Amount paid towards ESI contribution cannot be equated for other purpose

Tamil Nadu Asbestos (Pipes) - Petitioner


Regional Director, Employees' State Insurance Corporation, Tamil Nadu - Respondent

Facts of the Case:
In 1996, petitioner’s factory situated at Mayanur Village in Kulithalai Taluk, Karur District was brought under the coverage of the Employees' State Insurance (ESI) Act, 1948 (the Act).

Respondent thus directed the petitioner by means of a letter to complete the formalities in this respect so that the company’s employees and their family members could avail the ESI facilities. Further, the letter stated that petitioner’s workers can approach ESI dispensary at Puliyur or other dispensaries situated in Karur or Trichy to avail medical facilities.

Petitioner challenged such applicability of Act before Madras High Court. He stated that, as per the ESI guidelines, any area for coverage under the Act should have an insurable population of 1000 people, whereas for Mayanur this is 890 workers. Secondly, that there should be an ESI dispensary within a radius of 8 kms from the said area (the dispensary at Puliyur is more than 8 kms away from Mayanur).

However, petitioner along with workers contributed requisite amount towards ESI since issuance of letter in 1996 to February 2002, till Hon’ble High Court granted a stay order. Petitioner even requested to equate this amount against revenue or taxes.


Hon’ble High Court here ruled that, as per the provisions of the Act coverage of ESI can be extended to an area with population of less than 1000 persons, if it applies to an adjacent area and if there is an existing dispensary within 8-10 kms radius. Also, as the village falls within a 9 km radius of the ESI dispensary at Puliyur, it can be brought within the coverage of the Act.

As none of the workers availed the facilities of the ESI since the applicability of Act in the village, the petitioner was not required to pay contribution since February 2002. However, they were required to make regular contributions since August 1, 2010.

As regards to the request for equating the amount of earlier contribution to tax or revenue, the High Court stated that the sum was collected only with the object of providing medical facilities to eligible workers and their family members. Thus, it cannot be utilized for any other purpose and cannot be so equated.





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