Social Security Legislations Lesson

LESSON 19

Unit I – Employees’ State Insurance Act, 1948 19-I

KEY CONCEPTS
n Confinement n Contribution n Dependent n Appropriate Government n Employment Injury n Employee
n Exempted Employee n Principal Employer n Immediate Employer n Permanent partial disablement
n Permanent total disablement n Temporary disablement n Employees’ Insurance Court

Learning Objectives
To understand:
 The legal frame work provided for law regulating social security for the workers in India.
 The legal machinery relating to Social Security in independent India
 The provisions relating to certain benefits to the employees in the organized sector in case of
sickness, maternity and employment injury
 The important definitions and concepts
 The need for protecting and safeguarding interest of employees
 To familiarize the students with the legal frame work stipulated under the Employees’ State Insurance
Act, 1948

Lesson Outline
 Introduction  Employees’ Insurance Court (E.I. Court)
 Important Definitions  Exemptions
 Registration of Factories and Establishments  Lesson Round-Up
under this Act  Glossary
 Employees’ State Insurance  Test Yourself
 Administration of Employees’ State Insurance
Scheme
 Employees’ State Insurance Corporation
 Wings of the Corporation
 Employees State Insurance Fund
 Contributions

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Regulatory Framework
l Employees’ State Insurance Act, 1948

The Employees’ State Insurance Act, 1948 provides an integrated need based social insurance scheme
that would protect the interest of workers in contingencies such as sickness, maternity, temporary or
permanent physical disablement, death due to employment injury resulting in loss of wages or earning
capacity. The Act also guarantees reasonably good medical care to workers and their immediate
dependents.

INTRODUCTION
The Employees’ State Insurance Act, 1948 provides for certain benefits to employees in case of sickness,
maternity and employment injury and also makes provisions for certain other matters in relation thereto. The
Act has been amended by the Employees’ State Insurance (Amendment) Act, 2010 for enhancing the Social
Security Coverage, streamlining the procedure for assessment of dues and for providing better services to
the beneficiaries.
The Act extends to the whole of India. The Central Government is empowered to enforce the provisions of
the Act by notification in the Official Gazette, to enforce different provisions of the Act on different dates
and for different States or for different parts thereof [Section 1(3)]. The Act applies in the first instance to
all factories (including factories belonging to the Government) other than seasonal factories [Section 1(4)].
According to the proviso to Section 1(4) of the Act, nothing contained in sub-section (4) of Section 1 shall
apply to a factory or establishment belonging to or under the control of the Government whose employees
are otherwise in receipt of benefits substantially similar or superior to the benefits provided under the Act.
Section 1(5) of the Act empowers the appropriate Government to extend any of the provisions of the Act to
any other establishment or class of establishments, industrial, commercial, agricultural or otherwise after
giving one month’s notice in the Official Gazettee. However, this can be done by the appropriate Government,
only in consultation with the Employees’ State Insurance Corporation set up under the Act and, where the
appropriate Government is a State Government, it can extend the provisions of the Act with the approval of
the Central Government.
Under these enacting provisions, the Act has been extended by many State Governments to shops, hotels,
restaurants, cinemas, including preview theatres, newspaper establishments, road transport undertakings,
etc., employing 20 or more persons. It is not sufficient that 20 persons are employed in the shop. They
should be employee as per Section 2(9) of the Act, getting the wages prescribed therein (ESIC v. M.M. Suri
& Associates Pvt. Ltd., 1999 LAB IC SC 956). According to the proviso to sub-section (5) of Section 1 where
the provisions of the Act have been brought into force in any part of a State, the said provisions shall stand
extended to any such establishment or class of establishment within that part, if the provisions have already
been extended to similar establishment or class of establishments in another part of that State.
It may be noted that a factory or an establishment to which the Act applies shall continue to be governed by this
Act even if the number of persons employed therein at any time falls below the limit specified by or under the Act
or the manufacturing process therein ceases to be carried on with the aid of power. [Section 1(6)]

IMPORTANT DEFINITIONS

(i) Appropriate Government

“Appropriate Government” means in respect of establishments under the control of the Central Government
or a railway administration or a major port or a mine or oil-field; the Central Government, and in all other
cases, the State Government. [Section 2(1)]

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(ii) Confinement
“Confinement” means labour resulting in the issue of a living child or labour after 26 weeks of pregnancy
resulting in the issue of child whether alive or dead. [Section 2(3)]

(iii) Contribution
“Contribution” means the sum of money payable to the Corporation by the principal employer in respect of
an employees and includes any amount payable by or on behalf of the employee in accordance with the
provisions of this Act. [Section 2(4)]

(iv) Dependent
“Dependent” under Section 2(6A) of the Act (as amended by the Employees’ State Insurance (Amendment)
Act, 2010) means any of the following relatives of a deceased insured person namely:
(i) a widow, a legitimate or adopted son who has not attained the age of twenty-five years„ an unmarried
legitimate or adopted daughter,
(ia) a widowed mother,
(ii) if wholly dependent on the earnings of the insured person at the time of his death, a legitimate or
adopted son or daughter who has attained the age of 25 years and is infirm;
(iii) if wholly or in part dependent on the earnings of the insured person at the time his death:
(a) a parent other than a widowed mother,
(b) a minor illegitimate son, an unmarried illegitimate daughter or a daughter legitimate or adopted
or illegitimate if married and minor or if widowed and a minor,
(c) a minor brother or an unmarried sister or a widowed sister if a minor,
(d) a widowed daughter-in-law,
(e) a minor child of a pre-deceased son,
(f) a minor child of a pre-deceased daughter where no parent of the child is alive or,
(g) a paternal grand parent if no parent of the insured person is alive.

(v) Employment Injury

It means a personal injury to an employee caused by accident or an occupational disease arising out of
and in the course of his employment, being an insurable employment, whether the accident occurs or the
occupational disease is contracted within or outside the territorial limits of India. [Section 2(8)]
It is well settled that an employment injury need not necessarily be confined to any injury sustained by a
person within the premises or the concern where a person works. Whether in a particular case the theory
of notional extension of employment would take in the time and place of accident so as to bring it within
an employment injury, will have to depend on the assessment of several factors. There should be a nexus
between the circumstances of the accident and the employment. On facts no case could be an authority for
another case, since there would necessarily be some differences between the two cases. Therefore, each
case has to be decided on its own facts. It is sufficient if it is proved, that the injury to the employee was
caused by an accident arising out of and in the course of employment no matter when and where it occurred.
There is not even a geographical limitation.

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In E.S.I. Corpn. Indore v. Babulal, 1982 Lab. I.C. 468, the M.P. High Court held that injury arose out of
employment where a workman attending duty in spite of threats by persons giving call for strike and was
assaulted by them while returning after his duty was over. A worker was injured while knocking the belt
of the moving pulley, though the injury caused was to his negligence, yet such an injury amounts to an
employment injury (Jayanthilal Dhanji Co. v. E.S.I.C., AIR AP 210).

The word injury does not mean only visible injury in the form of some wound. Such a narrow interpretation
would be inconsistent with the purposes of the Act which provides certain benefits in case of sickness,
maternity and employment injury (Shyam Devi v. E.S.I.C., AIR 1964 AII. 42).

(vi) Employee
“Employee” according to Section 2(9) as amended by the Employees’ State Insurance (Amendment) Act,
2010 means any person employed for wages in connection with the work of a factory or establishment to
which this Act applies and:

(i) who is directly employed by the principal employer on any work of, or incidental or preliminary to or
connected with the work of the factory or establishment, whether such work is done by employee in the
factory or establishment; or elsewhere, or

(ii) who is employed by or through a immediate employer on the premises of the factory or establishment
or under the supervision of the principal employer or his agent, on work which is ordinarily part of the
work of the factory or establishment or which is preliminary to the work carried on in or incidental to
the purpose of the factory or establishment; or

(iii) whose services are temporarily lent or let on hire to the principal employer by the person with whom
the person, whose services are so lent or let on hire, has entered into a contract of service;

and includes any person employed for wages on any work connected with the administration of the factory
or establishment or any part, department or branch thereof, or with the purchase of raw materials of, or the
distribution or sale of the product of the factory or establishment; or any person engaged as an apprentice,
not being an apprentice engaged under Apprentices Act, 1961 and includes such person engaged as
apprentice whose training period is extended to any length of time, ; but does not include:

(a) any member of the Indian Naval, Military or Air Forces; or

(b) any person so employed whose wages (excluding remuneration for overtime work) exceed such wages
as may be prescribed by the Central Government.

Provided that an employee whose wages (excluding remuneration for overtime work) exceed such wages
as may be prescribed by the Central Government at any time after (and not before) the beginning of the
contribution period shall continue to be an employee until the end of that period. The Central Government
has since prescribed the wage limit for coverage of an employee under Section 2(9) of the Act as Rs. 21,000
per month. Further, it is provided that an employee whose wages (excluding remuneration for overtime work)
exceed Rs. 21,000 a month at any time after and not before the beginning of the contribution period, shall
continue to be an employee until the end of the period.

(vii) Exempted Employee

“Exempted Employee” means an employee who is not liable under this Act to pay the employees contribution.
[Section 2(10)]

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(viii) Principal Employer

“Principal Employer” means the following:
(i) in a factory, owner or occupier of the factory and includes the managing agent of such owner or
occupier, the legal representative of a deceased owner or occupier and where a person has been
named as the manager of the factory under the Factories Act, 1948, the person so named;
(ii) in any establishment under the control of any department of any Government in India, the authority
appointed by such Government in this behalf or where no authority is so appointed the head of the
Department;
(iii) in any other establishment, any person responsible for the supervision and control of the establishment.
[Section 2(17)]

(ix) Family
“Family” under Section 2(11) as amended by the Employees’ State Insurance (Amendment) Act, 2010 means
all or any of the following relatives of an insured person, namely:
(i) a spouse;
(ii) a minor legitimate or adopted child dependent upon the insured person;
(iii) a child who is wholly dependent on the earnings of the insured person and who is:
(a) receiving education, till he or she attains the age of twenty-one years;
(b) an unmarried daughter;
(iv) a child who is infirm by reason of any physical or mental abnormality or injury and is wholly dependent
on the earnings of the insured person, so long as the infirmity continues;
(v) dependent parents whose income from all sources does not exceed such income as may be prescribed
by the Central Government;
(vi) In case the insured person is unmarried and his or her parents are not alive, a minor brother or sister
wholly dependant upon the earnings of the insured person.

(x) Factory
The definition of the factory as amended by the Employees’ State Insurance (Amendment) Act, 2010 is as
follows:
“Factory” means any premises including the precincts thereof whereon ten or more persons are employed
or were employed on any day of the preceding twelve months, and in any part of which a manufacturing
process is being carried on or is ordinarily so carried on, but does not including a mine subject to the
operation of the Mines Act, 1952 or a railway running shed.
It may be noted that the terms manufacturing process, occupier and power, shall have the meaning assigned
to them in the Factories Act, 1948. [Section 2(12)]

(xi) Immediate Employer

“Immediate Employer” means a person, in relation to employees employed by or through him, who has
undertaken the execution on the premises of a factory or an establishment to which this Act applies or under
the supervision of principal employer or his agent, of the whole or any part of any work which is ordinarily
part of the work of the factory or establishment of the principal employer or is preliminary to the work carried

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on, in or incidental to the purpose of any such factory or establishment, and includes a person by whom the
services of an employee who has entered into a contract of service with him are temporarily lent or let on
hire to the principal employer and includes a contractor. [Section 2(13A)] It would not be necessary that the
work undertaken by immediate employer should be in the premises where the factory of principal employer
is situated (1997-11 LU 31 Pat.).

(xii) Insurable Employment

It means an employment in factory or establishment to which the Act applies. [Section 2(13A)]

(xiii) Insured person

It means a person who is or was an employee in respect of whom contributions are, or were payable under
the Act and who is by reason thereof entitled to any of the benefits provided under the Act. [Section 2(14)]

(xiv) Permanent Partial Disablement

It means such disablement of a permanent nature, as reduced the earning capacity of an employee in every
employment which he was capable of undertaking at the time of the accident resulting in the disablement:
Provided that every injury specified in Part II of the Second Schedule to the Act shall be deemed to result in
permanent partial disablement. [Section 2(15A)]

(xv) Permanent Total Disablement

It means such disablement of a permanent nature as incapacitates an employee for all work which he was
capable of performing at the time of the accident resulting in such disablement:
Provided that permanent total disablement shall be deemed to result from every injury specified in Part-I
of the Second Schedule to the Act or from any combination of injuries specified in Part-II thereof, where the
aggregate percentage of the loss of earning capacity, as specified in the said Part-II against those injuries,
amounts to one hundred per cent or more. [Section 2(15B)]

(xvi) Seasonal Factory

It means a factory which is exclusively engaged in one or more of the following manufacturing processes
namely, cotton ginning, cotton or jute pressing, decortication of groundnuts, the manufacture of coffee, indigo,
lac, rubber, sugar (including gur) or tea or any manufacturing process which is incidental to or connected with
any of the aforesaid processes and includes a factory which is engaged for a period not exceeding seven
months in a year:
(a) in any process of blending, packing or repacking of tea or coffee; or
(b) in such other manufacturing process as the Central Government may by notification in the Official
Gazette, specify. [Section 2(19A)]

(xvii) Sickness
It means a condition which requires medical treatment and attendance and necessitates, abstention from
work on medical grounds. [Section 2(20)]

(xviii) Temporary Disablement

It means a condition resulting from an employment injury which requires medical treatment and renders an
employee as a result of such injury, temporarily incapable of doing the work which he was doing prior to or
at the time of injury. [Section 2(21)]

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(xix) Wages
“Wages” means all remuneration paid or payable in cash to an employee if the terms of the contract of
employment, express or implied, were fulfilled and includes any payment to an employee in respect of any
period of authorised leave, lock-out, strike which is not illegal or lay-off and other additional remuneration if
any, paid at intervals not exceeding two months but does not include:
(a) any contribution paid by the employer to any pension fund or provident fund, or under this Act;
(b) any travelling allowance or the value of any travelling concession;
(c) any sum paid to the person employed to defray special expenses entailed on him by the nature of his
employment, or
(d) any gratuity payable on discharge. [Section 2(22)]
Wages include other additional remuneration paid at intervals not exceeding two months wages. It is question
of fact in each case whether sales commission and incentive are payable at intervals not exceeding two months
(Handloom House Ernakulam v. Reg. Director, ESIC, 1999 CLA 34 SC 10). Travelling allowance paid to employees
is to defray special expenses entitled on him by nature of his employment. It does not form part of wages as
defined under Section 2(22) of the E.S.I. Act. Therefore, employer is not liable to pay contribution on travelling
allowance. [S. Ganesan v. The Regional Director, ESI Corporation, Madras, 2004 Lab.I.C 1147]

REGISTRATION OF FACTORIES AND ESTABLISHMENTS UNDER THIS ACT

Section 2A of the Act lays down that every factory or establishment to which this Act applies shall be registered
within such time and in such manner as may be specified in the regulations made in this behalf.

EMPLOYEES’ STATE INSURANCE

Section 38 of the Act makes compulsory that subject to the provisions of the Act all the employees in factories
or establishments to which this Act applies shall be insured in the manner provided by this Act. Such insured
persons shall pay contributions towards Insurance Fund through their employers who will also pay their own
contribution. Such insured persons are entitled to get certain benefits from that fund which shall be administered
by the Corporation. Any dispute will be settled by the Employees’ Insurance Court.

ADMINISTRATION OF EMPLOYEES’ STATE INSURANCE SCHEME

For the administration of the scheme of Employees’ State Insurance in accordance with the provisions of this
Act, the Employees’ State Insurance Corporation Standing Committee and Medical Benefit Council have been
constituted. Further, ESI Fund has been created which is held and administered by ESI Corporation through its
executive committee called Standing Committee with the assistance, advice and expertise of Medical Council,
etc. and Regional and Local Boards and Committees.

EMPLOYEES’ STATE INSURANCE CORPORATION

Section 3 of this Act provides for the establishment of Employees’ State Insurance Corporation by the Central
Government for administration of the Employees’ State Insurance Scheme in accordance with the provisions of
Act. Such Corporation shall be body corporate having perpetual succession and a common seal and shall sue
and be sued by the said name.

Constitution
The Central Government appoints a chairman, a vice-chairman and other members representing interests of
employers, employees, state governments/union territories and medical profession. Three members of the
Parliament and the Director General of the Corporation are its ex-officio members. [Section 4]

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Powers and duties of the Corporation

Section 19 empowers the Corporation, to promote (in addition to the scheme of benefits specified in the
Act), measures for the improvement of the health and welfare of insured persons and for the rehabilitation
and re- employment of insured persons who have been disabled or injured and incur in respect of such
measures expenditure from the funds of the Corporation within such limits as may be prescribed by the
Central Government.

Section 29 empowers the Corporation (a) to acquire and hold property both movable and immovable, sell
or otherwise transfer the said property; (b) it can invest and reinvest any moneys which are not immediately
required for expenses and or realise such investments; (c) it can raise loans and discharge such loans with
the previous sanction of Central Government; (d) it may constitute for the benefit of its staff or any class of
them such provident or other benefit fund as it may think fit. However, the powers under Section 29 can be
exercised subject to such conditions as may be prescribed by the Central Government.

Appointment of Regional Boards, etc.

The Corporation may appoint Regional Boards, Local Committees and Regional and Local Medical Benefit
Councils in such areas and in such manner, and delegate to them such powers and functions, as may be
provided by the regulations. (Section 25)

WINGS OF THE CORPORATION

The Corporation to discharge its functions efficiently, has been provided with two wings:

Standing Committee
The Act provides for the constitution of a Standing Committee under Section 8 from amongst its members.

Power of the Standing Committee

The Standing Committee has to administer affairs of the Corporation and may exercise any of the powers
and perform any of the functions of the Corporation subject to the general superintendence and control of
the Corporation. The standing Committee acts as an executive body for administration of Employees State
Insurance Corporation.

Medical Benefit Council

Section 10 empowers the Central Government to constitute a Medical Benefit Council. Section 22 determines
the duties of the Medical Benefit Council stating that the Council shall:

(a) advise the Corporation and the Standing Committee on matters relating to administration of medical
benefit, the certification for purposes of the grant of benefit and other connected matters;

(b) have such powers and duties of investigation as may be prescribed in relation to complaints against
medical practitioners in connection with medical treatment and attendance; and

(c) perform such other duties in connection with medical treatment and attendance as may be specified in
the regulations.

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Unit I – Employees’ State Insurance Act, 1948 LESSON 19

EMPLOYEES’ STATE INSURANCE FUND

Creation of Fund
Section 26 of the Act provides that all contributions paid under this Act and all other moneys received on
behalf of the Corporation shall be paid into a Fund called the Employees’ State Insurance Fund which shall
be held and administered by the Corporation for the purposes of this Act. The Corporation may accept grants,
gifts, donations from the Central or State Governments, local authority, or any individual or body whether
incorporated or not, for all, or any of the purposes of this Act. A Bank account in the name of Employees’
State Insurance Fund shall be opened with the Reserve Bank of India or any other Bank approved by the
Central Government. Such account shall be operated on by such officers who are authorised by the Standing
Committee with the approval of the Corporation.

Purposes for which the Fund may be expended

Section 28 provides that Fund shall be expended only for the following purposes:
(i) payment of benefits and provisions of medical treatment and attendance to insured persons and,
where the medical benefit is extended to their families, in accordance with the provisions of this Act
and defraying the charge, and costs in connection therewith;
(ii) payment of fees and allowances to members of the Corporation, the Standing Committee and Medical
Benefit Council, the Regional Boards, Local Committees and Regional and Local Medical Benefit
Councils;
(iii) payment of salaries, leave and joining time allowances, travelling and compensatory allowances,
gratuities and compassionate allowances, pensions, contributions to provident or other benefit fund
of officers and servants of the Corporation and meeting the expenditure in respect of officers and
other services set up for the purpose of giving effect to the provisions of this Act;
(iv) establishment and maintenance of hospitals, dispensaries and other institutions and the provisions
of medical and other ancillary services for the benefit of insured persons and where the medical
benefit is extended to their families, their families;
(v) payment of contribution to any State Government, local authority or any private body or individual
towards the cost of medical treatment and attendance provided to insured persons and where the
medical benefit is extended to their families, their families including the cost of any building and
equipment, in accordance with any agreement entered into by the Corporation;
(vi) defraying the cost (including all expenses) of auditing the accounts of the Corporation and of the
valuation of the assets and liabilities;
(vii) defraying the cost (including all expenses) of Employees Insurance Courts set up under this Act;
(viii) payment of any sums under any contract entered into for the purposes of this Act by the Corporation
or the Standing Committee or by any officer duly authorised by the Corporation or the Standing
Committee in that behalf;
(ix) payment of sums under any decree, order or award, of any court or tribunal against the Corporation
or any of its officers or servants for any act done in execution of his duty or under a compromise
or settlement of any suit or any other legal proceedings or claims instituted or made against the
Corporation;
(x) defraying the cost and other charges of instituting or defending any civil or criminal proceedings arising
out of any action taken under this Act;

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(xi) defraying expenditure within the limits prescribed, on measure for the improvement of the health and
welfare of insured persons and for the rehabilitation and re-employment of insured persons who have
been disabled or injured; and

(xii) such other purposes as may be authorised by the Corporation with the previous approval of the Central
Government.

CONTRIBUTIONS
The contributions have to be paid at such rates as may be prescribed by the Central Government. The wage
period in relation to an employee shall be the unit in respect of which all contributions shall be payable. The
contributions payable in respect of each wage period shall ordinarily fall due on the last day of the wage
period and where an employee is employed for part of the wage period, or is employed under two or more
employers during the same wage period, the contributions shall fall due on such days as may be specified
in the regulations.

Principal employer to pay contributions in the first instance

According to Section 40 of the Act, it is incumbent upon the principal employer to pay in respect of every
employee whether directly employed by him or by or through an immediate employer, both the employers
contributions and the employees contribution. However, he can recover from the employee (not being an
exempted employee) the employees contribution by deduction from his wages and not otherwise. Further
Section 40 provides that the principal employer has to bear the expenses of remitting the contributions to
that Corporation.

According to Section 39(5) of the Act, if any contribution payable is not paid by the principal employer on
the date on which such contribution has become due, he shall be liable to pay simple interest at the rate
of 12 per cent per annum or at such higher rate as may be specified in the regulations, till the date of its
actual payment. However, according to proviso to sub-section (5) of Section 39, higher interest specified in
the regulations should not exceed the lending rate of interest charged by any scheduled bank. It may be
noted that any interest recoverable as stated above may be recovered as an arrear of land revenue or under
newly introduced Sections 45-C to 45-1 of the Act.

Recovery of contribution from immediate employer

According to Section 41, principal employer who has paid contribution in respect of an employee employed by
or through an immediate employer is entitled to recover the amount of contribution so paid (both employers
and employees contribution) from the immediate employer either by deduction from any amount payable to
him by the principal employer under any contract or as a debt payable by the immediate employer. However
the immediate employer is entitled to recover the employees contribution from the employee employed by
or through him by deduction from wages and not otherwise. The immediate employer is required to maintain
a register of employees employed by or through him as provided in the Regulations and submit the same to
the principal employer before the settlement of any amount payable. He is not required to have separate
account with ESI (LAB IC 1999 Kar 1369).

Method of payment of contribution

Section 43 provides for the Corporation to make regulations for payment and collection of contribution
payable under this Act and such regulations may provide for:

(a) the manner and time for payment of contribution;

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(b) the payment of contributions by means of adhesive or other stamps affixed to or impressed upon books,
cards or otherwise and regulating the manner, times and conditions in, at and under which, such stamps
are to be affixed or impressed;
(c) the date by which evidence of contributions having been paid is to be received by the Corporation;
(d) the entry in or upon books or cards or particulars of contribution paid and benefits distributed in the
case of the insured persons to whom such books or card relate; and
(e) the issue, sale, custody, production, inspection and delivery of books or cards and the replacement of
books or cards which have been, lost, destroyed or defaced.

BENEFITS
Under Section 46 of the Act, the insured persons, their dependants are entitled to the following benefits on
prescribed scale:
(a) periodical payments in case of sickness certified by medical practitioner;
(b) periodical payments to an insured workman in case of confinement or miscarriage or sickness arising
out of pregnancy, confinement;
(c) periodical payment to an insured person suffering from disablement as a result of employment injury;
(d) periodical payment to dependants of insured person;
(e) medical treatment and attendance on insured person;
(f) payment of funeral expenses on the death of insured person at the prescribed rate of.

General provisions relating to Benefits

Right to receive benefits is not transferable or assignable. When a person receives benefits under this Act,
he is not entitled to receive benefits under any other enactment.
An insured person is not entitled to receive for the same period more than one benefit, e.g. benefit of sickness
cannot be combined with benefit of maternity or disablement, etc.

EMPLOYEES’ INSURANCE COURT (E.I. COURT)

Constitution
Section 74 of the Act provides that the State Government shall by notification in the Official Gazette constitute
an Employees’ Insurance Court for such local area as may be specified in the notification. The Court shall
consist of such number of judges as the State Government may think fit. Any person who is or has been
judicial officer or is a legal practitioner of 5 years standing shall be qualified to be a judge of E.I. Court. The
State Government may appoint the same Court for two or more local areas or Mo or more Courts for the
same local area and may regulate the distribution of business between them.

Matters to be decided by E.I. Court

(i) Adjudication of disputes

The Employees’ Insurance Court has jurisdiction to adjudicate disputes, namely, whether any person
is an employee under the Act, rate of wages/contribution, as to who is or was the principal employer,
right of a person to any benefit under the Act.

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(ii) Adjudication of claims

The El Court also has jurisdiction to decide claims for recovery of contribution from principal employer
or immediate employer, action for failure or negligence to pay contribution, claim for recovery of any
benefit admissible under the Act.
Proceedings in both the above cases can be initiated by filing application in the prescribed form by the
employee or his dependent or employer or the corporation depending who has cause of action.
No Civil Court has power to decide the matters falling within the purview/ jurisdiction of E.I. Court.

EXEMPTIONS
The appropriate Government may exempt any factory/establishment from the purview of this Act, as well as
any person or class of persons employed in any factory/establishment, provided the employees employed
therein are in receipt of benefits superior to the benefits under the Act. Such exemption is initially given
for one year and may be extended from time to time. The applicant has to submit application justifying
exemption with full details and satisfy the concerned Government.

LESSON ROUND-UP

l The law relating to employees’ State Insurance is governed by the Employees’ State Insurance Act,
1948.
l The objective of the act is to provide for certain benefits to employees in case of sickness, maternity
and employment injury and to provide for certain other matters in relation there to.
l The Act is applicable to all factories including factories belonging to the Government other than
seasonal factories. The appropriate Government may after giving a notice of not less than one month
and by notification in the official Gazette, extend the application of the Act or any of them, to any other
establishment or class of establishments, industrial, commercial, agricultural or otherwise. Once the
Act becomes applicable, the Act shall continue to apply irrespective of the reduction in number of
employees or cessation of manufacturing process with the aid of power.
l Every factory or establishment to which this Act applies has to be registered within the specified time
and the regulations made in this behalf.
l AII the employees in factories or establishments to which this Act applies shall be insured in prescribed
manner. Such insured persons shall pay contributions towards Insurance Fund through their employers
who will also pay their own contribution.
l The ESI Act authorises Central Government to establish Employees State Insurance Corporation for
administration of the Employees State Insurance Scheme. Such Corporation shall be body corporate
having perpetual succession and a common seal and shall sue and be sued by the said name.
l AII contributions paid under this Act and all other moneys received on behalf of the Corporation shall
be paid into a Fund called the Employees State Insurance Fund which shall be held and administered
by the Corporation for the purposes of this Act.
l The insured persons, their dependants are entitled to various benefits on prescribed scale. Right to
receive benefits is not transferable or assignable. When a person receives benefits under this Act, he
is not entitled to receive benefits under any other enactment.

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Unit I – Employees’ State Insurance Act, 1948 LESSON 19

l The Act empowers State Government to constitute an Employees Insurance Court. The Employees
Insurance Court has jurisdiction to adjudicate disputes, namely, whether any person is an employee
under the Act, rate of wages/contribution, as to who is or was the principal employer, right of a person
to any benefit under the Act.
l The El Court also has jurisdiction to decide claims for recovery of contribution from principal employer
or immediate employer, action for failure or negligence to pay contribution, claim for recovery of any
benefit admissible under the Act.

GLOSSARY

Confinement: “Confinement” means labour resulting in the issue of a living child or labour after 26 weeks of
pregnancy resulting in the issue of child whether alive or dead.
Contribution: It means the sum of money payable to the Corporation by the principal employer in respect
of an employees and includes any amount payable by or on behalf of the employee in accordance with the
provisions of this Act.
Employment Injury: It means a personal injury to an employee caused by accident or an occupational
disease arising out of and in the course of his employment, being an insurable employment, whether the
accident occurs or the occupational disease is contracted within or outside the territorial limits of India.
Factory: It means any premises including the precincts thereof whereon ten or more persons are employed
or were employed on any day of the preceding twelve months, and in any part of which a manufacturing
process is being carried on or is ordinarily so carried on, but does not including a mine subject to the
operation of the Mines Act, 1952 or a railway running shed.
Permanent partial disablement: It means such disablement of a permanent nature, as reduced the earning
capacity of an employee in every employment which he was capable of undertaking at the time of the
accident resulting in the disablement.
Permanent total disablement: It means such disablement of a permanent nature as incapacitates an
employee for all work which he was capable of performing at the time of the accident resulting in such
disablement.
Temporary disablement: It means a condition resulting from an employment injury which requires medical
treatment and renders an employee as a result of such injury, temporarily incapable of doing the work which
he was doing prior to or at the time of injury.

Test Yourself

(These are meant for re-capitulation only. Answers to these questions are not to be submitted for evaluation)
1. Discuss the object and scope of the Employees’ State Insurance Act, 1948.
2. What are the different kinds of benefits provided under the E.S.I. Act.
3. How is the Employees’ Insurance Court constituted and what is are the matters to be decided by such
a Court?
4. Write short notes on Principal Employer and Immediate Employer.
5. What are the penalties prescribed by the ESI Act, 1948 for contravention of the provisions of the Act?

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EP-SBI&LL Social Security Legislations

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