LI Network
Published on: 14 August 2023 at 10:10 IST
The Supreme Court has determined that an electronics store involved in both the sale and repair of electronic goods falls under the purview of a “manufacturing process” employing “power” as stipulated in the Employees State Insurance Act, 1948 and the Factories Act of 1948.
The legal proceedings, presided over by Justices Hima Kohli and Rajesh Bindal, pertained to an appeal against a Karnataka High Court decision that upheld the applicability of the ESI Act to the concerned enterprise.
The Court opined that the enterprise’s use of electrical energy to repair electronic goods aligns with the definition of “power” employed in the context of a “manufacturing process” as defined in both the ESI Act and the Factories Act of 1948.
The verdict highlighted Section 2(14A) of the ESI Act, which references “manufacturing process” and draws upon its interpretation elucidated in Section 2(k) of the Factories Act, 1948. Notably, the term “manufacturing process” encompasses the act of “repairing” any article for its utilization.
The Court stated, “The appellant enterprise operates a shop specializing in the sale of electronic goods. Significantly, the premises are utilized not just for sales but also for the repair of electronic goods. Given this scenario, it is evident that the appellant enterprise fits within the definition of a ‘Factory’ and is involved in a ‘manufacturing process,’ as envisaged by both statutes.”
The appellant had argued that it did not engage in the manufacturing of goods utilizing the “power” outlined in the ESI Act. The court referred to the definition of “power” found in Section 2(15)(C) of the ESI Act, which draws its meaning from Section 2(g) of the Factories Act, 1948.
The Court noted that “power” denotes the transmission of electric energy. Thus, the conclusion was reached that the application of electric energy in the repair of goods constitutes the use of “power” as defined by the aforementioned Acts.
Further expounding, the Court observed, “The appellant enterprise is an establishment that employs electrical energy for the sale and repair of electronic goods within its premises by employing ‘power’ as elucidated in Section 2(15)(C) of the ESI Act, thereby tracing back to the Factories Act of 1948.
The definition of ‘power’ laid out in Section 2(g) of the latter Act signifies ‘electrical energy, or any other form of energy that is mechanically transmitted and is not generated by human or animal agency.'”
Considering the aforementioned observations, the Supreme Court dismissed the appeal and affirmed the lower courts’ findings that the appellant enterprise indeed fell within the ambit of the ESI Act.
