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The Employees' State Insurance Act, 1948

The Employees' State Insurance Act of 1948 seeks to replace the benefits as available to the workmen under the Workmen's Compensation Act, 1923, by a more comprehensive scheme not only of accident benefit, but for other contingencies like sickness, maternity and funeral expenses. The Act applies, in the first instance, to all factories other than seasonal factories, including factories belonging to the government, but the appropriate government is authorized, in consultation with the Employees' State Insurance Corporation, after complying with the needful formalities, to extend the provisions of the Act to any other establishment or classes of establishments- industrial, commercial, agricultural or otherwise. The definition of 'employee' under the Act is wide so as to include within the ambit of the Act all persons employed in the establishment of the employer, whether directly or through an intermediary and even taken on hire from other employer. There has also been notional extension of the definition to include all employee connected with the administration of the factory or establishment covered by the Act including those concerned with the sales or purchases relating to the factory or establishment.1) In Pondkherry State Weaver's Co op. Society v. Regional Director, Employees' State Insurance Corporation, Madras2) the question was whether the provisions of the Act are applicable to Weavers' Co-operative Society whose workers are shareholders of the society. It was held that a co-operative society, on registration, becomes a body corporate with a perpetual succession and it is legally independent of its members who constitute the society. Once the society is independent of its members and has a separate legal existence apart from its members, then there is no bar for the society employing its members. And if such members are employed, they are entitled to be covered by the Employees State Insurance Act.

In Kunnathunad C.S. Co-operative Society v. Regional Director, E.S.I, C.3) it was held that a co-operative society is a separate legal entity distinct from its members. Hence a society employing its members for wage in manufacturing process is liable to be covered under the Act. Further, the branch office of Brooke Bond engaged in buying the exporting tea was held to be covered by the definition of shop for the purposes of notification under Section 1 (5) of the Act.4) The premises where the businesses of undertaking electrical work contracts in the factories and other places of customers was carried on is a shop and the Act applies by virtue of the notification issued by Karnataka Government extending the provisions of the Act to shop.5) In Balachandra Aggrawal and another v. Union of India and others 6) the petitioner's firm was registered under the West Bengal Shops and Establishments Act, 1963 as a commercial establishment. The Employees State Insurance Act, 1948 was made applicable to the firm which was challenged by it. It was held by the high court that the petitioner's establishment is engaged in rendering services to its customers by providing technical services and such selling of services by the firm brings the establishment within the purview of section 1(5) of the Employees' State Insurance Act, 1948.

The provisions of the Act have to be construed liberally.

Where the driver employed by the transport corporation to drive the truck on payment of remuneration for each trip is employed in connection with its business, it was held that he comes within the definition of employee under the Act.7) Injodhpur Vidyut Vitran Nigam Ltd. v. Karamchari Rajya Beema Nigam and another8) it was observed that the central government by a notification extended the provisions of the Employees State Insurance Act to Hanumangarh Town and therefore the insurance scheme was applicable in this area also. The appellant contended before the high court that it was not a factory and as such its employees were not covered by the Employees State Insurance Scheme. It was held by the high court that the term 'employee' in section 2 (9) of the Act was not confined to those employed in a factory but extended as well to those engaged in work incidental or preliminary to work of establishment. Hence the appellant was held liable under the Act.

In Saraswati Films v. Regional Director E.S.I. Corporation, Trkhur9) security guards in cinema hall were employed through another agency which used to send the guards by rotation. The appellant pleaded that these security guards were not their employees. The Supreme Court referring to sub-sections (9), (13), (15) and (17) of Section 2 of the Employees State Insurance Act, 1948 held that the definition of 'employee' in the Act was wide and comprehensive. The appellant was the principal employer of the security guards and they were employees under Section 2 (9) of the Employees State Insurance Act, 1948. The Act establishes a corporation to implement the scheme of insurance under the Act. The main funds of the corporation are derived from the employers' and employees' contribution, which are specified percentage of their salary or wages. The principal employer is required to pay the employees' contribution in the first instance, with a right to recover the same from the immediate employer. As far as the employees' contribution is concerned, the deduction is to be made from the current wages of the employee, and not otherwise, and paid by the principal employer to the corporation. Recovery of the employer's contribution however, cannot be made from the wages payable to an employee either directly or indirectly. The corporation may also accept donations to augment its funds. Under the Act, the following benefits are available to an employee:

  1. periodical payments in case of his sickness;
  2. periodical payments to an insured woman worker in case of confinement or miscarriage or sickness arising out of pregnancy (maternity benefit);
  3. periodical payments to an insured person suffering from disablement as a result of an employment injury (disablement benefit);
  4. periodical payments to dependents of an insured person who dies as a result of an injury sustained as an employee under the Act (dependents' benefits);
  5. medical treatment for and attendance on insured person (medical benefit); lastly
  6. funeral benefits towards expenditure on the funeral of the deceased insured person.

Provision is also made for the payment of compensation in case an employee contracts what is called 'an occupational disease'. Protection is given to an employee who is in receipt of sickness or maternity benefit under the Act so that he cannot be dismissed or discharged or otherwise punished during the time he is in receipt of such benefit.

Hyderabad Asbestos Cement Products etc. v. E.S.I. Court & Others (1978) ILLJ
(1983) I LLJ 17 (Mad.).
(1989) I LLJ 11 (Ker.).
The Brooke Bond India v. E.S.I. Corporation (1980) ILLJ 352 (K)
Reunion Engg. Co. Pvt. Ltd. v. E.S.I.C (1993) 1 LLJ 31 (K
(2000) ΠΙ LLJ 127 (Cal.).
£.5.7. Corporation v. RajKamal Transport & Others (1995) 1 LLJ 94
(2003) 1 LLJ 104 (Raj.).
(2002) III LLJ 169 (SC).

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