THE ESI CORPORATIONversusM/S. RADHIKA THEATRE

                         [2023] 1 S.C.R. 1045                           1045


                    THE ESI CORPORATION                                 A
                                 v.
                    M/S. RADHIKA THEATRE
                   (Civil Appeal No. 312 of 2023)
                        JANUARY 20, 2023                                B
         [M. R. SHAH AND C. T. RAVIKUMAR, JJ.]
       Employees State Insurance Act, 1948 – s.1(6) (inserted w.e.f.
20.10.89) – Whether w.r.t the demand notices post 20.10.89, a
factory or an establishment established prior to 20.10.89 shall be
governed by the ESI Act notwithstanding the number of persons           C
employed therein – Held: Prior to insertion of sub-section (6) of
s.1, only those establishments/factories engaging more than 20
employees were governed by the ESI Act – However, after sub-section
(6) of s.1 was inserted on 20.10.89, under the amended provision a
factory or establishment to which ESI Act applies would be governed     D
by the ESI Act notwithstanding that the number of persons employed
therein at any time falls below the limit specified by or under the
ESI Act – Therefore, for the demand notices for the period after
20.10.89, there shall be liability of every factory or establishment
irrespective of the number of persons employed therein – With respect
to such a notice it cannot be said that amended s.1 inserting Sub-      E
section (6) is applied retrospectively as held by High Court – Only
in case of demand notice for the period prior to inserting Sub-
section (6) of s.1, it can be said that the same provision has been
applied retrospectively – Sub-section (6) of s.1 therefore, shall be
applicable even with respect to those establishments, established
                                                                        F
prior to 31.03.1989/20.10.1989 – High Court erred in setting aside
the demand notices even for the period subsequent to 20.10.89 –
Order of High Court set aside – Demand notices for the period post
20.10.1989 restored.
       Interpretation of Statutes – Social welfare legislation –
Interpretation of – Held: ESI Act being a social welfare legislation,   G
any interpretation which would lean in favour of the beneficiary
should be given – Employees State Insurance Act, 1948.
       Allowing the appeal, the Court
       HELD: Prior to insertion of Sub-section (6) of Section 1 of
the ESI Act, only those establishments/factories engaging more          H
                                1045
1046           SUPREME COURT REPORTS                      [2023] 1 S.C.R.


 A     than 20 employees were governed by the ESI Act. However,
       thereafter, Sub-section (6) of Section 1 of the ESI Act has been
       inserted on 20.10.1989, and after 20.10.1989 there is a radical
       change and under the amended provision a factory or
       establishment to which ESI Act applies would be governed by
       the ESI Act notwithstanding that the number of persons employed
 B
       therein at any time falls below the limit specified by or under the
       ESI Act. Therefore, on and after 20.10.1989, irrespective of
       number of persons employed a factory or an establishment shall
       be governed by the ESI Act. Therefore, for the demand notices
       for the period after 20.10.1989, there shall be liability of every
 C     factory or establishment irrespective of the number of persons
       employed therein. With respect to such a notice it cannot be
       said that amended Section 1 inserting Subsection (6) is applied
       retrospectively as observed and held by the High Court. Only in
       case of demand notice for the period prior to inserting Sub-
       section (6) of Section 1 of the Act, it can be said that the same
 D
       provision has been applied retrospectively. Therefore, the High
       Court has committed a very serious error in observing and
       holding that even for the demand notices for the period
       subsequent 20.10.1989 i.e., subsequent to inserting Sub-section
       (6) of Section 1 the said provision is applied retrospectively and
 E     the High Court has erred in allowing the appeal and setting aside
       the demand notices even for the period subsequent to 20.10.1989.
       Sub-section (6) of Section 1 therefore, shall be applicable even
       with respect to those establishments, established prior to
       31.03.1989/20.10.1989 and the ESI Act shall be applicable
       irrespective of the number of persons employed or
 F
       notwithstanding that the number of persons employed at any time
       falls below the limit specified by or under the ESI Act. The
       impugned judgment and order passed by the High Court is set
       aside and the demand notices for the period post 20.10.1989 are
       restored. [Paras 7, 8][1053-E-H; 1054-A-D]
 G           Bangalore Turf Club Limited Vs. Regional Director,
             ESIC (2014) 9 SCC 657 : [2014] 8 SCR 1021– relied
             on.
                             Case Law Reference
       [2014] 8 SCR 1021             relied on               Para 6.1
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     THE ESI CORPORATION v. M/S. RADHIKA THEATRE                                1047


        CIVIL APPELLATE JURISDICTION : Civil Appeal No.312 of                   A
2023.
       From the Judgment and Order dated 17.02.2021 of the High Court
for the State of Telangana at Hyderabad in CMA No.125 of 2011.
     Mahesh Srivastava, Vaibhav Manu Srivastava, Ms. Niharika Gupta,
Abhishek Jaiswal, Advs. for the Appellant.                                      B

        The Judgment of the Court was delivered by
        M. R. SHAH, J.
       1. Feeling aggrieved and dissatisfied with the impugned judgment
and order dated 17.02.2021, passed by the High Court for the State of           C
Telangana at Hyderabad in Civil Misc. Appeal No. 125/2011, by which,
the High Court has allowed the said appeal and has set aside the order
dated 13.12.2010 passed by the Employees Insurance Court (hereinafter
referred to as the EI Court) dismissing EIC No. 14/2003 in which the
respondent herein challenged the demand notice dated 31.08.1994 issued          D
by the ESI Corporation, the ESI Corporation has preferred the present
appeal.
        2. The facts leading to the present appeal in nutshell are as under:-
       2.1 That the respondent herein was running a Cinema Theatre
since 1981. It paid ESI contributions up to September, 1989. However,           E
thereafter, as its employees were less than 20 in number, it did not pay
the contributions. Therefore, the appellant – corporation issued demand
notices. The respondent herein challenged the demand notices before
the EI Court by way of EIC No. 14/2003 containing, inter alia, that
prior to the insertion of Sub-section (6) of Section 1 of the ESI Act, 1948
                                                                                F
w.e.f. 20.10.1989, it employed less than 20 persons and therefore, it was
not liable to be covered under the provisions of the ESI Act. The EI
Court dismissed the case vide order dated 13.12.2010. The order passed
by the EI Court confirming the demand notices was the subject matter
of appeal before the High Court. Before the High Court, it was the case
on behalf of the respondent – original appellant that Sub-section (6) of        G
Section 1 of the ESI Act which came to be inserted on 20.10.1989 shall
not be made applicable retrospectively and the same would be effective
only on or after 20.10.1989 and not prior to that date. On the other hand,
it was the case on behalf of the ESI Corporation that the ESI Act being
a social welfare legislation, greater amplitude is required to be given to
                                                                                H
1048             SUPREME COURT REPORTS                           [2023] 1 S.C.R.


 A     the same, as, it is intended for the welfare of the workmen concerned. It
       was submitted that as per amended Sub-section (6) of Section 1, all the
       establishments shall be governed by the ESI Act, notwithstanding the
       fact that the number of persons engaged therein is less than the prescribed
       number. However, thereafter, by the impugned judgment and order the
       High Court has allowed the appeal preferred by the respondent herein
 B
       taking the view that amendment to Section 1 of the ESI Act by which
       Sub-section (6) of Section 1 came to be inserted w.e.f. 20.10.1989, the
       same shall not be applicable retrospectively and the same shall not be
       made applicable to an establishment, established prior to 20.10.1989/
       31.03.1989.
 C             2.2 Feeling aggrieved and dissatisfied with the impugned judgment
       and order passed by the High Court, the ESI Corporation has preferred
       the present appeal.
               3. Shri Mahesh Srivastava, learned counsel appearing on behalf
       of the appellant – ESI Corporation has vehemently submitted that the
 D     High Court has materially erred in allowing the appeal and setting aside
       the demand notices even for the period post 20.10.1989 by holding that
       amendment to Section 1 by inserting Sub-section (6) shall not be
       applicable retrospectively.
               3.1 It is vehemently submitted that the High Court has not properly
       appreciated the object and purpose of the ESI Act and that the ESI Act
 E     is a social welfare legislation and intended for the welfare of the workmen
       concerned. It is submitted that therefore, to achieve the object and purpose
       of the ESI Act, the legislature thought it fit to insert Sub-section (6) to
       Section 1 of the ESI Act by which a factory or an establishment shall be
       governed by the ESI Act notwithstanding the number of persons employed
 F     therein at any time falls below the limit specified by or under the ESI Act
       or the manufacturing process therein ceases to be carried on with the
       aid of power.
               3.2 It is submitted that demand notices for the period post
       20.10.1989, therefore, cannot be said to be illegal applying Sub-section
       (6) of Section 1 retrospectively as observed and held by the High Court.
 G     It is submitted that at the most, the demand notices for the period prior to
       20.10.1989 can be said to be bad in law as in that case Sub-section (6)
       of Section 1 of the ESI Act can be said to have applied retrospectively.
             3.3 It is submitted that in any case in view of insertion of Sub-
       section (6) of Section 1 w.e.f. 20.10.1989, any factory or establishment
 H
     THE ESI CORPORATION v. M/S. RADHIKA THEATRE                           1049
                   [M. R. SHAH, J.]

shall have to be governed by the ESI Act notwithstanding that the number   A
of persons employed therein at any time falls below the limit specified
by or under the ESI Act.
        3.4 Making the above submissions and relying upon the decision
of this Court in the case of Bangalore Turf Club Limited Vs. Regional
Director, ESIC; (2014) 9 SCC 657, it is prayed to allow the present        B
appeal.
      4. Though served none has appeared on behalf of the respondent.
       5. Having heard learned counsel appearing on behalf of the
appellant – corporation and having gone through the impugned judgment
and order passed by the High Court, the short question which is posed      C
for consideration of this Court is whether with respect to the demand
notices post 20.10.1989 a factory or an establishment, established prior
to 20.10.1989 shall be governed by the ESI Act notwithstanding that the
number of persons employed therein at any time falls below the limit
specified by or under the ESI Act?                                         D
        An incidental question which is also posed for consideration of
this Court is whether the demand notices for the period after 20.10.1989
i.e., from the date by which Sub-section (6) of Section 1 of the ESI Act
came be inserted can it be said that the amended Section 1 of the ESI
Act can be said to have been applied retrospectively?                      E
      6. While answering the aforesaid issues/questions the object,
purpose and preamble of the ESI Act is required to be referred to and
considered. The Preamble of the ESI Act is as under: -
      “An Act to provide for certain benefits to employees in case of
      sickness, maternity and employment injury and to make provisions     F
      for certain other matters in relation thereto.”
       6.1 Thus, the ESI Act being a social welfare legislation, any
interpretation which would lean in favour of the beneficiary should be
given. The object and purpose of the ESI Act has been elaborately
considered by this Court in the case of Bangalore Turf Club Limited        G
(supra). After considering catena of earlier decisions under the ESI
Act, it is observed and held that ESI Act should be given liberal
interpretation and should be interpreted in such a manner so that social
security can be given to the employees. In paragraph 16 to 21, it is
observed and held as under:-
                                                                           H
1050      SUPREME COURT REPORTS                           [2023] 1 S.C.R.


 A     “16. The primary rule of interpretation of statutes may be the
       literal rule, however, in the case of beneficial legislations and
       legislations enacted for the welfare of employees, workmen, this
       Court has on numerous occasions adopted the liberal rule of
       interpretation to ensure that the benefits extend to those workers
       who need to be covered based on the intention of the legislature.
 B
       17. The ESI Act is a welfare legislation enacted by the Central
       Government as a consequence of the urgent need for a scheme
       of health insurance for workers. It would be beneficial to reproduce
       the Preamble of the ESI Act in this context. It is as under:
 C     “An Act to provide for certain benefits to employees in case of
       sickness, maternity and employment injury and to make provision
       for certain other matters in relation thereto”
       18. In ESI Corpn. v. Francis De Costa [1993 Supp (4) SCC 100
       : 1994 SCC (L&S) 195] , this Court held that : (SCC pp. 105-06,
 D     paras 5-6)
       “5. The Act seeks to cover sickness, maternity, employment injury,
       occupational disease, etc. The Act is a social security legislation.
       It is settled law that to prevent injustice or to promote justice and
       to effectuate the object and purpose of the welfare legislation,
 E     broad interpretation should be given, even if it requires a departure
       from literal construction. The court must seek light from loadstar
       Articles 38 and 39 and the economic and social justice envisaged
       in the Preamble of the Constitution which would enliven meaningful
       right to life of the worker under Article 21. The State is enjoined
       under Article 39(e) to protect the health of the workers, under
 F     Article 41 to secure sickness and disablement benefits and Article
       43 accords decent standard of life. Right to medical and disability
       benefits are fundamental human rights under Article 25(2) of the
       Universal Declaration of Human Rights and Article 7(b) of the
       International Convention on Economic, Social and Cultural Rights.
 G     Right to health, a fundamental human right stands enshrined in
       socio-economic justice of our Constitution and the Universal
       Declaration of Human Rights. Concomitantly right to medical
       benefit to a workman is his/her fundamental right. The Act seeks
       to succour the maintenance of health of an insured workman.
       The interpretative endeavour should be to effectuate the above.
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THE ESI CORPORATION v. M/S. RADHIKA THEATRE                               1051
              [M. R. SHAH, J.]

Right to medical benefit is, thus, a fundamental right to the             A
workman.
6. Moreover, even in the realm of interpretation of statutes, rule
of law is a dynamic concept of expansion and fulfilment for which
the interpretation would be so given as to subserve the social and
economic justice envisioned in the Constitution. Legislation is a         B
conscious attempt, as a social direction, in the process of
change. The fusion between the law and social change would
be effected only when law is introspected in the context of
ordinary social life. Life of the law has not been logic but has
been experience. It is a means to serve social purpose and
felt necessities of the people. In times of stress, disability, injury,   C
etc. the workman needs statutory protection and assistance.
The Act fastens in an insured employment, statutory obligation on
the employer and the employee to contribute in the prescribed
proportion and manner towards the welfare fund constituted under
the Act (Sections 38 to 51 of the Act) to provide sustenance to           D
the workmen in their hours of need, particularly when they become
economically inactive because of a cause attributable to their
employment or disability or death occurred while in employment.
The fact that the employee contributed to the fund out of his/her
hard-earned wages cannot but have a vital bearing in adjudicating
whether the injury or occupational disease suffered/contracted            E
by an employee is an employment injury. The liability is based
neither on any contract nor upon any act or omission by the
employer but upon the existence of the relationship which employer
bears to the employment during the course of which the employee
had been injured. The Act supplants the action at law, based not          F
upon the fault but as an aspect of social welfare, to rehabilitate a
physically and economically handicapped workman who is
adversely affected by sickness, injury or livelihood of dependents
by death of a workman.”
19. A three-Judge Bench of this Court, in reference to the ESI            G
Act, in Transport Corpn. of India v. ESI Corpn. [(2000) 1 SCC
332 : 2000 SCC (L&S) 121] , held that : (SCC pp. 357-58, paras
27-28)
“27. Before parting with the discussion on this point, it is necessary
to keep in view the salient fact that the Act is a beneficial piece of    H
1052      SUPREME COURT REPORTS                            [2023] 1 S.C.R.


 A     legislation intended to provide benefits to employees in case of
       sickness, maternity, employment injury and for certain other matters
       in relation thereto. It is enacted with a view to ensuring social
       welfare and for providing safe insurance cover to employees who
       were likely to suffer from various physical illnesses during the
       course of their employment. Such a beneficial piece of
 B
       legislation has to be construed in its correct perspective so
       as to fructify the legislative intention underlying its enactment.
       When two views are possible on its applicability to a given set
       of employees, that view which furthers the legislative intention
       should be preferred to the one which would frustrate it. …
 C     28. Dealing with this very Act, a three-Judge Bench of this Court
       in Buckingham and Carnatic Co. Ltd. v. Venkatiah [AIR 1964
       SC 1272] speaking through Gajendragadkar, J., (as he then was)
       held, accepting the contention of the learned counsel, Mr Dolia
       that : (AIR p. 1277, para 10)
 D     ‘10. … It is a piece of social legislation intended to confer specified
       benefits on workmen to whom it applies, and so, it would be
       inappropriate to attempt to construe the relevant provisions in a
       technical or a narrow sense. This position cannot be disputed.
       But in dealing with the plea raised by Mr Dolia that the section
 E     should be liberally construed, we cannot overlook the fact that the
       liberal construction must ultimately flow from the words used in
       the section. If the words used in the section are capable of two
       constructions one of which is shown patently to assist the
       achievement of the object of the Act, courts would be justified in
       preferring that construction to the other whichmay not be able to
 F     further the object of the Act.’”
       20. In Bombay Anand Bhavan Restaurant v. ESI Corpn. [Bombay
       Anand Bhavan Restaurant v. ESI Corpn., (2009) 9 SCC 61 : (2009)
       2 SCC (L&S) 573] , it was observed that : (SCC p. 66, para 20)

 G     “20. The Employees’ State Insurance Act is a beneficial legislation.
       The main purpose of the enactment as the Preamble suggests, is
       to provide for certain benefits to employees of a factory in case
       of sickness, maternity and employment injury and to make
       provision for certain other matters in relation thereto. The
       Employees’ State Insurance Act is a social security legislation
 H
     THE ESI CORPORATION v. M/S. RADHIKA THEATRE                               1053
                   [M. R. SHAH, J.]

      and the canons of interpreting a social legislation are different        A
      from the canons of interpretation of taxation law. The courts must
      not countenance any subterfuge which would defeat the provisions
      of social legislation and the courts must even, if necessary, strain
      the language of the Act in order to achieve the purpose which the
      legislature had in placing this legislation on the statute book. The
                                                                               B
      Act, therefore, must receive a liberal construction so as to promote
      its objects.”
      21. The legislature enacted the ESI Act to provide certain benefits
      to employees in case of sickness, maternity in case of female
      employees, employment injury and to make provision in certain
      other matters in relation thereto. The provisions of the ESI Act         C
      apply to all the factories other than seasonal factories. The State
      Government with the approval of the Central Government is
      authorised to make the provisions of the ESI Act applicable to
      any other establishment or establishments. The provisions of the
      ESI Act provide that all employees in factories or establishments        D
      to which the ESI Act applies shall be insured in the manner provided
      under the ESI Act. Since the ESI Act is passed for conferring
      certain benefits to employees in case of sickness, maternity and
      employment injury, it is necessary that the ESI Act should receive
      a liberal and beneficial construction so as to achieve legislative
      purpose without doing violence to the language of the enactment.”        E

       7. Prior to insertion of Sub-section (6) of Section 1 of the ESI Act,
only those establishments/factories engaging more than 20 employees
were governed by the ESI Act. However, thereafter, Sub-section (6) of
Section 1 of the ESI Act has been inserted on 20.10.1989, and after
20.10.1989 there is a radical change and under the amended provision a         F
factory or establishment to which ESI Act applies would be governed by
the ESI Act notwithstanding that the number of persons employed therein
at any time falls below the limit specified by or under the ESI Act.
Therefore, on and after 20.10.1989, irrespective of number of persons
employed a factory or an establishment shall be governed by the ESI            G
Act. Therefore, for the demand notices for the period after 20.10.1989,
there shall be liability of every factory or establishment irrespective of
the number of persons employed therein. With respect to such a notice
it cannot be said that amended Section 1 inserting Sub-section (6) is
applied retrospectively as observed and held by the High Court. Only in
                                                                               H
1054              SUPREME COURT REPORTS                         [2023] 1 S.C.R.


 A     case of demand notice for the period prior to inserting Sub-section (6) of
       Section 1 of the Act, it can be said that the same provision has been
       applied retrospectively. Therefore, the High Court has committed a very
       serious error in observing and holding that even for the demand notices
       for the period subsequent20.10.1989 i.e., subsequent to inserting Sub-
       section (6) of Section 1 the said provision is applied retrospectively and
 B
       the High Court has erred in allowing the appeal and setting aside the
       demand notices even for the period subsequent to 20.10.1989. Sub-section
       (6) of Section 1 therefore, shall be applicable even with respect to those
       establishments, established prior to 31.03.1989/20.10.1989 and the ESI
       Act shall be applicable irrespective of the number of persons employed
 C     or notwithstanding that the number of persons employed at any time
       falls below the limit specified by or under the ESI Act.
             8. In view of the above and for the reasons stated above, the
       present appeal succeeds. The impugned judgment and order passed by
       the High Court is hereby set aside and the demand notices for the period
 D     post 20.10.1989 are hereby restored. Present appeal is accordingly
       allowed. No costs.

       Divya Pandey                                                 Appeal allowed.
       (Assisted by : Abhishek Pratap Singh and Rakhi, LCRAs)

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