1. Dispute over liability for contributions under the Employees State Insurance Act, 1948, concerning whether a coffee manufacturing, blending, and packing unit qualifies as a seasonal factory. (Para 2 , 7 )
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2025 Supreme(SC) 1525
SUPREME COURT OF INDIA
SUDHANSHU DHULIA AND K. VINOD CHANDRAN, JJ.
Hindustan Unilever Limited – Appellant
Versus
Deputy Director Sub Regional Office (Salem) – Respondent
Petition(s) for Special Leave to Appeal (C) No(s). 24686 of 2023 [Arising out of impugned final judgment and order dated 26-06-2023 in WA No. 2836/2022 passed by the High Court of Judicature at Madras]
Decided on : 06-05-2025
Important Points
The court examined whether a factory engaged in coffee manufacture, blending, and packing, operating for more than seven months, qualifies as a 'seasonal factory' under Section 2(19A) of the ESI Act, referring the matter to a larger bench to determine if the definition is inclusive or exhaustive.
Subject
Labor Law - Employees State Insurance
Act Referred
Headnote
(A) Employees State Insurance Act, 1948 - Sections 1(4) and 2(19A) - Contribution liability for seasonal factory - Appellant claimed exclusion from ESI Act as seasonal factory manufacturing coffee - Court considered definition of 'seasonal factory' under ESI Act, noting amendments over time and the conditions under which factories qualify - The key question was whether appellant's factory, engaged in blending and packing alongside manufacturing coffee, falls under the definition of a seasonal factory. (Paras 2-14)
(B) Legislative Intent - The court held that the amendment expanding the definition aimed to clarify that blending and packing of coffee is subject to a seven-month operational limit to qualify as seasonal; thus, the appellant's operation, exceeding this duration due to blending with chicory, excluded it from seasonal classification. (Paras 8-13)
(C) Appeal Status - The bench deemed a re-evaluation by a three-judge bench necessary for broader legal clarity on definitions of 'seasonal factory' and statutory interpretations relevant to contributions under the ESI Act. (Paras 14-15)
(B) Legislative Intent - The court held that the amendment expanding the definition aimed to clarify that blending and packing of coffee is subject to a seven-month operational limit to qualify as seasonal; thus, the appellant's operation, exceeding this duration due to blending with chicory, excluded it from seasonal classification. (Paras 8-13)
(C) Appeal Status - The bench deemed a re-evaluation by a three-judge bench necessary for broader legal clarity on definitions of 'seasonal factory' and statutory interpretations relevant to contributions under the ESI Act. (Paras 14-15)
Legal Category Hierarchy
Advocates:
Advocate Appeared:
For the Appellant :Mr. V. Giri, Senior Advocate, Mr. Sandeep Prabhakar, Senior Advocate, Mr. Pravin Bahadur, Advocate, Mr. Amit Agarwal, Advocate, Mr. S. Anjani Kumar, Advocate, Mr. Eshan Banduni, Advocate, Mr. Nihar Dharmadhikari, Advocate, Mr. Amit Kumar, Advocate and Ms. Prerna Mehta, Advocate
For the Respondent:Mr. Santosh Krishnan, Advocate and Mr. Ashwin Joseph, Advocate
Advocate Appeared:
For the Appellant :Mr. V. Giri, Senior Advocate, Mr. Sandeep Prabhakar, Senior Advocate, Mr. Pravin Bahadur, Advocate, Mr. Amit Agarwal, Advocate, Mr. S. Anjani Kumar, Advocate, Mr. Eshan Banduni, Advocate, Mr. Nihar Dharmadhikari, Advocate, Mr. Amit Kumar, Advocate and Ms. Prerna Mehta, Advocate
For the Respondent:Mr. Santosh Krishnan, Advocate and Mr. Ashwin Joseph, Advocate
Table of Contents
2. Appellant claims exclusion as a seasonal factory based on coffee manufacture; Respondent argues blending and packing activities exceeding seven months disqualify the factory from such status. (Para 3 , 8 , 9 )
3. The court observed that blending and packing are distinct from exclusive manufacture and, under the 1966 amendment, require a seven-month limit to be deemed seasonal. (Para 11 , 12 , 13 )
4. A factory engaged in blending or packing tea or coffee is a seasonal factory only if engaged for a period not exceeding seven months per year. (Para 12 )
5. The matter is referred to a three-judge bench for reconsideration of the definition of seasonal factory under the Employees State Insurance Act, 1948. (Para 14 , 15 )
6. When is a coffee-related factory considered a seasonal factory under the ESI Act?
A factory exclusively manufacturing coffee is a seasonal factory. However, if it also engages in blending, packing, or re-packing, it qualifies as a seasonal factory only if it operates for a period not exceeding seven months in a year. (Para 12 )
7. What is the legal effect of the 1966 amendment on blending and packing processes?
The amendment removed blending, packing, and re-packing from the category of incidental processes. These activities now only qualify for seasonal factory status if the factory is engaged in them for no more than seven months annually. (Para 11 , 13 )
8. How should the phrase 'means and includes' be interpreted in a statutory definition?
While 'include' generally enlarges a definition, a clause employing 'means and includes' is interpreted as an exhaustive definition that encompasses the core meaning and specified additions, excluding anything not specifically mentioned. (Para 11 )
ORDER :
1. Leave granted.
2. The appellant before this Court is a Company which has a factory presently engaged in the manufacturing of coffee as also its blending and packing and is known as Hindustan Unilever Limited. The question before this Court is whether appellant is liable to make its contribution under the Employees State Insurance Act, 1948 (hereinafter called "the ESI Act") or not?
3. Mr.V.Giri, learned Senior Counsel for the appellant would claim exclusion from the purview of the ESI Act on the ground that it is a seasonal factory since it is a factory engaged in the manufacture of coffee. The appellant relied upon sub-section (4) of Section 1 of the ESI Act which reads as under:
"(4) It shall apply, in the first instance, to all factories (including factories belonging to the Government other than seasonal factories:
[Provided that nothing contained in this sub-section shall apply to a factory or establishment belonging to or under the control of the Government whose employees are otherwise in receipt of benefits substantially similar or superior to the benefits provided under this Act]."
Mr. Giri, learned Senior Counsel then relied upon Section 2 (19A) of the ESI Act. He would then argue that a seasonal factory as defined under Section 2 (19A) of the ESI Act, includes a factory which is manufacturing coffee.
4. Initially, the definition of factory and seasonal factory as given in Section 2 (12) of the ESI Act read as under: -
"2 (12) "factory" means any premises including the precincts thereof whereon twenty 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 on with the aid of power or is ordinarily so carried on but does not include a mine subject to the operation of the Kines Act, 1952, or a railway running shed : '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, decortication 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."
5. An amendment has been brought in the year 1966 and the following was included in the definition clause i.e. in Section 2 (12). What is included by the said Amendment Act of 44 of 1966 reads as under:
"...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 re-packing of tea or coffee; or
(b) in such other manufacturing process as the Central Government may, by notification in the Official Gazette, specify";
6. A further amendment was brought in the year 1989 and now the definition of seasonal factory under Section 2 (12) has been transposed bodily to Section 2 (19A) of the ESI Act and the definition is in pari materia to the amendment of 1966. Section 2 (19A) which defines seasonal factory, reads as under:
"2(19A) 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, decortication 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 re-packing of tea or coffee; or
(b) in such other manufacturing process as the Central Government may, by notification in the Official Gazette, specify;"
7. The appellant-factory got a notice from the authority under the ESI Act on 05.08.2013 directing them to pay the contribution under the ESI Act and with effect from the year 2006. The appellant challenged it before the learned Single Judge of the Madras High Court, where the groun
