Bengaluru High Court: The Karnataka High Court recently ruled that workers engaged on a contract basis for construction and repair activities within factory premises are also considered employees under Section 2(9) of the Employees’ State Insurance (ESI) Act. The court’s decision came in response to an appeal filed by the Assistant Director of the ESI Corporation, challenging an order by the Bengaluru ESI Court, which had reduced the ESI contribution amount of ₹13,52,825 owed by Sansera Engineering Company, located in Bommasandra Industrial Area, Anekal Taluk, to ₹3.5 lakh.

The appeal was upheld by a single-judge bench presided over by Justice Ramachandra D. Huddar.The court clarified that under Section 2(9) of the ESI Act, an employee is not only someone directly employed by the principal employer but also includes those engaged through an immediate employer (such as a contractor) for work related to the factory or ancillary to its main operations. Therefore, the establishment employing such workers is liable to pay the ESI contributions as mandated by the Act. also read: T20I Series Update: South Africa vs Australia; Do you know the update.? here is the info

In this case, the respondent company (Sansera Engineering) had engaged contractors for various construction activities, maintenance, and repair work within its factory premises. However, the company failed to pay ESI contributions for the workers involved in these activities. The workers carried out tasks such as constructing additional sheds, installing new units, renovating existing buildings, and other related activities, all of which were integral to the factory’s operations.

The court rejected the company’s argument that these workers, engaged through independent contractors, were not connected to the factory’s activities.Despite being given ample opportunity, the respondent company failed to provide details of payments made to contractors, including labor and material costs. In this context, the ESI Corporation estimated the contribution based on the nature of the work, wages, and an internal assessment, determining that 25% of the amount should be paid.Vogaan Men's Polo Shirt and Shorts Set | Summer Fashion Short Sleeve Solid Zipper 2 Pieces Outfits for Men

The court found no fault in this estimation process.The High Court observed that the ESI Court’s decision to reduce the amount to ₹3.5 lakh was flawed and unsupported by any calculations. Such arbitrary reductions, without evidence, could enable employers to evade responsibility by failing to provide required documentation. Consequently, the High Court set aside the ESI Court’s order and directed the respondent company to pay ₹13,52,825 to the ESI Corporation within eight weeks.