Electronics Shop Repairing & Servicing Electrical Goods Is “Factory” Under ESI Act: Supreme Court

The Supreme Court recently held that the electronic goods shop which sells goods and repairs/services such goods can be said to be engaged in a “manufacturing process” using “power” as defined under ESI Act and Factories Act, 1948.

The Supreme Court bench comprising Justices Hima Kohli and Justice Rajesh Bindal was hearing an appeal against the Karnataka HC judgment which confirmed ESI Court’s finding that the ESI Act would be applicable to the firm.

The Court opined that the firm's utilization of electrical energy for repairing electrical goods would make it fall within the definition of “power” used in the “manufacturing process” under both the ESI Act and Factories Act,1948.

The court noted that section 2(14A) of the ESI Act mentions the term manufacturing process and relies on its definition given under section 2(k) of the Factories Act, 1948. Interestingly, the word Manufacturing process also includes “repairing” any article for its use.

The Court observed “The appellant firm is in the business of selling electrical goods in a shop. Admittedly, the shop premises is used not only for selling goods, but also to service electrical goods. That being the position, it is clear that the appellant firm falls under the definition of a “Factory” and is using a “manufacturing process”, as contemplated under both the Statues.”

The appellant had contended that it was not manufacturing any goods with the aid of “power” as defined under the ESI Act. The court referred to the term “power” mentioned under section 2(15)(C) of the ESI Act which is defined under section 2(g) of the Factories Act, 1948.

The Court noted that “power” means where any electric energy is transmitted”. So, it was convinced that when electric energy is used for the repair of goods, it can be said to be using “power” as contemplated under the said Acts.

The Court went on to observe “The appellant-firm is an establishment that has been using electrical energy for the sale and repair of electrical goods at its premises by using “power” as has been defined under Section 2(15)(C) of the ESI Act, which again takes us back to the Factories Act, 1948, where the definition of “power” has been spelt out in Section 2(g) and the meaning ascribed to the said word is ‘electrical energy, or any other form of energy which is mechanically transmitted and is not generated by human or animal agency’.”

In light of the above observations, the Supreme Court dismissed the appeal and confirmed the findings of the courts below that the appellant firm was in fact covered under the ESI Act.

Case title: M/S JP Lights India v. Regional Director, ESI Corporation, Bangalore

Citation: 2023 LiveLaw (SC) 637

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