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Our company is situated in Mumbai, it is basically a trading company and currently has 38 employees working for it. Out of these 38 employees 10 employees Gross Salary is Less Than 10,000/-.
The ESIC Act states that if a company employing 20 or more people and a factory employing 10 or more people should register for esic. But the wage limit is less than 10,000/-.
The ambiguity in this is that, we have 38 employees but employees eligible for the Act is not more than 20, so is our company liabe to register for ESIC or should we wait until we have 20 employees whose salary is less than 10,000/-
Kindly advice. Thanks.

Hi, The Act is applicable to the company employing 20 or more workers, regardless of the number of workers falling inder ESIC. You should immediately apply to ESIC for registration.
Dear Aarti,
Act says that when employee stgrength comes to 20 then ESI act will be applicable to that company either employees are getting more then limit or less then limit. So in my opnion you have get registration under ESIC ACT.

But suppose if in a company none of the employees salary is less than 10,000 and it employs around 50 employees, for other miscellaneous jobs they outsource it to contractors and the contrators pay for labours esic and all. Then also the company has to register it self with ESIC.
as my earlier friend said yes ESIC act is applicable to this is number of employee which decide ESIC code not number of eligible employees.
as arti has asked if concern does not have single eligible employee and has got 50 empoyee altogether ,than also required to take ESI code .
j s malik


Let me recapitulate the factual matrix of your question

1. It is a trading concerned, No manufacturing activity.

2. Total 38 Persons are working.

3. Of the 38 person working wage of 10 person is Rs 10000 or below and rest 28 person are getting more than Rs 10000.

With the above facts, I am sorry to say that all our friends who answered to you are wrong. Your Shop is not coverable under the ESI Act.

As lots of people are having this doubt, and some of the ESI officials are not advising the Employers corrctly, I wish to to give below a reply given by me to Mr Malik, today. It is as follows.

I left ESIC in 2006. No amendment has come till then. I just checked with ESI Department, and no amendment has been made in the law so far and SC judegment in Suri case is the law of the land till amended by Pariliament. I believe the department suggested amendment but Government was not inclined.


O. Abdul Hameed

My reply to Mr malik -

Mr Malik

SC has finally ruled that for coverage it should 20/10 "employees" as defined under ESI Act and Not total Persons working in the factory/Establishment. Please refer to SC judment reported in the case of E.S.I Corporation Vs M.M. Suri and Associates Private Limited, judgement dated 28 Oct 1998 pronounced by Justic D.P. Wadhwa. The Court concluded in that case (para 5) "In our view, therefore, the Act would apply to an establishment only when number of employees is 20 or more and all those employees answer the description of employee contained in Section2(9) of the Act.".

The court further observed that "To controvert the argument that even though majority of the persons employed are 'employees' and their number is less than 20 they should not be deprived of the benefit under the Act, it was submitted that what will happen when the 'employees' falling within the definition of Sec. 2(9) of the Act are only 2 or 3 though the total strength in the establishment is more than 20. How can it be said in that case that the Act should nevertheless apply to such an establishment ? The answer is obviously in negative that Act cannot apply.

The confusion persisted only because before amendment of ESI act in 1968, the definition of factory stated on as "Person working", and there was no seperate definition of "Person". In 1968 when the word factory was amended, the definition stated " Person employed for Wage" (instead of earlier words Person working). Court felt that, when word "Wage" is defined, then that definition has to be followed and hence "person employed for Wage" is same as "Employees" as defined under the Act.

The ESI department could not do any thing further in court, and a revision failed. I think department has gone to Central Govt for amendment but no amendment has come.

It is one of those few occasion when Supreme Court did not give a liberal and beneficial construction, in case of ESI and other labour laws, and went by the literal interpretation.

Therefore the law of the land is that the reckong number for deckiding coverage has to be 20/10 "Employees" as defined under the ESI act, and not total employment.

Hope I made the position clear. you can get in touch with me at

O. Abdul Hameed

Dear Arti,
As per my knowledge only those employees are eligeble for ESIC whose salary upto Rs.10, no matter for ESIC what is the employees strength of u org.So my suggession is ,u should as soon as possible apply for ESIC code .

HI !
We need to check whether the working is with power or without power
with power it applies to 10 employees including contract employees working in your office(drawing salary/wages below 10K pm)
without power it applies to 20 employees including contract employees working in your office (drawing Salary /wages below 10K pm)
if you are billing with computer it means you are working with power
ESIC v Bhagatram & Other, ,2002(100) FJR 751 (Kar HC) LPG
LPG USED FOR making Sweets in one of source of Power and Mfg Estabishment using it is covered within definition.

Thanks Mr. Hameed, We had similar situation number of employees 20 but none with salary less than 10K. I am sending another query on your email. Would appreciate your inputs on that too.
Dear Arti Gulati,
The coverage under the ESI Act is based on the total No. of employees engaged in an establishment, not on the eligible employees to be insured.
since your company is employing 38 empoyees therefore you are liable to be covered under the Act.
It is regardless that the coverable employees are less than 10 or 20 as the case may be ( Factory/Shop).
It is pertinent to mention here that after the coverage of an establishment and susequently there is a fall in the total No. of employees (i.e. less than 20 employees in a Shop or 10 employees in a factory) the Act will be applicable in this case also.
Mohd. Arif Khan

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