Supreme Court judgment in the case of E.S.I. Corporation vs. M/s. Endocrinology and Immunology Lab (Civil Appeal No. 3368 of 2012), which was decided on August 2, 2023:
- Background: The case revolves around the interpretation of the Employees’ State Insurance Act, 1948 (ESI Act) in the context of pathological laboratories in Kerala. The central issue is determining the date from which a particular pathological laboratory (respondent establishment) should be covered by the ESI Act.
- Facts:
- The respondent establishment is a pathological laboratory in Kerala.
- An inspection of the establishment was conducted in 1999, revealing that 19 employees were working there.
- A show cause notice was issued to the respondent by the Employees State Insurance Corporation (ESI Corporation).
- The Employees’ Insurance Court declared in an order dated 19.04.2007 that the establishment should be classified as a ‘shop’ under Section 1(5) of the ESI Act and should be covered by the Act from 22.11.2002.
3. The High Court Decision:The High Court allowed the appeal filed by the respondent, ruling that the establishment should be covered under the ESI Act from 06.09.2007 and not from 22.11.2002.The High Court’s decision was primarily based on a government notification issued on 06.09.2007.
4. Legal Provisions:The ESI Act contains provisions related to coverage and applicability to different types of establishments, including factories and shops. 5. Key Arguments: 1.The ESI Corporation argued that the establishment should be covered under the ESI Act from 22.11.2002 based on a notification issued in 1976 by the Government of Kerala. 2. The respondent argued that the 1976 notification did not include pathological laboratories in its definition of a ‘shop 3. The respondent also pointed to a later 2007 notification, which specifically included medical institutions, including pathological laboratories, with 20 or more employees under the ESI Act.
6. Court’s Analysis and Decision:
- The Court analyzed the relevant provisions of the ESI Act, particularly Sections 1(4), 1(5), and 2(12), to determine the scope and applicability of the Act to different types of establishments.
- It was established that the establishment, being a pathological laboratory, did not fall under the definition of a ‘factory’ as it did not involve a manufacturing process.
- The Court noted that the 1976 notification by the Government of Kerala did not categorize pathological laboratories as ‘shops,’ and the Corporation’s interpretation was inconsistent with this notification.
- The Court pointed out that the Government of Kerala issued a fresh notification in 2007, explicitly including medical institutions, including pathological laboratories, under the ESI Act when there were 20 or more employees.
- The 2007 notification, issued in consultation with the ESI Corporation and with the approval of the Central Government, was found to be the relevant authority on the matter.
- The Court emphasized that the issuance of the 2007 notification indicated that, even by the Corporation’s own understanding, pathological laboratories were not previously covered by the Act.
7. Judgment:
- The Supreme Court upheld the High Court’s decision, affirming that the respondent establishment should be covered under the ESI Act from September 6, 2007, in accordance with the 2007 government notification.
- The Court dismissed the appeal, and no costs were awarded.
In summary, this case involved a dispute over the coverage of a pathological laboratory under the ESI Act. The Supreme Court clarified that the 2007 notification specifically including such establishments under the Act took precedence over the Corporation’s earlier interpretations and the 1976 notification, resulting in coverage from September 6, 2007.
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