Category Archives: For Trainees

To all those who want to know the concepts of the ESI Scheme.

Wages: The foresightful Sec. 2 (22) !

It was 1989-90. An employer, a well-known business magnate, having many business interests in many fields, had paid Rs. 10 as Attendance Bonus to his employees who attended factory on all the 26 working days in a month. The Insurance Inspector (Now, SSO) reported that the employer had not paid contribution on that amount. Notice in Form C-18 (Ad hoc) was issued in 1991-92. The amount claimed as contribution on omitted wages was around Rs. 1600/-.

The employer’s representatives attended hearing and explained their stand. They said that it was not an amount paid as per any settlement between the employees’ union and the management. It was not a bilateral decision. It was an unilateral one and could be withdrawn at any time. It was paid quarterly and not monthly. The employer was, therefore, not required to pay contribution to the ESIC on this expenditure, they said. When asked, pointedly, how the employees were made to understand that they would be paid Attendance Bonus if they had attended factory on all the 26 days, the representatives said that the management had put up a notice in the canteen to that effect, wherein it had also been mentioned that it was unilateral, that it could be withdrawn at any time and that it would be paid once in a quarter.

Final orders were issued under Sec. 45-A, after the hearing was over, determining the contribution payable. Employer’s contentions were recorded and reasons given.

It was explained in the order issued under Sec. 45-A that

  • the very fact that the employer had displayed a notice in the canteen proved that the Attendance Bonus had been paid as per specific terms of contract.
  • there was an express contract, and that it was not unilateral, because there had been clear communication of mind, the consensus ad idem, and the ingredients of offer and acceptance were there.
  • the amount was ‘payable’ every month but was postponed and paid once in three months.
  • the amount being ‘payable’ every month, this case fell within the first portion of the definition of the term wages and not within the third portion of it.

Contribution was, therefore, claimed on the entire amount. After a few months, the employer’s representative who came to the Regional Office for some other purpose, said that the CEO had ordered the issue to be challenged in the court of law.

When asked how the CEO expected to win the case, the representative said that the CEO referred the matter to court, because he was paying a standing counsel every month without getting any work done by him. He therefore, wanted to give some work to the standing counsel. The employer paid the dues later with further interest, after the court verdict.

What are those different parts of the definition of the term ‘wages’? Wages Page 1 Another major employer did not pay contribution on Conveyance Allowance. When the ESIC asked for contribution, the employer went to court, where his stand was upheld. The judge had reasoned that the ESIC would not have claimed contribution if the employer had given season-tickets to his employees or reimbursed the expenditure. As the employees actually incurred expenditure on conveyance, it was not wages, the Court reasoned.

But, the fact was that it was not a case of reimbursement. The payment was not in kind. It was an amount paid in cash. The court had traversed the extra mile arguing that the ESIC would not have demanded contribution, if the employer had reimbursed it or had given season tickets. The court had overlooked the fact that the employer had, actually, paid in cash. This fact on record had been ignored by the court. The argument could also be that the employer could have given to his employees grocery, cloth and other domestic requirements too and then paid less contribution only on the remaining carry home pay.

What happened in this case was that our counsel had failed to bring it to the knowledge of the court the first part of the definition of the term ‘wages’ which refers to the payment in ‘cash’. When an amount is paid in cash, the liability to pay contribution arises automatically, unless exempted under the fourth part of the definition of the term ‘wages’. Because, there is no system to ensure that the employee spends a particular allowance only for that purpose.

The Act, therefore, does not lay stress on the nomenclature used by the employers to pay remuneration to his employees. ESIC is not obliged to give cognizance to the terminology used by the employer in this regard. Wages Page 2 ESIC officers would see only whether the payment fell within the parameters specified in the definition. Many such attempts at evasion to pay contribution had been resisted successfully, only because of the great definition of the term ‘wages’ under Sec. 2 (22). Otherwise, the contribution would have been very less resulting in meager amount of cash benefits to the working population, making it difficult for them to sustain themselves during the period of sickness and disability.

The term ‘wages’ had, thus, been defined in a very thoughtful and foresightful manner in the year 1948. It has withstood numerous onslaughts from various minds with fertile imagination.

Compare this with the contents of Sec. 45 AA which had been drafted very loosely and rushed through as an Amendment in the year 2010 making one wonder whether law-making process in the nation had become so ineffective and inefficient in the nation.

It is time the ESIC turned a new leaf and sent its young officers for training on Legislative Drafting conducted by the ILDR of the Ministry of Law & Justice, to prevent recurrence of such anomalous situations. Legislative drafting NB: The Note in Pdf is available in the following link:

Training Note Wages


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Sorry! No ‘hostages’ there, Mr. Finance Minister!

The following are the excerpts from the speech of the Finance Minister, Mr. Arun Jaitely while presenting the Budget of the Government on 28.02.2015:

“61. Madam Speaker the situation with regard to the dormant Employees Provident Fund (EPF) accounts and the claim ratios of ESIs is too well known to be repeated here. It has been remarked that both EPF and ESI have hostages, rather than clients. Further, the low paid worker suffers deductions greater than the better paid workers, in percentage terms.

62With respect to the Employees Provident Fund (EPF), the employee needs to be provided two options. Firstly, the employee may opt for EPF or the New Pension Scheme (NPS). Secondly, for employees below a certain threshold of monthly income, contribution to EPF should be optional, without affecting or reducing the employer’s contribution. With respect to ESI, the employee should have the option of choosing either ESI or a Health Insurance product, recognized by the Insurance Regulatory Development Authority (IRDA). We intend to bring amending legislation in this regard, after stakeholder consultation.”



We, first of all, thank Mr. Arun Jaitely that he has chosen to consult the stakeholders before making amendments to further his observations on ESI Scheme.

In regard to his proposal to allow option to the employees to choose either ESI or a Health Insurance product, recognized by the IRDA, we have already brought out the well-known fact the medical benefit provided by the ESIC is just one of the many benefits and that it has close connection with important cash benefits like Sickness Benefit, Extended Sickness Benefit and also Sickness arising out of pregnancy and Sickness arising out of Confinement, Sickness arising out of premature birth of child or miscarriage.

In the present write-up we would like to remind the Minister just one fact which might not have been brought to his notice by the overzealous bureaucrats who wanted to please him so that he could, in turn, please the private players who would be pleased if the ESIC, which affects their area of operation, is not there.

The Minister has gone on record having said that the ESIC does “have hostages, rather than clients”.

The fact is that the ESI Scheme is run by government. Mr. Arun Jaitely belongs to that Government now. And his statement implies that he is of the opinion that the Government of India does have hostages through its ESI Scheme and not clients.

But, the employers through whom and with whose  active co-operation the scheme is run, would not and cannot say that they are held hostages. The ESI Act is not a compulsory provision. Because, the employers are free to get themselves and their employees totally exempted from ESI coverage.

Sections from 87 to 91-AA deal with exemptions. If the employers are able to provide benefits which are ‘substantially similar’ or ‘superior’ to those provided by the ESI Corporation, they can, as a matter of right, demand exemption from coverage under the ESI Scheme.

It is so simple. There is a format in the ESIC offices for this purpose. There are three columns in it. The first one lists out the benefits provided by the ESI Scheme. The next column is to be filled in by the employer recording the benefits that he provides. The third column is intended to be filled by the employer wherein he would say whether, in his own assessment, the benefits provided by him are ‘substantially similar’ or ‘superior’. Let them assess themselves first that way, before coming to the Minister and saying that the ESIC is holding them and their employees hostages.

The ESIC had successfully challenged all the employers, on many an occasion, whether they were ready to provide benefits on par with those provided by the ESIC. But, none came forward.

The Private Players do not want to provide all the benefits provided by the ESIC. Their intention is not to provide ‘social security’ but to ‘earn profit and throw a portion of it to all the political parties’.

But, ESI Act is for the welfare of humanity. It has kindness in-built. The deficiencies in providing service were and are only man-made and they can be set right by committed leadership backed by the Labour Ministry committed for honesty and transparency in running the organization. “Cleaning corruption is like cleaning the stair-case. It must start from the top”. There had been many an illustrious era that the ESIC has seen in its 63 years of existence, although it had seen many dark spells too.

ESIC has the capacity and can make the nation strong economically, if it is well-run.

We, therefore, request the Hon’ble Finance Minister not to rely only upon the convenient filenoting submitted by his pliant bureaucrats without studying the 210 years-old poignant and heart-rending history behind the ESIC.


The Finance Minister may better advise the employers to give all kinds of cash and medical benefits to their employees in a better manner than what is provided by the ESIC and seek proper exemptions as per the existing law itself. There is no need for amendments of any kind to the ESI Act, 1948, if the advice given to him by the bureaucrats was to free the ‘hostages’. For ready reference, we provide, in the following link, a presentation on the provisions in the ESI Act, 1948 that govern Exemptions:


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Sickness Benefit and Extended Sickness Benefit: The impact of Budget.

This is the second article in the series, on the announcement of the intention of the Government to free the employees from being held hostage by the Government of India itself, through ESIC. The former one is available at

The essential questions now, after the employees choose private operators for medical benefit, are “Who will provide Sickness Benefit? And, on whose certificate? And, what is the monitoring mechanism?”

Or, has the BJP chosen to do away with the Sickness Benefit altogether?

Have the officials who suggested this proposal examined all the issues of various dimensions involved in it?

The people who are farm workers are paid only for the day of actual work. If they fall sick they would not be able to go for work and will be confined to bed to take rest. There would be no income for them for those days of abstention from work. On the other hand, they would have to spend money for medical treatment during that period. That expenditure must be meted out from their savings or by borrowing.

The same was the case with industrial workers before the ESIC came on the scene. It was this kind of situation, the loss of income during certain period coupled with the necessity of incurring medical expenditure during the same period, that was sought to be answered to by the ESI Scheme. Once covered under the ESI Scheme, the employees get medical treatment and medicines from the ESI medical institutions. The period for which they are required to be on abstention from duty is decided by the medical officers of the ESIC who issue certificate to that effect. The employees get around 60-70% of their wages in cash for those periods of abstention as Sickness Benefit for a maximum of 91 days in two consecutive Benefit Periods, which is actually one full year.

Now that the overenthusiastic BJP regime has declared its intention to free the employees from being held hostages by the Government of India (as invented by Mr. Jaitely), will the BJP stalwart explain the consequences of his decision on Sickness Benefit?

Maybe, they would not want to step back for reasons of prestige. They may even declare that the private medical institutions would issue certificates, which must be honoured by the ESIC Branch Offices.

Or, they may say that there will be no Sickness Benefit at all.

Anyway, if the former is the solution given by them, another question arises. The Medical Officers of the ESIC are monitored through a system of Medical Referees of the same organisation. What will be the system to monitor the private agencies that provide treatment and issue certificate to the employees?

Extended Sickness Benefit

Moreover, what will be the fate of the celebrated and important Extended Sickness Benefit?

No certification in the UK for Cash Benefit

Significantly, there is no system of certificates being issued by the medical officers in the UK. They provide only treatment and recommend the period of leave. It is the employees who decide the period of abstention and get cash benefit for those periods from post offices. Can Mr. Jaitely usher in that era? In India, we could not bring it into force for the past 40 years, only because of the general tendency of choosing to remain on leave for the entire period of 91 days. Our society did not become that mature, at least, up to 1989.

That was the reason for the introduction of the words ‘strike’ in Sec. 63 and Sec. 97 (iv-b) of the ESI Act in the year 1989. One would be happy if the Indian society has become so mature that the Government considered it unnecessary to retain these checks and balances.

Or, another method is to make the Sickness Benefit totally unattractive, by reducing the percentage of the benefit. But, as per ILO mandate, it cannot be reduced below 45% of the wages earned.

So, the alternative is to change the beautiful, time-tested and war-withered-veteran, the Sec. 2 (22) and modify the definition of the term ‘wages’.

Wages can, hereafter, be defined as the basic pay only which may be decided only by the employer and it may even, for example, be just 10% of the total wages. So, even if the Sickness Benefit were increased to 100%, the quantum of benefit would not be attractive to the Insured Person.

No need to worry how he would sustain his family during the period of Sickness and Extended Sickness that runs into two years, i.e, 730 days. Mr. Jaitely, the Finance Minister, has now the authority to believe that such people would fend for themselves.

Adharkar was prophetic!

Pity, a Noble scheme of the Government of India has fallen, for quite some time, already, into the feeble hands of the corrupt and inept! Prof. Adharkar was prophetic. He said that the success of the ESI Scheme depended not only on the honest working of the ESI Act by all concerned. But, by introducing some more measures by the Government. He wanted that the ESI Scheme should not be “saddled with burdens legitimately belonging to other branches of social insurance”. Therefore, while formulating the ESI Scheme, he made four assumptions for its success. They are:

  • Adoption of a scheme for Unemployment Insurance and creation of new employments in the post war period,
  • Establishment of a scheme of Old Age Pension,
  • Adoption of certain pre-medical measures like education in health and improvement in environment hygiene besides regulation of wages and rigorous enforcement of factory laws and, finally,
  • National Health Drive.

While some steps had been taken in respect of items 1 and 2 during the past 60 years, the required importance has not been given to items 3 and 4. Consequently, Adharkar’s  dreams which were actually achievable and have been achieved in many countries are becoming distant dreams for Indian common people, with the present Government vying with the former one in diluting labour laws. Moreover, ESIC is blamed when it faces and suffers from the negative impact of the non-performance of the politicians on these four areas.

The root cause of all evils!

The only solution for all the problems is to compel all the political parties to make the source of funds of all these parties totally transparent. That alone will strike at the root cause of all the ills plaguing the nation in various spheres.

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Builders : Germans : : Sellers : Indians – Part I

Presentation 1

(Dear Readers, The nation is now in the throes of crisis. Present rulers intend to deny the benefits of 14 labour welfare enactments to the workforce in the factories that employ up to and including 39 ‘workers’ for wages, excluding the ‘persons’ who are performing in administrative, supervisory or managerial functions. This will result in abundant supply of Slave Labour to facilitate Money Sharks to exploit and squeeze labour and share the spoils between them and the politicians who are powerful. The text of the Bill is available in the following link:

The issues involved are going to be analysed in this web-site, in detail. Readers may convey their views to the Ministry of Labour in and before 10.11.2014. Part I of the series is here for the readers to have a birds-eye view of the subject)


It was 11.10.2014. When we sneaked into Heaven, we happened see three persons sitting under a tree in the morning sun. On closer view we found that they were the souls who worked for the welfare of humanity, when on earth. They were Otto Von Bismarck, the Iron Man of Germany, Sir William Beveridge, Father of the Welfare State, and Ernest Bevin, the Minister of Labour in the Cabinet of Winston Churchill. All of them looked sad and it seemed that they were concerned about certain issues. We made an attempt to overhear their conversation. Ernest Bevin said, “Mr. Beveridge! I share your concern. I did not know how the Indian bureaucrats put forward such cases before lawmakers. Although it is said, on theory, that the Executive must do what the Legislature says, the reverse is always the case in India, in practice. I find that the Indian politicians do not know the subjects much and are falling victims to the manipulations of the bureaucrats and become willing tools in their hands. I am afraid what the future holds for the common men in India”. “Yes, many Indian politicians want only the post and glory. They do not want to work to understand the issues and explain their enlightened stand in the forum to which they have been elected. This was the attitude of the politicians of India even when they were members of the Constituent Assembly. Wwhen crucial subjects were discussed in the Constituent Assembly, the members were not ready to extend their stay in Delhi but wanted to catch their trains to go back. They subordinated the national interests to their own personal interests, although they visited Delhi at government’s expense, at that time. The trend continues even now.”

Bureaucrats manage the Politicians

“Yes. I find that it is because of the incompetence of the legislators who know only how to manipulate people to win elections. They do not have the capacity or inclination  to understand and analyse the macro-issues affecting the nation. As a result, many bureaucrats have been, directly, made ministers in the central cabinet, to man important portfolio. The elected MPs are just looking at them helplessly. Consequently, the other bureaucrats also find it convenient to keep the legislators as ignorant as possible,  forever, so that their bureaucracy can have upperhand in the governance of the nation.” “I agree. In India, except in exceptional cases, it is the bureaucracy that runs India. The business-magnates, therefore, find it easy to get things done their way, by patronising the bureaucrats who take care to manipulate the opinions of the Legislature. During the discussion in the House of the People on 23.3.1992, Mr. A.B. Vajpayee blamed that the bureaucrats were more responsible for creating the economic crisis than the political leadership. His statement is one of the many evidences available to prove that the politicians are led by and not obeyed to by the bureaucrats. What has been depicted in the famous serial ‘Yes, Minister’ is  applicable more to India than any other country.” Slide2 At that moment, Prof. Adharkar came to the meeting spot. The others welcome him and asked him if he had seen the draft of the “The Small Factories (Regulation of Employment and Conditions of Services) Bill, 2014”, proposed to be made law. Prof. Adharkar, who looked downcast, did not give any reply but sat down on the floor, near Bismarck. Ernest Bevin prodded Adharkar to speak. Adharkar just threw his hands in despair and did not say anything. Bismarck patronisingly patted Adharkar on his back and said, “What can he do, friends? He had done whatever he could and his role was over on 15.08.1944 when he handed over his report to the Government. But, does anyone care to read it, now? He had enumerated some Fundamental Principles also for the success of social security in India. That too is not read by anyone. At least, the present day politicians can read the 1929-31 report of the Royal Commission of Labour. Many findings reported therein are relevant in the present context too. But, nobody cares, now. That was not the case then. Those were the days when politicians were really concerned about the real welfare of the people. It is natural that Mr.Adharkar is upset.” Beveridge said, “Yes. But, now a days the politicians in India run after moneybags and believe that the poor can be quietened by propaganda and repression. In short, the politicians believe that they can flourish by making the rich really happy and by making the poor believe they are happy.”. Adharkar looked at the other three. He said, “What the Bill is going to do is to take India back to the pre-1923 situation. It was only in 1923 that the Workman’s Compensation Act was enacted. Before that, there was no labour welfare measure at all. Even this was enacted in 1923 only because of some provocative remarks by others in the ILO meeting in 1922. All other labour welfare legislations like the Factories Act, Employees’ State Insurance Act, Minimum Wages Act, etc., came after Independence as a bouquet. But, this Bill intends to undo all this.”

 Bismarck pleased the workers and not the employers

Bismarck agreed. “When I wanted to build a mightier Gemany, I laid stress on labour welfare. I set up separate hospitals for factory workers. I brought into force the Accident Insurance Act in 1883, Maternity benefit provisions in 1884, Sickness and Old-age Pension in 1889 and so forth. The nation flourished because the government took care of the people in the lower strata who work on the field by providing them security for livelihood and incentive to work. Even after Germany was devasted after Second World War, it re-emerged to become a mighty economic power and its monetary unit attained full value within 26 years in 1971. But, India which got peaceful transition of power in 1947 has not seen its rupee attain full value till date. The Indian politicians, in my assessment, do not care for the real development of the nation.” Adharkar said, “Yes. In India, politics is the means for making money. Those who have talent enter politics, become leaders and amass wealth. Those who are not fit for anything also enter politics, work as party-workers with the aim of sharing the party-money. They are in politics not for service to the society but to earn their livelihood. The former and the latter make a perfect combination to cheat the public. You see, Tony Blair. He was worried how he could settle his debts, after he ceased to be the Prime Minister of England. But, in India you cannot find a single Municipal Councillor with debts after his tenure even for a single term. The system is corroded so much. There is, therefore, nobody to care for the commoners. The Bill is just symptomatic of this rot that has set in.” “Is the system so rotten?”, asked Beveridge. Adharkar nodded. “Yes. That is why none of the major political parties is ready to disclose the source of their income to the public, through website, in spite of the direction of the Central Information Commission to that effect. A political party supposed to work for the public and collects money as donations from public for the proclaimed public cause, is duty bound to disclose its complete source of income. But, the politicians are mortally afraid to make the source public, only because they remain there as politicians, just in order to apportion that party money among themselves for their personal consumption. As long as the Indian politicians, including the so-called Communists, fight shy of disclosing their complete source of income, they will run after the moneybags only. They will use their legislating power to further the interests of only the rich, who pay them donations heftily as a quid pro quo. This is the root cause of this kind of Bills. This does not take into account the welfare of the workers. Their tall talks about welfare of the people, patriotism, etc., are nothing but farce.”

Indian politicians pave way for  Forced Labour 

Adharkar continued, “These bureaucrats do, however, have a sense of sadistic humour. They call this Bill a part of ‘reforms’. “Yes, I noticed too” said Beveridge. He continued, “Earlier, these bureaucrats called a bill that permits exploitation of work force as the ‘Bill for improving Safety and Health of Workers’. The Indian politicians and bureaucrats believe in forced labour. But, that will not help evolve a civilised nation, as explained in the  Charter of the International Labour Organisation. All along, I had been saying that the making of a nation is possible only with “willing participation of labour”. But, the Indians do not care”. Slide 3 Ernest Bevin interjected. “I find Indian politicians and bureaucrats pursuing a path which is not followed by the UK, Germany, Japan, Switzerland or the Scandinavian countries. These leaders in India mislead the masses. A simple analysis of the employment position in the beverage industry after the entry of two MNCs would show that the opportunity of employment has become less than what it was in 1990. Profit is the only motive for the businessmen now a days, especially those of MNCs. I had said, in the year 1945 itself, after the Second World War was over, that such profit-motive of the businessmen had resulted in world war. I stressed on the need for providing basis economic security to create fairer conditions of living for the working population also. But, Indian politicians do not realise the need for taking real care of their working population. The business organisations like Times of India editorially welcomes such anti-poor, anti-labour and pro-rich policies as ‘labour reforms’ (14.10.2014). India, with this kind of politicians around, is in the throes of crisis.”

ESI Act aims at extending coverage

“I agree”, said Adharkar, “Our ESI Act was intended to provide social security to the employees in the organised sector and its aim was to cover the factories with ten or more employees and also to extend the scheme to establishments in industrial, commercial and agricultural sectors and thereafter to other areas too. But, the proposed Bill, says that the ESI Act and many other Acts are not applicable to ‘Small factories’ which term has been defined as “any premises wherein a manufacturing process is carried on and which employs less than forty workers”. The exploitation of common man by the economically mightier rich will be more acute, if and when this Bill becomes an Act. The protagonists of this Bill have not explained how the ESI Act and other Acts had worked against the interests of the nation. But, they won’t as their aim is to placate the moneybags and, specially, the MNCs, only and not the commoners”.

 Institutional Economists work for better world

Beveridge said, “ See,  what Communism could not achieve has been achieved by Social Security. The rulers must aim for less gap between the rich and poor. That alone will make the nation civilised and the people happy. But, the basic flaw is that  the Indian politicians do not care for Institutional Economics which focuses on understanding the role of the evolutionary process and the role of institutions in shaping economic behaviour. Indians can do wonders if they fine tune the organisations discharging the work mandated by the Acts to work effectively. But, they propose to drive those organisations out from the factories employing less than 40 workers”. All others were listening to Beveridge with rapt attention. Beveridge continued, “One must read, at least, Edwin E. Witte. He  said that “All or most of the institutional economists have been pragmatists, studying facts, not for their own sake, but to solve problems and to make this a better world to live in”. But, Indian politicians are in a hurry to please the rich and ditch the poor. As you said, unless the source of income of the political parties in India is made transparent, India will continue to be run only by the educated dupes.  It will not become a civilised nation. A nations social security measures and their effective implementations are the symbol of civilisation. One can refer to the Human Development Index in this regard.  Seen in this background, “The Small Factories (Regulation of Employment and Conditions of Services) Bill, 2014” is a move in the wrong direction, where there will be total slavery in the nation. I feel sorry for the common people of India”. Bismarck said, “ I feel very sorry for the poor in India. We, the Germans, built our nation. But, the Indians sell their nation”. Bevin

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Keep alive the Employers’ Liability Act, 1938!

Employers Liability Act, 1938 has been legislated with the objective of ruling out certain defences in suits for damages arising out of injuries sustained by workmen. Under the Common law, in case of civil suits for damages resulting from injuries sustained by workmen the employer can plead the Doctrine of Common Employment, by which the employer is not normally liable to pay damages to a workman for an injury resulting from the default of another workman and the Doctrine of Assumed Risk, by which an employee is presumed to have accepted a risk if it is such that he ought to have known it to be part of the risks of his occupation.

The Royal Commission on Labour viewed both these doctrines as inequitable and recommended with a majority that a law should be enacted to abolish these defences in case of all workmen.

Employers’ Liability Act, 1938 says clearly who the employer is in respect of the workers deputed by the contractors and man-power supply agencies to work in the factories and establishments of other employers. The definition in this Act helps understanding the definition of the term ‘Workman’ in the Workman’s Compensation Act, 1923 (now Employee’s Compensation Act, 1923), the definition of the terms like ‘employee’, ‘principal employer’ and ‘immediate employer’ in the ESI Act, 1998, the definition of the terms ‘workman’, ‘contract labour’ and ‘contractor’ in the Contract Labour (Regulation & Abolition) Act, 1970. This Employers’ Liability Act, 1938 would help bridge many gaps that may arise between various other labour welfare enactments. This Act is resorted to for clarification and protection, when there is flaw or doubt in other enactments. This is a protective umbrella for workmen and had been enacted after due deliberations. This has withstood the test of time.

The utitlity of the Employer’s Liability Act, 1938 and the way it helps understanding the subject matter pertaining to the employees employed through contractors including the outsourcing agencies can be seen from the exhaustive Powerpoint Presentation (containing 206 slides) available in the article given in the following link:

The Powerpoint presentation explains how this Act supplements and aids interpretation when doubts are raised by the employers in regard to their liability towards the workmen engaged through contractors or in respect of employees whose services are utilised through outsourcing methods.   The history behind this Act and its contents are very useful to explain the concept of contract labour in various seminars of employers, with the help of this Act.

Employers’ Liability Act defines and restricts the occasions and the extent to which public and private employers shall be liable in compensation in case of injuries to their employees occurring in the course of their employment and particularly abolishing the common law rule that the employer is not liable if the injury is caused by the fault or negligence of a fellow servant and also the defences of contributory negligence and assumption of risk.

There is no harm in retaining the Statute as a live enactment, especially when the legislators of these days had shown no interest in proper discussion and understanding the intricacies of amendments proposed by bureaucrats. (Ex. the amendments proposed in 2009 to the ESI Act, 1948 contained so many serious flaws that affect the functioning of the organization till date). It is therefore proper to retain the Employer’s Liability Act, 1938 in the Statutes without repealing it.

  1. Definitions:-

 In this Act, unless there is anything repugnant in the subject or context,–      (a) “workman” means any person who has entered into, or works under a contract of, service or apprenticeship with an employer whether by way of manual labour, clerical work or otherwise, and whether the contract is expressed or implied, oral or in writing; and       (b) “employer” includes any  body of persons whether incorporated or not, any managing agent of an employer, and the legal representatives of a deceased employer, and, where the services of a workman are temporarily rent or let on hire to another person by the person with whom the workman has entered into a contract of service or apprenticeship, means such other person while the workman is working for him.

The definition in this Act helps fix tortious liability on the employers not covered by any other enactment,too. Retaining it on the statute books will not be harmful to anyone.

Repealing it can be harmful to the working population in various contingencies. The text of the Employers’ Liability Act, 1938 is available at:

and also at

(although it is written as Employees Liability Act, 1938 there).

Those who agree with this proposition may convey their views to

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Coverage of Man-Power Supply Agencies!

Man-power supply agencies are coverable under the ESI Act as Shops, but only their offices, as the premises in which those offices are functioning are utilised to render service for a price.

The persons supplied by them to do the work of the other factories or establishments cannot be treated as employees of these Man-power supply agencies, just because they got an ESI Employer’s Code Number.


A lot of evasion, manipulation and abuse of the benefits of ESI and denial of benefits takes place in the coverage and non-coverage of the employees deputed by these agencies, which use their employer code number to cover the non-coverable employees also.


The responsibility for their coverge lies only with the ultimate employer who utilizes their services. The Principal Employer for the employees deputed by these agencies to work in other factories or establishments are only those employers who utilize the services of these employees and not the man-power supply agencies which depute them.

Relevant details in this regard are provided in the Powerpoint Presentation available in the following link:

Manpower supply agencies

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If innocents must escape being framed…

We had posted three threads on the topic “Framing the Innocents” as Parts I, II and III earlier. The present Post would show from real life example how honest officials can escape from being framed later. An officer must be meticulous in observing the formalities as per Office Procedure. He must obey the command of the higher-ups, as he would, otherwise, be charged with insubordination. But, if he does everything as per the orders of the higher-ups, he may land himself in difficulty, later, when that order from that higher-up happened to be an unlawful one.
Conduct Rules permit the officers to defy the higher-ups when their orders are unlawful. But, in practice, it will be disastrous to the career and life of the officers to plainly refuse to obey such orders. Because, the higher-ups who tend to give unlawful orders, do indulge in unlawful harassment and victimization too, without any qualm of conscience. It is always difficult for honest officers to work under dishonest higher officers.
In the circumstances, a subordinate officer who is committed to remain honest in his public service, can find solution to the dilemma, only in office procedure. The officer concerned should be alert enough to create proper records as per office procedure and ensure that the relevant records are kept safe, to establish his honesty, at a later date too.
Here is an example from the life and career of Mr. K. Sankaran Nair, when he was, once, such a subordinate officer at the top-level, in the RAW. The incident he narrates in his book ‘Inside IB and RAW’ would guide the honest public servants to prepare proper filenotings and create relevant evidence to prove their honesty later, when they are under pressure to do some questionable actions.

Pages 171, 172 and 173 from the book of Mr. K. Sankaran Nair are posted here for the benefit of the officers who choose to remain honest by choice.

The Book:
Page 171:
Page 172:
Page 173:
DSC02472 copy

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Filed under For Trainees

ESIC Meeting Minutes: Letter to the Hon’ble Prime Minister!

The last sentence in the post titled “ ESI Corporation Meeting on 19.09.2013” published on 25.09.2013 ( read:

“At present, we only hope that the Minutes approved by the Chairman of the ESI Corporation would faithfully record the complete discussion that had, actually, taken place on 19.09.2013 on all subjects.”

But, our worst fears on this issue have come true. The Minutes have been modified by the Hon’ble Minister as he pleased. He had made the entire body of members of the ESI Corporation a mockery. What can we do now? We can only write to the Hon’ble Prime Minister. We have, therefore, written. The following is the text:


The Prime Minister,

Government of India,


New Delhi

E.S.I. Corporation – Meeting of the Corporation on 19.09.2013 – Minutes – tampered and doctored by the Minister for Labour – intercession – requested.


I have to state that the meeting of the Apex Body of the ESI Corporation was held on 19.09.2013. Among the points on the Agenda were the ones conferring powers on the Hon’ble Minister for Labour and Employment to act as the Appointing Authority and Disciplinary Authority of the officers of the ESI Corporation.

This was opposed to by the Members of the body, as it was unnecessary and no justifiable reason was given in the Agenda for the change proposed. It was, therefore, decided to refer the matter to a Sub-Committee to examine the issue in-depth. The tape-recorded version of the discussion during the Meeting would testify to these facts.

That was a correct decision of the body, especially when the Agenda had been introduced under dubious circumstances by the Hon’ble Minister in his capacity as the Chairman of the ESI Corporation.

It is a fact that he was showing extraordinary interest in acquiring the powers of transfer of the officers of the ESI Corporation right from the day he assumed charge as Minister for Labour. This power, when conferred upon the Minister, will give him real authority without any responsibility.

Earlier, Hon’ble Mr. Sahib Singh Verma was also exhibiting such irrepressible desire to acquire the power of transferring the officers of the ESI Corporation. Documentary evidences are available in the Ministry itself in this regard. The organization was saved, fortunately, because his party lost  the elections in the year 2004.

Hon’ble Mr. Sis Ram Ola has not only been exhibiting similar uncontainable desire on this issue but has also gone to the extent of writing the Minutes as he pleased. He has, thus, rendered the entire body of the ESI Corporation redundant. His action is unlawful and gives new dimension to the way we understand democracy in India. I request you to kindly intercede, immediately, and set right matters before it spills over as a major issue spoiling the image of your government during the coming elections in 2014.

Yours faithfully,


Filed under Amendments 2010, For Trainees, Transfers

ESIC Revenue Manual Vs. EPF Inspector Manual

Once upon a time, in the later Eighties, an Insurance Inspector sent his Inspection Report pertaining to a hotel in a small town, which fell within the implemented area. The hotel had been covered as an establishment, then. He reported that the Attendance Register and the Wages Register showed very clearly that there were only 22 employees in the hotel. But, the employer had been paying contribution for 25 employees and submitting Return of Contribution Cards too.

The matter was probed into by him further and it was found that the three persons for whom the employer of the hotel was paying contribution were employed in the neighbouring peanut shop, not run by the hotel-owner. The peanut-shop owner had, earlier, been working in a textile mill in Mumbai and had come back to his native town, after the mills were closed after the large scale strike by the labour leader Datta Samant. This peanut-shop owner knew the benefits of coverage under the ESI Act and, therefore, wanted to provide that security net to his employees. He requested the neighbour, the hotel owner, to include his employees also in the RCC stating that he would pay the contribution amount correctly.

While this report was considered to be a compliment to the ESI Corporation, the hotel-owner was advised to desist from such practice, as the employees of the peanut-shop were not the employees of the hotel and the peanut-shop was not an establishment coverable under the ESI Act.

Moreover, providing Disablement Benefits and Dependant Benefits to these three employees in the event of accidents in the non-coverable peanut shop would become difficult.

The ESIC is supposed to receive contribution compulsorily from and in respect of all the coverable employees, but, only from the coverable employees and not from the non-coverable but willing employees. ESIC did not see that there was more revenue because of such coverage. ESIC went beyond it and understood that there was more liability than what was legally permitted, when such non-coverable but willing employees are admitted into its fold. ESIC took care to enforce the law strictly and rightly.

What is the position now? And, what is the position after the introduction of the I.T. Roll-Out? Is it a free-for-all now in respect of coverage? These matters will be discussed when the issues involved in I.T. Roll-Out are taken up. For the present, the contents of the Revenue Manual alone are discussed. Flourishing ESIC acknowledges with deep appreciation the inputs given by many.

When the ESIC Headquarters Office released the Revenue Manual, two questions were asked:

1. Does this Revenue Manual supersede all the instructions on Revenue-related matters until the date of its publication?

2. Has this Revenue Manual taken into consideration all the instructions issued by the Hqrs. on revenue-matters until the date of its publication?

The answer was a plain and simple ‘No’.

The extent to which the Revenue Manual would be useful to the Revenue Branch Officers, Social Security Officers, and the staff members dealing with Revenue matters in the ESIC can be understood from the above-said reply itself.

This Manual is available online and is in public domain. It is a fact that the Revenue Manual, brought out after a lot of hard work, throws  light on important issues with historical facts. But, a Manual of an organisation must be foolproof. When the Local Office Manuals were prepared and updated, different sections of the Manual were sent to various regions for examination and feedback to ensure that there was no error. But, such an exercise had not been done before printing the Revenue Manual, in spite of the fact that some problems were and are endemic while many are epidemic. Endemic issues are those which are confined only to a few Regions or Sub-Regions. This Manual does not tackle certain important  endemic and epidemic issues plaguing the revenue administration. A consultation and brain-storming sessions with regions would have helped the Hqrs. to solve many problems.

Some of the issues are, therefore, brought up for discussion in this article. Some major issues are and will not be discussed here in this forum, as it would be misused by unscrupulous elements, which already play a negative role aided by the deficiencies in the Revenue Manual. :

Issue 1: Incorporating obsolete instructions:

It has been mentioned in Page 212 of the Revenue Manual that order under Sec. 45-A of the ESI Act, 1948 could be issued on the basis of entries in the Despatch Register regarding the despatch of C-18 adhoc.Instructions like this had been issued in July 2002 but were later modified in May 2008.There had been so many judgments against the method suggested in Page 212. That a letter had been sent by Registered Post does not imply that it had, really, been delivered. One must ensure that the Notice sent in Form C-18 had actually been delivered before passing the order under Section 45-A.But, the instructions issued in May 2008 had not been taken into account before publishing the contents of Page 212.
Page 221 contains the word ‘or’ in line 3 in Para L.13.2.(1) and this confuses the issue more.
But, Page 223 contains the following details of the instructions issued in May, 2008:

“Keeping the above broadly in view, it has been desired that adequate care should be taken to ensure that the following action has been completed before issuing speaking order u/s 45-A:

  • . i)  to ensure proper service of the notice (C-18) to the employer. “


What, then, is the need to incorporate the obsolete instructions in Page 212?


Issue 2: Essential details omitted:

The format for issue of order u/s 45-A does not contain, in its last paragraph in Page 230, the date of delegation of power by the Corporation and the details of gazette in which it was published in the year 1991. When a standardised format is introduced, this aspect could have been taken care of.
Issue No. 3: Allotment of Code Numbers to Contractors:

Page 57of the Revenue Manual contains unlawful instructions. While Para P.5.3 is correct, the contents of the next para P.5.4 are wrong. It is true that the authorities are able to do now whatever they desire. But, that does not imply that whatever they do is right.

P. 5.3. Submission of Employer’s Registration Form by the Contractors (Immediate Employers): A contractor or the immediate employer to whom the Act applies, but is letting out the services of all his employees to only one covered factory or establishment, no separate ESI code number is allotted to him. He is required to comply with the provisions of the Act, rules and regulations under the code number of the principal employer, with a sub-code number to identify him and his compliance.
P. 5.4. Allotment of a code number to a contractor or immediate employer : If a contractor or immediate employer to whom the Act applies, and letting out the services of his employees to an uncovered factory or establishment or to more than one covered factory or establishment, such contractor or immediate employer may be registered separately and a separate code number allotted to him. For this purpose, the following points may be kept in view.
A contractor is only an Immediate Employer and he cannot be given separate code number to enable him to cover the employees sent by him to do work of other employers, to do the work in the premises of other employers.
The directions in page 57 and subsequent pages on this issue have created a lot of havoc. The manner in which the software under the I.T. Roll Out has enabled the employers to create their own code numbers has added to the problems, to put it very politely.
Hope the matter will be set right by the authorities. The intricacies of this issue had been brought to the notice of the authorities long back. But, there is no system in place to hear the subordinates.
The management principle recommended by Mr. Gordon M.Bethune, former Chief Executive of the Continental Airlines is to hear the subordinates. For, they know more about the work, they know more about the weak-spots.
The importance of respecting the views of the subordinates has already been highlighted in the following thread:
In the context, the contents of the EPF Inspector Manual, available in the following link, is worth-comparing. The ESIC too had similar Handbook for Insurance Inspectors. This Handbook has not been published now.
On the other hand, the Revenue Manual contains the duties of Social Security Officers too. But, as a rule, Manuals must confine themselves only to time-tested procedures. They should not give room to ambiguous interpretations.


Filed under For Trainees, Inspections

Mr. O. Abdul Hameed, former A.C, on ESIC Medical Colleges!

(Mr. O.A. Hameed, former Additional Commissioner of the ESI Corporation, has written the following in the Facebook, which is reproduced here for the benefit of the readers)

“After seeing ESIS from within the organisation at several level and at several States including its Corporate HQ and then from Industry in two States and one UT, I feel ESIS scheme has utterly failed in its primary goal. For me the primary goal is to provide satisfactory medical care with greatest emphasis on primary medical care through the dispensaries. Why do I say primary medical care is much more important ? The object of the scheme is to to prevent absenteeism due to sickness by keeping workers healthy, and by keeping their dependent healthy and in case of illness, to ensure that they are cured as early as possible, so that they can join back the economic activity and contribute to their own need-satisfaction as also the national production and productivity. Primary medical care is also the most accessed benefit unlike cash compensation since every one in family need to go to a doctor for small to major ailment and while wast majority go to primary medical centers, those needing super-specialty would be a fraction. If you take a group of 1000 IPs/family member during a period of one year, we may find that at least 900 would need to go to a doctor at least once during the year, whereas not more than 5 would need super-specialty care. It is in the Primary care role, ESIC failed miserably, by asking the contributing person to go to State Government, while enforcing contribution! Panel system in major state provide no medical care at all, just leave certification and primary medical cares dispensaries in most state is very poorly managed. ESIC has been taking the stand that medical care is responsibility of State and it is difficult for them to take over. When ESIC can not run primary care dispensaries, providing basic infrastructure and personnel, they are now embarking on very expensive step of medical education by setting up over 15 medical colleges besides PG centers, nursing colleges, para-medical colleges etc. It is like, if you can’t provide dal-roti, provide chocolate cake and to do that set up several air conditioned cake factory!”


But, things had, long back, gone beyond the stage of consideration of this valuable advice. So many projects running into hundreds of crores of rupees were sanctioned, in the year 2008-09 itself, for construction of buildings for the Medical Colleges, even before the Parliament passed Amendment Bill in the year 2010.

Event that Amendment came into existence by deceiving the Parliamentary Committee. Ministry of Law did not want to go into the merits of the issues raised by Mr. A. Veerappan. Herculean attempts made by him to convince the Members of Parliament met with improper response by those members. Only a few workers unions in Chennai and Banagaluru raised voice of protest. Parliamentary approval was managed on the last day of the session. For more on them, click on these links. ( & (

Now, there are buildings but no medical colleges, Ayanavaram being the best example. Land had been alienated to CMDA too, unnecessarily without any authority. (


A reader from London has sent an email which describes the situation very appropriately, with precedents. Excerpts:

“… I am reminded of the 3rd Law of ‘The 48 Laws of Power’, written by American strategist Robert Greene and the said 3rd Law is reproduced under:

“Conceal your intentions. Keep people off balance and in the dark by never revealing the purpose behind your actions. If they have no clue what you are up to, they cannot prepare a defines. Guide them far enough down the wrong path, envelop them in enough smoke, and by the time they realise your intentions, it will be too late.”

I am sure that you will agree that the above law holds good on all the issues raised by you in your write-ups, as the real intention of the powers-that-be behind such reckless actions are indeed malafide, but camouflaged to hoodwink the gullible public….Now coming to the yet another issue of manifest misuse of administrative powers and total lack of accountability …. of such powers-that–be, but conveniently forgotten with the passage of time, as the public memory is too short, as the adage goes.  … give a thought on the so called ‘Census’, futile exercise undertaken in all Regions, ordered at gun point, in the year 2007, involving considerable expenses at the cost of stake holders’ hard earned money, but with no useful result to the organisation. …”


Readers may please go through the Comments below as they contain important information.


Filed under Amendments 2010, Benefits, For Trainees