EMPLOYEES STATE

INSURANCE ACT, 1948

HISTORICAL BACKGROUND
1. In 1928 examination of the question of sickness

insurance

whether
to
re-draft
and
recommendations adopted at the 10th International
Labour Conference in 1927.
2. In 1931 the Royal Commission on Labour
suggested for early consideration on the matter.
3. Commission also proposed a tentative scheme
pertaining to sickness insurance for being put into
operation.
4. Govt. of India again question on ratification of Draft
Convention and recommendations concerning
invalidity, old age and widows and orphans.

1. At the first conference in 1940 the principle of

2.

3.
4.
5.

central sickness insurance legislations considered.

Tentative scheme on sickness was prepared by the
Labour Department of Govt. of India and placed
before 3rd Labour Conference.
Meanwhile Prof. B.P. Adarkar was appointed as a
special officer in March, 1943.
In August,1944 Prof. B.P. Adarkar submitted his
report.
Maurice Stack and Raghunath Rao of ILO was
invited by Govt. of India to give recommendation on
the report submitted by Prof. B.P. Adarkar.

1. They had given some recommendations. It was generally

agreed on:
a) C.G. proceed with preparation of a health insurance
scheme applicable to all perennial factories and covering
employment injuries and maternity benefits, if possible;
b) Scheme should be circulated to provincial govt.,
Associations of Employer and Trade Unions before bill
was draft.
2. Pursuant to this Workmens State Insurance Bill provided:
i. Sickness benefits;
ii. maternity benefits and;
iii. Employment injury benefits for workers perennial
factories

1. Ultimately after due consideration bill was passed

on April 19,1948.
2. Time and again Act was amended according to the
changing conditions.
3. Act was amended in 2010.

OBJECTIVE AND APPLICATION

1. Object:
a) to provide certain benefits to employees in

cases of sickness, maternity and

employment injury;
b) Make provisions of certain other matters in
relation thereto as the preamble to this Act
reflects.
c) Scheme of Socio- economic- welfare.

APPLICABILITY
1. It extend to whole of India.
2. Shall apply in the first instance, to all factories

3.
4.
a)
b)
c)
d)

including factories belonging to the Government

other than seasonal factories.
Section 2 (19-A) of the Act defines a Seasonal
Factory .
One or more of the following manufacturing
processes:
cotton ginning;
cotton or jute pressing;
Sugar (including gur);
Tea etc

1. 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.

From an analysis of this definition, the following three

DOMINANT INGREDIENTS DETERMINE the coverage of
a factory.
a) A Premises including the precincts thereof;
b) A manufacturing process is being carried on; and
c) A minimum of 10 persons are employed therein.
1.

PREMISES INCLUDING THE PRECINCTS THEREOF

Honorable Supreme Court (Criminal appeal No. 32 of 1953
contained in Supreme Court Labour Judgments (Vol. 3)195037 page 1323) the word premises in the definition of
Factory in Section 2(m) of the Factories Act, 1948, is a
generic term meaning open land, or land with building,
buildings or shed or building alone.

WAGES
SECTION 2 (22)

1.

2.
a)
b)
c)
d)

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 layoff and] other additional remuneration, if any,
paid at intervals not exceeding two months.
But does not include:
contribution paid;
travelling allowance;
defray special expenses entailed on him by the nature
of his employment and;
any gratuity payable on discharge.

Based on the Supreme Courts Judgment dated 28-10-

1998 in the case of ESIC-Vs-M.M.Suri & Associates

Pvt. Ltd., New Delhi, it was decided by the
Corporation to consider only Coverable employees
under Section 2(9) for coverage of a Factory or
Establishment. This decision is applicable from 2810-1998, i.e. the date of Judgment of the Supreme
Court. In view of this decision, the word persons
appearing in the definition was understood as
Coverable employees till the amendment of this
definition with effect from 1st June, 2010.
Indian Drugs and Pharmaceutical Ltd. And others
v. ESI Corporations and others (1995 SCC
(L&S)1038.

EMPLOYMENT INJURY
SECTION 2 (8)
1. Personal injury to an employee caused by:
a) accident or
b) an occupational disease

2. Arising out of and in the course of his employment,

being an insurable employment.
3. Within or outside the territorial limits of India.

CONTRIBUTION
SECTION 38 TO 45-I

1. Section 38 - All employees employed in factories or

2.
a)
b)
c)

d)

establishments to which this Act applies shall be insured in the

manner provided by this Act.
Section 39- Contribution :
Employers Contribution +Employees Contribution
Contributions shall be paid at such rates as may be prescribed
by the C.G.
If contribution is not paid by the principle employer of the due
such contribution bm due - liable to pay simple interest at the
rate of twelve per cent. per annum or at such higher rate as may
be specified in the regulations till the date of its actual payment.
The liability to pay the interest is statuary- no power of waiverquestion of settlement or compromise does not arise.

1. Section

40- Principal employer to pay

contributions in the first instance:
a) The principal employer shall pay in respect of every
employee, whether directly employed by him or by
or through an immediate employer, both the
employers contribution and the employees
contribution.
b) Recover from the employee the employees
contribution by reduction from his wages and not
otherwise.
c) The employer or immediate employer entitle to
deduct the from the wages for contribution u/this Act
or otherwise recovery from employee.

1. Section 42- General provisions as to payment of

contributions:
a) No employees contribution shall be payable by or
on behalf of an employee whose average daily
wages during a wage period are below such wages
as may be prescribed by the Central
Government.
b) Contribution both the employers contribution and
the employees contribution shall be payable by the
principal employer for each wage period in respect
of the whole or part of which wages are payable
to the employee and not otherwise.

1. Section 43: Method of payment of contribution

Corporation may make regulations for any matter:

a) relating or incidental to the payment;
b) collection of contributions payable under this Act;
c) without prejudice to the generality of the foregoing
power such regulations may provide for:
i. the manner and time of payment of contributions;
ii. payment of contributions by means of adhesive or
other stamp affixed.

1. According to Section 45 the Corporation shall

2.
a)
b)
c)
d)
i.
ii.
iii.

appoint Social Security Officer and enumerated his

powers.
Section 45-A - Determination of contributions in
certain cases
no returns,
particulars,
registers or
records are:
submitted,
furnished or
maintained

In accor-dance with the provisions of section 44 or any Social

Security Officer] or other official of the Corporation
prevented in any manner by:
1. the principal or
2. immediate employer or
3. any other person.
In exercising his functions or discharging his duties under
section 45, the Corporation may, on the basis of information
available to it, by order, determine the amount of
contributions payable in respect of the employees of that
factory or establishment.
. Rule of natural justice to be folowed.
. No such order shall be passed for the period beyond 5 yrs.

1. Section 45-AA- Appellate Authority:

a) If employers is not satisfied with any reference made

u/Sec.45-A.
b) Can appeal against the order to appellant authority.
c) Within 60 days with 25% of the amount of the
contribution.
d) If employer succeed in the appeal Corporation shall
refund the amount with such interest as specified.

1. Mode of Recovery Section 45-B to 45-I

2. Section 45-B contribution payable as arrear of

Land revenue.
3. Section 45- C empower the authorize officer to
issue certificate to the recovery officer u/his
signature specifying the amount of arrears.
. Authorize office shall proceed further to collect the
amount as specified under sub section clause (a),
(b) and (c). Such as: Attachment and sale of the
immovable property of factory or establishment.
4. Section 45-E make it clear that it shall not open to
the factory or the establishment or the immediate
employer to dispute before the Recovery officer on
the ground such as correctness of the amount etc..

1. However the authorize have power to withdraw or

cancel the certificate or any correction made by him or

any amendment made u/sub-section (4) of Section 45-F.
2. Section 45-G- lead down other modes of recovery.
Under this section Director General or any other officer
authorised by the corporation may recover the amount
any one or more modes provided in this Section.
3. Application of certain provisions of the Income Tax
Act- Section 45-H.
4. Section 45-I define Authorize officer and
Recovery Officer for the purpose of Section 45-C to
H.

BENEFITS

1. Most important social legislations.

2. The scheme contain under E.S.I. Act makes
a)
b)
c)
d)
e)
f)

provisions for the following benefits:

Sickness benefits;
Maternity Benefits;
Disablement Benefits;
Dependents Benefits;
Medical Benefits and;
Funeral Expenses.

SICKNESS BENEFITS
1. Section 46 (a) read with Section 49

A periodical payments to any insured person in case of

his sickness certified by:
a) A duly appointed medical practitioner or;
b) By any other person possessing such qualifications
and;
c) Experience as the Corporation may, by regulations,
specify in this behalf.
Pre conditions of Sickness:
i. Medical treatment;
ii. Attendance and;
iii. Necessitates abstention from work on medicinal
grounds.

MATERNITY BENEFITS
1.
a)
b)
c)
d)
e)
f)

2.

Section 46 (b) read with Section 50

Periodical payments to an insured woman in case of:
confinement or
miscarriage or
sickness arising out of pregnancy,
confinement,
premature birth of child or
miscarriage,
such woman being certified to be eligible for such payments
by an authority specified in this behalf by the regulations.
The central government shall prescribe the benefits, the
conditions , the rates and period for such benefits (Section
50).

DISABLEMENT BENEFITS
Section 46 (c) read with Section 51 and 51-A
1. Any insured person shall be entitled to periodical
mentioned if:
a) Suffering from disablement;
b) The disablement result from employment injury;
c) He sustained employment injury as an employee under
mentioned this Act.
d) The disablement benefit is payable only when the injury
is duly certified by an Insurance Medical Officer.

DEPENDENTS BENEFITS
Section 46 (d) read with Section 51-A and 52
1. This benefit is available to such dependents, of an

insured person who dies as a result of an employment

injury sustained s an employee, as are entitled to
compensation under this act.
2. Please refer the concept of accident arising out of and
out of employer as discussed under Employees
Compensation Act.

MEDICAL BENEFITS
Section 46 (e) read with Section 52-A and 56
1. Medical benefit is available to an injured person or to a
member of his family, were such benefit is extended to
embers of his family.
2. Occupational Disease Section 52-A:
a) The term Occupational Disease has nowhere been
defined in the Act.
b) The list of the Occupational Disease is given in the third
Schedule of the Act.
c) Any employee contracted any such occupational disease
while working in any of the employment shall be
deemed to have contracted an employment injury.

Third Schedule

Part A

Part B

Part C

No necessary period of
Necessary to serve
employment is necessary. not less then 6 months.
Period specified by corporation in respect of the
employment.

1. These medicinal benefits is in the following forms:

a) Out-patient treatment and attachment in the hospital or

dispensary; or
b) By the visit of the home of the insured; or
c) As an in- patient in a hospital or other institution.

1.
a)
b)
c)
d)
e)
f)

ADJUDICATION OF DISPUTE AND CLAIMS

Constitution of Employees Insurance Court: Section
74
Under this Act State Government to constitute an
Employees Insurance Court.
Constitute such court by issuing the Official Gazette.
Local jurisdiction shall also specified in the official
notification.
No. of judges shall be determine by the S.G.
Such judges shall be judicial officer or a legal
practitioner of 5 yrs.
S.G. may appoint same Court for two or more local
jurisdiction and two or more court for same jurisdiction.

a) Same Court appointed for two or more local jurisdiction

and two or more court for same jurisdiction; S.G. shall

notify the distribution of work amongst them by general
or special order.
Jiyaji Rao Cotton Mills vs E.S.I.C. AIR 1962 Madh Pra
340

MATTERS TO BE DECIDED BY EMPLOYEES

INSURANCE COURT: SECTION 75
1. If any question or dispute arises as to
a) whether any person is an employee within the meaning of this Act
b)
c)
d)
e)
f)
g)

or whether he is liable to pay the employees contribution, or

the rate of wages or average daily wages of an employee for the
purposes of this Act, or
the rate of contribution payable by a principal employer in respect
of any employee, or
the person who is or was the principal employer in respect of any
employee, or
the right of any person to any benefit and as to the amount and
duration thereof, or
any direction issued by the Corporation under section 55-A on a
review of any payment of dependants benefits, or
any other matter which is in dispute between:

i.
ii.
iii.
iv.

a.
b.

The Principal employer and the Corporation;

The Principal employer and an immediate employer;
The person and the Corporation;
An employee and a principal or immediate employer.
The dispute between the above parties may be in
respect of:
any contribution or benefit or other dues payable or
recoverable under this Act;
any other matter required to be or which may be
decided by the Employees Insurance Court under this
Act

1. Subject to the provisions of sub-section (2A), the

a)
b)
c)
d)

e)

following claims shall be decided by the Employees

Insurance Court, namely :
claim for the recovery of contribution from the principal
employer ;
claim by a principal employer to recover contributions
from any immediate employer ;
claim against a principal employer under section 68 ;
claim under section 70 for the recovery of the value or
amount of the benefits received by a person when he is
not lawfully entitled thereto ; and
If any claim for the recovery of any benefit admissible
under this Act.

POWER OF EMPLOYEES INSURANCE COURT

1. The Employees Insurance Court shall have the power of
a)
b)
c)
2.

3.

a civil court for the following:

summoning and enforcing the attendance of witnesses;
compelling the discovery and production of documents;
compelling the discovery and production of documents.
Employees Insurance Court shall be deemed to be a
civil court within the meaning of Section 195 of the
Cr.P.C.
The Principal of Natural Justice must be followed by the
Employees Insurance Court.

1. Sub-Section (3) of Section 75 bars the jurisdiction civil

Court in respect of any matter covered by this Section

and to be decided by:
i. a medical board, or
ii. by a medical appeal tribunal or
iii. by the Employees Insurance Court.

APPEAL: SECTION 82
There shall be no right of appeal from an order of an
Employees Insurance Court expect where appeal is allowed
under this Section.
2. An appeal shall lie to the High Court from an order of an
Employees Insurance Court if it involves a substantial
question of law.
3. The period of limitation for an appeal under this section shall
be sixty days.
4. The provisions of sections 5 and 12 of the Limitation Act, 1963
shall apply to appeals under this section.
Deputy Commissioner, Hardoi vs Ramkrishna Naraindas AIR
1953 SC 521
It is pertinent to note that tan appeal is allowed only when
some substantial question of law is involved and not otherwise.
The expression substantial question of law, means a
substantial question of law as between the parties in the case
involved and not merely a question of general importance.
1.

Example of Substantial Question of Law:

1. Whether decision is based on any evidence but on mere
presumption and inferences not warranted by facts, a
question of law is said to be involved.
Example of Question of Fact:
2. Whether a person is employee or not?

PENALTIES
The following acts are made offence under Section 84 of
the Act:
1. Knowingly making any false statement;
2. Knowingly making any false representation;
3. Knowingly causing any false statement to be made;
4. Knowingly causing any false representation to be made.
It is further provided that the false statement or false
representation made or caused to be made must be for
any of the following purpose:
5. To cause any increase in payment or benefit under this
Act;
6. To cause any payment or benefit to be made where no
payment

3. To cause any payment or benefit to be benefit to be made

where no payment or benefit is authorized under this Act;
4. To avoid any payment to be made by himself under this
Act ;
5. To enable any other person to avoid any such payment.
The penalty provided by Section 84 for any offence under
that Section is imprisonment for a term which may extend to
six months or with fine not exceeding two thousand rupees,
or with both.
Provided that where an insured person is convicted under
this section, he shall not be entitled for any cash benefit
under this Act for such period as may be prescribed by the
Central Government.

PUNISHMENT FOR FAILURE TO PAY CONTRIBUTIONS :SECTION 85

The following failure can be penalized under Section 85 of the Act:

1. If any person fails to pay any contribution which under this Act he is
liable to pay, or
2. If any person deducts or attempts to deduct from the wages of an
employee the whole or any part of the employers contribution, or
3. If any person in contravention of section 72 reduces the wages or any
privileges or benefits admissible to an employee, or
4. If any person in contravention of section 73 or any regulation
dismisses, discharges, reduces or otherwise punishes an employee, or
5. If any person fails or refuses to submit any return required by the
regulations or makes a false return, or
6. If any person obstructs any Inspector or other official of the
corporation in the discharge of his duties, or
7. If any person is guilty of any contravention of or non-compliance with
any of the requirements of this Act or the rules or the regulations in
respect of which no special penalty is provided,

Any person who commits an offence under clause (a) shall be

punishable, with the imprisonment for a term which may
extend to three yrs
i. which shall not be less than one year, in case of failure to
pay the employees contribution which has been deducted
by him from the employees wages and shall also be liable
to fine of ten thousand rupees ;
ii. which shall not be less than six months, in any other case
and shall also be liable to fine of five thousand rupees :
Provided that the Court may, for any adequate and special
reasons to be recorded in the judgment, impose a sentence of
imprisonment for a lesser term:
.where he commits an offence under any of the clauses (b) to
(g) (both inclusive), with imprisonment for a term which may
extend to one year or with fine which may extend to four
thousand rupees, or with both

ENHANCED PUNISHMENT IN CERTAIN CASES

AFTER PREVIOUS CONVICTION: SECTION 85-A
1. Whoever, having been convicted by a Court of an

offence punishable under this Act, commits the same

offence shall, for every such subsequent offence, be
punishable with imprisonment for a term which may
extend to two years and with fine of five thousand
rupees:
2. Provided that where such subsequent offence is for
failure by the employer to pay any contribution
which under this Act, he is liable to pay, he shall, for
every such subsequent offence, be punishable with
imprisonment for a term which may extend to five
years but which shall not be less than two years and
shall also be liable to fine of twenty-five thousand
rupees.

POWER TO RECOVER DAMAGES: SECTION

85-B
1. 1) Where an employer fails to pay the amount due in

respect of any contribution or any other amount payable

under this Act, the Corporation may recover from the
employer by way of penalty such damages, not
exceeding the amount of arrears as may be specified in
the regulations
2. Provided that before recovering such damages, the
employer shall be given a reasonable opportunity of
being heard :
3.

1. Provided further that the Corporation may reduce or

waive the damages recoverable under this section in

relation to an establishment which is a sick industrial
company in respect of which a scheme for rehabilitation
has been sanctioned by the Board for Industrial and
Financial Reconstruction established under section 4 of
the Sick Industrial Companies (Special Provisions) Act,
1985 (1 of 1986), subject to such terms and conditions
as may be specified in regulations.
2.
Any damages recoverable under sub-section (1) may
be recovered as an arrear of land revenue or under
section 45-C to section 45-I.

POWER OF COURT TO MAKE ORDERS:

SECTION 85-C
1. Where an employer is convicted of an offence for failure

to pay any contribution payable under this Act, the

Court may, in addition to awarding any punishment, by
order, in writing, require him within a period specified
in the order (which the Court may if it thinks fit and on
application in that behalf, from time to time, extend), to
pay the amount of contribution in respect of which the
offence was committed and to furnish the return relating
to such contributions.

1. Where an order is made under sub-section (1), the

employer shall not be liable under this Act in respect of

the continuation of the offence during the period or
extended period, if any, allowed by the Court, but if, on
the expiry of such period or extended period, as the case
may be, the order of the Court has not been fully
complied with, the employer shall be deemed to have
committed a further offence and shall be punishable
with imprisonment in respect thereof under section 85
and shall also be liable to pay fine which may extend to
3 [one thousand] rupees for every day after such expiry
on which the order has not been complied with.

CASES
1. A.P. State Electricity Board vs E.S.I.C. 1977 Lab IC

316 (AP)
2. Hyderabad Asbestos Cement Products vs Employees'
Insurance Court (1978) 1 SCC 356
3. South India Viscose Cooperative Store Ltd. Vs
E.S.I.C. (1986) 2 LLN 598