Case Note & Summary
The Appellant, Madhu Malti Enterprises, a medicine distributor, appealed against an ESI Court order holding that storing medicines in a refrigerator constituted a manufacturing process under the ESI Act, making it liable for contributions. The High Court examined the definitions of 'factory' and 'manufacturing process' under the ESI Act and Factories Act. It concluded that the Appellant was engaged in trading, not manufacturing, and mere storage in cold storage did not meet the statutory definition of 'manufacturing process'. The Court allowed the appeal, setting aside the ESI Court's order.
Headnote
The High Court of Judicature at Bombay heard an appeal under Section 82 of the Employees' State Insurance Act, 1948 (ESI Act) -- The Appellant, a trader distributing medicines, stored medicines in a refrigerator until sale -- The ESI Court had held this amounted to a manufacturing process under the ESI Act -- The High Court analyzed Section 2(12) and Section 2(14-AA) of the ESI Act and Section 2(k)(vi) of the Factories Act, 1948 -- The Court held that mere storage in cold storage does not constitute a 'process for' preserving or storing under Section 2(k)(vi) -- The Appellant's activity was trading, not manufacturing -- The appeal was allowed, setting aside the ESI Court's order
Issue of Consideration
Whether the use of refrigerator for storage of medicines in a refrigerator amounts to continuation of process of manufacturing
Final Decision
The High Court allowed the appeal, set aside the ESI Court's order dated 8th September, 2015, and held that the Appellant was not liable under the ESI Act
Law Points
- Interpretation of 'manufacturing process' under Section 2(14-AA) of the Employees' State Insurance Act
- 1948 read with Section 2(k)(vi) of the Factories Act
- 1948 -- Definition of 'factory' under Section 2(12) of the Employees' State Insurance Act
- 1948 -- Distinction between trading and manufacturing activities -- Principles of statutory interpretation for welfare legislation
Case Details
2026 LawText (BOM) (02) 32
First Appeal No. 291 of 2016
Mr. V. P. Vaidya i/by Mr. Mahendra Agavekar for the Appellant, Mr. Shailesh Pathak for the Respondents
The Employees State Insurance Corporation, Shri G. P. Vishvakarma, Shri A. K. Mohan, Shri Hari Krishnan
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Nature of Litigation
Appeal under Section 82 of the Employees' State Insurance Act, 1948 against an order of the ESI Court
Remedy Sought
The Appellant sought to set aside the ESI Court's order holding it liable under the ESI Act for storing medicines in a refrigerator
Filing Reason
The ESI Court held that preservation and storage of medicines in a refrigerator amounted to a manufacturing process under the ESI Act
Previous Decisions
ESI Court order dated 8th September, 2015 held the Appellant liable under the ESI Act
Issues
Whether the use of refrigerator for storage of medicines amounts to a manufacturing process under the ESI Act
Submissions/Arguments
Appellant argued it was only a trader and storage did not constitute manufacturing -- Respondent argued storage in cold storage fell under the definition of manufacturing process under the Factories Act, 1948
Ratio Decidendi
Mere storage of medicines in a refrigerator does not constitute a 'process for' preserving or storing under Section 2(k)(vi) of the Factories Act, 1948 -- The Appellant's activity was trading, not manufacturing, and thus did not fall within the definition of 'manufacturing process' under the ESI Act
Judgment Excerpts
Held that the mere act of preserving or storing any article in cold storage would not amount to a manufacturing process under the ESI Act -- The Appellant is a trader and the medicines purchased from pharma companies are stored in refrigerator till they are finally sold
Procedural History
Appeal filed under Section 82 of the ESI Act -- Admitted on 19th August, 2019 on a substantial question of law -- ESI Court order dated 8th September, 2015 held storage constituted manufacturing process -- High Court heard arguments and delivered judgment on 2nd February, 2026
Acts & Sections
- Employees' State Insurance Act, 1948: Section 82, Section 2(12), Section 2(14-AA), Section 2-A, Section 39
- Factories Act, 1948: Section 2(k)(vi)
