Holding

The Court held that Shree Mahila Gruh Udyog Lijjat Papad may constitute an ‘establishment’ under Section 2(12) of the Employees State Insurance Act and its women members may be ‘employees’ under Section 2(9), warranting remand for fresh determination.

Summary

The Employees State Insurance Corporation (ESIC) issued notices demanding contribution from Shree Mahila Gruh Udyog Lijjat Papad, a society of women who roll papads at home, alleging that the society was an "establishment" under the Employees State Insurance Act, 1948. The ESIC Court had earlier cancelled the notices, holding that the women were merely members and not employees and that the society did not qualify as an establishment. ESIC appealed, arguing that the women performed work under its supervision and that more than 600 women were engaged, thus bringing the society within the definition of "establishment" and the women within the definition of "employee". The High Court examined the statutory definitions, prior Supreme Court decisions, and the factual arrangement of work, and concluded that the matter required fresh consideration. Consequently, it quashed the earlier judgments and remanded the case to the ESIC Court for a new hearing.

Issues considered

Whether Shree Mahila Gruh Udyog Lijjat Papad qualifies as an ‘establishment’ under Section 2(12) of the Employees State Insurance Act, 1948.
Whether the women members constitute ‘employees’ within the meaning of Section 2(9) of the Employees State Insurance Act, 1948.

Legislation cited

Bombay Public Trust Act, 1950
Employees' Provident Funds and Miscellaneous Provisions Act, 1952s. 6
Employees' State Insurance Act, 1948s. 2(12), s. 2(9), s. 75, s. 82(2)
Mines Act, 1952
Societies Registration Act, 1960

Subjects

Employees State Insurance ActEstablishmentEmployee definitionCooperative societyLabor lawRemandESIC contribution

Judgment

C/FA/4451/2006 CAV JUDGMENT DATED: 16/07/2026

Reserved On : 24/06/2026
Pronounced On : 16/07/2026

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

R/FIRST APPEAL NO. 4451 of 2006
With
R/FIRST APPEAL NO. 4452 of 2006

FOR APPROVAL AND SIGNATURE:

HONOURABLE MR. JUSTICE J. C. DOSHI sd/-

==========================================================

Approved for Reporting Yes No
no
==========================================================
REGIONAL DIRECTOR
Versus
SHREE MAHILA GRUH UDYOG LIJJATPAPAD
==========================================================
Appearance:
MR HEMANT S SHAH(756) for the Appellant(s) No. 1
MR KM PATEL SENIOR ADVOCATE WITH MR PS GOGIA(2751) for the
Defendant(s) No. 1
==========================================================

CORAM:HONOURABLE MR. JUSTICE J. C. DOSHI

CAV JUDGMENT

1. The captioned appeals involves same facts and points in
dispute. Hence with the consent of learned Advocates for both
the sides, both the appeals are heard analogously and decided
by this common order.

2. The orders passed by the E.S.I Court, Rajkot in E.S.I
application nos.32/90 and 29/90 are challenged under Section
82(2) of the Employees State Insurance Act, 1948 (for short, ‘the

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E.S.I Act’) as First Appeal No.4451 of 2006 and First Appeal
No.4452 of 2006 respectively at the behest of E.S.I Corporation.

3. Fact is taken from the E.S.I application no.32 of 90. Shree
Mahila Gruh Udyog Lijjat Papad is a society registered with the
Society Act, 1960 and also as a Bombay Public Trust registered
under the BPT Act, 1950. Having its main office at Rajkot, Shree
Mahila Gruh Udyog Lijjat Papad is operating throughout India in
different branches and approximately 9,000 women are working;
a woman who is able to roll at least 3kgs of papads in a day and
being a major can be a member of the society. They are not
required to invest any amount. Shree Mahila Gruh Udyog Lijjat
Papad has been given exemption from paying income tax and
sales tax. The work of rolling papad is not under the supervision
of anyone. In other words, women who are members of Shree
Mahila Gruh Udyog Lijjat Papad are working on their own and
Shree Mahila Gruh Udyog Lijjat Papad is mainly working for the
upliftment of women from the lower strata of the society.

3.1 It is the further case of Shree Mahila Gruh Udyog Lijjat
Papad that whatever profit earned by the society would be
divided amongst the members, either in case or in a kind. In a
nutshell, it is stated that Shree Mahila Gruh Udyog Lijjat Papad,
since does not fall within the definition of industry or so, E.S.I
Corporation cannot levy any contribution.

3.2 In line of the aforesaid pleading, Shree Mahila Gruh Udyog
Lijjat Papad has challenged two different notices issued by the
E.S.I Corporation for levy of contribution, invoking Section 75 of

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the E.S.I Act by way of aforesaid two E.S.I applications. The E.S.I
Court pleased to allow the aforesaid applications and declared
that women of Shree Mahila Gruh Udyog Lijjat Papad does not
fall within the definition of ‘employee’ as per Section 2(9) of the
E.S.I Act, 1948. Further, that the women working in rolling
papads are not paid any wages, which also indicates that they
are not the employees and thus, Shree Mahila Gruh Udyog Lijjat
Papad does not attract Section 2(12) of the E.S.I Act as E.S.I
Corporation failed to prove it as ‘establishment’. Ultimately, as
stated herein-above, the E.S.I Court has canceled the notice
issued by the E.S.I Corporation by declaring it as invalid.

3.3 Being aggrieved, E.S.I Corporation has filed this appeal,
raising following substantial question of law:

“A. Whether the establishment is
covered under the E.S.I Act in view of the
report of the insurance inspector?

B. Whether the payment made on
voucher to the workers are said to be
workers and can be considered as
employees under the act and for that the
act is applicable?”

4. Heard learned Advocate Mr. Hemant S Shah appearing for
the E.S.I Corporation and learned Senior Counsel Mr. KM Patel
assisted by learned Advocate Mr. PS Gogia appearing for Shree
Mahila Gruh Udyog Lijjat Papad.

5. Learned Advocate Mr. Hemant Shah has referred to the
impugned judgment and submitted that the learned E.S.I Court

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has committed serious error in believing that women who are
working in Shree Mahila Gruh Udyog Lijjat Papad are just
members and not the employees. He would further submit that
learned E.S.I Court has committed serious error in reading the
definition of ‘employee’ under Section 2(9) and the definition of
‘establishment’ under Section 2(12) of the E.S.I Act. He would
further submit that in the Rajkot Branch where the officer of
E.S.I visited and found that more than 600 women were
working, they are taking away the raw materials from the branch
office of Shree Mahila Gruh Udyog Lijjat Papad to their home,
rolling papads and giving it back to Shree Mahila Gruh Udyog
Lijjat Papad. He would further submit that papads which are
rolled out by the women are sold in the open market under the
brand name of “Lijjat Papad”, earning profit and under its
policy, Shree Mahila Gruh Udyog Lijjat Papad is distributing the
entire profit to the women for their upliftment. Thus, it would
not exclude Shree Mahila Gruh Udyog Lijjat Papad from the
definition of ‘industry/establishment’ under Section 2(12) of the
Act.

5.1 Learned Advocate Mr. Hemant Shah, therefore, submitted
that learned E.S.I Court has committed serious error in
canceling the two notices issued for recovery of the contribution
and extending coverage of the E.S.I Act upon Shree Mahila Gruh
Udyog Lijjat Papad.

5.2 Upon above submissions, learned Advocate Mr. Hemant
Shah submitted to allow these appeals and to quash and set
aside the impugned judgment and to dismiss the applications

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filed before the learned trial Court.

6. Per contra, learned Senior Counsel Mr. KM Patel relied
upon the judgment in case of C.E.S.C. Limited and Others vs.
Subhash Chandra Bose And Others, reported in 1992 (1) SCC
441 and submitted that if an employee is employed under the
supervision of principal employer or his agent then only he can
be treated as an ‘employee’ and if the number of such employees
exceed 10, then the E.S.I Act would apply. He would further
submit that the word ‘supervision’ has been explained by the
Hon’ble Supreme Court in the aforesaid judgment holding that
the consistency of vigil necessary; mere right of checking of work
after its completion and rejection or accepting the work on
scrutinizing compliance with the job requirement would not
constitute supervision.

6.1 Learned Senior Counsel Mr. KM Patel refers to para 14 of
the judgment in case of C.E.S.C. Limited and Others vs.
Subhash Chandra Bose And Others (supra), to buffer his
contentions which reads as under:

...“14. The case of P.M. Patel & Sons v.
Union of India, reported in 1986 (1) SCC
32, can also be no help to interpret the
word 'supervision' herein. The word as
such is not found employed in Sec-tion
20) of the Employees' Provident Funds
and Miscellaneous Provi-sions Act, 1952
but found used in the text of the
judgment. It appears to have been used as
a means to establish connection between
the employer and the employee having
regard to the nature of work performed.

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But what has been done in Patel case
cannot ipso facto be imported in the
instant case since the word 'supervision'
in the textual context requires
independent construction. In the ordinary
dictionary sense "to super-vise" means to
direct or oversee the performance or
operation of an activity and to oversee it,
watch over and direct. It is work under
eye and gaze of someone who can
immediately direct a corrective and tender
advice. In the textual sense 'supervision'
of the principal employer or his agent is
on 'work' at the places envisaged and the
word 'work' can neither be construed so
broadly to be the final act of acceptance or
rejection of work, nor so narrowly so as to
be supervision at all times and at each
and every step of the work. A harmonious
construction alone would help carry out
the purpose of the Act, which would mean
moderating the two extremes. When the
employee is put to work under the eye and
gaze of the principal employer, or his
agent, where he can be watched secretly,
accidentally, or occasionally, while the
work is in progress, so as to scrutinise the
quality thereof and to detect faults
therein, as also put to timely remedial
measures by directions given, finally
leading to the satisfactory completion and
acceptance of the work, that would in our
view be supervision for the purposes of
Section 2(9) of the Act. It is the
consistency of vigil, the proverbial 'a stich
in time saves nine'. The standards of vigil
would of course depend on the facts of
each case. Now this function, the
principal employer, no doubt can delegate
to his agent who in the eye of law is his
second self, i.e., a substitute of the
principal employer. The immediate
employer, instantly, the electrical

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contractors, can by statutory compulsion
never be the agent of the principal
employer. If such a relationship is
permitted to be established it would not
only obliterate the distinction between the
two, but would violate the provisions of
the Act as well as the contractual
principle that a contractor and a
contractor cannot be the same person.
The ESIC claims establishment of such
agency on the terms of the contract, a
relationship express or implied. But, as is
evident, the creation or deduction of such
a relationship throws one towards the
statutory scheme of keeping distinct the
concept of the principal and immediate
employer, because of diverse f and distinct
roles. The definition is well drawn in
Halsbury's Laws of Eng-land (Hailsham
Edition) Vol. I at page 145, para 350 as
follows:

"An agent is to be distinguished on the
one hand from a servant, and on the
other from an independent contractor.
A servant acts under the direct control
and supervision of his master, and is 9
bound to conform to all reasonable
orders given to him in the course of his
work; an independent contractor, on
the other hand, is entirely independent
of any control or interference and
merely undertakes to produce a
specified result, employing his own
means to produce that result. An
agent, though bound to exercise his
authority in accordance with all lawful
instructions which may be given to him
from time to time by his principal, is
not subject in its exercise to the direct
control and supervision of the
principal."

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And this statement of law was used with
approval by this Court in Superintendent
of Post Offices vs. P.K. Rajamma, reported
in 1977 (3) SCC 94.”...

6.2 Taking to the facts of the case, learned Senior Counsel Mr.
Patel submits that in the case on hand, Shree Mahila Gruh
Udyog Lijjat Papad is working for the social restructuring and
upliftment of the women. It is working like cooperatives. All the
women are members of the society and they are rolling papads at
their home, after obtaining the raw material from the society and
after rolling papads at their home, they are giving back papads
to Shree Mahila Gruh Udyog Lijjat Papad. Therefore, in absence
of consistent vigilance of the society over the working of the
women, the society cannot be considered as an establishment
attracting the Section 2(12) of the E.S.I Act. He would further
submit that though more than 600 women workers are working
in a particular branch, they are just members as per the rules
and regulations notified by the Charity Commissioner,
Maharashtra, which indicates that all the women are members
and their memberships can be canceled.

6.3 Thus, learned Senior Counsel Mr. KM Patel submitted that
Shree Mahila Gruh Udyog Lijjat Papad cannot be considered as
an ‘establishment’ within Section 2(12) of the Act. Supporting
the impugned judgment, learned Senior Counsel submits that no
effective strength of more than 10 employees was ever found
during the visit. He would further submit that since women are
not to be treated as employees within Section 2(9) of the E.S.I
Act, the learned E.S.I Court has not committed error in allowing

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two separate applications to cancel the demand of contribution
raised by the E.S.I Corporation on extending cover of the E.S.I
Act.

6.4 In line of the aforesaid submissions, learned Senior
Counsel Mr. KM Patel submitted to dismiss both the captioned
appeals.

7. Having heard learned Senior Counsel and learned
Advocates for both the sides and considering the facts and
circumstances of the case, the point arises for consideration that
whether Shree Mahila Gruh Udyog Lijjat Papad can be treated
as ‘establishment’ under Section 2(12) of the E.S.I Act and
women who are members of Shree Mahila Gruh Udyog Lijjat
Papad can be treated as ‘employees’ ?

7.1 There is no cavil. When the officer of the E.S.I visited the
branch of Shree Mahila Gruh Udyog Lijjat Papad, in the register,
he found more than 600 women are working. It is also
undeniable that women are working at their home and not at the
branch of Shree Mahila Gruh Udyog Lijjat Papad. Equally, it is
an undisputed fact that Shree Mahila Gruh Udyog Lijjat Papad
is registered under the Society Act and also under the Public
Trust Act, having its own constitution.

7.2 In background of the aforesaid undisputed aspect, let me
refer to Section 2(9) and Section 2(12) of the E.S.I Act, which
reads as under:
...“2.(9) – ‘employee’ means any person
employed for wages in or in connection
with the work of a factory or

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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 the employee
in the factory or establishment or
elsewhere; or

(ii) who is employed by or through
an 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.”...
...“2.(12) “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
include a mine subject to the operation of
the Mines Act, 1952 (35 of 1952) or a
railway running shed;”...

7.3 Thus, an “employee” means a person employed for wages

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or in connection with the work of factory or establishment, who
is directly employed by the principal employer on any work, or
incidentally or preliminary to or connected with the main work of
the factory, or an establishment or a person who is employed by
or through any immediate employer on the premises of the
factory, or under the supervision of the principal employer or his
agent on work which is ordinarily part of the work of factory or
establishment, or whose service are temporarily lent or let on
hire to principal employer by the person with whom the person
whose services are so lent or let on higher as entered into the
contract of service. It also include a person employed for wages
on any work connected with the administration of the factory or
establishment or any part thereof, or with the purchase of raw
material, or distribution of sale of the products of the factory or
establishment.

7.4 The “factory” means any premises including the precincts
thereof where ten or more person are employed or employed on
any day of the preceding twelve months, and in any part of
which manufacturing process has been carried on or is
ordinarily carried on. The mining project are not included and
simultaneously, railway running shed is also not included in the
definition of “factory”.
8. At this juncture, let me refer to the judgment of the Hon’ble
Supreme Court in case of Shri Mahila Griha Udyog Lijjat Papad
vs. Union of India and Another, reported in 1999 (6) SCC 38 ,
while examining the issue arising under the Employees
Provident Funds and Miscellaneous Provisions Act, 1952, in
regards to a particular branch of Jabalpur, in para nos.1, 2 and

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3 of the judgment of the Hon’ble Supreme Court held as under:

“1. After this appeal was heard for quite
some time, Mr. G.L. Sanghi, learned
Senior Counsel appearing for the
appellant, fairly stated that he gives up all
his contentions in this appeal especially in
view of the decision of the Constitution
Bench of this Court in Writ Petition No. 86
of 1962 (Basant Lal Jain v. R.P. F.
Commr. 1963 SC (Notes) 114) decided on
21-31963 where under the same Entry 24
inserted by notification of 30-4-1962
applying the Act as per the provisions of
Section 1(3) Sub-section (b) was held
applicable to the facts of the case wherein
a manufacturer of sweetmeats was held
liable to be covered under the said entry
even though he was selling his own
manufactured sweetmeats after storing
them. That Entry 24 reads as under:
“Every trading and commercial
establishment engaged in the
purchase, sale or storage of any
goods, including establishment of
exporters, importers, advertisers,
commission agents and brokers, and
commodity and stock exchanges but
not including banks or warehouses
established under any Central or
State Act.”

2. Mr. Sanghi is also right when he does
not contest the finding of fact recorded by
the Regional Provident Fund
Commissioner and which is also
confirmed by the High Court, that women
who were preparing "Lijjat" papad by
utilising the raw material supplied by the
Jabalpur branch of the appellant, were

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employees of the branch concerned. He,
however, submitted that even if this
appeal is dismissed, the application of the
Employees' Provident Fund and
Miscellaneous Provisions Act, 1952 may
be made prospective in its applicability to
Jabalpur branch for the simple reason
that under Section 6 of the Act the
employer has to deduct, for remitting to
the authorities, eight and one-third
percent (after amendment 10 per cent) of
the basic wages dearness allowance and
retaining allowance (if any) from wages of
its employees and deposit the same as
prescribed under the Act together with its
own equal amount of contribution every
month for the future statutory benefits of
the employees. The employees are women
who carried on physical work of preparing
papads. Years have rolled by. They are
mostly destitute and also in dire economic
need for carrying out their livelihood to
maintain their families living from hand to
mouth. The demand from 1986 to 1991,
by way of monthly deductions from their
wages, will give rise to immense hardships
to all these women and equal hardships to
the appellant. During the proceedings
before the High Court the demand had
remained stayed by the High Court and
till today, under the orders of this Court
in this appeal, when leave was granted on
6-12-1993 the stay has continued. In
these circumstances, if the past demands
are revived, it would bring extreme
disaster, not only to the appellant
concerned, but also to the poor women
employees, who were to be financially
assisted by giving them economic
assistance when work was taken from
them of preparing papads and vadis and
were paid on the basis of the out-turn of
papads and vadis on piece-rate basis

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related to the weight of the papads and
vadis prepared by them.

3. The aforesaid submission of Mr. Sanghi
deserves to be accepted in the interest of
justice and in the light of the peculiar
facts of this case. We, therefore, while
dismissing this appeal and while holding
that the Act applied to the appellant's
branch at Jabalpur, direct that the
application of the Act to that branch
should be with effect from 1-4-1999. It is
obvious that the appropriate deductions
under Section 6 of the Act from the wages
of the employees concerned at Jabalpur
branch as well as the matching
contribution of the employer for
depositing them with the authority will
start from 1-5-1999 for the month of April
1999 onwards.”...

8.1 Para 2 in the judgment of Shri Mahila Griha Udyog Lijjat
Papad vs. Union of India and Another (supra), it attracts to the
facts of the present case where women of Lijjat Papad, by
utilizing the raw materials supplied by the Rajkot Branch and
rolling papads at home, sends those papads back to Lijjat Papad
for selling purpose. This judgment was not brought to the notice
of the E.S.I Court, while passing the impugned judgment.

8.2 Learned Advocate Mr. PS Gogia pointed that in the State of
Maharashtra, Shree Mahila Gruh Udyog Lijjat Papad has been
given exemption from operation of the E.S.I Act. Simultaneously,
one cannot lose sight to the fact that Shree Mahila Gruh Udyog
Lijjat Papad has been registered under the Societies Registration
Act as well as under the Gujarat Public Trust Act. There is no

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gainsaying that Shree Mahila Gruh Udyog Lijjat Papad has its
own constitution regularity, governing the status of women
working to roll papads and how to sell papads in open market.
Therefore, all these aspects requires to be re-analyzed. The
parties in this regard may lead the necessary evidence and the
shift and weight of the evidence is required to be independently
carried out.

9. In view of the above, this Court without delving further into
merits of the case, finds it that it is a proper to remand back the
matter to the E.S.I Court for fresh consideration.

10. In wake of the aforesaid reasons, the impugned judgment
in E.S.I Application Nos.32 of 90 and 29 of 90 are hereby
quashed and set aside. Proceeding of both the E.S.I applications
are restored back to the E.S.I Court for fresh consideration.
Liberty is granted to both the parties to lead the fresh evidence,
if they are so intended and advised.

11. Learned E.S.I Court shall decide the entire issue afresh as
early as possible, preferably within nine months from the receipt
of this order. Record and Proceedings is ordered to be sent back.
Registry is directed to maintain a copy of this order in both the
appeals.

sd/-
(J. C. DOSHI,J)
PARMAR KRISH

Original copy of this order has been signed by the Hon'ble Judge.
Digitally signed by: PARMAR KRISH(HC02348), ENGLISH STENO GRADE-II\, at High Court of Gujarat on 16/07/2026 14:36:02

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