MISCELLANEOUS



CONTINUOUS APPLICABILITY OF THE ACT

Will E.S.l Act continue to apply to a factory or an establishment where the number of employees is less than the limit specified by the Act?

By an Amendment of Act 29 of the ESI in 1989, it is provided that a factory or an establishment shall continue to be governed by this Act notwithstanding that the number of persons employed therein at any time falls below the limit specified by or under this Act or the manufacturing process therein ceases to be carried on with the aid of power.

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BENEFITS AWAY FROM THE PLACE OF WORK

Can an employee insured under E.S.1. Avail benefits of E.S.I. at a different place where he is temporarily staying?

If an insured person who is temporarily away on leave for a period of up to three months from his place of employment to another area where medical care under the scheme is available, he can get medical treatment if he takes a certificate of temporary resi¬dence from his employer.


CLAIM FOR BENEFIT NOT MAINTAINABLE

Can an employee covered under the E.S.I. Act claim disablement benefit from the Employees' Insurance Court without first approaching the E. S.1. Corporation?

The language of section 77(1) (I-a) of Employees' State Insurance Act is unambiguous and clear and leaves no scope for any exception. An employee claims benefits in accordance with the vari¬ous regulations as contained in Chapter 3. Thereafter under Regula¬tion 51, if the authority certifies the eligibility of the claim and, then the benefit shall be paid in accordance with Regulation 50. Regulations 53 to 64 deal with certification and claim from sickness and temporary disablement. After the scrutiny of the claim by the corporation. If the claim is denied by the corporation, then only the cause of action arises to an insured person under section 77 of the Act to commence the proceedings before the Employees' Insurance Court. In one case, court has held that in fact the application was premature and the E.!. Court acted illegally, in not directing the appellant insured person to approach the E.S.l. Corporation. It was also observed that the Corporation was also responsible for not invit¬ing the attention of the court to decide the matter in respect of cause of action and maintainability of the application.
Radheyshyam vs. Employees State Insurance Corporation, Ujjain, 1989 (58) FLR 133 (M.P.HC Indore Bench),


CASUAL EMPLOYEES OF A CONTRACTOR

Are the casual employees employed through the contractor covered under the £.5.1. Act?

For E.S.I. purposes an employee 'need not be directly employed by the employer in connection with some work which is incidental or preliminary to the work of the factory or establishment or connected with its works, so workers even engaged by a contractor will be' 'employees' of the factory or establishment and will be covered by the Act. In one case, the factory was engaged in the purchase of raw coir mats and mattings. The process of shearing, trimming, pressing and packing them was also
Employees State Insurance Corporation vs. Suresh Trading Company, 1983 (Ker.HC) LLR 168.


ABOUT THE EMPLOYEES ENGAGED BY A CONTRACTOR

Under what circumstances the E.S.I. will be applicable to the employees engaged by a contractor?

The employees engaged by a contractor are surely to be covered under E.S.I Act and the Scheme. A Division Bench of the Bombay High Court dealing with such a proposition has held that the employees of the contractors engaged for repairs, site clearing, construction of buildings etc. are engaged in an activity which is essentially required for the running of the factory and is ancillary or incidental to and has relevance to or link with the object of the factory, 1 However, the Supreme Court has held that the order to determine the -relationship of employer and employee between the principal employer and the employees engaged by the contractor (immediate employer) the supervision by the principal employer or his agent is essential.
1. Kirloskar Pneumatic Company Ltd. vs. Employees State Insurance Corporation, 1987-1 LLN 906.

2. C.E.S.C. Limited etc. vs. Subash Chandra Bose 1992 Lab. IC 332; AIR1992 SC 573; 1992 (I) LLJ 475; 1992 LLR81 (Supreme Court).


CONTRIBUTION FOR PAST PERIOD

Is it justified for authorities to recover E.S.I, contribution when the employees have not availed the benefit for that particular period?

It is immaterial whether the employees have availed the benefits or not so far as the payment or deposit of E.S.I. contribution is concerned since the liability to pay contribution is not made to depend on the benefit to be received by the members in respect of whom the contribution is sought for.
1. South India Viscose Co-operative Stores Ltd. vs. Regional Director, Employees State Insurance Corporation, 1986 (68) ;FJR 329 (Mad .HC)

2. ESl Corporation vs. Hotel Kalpaka International 1993(1) KLT 281 1993 LLR 177 (Supreme Court).


DAMAGES ON LATE SUBMISSION

Whether E.S.I. authorities are within their right to levy damages for late submission of contribution cards?

A plain reading of Regulation 31-A of the E.S.I. (General Regulations), which came into force w.e.f. November 23, 1977, shows that only in these cases the late submission of contribution cards amounts to late submission of payments where an employer is paying contribution by affixation 'of contribution stamps ,on the contributions cards. The legislature on its wisdom, has merely pro¬vided that in those cases where the contributions are being paid by affixation of adhesive stamps, the delay in the contribution cards will tantamount to delay in payment of contributions. This provision has been enacted to clarify the position of those employers who are paying contributions by way of purchasing adhesive stamps and then fixing them on the contribution cards. It was held that the provision to Regulation 31-A does not at all cover the case in which an employer is making payment of contributions by depositing the amount in case in the bank. The decision of the Punjab and Haryana High Court reported in 1981 Lab. IC 658 was distinguished on the ground that there the contributions were paid by way of affixation of contribution stamps and not in cash.
E.S.I. Case No. 77 of 1979 decided by E.S.I. Court, Delhi on the 24th September, 1981. Elephant Wire Gauge Factory vs. E.S.I. decided on 30.9.1983 by E.S.L Court, Delhi.


DEFINITION OF FACTORY UNDER E.S.I.


Whether ESI Act will be applicable when there are more than one establishments of same concern but located at different premises?

The Act applies to factories which have been defined under section 2(12) of the Act. The definition does not indicate that the factory will have to be located within a single municipal premise or building. In a case where the firm was carrying on manufacturing process in the shape of printing and actually the printing work with machine was being carried on in 2 premises and the composing at another premise which was being done mechanically. In none of the premises taken separately number of employees engaged exceeded 20 but the aggregate number of employees engaged in the aforesaid three premises admittedly exceeded 20. In the prevail¬ing circumstances, it was held that it would not be possible for the employer to find out one common place to run its different units for some reasons that may not be convenient or economical. It was held that the point of greatest importance was unity of purpose of the different units notwithstanding location far apart. Considering the facts of the case and the law, it has to be concluded that all the three units will be treated all 'factory' and liable to be covered under E.S.I.
Employees Stale Insurance Corporation vs. Bengal Priming Works, 1983, (2) LLN 187.


EMPLOYEES' CLAIM AGAINST INSURED ESTABLISHMENT

Can an employee insured under the E.S.I. Act claim compensation under Workmen:, Compensation Act?

No. Where a workman is covered under E.S.I. Scheme, no compensation could be claimed from his employer under the Workmen's Compensation Act in respect of employment injury sustained by him.
Abad Fisheries vs. Commissioner for Workmen's Compensation, Ernakulam and others. 1985 (50) FLR 512.


EMPLOYEES OF MANUFACTURING CONCERN

Whether E.S.I. Act and the Scheme thereto will be applicable to a concern rendering services through other concerns to its employees?

The E.S.I. Act, 1948 is a complete code and will be applic¬able to all the employees of a concern employed in different units. Where the main business of concern was to attend to the defects, including servicing and repairing of air-conditioner machines, not only at the office premises but to take such work in complete sense at the place of the customers, on their request or demand and the employer was engaging more than the required number of employees as defined under the Act, it has been held that the petitioner would not only be governed under the provisions of E.S.I. Act but the provisions of the Factories Act would also be applicable to him.
T.V. Punj vs. Regional Director, Employees State Insurance Corporation and others, 1982 Lab. ICNOC 102 (Cal).


E.S.I. DISPUTES AND CIVIL COURTS

Can a civil court entertain a petition pertaining to a dispute or difference between an employer/employee and the E.S.I. authorities?

No. Section 75 of the Employees' State Insurance Act provides a forum for adjudication of the dispute as to whether any person is an employer and is liable to pay employee's contribution, whereas the clauses (h) to (d) of the said section have reference to the definition of employees and principal employer. By reasons of these definitions to find out an employee, it must be found out whether a person was employed for wages or in connection with the work of a factory or establishment to which the Act applies and to find out the principal employer, it would be necessary to find out the owner of occupier of the factory as far as clause (1) of sub-section 17 of section 2 is concerned. It has been held that it is only in relation to a factory or an establishment to which the Act applies that the question or dispute can be adjudicated as provided for in clauses (a) to (d) of section 75(1) of the Act. The dispute would squarely fall under clauses (c), (d) and (g) of section 75(1) of the Act. It is covered then by virtue of sub-section (3) of section 75, the jurisdic¬tion of the civil court to decide or deal with such disputes would be barred.! The Punjab and Haryana High Court has also held that the disputes between employers and employees have to decide by the Employees' Insurance Court and Civil Courts will have no jurisdic¬tion to decide such disputes.2 The question as to whether the Act applied is not upon a factory will be decided by the E.I Court and not the Civil Courts held by the Karnataka High Court in one case.3
1. Employees' State Insurance Corpn. Bombay. Appellant vs. RP. Gundu and Anr., 1983 Lab IC 16M, 1983 Maharashtra LawJournal761 (Born.).

2. Employees' State Insurance Corpn. vs.]alandhar Gymkhana Club, 1992 LLR 733; 1993 (1) CLR220 (Punjab and Haryana High Court).

3. Employees' State Insurance Corporation vs. Nirmata Chemical Industries, 1993 LlR.941 (Karnataka High Court).


IDENTITY CARDS TO EMPLOYEES

What are the obligations of an employer 10 provide identity cards to employees who are covered under E.S.I. ?

When the identity cards are received by the employer, he should hand them over to the employees on taking their signatures or thumb impressions on the identity cards in the space provided for the purpose. The temporary Identification Certificate, if issued to the employees, should be received back and sent to the local office concerned after obtaining the signatures or thumb impressions of the employees on the back of the certificate. In areas where the panel system of medical treatments is in force, a Medical Acceptance Card will be sent to the employer by the E.S.I. Corporation along with the identity cards. The employer will hand over the medical acceptance cards to the employees who will take them to the panel doctors from whom they wish to receive treatment.


JURISDICTION OF E.S.I. COURT

Which will be the forum when there is a dispute or difference of opinion between an employer and the authority under E.S.I. Act? Whether civil courts can decide such matters ?

The Employees' State Insurance Act IS a self-contained and complete code providing a forum i.e. E.S.1. Court under E.S.1. Act to adjudicate upon the questions or disputes as to whether any person is an employee or liable to pay contribution or to resolve the disputes or differences between an employer and the E.S.1. It is also within its 'exclusive jurisdiction in deciding such a dispute. The Employees' Slate lnsurance Court by reason of the provisions of section, 75 of the E.S.l. Act excludes the jurisdiction conferred on civil court by virtue of provisions of section 9 of the Civil Procedure Code. It is also open to the E.S.I. court to grant all injunction or interim stay.
1. Employees' State Insurance Corporation, Bombay vs. R.I'. Gundu Rao and another, 1983 Lab. IC 1631 Born. 1983 Mah. LJ 761 (Born.).

2. Aggarwal Hardware Industries vs. E.S.I. Corpo. 1976 Lab, lC 1:354; 19772 LLN 412; 1977(t) LLJ 197.


JURISDICTION OF CIVIL COURTS

Can civil courts determine as to whether E.5.I. Act is applicable to an establishment or not?

No. Section 75(3) of the E.S.1. Act imposes express and complete bar of jurisdiction of a civil court in such matters. The E.S.I. Act creates a special right or a liability and further lays down that question about the said right and liability shall be determined by the Employees' Insurance Court constituted under sec Lion 74 of the Act. The Employees' Insurance Court has exclusive jurisdiction to determine the dispute as to whether a particular establishment comes within the purview of the E.S.I. Act or not. The Punjab and Haryana High Court has also held that the disputes between employers and employees have to decide by the Employers Insur¬ance Court and Civil Courts will have no jurisdiction to decide such disputes.
1. Ram Prasad vs. E.S.I.C., 1988•11 CLR446; 1988(57) FLR 139 (Delhi HC).

2. Employers' State Insurance Corporation vs.Jalandhar Gymkhana Club 1992 LLR 733; 1993 (10) CLR220 (Punjab and Haryana High Court).


LIABIUTY OF A PARTNER FOR PROSECUTION 


Will a partner be liable for prosecution under E.5./. Act, if he fails to submit the contribution cards within the specified period?

The liability of the owner of the factory is absolute for the compliance and implementation of the provisions of the E.S.I. Act. As a partner of the firm owning the factory, he could not. escape the liability of the prosecution under section 85(g) of the Act [or non¬ submission of contribution cards within the specified period.
Sankar Bhattacharjee vs. Bholanath Ghosh, 1987-1 Cur. LR 413 (Cal.HC).


OBLIGATIONS TO HEAR THE EMPLOYER

Is it obligatory on the part 0I E.5.I.G. to hear the employee, while insisting for payment of contribution, which is disputed by the employer ?

The E.S.I.C. is under an obligation to hear an employer before determining the contribution payable by him if there is any dispute regarding such liability. The determination or a point touching the liability of the employer. Under the Act, should be in confor¬mity with the principles of natural justice. It has also been held that it is incumbent on the E.S.I.Corporation not only to consider explanation of the employer but also to pass reasoned order
1. Hegde and Golay Limited vs. E.5.l.C. and another, 1982 1 LLJ 49 (Karnataka HC).

2. Rameshwar Jute Mills Ltd. us. Union of India & others. 1986 Lab. IC 1225; AIR •1986 Pat. 228; 1986(2) LLN 610; 1986 (FJR) 387.


PROSECUTION OF DIRECTORS

Whether the Directors of a company can be prosecuted for violation of the provisions of £.5.1. Act?

The question of liability of a director or company under sections 2(17), 85(a) and (b) of the Employees' State Insurance Act and 26(1) of the Employees' State Insurance General Regula¬tions 1950 was considered by the Calcutta High Court in the case of Bidyut Kumar Seti and another vs. Sat yes Chandra Bogehi and another,, the High Court held that the Employees' State Insurance Act does not define the word owner but under section 2(15) of the said Act, an 'occupier' of a factory is to have; the meaning assigned to it under the Factories Act, 1948. Section2(n) of the Factories Act defines 'occupier' of a factory as a person who has the ultimate control over the affairs of a factory and where such affairs are entrusted to a managing agent then he shall be deemed to be occupier to the Factory. Relying on these provisions, the Calcutta High Court held that a director of a company is an occupier as mentioned in section 2(17) of the Employees' State Insurance Act as he has the ultimate control over the affairs of the factory. The Calcutta High Court further held that a distinction has to be drawn between the Employees' State Insurance Act and other Acts such as the Employees' Provident Fund Act, the Prevention of Food Adultera¬tion Act etc. Under the Employees' Provident Fund Act only those directors and persons who are concerned in day-to-day running of the business of the companies are primarily held responsible for makirlg contributions.
E.S.I.C. Chandigarh vs. Gurdial Singh, 1974(45) FJR ~08.


TERMINATION OF AN EMPLOYEE DURING WE PERIOD OF SICKNESS

Can an employer terminate the services of an employee during his period of sickness, if he is covered under E.S.I. ?

Section 73 of the Employees' State Insurance Act, 1948 prohibits an employer to dismiss, discharge or reduce or otherwise punish the employee during the period an employee is in receipt of sickness benefits or maternity benefits. However, the cases of abandonment of service on the part of an employee are not covered. I t has been held that the refusal of the employer to take back an employee after remaining absent. With leave and thus giving effect to Standing Order 8(2) did not contravene the provisions of section 73 of the Act. In another case, it has been held that if the termination of services of an employee follows automatically either from the contract or from standing order, section 73 of the E.S.I. Act does not apply in such case even if the employee remained sick during the last days of his service and was in receipt of sickness or disablement benefit.
1. Premier Tyres Ltd. vs.A.Abraham, 1976 Lab. IC684; 19761 Lab. LJ 161; 1976 I Lib. LN 518.

2. Buckingham & Karnataka Company Ltd., vs. Venkatiah, 196~(7) FLR 343; AIR 1964 (SC) 1272; 1963 2 LLJ 638; 25 ~]R 25.

3. Moti Singh vs. The Factory Manager Cimmco Ltd.., Bharatpur and another. 1989(58) FLR 900 (Rajasthan High Court).

4 Management of Guest keen Williams Ltd. VS. Presiding Ofiicer,2nd Additional Lahore Court 19921 CLR 433 (Karnataka High Court D.B).


TIME LIMIT FOR RECOVERY OF CONTRIBUTION

whether any limitation period is prescribed for claiming the contribution by the E.S.J. from an employer?

No. It has been held that unless the statute itself limits the period for recovery by processes envisaged by the statute itself there would be no scope for applying the provisions of the Limita¬tion Act. In other words. The law of limitation on being confined to actions in courts, will have no application where a statute creates a right and does not envisage to court for enforcing the right. That would be the position in a case arising under the Employees' State Insurance Act. The obligation to pay contribution imposed on the principal employers and the right of the corporation to recover such contributions are creations of the statute and do not exist indepen¬dent of the statute. The mode of recovery is prescribed in the statute itself. It is either by resort to section 4-8, or by resort to section 75 read with section 78(4). Therefore, the right to recover such contribution would not in any way be affected by any law of limita¬tion other than what is provided in the Act itself, if there be any. The Limitation Act will have no scope for operation in respect of any claims arising under section 45-A of the Act.
Employees' State Insurance Corporation vs, Ramadas Reddiar, 1980(56) FJR 490 (Madras HC).


SUSPENSION ALLOWANCE-WILL ATTRACT CON¬TRIBUTIONS

Whether E51's contributions will be payable on suspension allowance?

Yes. All eligible employees are entitled to get the statutory coverage of the Act, the benefits being insured employees and any person employed for wages is to be treated as an employee for the purpose of the Act. Under these circumstances an employee who is admittedly covered by the Act and who is entitled to get the benefits under the Act as insured employee will not cease to be an employee covered by the Act if he is placed under interim suspension pending domestic enquiry on any alleged misconduct by his employer
Regional Director, Employees' State Insurance Corpn.vs. Popular Automobiles etc., 1997 LLR 1147 (SC).
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WAGE - CONTRIBUTION



CONTRIBUTION OF ALLOWANCES

Whether the allowances paid to the employees are subject to E. S1. Contribution deduction?

The allowances have been excluded by section 2(22) (b) and (c) of the E.S.I. Act. In a case it has been held that the cycle allowance given to the employees is nothing but traveling concession and the value of cycle allowance falls in exception (b) of section 2(22) of the Act. Similarly, the uniform allowance paid by the employer cannot be added to wages for calculating contribution under the Act All the same the payment of milk, tea and egg allowances has also been excluded from the purview of the wages.


Payment of lnam paid by the employer in pursuance of an agreement will be 'wages' notwithstanding that agreement was not a term of the original contract. In a case before the Supreme Court, it has been held that the term 'wages' includes House Rent Allowances; Heat Gas and Dust Allowance as well as Incentive Allowance.

1.Hyderabad Asbsestos Cement Product Ltd., Ballabgarh vs. Regional Director, ESI. Corpn., Chandigarh. 1982 Lab. IC 88 (Punjab) (NOC); Employees State Insurance Corpn. Chandigarh vs. Gedore Tools (India) P.Ltd. Faridabad, 1982 Lab. IC87 (Punjab) NOC; Employees State Insurance Corpn. NewDelhi vs. Pratap Names Labels Factory. 1982 Lab.IC41 (Delhi) (NOC)

2.Employees' State lnsurance Corp. vs. Enfield India, 1995 LLR 81 (Madras High Court).


3.Harihar Polyfibres vs. Regional Director, ESI Corpn. AIR 1984 SC 1680; 1984 Lab. IC 1568; 1984 (65) FJR 199.


DEPOSIT OF CONTRIBUTION


Is it obligatory on the part of an employer to deposit contribution or other dues when he challenges the liability in the Employees' Insurance Court?

Section 2-B as inserted by amendment of Act 29 in 1989 provides that any dispute between a principal employer and the E.S.I. Corporation in respect of any contribution or any other dues could be raised by the principal employer in, the Employees' Insur­ance Court only when he has deposited with the court fifty per cent of the amount due from him as claimed by the Corporation. How­ever, the court may for reasons to be recorded in writing waive or reduce the amount to be deposited under this sub-section.


E.S.!. ON BONUS & EX-GRATIA

Whether bonus or ex-gratia paid by an employer to his employees will be treated as wages as defined under E.S.I. Act.

No. Where the bonus paid by employer to its employees was in the nature of ex-gratia payment or, as has been described in one of the settlements, employer has paid as a gesture of goodwill on the part of the respondent. The bonus in question was neither in the nature of production bonus nor incentive bonus nor custom­ary bonus nor any statutory bonus. The bonus payable 'one month after the end of each quarter' has been held that the bonus in ques­tion did not fall under any category or class mentioned in the definition of 'wages' as contained in section 2(22) of the Act.

Regional Director, E.S.I.C. Be another V5. Bata Shoe Co. (P) Ltd., AIR 1986 sc 237; 1986 Lab. IC 72.


ESI CONTRIBUUON ON INCENTIVE BONUS

When and under what circumstances the incentive bonus be treated as wages for payment of ESI's contributions?

The E.S.I. authorities can 'ask for payment of incentive bonus payable to the employees more particularly when such an incentive is linked with production. In this' context reference is rnade to one case wherein it was held that Production Bonus paid to the employees for more production falls within the latter part of definition of Wages in section 2(22) of the ESI Act.1 The Bombay High Court has also held that the amount paid to employees towards incentive or production bonus will constitute wages for ESI purposes.2


1. Shourie Duplicators Pvt. Ltd. and others vs. E.S.I.C., 1992 II LLJ 443 (Delhi HC).

2. All India Glass Works (P) Ltd. vs. Regional Director ESI Corn. & Another 1995 LLR 28 (Bombay H.G).


ESI CONTRIBUUONS ON CLOSURE OF THE ESTABLISHMENT

Will an employer be liable to pay ESI contributions when the establishment is closed and deductions have been made from the wages of the employees?

Under section 40 of the Act, primary liability of the employer is to not pay only his contribution but also the employee's contribution. Therefore, he cannot be heard to contend that since he had not deducted the employee's contribution from the wages of the employees, he could not be made liable for the same. The Supreme Court has held that the object of making a deeming entrustment sub-section (4) of section 40 will be altogether rendered nugatory if such a contention were to be accepted. After all, when he makes employee's contribution, he is entitled to deduct from their wages. It is rather strange to conclude that the demand could not be enforced against a closed business. If this finding were to be accepted, it would not promote that the scheme and avoid the mischief. On the contrary it would help perpetrate the mischief. The Supreme Court observed that any employer can easily avoid his statutory liability and deny the beneficial piece of social security legislation to the employees, by closing down the business before recovery. That certainly is not the intendment of the Act. They hold, as the High Court has done, would set as naught all these beneficial provisions. It is equally fallacious to conclude that because the employees had gone away, there is no liability to contribute. It has to he carefully remembered that the liability to contribute arose from the date of commencement of the establishment and is a continuing liability till the closure. The very object of establishing a common fund under section 26 for the benefit of all the employees will again be thwarted if such a construction is put.

ESI Corporation vs. Hotel KalpakaInternational, 1993 (1) KLT28I"'1993 LLR 117 (Supreme Court).



E.S.I. ON OVERTIME

Whether E.5.1. Contributions are payable on overtime?

There has been differences of opinion of various High Courts on this point. Finally the Supreme Court has held that overtime wages will be liable for deductions for ESI's contributions. The employer is obligated to pay wages when the employee does work beyond his duty hours. This will be, in addition to payment of the wages an employee receives for normal work. In other words, both the remuneration received during the working hours and overtime constitute a composite wages and thereby it is a ‘wage' within the meaning of section 2(22) of the Act. Whatever remuneration, paid or payable for overtime work, forms wages under an implied term of the contract of employment and the remuneration paid therefore forms part of the 'wages' under section 2(22) of the Act. The Supreme Court considered elaborately and held that the Act is welfare legislation and the definition of wages is designedly wide.

Indian Drugs & Pharmaceuticals Ltd. etc. vs. Employees' State Insur· .nce Corporation, 1997 LLR 1 (Supreme Court).


E.S.I. CONTRIBUTION ON PAID HOLIDAYS

Whether E.S.I. contribution is payable on paid holidays?

The payment made by an employer in respect of 'paid holidays' is not 'wages' as defined in section 2(22) of the Act and, therefore, the employer is not liable to pay special contribution under section 73-A on such payments made to his employees in respect of 'paid holidays'. Be it clear that on paid holiday the employee cannot render any service, as well as employer cannot take any service from the employee. 'Paid holiday' is a holiday which could not be substituted for another holiday and under the terms of the contract, the parties agree that on that day no service would be rendered and no service would be taken and yet payment would be made. The payment, in view of the ruling reported in Nutan Mills (i\IR 1956 Bombay 336). Cannot be considered 'remuneration', because it is a payment not for services rendered or to be rendered by the employee. In this view of the matter, the payment paid towards paid holiday cannot be considered 'wages'. The Kerala High Court has also held that the wages paid for holidays allowed under Kerala Industrial Establishments (National and Festival Holidays) Act will not amount to remuneration to attract the payment of ELL's contributions.2

1. Regional Director, E.S.I.C., Ahmedabad vs. New Aswarwa Mfg. Co, Ltd., Ahmedabad, 1981 Lab. IC 90 (Gujarat High Court).

2. E51 Corporation us. Malabar Cashew Nut and Allied Products 1993 (1) CLR 199 (Kerala High Court).


NON-PAYMENT OF CONTRIBUTION DUE TO NON-AVAILABILITYOF FINANCES

Can non-payment of E.S.I. contribution be justified by an employer due to non-availability of finances?

No. Where in a case, the co-operative societies did not have resources for payment of contribution, it has been held that such a plea cannot be taken into consideration for late or non­payment of contribution. In a case it has been held that if such a plea could be entertained, every one who is made liable to pay the contribution under the E.S.I. Act will say that he has no sufficient resources to pay so that the statutory liability would not be possible to be enforced. Therefore, whether a person has sufficient resources or not., his liability under the Act is never under dispute.

South India Viscose Co-operative Stores Ltd. vs, RegionalDireclor Employees' State Insurance Corpn. 19B6 (6B) F.L.R. 329 (Mad. He).


PAYMENT OF BONUS UNDER INCENTIVE SCHEME-WHETHER WAGES

Whether the payment of bonus will be deemed as 'wages' under E.S.I., i/it is paid under an incentive scheme stipulating that the same is not a term of contract 0f employment?

The 'wages' under the E.S.1. Act is very wide which includes house rent allowance, night shift allowance, incentive allowance and heat gas and dust allowance etc. A similar point has arisen before the Allahabad High Court as to whether the remunera­tion paid by the employer under incentive scheme to his employees constitutes wages within the meaning of section 2(22) of the Employees' State Insurance Act. The incentive scheme provided that the incentive bonus was not a term of contract of employment. The High Court held that an employer cannot invoke doctrine of promissory estoppel against E.S.I. Corporation and as such the bonus is paid to the employees under the incentive scheme will be treated as 'wages', liable to be E.S.I. contribution. In another case, while holding that the 'attendance bonus as 'wages' the Bombay High Court has held that the scheme of attendance bonus would be deemed as a term of contract of employment.

1.Dass Hitachi Pvt Ltd., Delhi vs. E.S.L Corporation, New Delhi, 1987 Lab. & Ind. Cases 14.

2.Employees' State Insurance Corp. vs. Indian Dyestuffs Industries Ltd., 1986 Lab. IC 1217; (1986) 2 Cur. LR 1~8; 1986(2) LLN 515; 1986 (53) FLR 730.

 
WHETHER INSURANCE PREMIUM SUBSIDY CONSTITUTES WAGES

Will the subsidy of life insurance premium be treated as 'wages' to attract the contributions for E.S.I.?

Yes. In one case, while enlarging the term 'any other remuneration' outside the term of contract of employment and then giving the examples of house rent allowance, night shift allow­ance, incentive allowance, heat, gas and dust allowance as wages, it has been held that the subsidy given for life insurance premium should also (over and come under this clause since it is not one of the exceptions mentioned in section 2(22) of the E.S.!. Act.

E.S.I.C. vs.J.S. & W.Mills Ltd., 198857 F.LR 32 (Raj. HC).
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WORKMEN UNDER E.S.I


POSITION OF AN APPRENTICE UNDER ESI

Whether apprentices engaged in a factory are liable to be covered under E.S.I.?

The apprentices who are mere trainees for a particular period for a distinct purpose are not employees under section 2 (9) of the E.S.I. Act. And the employer is not bound to employ them after training period.

Employees' State insurance Corporation and other vs. Tata Engineering & Locomotive Co. Ltd. and another, 1975(58) FJR 206 (SC); AIR 1976 SC 66; 1976 Lab.IC 1; 31 FLR 387; 1976 (I) LLJ 71; 1975(2) LLN 498.


CASUAL EMPLOYEES OF A CONTRACTOR

Are the casual employees employed through the contractor covered under the £.5.1. Act?

For E.S.I. purposes an employee 'need not be directly employed by the employer in connection with some work which is incidental or preliminary to the work of the factory or establishment or connected with its works, so workers even engaged by a contractor will be' 'employees' of the factory or establishment and will be covered by the Act. In one case, the factory was engaged in the purchase of raw coir mats and mattings. The process of shearing, trimming, pressing and packing them was also

Employees State Insurance Corporation vs. Suresh Trading Company, 1983 (Ker.HC) LLR 168.


ABOUT THE EMPLOYEES ENGAGED BY A CONTRACTOR

Under what circumstances the E.S.I. will be applicable to the employees engaged by a contractor?

The employees engaged by a contractor are surely to be covered under E.S.I Act and the Scheme. A Division Bench of the Bombay High Court dealing with such a proposition has held that the employees of the contractors engaged for repairs, site clearing, construction of buildings etc. are engaged in an activity which is essentially required for the running of the factory and is ancillary or incidental to and has relevance to or link with the object of the factory, 1 However, the Supreme Court has held that the order to determine the -relationship of employer and employee between the principal employer and the employees engaged by the contractor (immediate employer) the supervision by the principal employer or his agent is essential.

1.Kirloskar Pneumatic Company Ltd. vs. Employees State Insurance Corporation, 1987-1 LLN 906.
C.E.S.C. Limited etc. vs. Subash Chandra Bose 1992 Lab. IC 332; AIR1992 SC 573; 1992 (I) LLJ 475; 1992 LLR81 (Supreme Court).


COVERAGE OF CASUAL AND CONSTRUCTION WORKERS

Whether casual workers are 'employees' within the meaning of Employees' State Insurance Act?

The Supreme Court has enlarged the meaning of an employee under section 2(9) of the E.S.I. Act and has held that the employees engaged for the construction of additional building required for expansion of a factory will fall within the definition of an 'employee'. Hence, they are covered under the Act. The casual employees engaged by publishers for folding cover and inside pages of a weekly and monthly magazine have also been held as employees under the E.S.I. Act.

1 Regional Director Employees State Insurance Corp., Madras & others vs. South India flour Mills (P) Ltd., and others, 1986 LLR 65;1986 Lab. IC1193; AIR 1986 SC 1686; 1986 2 LLN 358; 1986 2 LLJ 304; 1986 (53) FLR 178.

2.Hindustan Times Ltd. vs. E.S.I. C. and another (36) DLT135.


COVERAGE OF WORKERS RENDERING SERVICES OUTSIDE SHOP

Whether such employees will also get benefit who are, in fact, not working at the place of establishment or shop as covered under the E.S.l. Act?

The place where services are rendered on retail basis is also a shop. A firm, which has been carrying on business of playing music on marriages and other social functions, challenged the liability of the applicability of E.S.I. Act on the ground that the business they have been carrying on was not of a shop and that the business being of seasonal character, the E.S.l. Act would not be applicable to such business. The E.S.!. Court rejected the plea of the employer and also Rajasthan High Court dismissed the appeal, the Supreme Court in the appeal has held that since E.S.I. has been made applicable to the shops by virtue, of notification dated 20th October, 1985 issued under section 1(5) of the ESI act, therefore, the employees paid on daily rate or part-time employees basis for playing band etc. will be treated as 'employees' as defined by E.S.I. Act.

Hindu Jea Band vs. Regional Director, E.S.I.C.  1986 LLR 95; 1987 Lab. IC 894; (1987) 54 FLR 44; 1987 Cur. LR. 166.


COVERAGE OF PART-TIME EMPLOYEES

Is a part-time employee covered under Employees' State Insurance Act?

A part-time employee would be coverable under E.S.I. if he has a contract of service with the employer. It is, however, very difficult to demarcate whether part-time workers, such as sweepers, clerks, accountants, engaged in a factory/establishment, which cannot afford to employ full time employee for these jobs, have a contract of service or contract for service, if the person has got some fixed hours of work and in case of absence he loses his wages. It would also be a case of contract of service if the part-time employee is governed by various labour laws, i.e. his attendance is marked, he is granted leave as per rule, he is paid overtime wages, or food allowance or any other allowance, or bonus or if any other privilege which is- admissible to the other employees is also extended to him. However, where an employee does not have any fixed hours of work, he has simply to finish the work contracted for at his convenience or the persons like street sweeper or street watchman cannot be termed as employed on can tract of service; When a part-time doctor was engaged by the factory for ambulance room, he has been held an employee of the factory. In another case, it has been held that the part-time employees are also included while extending the E.S.I. Act and the scheme on an establishment.1n a case, where gardeners and sweepers were employed by a company on part-time basis and were paid along with other 8 regular employees; it was held that the E.S.I. Act would be applicable. The Supreme Court has held that the part-time employees employed on daily rate basis for playing of band etc. will be deemed as employees to be covered under ESI.

1.T.I. Cycle of India, Madras us. Regional Director Employees State Insurance Corpn. 1977 Lab. IC 1335; (1977) 1 Mad. LJ 511 DB.

2.Modern Equipment Company, Ambala Cantonment vs. E.S.I.C. Chandigarh, 1984-II LLN 560.

3.Hindu Jea Band vs. Regional Director E.S.I., 1987 Lab. IC 894; 1987 (54) FLR; 144; 1987 Cur. LR 166.


WHETHER AN EMPLOYEE-MANAGING DIRECTOR

There have been difference of opinions and finally the Supreme Court has set the controversy at rest in holding that a Managing Director of a company is chosen one of the directors on payment of remuneration for extra work to be done by him as such he has to discharge his functions as Managing Director under the supervision of the Board Of Directors. Thus, there is employer and employee relationship between two separate entities. On the one hand is the Managing Director of a company will be covered under the Act. 
Employee’s State Insurance Corpn. vs. Apex Engineering Pvt. Ltd., 1997 LLR 1097 (SC).


FREE LANCER AND E.S.I. ACT

Whether the free lancer such as an electrician or a carpenter will be covered under E.S.I.?

No. In a case where an electrician who was carrying some repair work for a company and was paid against the bill, it has been held that he will not be treated as an employee under E.S.I.

Modern Equipment Company, Ambala Cantonment vs. E.S.I,C Chandigarh, I 984·II UN 560.


WHETHER PARTNER IS AN EMPLOYEE

Will a partner be an employee under the £.5.1. Act?

The Supreme Court has held that the position of a partner qua the firm is not that of a master and a servant or employer and employee which concept involved an element of subordination and not that of equality. The partnership business belongs to the part­ners and each one of them is an owner thereof. In common parlance the status of a partner qua the firm is thus different from employees working under the firm. It may be that a partner is being paid some remuneration for any special attention which he devotes but that would not involve any change of status and being him within the definition of 'employees' under the Act.

Employees' State Insurance Corpn. V5. Apex Engineering Pvt. Ltd., 1997 LLR 1097 (SC).
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APPLICABILITY OF THE ACT


ADVERTISING AGENCY IS A SHOP OR NOT?

The E. S.I. Act has been extended to shops by some of the Stales by invoking section 1(5) of the Act. Will an advertising agency be a 'shop' to attract the applicability of the Act?

Earlier some of the High Courts have' held that an adver­tising agency selling its experts' services to its clients to enable them to launch an effective advertising campaign of their products will not attract the applicability of the ESI Act but the Supreme Court reversed those decisions in holding that the ESI Act is a beneficial legislation hence the word 'shop' has to be construed in a liberal sense. Thus an advertising agency will attract the applicability of ESI Act.

Employees' State Insurance Corporation vs. R.K. Swamy & others, 1994 labour Law Reporter 51.



CLUBBING OF ESTABLISHMENTS

When and what circumstances two or more establishments at different places will constitute, one establishment to attract the applicability of E.S.I.?

Where a firm' manufactured its products in a workshop employing 13 person in one workshop and seven persons for polish­ing the products at a different place. The two workshops together constituted a factory to which E.S.I. Act was held to be applicable. Separate buildings, even though located as some distance when used for one continuous manufacturing process will constitute a single factory under E.S.1. Act. In another case it has been held by Madras High Court that though the work was being done at two different premises but the entire work has been one process hence the strength of both the units will be counted for the applicability of the Act.2

1.S.P. Varma vs. E.S.I Corporation, (1973) (44) FJR17 (All.H.C). Also see Agents and Manufacturers, Delhi vs. The Employees Slate Insurance Corporation, New Delhi and others, 1973(9) DLT 500 (Delhi HC).

2.A-I Plastic Firm Vs. Regional Director Employees State Insurance Corporation, Madras, 1993 LLR 156.


CLUBBING OF MORE THAN ONE ESTABUSHMENT

Whether more than one establishment situated within the common boundary can be taken to constitute a single unit for coverage under E.S.I. ?

The E.S.I. Act aims at conferring various benefits 'on the employees and as such should be construed that the employees get the intended benefits. The definition of the factory does not indi­cate that the factory will have to be located within a single premise of the building as it lays emphasis on the use of power for manufacturing process carried on in any part of any premises and number of employees engaged in the process of manufacture. Where a firm was running three establishments located at three different municipal premises namely, 1, 2 and 21 in Synagogue Street, Calcutta and the work of printing carried on with the aid of electricity although the machine section was housed only in premises Nos.1 and 2, it was held that the three premises were not only closely located but also the industry connected with the identi­cal manufacturing process carried on by the firm and as such the different units would be covered under the E.S.I. Act.


E.S.I. Corporation vs. Bengal Priming Works, 1984 Lab. LIC 1.



COVERAGE OF PETROL PUMP UNDER E.S.I.

Whether a petrol pump is coverable under E.S.l. Act?

A petrol pump engaged in pumping oil, washing and servicing vehicles would be covered by the expression 'manufactur­ing process' as defined by section 2(12) of the ESI Act. Petrol Pump and service station are work places where persons are employed and power is used in the process of its activities. There is no material difference from the other activities of a manufacturing place strictly so-called. A very narrow construction Lo· the definition of 'manufacturing process' so as to restrict its application only to a work place where by virtue of the manufacturing process a commercially different article is produced, would be unjustified. In the .case of ~ service station, washing, cleaning or oiling a car brings about a particular result in either as a lubricated or cleaned vehicle. That result itself shall be treated as enough to bring the process within the meaning of the Act.

I. E.S.I.C. vs. Bhag Singh, 1988 LIC 1170; 1989(2) LLJ 126 (P&H) F.B. 2. Baranager Service Station vs. E.S.I. Corporation, 1988 Lab. IC 302.



FOR SHOWROOM EMPLOYEES

Whether the employees working in showroom sales office close to the workshop will be covered under E.S.I.?


Since Employees' State Insurance Act, 1948 is a social security legislation, the term 'employee' in the Act should be held to cover a wider field and should receive a very liberal connotation than the meaning attributed to the term 'worker' it) the Factories Act. After amendment in 1966 the benefit of the Act extends also to employees whether inside the factory or establishment or elsewhere. In one case with similar facts it has beel1' held that there should be nexus between the establishment and the work of the employee, howsoever loose the connection may be. The employees who are working in a showroom/ sales office were held to be covered under ESI.

Bhopal Motors (Pvt.) Ltd., Bhopal vs Employees’ State Insurance Corpn.,Indore,1982-II LLN 827 (M.P.HC)



HOTEL EMPLOYEE5AND E.S.I. ACT

Can there be any distinction between employees in kitchen and those in hotel for purposes of E.S.l. Act, 1948?

Sub-section (12) of section 2 of the Act defines a ‘factory’, amongst others, as meaning any premises where manufacturing process is being carried on with the aid of power. Where, therefore, in the kitchen of the hotel power is used for manufacturing articles of food and twenty persons are employed, then the 'kitchen' of the hotel would come within the definition of 'factory'. No distinction can also be made between the workers employed in the kitchen and those in the hotel. Classification of employees working in the kitchen of the hotel and those engaged in supply and distribution and other work is next to impossible and it will be unjustified to say that the former are covered by the E.S.I. Act and the latter are not. It therefore, follows that all persons employed for the purpose of supply and distribution of food prepared in the kitchen and for doing other incidental duties in the hotel are regarded as employees of the factory, (1978) Lab. IC 307 (SC) and 1978 Lab.IC 1759 (Mad. HC) and 1980 Lab. Ie 100 (Bam.) have been followed.

All India lTDC Employee's Union us. Hotel Ashok, Bangalore and another. 1984 Lab. IC NOC 107 (Kant. HC).



APPLICATION OF ESI TO THE HOSPITAL ATTACHED TO THE FACTORY

Whether the workers employed in a hospital attached to the factory will be covered under E. S.I. ?

The E.S.I. Act will be applicable to a hospital. A company was running a factory at. Sahibabad and the company also establish­ed a hospital exclusively for the benefit of its employees, where the employees and the members of their families were given medical treatment free of charge. There were 15 persons employed by the company including a doctor and a nurse. It has been held that the E.S.I. was applicable to the hospital also.

Regional Director, E.S.J. vs. Manager, Associated Cement Company Ltd. (1979) I Kant. LJ 209; (1979) 1 Lab. LN 418; AIR 1979 NOC 145 (Kant.); 55 FJR 307; (39) FLR 220.



COVERAGE OF A CLUB

Will a 'club' be covered under the ESI Act?

Yes. The sole test to decide whether any premises is a factory under the 1\ct, therefore, depends on the finding whether any 'manufacturing process' is being carried on with the aid of power or is ordinarily so carried on in the premises including the precincts thereof whereon twenty or more persons are employed or were employed for wages on any day of the preceding twelve months. A club, which has a kitchen rendering catering services to its mem­bers. The question then arises as to whether any manufacturing process is being carried on in the kitchen. A perusal of sub-clauses I to 6 of Section 2 (K) of Factories Act would make it clear that preparation of the items which arc prepared in the kitchen and the preservation and storing of any articles in the cold storage would amount to a manufacturing process. The Bombay High Court has also held that ESI Act will apply to dub since there is no distinction between a hotel and a club.

1 Employees' State Insurance Corporation vs.jalandhar Gymkhana Club, 1992 I J.R 733 (Punjab & Haryana High Colin).

2 Cricket Club of India Bombay and others vs., Employees' State Insurance Corporation and another 1992 LLR 729; 1993 (1) CLR 120; 1992 Lab IC 2029 (Bombay High Court).


MANUFACTURING PROCESS AND E.S.I.

How the concept of manufacturing process is to be determined while applying the E.S.!. ?

It depends upon the merits of a particular case. Where in a case the owner of petrol pump-cum-service station was carrying on the business of sale of petrol, diesel, motor spirit, lubricants, etc. and servicing of motor cars and lorries, it has been held that it will be treated as manufacturing process and the E.S.I. will be applicable as more than 20 employees were employed on the petrol pump-cum-service station.

Barnagar Service Station vs. Employees' State Insurance Corporation, 1987- I LLN 9]2



MEMBERS OF CO-OPERATIVE SOCIETY

Are the members of a co-operative society working as employees coverable under the E.S.I. Act?

A co-operative society is a separate legal entity distinct from its members and if members work for wages for the society then they are, of course, its employees within the meaning of section 2(9) of the E.S.I. Act.

Kunnathund Chalakudy Sankethika Co-operative Society Ltd. vs. Employees' Slate Insllranc~ Corporation 1989(2) LLJ 27 (Ked'1C).




'SHOP' UNDER E.S.I. ACT

What meaning is attributed 10 a 'shop' liable to be covered under the ESI Act?

In some States, the ESI Act has been extended to the 'shop' also employing 20 or more than 20 employees. However, the word 'shop' is not defined in the Act or in the notifications issued by the State Government. According to the Shorter Oxford English Dictionary, the expression 'shop' means 'a house or building where goods arc made or prepared for sale and sold'. It also means a 'place of business' or 'place where one's ordinary occupation is carried on'. In ordinary parlance a 'shop' is a place where the activities connected with the buying and selling of goods are carried on. In one case before the Supreme Court the facts were that the appellant has been carrying on stevedoring, clearing and forwarding oper­ations, the question arose as to whether such activities would within the purview of the term 'shop'. The Supreme Court held that the clearing the documents, even it be in the customs house, is necessary for the export of import of goods. These services formed part of the carrier's job. Thus it cannot be gainsaid that the appellant is render­ing service to cater to the needs of exporters and importers and others who want to carry the goods further. Therefore, it will be a 'shop' carrying on a 'systematic economic or a commercial activity.

In another case, the Madras High Court has held that the test to be applied is whether goods are sold or services are rendered for a price in the premises and whether 20 or more persons are employed in the establishment; if the' answer is in the affirmative, the provisions of the Employees' State Insurance Ac~ 1948, will be clearly attracted. It was further held that even if the sale or services rendered for price are stray or restricted, nevertheless, it would be a 'shop' if20 or more persons are employed in the establishment, whether it be an independent establishment or part of larger organization which may be carrying on additional activities falling out­side the Employees' State Insurance Act, J 9482

1.Cochin Shipping Co. and others vs. Employees State Insurance Corpo., 1992 LLR 801 (Supreme Court)

2.Employees' State Insurance Corpn. vs. Oxford University Press, 1993 LLR 450 1993 (1) CLR 1035



TAILORS AND GARMENT MANUFACTURERS

Can an establishment engaged in tailoring of clothes be covered under E.S.I.? Whether the tailoring of clothes comes under the purview of manufacturing process?

So far as an establishment manufacturing of ready-made garment is concerned, it has been held by Bombay High Court that ironing is a process of treating the articles with a view to enhance their use for sale in the market and as such a ready made garment must be ironed properly before it is sold. Accordingly the process of treating the articles would be a manufacturing process carried on with the aid of power so as to constitute the place of premises to be a 'Factory'. In another case, pertaining to the tailoring establish­ment the Andhra Pradesh High Court has held that even though power was not used to stitch clothes or garment, yet the tailoring firms adopted La iron them with aid of power for ornamentation or giving elegant appearance to stitched clothes as finished product of use, thereby ironing the clothes with the aid of power became an integral part of manufacturing process. The tailoring firm employ­ing ten or more persons in a 'Factory' under section 2(m) of the Factories Act coming within the sweep of clause (i) of the notifica­tion under section 1(5) of E.S.I. Act.


1.Kalpana Dresses Bombay V.I". E.S.L Copn; 1976 Lab. IC.186.

2.Smt. Vasanti Mahendra Kumar Shah and etc. vs. All India Handloom Fabrics Marketing Coop. Society Ltd. Ahmedabad, 1985 Lab. Ie, 1104 (Gujarat HC).



WORKERS EMPLOYED IN CANTEEN AND E.S.I.

Whether the workers working in the canteen are 'employees' under E.S.J. Act?

The provisions of the Factories Act, 1948, cast an obliga­tion on a factory which employs more than 250 workers to maintain a canteen. In one case the management of a factory opened a canteen section 72 of the Contract Act provides that person to whom money has been paid or anything delivered by mistake or under coercion must return or repay-it. It was however, contended on behalf of ESI Corporation that the employees have taken benefit, but there has been no evidence to this effect. This aspect is immate­rial, because the benefit to be received has nothing to do with the employer's liability to make contributions. No equitable consider­ation can be imported when section 72 of the Contract Act is clear and unambiguous. The petitioner's contribution included the amount deducted from the wages of employees. The petitioner will thus be entitled to refund of 2/3rd amount. If the workmen make application for refund of their contribution they shall be entitled to the same.

Anil Textile Industry vs. ESI Corpn., 1992 (64) FLR 856 (Rajasthan High Court).
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APPLICABILITY OF THE ACT & SCHEME:

 Is extended in area-wise to factories using power and employing 10 or more persons and to non-power using manufacturing units and establish-ments employing 20 or more person upto Rs.15,000/- per month w.e.f. 01.04.10. It has also been extend-ed upon shops, hotels, restaurants, roads motor transport undertakings, equip-ment maintenance staff in the hospitals.

COVERAGE OF EMPLOYEES:

 Drawing wages Upto Rs.15,000/- per month Engaged either directly or thru’ contractor

RATE OF CONTRIBUTION OF THE WAGES:

 Employers’ 4.75%

 Employees’ 1.75%

MANNER AND TIME LIMIT FOR MAKING PAYMENT OF CONTRIBUTION:

 The total amount of contribution (employee’s share and employer’s share) is to be deposited with the authorized bank through a challan in the prescribed form in quadruplicate on ore before 21st of month following the calendar month in which the wages fall due.

BENEFITS TO THE EMPLOYEES UNDER THE ACT:

 Medical Benefit
 Sickness Benefit(SB)
 Maternity Benefit(MB)
 Disablement Benefit
 Dependants’ Benefit(DB)
 Funeral Expenses

 In addition, the scheme also provides some other need based benefits to insured workers.

WAGES FOR ESI CONTRIBUTIONS:

 Registers/files to be maintained by the employers

CONTRIBUTION PERIOD:

 If the person joined insurance employment for the first time, say on 5th January, his first contribution period will be from 5th January to 31st March and his corresponding first benefit will be from 5th October to 31st December.

TO BE DEEMED AS WAGES:

• Basic pay
• Dearness allowance
• House rent allowance
• City compensatory allowance
• Overtime wages (but not to be taken into account for determining the coverage of an employee)
• Payment for day of rest
• Production incentive
• Bonus other than statutory bonus
• Night shift allowance
• Heat, Gas & Dust allowance
• Payment for unsubstituted holidays
• Meal/food allowance
• Suspension allowance
• Lay off compensation
• Children education allowance (not being reimbursement for actual tuition fee)

NOT TO BE DEEMED AS WAGES:

• Contribution paid by kthe employer to any pension/provident fund or under ESI Act.
• Sum paid to defray special expenses entailed by the nature of employment – Daily allowance paid for the period spent on tour.
• Gratuity payable on discharge.
• Pay in lieu of notice of retrenchment compensation
• Benefits paid under the ESI Scheme.
• Encashment of leave
• Payment of Inam which does not form part of the terms of employment.
• Washing allowance for livery
• Conveyance Amount towards reimbursement for duty related journey

PENALTIES :

 Different punishment have been prescribed for different types of offences in terms of Section 85: (I) (six months imprisonment and fine Rs.5000), (ii) (one year imprisonment and fine), and 85-A: (five years imprisonment and not less to 2 years) and 85-C (2) of the ESI Act, which are self explanatory. Besides these provisions, action also can be taken under section 406 of the IPC in cases where an employer deducts contributions from the wages of his employees but does not pay the same to the corporation which amounts to criminal breach of trust.

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