IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE M.N.KRISHNAN TUESDAY, THE 12TH OCTOBER 2010 / 20TH ASWINA 1932 Ins.APP.No. 40 of 2009() ----------------------------------- IC.71/2006 of EMPLOYEES INSURANCE COURT, ALAPPUZHA .................... APPELLANT (S): APPLICANT: ----------------------------------------- M/S.ASTRO-VISION FUTURE TECH PVT.LTD. 36/674, 675 ELAMKULAM ROAD, KALOOR, COCHIN-682017, REPRESENTED BY ITS EXECUTIVE DIRECTOR BINOD HARIHARAN. BY ADV. SRI.E.K.NANDAKUMAR SRI.A.K.JAYASANKAR NAMBIAR SRI.K.JOHN MATHAI SRI.P.BENNY THOMAS SRI.ANIL D. NAIR RESPONDENT(S): RESPONDENT: ------------------------------------------------ THE DEPUTY DIRECTOR, ESI CORPORATION, PANCHDEEP BHAVAN, N.S.ROUND, THRISSUR-20. ADV. SRI.T.V.AJAYAKUMAR, SC, ESI CORPN. THIS INSURANCE APPEALS HAVING BEEN FINALLY HEARD ON 12/10/2010 , THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: ORDER ON IA. NO.2836/2009 IN INAP. NO.40/2009 DISMISSED 12/10/2010 SD/- M.N.KRISHNAN, JUDGE TRUE COPY P.A. TO JDUGE tss M.N. KRISHNAN, J. ........................................... Ins.A.NO.40 OF 2009 ............................................. Dated this the 12th day of October, 2010. J U D G M E N T This is an appeal preferred against the order of the Employees' Insurance Court, Alappuzha in I.C.No.71/2006. M/s.Astro-vision Future Tech Pvt. Ltd moved an application seeking for a declaration that the data processing and software development unit of the applicant is not a factory under Section 2(12) of the E.S.I Act and, therefore, the establishment is not liable to be covered under the said Act. According to the applicant, it is engaged in the business of data processing and software development. It is not a manufacturing process. 2. On the contra, the Employees State Insurance Corporation would contend that the establishment is engaged in software development using computer. Electric power is used in the development of the software. Development of the software involves alteration of magnetic field into tape/disc/floppy in order to store the desired software which is then marketed as final product. Since : 2 : Ins.A.NO.40 OF 2009 involvement of more than 10 persons is there and there is manufacturing process going on, it is contended that the institution is liable to be covered under the Employees Insurance Act. 3. The learned Insurance Court Judge after analysing the materials held that there is manufacturing process going on with the aid of power and as more than 10 workers are employed, it amounts to manufacturing process and it satisfies the definition of a factory as defined under the ESI Act and, therefore, it is liable to be covered under the Act. It is against that decision, the applicant has come up before this Court. 4. Heard the learned counsel for the appellant as well as the respondent. The question raised is a ticklish question with scientific basis and therefore it is desirable to understand the scope of the word used in the Factories Act as well as Employees State Insurance Act. The word factory which is defined under the Factories Act and the Employees Insurance Act is almost identical, but there is one explanation added to the definition of factory under : 3 : Ins.A.NO.40 OF 2009 the Factories Act which is not available under the Employees State Insurance Act. It is Section 2 Clause (m) Explanation II. For the purpose of this clause the mere fact that where Electronic Data Processing Unit or a Computer Unit is installed in any premises or part thereof, that shall not be construed to make it a factory if no manufacturing process is being carried on in such premises or part thereof. So the presence of electronic data processing unit in a premises with some other workers where the definition of factory is not satisfied, this shall not be used to hold that it would satisfy the definition of the factory. But in the Employees' State Insurance Court Act, definition of factory does not involve this explanation at all. The decisions referred to are with reference to the definition of the factory under the Factories Act wherein the explanation is involved. So it is the presence of the explanation that makes the difference so far as the definition of a factory is concerned under the Factories Act and the Employees State Insurance Act. Now what is a manufacturing process is not defined in the Employees : 4 : Ins.A.NO.40 OF 2009 State Insurance Act but it is stated in Section 2(14)(aa) that manufacturing process shall have the meaning assigned to it in the factories Act. So we have to see what is the meaning assigned to this word under the Factories Act. It is dealt with under Section 2(k) of the Factories Act which reads as follows: “Manufacturing process” means process for - making, altering, repairing, ornamenting, finishing, packing, oiling washing, cleaning, breaking up, demolishing or otherwise treating or adapting any article or substance with a view to its use, sale, transport, delivery or disposal. 5. So far as the case on hand is concerned there is no other work going on in the premises. The premises is exclusively intended as a data processing unit. That data processing unit is with the solid object of getting out a product which can be sold and money can be made. So the outcome or the end result of this is an out product which gives use for commercial purpose namely sale. 6. The learned Employees Insurance Court Judge had considered and held that according to him the applicant is engaged in the development of software which involves : 5 : Ins.A.NO.40 OF 2009 alteration of magnetic field into tape/floppy in order to store the software and then is marketed as a final product. So, it can be seen that it is by tapping of the magnetic field scientifically and altering it the end product is obtained. The article or substance when used in larger dimension will take in this also. Therefore when a process is established and used for converting or altering an article or a substance and an end product is obtained, certainly it will come within the ambit of manufacturing process as defined under the Factories Act. 7. Now as discussed by me earlier, explanation to the word factory regarding the data processing unit is not available under the Employees State Insurance Act. The Employees State Insurance Act is a self contained statute wherein the factory is defined and help is sought from the Insurance Act to define the word manufacturing process. So the explanation that is given in the Insurance Act cannot be read into the definition of factory under the Employees State Insurance Act where it is specifically excluded. This is a case where as stated earlier there is a : 6 : Ins.A.NO.40 OF 2009 process of manufacturing wherein electrical energy is used and more than 10 persons are employed and, therefore, it satisfies all the ingredients to attract the definition of a factory under the ESI Act and, therefore, the finding of the learned Insurance Judge that it is an establishment that will come under the coverage of the ESI Act has to be sustained and I do so. So far as other materials, in all aspects the order of the Employees Insurance Court is sustained. Parties are directed to bear their respective costs. The appeal is thus dismissed. M.N. KRISHNAN, JUDGE. cl