### Determination of 'Employee' Status for Home-Based Workers in Cooperative Societies Requires Re-Examination of Supervision and Control

The Appellant (ESI Corporation) challenged two orders passed by the E.S.I. Court, Rajkot, which had declared that the female members of Shree Mahila Gruh Udyog Lijjat Papad (the Respondent) were not "employees" under Section 2(9) of the E.S.I. Act, 1948.

The Respondent is a society registered under the Societies Act, 1960, and a Public Trust, aimed at the upliftment of women.

The Respondent’s operations involve women members (approx. 9,000) who collect raw materials from branch offices, roll papads at their own homes without direct supervision, and return the finished product for sale.

The ESI Corporation issued notices for recovery of contributions after an inspector found over 600 women working at the Rajkot branch.

The E.S.I. Court canceled these notices, holding the Respondent was not an "establishment" and the women were not "employees".

1. Whether the Respondent’s establishment is covered under the E.S.I. Act in view of the insurance inspector’s report?

2. Whether the payments made to the women workers constitute "wages" and whether they can be considered "employees" under Section 2(9) of the Act?

3. Whether the High Court should remand the matter for fresh consideration in light of specific precedents?

The Court primarily considered Section 2(9) of the E.S.I. Act, which defines an "employee" as a person employed for wages under the supervision of the principal employer.

Section 2(12) defines a "factory" based on the employment of ten or more persons.

Reliance on C.E.S.C. Limited v. Subhash Chandra Bose, which held that "supervision" requires consistent vigil and direct control rather than mere checking of the final product.

Reference to the Supreme Court’s decision in Shri Mahila Griha Udyog Lijjat Papad v. Union of India, which held that women preparing papads at home were "employees" for the purposes of the Employees' Provident Funds Act.

The Court noted that while the women roll papads at home without direct supervision—factors normally excluding them from the definition of "employee" per C.E.S.C. Limited—the Supreme Court had previously observed in a Provident Fund context that these specific women workers at the Jabalpur branch were "employees".

The High Court observed that the E.S.I. Court had failed to consider this Supreme Court precedent and the Respondent’s internal constitution governing the status of these women.

The Respondent's argument regarding exemptions in other states (like Maharashtra) and its status as a social-upliftment trust needed deeper evidentiary analysis.

The Court determined that the existing findings reached by the E.S.I. Court were insufficient and required a re-analysis of the "employee" and "establishment" definitions as applied to the unique "Lijjat Papad" cooperative model.

The High Court quashed and set aside the E.S.I. Court's orders in Application Nos. 32/90 and 29/90, and remanded the matters back to the E.S.I. Court, Rajkot, for a fresh decision within nine months, granting both parties liberty to lead fresh evidence.