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Sugar factories, including gur producing units, are exempt from coverage of Employees State Insurance Corporation Act, the Madras High Court has held. Under Section 1(4) of the Act, ‘seasonal' factories were excluded from coverage under the law.
Hearing a writ petition from Ponni Sugars (Erode) Ltd., Perungudi, Chennai, challenging a notice dated November 9, 2006 issued by Joint Director, Sub-regional Office (Salem), Employees State Insurance Corporation asking them to pay contribution for ESI, Mr Justice K. Chandru ruled that in view of the clear expanded definition of the term ‘seasonal' factory u/s 2(19A) read with Sec 1(4), the petitioner's factory at Erode was not covered by the provisions of the Act.
The petitioner contended that the term ‘seasonal' factory was introduced by Central Act 29 of 1989 with effect from October 20, 1989. Notwithstanding the same, the respondent (ESI Corporation) was attempting to cover the Erode factory under the law.
In respect of sugar units, the number of days a factory worked was irrelevant and the definition that included a factory which was engaged for a period not exceeding seven months in a year would not apply, the petitioner argued.
The respondent submitted that the Erode factory engaged more than 373 workers not only for manufacturing process, but also for other processing work. Since it was registered as a factory, the unit was covered by the ESI Act. In the light of the expanded definition of the term ‘seasonal' factory, all factories which were working beyond seven months were covered by the law.
The judge observed that the Supreme Court had considered the issue of ‘seasonal' factory in the case of Regional Director, ESIC vs Highland Coffee Works of PFX Saldanha & Sons [reported in (1931) 3 SCC 617. The court, inter alia, held that the amendment to the definition of expression ‘seasonal factory' brought out by Amending Act 44 of 1966 had not altered the position of the seasonal factory as obtained prior to amendment and Section 1(4) of Act would still continue to exclude such factory from operation of the Act.
The decision of the apex court would squarely apply to the case on hand. Hence, impugned notice of the respondent was clearly erroneous and the same stood set aside. The writ petition stood allowed.
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