hyderabad in Civil Misc. Appeal No. 125/2011, by which, the High Court has allowed the said appeal and has set aside the order dated 13.12.2010 passed by the Employees Insurance Court (hereinafter referred to as the EI Court) dismissing EIC No. 14/2003 in which the respondent herein challenged the demand notice dated 31.08.1994 issued by the ESI Corporation, the ESI Corporation has preferred the present appeal.

2. The facts leading to the present appeal in nutshell are as under: -

2.1 That the respondent herein was running a Cinema Theatre since 1981. It paid ESI contributions up to September, 1989. However, thereafter, as its employees were less than 20 in number, it did not pay the contributions. Therefore, the appellant – corporation issued demand notices. The respondent herein challenged the demand notices before the EI Court by way of EIC No. 14/2003 containing, inter alia, that prior to the insertion of Sub-section (6) of Section 1 of the ESI Act, 1948 w.e.f. 20.10.1989, it employed less than 20 persons and therefore, it was not liable to be covered under the provisions of the ESI Act. The EI Court dismissed the case vide order dated 13.12.2010. The order passed by the EI Court confirming the demand notices was the subject matter of appeal before the High Court. Before the High Court, it was the case on behalf of the respondent – original appellant that Sub-section (6) of Section 1 of the ESI Act which came to be inserted on 20.10.1989 shall not be made applicable retrospectively and the same would be effective only on or after 20.10.1989 and not prior to that date. On the other hand, it was the case on behalf of the ESI Corporation that the ESI Act being a social welfare legislation, greater amplitude is required to be given to the same, as, it is intended for the welfare of the workmen concerned. It was submitted that as per amended Sub-section (6) of Section 1, all the establishments shall be governed by the ESI Act, notwithstanding the fact that the number of persons engaged therein is less than the prescribed number. However, thereafter, by the impugned judgment and order the High Court has allowed the appeal preferred by the respondent herein taking the view that amendment to Section 1 of the ESI Act by which Subsection (6) of Section 1 came to be inserted w.e.f. 20.10.1989, the same shall not be applicable retrospectively and the same shall not be made applicable to an establishment, established prior to 20.10.1989/31.03.1989.

2.2 Feeling aggrieved and dissatisfied with the impugned judgment and order passed by the High Court, the ESI Corporation has preferred the present appeal.

3. Shri Mahesh Srivastava, learned counsel appearing on behalf of the appellant – ESI Corporation has vehemently submitted that the High Court has materially erred in allowing the appeal and setting aside the demand notices even for the period post 20.10.1989 by holding that amendment to Section 1 by inserting Sub-section (6) shall not be applicable retrospectively.

3.1 It is vehemently submitted that the High Court has not properly appreciated the object and purpose of the ESI Act and that the ESI Act is a social welfare legislation and intended for the welfare of the workmen concerned. It is submitted that therefore, to achieve the object and purpose of the ESI Act, the legislature thought it fit to insert Sub-section (6) to Section 1 of the ESI Act by which a factory or an establishment shall be governed by the ESI Act notwithstanding the number of persons employed therein at any time falls below the limit specified by or under the ESI Act or the manufacturing process therein ceases to be carried on with the aid of power.

3.2 It is submitted that demand notices for the period post 20.10.1989, therefore, cannot be said to be illegal applying Sub-section (6) of Section 1 retr