The division Bench of Justice M.R. Shah and Justice C.T. Ravikumar of the Apex Court in the case of The ESI Corporation Vs M/s. Radhika Theatre held that the ESI Act shall be applicable irrespective of the number of persons employed or notwithstanding that the number of persons employed at any time falls below the limit specified by or under the ESI Act.
Brief Facts:
The Respondent was running a cinema theatre since 1981 and paid ESI contributions up to 1989. Thereafter, contributions were not paid as employees were less than 20. Thus, the Appellant-Corporation issued demand notices which were challenged before the EI Court. The EI Court dismissed the case which further resulted in the appeal before the High Court.
The High Court allowed the appeal and held that amendment to Section 1 of the Employees’ State Insurance Act, 1948 (hereinafter referred to as the “ESI Act”) by which Section 1(6) came to be inserted w.e.f. 20.10.1989, shall not be applied retrospectively and the same shall not be made applicable to an establishment, established before 20.10.1989/31.03.1989. Hence, the present appeal has been preferred by the ESI Corporation.
Contentions of the Appellant:
It was submitted that the ESI Act is a social welfare legislature and the legislative intention behind Section 1(6) of the ESI Act was to govern the factory/establishment irrespective of the number of persons employed therein. It was also contended that Section 1(6) would have a retrospective application.
Observation of the Court:
The issues to be ascertained in the present case were whether the factory/establishment established before 20.10.1989 would be governed by the ESI Act irrespective of the number of employees and whether Section 1(6) has retrospective application.
It was observed that the ESI Act is a social welfare legislation, hence, a liberal interpretation that would lean in favour of the beneficiary should be given.
It was noted that only those businesses/factories employing more than 20 people were subject to the ESI Act before the addition of Section 1(6) of the ESI Act on 20.10.1989. After the addition of Section 1(6), a factory or establishment to which the ESI Act applies would now be governed by the amended provision even if the number of people employed there at any given time fell below the limit outlined by or under the ESI Act.
It was held that the High Court erred by noting and concluding that even for demand notices for the time after 20.10.1989, the said provision is applied retrospectively, and by allowing the appeal and invalidating the demand notices even for the time after 20.10.1989. It was opined that the retrospective application is only in those cases where the demand notice is for the period before the insertion of Section 1(6).
The decision of the Court:
Based on the above-mentioned reasons, the Apex court set aside the judgment of the High Court and restored the demand notices for the period post-20.10.1989. Accordingly, the present appeal was allowed.
Case Title: The ESI Corporation Vs M/s. Radhika Theatre
Coram: Hon’ble Justice M.R. Shah and Hon’ble Justice C.T. Ravikumar
Case No: Civil Appeal No. 312 OF 2023
Citation: 2023 Latest Caselaw 63 SC
Advocate for Petitioner: Adv. Vaibhav Manu Srivastava
Read Judgement @LatestLaws.com
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