Harsh Kumar Mehta
Consultant In Labour Laws/hr
Manojkamble
Sr. Hr Executive

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Sir, My Query is :- Our establishment is covered under PF & ESI Act. We have a rental deed wherein we have provided space within our campus
(a) For Parking purpose. The Contractor had hired four employees on minimum wages
(b) For running a Canteen :- The Contractor have 6 employees
Both contractor had not registered under ESI Act neither under PF act . Their excuse is that since the number of employees are less than ten/twenty (as required under ESIC/PF act), they doesn't comes under the coverage of act.
At the time of inspection by ESI inspector, he had questioned us for non coverage of these employees of contractor and had penalized us being principal employer. Though we argued that
(i) Parking and Canteen are run by seprate owners and we just collect rent from them for the space provided as per license deed.
(ii) Workers in these shops are not of ours. there is no Employer employee relation between their emplyees and our organization.
(iii) These shops are not patronized exclusively by our Guest, and are open to common public also.
Kindly apprise as whether we are liable to deposit ESIC/PF contribution on behalf of employees of Parking contractor as well as canteen.
Please note that both the shops (Parking and canteen) are running within our organization premises.

From India, Delhi
Dear Vinay,
If your company had given a land on lease to somebody to run their own business then yes you are not entitled to pay any amount towards PF / ESIC. But if you have shown a agreement of rent and assigned a land for any specified work which is related to your organisation then it shows that you are outsourcing or providing contract for your work to someone else only. Thus in that case you will become a principle employer and liable to pay PF and ESIC contribution. Also, from your comment it seems like you have rented your office premises to some other contractor who is performing duties for your company only such as canteen and parking. As you are the owner of the premises and contractor is performing duties for your company work as well then you will become principle employer automatically.


1. Sir, in the year 1978 i.e. long back, the Hon'ble Supreme Court of India had already decided that persons employed in the canteen, cycle stand, etc. in the premises or precincts of a principal employer through / by contractor are employees within the meaning of ESI Act, 1948. The citation of the said court judgment is: M/S Royal Talkies Hyderabad -vs- ESIC,(AIR 1978 S.C. 1478).
2. I think the contention of ESIC is correct. You can define the relations of your company with the contractors of cycle stand or canteen and their employees in any way as the same suit your company. You can also contest that such employees engaged through cycle stand and canteen are not your company employees. But I feel that the said department may not agree to your all such arguments keeping in view the provisions of law as laid down under section 2(9) of said Act as well as vide above judgment of hon'ble apex court.
3. The fact that the said cycle stand or canteen contractors are not having their separate ESI Code Number is irrelevant. Compliance can be made on the code number of principal employer.

From India, Noida
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