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The Bombay High Court last week ruled that creation of software or development of software is a manufacturing process and the premises where computers are involved in manufacturing process is a factory under the Employees’ State Insurance Act. Two companies had argued before the ESI court in Mumbai that they were not involved in any ‘manufacturing process’ and therefore labour laws were not applicable to them. One firm, Reliable Software Systems Ltd, argued that it was engaged in providing online information to share market traders regarding the position of shares in the market. So the function of the company was only related to receiving, storing and transmitting the information to the clients in the stock market. There was no question of development of any software. ESI Corporation submitted that computer units are covered under the definition of “shop” according to a government circular and a Supreme Court judgment. It further submitted that it was not necessary that the process should end in a substance being manufactured. What is required is that it should carry on manufacturing process. The ESI argument was accepted by the high court.

Attached Files
File Type: pdf ESI applicable to software development companies - Bombay HC 11.7.2012.pdf (174.8 KB, 963 views)

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