The applicability of the Employees’ State Insurance Act is contingent upon the establishment being classified as a 'factory' with at least 10 employees, as defined under Section 2(12).

JUDGMENT :

Ravi Nath Tilhari, J.

Heard Sri Venna kalyan Chakravarthi, learned counsel representing Sri U.R.P.Srinivas, learned Standing Counsel for the appellant-ESI Corporation.

2. No representation for the respondents.

3. This appeal under Section 82 of the Employees’ State Insurance Act, 1948 (in short ‘ESI Act’)has been filed by the Regional Director of ESI Corporation challenging the order dated 30.03.2007 in ESI O.P.No.75 of 2005 passed by the Principal Senior Civil Judge, Nellore.

4. The respondent No.1 – M/s.Sri Ramakrishna Rice Mill filed petition being ESI O.P.No.75 of 2005 under Section 75 of ESI Act with the prayer to declare that the said rice mill was not liable for coverage under the provisions of the ESI Act and to set aside the orders dated 02.01.2003 under Section 45A; dated 06.01.2003 and dated 24.03.2005 under Section 45G of the ESI Act, with further directions to the respondents therein (the present appellants) to refund the amounts together with interest at 6.69% per day.

5. The Respondent No.1 was a registered partnership firm which commenced doing milling of paddy by converting into rice and broken rice, bran and husk in the year 1980. It was its case that since beginning in the rice mill less than 9 employees were employed, including coolies on daily wages and contract labour.

At any point of time, the employed/workers did not exceed 9. They were also not on permanent basis. The rice mill was regularly and periodically being inspected and visited by Labour Officer, Inspector of Factories and Assistant Labour officer and occasionally, for three times, by the ESI Inspector. Those authorities used to sign in Attendance register, Wages register, Inspection register, Accident Register and Over-time Register being maintained by rice mill. Since the number of employees did not exceed 9, the rice mill was not covered under the ESI Act. However on 25.04.1998, the Insurance Inspector, ESI Corporation, Nellore visited the rice mill and after such visit, it received order dated 06.01.2003, on 10.01.2003 directing the District Manager to transfer Rs.75,381/- to ESI Corporation. The respondent No.1 was not liable to pay that amount which was illegally imposed, without giving due opportunity of hearing. The amount was recovered by the District Manager on 31.03.2003 and paid to ESI Corporation.

6. The Regional Director, ESI Corporation filed counter denying the averments of the petition and contending that the respondent No.1 was engaged in milling of raw rice with the aid of power and employed 12 persons for wages on 25.04.1998. So the provisions of Section 2(12) of ESI Act were attracted. The respondent No.1 was liable to make contributions. There was no illegality in issuing notice, passing the order and taking action under the ESI Act.

7. The District Manager, FCI, Nellore, filed counter. He denied the allegations made in the petition and submitted that he was in no way concerned with the dispute, but had acted only on the request made by ESI authorities being duty bound under the ESI Act to deduct and pay the amount.

8. The learned Principal Senior Civil Judge, Nellore framed the following point for consideration:

“Whether the petitioner is entitled for the relief as prayed for?”

9. On behalf of petitioner in ESI OP (respondent No.1 herein), Kanumuru Venkata Ramaiah @ Venkata Rama Naidu was examined as PW1 and on behalf of respondents therein (appellant herein), RW1 - P.L.N.Murthy was examined. The parties also filed their respective documentary evidences.

10. The learned Court recorded the finding that the respondent No.1 never employed more than 9 persons at any point of time. It was not covered under the ESI Act. ESI OP was allowed. The orders impugned were set aside, with the direction to the ESI Corporation to refund the amount of Rs.88,657/-, without interest.

11. Learned counsel for the appellant raised the only submission that, after the amendment in ESI Act, in 1989 vide Act 29 of 1989, with effect from 29.10.1989, u