The mere act of storing medicine in a domestic refrigerator by a trader does not constitute a 'manufacturing process' under the Factories Act and ESI Act, as it lacks an active process involving the alteration or adaptation of the product.

ORAL JUDGMENT:-

CORAM : JITENDRA JAIN, J.

DATED : 2nd FEBRUARY 2026

1. This appeal filed under Section 82 of the Employees’ State Insurance Act, 1948 (for short “the ESI Act”) was admitted on 19th August, 2019 on following substantial question of law.

(a) Whether the use of refrigerator for storage of medicines in a refrigerator amounts to continuation of process of manufacturing ?

2. This appeal is filed against an order of the ESI Court dated 8th September, 2015 wherein it is held that preservation and storage of medicines in the refrigerator would amount to process of manufacturing since the said process continues till the goods are disposed of by a person who is involved in the trade. The reasoning is given in paragraphs 23 and 24 of the impugned order.

Nature of Activity :

3. The Appellant is in the business of distribution of medicines of several pharmaceutical companies. The Appellant is a trader and the medicines purchased from pharma companies are stored in refrigerator till they are finally sold to various druggist and chemist. These facts are not disputed.

Submissions of the Appellant :

4. Mr. Vaidya, learned counsel for the Appellant states that the Appellant is only a trader and by preserving the medicines in refrigerator they do not engage in the manufacturing of these medicines. The Appellant, therefore, cannot be made liable under the ESI Act. The principle of extension of manufacturing process applied by the ESI Court is erroneous. He further relied upon following decisions in support of his submissions:-

(a) Ritz Hotel (Vegetarian) Pune V/S Joint Regional Director, (1 1994 Supreme (Bom) 411)

(b) Regional Director Employees State Insurance Corporation V/S Serofie Bernard Vaz, (2 2009 (1) LLN 496)

(c) Hotel New Nalanda V/S Regional Director ESI Corporation , (3 2009-IV-LLJ-21 (SC))

d) The Management of Kumar Medical Centre (Wholesale Pharmaceutical Distributors) V/S Employees State Insurance Corporation Sub-Regional Office, (4 2011 (2) CWC 802)

Submissions of the Respondent-Corporation :

5. Per contra, Mr. Pathak, submits that on a conjoint reading of Section 2-A, Section 2(12) and Section 2(14-AA) of the ESI Act with Section 2 (k)(vi) of the Factories Act, 1948, the activity of storing and preserving medicines in cold storage is liable to be included in the definition of “manufacturing process” and therefore the impugned order has correctly held the Appellant liable under the ESI Act. Mr. Pathak states that the act of preservation itself would amount to manufacturing process and more particularly considering the welfare legislation with which we are concerned with. The manufacturing process need not result into creation of any new product but it can be also maintenance of the existing product. Therefore, he submits that the reasoning given by the ESI Court is justified. He further submitted that if two views are possible, then the view in favour of the social welfare legislation is to be considered.

Analysis & Conclusions :

6. I have heard learned counsel for the Appellant and the Respondents.

7. Section 2-A of the ESI Act provides that, every factory or establishment to which this Act applies shall be registered within such time and in the manner specified in the regulation. Once registered, the said factory or establishment is liable to make contribution under Section 39 of the said Act.

8. The phrase “factory” as defined by Section 2(12) of the ESI Act reads as under:-

Section 2(12) “factory” means any premises including the precincts