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Electronics Shop Repairing Electrical Goods Classified as “Factory” under ESI Act


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The Case

CIVIL APPEAL NO. 2527/2012




Date: 27-07-2023


The background!

1.The appellant, a sole proprietorship firm, is aggrieved by the judgment impugned dated 26th August, 2010, passed by the High Court of Karnataka, Bangalore, whereby the appeal preferred by it against the order dated 29th September, 2003, passed by the Employees State Insurance Court2, Bangalore, has been dismissed.

  1. The appellant-firm had approached the ESI Court, by filing applications under Section 75 of the Employees State Insurance Act, 1948, assailing the notices of recovery and orders passed by the Respondent-Corporation, taking a plea that it had never employed more than eleven employees and was not using power and, therefore, the provisions of the ESI Act were not applicable to it.
  2. After evidence was led before the ESI Court and issues were framed, the plea of the appellant-firm to the effect that it was not manufacturing any goods with the aid of power and, therefore, was not a factory as contemplated under the ESI Act, was turned down.

The second plea with regard to employing ten or more persons at a given point of time in the preceding 12 months, during which manufacturing process was carried out by the aid of power, was also decided against the appellant-firm, upon going through the records and observing that the appellant-firm had engaged more than ten workmen at its unit, which could be gathered from the attendance register for the relevant period.

As a result, both the applications filed by the appellant-firm were dismissed.

  1. Aggrieved by the said dismissal order, the appellant preferred an appeal before the High Court, wherein the following two substantial questions of law were formulated:

“1. Whether the appellant would not come within the definition of Factory as defined under Section 2(12) of the ESI Act?

2.Whether the appellant business being carried on with the aid of power as defined under Section 2(15) (C) would not be applicable or not?”


  1. Both the questions of law have been answered against the appellant and in favour of the Respondent-Corporation. Aggrieved thereby, the present appeal has been filed by the appellant-firm.


  1. It is the contention of Mr. Balaji Srinivasan, learned counsel for the appellant that the appellant-firm does not fall under the definition of “Factory” as defined in Sections 2(12) & 2(14AA) of the ESI Act read with Section 2(k) of the Factories Act, 1948.


  1. In the instant case, the appellant-firm is in the business of selling electrical goods in a shop.

Admittedly, the shop premises are used not only for selling goods, but also to service electrical goods. That being the position, it is clear that the appellant firm falls under the definition of a “Factory” and is using a “manufacturing process”, as contemplated under both the Statues.

  1. The appellant-firm is an establishment that has been using electrical energy for the sale and repair of electrical goods at its premises by using “power” as has been defined under Section 2(15)(C) of the ESI Act, which again takes us back to the Factories Act, 1948, where the definition of “power” has been spelt out in Section 2(g) and the meaning ascribed to the said word is ‘electrical energy, or any other form of energy which is mechanically transmitted and is not generated by human or animal agency’.

The observations made in the impugned judgment to the same effect, are based on the provisions of the relevant Statues and are therefore, upheld. 

  1. In light of the above observations, the Supreme Court dismissed the appeal and confirmed the findings of the courts that the appellant firm was in fact covered under the ESI Act.


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