To get Exemption from E.S.I laws for the Institutions

1. Designation of Institutions under ESI and Exemptions:

? An institution or a class of institutions may be designated under the Employees' State Insurance (ESI) Act. Exemptions from the applicability of the Act may be granted by the respective Governments through a Gazette Notification for a period of up to one year (Section 87). Such exemptions may also be renewed from time to time by issuing similar Gazette Notifications. Institutions under the control of the Central Government fall under specific guidelines, while State Governments have the power to grant exemptions to all other non-Central Government institutions, as per the provisions of the Act.

?2. Exemptions for Persons or Class of Persons:

???Any person employed in an establishment or a class of establishments covered by the ESI Act, including a worker or a class of workers, is eligible for ESI coverage. However, the concerned Government may exempt such persons or workers from the applicability of the Act under Section 88.

?3. Role of the ESI Corporation in Granting Exemptions:

???Regarding the grant of exemptions to establishments or workers under Sections 87 and 88, the ESI Corporation must be consulted. The Corporation has a statutory right to express its views on such exemptions. However, exemption orders may be issued even without considering the Corporation's recommendations, as per Section 89. Despite this, the Corporation may still provide instructions related to these exemptions. It is important to note that exemptions are not granted if the Corporation’s instructions are disregarded.

?4.?Exemptions for Institutions under Government or Local Authorities:

????If employees of Government or local authority establishments receive benefits that are equal to or superior to those provided under the ESI Act, the concerned Government, after consulting the ESI Corporation, may exempt such institutions from the operation of the Act under Section 90.

?5.?Exemption from Specific Sections of the ESI Act:

???The ESI Corporation, with the consent of the concerned Government, may exempt workers in an establishment or class of establishments from the operation of one or more sections of the Act under Section 91. The one-year limitation applies only to exemptions under Section 87. Furthermore, consent from the ESI Corporation is required for granting exemptions under Section 91. Amendments made on 01-06-2010 imposed stricter restrictions on state governments regarding the granting of exemptions. The following provisions were added to Section 87:

??????I. Exemptions for workers in establishments applying for exemption can only be granted if the benefits provided are equal to or superior to those under the Act.

??????II. Applications for renewal of exemptions must be submitted three months before the expiration of the exemption period.

??????III. Governments must take an appropriate decision within two months of receiving such applications.

?6. Amendment to Section 91A - Prospective Exemptions:

???Following the amendment to Section 91A, all exemptions shall only be allowed with prospective effect. Before this amendment, exemptions could be granted with retrospective effect. In the case of Suwari Cement vs ESI Corporation (2015 (3) KHC SN 18), the Supreme Court addressed whether insurance courts have the power to exempt companies from the purview of the Act. The factory in question operated under the ESI Act from 1986 to 1993, after which the state government exempted it from the Act. However, post-1993, the factory was not exempted, yet the management refused to pay the ESI contributions. After several notices, the management filed a writ petition in the High Court, which directed the petition to be submitted to the Insurance Court. The Insurance Court waived the factory's liability under the ESI Act, but ESI Corporation appealed to the High Court. The High Court held that the Insurance Court had no jurisdiction to grant exemptions. The Supreme Court upheld this order.

? Similarly, in the case of Employees??State Insurance Corporation vs UAE Exchange and Financial Services Ltd. (2023 (1) KHC 499), the Kerala High Court held that the ESI Corporation does not have the authority to prevent an exempted entity from seeking exemption. UAE Exchange, being exempt due to its own social security scheme, had applied for exemption for the years 2004-2005 and 2005-2006. However, after the 2010 amendment, the state government rejected the company's applications citing the restriction against retrospective exemptions. The High Court clarified that "retroactive effect" refers to the period immediately before the date of application, not before the date of the order.

?In Aryavaidyasala, Kottakkal vs State of Kerala (2022 (7) KHC 463), the Kerala High Court held that ESI could be imposed on institutions from the date of application. The workers of Aryavaidyasala, engaged in manufacturing Ayurvedic medicines, received better benefits than those provided by the ESI scheme. Since 1978, the institution had been exempted from the Act, with annual renewals. The institution applied for renewal two weeks before the expiration of the 2009 exemption. However, due to delays, the government's decision took a year, during which the 2010 amendment came into effect, leading to the rejection of the institution’s application for not adhering to the new rules.

Adv. Jeevadas

High court of Kerala

7034522626

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