This article is written by Neelabh Keshav Sinha , a first-year student from Symbiosis Law School, Noida who is pursuing BBA LLB. The article provides an overview of the Employees’ State Insurance Act and its different provisions, along with a few landmark judgments.
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The Employees’ State Insurance Act incorporates a number of sections, these sections provide for medical benefits and insurance for any employees working under factories registered under the ESI Corporation. This is an exciting prospect from both an employee’s and a legal perspective as the beginning of a formal social security program in India.
This article will explain the highlight sections of the Act, as well as elaborate landmark cases that prove the authenticity of the scheme, and how it worked for the benefit of its employees at times of need.
The Employees’ State Insurance Act, 1948 (ESI), enables the financial backing and support to the working class in times of medical distress such as:
It is a self-financed initiative, which serves as a type of social security scheme, to prevent the working class from any financial problems arising out of the above medical issues.
The ESI Act serves as a constitutional instrument because of its practice of providing insurance and medical insurance. While the ESI Act is mostly executed through the ESI Corporation, the Central Government takes control of most of the proceedings.
This control by the Central Government largely contributes to the constitutionality of the Act, because Insurance, be it public or private, is listed in the Seventh Schedule of the Indian Constitution as a Union List subject i.e. it can only be legislated by the Central Government.
The ESI Act exercises its function through the Employees’ State Insurance Corporation, established via Section 3 , a body created to maintain social security. It was established on 24 February, 1952. The corporation is supposed to grant relief to the employees in case of medical emergencies.
The composition of the ESIC is defined in Section 4 , and it is as follows:
Via Section 5 , the following members are appointed for up to a 4 year period:
An outgoing member of ESIC, the Standing Committee of ESIC, or the Medical Benefit Council is automatically eligible for re-appointment or re-election into office as the case may be, at the pleasure of the appointing Central Government.
The signature of the Director-General of ESIC is the only necessary requirement to authenticate an outgoing order or a decision, there is no other way to authenticate or enforce an order.
The Director-General can also temporarily delegate his authority to any other officer. In this case, the signature of the authorised officer will also suffice to authenticate an order.
The composition of the Standing Committee of ESIC is as follows:
The following members are appointed for a two year period:
The Medical Benefit Council is an advisory body on matters related to the administration of medical benefits under the ESI scheme. It consists of:
The following members of the Medical Benefit Council are appointed for a period of 4 years, these are:
The resignation of a member of the Corporation is complete when a notice for the same, in writing, is delivered to the Central Government, and his seat shall fall vacant upon acceptance of his resignation.
A member of the ESIC shall cease to be a member of his respective body (Corporation, Standing Committee or Medical Council) upon failing to attend three consecutive meetings. However, the same member can be restored by the concerned body via the rules made by the Central Government.
If in the opinion of the Central Government, any employer, employee or medical representative fails to represent their qualification, they shall cease to be members of ESIC.
A person can be disqualified as a member of ESIC if:
Any vacancy in the office of ESIC shall be filled by appointment or election, as the case may be.
A member of ESIC can only hold the ex-member’s spot in the respective committee, if the original holder of that position was found to be eligible for the same. Otherwise, the position is void.
The fees which are payable to the members of the ESIC for their services can be payable at any time, at the discretion of the Central Government. There is no definitive schedule.
The Principal Officers referred to under this Section are the Director-General and/or Financial Commissioner, to act as the CEO for ESIC.
They serve as whole-time officers and are not permitted to undertake any work outside of office jurisdiction without the sanction of the Central Government.
The time period for the appointment of any principal officer may not exceed 5 years.
The operation of their fees, disqualification, and cessation of seats operate in the same manner as that of their subordinates.
ESIC has the jurisdiction to employ staff of officers as may be necessary for the optimum running of the corporation, however, according to the prerequisites in Section 17 , the sanction for creating any staff position has to be acquired from the Central Government. Their salary shall be prescribed by the Central government within a particular range, which cannot be exceeded.
The scale of pay will be determined on the basis of their educational qualifications, method of recruitment, duties, and responsibilities, etc.
The Standing Committee, with its powers defined in Section 18 , shall administer the affairs of the Corporation and may exercise any of the powers and perform any of the functions of the Corporation, while authorised and under the jurisdiction of the corporation.
The Standing Committee shall submit for the consideration and decision of the Corporation all such cases and matters as may be specified in the regulations made in this behalf.
The Standing Committee also, in its discretion, may submit any other case or matter for the decision of the Corporation.
ESIC, in its jurisdiction, may take initiatives that promote health and welfare amongst its employees, while also promoting rehabilitation and re-employment for past employees who were injured or disabled in the course of employment.
The funding and expenditure for such initiatives is at the discretion of the Central Government.
ESIC, its Standing Committee, and its Medical Council shall meet periodically to observe rules and procedures in regard to the efficient functioning of the corporation. Such observations can be specified as per the regulations in regard to the meeting.
The supersession of the Corporation and the Standing Committee occurs when there is a persistent failure to perform the duties prescribed to both parties. In such a case, the Central Government, via a notification in the Official Gazette, can take the place of the corporation, or with the consultation of the corporation, can take the place of the Standing Committee.
The supersession of the corporation will take place by rendering all of the seats of the corporation, previously occupied by the members, as vacant.
In the case of the Standing Committee, a new one shall be constituted immediately as per Section 8 of the ESI Act.
The Medical Council’s functions are as follows:
The duties of the Director-General and Financial Commissioner are prescribed by the ESI Act itself in accordance with the Central Government. These tasks may concern various arenas from management to miscellaneous tasks.
No act of any ESIC body shall be termed as invalid with respect to their own rules and regulations. Invalidity cannot be claimed on the eligibility or ineligibility of a particular member of that office.
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 powers and functions.
The Employees’ State Insurance Fund is the primary monetary source for the ESIC to perform its functions. All contributions paid under this Act and all other money received on behalf of the Corporation shall be paid into this fund to be held and administered by the Corporation.
These could be in the form of grants, donations or gifts by the government.
The ESI Fund is responsible for maintaining the expenses of ESIC, which are as follows:
Administrative expenses are termed so, those expenses which cover the costs of administration of ESIC, prescribed by the Central Government.
ESIC is subject to conditions prescribed by the Central Government, in terms of acquiring, hold, sell or transfer any property, movable or immovable, vested in or acquired by it, so as to fulfill the purposes of the corporation. The ESIC also has the ability to invest in property as and when required, under the jurisdiction of the Central government. It can also delegate property for the benefit of its staff.
Any and all property acquired by ESIC, before its establishment, will be brought into the accounting books of the corporation.
Every year, ESIC frames and projects a potential budget showcasing how much expenditure it proposes to incur, and how it will discharge its liabilities during the following year. This is then submitted to the Central Government for approval.
The Corporation shall maintain correct accounts of its income and expenditure in such form and in such manner as may be prescribed by the Central Government.
The Corporation prepares accounts regularly which are audited annually by the comptroller and Auditor-General of India, and any audit which leads to an expenditure will be payable to the above parties.
Any person appointed by the Comptroller and Auditor-General to act on their behalf will temporarily have the same powers as the above parties and are authorised to demand the production of books, accounts, connected vouchers, and other documents and papers. They shall also be authorised to inspect any offices of ESIC at any time.
The accounts of the Corporation, before being forwarded to the Central Government, have to be verified by the Comptroller and Auditor-General, or any of their representatives. After verification, the accounts can be forwarded to the Central Government along with any comments on the report, given by the above parties.
The Corporation shall submit an annual report of its work and activities to the Central Government.
The annual report, the audited accounts of the Corporation along with the report of the Comptroller and Auditor-General of India, and the comments of the Corporation on such report under section 34 and the budget, as finally adopted by the Corporation, shall be placed before the Parliament.
The Corporation shall, at intervals of three years, have a valuation of its assets and liabilities made by a valuer appointed with the approval of the Central Government: Provided that it shall be open to the Central Government to direct a valuation to be made at such other times as it may consider necessary.
All employees employed in the factories which meet ESIC prescribed rules (under Section 2) are insured for all the benefits offered by it.
In the case of an employee who is indirectly employed under the principal employer, via an immediate employer, the principal employer shall be entitled to recover the payment made on behalf of an indirect employee, from the immediate employer, as a debt payable to him.
The immediate employer also has to prepare a list of all the employees under him and submit the same to the principal employer, before paying his dues.
In case an employee’s wage falls below the prescribed wage range prescribed by the Central Government, the employee shall not be liable for his contribution and it shall not be payable.
The manner for payments which the Act provides regulations for, has been elaborated in the following conditions:
According to the provisions given as per the ESI Act, the principal and immediate employers are to submit all the investment profits, as well as any and all details relating to their employees in any factory under their jurisdiction. In case of failure to submit a return, that the corporation had reasonable cause to believe, should have been submitted, the corporation can require the employers to present all the details.
ESIC has the power to appoint persons as Social Security Officers. Their functions are mostly to serve a role in inspecting the function of the corporation.
A Social Security offer is restricted from exercising his functions and discharging his duties, if the accounting statements of the factory/establishment are not submitted, or not maintained in accordance with Section 44 of the ESI Act. As such, the Corporation may, with the available information, determine the contribution(defined under Section 39) amount payable to employees. However, this procedure will not take place until after the person in charge has been given a reasonable opportunity to be heard regarding the absence of such records.
In the scenario specified in Section 45A, once the employer in charge is heard, and he is not satisfied with the verdict given by the corporation, he may prefer an appeal to an appellate authority as may be provided by regulation, within sixty days of the date of the verdict. He must also pay a sum of 25% of his calculated contribution, in order to file the appeal. In case he is successful, the corporation will also refund the contribution paid by him.
Any and all contributions which are payable under the provisions of ESI Act, can be recovered, termed as ‘arrears of land revenue’.
In lieu of Section 45B, where the contribution is to be recovered, an authorised officer of the corporation issues a certificate bearing his signature and the amount to be recovered, to a Recovery Officer, who then proceeds to recover the amount specified from the factory where the default took place. He does this via:
For the contribution certificate to be forwarded to the Recovery Officer, the factory employer must be under the jurisdiction of the Officer in the following ways:
The analysis of the recovery amount, as per the certificate issued to the Recovery Officer, operates on his word only. The factory or any authority related to it cannot question the Officer on the correctness of the mount, and no objection shall be entertained. However, with a prior intimation, an arithmetical mistake can be corrected by an authorised officer, along with any orders about withdrawal or cancellation of a certificate.
It is at the discretion of the Recovery Officer, within the boundaries of the ESI Act, to halt legal proceedings if the time he has allocated for the recovery of an amount, has expired.
The Recovery Officer is also entitled to receive constant updates about the status of payment of any due amount.
If, as a result of an appeal, the amount due is decreased, then the Recovery Officer temporarily halts the recovery of the now decreased amount.
Some of the other modes of recovery are elaborated within Section 45G. These are rarer modes of recovery, due to the primary modes of recovery often being preferred:
The arrears of the amount of contributors, which are to be sold to cover the remaining costs, can be affected by decisions from the Assessing Tax Officer or Tax Recovery Officer. They can make changes which shall apply to all the interests and damages.
Section 46 of the ESI Act grants benefits to employees as social security in case of injury, which can be availed during the course of employment. There are 6 types of benefits that can be availed:
These benefits are guaranteed to the employee as soon as he/she is hired, with the benefits extending to their family members as well.
This benefit covers the payment of all treatment expenses in lieu of medical issues faced by the employee
The employees covered by the ESI Act can avail periodical payments in case of sickness as per Section 46(1)(a), as long as the medical condition is verified by the appointed medical practitioner.
The compensation is approximately 70% of their wages, with the upper limit for availing compensation being 91 days in a year.
In a period of 6 months of employment, the employee must have been working for a minimum of 78 days, else the benefit cannot be claimed.
As per Section 46(1)(b) of the ESI Act, an insured woman can claim periodical payments in case of occurrence of any of the following situations:
The benefit is payable for three months, with an extension of one month, if required. The minimum work duration must be 70 days in the year preceding the year of pregnancy.
Section 46(1)(d) prescribes periodical payments(often made monthly) to the dependants/family members of the person who dies during the course of employment, with the cause of death being an employment injury or an occupational hazard. Compensation is generally 90% of the employee’s wages.
In case an employee suffers an injury during the course of employment which results in their disablement. The nature of the disablement may be temporary or permanent. Unlike the other benefits, there is no minimum work contribution required to avail the disablement benefit, although eligibility for the same will be determined by the Medical Board.
This determination also affects the amount of compensation granted, if any, with the general percentage of wages granted being around 90%.
‘Other benefits’ refer to the miscellaneous benefits apart from the five major benefits that can be availed by the employees. These are as follows:
Section 53 of the ESI Act acts as a deterrent for employees, in order to prevent them or their families from claiming benefits provided under the scope of Workmens’ Protection Act, so long as they are still insured under the reliefs offered by the ESI Act.
Section 61 acts like an extension to Section 53, in the sense that while Section 53 only bars employees from receiving compensation under the Workmens’ Compensation Act, Section 61 bars employees from receiving compensation from any other enactment so long as they are still insured under the ESI Act.
The Central Government holds the power to frame schemes for other beneficiaries and their family members, mostly for providing medical facilities in ESI hospitals. However, this must be within the framework of the ESI Act and must be notified in the Official Gazette.
Schemes implemented for beneficiaries may cover for a number of matters such as:
Via a notification in the Official Gazette, the Central Government may add to, amend, introduce variations, or rescind the scheme.
Via a notification in the Official Gazette, an Employees’ Insurance Court will be constituted by the State Government, with a set amount of judges as per the decision of the State Government.
The same court may be appointed for two or more local areas, or two courts or more courts may be appointed for the same local area.
The Employees’ Insurance Court will function with the same powers as that of a Civil Court, in which, to enforce the provisions of the ESI Act, it can enforce witness attendance, compel document and material evidence to be presented, it can administer an oath and can record evidence.
All expenses incurred before a proceeding are subject to the discretion and liability of the court itself.
An Employees’ Insurance Court, according to Section 81 may submit any question of law for the decision of the High Court and if it does so, the answer to the question shall hold precedence before any judgment.
Section 82 defines that no appeal can be laid down as against an order from the Employees’ Insurance Court. However, appeals from the High Court can stand if they involve a substantial question of law.
Sections 84 , 85 , and 85A cover all the punishments for default listed within the ESI Act.
If an employer fails to pay the contributions due in any aspect, whether it be from his side or his employee’s side, the Corporation can recover the deficit from him by way of penalty.
However, this recovery of contribution will not take place until after the person in charge has been given a reasonable opportunity to be heard regarding the failure to pay the contribution.
Along with the power of the court to recover damages, it also has provisions to enforce judicial orders. If the defaulting employer fails to meet the time conditions for payments that have been stated by the Court, the employer will be deemed to have committed another offence, which can be punishable with imprisonment and/or fines.
Section 86 dictates that any sort of prosecution cannot take place under the provisions of ESI Act unless it has previously obtained the sanction of the Insurance Commissioner or any other authorised authority such as the Director-General of the Corporation. No court lower than a First Class Magistrate can try an offence under the ESI Act, and no Court will take cognizance of any offence reported under this Act.
Taking inference from the concept of business entity, where every company is its own individual i.e. it is a separate legal entity of its own and can sue or be sued in a court of law accordingly.
As such, when an offence is said to have been committed by a company, all of its managerial employees, who were responsible for the company at the time, will be tried along with the company, deemed to be guilty of the same offence. They are liable for punishment accordingly.
Sections 87 , 88 , 90 , 91 and 91A list the criteria under which certain exceptions to benefits can be made under ISA. Via a notification in the Official Gazette, the appropriate government(appropriate here meaning the government exercising more authority, in a closer proximity), can exempt the following from the benefits of the ESI Act(if they were enjoying those same benefits before):
In case of any misuse of benefits by the insured persons, the Central Government can, at its discretion, publish a notice in the Official Gazette that disentitles such persons from their benefits that they have under ESI Act.
The bodies of ESIC possess authority that they can delegate to authorised personnel, at their discretion. These authorised personnel can exercise the powers given to them by their specific ESIC bodies, but only for a temporary period.
Medical care is guaranteed for family members of the insured person, covered at the cost of the Corporation if the funds at the time permit the coverage.
In this case, the plaintiff was under the employment of defendant 1 for carrying out television repairs. On July 17, 1987, he was injured during the course of employment while repairing a television set, when a component burst and he suffered injuries on his face.
After claiming relief from the ESIC Corporation under Section 46 of the Act, he then filed an appeal asking for compensation under the Workmens’ Compensation Act, which required an amount paid by the defendant.
This was challenged by the defendant in the Bombay High Court via an appeal, which contested their payment of the compensation, and called into usage Sections 38 and 46 of the ESI Act, which lay the foundation for the insurance offered by the Act. (Section 38 guaranteeing that every worker is insured and Section 46 defining the relief available to workers).
This was further verified by the High Court, whose Division Bench further stated that the worker’s appeal for the amount to be paid by the plaintiff could not be upheld. Instead, he would receive appropriate relief, to be determined by the ESIC.
In this case, the defendant, P. Ashokan, was appealing to claim damages from the appellant, his employer, ‘Western India Plywood Ltd.’ as compensation for an injury which he had suffered during the course of employment. However, the defendant had already claimed compensation from ESIC for his injuries as he was insured under the ESI Act.
The appeal was filed in lieu of the existence of Articles 53 and 61, the former restricting compensation to be availed from the Workers’ Compensation Act, and the latter restricted compensation being availed from any law or action other than the ESI Act. This bar would only hold if the employee who had suffered the injury had received adequate compensation for the same.
The Full Bench assigned to this judgment then attempted to define what could constitute as ‘adequate compensation’ if an injury had been suffered, for which the reliefs received by the ESIC under Sections 38 and 46 of the ESI Act were eligible as ‘adequate compensation’.
The final judgment laid down by the bench was to both, restrict the employee from getting double relief as compensation from his employer, and to define the objective of Section 53, which was then laid down as not only a bar to guarantee only the required amount of relief for an injury by ESIC, but also to save the employer from facing more than one claim in relation to the same accident, i.e. an indirect form of double jeopardy, in which he may have to compensate twice for the same injury.
This is one of the premier landmark judgments in relation to the ESI Act as the basis of this case is the determination of whether a particular institution can be covered under the ESI Act or not.
The matter originally under contention was the release of a new notification by the Kerala State Government in the Official Gazette, which extended the scope of the ESI Act, i.e. which organisations could fall under it, was extended to schools and other educational institutions. The matter was then decided through the interpretation of the statute in Section 1 of the ESI Act.
It was held that educational institutions, while not being commercial in nature, nor having the functions of a traditional factory, was not completely excluded from the statute itself, and could still be applied as an instrument under the ESI Act.
The deciding contention was when the final responsibility towards educational institutions was discussed. Since the Central Government had a priority to control and manage most educational institutions, the notification which extended the provision of the ESI Act to schools was held valid.
For a working-class employee in India, the ESI Act is an essential utility that works in their favour, while also being beneficial for sectors outside that of the working class.
The ESI Act is unique in the fact that it works in advantageous ways for both employees and employers. While employees are insured under the act and get financial aid in case of an injury, the employers are also protected from being jeopardized twice in lieu of paying compensation to the employees.
The Employees’ State Insurance Act, apart from medical benefits provided to employees, also controls many more indirect aspects of efficiently managing the Corporation established by the Act, be it its sales proceedings, account management or separation of powers amongst its various officers.
