2026 Supreme(Online)(Guj) 6990

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
HONOURABLE MR. HEMANT M. PRACHCHHAK
SURAT MANAV SEVA SANGHV/sEMPLOYEES STATE INSURANCE CORPORATION
R/SCA/6517/2020

Headnote:

(A) Employees' State Insurance Act, 1948 - Sections 1(5), 2(12), 39(5), 45A, 45AA, 45A(2), 75, 75(3), 75(2B), 85B - Employees' State Insurance (General) Regulations, 1950 - Regulations 31A, 31C - Factories Act, 1948 - Sections 2(k), 2(m) - Constitution of India - Article 226, 227 - Bombay Public Trust Act - Jurisdiction of High Court under Article 226 in ESI matters - Availability of alternative remedy under Section 75 of the ESI Act does not bar writ jurisdiction where the order is passed without jurisdiction or in violation of principles of natural justice - Definition of 'factory' under Section 2(12) of the ESI Act - A charitable trust running a pathology laboratory and dialysis center attached to a civil hospital, not engaging in a manufacturing process, does not fall within the definition of 'factory' - Requirement for reasoned orders by quasi-judicial authorities - Orders passed under Sections 45A and 45AA without recording reasons are mechanical and liable to be set aside - Limitation under Section 45A(2) bars determination of contribution beyond five years from the date of payment. (Paras 7, 7.1, 7.2, 7.3, 8, 8.1)

(B) Constitutional Law - Alternative Remedy - The High Court has discretion to entertain a writ petition even if an alternative remedy exists, particularly where the order or proceedings are wholly without jurisdiction or there has been a violation of principles of natural justice, as held in Whirlpool Corporation vs. Registrar of Trade Marks. (Para 8)

Facts of the case:
The petitioner, a charitable trust, operated a pathology laboratory and dialysis center at a civil hospital under a Memorandum of Understanding, providing services at subsidized rates. The respondent, the ESI Corporation, issued a code number to the petitioner and subsequently passed an order under Section 45A determining contribution payable. This order was confirmed on appeal under Section 45AA. The petitioner challenged these orders and consequential show-cause notices for damages and interest, arguing that the ESI Act was not applicable as its activities did not constitute a 'factory' under Section 2(12) of the Act.

Findings of Court:
The High Court found that the activities of the petitioner trust did not fall within the definition of 'factory' under Section 2(12) of the ESI Act, which must be read with the definition of 'factory' and 'manufacturing process' under the Factories Act, 1948. The Court held that the orders under Sections 45A and 45AA were mechanical and not speaking orders, as they failed to record reasons. The Court also noted that the petition fell within the exceptions to the rule of alternative remedy, as the orders were passed without jurisdiction. Consequently, the impugned orders and show-cause notices were quashed and set aside, and the matter was remanded for fresh adjudication.

Issues: The main issues were (i) whether the petitioner's activities fall under the definition of 'factory' under Section 2(12) of the ESI Act, making it liable to be covered under the Act, (ii) whether the orders passed under Sections 45A and 45AA were valid speaking orders, and (iii) whether the existence of an alternative remedy under Section 75 of the ESI Act bars the maintainability of the present writ petition.

Ratio Decidendi: The court ruled that a charitable trust providing medical services attached to a civil hospital, without engaging in a manufacturing process, does not fall within the ambit of a 'factory' under the ESI Act. Quasi-judicial authorities must pass reasoned orders; orders passed mechanically without recording findings are illegal. The High Court can entertain a writ petition under Article 226 despite an alternative remedy where the order under challenge is wholly without jurisdiction or violative of principles of natural justice.

Result: Petition partly allowed. Impugned orders and show-cause notices quashed and set aside. Matter remanded to the respondent authority for fresh adjudication in accordance with law, after giving ample opportunity of hearing to all concerned parties. Rule made absolute to the aforesaid extent. No order as to costs. (Para 9)