Powered Hospital Canteen Is ESI-Covered, Jharkhand HC Upholds Caterer’s Exemption Denial For Lack Of Proof Of Equivalent Medical Benefits

M/s Bharat Caterers, a partnership firm operating a canteen at Telco Hospital, sought exemption from the Employees’ State Insurance Act, 1948 (ESI Act) for November 2014 to October 2015 under Sections 88 and 91-A.

The State rejected the application by order dated 12 November 2015, citing deficiencies in the medical and other benefits provided to the petitioner’s employees.

The petitioner challenged that order and also sought a declaration that the ESI Act did not apply to its establishment absent a notification under Section 1(5).

The petitioner had previously pursued exemption applications and writ proceedings, and it was undisputed that it had been making ESI contributions for covered employees since 2017.

Under Section 1(4) of the ESI Act, the Act applies in the first instance to factories other than seasonal factories; Section 1(5) concerns extension of the Act to other establishments.

“Factory” under Section 2(12) includes premises where the prescribed number of persons are employed and a manufacturing process is carried on.

Section 14-AA of the ESI Act adopts the meaning of “manufacturing process” in Section 2(k) of the Factories Act, 1948.

The Court considered the exemption application under Sections 88 and 91-A of the ESI Act and held that each exemption period must be assessed on its own merits.

The petitioner’s establishment carried on manufacturing activity with the aid of power and therefore fell within the definition of a factory; no separate Section 1(5) notification was required.

On the exemption merits, the petitioner did not substantiate its assertions of a medical tie-up, cashless treatment, or benefits equivalent to those available under the ESI Act.

The Court also found that ad hoc medical leave for some employees did not establish an equivalent benefit as a matter of right, and that the absence of female employees did not excuse the lack of maternity-benefit provisions in the terms of employment.

The authority’s reliance on the fact that no exemption had previously been granted was not a valid ground by itself, but the other grounds supported rejection.

As the application had been rejected rather than an adverse order passed against the employees, the Court found no basis to require notice to the union.

It dismissed the writ petition, closed any pending interlocutory application, and vacated any interim order.