ESI coverage cannot be extended based on inspector reports derived from surmises without supporting documentary evidence.

The E.S.I. Corporation’s Inspector conducted visits to Amardeep Mineral Industries (the respondent) in 1989 and 1996.

Based on various registers and ledger books, the Inspector reported that the establishment employed more than nine persons (specifically twelve in March 1989), thereby bringing it under the purview of Section 2(12) of the E.S.I. Act.

Consequently, the Corporation issued a letter on 21.07.1997 demanding a contribution of ₹52,445.

The respondent challenged this before the E.S.I. Court, Vadodara, under Section 75 of the Act. The E.S.I. Court set aside the Corporation's order, leading to the present appeal by the Regional Director.

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

2. Whether the payment of remuneration made to the employees by vouchers can be considered as employees under the Act?

Section 2(12) of the Employee State Insurance Act, 1948, which defines "factory" based on the threshold of the number of persons employed for wages.

Section 75 of the E.S.I. Act regarding the adjudication of disputes and Section 82(2), which restricts appeals to the High Court only on "substantial questions of law".

The principle of natural justice, specifically nemo judex in causa sua (no one should be a judge in their own cause), regarding unilateral administrative determinations.

The High Court observed that the Insurance Inspector’s report, which served as the sole basis for the Corporation's demand, was founded on "surmise and conjecture" rather than concrete evidence.

Although the Inspector claimed to have found twelve employees in the 1989 records, no supporting documents or evidence were produced to verify this find, nor were such documents requested from the respondent.

The Court reasoned that the Corporation acted unilaterally and failed to provide an opportunity for a hearing or a thorough evidentiary assessment before extending the Act's coverage.

Consequently, the Court found no error in the trial court's assessment of the evidence and determined that the appellant failed to raise any "substantial question of law" necessary to maintain the appeal.

The High Court dismissed the appeal and affirmed the judgment of the E.S.I. Court, Vadodara. All interim reliefs were discontinued, and the record and proceedings were ordered to be returned.