Category Archives: Inspections

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


Leave a comment

Filed under For Trainees, Inspections, Powerpoints

Sec. 84: Chartered Accountants, beware!

Page 148 of the Revenue Manual of the ESIC says as under:

“Self Certification of Employers in Return of Contributions – To streamline and simplify the process of Revenue enforcement and with a view to lay focus on coverage and registration of all coverable employees to enable them to avail the benefits without hassle, the Corporation in its meeting held on 16.12.2007 resolved to amend Regulation 26 and Form 5 of the ESI (General) Regulation 1950. A notification to this effect has been issued on 11.3.2008 ( Copy enclosed as Annexure 10). Accordingly, Regulation Form 5 ( Return of Contribution) has been modified . The salient features of amendment made in the Return of Contribution are as under :

  1. Self Declaration by employers regarding maintenance of records and registers, submission of Declaration Forms, distribution of Temporary Identification Certificates/Permanent Identity Cards, employees engaged directly or through immediate employers and wages paid to the workers.
  2. All the employers employing 40 and more employees shall have to append a certificate duly certified by a Chartered Accountant in the revised format of Return of Contribution.
  3. Employers employing less than 40 employees will have to provide self-certification without any certification from the Chartered Accountant in Return of Contribution. “

Continue reading

1 Comment

Filed under Inspections

ESIC inspection & Account Books of employers!


Can the ESI Inspector (the SSO) demand the ledger, cash books, balance sheets, Income Tax Assessment Reports, etc., of the employers?

What will happen if the employer says that he has not preserved the records as mandated by the Income Tax Act for six years or as per the Companies Act for eight years?

The Power Point Presentation provides a brief answer to these questions.



Click on the link below for the Power Point Presentatin

Inspection and Account Books

NB: This presention would also provide answer to the comments of Mr. Jai who said, “If an employer does not preserve records as per the Company Act and the Income Tax Act, that is none of the business of ESIC” under the thread “On Amnesty Scheme 2014: Part -II”.

Leave a comment

Filed under Inspections

New Inspection Policy – 2014: Another merry playground for Consultants!

(An organisation entrusted with the statutory duty of providing benefits to the voiceless section of the society has to meaningfully activate Sec. 45 and detect the coverable employees and extend them the benefit provisions, in time. It is possible to do so under the existing provisions of the Act. The New Inspection Policy-2014 must be modified accordingly to help advance the purpose of the Act).

Nothing remains constant, including the Inspection Policy in the ESIC. But, when new policies are framed, the elementary requirement in the policy-making division of the authorities is to record the existing procedure and explain how that procedure is wrong, why a change is needed and how it would improve things.

We are not sure whether such exercise had been done in an intensive manner before bringing out the New Inspection Policy. It was a matter of common knowledge that the earlier New Inspection Policy of 2008 was a totally flawed one and was impractical besides inviting ridicule from the employers and staff alike. Details in this regard had been taken to the knowledge of the authorities both from within and from outside. But, nobody was listening. The attitude of self-righteousness had done great damage to the organisation and also to the working population since then. The legal luminary Nani Palkivala once said that the Income Tax Act was the playground for the lawyers and auditors. The consultants who look after the ESIC related work in factories would also say the same thing in respect of the inspection policies of the ESIC.

The details and defects in this inspection policies and procedures had, already, been brought out in the following posts in this website:

But, the present New Inspection Policy goes still further in diluting the responsibility cast on the employers to ensure that the coverable employees are covered in time, on their own.

An employer in Rohini had been regularly paying contribution only in respect of 25 employees, but always in time. He took care to see that he was never in the Defaulters List. As the Sub-Region in charge had a doubt about the constancy in the number of employers, for years, he arranged for surprise inspection by a team of officers. They found that there had actually been 400 employees. Now, the present New Inspection Policy would entrust this analysis to the machine which would only see whether there is 30% variation in compliance meriting inspection. Naturally, the employers like the above mentioned one would be chuckling behind their chairs, when they find this peculiar yardstick entrusted to machines.

Continue reading

1 Comment

Filed under Inspections

ESI Corporation under attack!

ESI Corporation is the backbone of the nation’s economy. The importance of the organization would become known to the ‘ill-informed’  and  the ‘innocents’ only when the organization ceases to exist. The economic miracle of 1945-71 of the West Germany became possible only because of the well-run social security system there.

But, the already-ailing ESIC in India, is under attack from the media, the self-styled ‘national’ media, now, for various commissions and omissions including the impact of having opened many medical colleges. But, these ‘traders in news’ simply forget the fact that it was they who did not care to publish even letters to editors when three retired officers had written to them about those issues in the year 2009 and 2010 itself. If these ‘traders’ had had real devotion to their profession, they would have applied their mind to the issues that had been brought before them and that exposure would have prevented the passage of the Bill bringing in amendments to the Act in the year 2010, by the MPs who did not care to discuss the issues in the floor of the house, in spite of the fact that those retired officers had taken the issues to their knowledge both in person and through email provided in the website of the two houses of Parliament. So much for the depth of knowledge and commitment of these ‘national traders in news’.

But, even while such exposure is being made in the media, the ESIC is under attack from various other quarters also as given below, making it difficult for the honest administrators to set things right even at that this late stage:

  • the corrupt officials who just want to loot and share among themselves the ESIC funds,
  • the association leaders, working overtime, to play power-politics in the postings of officers (by roping in the politicians in power) to bring in pliable officers, at appropriate places, to suit their myopic personal agenda,
  • the indifferent officials who just do their work with honesty and sincerity but do not want to have macro-knowledge about the purpose of their work, the goal of the organization and the goings on in the organisation,
  • the dishonest employers who do not want proper and periodical inspections to ensure correct compliance and payment of the dues legally payable but are conniving to shift the burden to the ESIC with retrospective effect when accidents take place in their factories and
  • the middlemen called ‘Consultants’ who play a major role by assisting such employers, etc.,
  • the inert statutory organisations, like the Central Vigilance Commission and the Office of the CAG which do not want to have proper probe into the issues.
  • the indifferent peoples’ representatives who are in large numbers, who do not feel any ownership to the  nation and do not spare time to understand the impact of the issues.

ESIC can provide medical and cash benefits properly only when its funds are managed in a professional way. ESIC funds can be generated only through proper monitoring mechanism by conducting proper inspection of all the covered and coverable units regularly. Its inspection machinery must be trained on core issues to detect concealment in coverage. The Inspectors (SSOs) and Officers must be equipped with more knowledge than the most knowledgeable but corrupt Consultants, about the  intricacies of the provisions on Revenue. The ESIC must curb corruption and provide quality treatment in the ESIC medical institutions by adopting the caring the manner in which it was done earlier. Otherwise, the ESIC might be in the red, as predicted by its Finance wing.

Endless enhancement of limit for coverage cannot be the solution.

In the circumstances, the only consolation is that there are honest authorities of the ESI Corporation who are really concerned about the issues and are struggling every day to find ways to save the organization by resisting and circumventing the pressures given by these unscrupulous elements.

Should the public remain unconcerned?

Before narrating certain issues with evidence, two articles explaining the importance of the ESI Corporation are published here for information and basic understanding of the importance of the ESIC in the Indian social and economic life.

Please Click on Articles

Leave a comment

Filed under Amendments 2010, Inspections, 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

Apprentices and the ESIC Revenue Manual.

The concept of Apprenticeship and the need for the Government to give encouragement to that concept can be seen from the Statement of Objects and Reasons of the Apprentices Act, 1961.

Coverage of Apprentices is not permitted under the ESI Act, 1948. For this purpose, the coverage of persons called as Apprentices required deeper examination. Industrial Employment (Standing Orders) Act, 1946 and the Industrial Disputes Act, 1947 refer to Apprentices. After the enactment of the Apprentices Act, 1961, also the ESI Act did not specifically refer to Apprentices. .But, that situation led to ambiguous interpretations and large-scale misuse. The Inspectors were to examine whether there was real training system in the factory, class room, etc., The employers argued that the learners, trainees were also excluded as they were apprentices too. The judgment of the Hon’ble Supreme Court in ESIC vs. Tata Engineering Co and others on October 8, 1975 would throw light on various issues pertaining to the Apprenticeship and the coverage of apprentices under the ESI Act.

“The Apprentices Act, 1850, defines an apprentice as a person who is undergoing apprenticeship training in a designated trade in pursuance of a contract of apprenticeship. Whenever the legislature intends to include an apprentice in the definition of a worker it has expressly done so, for instance, while defining a worker under s. 2 of the Industrial Disputes Act, 1947. The very next year while passing the Employees State Insurance Act, 1948, the Legislature did not choose to include apprentice while defining the word employee. Such a deliberate omission on the part of the Legislature can be only attributed to the well known concept of apprenticeship which the Legislature assumed and took note of for the purpose of the Act.”, said the Hon’ble Supreme Court of India. (

The problems were being encountered in numerous cases at the time of inspections and hearing under Sec. 45. So, the ESI Amendment Act, 1989 addressed the issue and made it specific to exclude only the Apprentices who were covered by the Apprentices Act, 1961 and the Apprentices as per the Standing Orders of the factory (Industrial Establishment).

The ESIC authorities had, however, to examine deeply various aspects pertaining to the Standing Orders and the way in which the Certifying Authority exercised his power to approve those Standing Orders. The Amendment Act, 2010 has put an end to all these problems. Now, only the persons who are Apprentices as per the Apprentices Act, 1961 are excluded from coverage.

But, the ESIC Revenue Manual says something different. The details in this regard are given below for the benefit of readers. They are welcome to offer their views.

Apprentices Act, 1961:

Sec.18: “Apprentices are trainees and not workers –
Save as otherwise provided in the Act, –
(a) every apprentice undergoing apprenticeship training in a designated trade in an establishment shall be a trainee and not a worker; and
(b) the provisions of any law with respect to labour shall not apply to or in relation to such employee.”

Position in the ESIC from 1989:

Sec. 2 (9) of the ESI Act, 1948 says that “employee means …… any person engaged as an apprentice, not being an apprentice engaged under the Apprentices Act, 1961 (52 of 1961), or under the standing orders of the establishment”.

Accordingly, all those appointed as Apprentices under the Standing Orders approved by the competent Certifying Authority as per Sec. 4 of the Industrial Establishment (Standing Orders) Act, 1946 were excluded. But, it was not that simple. The ESIC would see whether the Certifying Authority had really ensured that the Standing Orders were in accordance with the Model Standing Orders. There were cases where the period of training as per the approved Standing Orders was much more than what was permitted as per the Model Standing Orders, both for skilled and unskilled persons. In that event, the ESIC would seek confirmation from the Certifying Authority how he certified and whether he had, indeed, certified those Standing Orders which were produced before the ESIC authorities. In many cases, the Certifying Authorities chose to keep mum, as they had certified those standing orders in violation of the provisions of the Act concerned. In such cases, the ESIC would not accept those employees as Apprentices. The Certifying Authority cannot approve any Standing Order for any factory or establishment, if those Standing Orders are in deviation of the Model Standing Orders.

There were also cases where large number of employees were shown as Apprentices as per the Standing Orders and payment of ESI Contribution avoided. But, in regard to Tamilnadu Region, disproportionate number of employees in any cadre were not permitted to be shown as Apprentices. Contribution was claimed in respect of all persons exceeding 5% in every cadre as ruled by the Hon’ble High Court of Chennai in the Pallavan Transport Corporation Vs. Appellate Authority in the year 1979 . This case was with reference to the provisions of the Industrial Establishment (Standing Orders) Act, 1946. The decision is available in the Book of K.D. Srivastava on the said Act published by the Eastern Book Company.

(1979) 2 LLJ 262

(1979) 2 LLJ 262
Click on the image to have a larger view

Position in the ESIC from 01.06.2010:

Sec. 2 (9) of the ESI Act, 1948 says that “employee means ….any person engaged as an apprentice, not being an apprentice engaged under the Apprentices Act, 1961 (52 of 1961), and includes such person engaged as apprentice whose training period is extended to any length of time.”

The amendment of 2010 did away with the need to examine the contents of the Standing Orders. All those who are called as Apprentices by the employer are now coverable under the ESI Act, 1948 except only those who fall within the purview of the Apprentices Act, 1961.

What does the ESIC Revenue Manual say?

But, Para L.2.12 in Page 23 of the Revenue Manual published by the ESI Corporation in the year 2011 says as under:

“Exceptions: The following categories need not be counted for the purpose of coverage of the factory or for their own coverage.
…. c) An apprentice engaged under the Apprentice Act, 1961 excluding the Apprentice whose training period is extended to any length of time.”

This is again reiterated against Item 1 under the category “Exclusions” in Page 78 under the Para L.6.4 which reads as follows:

“Exclusions are:
(1) An Apprentice engaged under the Apprentice Act 1961. Consequent to the Amendment to the Act in 2010, only the Apprentices covered under Apprentice Act 1961 are not coverable as employees under the Act. Apprentices engaged under Apprentice Act whose training period is extended to any length of time and all other trainees working under the Standing Orders of the companies are coverable as employees.”

  1. Does it imply that the ESIC says that the Apprentices engaged under the Apprentices Act, 1961 are coverable, if their training period extends to any length of time?
  2. Does this not run contrary to what is, correctly, mentioned against Item 6 in Para L.2. 11 in Page 22?
  3. Is not Item (c)  under Para L.2.12 , then, in violation of Sec 18 (a) and (b) of the Apprentices Act, 1961?
  4. Can the ESI Act, 1948 supersede the Apprentice Act, 1961 on the core issue of the status of an Apprentice, when there is no specific provision in the ESI Act for such supersession?
  5. Is it not reasonable on the part of the employers to expect clarification from the ESIC authorities with reference to the aforesaid interpretations and discrepancies in the Revenue Manual?


Filed under Amendments 2010, For Trainees, Inspections

Appellate Authority u/s 45 AA of the ESI Act – Part I

The following are excerpts from the application sent by Mr. P. Ramar on 10.10.2009 to the Ministry of Law on the amendment then proposed for having an Appellate Authority under the ESI Act:

  1. Sec. 74 of the Principal Act provides for a full-time domestic tribunal as part of the ESI Corporation exclusively for deciding the cases pertaining to the ESI Corporation. The expenditure pertaining to that Tribunal was intended to be met from the ESI Fund as per Sec. 28 (vii) of the ESI Act, 1948 which authorises that the ESI Fund shall be expended for “defraying the cost (including all expenses) of the Employees’ Insurance Courts set up under this Act”. Accordingly, full time E.I.Courts had been set-up and were functioning upto the mid-seventies, although the expenditure of such E.I.Courts had been met only by the concerned State Governments. At that time, the disposal of the cases was fast and the E.I.Courts functioned as specialized institutions on matters pertaining to the ESI Act.

2. Now, all of a sudden a provision is attempted to be made for having an Appellate Authority with reference to the orders issued under Sec. 45-A pertaining to Contribution. The Statement of Objects and Reasons for the Bill do not explain the problems, if any, faced by the organization for want of such an Appellate Authority and the necessity for such an amendment.

3. The Bill is totally silent with reference to Sec. 85-B under which the same ESI Authorities issue orders regarding Damages by exercising the same powers and extending the same opportunity to the employers as per the principles of natural justice.

4. The fact is that there is no need for an internal appellate authority under Sec. 45 and the present proposal as per Clause 9 is only intended to preclude the E.I.Courts from playing their legitimate role.

5. All that the ESIC has to do, under Sec. 74 is

  1. a)to ask the State Governments to make the E.I. Courts as full-time courts to attend only to the cases pertaining to the ESI matters;
  2. b)to ask the State Governments to nominate judges for these courts with reference to the EI Court rules already framed by them,
  3. c)to inform the State Governments that the ESI Corporation would meet the entire cost of running the courts from the ESI Fund.

6. But, the ESI Corporation had, over a period of time, simply left it to the concerned State Governments to do whatever they pleased. No money has been spent from the ESI Fund for running the E.I. Courts. So, the State Governments have, instead of appointing full-time EI Courts simply allotted the work to the Labour Courts. The judges of the Labour Courts, overloaded already with their main work, began to consider the ESI work as a part of their other works. Because of this overload, there is significant delay in the disposal of cases.

7. The prime factor for consideration is that the authors of the Principal Act had very wisely understood the need for having an appellate authority who will not be a civil court but in-house tribunal. But, later, because of the ignorance and inaction of the ESI Authorities of the nuances of the subject-matter, the State Governments had not been informed of the financial assistance available to them as per Sec. 28 (viii). As a result, the ESI Corporation had been suffering all along because of the delay in the disposal of cases.

8. Delay in the disposal of cases cannot, therefore, be a reason for moving an amendment as per Clause 9 of the ESI (Amendment) Bill, 2009. Proper understanding of the significance behind Sec. 74 and Sec. 28 would help set-up full-time EI Courts and clear the arrears. The present amendment is an attempt to make things chaotic without enforcing Sec. 28.

The Clause 9 of the ESI (Amendment) Bill, 2009 introduced in the Lok Sabha is reproduced below:
9. After section 45A of the principal Act, the following section shall be inserted, namely:—

“45AA. If an employer is not satisfied with the order referred to in section 45A, he may prefer an appeal to an appellate authority as may be provided by regulation, within sixty days of the date of such order after depositing twenty-five per cent. of the contribution so ordered or the contribution as per his own calculation, whichever is higher, with the Corporation:

Provided that if the employer finally succeeds in the appeal, the Corporation shall refund such deposit to the employer together with such interest as may be specified in the regulation.”.

Para 2 of the Memorandum Regarding Delegated Legislation is reproduced below:

2. Clause 9 of the Bill seeks to empower the Employees’ State Insurance Corporation to provide an appellate authority by regulation for hearing appeal from an employer against the determination of contribution payable in respect of employees and to specify the interest on the deposit made by the employer in case the employer is finally succeeds in the appeal.

Para 5 of the Memorandum Regarding Delegated Legislation is reproduced below:

5. The matters in respect of which the rules or regulations, as the case may be, to be made, are of administrative and procedural details and it is not practicable to provide for them in the Bill itself. The delegation of legislative power is, therefore, of a normal character.

9. There is no provision in the Bill to provide for a Section similar to Sec. 45 – A (2) to make the orders of the Appellate Authority enforceable.

10. Moreover, the Amendment Bill seeks to vest the power in the ESI Corporation to decide the (a) Constitution and appointment of Appellate Authority, (b) Powers and (c) procedure to be followed by the said authority. These matters have been left to the purview of delegated legislation.

11. If the ESI Authorities had moved the proposal by giving the impression that the EI Court is a Civil Court and that there is a requirement for an intra-departmental remedy for reviewing the orders issued under Sec. 45 A, their contention is wrong.

  1. a)“The E.I. Court is not a Civil Court but a domestic tribunal specially constituted for the purposes of deciding any controversy that may arise and the matters enumerable in Sec. 73 A”. (ESIC Vs. Zeckra 1969 (36) FJR 110.).
  2. b)Punjab High Court has held that the E.I. Court is not an ordinary civil court but a domestic tribunal specially constituted for the purpose of deciding any controversy that may arise in the matters enumerated in Sec. 75 of the Act.(ESIC Vs. Ram Lakhan, AIR 1960 Punj.559). The Bombay High Court has described the E.I.Court as a persona designate.
  3. c)In Virendra Kumar Vs. State of Punjab (AIR 1956 SC 153), the Supreme Court has made the following observations: “It is a familiar feature of modern legislation to set up bodies and tribunals and entrust them with the work of judicial character, but they are not courts in the accepted sense of that term though they may possess some of the trappings of a Court.”
  4. d)The mere fact that a judicial officer presiding over a Civil Court is appointed a judge would not, while he is performing his functions as a judge of the E.I. court, make him a civil court. “All the powers of a Civil Court cannot be exercised by an E.I. Court and only such power has been conferred by sub-section 1 of Section 78 upon it as are common with the powers of a civil court.” (ESIC vs. Shashi Kant Arc Khandi and another 1983 (47) FLR 269). There are only deeming premises made by Sec.78 (4) for the enforcement of orders of the EI Court in the same manner as done for the orders of Civil Court.

12. The “Commentaries on ESI Act, 1948” by M.R. Mallick published by the Eastern Law House, Kolkata in the year 1974 analyses the issue in depth and you could find more references in that book. It would thus become clear that the Principal Act has already placed a Domestic Tribunal for immediate remedy with reference to any issue that may arise between the employers and the ESI Corporation.

13. There is, therefore, no need for an additional departmental authority to become an appellate authority to decide any issue that may arise between the employers and the ESI Corporation under Sec. 45A. Yet, the Ministry of Law has become a party to the decision to vest some arbitrary powers in the ESI authorities to nominate the Appellate Authorities even without examining the fact that the ESI Corporation is not utilizing the powers vested in it to establish a full-time Tribunal under Sec. 74 meeting the required expenditure for it under Sec. 28.

14. The present bill aims at obtaining the approval of the Hon’ble Members of the Parliament to appoint an Appellate Authority in the ESI Corporation for the purpose of revising and reconsidering the orders under Sec. 45-A without informing the Hon’ble Members the manner in which such Appellate Authority is going to be appointed. The Bill aims at delegating arbitrary power to the Corporation to do as it pleases in such an important quasi-judicial matter.

  1. 1.Please, therefore, intimate, with reference to your office records, the details of the difficulties faced by the ESI Corporation, at present, because of the absence of any departmental officer to function as an Appellate Authority.
  2. 2.Please intimate whether the Ministry of Law had actually examined beforehand the manner in which the ESI Corporation is going to frame the delegated legislation regarding the appointment and powers of the proposed Appellate Authority.
  3. 3.Please intimate whether an Appellate Authority can be appointed and vested with powers as per Delegated Legislation when the Inspector and the Quasi-Judicial Authority and the E.I. Courts are appointed under Sec. 45 and Sec. 74 respectively and are deriving powers as per the Principal Act.
  4. 4.Please intimate whether the Ministry of Law is aware that the same officers who pass the orders under Sec.45-A regarding contribution happen to pass orders under Sec. 85-B regarding damages also following the same principles of affording the opportunity of principles of natural justice. In that case, please intimate whether you had examined the reason behind the fact that the ESI Authorities did not bother themselves about having the same Appellate Machinery regarding the Damages ordered under Sec. 85-B of the ESI Act, 1948.
  1. 5.Please intimate whether the orders of the proposed Appellate Authority under Sec. 45 AA are enforceable without there being any provision under the said Sec. 45 AA, corresponding to the Sec. 45-A (2) available under Sec. 45 A.

A sum of Rs.10 towards fee under the Right to Information Act,2005 has been paid in the form of Indian Postal Order for Rs.10/- drawn in favour of Secretary, Ministry of Law payable at New Delhi the details of which are asunder:



Filed under Administration, Benefits, E I courts, For Trainees, Inspections

Towards objective Test-Inspections in the ESIC!

(The earlier Post titled ‘Test Inspections in the ESIC: A charade!’ dealt with the flaws in the amendment and the administrative instructions pertaining to Test Inspections, i.e., the Theory on the subject. The present Post deals with the Practice, the practical aspects in general. The ESIC Administration must plug the loopholes and not increase them by overlooking the routes for escapes and excuses)

 The perception of the employers

It has been mentioned more than once, in this forum, that periodical and proper inspections by the ESIC authorities could alone safeguard the interests of the working population by ensuring proper coverage and compliance. Proper inspections contemplate proper monitoring mechanism also in the form of Test Inspections and Vigilance Inspections. However, in practice, the employers feel that they are at the receiving end in an unjust manner because of the following reasons:

  • Undue claims are raised which are waived after questionable practices.
  • The fear of having to face such a situation compels the employers to resort to questionable methods during the inspection stage itself.
  • The inspections should, therefore, be avoided.

A narrative by Mr. O.A. Hameed, former A.C, in this regard is recalled here which can be considered as representative of the grievances of the employers. The ESIC, a public body, cannot ignore these observations:

“All Inspections are source of corruption, intimidation and harassment. Often the inspecting official do not themselves know the law clearly and they are also totally ignorant of modern system of book keeping and therefore unable to understand and examine various kind of books and documents, which result in bulk booking of some entries and then leaving it to be sorted out between the department officers and employers, which is opening further scope for corruption and avoidable harassment. An organization, which claims to provide various kind of benefits in case of sickness, abstention, accidents and death and help employees immensely, should not resort to inspection but education of employees. The law that benefits has to be given even for those in respect of whom no contribution is actually paid but only payable is more a myth since actual amount of benefit is linked to contribution payable and this requires verification of records when there is a claim which can only come through report from employers. When the employers certify a claim of workers, he need to give his wage break up and period of employment and he is open to scrutiny of his records. Let ESIC ensure better, speedy and seamless benefit dispensation, educate the public at large and the industrial workers and their leaders continuously as also employers, I am sure the registration and payment will be more voluntary and friendly and that is what ESIC should strive for. Instead of inspection, department should undertake selective scrutiny of records called to its office, in case of complaint or doubtful claim.”

More on the views of employers at the following links:

The issues that arise are:

Should inspections by the ESIC authorities be detested so much? Would the employers dislike the inspections even by the well-meaning and honest Inspectors of the ESIC? This article is an attempt to throw light on these facts. Continue reading


Filed under Inspections

Test Inspections in the ESIC: A charade!

(This article deals only with the theory of checks and balances in the functioning of an organization and not the practice in Test Inspections, which will be dealt with separately. The theories must always be correct and take into account the problems that would be encountered in the field when it is enforced).


Every system in a democracy must have checks and balances. As far as the ESIC is concerned, a provision for inspection of factories and establishments was incorporated in the ESI Act to facilitate monitoring proper compliance by the employers. Inspecting the records of the past periods helps the ESIC Administration detect (a) the occasions and (b) the manner in which the employers had, in the past, concealed the concealment of employment of persons and payment of wages. Such inspections help the Administration to find remedial measures to ensure that such concealments do not recur in future. The ESI Act is a labour-welfare legislation and the provision for inspections in the Act are, obviously, intended to advance the purpose of labour and their welfare. Such advancement can be achieved only when the inspections are done in a qualitative manner with adequate depth and substance. This being the importance of inspections under the ESI Act, as a natural corollary, the Administration must provide a system to monitor the performance of the Inspectors, the way there is a need to police the police.

The only way in which such monitoring can be done is to conduct Test inspections by higher officers. This system of checks and balances is there in the EPF Organisation also where it is called Supervisory Inspection.

Test Inspection is only an Administrative action

Test Inspection is only an Administrative action. It does not require any statutory provision. Reg. 102 of the ESI (General) Regulations, 1950 was found adequate for conducting Test Inspections. There was no problem on this issue until some employer went to court and got an interpretation that there was no provision for test inspection in the ESI Act. But, there were many Courts, which did not find fault with the system of such test-inspection. Moreover, the matter was not taken up with higher judiciary for any final verdict on the issue. The legitimacy of test inspections can be explained and justified by the ESIC by citing the practice followed in other departments. That would have protected the interests of the organization. However, it was not considered so essential at that time as the test inspections were continued to be done everywhere by calling them only as inspections (although they were done by the officers who were superior in rank to that of the inspectors).

But, all of a sudden Test Inspections were stopped describing them, strangely, as ‘harassment of employers’. This kind of phraseology in official communication puzzled the readers, as the test inspection was intended to monitor the quality of inspections conducted by the inspectors. That the employer had to pay, sometimes, additional contribution was only a consequential effect. Continue reading


Filed under Amendments 2010, Inspections