E.S.I. CORPORATION, REP. BY THE REGIONAL DIRECTORversusM/S. ENDOCRINOLOGY AND IMMUNOLOGY LAB

                 [2023] 11 S.C.R. 159 : 2023 INSC 665



                            CASE DETAILS

  E.S.I. CORPORATION, REP. BY THE REGIONAL DIRECTOR
                                     v.
       M/S. ENDOCRINOLOGY AND IMMUNOLOGY LAB
                     (Civil Appeal No.3368 of 2012)
                           AUGUST 02, 2023
           [HIMA KOHLI AND RAJESH BINDAL, JJ.]

                             HEADNOTES

      Issue for consideration : Date from which the respondent
establishment, a pathological laboratory will be covered under the
Employees’ State Insurance Act, 1948.
      Employees’ State Insurance Act, 1948 – s.1(5) – Notifi cation
dated 06.09.2007 issued in terms of the power conferred u/s.1(5) –High
Court held that the provisions of the 1948 Act will be applicable to the
respondent w.e.f. 06.09.2007 and not from 22.11.2002 – Legality:
       Held : Respondent would be covered under the Act in terms of the
Notification dtd.06.09.2007 issued by the Government of Kerala covering
medical institutions including pathological laboratories from that date,
where 20 or more persons were employed – The Notification was issued
in terms of the power conferred u/s.1(5) of the Act in consultation with
the Corporation and with the approval of the Central Government – If the
pathological laboratories were already covered under the Act, as urged by
the appellant-Corporation, there was no occasion to issue such a notification
– Order passed by the High Court is in terms of the aforesaid notification
directing coverage of the respondent establishment from that date onwards,
as undisputedly, 20 or more persons were found to be employed in the
establishment – Appellant argued that the respondent would fall within
the term “shop” and the same is covered in terms of the notification dtd.
27.05.1976 –The argument that the respondent should be deemed to be
covered in terms of the said notification r/w the Circular dtd. 22.11.2002,
rejected – Appeal dismissed.[Paras 10, 12-16]
                                   159
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      Employees’ State Insurance Act, 1948 – ss.1(4), 2(12), 14(AA) –
Respondent establishment, a pathological laboratory if covered u/s.1(4)
providing that the Act shall apply to all factories (including factories
belonging to the Government) other than seasonal factories:
        Held : No – The term “factory” has been defined u/s.2(12) –
“manufacturing process” has been defined in s.14 (AA) to give it a meaning
as assigned to it u/s.2(k), Factories Act, 1948 – Respondent establishment
will not be covered u/s.1(4) as it will not fall within the definition of a
“factory”, since no manufacturing process is carried on therein. [Paras
7(iii), (iv) and 8]

        OTHER CASE DETAILS INCLUDING IMPUGNED
               ORDER AND APPEARANCES

        CIVIL APPELLATE JURISDICTION : Civil Appeal No.3368 of
2012.
      From the Judgment and Order dated 21.08.2008 of the High Court
of Kerela at Ernakulam in IA No.4 of 2008.
        Appearances:
        Kumar Rajesh Singh, Mrs. Niranjana Singh, Advs. for the Appellant.
        Ms. Ritika Sinha, Siddhartha Jha, Advs. for the Respondent.

         JUDGMENT/ORDER OF THE SUPREME COURT

                                    JUDGMENT
        RAJESH BINDAL, J.
      1. Order dated 21.08.2008 passed by the High Court of Kerala has
been challenged by the Corporation1 by which the appeal2 filed by the
respondent was allowed. It was held that the provisions of the Act3 will be
applicable to the respondent establishment w.e.f. 06.09.2007 and not from
22.11.20024.

1   The Employees State Insurance Corporation
2   Ins. App. No.4 of 2008(A)
3   The Employees’ State Insurance Act, 1948 (hereinafter ‘the Act’)
4   Wrongly typed in the impugned order as 24.11.2002
           E.S.I. CORPORATION, REP. BY THE REGIONAL DIRECTOR v. 161
     M/s. ENDOCRINOLOGY AND IMMUNOLOGY LAB [RAJESH BINDAL, J.]


       2. Briefly stated, as per the facts available on record, the respondent
establishment is a pathological laboratory. Inspection of the premises of
the respondent was carried out by the Inspector on 01.04.1999. Having
found that there were 19 employees working in the establishment, a show
cause notice was issued to the respondent. The respondent establishment
challenged coverage of the establishment by filing an application under
Sections 75 and 77 of the Act before the Employees’ Insurance Court. The
Court vide order dated 19.04.2007, passed in I.C. No.13/2003 declared
that the establishment of the respondent is a ‘shop’ as per Section 1(5) of
the Act and the provisions of the Act would extend to the respondent w.e.f.
22.11.2002. A review application5 filed by the respondent before the E.S.I.
Court, was dismissed vide order dated 21.12.2007. The orders of the E.S.I.
Court were challenged by the respondent by filing an appeal before the High
Court which was allowed vide impugned order.
       3. Learned counsel for the appellant submitted that the order passed
by the High Court is not in conformity with the law as the respondent
establishment will be covered under the provisions of the Act in terms of
the notification dated 27.05.1976 issued by the Government of Kerala in
exercise of the powers conferred under the Act. In terms of the aforesaid
notification, if 10 or more persons are employed in an establishment on any
day in the preceding 12 months which included a “shop”, it will be covered
under the provisions of the Act. The respondent establishment being a shop,
was clearly covered. After inspection, a notice was issued to the respondent
for coverage w.e.f. 01.04.1999. However, in view of the Circular dated
22.11.2002, issued by the Corporation for the coverage of pathological
laboratories and diagnostic centres, the establishment was covered from
22.11.2002. It is stated that the findings of the High Court that the respondent
establishment shall be covered under the Act w.e.f. 06.09.2007, is erroneous.
       4. On the other hand, learned counsel for the respondent submitted
that there is no error in the order passed by the High Court. Notification
dated 27.05.1976, issued by the Government of Kerala, does not cover the
establishment of the kind that the respondent has, which is pathological
laboratory. By no stretch of imagination can it be termed as a shop, where
merely buying and selling activities take place, and not the kind of work
executed by experts engaged by the respondent. In fact, medical institutions

5   M.P. No.159/2007
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which included nursing homes, diagnostic centres and pathological
laboratories employing 20 or more persons were brought under the ambit
of the Act vide notification6 issued by the Government of Kerala. The order
passed by the High Court is in line with the said notification. Hence, the
present appeal deserves to be dismissed.
      5. We have heard learned counsel for the parties and perused the
material placed on the record.
       6. The short question which requires consideration by this Court is, the
date from which the respondent establishment, which is undisputedly carrying
on the business of a pathological laboratory, will be covered under the Act.
       7. (i) Section 1(4) of the Act provides that the Act shall apply to all
factories (including factories belonging to the Government) other than
seasonal factories. Proviso to the aforesaid section provides that this sub-
section does not apply to the 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 for under
the Act.
      (ii) Section 1(5) of the Act provides that the appropriate Government
      may, in consultation with the Corporation and where the appropriate
      Government is a State Government, with the approval of the Central
      Government, can extend the provisions of the Act by issuing a
      notification in the official gazette, to any other establishment or class
      of establishments.
      (iii) The term “factory” has been defined under Section 2(12) of the
      Act. The same as existed at the relevant time, included any premises
      and part thereof in which manufacturing process is being carried on
      with or without the aid of power. The only difference being that the
      number of persons required to be working in the establishment with the
      aid of power was 10 or more whereas in cases without the aid power,
      the number required was 20 or more. It did not include a mine subject
      to the operation of the Mines Act, 1952 or a railway running shed.
      (iv) The term “manufacturing process” has been defined in Section 14
      (AA) of the Act to give it a meaning as assigned to it in the Factories

6   Dated 06.09.2007
           E.S.I. CORPORATION, REP. BY THE REGIONAL DIRECTOR v. 163
     M/s. ENDOCRINOLOGY AND IMMUNOLOGY LAB [RAJESH BINDAL, J.]


      Act, 1948. The same is defined under Section 2(k) of the Factories Act,
      1948 which is reproduced herein below:
       “2(k) “manufacturing process” means any process for –
       (i)        making, altering, repairing, ornamenting, finishing, packing,
oiling, washing, cleaning, breaking up, demolishing, or otherwise treating or
adapting any article or substance with a view to its use, sale, transport, delivery
or disposal, or
       (ii)       pumping oil, water, sewage or any other substance; or
       (iii)      generating, transforming or transmitting power; or
       (iv)      composing types for printing, printing by letter press,
lithography, photogravure or other similar process or book binding; or
      (v)        constructing, reconstructing, repairing, refitting, finishing or
breaking up ships or vessels; or
       (vi)       preserving or storing any article in cold storage; “
       8. On a perusal of the aforesaid provisions in the Act, it can safely be
concluded that the establishment of the respondent will not be covered under
the provisions of Section 1(4) of the Act as it will not fall within the definition of
a “factory”, since no manufacturing process is carried on therein. It is not even
the case of the appellant. The respondent establishment is merely a pathological
laboratory.
       9. The stand taken by the appellant is that the respondent establishment
will be covered in view of the notification dated 27.05.1976 issued by the
Government of Kerala, the relevant part whereof is extracted below:
                        “GOVERNMENT OF KERALA
                         LABOUR (E) DEPARTMENT
                                NOTIFICATION
               16141/E2/75/LBR Dated, Trivandaram 27th May 1976
       S R O No.559/76 – In exercise of the powers conferred 1948 (Central Act
34 of 1948), the Government of Kerala having already given six months’ notice
as required thereunder. The government of Kerala Notification No.16141/E2/75/
LBR dated 5.11.1975 published as SRO BNO.1070/75 in the State Gazette dated
18.11.1975 hereby appoints the midnight of 29th shall extend to the classes of
establishment and in areas as specified in the schedule annexed hereto:-
164           SUPREME COURT REPORTS                              [2023] 11 S.C.R.


                                  SCHEDULE
      Description of establishment        Area in which the establishments are
                                                        situated
                    1                                        2
                   xxx                                      xxx
 The following establishments 10 or       Whole of the State of Kerala where the
 more persons are employed or where       benefit provisions of Chapter IV, V and
 employed for any day of preceding 12     VI of the Act have already been brought
 months namely:                           into force by the Central Government
 Hotels                                   under Section(3) of the Employees
 Restaurants                              State Insurance Act, 1948 (Central Act
 Shops                                    34 of 1948) except the areas where the
 Road Motor Transport Establishment       scheme has already been extended with
 Cinema including preview                 effect from the midnight of 29th March
 Theaters                                 1975 vide notification No.22877/
 Newspaper establishment as defined        E2/73LBR dated 22.03.1975 published
 in Section 2(d) of the Working           in the Kerala Gazette dated 25th March
 Journalists (Conditions of Service and   1975 as SRO No.288/75
 Miscellaneous Provisions) Act, 1955
 (45 of 1955)

       10. The argument raised by the appellant is that the respondent
establishment would fall within the term “shop” and the same is sought to be
covered in terms of the aforesaid notification.
       11. A notice was issued to the respondent establishment on 27.04.2001,
directing production of certain records. The same was replied to. Though it is
claimed that the respondent establishment would be covered under the provisions
of the Act in terms of the Notification dated 27.05.1976, however, before the
E.S.I. Court, reliance was placed on a letter issued by the Corporation on
22.11.2002 through which an earlier Memo dated 06.01.1989, was modified.
In terms of the aforesaid Memo letter, pathological laboratories and diagnostics
centres were not covered under the definition of “shop”. It was not disputed that
a “shop” as such is not defined under the Act. At the time of hearing, reliance
was also placed on the Notification dated 06.09.2007, issued by the Government
of Kerala bringing certain establishments under the ambit of the Act.
       12. It is not a matter of dispute that such a notification is issued in terms
of the power conferred under Section 1(5) of the Act in consultation with the
           E.S.I. CORPORATION, REP. BY THE REGIONAL DIRECTOR v. 165
     M/s. ENDOCRINOLOGY AND IMMUNOLOGY LAB [RAJESH BINDAL, J.]


Corporation and with the approval of the Central Government. In terms of the
aforesaid notification, medical institutions including diagnostic and pathological
laboratories, where 20 or more persons were employed, were covered. The
relevant part of the said notification is extracted below:
                      “GOVERNMENT OF KERALA
          LABOUR & REHABILITATION (F) DEPARTMENT
                              NOTIFICATION
          G.O. (P) NO/116/2007/LBR Dated, Thiruvanthapuram
                            6TH September 2007
     S R O No.749/2007 – In exercise of the power conferred by sub-section
     (5) of Section 1 of the Employees’ State Insurance Act 1948 (Central
     Act 34 of 1948), the Government of Kerala in consultation with the
     Employees’ State Insurance Corporation and with the approval of
     the Central Government and after having given six months’ notice
     of its intention to do hereby extend the provisions of the said Act to
     the classes of establishments specified in Column (1) of the Schedule
     annexed hereto and situated in the areas specified in column (2) thereof
     with immediate effect
                                 SCHEDULE

    Description of establishment         Areas in which the establishments
                                                      are situated
 Medical institution (including          Areas where the scheme has al-
 corporate, joint sector, trust,         ready been brought into force un-
 charitable,      and      private       der sub-section (2) and (5) of Sec-
 ownership hospitals, nursing            tion 1 of the Act
 homes,      diagnostic    centre,
 pathological laboratories wherein
 20 or more persons are employed
 or were employed on any day of the
 preceding twelve months
      13. A perusal of the aforesaid notification shows that pathological
laboratories were specifically covered under the provisions of the Act in
terms of the aforesaid notification. In the case at hand, the respondent is
running pathological laboratory and would be covered under the Act in
terms of the Notification dated 06.09.2007, issued by the Government of
166            SUPREME COURT REPORTS                        [2023] 11 S.C.R.


Kerala. The order passed by the High Court is in terms of the aforesaid
notification directing coverage of the respondent establishment from that date
onwards, as undisputedly, 20 or more persons were found to be employed
in the establishment.
       14. The argument raised by the appellant that the respondent
establishment should be deemed to be covered in terms of the Notification
issued on 27.05.1976 read with the Circular dated 22.11.2002 issued by the
Corporation, is merely to be noticed and rejected. It is admittedly the case of
the Corporation itself that the term “shop” as such has not been defined under
the Act. It was sought to be assigned a meaning as per the understanding
of the “Corporation”. Clause 23 of the aforesaid letter shows that even as
per the earlier Memo dated 06.01.1989, pathological laboratories were not
covered as shops under Section 1(5) of the Act. The aforesaid Memo letter
was subsequently modified vide Memo letter dated 22.11.2002.
       15. Further, fact remains that there is a Notification issued on
06.09.2007 by the Government of Kerala covering medical institutions
including pathological laboratories from that date. The aforesaid Notification
was issued in consultation with the Corporation and with the approval of the
Central Government. If the pathological laboratories were already covered
under the Act, as is sought to be urged by the Corporation, there was no
occasion to issue such a notification. This fact clearly establishes that even
as per the understanding of the Corporation, pathological laboratories were
not covered under the Act prior to that date.
      16. For the aforesaid reasons, we do not find any merit in this appeal.
The same is hereby dismissed. There shall be no orders as to costs.

Headnotes prepared by:                                          Appeal dismissed.
Divya Pandey