CHAPTER 9.

EMPLOYEES STATE INSURANCE ACT, 1948

9.1 OBJECT OF THE ACT [NOT FOR EXAMS]
▪ To provide social protection to employees in contingencies such as
- illness, long term sickness or any other health risks
- due to exposure to the employment injury or occupational hazards.
▪ Medical facilities are also made available to legal dependents of insured employees.
▪ This facility is also extended to retired persons also.

9.2 APPLICABILITY OF THE ACT [Section 1(4)] [IMP FOR EXAMS]

▪ This Act extends to whole of India.
▪ This Act applies to -
- All factories, including factories belonging to Government (except seasonal factories);
[Min. No of Employees in factory shall be 10; working with or without power]
- any other establishments (industrial/commercial/agricultural, otherwise) notified by AG;
[if AG (being CG) in consultation with corporation & AG (being SG) with approval of CG,
after giving 1 month notice of its intention of doing so by notification in Official Gazette].

IMP. PC NOTE
1. Factory or establishment to which this Act applies shall continue to be governed by this Act
even if manufacturing process ceases to be carried on with the aid of power.
2. Wage limit for an employee u/s 2(9) = Rs. 21,000 per month.
Provided that, employee whose wages (excluding remuneration for overtime work) exceeds
Rs. 21,000 per month at any time after & not before the beginning of contribution period,
shall continue to be an employee until the end of the said period.
3. ESI scheme will be applicable to establishment preparing sweets with the aid of LPG.
4. Once the Act become applicable to a factory or establishment, it will always be applicable.

9.3 APPLICABILITY OF THE ACT [Section 1(4)] [IMP FOR EXAMS]

(1) Seasonal Factory
(2) Government Factories if employees are in the receipt of similar or superior benefits.
(3) Exemption may be given by AG to financially weak establishments (for 1 year at a time).
9.4 CONTRIBUTIONS PAYABLE UNDER THE ACT
(1) Employer’s Contributions: 4.75% of workers’ wages.
Employee’s Contributions: 1.75% of workers’ wages.
PC Note: Employee’s Contributions is recovered from his wages & remitted to the Fund.
(2) Contribution shall be paid in authorized bank within 21 days of last day of the month.
(3) Employer is required to file monthly contributions online through ESIC portal i.r.o. all its
employees after duly registering them. Employer has to file employee wise number of days for
which wages are paid & amount of wages to ascertain the amount of contributions payable.
(4) Deposit of Contribution
Total amount of contribution both by employer & employee for each month is to be deposited
in any branch of SBI in cash/cheque/draft on generation of such a challan through ESIC portal.
PC Note: Contributions can also be paid through SBI internet banking.
(5) Method of payment of contribution [Section 43] [Not for Exams]
▪ Corporation may make regulations for payment & collection of contributions. They provide-
- Manner & time of payment of contributions;
- Payment of contributions by means of adhesive or other stamps & regulating the manner, times

& Conditions under which such stamps are to be affixed or impressed;

- Date on which evidence of payment of contributions is to be received by the Corporation;

- Entry in books of particulars of contributions paid & benefits distributed to insured person;

- Issue, sale, custody, production, inspection & delivery of books or card & replacement of

books or cards which have been lost, destroyed or defaced.

(6) Recovery of contributions [Section 45B]

▪ Any contribution payable under this Act may be recovered as an arrear of land revenue.
▪ Section 45C: Authorized officer may issue certificate to Recovery Officer who shall proceed
to recover the amount by one or more of the modes mentioned below:
- Attachment & sale of moveable or immovable property of the factory or establishment;
- Attachment & sale of moveable or immovable property of principal or immediate employer
- Arrest of the employer & his detention in prison;
- Approving a receiver for management of movable or immovable properties of the factory
or establishment or, as the case may be, the employer.
PC Note: Recovery office shall first sale the properties of factory/establishment & it is not
sufficient for recovering the whole of the amount of arrears, Recovery Officer may take such
proceedings against the property of the employer.

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 Principal employer to pay contribution in the first instance [Section 40]
▪ Principal employer shall pay both employer’s & employee’s contribution. [Section 40(1)]
(i.r.o. all employer, whether directly employed by him or by or through immediate employer)
▪ Any sum deducted by principal employer from wages shall be deemed to have been entrusted
to him by the employee for paying the contribution i.r.o. which it was deducted [Sec. 40(4)]
▪ Principal employer shall bear the expenses of remitting the contributions to the corporation.

Recovery of contribution from immediate employer [Section 41]

▪ Principal employer who has paid contribution i.r.o. an employee employed through immediate
employer, shall be entitled to recover the amount of the contribution so paid from immediate
employer, either by deduction from any amount payable to him by principal employer or as
a debt payable by immediate employer.
▪ Immediate employer shall maintain register of employees employed by/through him & submit
the same to principal employer before the settlement of any amount payable by him.

9.5 REGISTRATION OF EMPLOYEES

▪ Every employee is to register himself under the provisions of the Act.
▪ Employee is required to give his details & his family details to his employer.
▪ A family photo is also to be provided so that the employer can register the employee.
▪ Registration is the process of obtaining & recording information about the entry of an
employee into ‘insurable employment’, for the purpose of his identification under the Act.
▪ Registration of employee is the process of identification to provide the benefits under the
Act which are related to contributions paid by the employer on behalf of insured persons.
▪ It is a onetime process in the life-time of an employee.
▪ Insurance number generated on first occasion of registration is to be used throughout his
lifetime irrespective of change of employment including change of place.

9.6 EMPLOYEES’ STATE INSURANCE FUND [SECTION 26]

Creation & Sources of Fund
▪ Employees’ State Insurance Fund is created, held & administered by the Corporation.
▪ All contributions paid under this Act & all other moneys received on behalf of corporation
shall be paid into this fund.
▪ Grants, donations & gifts received from CG, SG, LA or any individual or body whether
incorporated or not, are also paid into this Fund.
Purposes for which ESI fund may be expended [Section 28]
CG may utilize the State Insurance Fund only for the following purposes:
(a) Payment of benefits & provision of medical treatment to insured persons & their families
defraying (pay) the charges & costs in connection therewith;
(b) Payment of fees & allowances to members of Corporation, Standing Committee & Medical
Benefit Council, Regional Boards, Local Committees & Medical Benefit Councils;
(c) Payment of salaries, leave & joining allowances, travelling & compensatory allowances,
gratuities & compassionate allowances, pensions, contributions to provident fund of
officers & servants of the Corporation & meeting the expenditure i.r.o. offices & other
services set up for the purpose of giving effect to the provisions of this Act;
(d) Establishment & maintenance of hospitals, dispensaries & other institutions & provision of
medical & other ancillary services for the benefit of insured persons & their families;
(e) Payment of contributions to any SG, LA or any private body or individual, towards the cost
of medical treatment & provided to insured persons & their families including cost of any
building & equipment, in accordance with any agreement entered into by the Corporation;
(f) Defraying the cost (including all expenses) of auditing the accounts of the Corporation &
of the valuation of its assets & liabilities;
(g) Defraying the cost (including all expenses) of Employees’ Insurance Courts set up;
(h) Payment of any sums under any contract entered into for this Act by the Corporation or
Standing Committee or by any authorized officer in that behalf;
(i) Payment of sums under any decree, order or award of any Court or Tribunal against the
Corporation or any of its officers or servants for any act done in the execution of his duty
or under a compromise or settlement of any suit or other legal proceeding or claim
instituted or made against the Corporation;
(j) Defraying the cost & other charges of instituting or defending any civil or criminal
proceedings arising out of any action taken under this Act;
(k) Defraying expenditure (within prescribed limits) on measures for improvement of health &
for rehabilitation & re-employment of disabled or injured insured persons
(l) such other authorized purposes with previous approval of the CG.

Establishment of hospital by Corporation [Section 59]

▪ Corporation may, with the approval of SG, establish and maintain in a State such hospitals,
dispensaries and other medical and surgical services as it may think fit for the benefit of
insured persons and their families.

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9.7 BENEFITS GIVEN UNDER THIS ACT [SECTION 46]
Insured persons, their dependents shall be entitled to the following benefits:
(1) Medical Benefits:
▪ Insured person or member of his family shall be entitled to receive medical benefits.
▪ Such medical benefit may be given either in form of out-patient treatment & attendance in
a hospital or dispensary, clinic or other institution or by visits to the home of insured person
or treatment as in-patient in a hospital or other institution. [No Cash Payment is given]
PC Note: Medical Treatment & care of IP & his family members in ESIC Hospitals.
(2) Sickness Benefits:
▪ Periodical payments to any insured person in case of his sickness;
PC Note: 70% wages shall be paid during sickness [for maximum 91 days in a year]
(3) Maternity Benefits:
▪ Periodical payments to an insured woman in case of confinement or miscarriage or sickness
arising out of the pregnancy, confinement, premature birth of child or miscarriage;
PC Note: 100% wages for 3 Months shall be paid [Additional 1 Month with doctor certificate].
(4) Disablement Benefits:
▪ Periodical payments to an insured person suffering from a disablement as a result of an
employment injury sustained as an employee;
PC Note: 90% wages till the time of disablement.
(5) Dependent Benefits:
▪ Periodical payments to such dependants of insured person who dies as a result of an
employment injury sustained as an employee.
PC Note: 90% wages to family members of the employee.
(6) Funeral Expenses:
▪ Payment to eldest surviving member of the family of insured person, who has died, towards
the expenditure on the funeral of deceased insured person.
▪ If deceased person at the time of his death does not have a family, funeral payment will be
paid to the person who actually incurs the expenditure.
PC Note: Amount of Rs. 10,000 will be given.

PC Note: Claim for such payments shall be made within 3 months of the death of insured person
or within such extended period as allowed by the Corporation.
 SOME OTHER POINTS
❖ Bar against receiving compensation under any other law [Section 53]
Insured person or his dependants shall not be entitled to receive or recover any compensation
or damages under any other Act from the employer or from any other person.

❖ Benefits not assignable [Section 60]

Right to receive any payment or benefit under this Act shall not be transferable or assignable.

❖ Benefits not to be combined [Section 65]

An insured person shall not be entitled to receive for the same period:
▪ both sickness benefit and maternity benefit; or
▪ both sickness benefit and disablement benefit for temporary disablement; or
▪ both maternity benefit and disablement benefit for temporary disablement.
PC Note: Where a person is entitled to more than one benefits, he shall be entitled to choose
which benefit he shall receive.

❖ Repayment of benefit improperly received [Section 70]

▪ Where any person has received any benefit/payment under this Act when he is now lawfully
entitled to receive, he shall be liable to return the value of the benefit to the Corporation
▪ In case of his death → His representative shall repay the same from the assets of deceased.
▪ Recoverable amount may be recovered as if it were an arrear of land revenue.

❖ Employer not to reduce wages etc., [Section 72]

▪ No employer by reason only of his liability for any contributions payable under this Act shall,
directly or indirectly reduce the wages of any employee, or except as provided by
regulations discontinue or reduce benefits payable to him under the conditions of his
service, which are similar to the benefits conferred by this Act.

❖ Employer not to dismiss or punish the employee during sickness etc., [Section 73]
▪ No employer shall dismiss, discharge or reduce or otherwise punish an employee during the
period in which employee is in receipt of sickness benefit or maternity benefit, in receipt
of disablement benefit for temporary disablement or is absent from work as a result of
illness duly certified in accordance with the regulars to arise out of pregnancy or
confinement rendering the employee unfit for work.

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 9.8 IMPORTANT DEFINITIONS
Employee [Section 2(9)]
Any person employed for wages in or in connection with the work of a factory or establishment
to which the Act applies &:
(i) who is directly employed by principal employer, on any work of, or incidental or preliminary
to or connected with the work of the factory or establishment, whether such work is done by
the employee in the factory or establishment or elsewhere; or
(ii) who is employed by or through an immediate employer, on the premises of the factory or
establishment or under the supervision of principal employer or his agent on work which is
ordinarily part of the work of the factory or establishment or which is preliminary to the work
carried on in or incidental to the purpose of the factory or establishment; or
(iii) whose services are temporarily lent or let on hire to the principal employer by the person
with whom the person whose services are so lent has entered into a contract of service;

Employee also includes any person employed on any work connected with -
- administration of the Factory/establishment/department/branch or
- for the purchase of raw materials or
- for the distribution or sale of the productions or
- any person engaged as apprentice (not being apprentice engaged under the Apprentices Act)
- includes such person engaged as apprentice whose training period is extended by any time.
PC Note: Apprentice who is mere trainee for a distinct purpose is not an employee.

Case Law Following categories are coming under the purview of the term ‘employee’:
 Canteen workers [ESIC V. Shri Ram Chemical Industries’]
 Employees who are working in showroom or sales office [Bhopal Motors Private Ltd V. ESIC]
 Workers rendering services outside the shop [‘Hindu Jea Band V. ESIC’]
 Part-time employees employed on daily rate basis [‘Hindu Jea Band’ (supra)]
 Casual workers [‘ESIC V. South India Flour Mill (Pvt) Limited]

Employee does not include:

- any member of the Indian naval, military or air forces;
- any person employed whose wages (excluding remuneration for overtime) exceed Rs. 21,000;
PC Note: “Partner is not an employee” [‘Regional Director, ESIC V. Ramanuja Match Industries’]
 Principal Employer [Section 2(17)] & Immediate employer [Section 2(13)]
(1) Principal Employer means the following:
(a) In a factory: Owner or occupier of the factory & includes managing agent of such owner or
occupier, legal representative of a deceased owner or occupier, & a manager (if named)
(b) In any establishment under control of any department of any Government in India: Authority
appointed by such Government in this behalf or where no authority is so appointed, the HoD;
(c) In any other establishment: Person responsible for supervision & control of the establishment.
(2) Immediate employer’ in relation to employees employed by or through him means -
- Person who has undertaken the execution of whole/part of any work which is ordinarily part of
the work of the factory or establishment of the principal employer or is preliminary to the work
carried on in or incidental to the purpose of any such factory or establishment &
includes a person by whom services of an employee (who has entered into a contract of service
with him) are temporarily lent on hire to the principal employer & includes a contractor.

Seasonal factory [Section 2(19A)]

Factory which is exclusively engaged in one or more of the following manufacturing processes:
- Cotton ginning, Cotton or jute pressing, Decortications of groundnuts,
- Manufacture of coffee, indigo, lac, rubber, sugar (including gur) or tea or any manufacturing
process which is incidental to or connected with any of the aforesaid processes &
- includes a factory which is engaged for a period not exceeding 7 months in a year in any
process of blending, packing or repacking of tea or coffee; or

Factory [Section 2(12)]

Any premises (including precincts) where 10 or more persons are/were employed on any day
of preceding 12 months & in which a manufacturing process is ordinarily carried
but does not include a mine (subject to Mines Act, 1952) or a railway running shed.

Employment injury [Section 2(8)]

Personal injury to employee caused by accident or occupational disease arising in the course of
employment, being an insurable employment.
PC Note: Insurable employment: Employment in factory or establishment to which this act applies.

Insured Person [Section 2(14)]

Person who is/was employee i.r.o. whom contributions are/were payable & entitled to benefits.

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 Temporary disablement [Section 2(21)]
Condition resulting from employment which requires medical treatment & renders an employee,
temporarily incapable of doing the work which he was doing prior to or at the time of the injury.

Permanent total disablement [Section 2(15B)]

▪ Disablement which incapacitates employee for all work which he was capable of performing at
the time of the accident in such disablement.
▪ Permanent total disablement shall be deemed to result from
- Every injury specified in Part I of Second Schedule or
- Any combination of injuries specified in Part II where aggregate % of the loss of earning
capacity, as specified in the said Part II against those injuries, amounts to 100% or more.

Permanent Partial Disablement [Section 2(15A)]

▪ Disablement which reduces the earning capacity of an employee which he was capable of
performing in every employment at the time of the accident resulting in the disablement.
▪ Every injury specified in Part II of Second Schedule = deemed to permanent partial disablement.

Wages [Section 2(22)]

All remuneration paid in cash to an employee if terms of contract of employment were fulfilled &
❖ includes -
- any payment to an employee i.r.o any period of authorized leave, lock out, strike which is
not illegal or lay-off & additional remuneration paid at intervals not exceeding 2 months.
❖ but not include:
- Contribution paid by the employer to any pension fund or provident fund
- Travelling allowance or concession;
- Sum paid to defray special expenses entailed on him by the nature of his employment; or
- Gratuity payable on discharge.

Case Law  ‘Bonus or ex-gratia amount is not ‘wages’ [‘Regional Director, ESIC – 1994 LLR 1 (SC)]
 Following are treated as wages:
▪ LIC Premium subsidy; Bonus;
▪ HRA, heat, gas & dust allowance & incentive allowance;
▪ Overtime allowance;
Dependant [Section 2(6A)] [Not for Exams]
Dependant is defined as any of the following of a deceased insured person:
Widow; Legitimate/adopted son (≥ 25 years); unmarried legitimate/adopted daughter;
Widowed mother;
Legitimate/adopted son or daughter (≥ 25 yrs) & is infirm (if wholly dependent on his earning)
Parent other a widowed mother (if wholly dependent on his earning)
Minor illegitimate son; unmarried illegitimate daughter; daughter legitimate or adopted
or illegitimate if married & a minor or if widowed & a minor; (if wholly dependent on him)
a minor brother or an unmarried sister or a widowed sister if a minor;
a widowed daughter-in-law;
a minor child of a pre-deceased son;
a minor child of a pre-deceased daughter where no parent of the child is alive; or
a paternal grand-parent if no parent of the insured person is alive.

Confinement [Section 2(3)]

Confinement is defined as labour resulting in the issue of a living child or labour after 26 weeks
of pregnancy resulting in the issue of a child, whether alive or dead.

Family [Section 2(11)] [Not for Exams]

All or any of the following relatives of an insured person:
▪ a spouse;
▪ a minor legitimate or adopted child dependent upon the insured person;
▪ a c hild who is wholly dependent on the earnings of the insured person & who is-
✓ receiving education, till he or she attains the age of 21 years;
✓ an unmarried daughter;
▪ a child who is infirm by reason of any physical or mental abnormality or injury & is wholly
dependent on the earnings of the insured person, so long as the infirmity continues;
▪ dependent parents, whose income from all sources does not exceed such income as may be
prescribed by the Central Government;
▪ in case the insured person is unmarried & his or her parents are not alive, a minor brother
or sister wholly dependent upon the earnings of the insured person.

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9.9 BODIES OF CORPORATION UNDER THE ACT

(1) Employees’ State Insurance Incorporation (ESIC)

▪ Section 3 provides for the establishment of ESIC w.e.f. 01.10.1948.
▪ Corporation is a body corporate having perpetual succession & a common seal & shall sue &
Be sued by the said name.

(2) Constitution of Corporation [Section 4]

▪ Corporation shall consist of a Chairman, a Vice Chairman & other members representing the
interests of employers, employees, state governments, UTs & medical professions.
▪ 3 members of Parliament & Director General of the Corporation are its ex-officio members.
▪ Section 5 → Term of office of members of Corporation.
▪ Section 6 → Eligibility for re-nomination or re-election.
▪ All order & decisions of corporation shall be authenticated by signature of Director General.

(3) Regional Boards [Section 25]

Corporation may appoint Regional Boards, Local Committees & Regional & Local Medical
benefit councils in such areas & manner & delegate them prescribed powers & functions.

(4) Standing Committee

(a) Constitution of Standing Committee (Section 8)
Standing Committee shall be constituted from among its members consisting of:
▪ Chairman;
▪ 3 members of the Corporation;
▪ 3 members of the Corporation representing such three State Governments;
▪ 8 members elected by Corporation:
✓ 3 members from among the members of the Corporation representing employers;
✓ 3 members from among the members of the Corporation representing employees;
✓ 1 member from among the members of Corporation representing medical profession;
✓ 1 member from among the members of the Corporation elected by Parliament.
▪ Director General of the Corporation, ex-officio.
(b) Term of office (Section 9)
Term of office of a member shall be 2 years from the date on which his election is notified.
PC Note: Member of Standing Committee ceases to hold office when he ceases to be the
member of Corporation.
 (c) Powers of the Standing Committee (Section 18)
▪ Subject to general superintendence & control of the Corporation, standing committee
shall administer the affairs of the Corporation & may exercise any of the powers &
perform any of the functions of the Corporation.
▪ Standing Committee shall submit for the consideration & decision of the Corporation
all such cases & matters as may be specified in the regulations made in this behalf.
▪ Standing Committee may, in its discretion, submit any other case or matter for the
decision of the Corporation.
(d) Meetings of Standing Committee, Corporation & Medical Benefit Council (Section 20)
▪ Standing Committee shall meet at such times & places & shall observe specified rules
or procedure in regard to transaction of business at their meetings.
(e) Supersession of the Corporation & Standing Committee (Section 21)
▪ If in the opinion of CG, Corporation or Standing Committee persistently makes default
in performing its duties or abuses its powers, Government may, by notification in OZ,
supersede standing committee in consultation with the standing committee.
▪ Before issuing a notification, standing committee shall be given a reasonable OOBH.
▪ On such superseding all the members shall be deemed to vacate their office.
▪ A new Standing Committee shall be immediately constituted.

9.10 Medical Benefit Council [Section 10]

Medical Benefit Council shall consists of:
▪ Director General of ESI, ex-officio - Chairman;
▪ Director General, Health Services, ex-officio - Co-Chairman;
▪ Medical Commissioner of the Corporation - ex-officio;
▪ 1 member each representing each state other than Union territories;
▪ 3 members representing employers & 3 members representing employees;
▪ 3 members representing the medical profession; among them one shall be a woman.
Term of office: 4 years from the date on which the appointment is notified.

Duties of Medical Benefit Council (Section 22)

▪ Advise corporation & standing committee on matters relating to administration of medical
benefit, the certification for purposes of the grant of benefits & other connected matters;
▪ Prescribed powers & duties of investigation in relation to complaints against doctors
▪ Such other specified duties in connection with medical treatment & attendance

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 Resignation [Section 11]
▪ Member of the Corporation, Standing Committee or Medical Benefit Council may resign his
office by notice in writing to CG & his seat fall vacant on acceptance of resignation.

Cessation [Section 12]

▪ Member of the Corporation, Standing Committee or Medical Benefit Council shall cease to
to be a member if he fails to attend 3 consecutive meeting.
▪ Corporation, Standing Committee or Medical Benefit Council may restore the membership
subject to the rules made by the Government.

Disqualification of member of Corporation, Standing Committee or Medical Council [Sec 13]

▪ He is declared to be of unsound mind by a competent court; or
▪ He is an undischarged insolvent; or
▪ He has any interest in a subsisting contract with or any work being done for the Corporation
except as a medical practitioner or as a shareholder of a company, (directly/indirectly) by
himself or by his partner
▪ He has been convicted of offence involving moral Turpitude (before/after commencement of
this Act).

9.11 ADJUDICATION OF DISPUTES & CLAIMS

❖ Section 74 provides that SG shall constitute ESI Court for such specified local area.
❖ Section 75 provides that ESI Court may decide any question or dispute arises as to:
- Whether any person is an employee within the meaning of this Act;
- Whether he is liable to pay the employee’s contribution;
- Rate of wages or average daily wages of an employee for this Act;
- Rate of contribution payable by a principal employer i.r.o. any employee;
- Person who is or was the principal employer i.r.o. any employee;
- Right of any person to any benefit & as to the amount & duration thereof;
- any direction issued by Corporation on a review of any payment of dependants’ benefit;
- any other matter which is in dispute between-
✓ Principal employer & the Corporation; or
✓ Principal employer & an immediate employer; or
✓ Person & the Corporation; or
✓ Employee & a principal or immediate employer,
 ❖ Following claims shall be decided by ESI Court:
- Claim for the recovery of contributions from the principal employer;
- Claim by a principal employer to recover contributions from any immediate employer;
- Claim against a principal employer;
- Claim for recovery of the value or amount of benefits received by a person when he is not
lawfully entitled thereto; &
- any claim for the recovery of any benefit admissible under the Act.
❖ Appeal against ESI Court:
- Appeal shall lie to High Court if it involves a substantial question of law.
- Appeal shall be filed within 60 days from the date of the order of ESI Court.

❖ No Jurisdiction of Civil Court [Section 75(3)]

- No Civil Court have jurisdiction to decide or deal with any question or dispute or to decide
on any liability which is to be decided by medical board/appeal tribunal or ESI Court.
Case Law - Civil court cannot determine whether this Act is applicable to an establishment or not.

9.12 PENAL PROVISIONS [SECTIONS 84 TO 86]

(1) Penalty for making wrong/false statements by Insured Person [Section 84]
- by Insured Persons to take any benefit which is not admissible to him.
- Imprisonment: upto 6 months; Fine: upto Rs. 2,000 or both.
Note: If insured person is convicted by Court for an offence committed by him under this section,
he shall not be entitled to any cash benefits available for such period prescribed by CG.

(2) Employer fails to pay any contribution within the prescribed time-limit [Section 85(a)]
- If employees’ share of contribution is deducted by employer from their wages but not paid:
Imprisonment: Min. 1 Year & Max. upto 3 years; Fine: upto Rs. 10,000.
- In other case: Imprisonment: not less than 6 months; Fine: Rs. 5,000.

(3) Penalties for non-compliance with any other provisions of the Act [Section 85(b) to 85(g)]
- Imprisonment: Upto 1 Year; Fine: upto Rs. 4,000 or Both.

(4) Penalties for Repetition of Same Offence [Section 85A] [IMP. FOR EXAMS]
- Imprisonment upto 2 years; Fine: Rs. 5,000.
- Imprisonment: Min. 2 yrs & upto 5 yrs; Fine: Rs. 25,000 (In case of failure to pay contribution)

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(5) Recovery of Damages from the employer by the corporation [Section 85B] [V. IMP]
- If any employer fails to pay contribution within the specified time or or pays belatedly.
- Before recovering such damages, employer shall be given a reasonable OOBH.
- Amount of damages may not exceed the amount of contribution paid/payable.
Reduction or waiving off of damages:
(a) Sick Industrial Unit & esrablishment for which Rehabilitation scheme has been sanctioned.
(b) Change of Management including transfer of undertaking to worker’s Co-operative or in
case of merger or amalgamation of Sick Industrial Unit with a healthy company.
(c) In other cases, depending on merits, damages levied/leviable can be waived upto 50%.
(d) In exceptional hard cases, damages levied/leviable can be waived either partially/totally.

(6) Direction to pay contribution [Section 85C] [V. IMP]

- If employer is convicted for not paying contribution, court may direct him to pay contribution
for which he was convicted within a time period (extension allowed) in addition to punishment
- If employer still fails to pay contribution, he is deemed to have committed a further offence &
shall be punishable with imprisonment u/s 85 & fine of Rs. 1,000 for every day of default.

(7) Provisions for Adjudication of Disputes & claims [Section 75]

- Any disputes or questions of the employer or employee may be settled by EIS Court after
adjudicating the matter if made before it.
- 50% security deposit is required to be made u/s 75(2B) (unless it is waived/reduced).

(8) Penal Action u/s 138 of N.I. Act

- If a cheque submitted by the employer is bounced subsequently by the Bank for reasons of
insufficient fund, it constitutes an offence under this section.
- Punishment → Imprisonment: 1 Year; Fine: 2 times the amount of cheque or with both.

(9) Penal Action u/s 405/406/409 of I.P.C

- If an employer deducts employees’ share of contribution from their wages but does not pay the
said contribution, he thereby commits an offence of criminal Breach of Trust which is punishable
under this section with imprisonment which may extend to 3 years or with fine or with both.