Mr. O. Abdul Hameed, former Additional Commissioner of the ESI Corporation, has written the following with reference to the post https://flourishingesic.info/2015/08/06/clubbing-different-units-together/ Considering the depth of the comment, the write-up is hosted here as a separate post:
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At a time when the service of the scheme was poor or less known, the misuse was also less. As the medical service, particularly the superficiality facilities from non-ESI hospital became available and got publicity, misuse also started. I know of a case of a medium size hotel whose owner added his wife to the muster as a clerk to get herself operated in AIIMS within one month and MD of a company who got his domestic cook into muster when he needed a major operation. There is lots of potential for misuse.
Coming to the issue of clubbing the principle is “Geographical proximity is not essential but functional integrity should be established”. Was the peanut an item of the menu, was it sold inside the restaurant and billed among other items?
If you see section 2 (12), the emphasis is on” Premise” and it is the premises that is covered and include its precincts. There is no reference to ownership or unity of ownership., and manufacturing process need not be in all part of this premises or precinct but in any part of it. Thus the premise or precinct need not be under a particular ownership or singular ownership.
Those who drafted this very long back had brain, and clarity of purpose to be achieved and not, regret to say, those who drafted some of the recent amendment.
Coming to the example of power looms mentioned above there was practice of several loom in one big shed and one or more loom owned by single person. This was not always a ploy to avoid factory act and other legislation but at times, for genuine reasons as a commune like operation.. The ESI act would apply to the entire shed but Government of India, following industry pressure asked the ESIC not to cover them, a direction which the Government had no power to give but ESIC was perforce compelled to comply.
Two illustration that I dealt-
1. Three different manufacturing units within a city, each with distance of around 10 km from one another, one making the wooden part of sewing machine, another the metal and other parts and third where all these were brought together, assembled, packed and distributed, all three belonging to belonging to one family being brothers of a Hindu undivided family.. Though all had separate sheds, electric/water connection, etc I found that no single unit can exist alone and do not produce a marketable product and they essentialy complement one another and transaction among them were not sale but good transfer.
2. Two unit within a compound, both separate sheds nearbyd by with separate electric connection, both same owner. One is printing Unit and another a binding Unity. All the printed material were bound by the second unit. I did not club them because binding Unit was charging the printing unit in the book and its income were treated to tax separately and they were also taking up binding for others and charging and printing unit was also taking up printing work without binding, though where binding was needed it was done only in the binding unit. I felt there is no functional integrity and dependence though owner is same and premises (in its broader literal sense, having been not defined) was same. Held not covered.
There can be several examples. One of the factories that I worked as GGM, we had set up a sophisticated machine shop with latest imported machine three of which can be supervised by one person. The machine shop was some distance away in separate premises and had just eight person which included two helpers. I insisted on covering them though my GM in charge f Administration felt it need not be covered, though only two helpers were to to be covered. This was because our foundry products are sold and exported after machining only.
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