REGIONAL DIRECTOR V. SHREE MAHILA GRUH UDYOG LIJJATPAPAD 2026: GUJHC:44136:

DATE: 16.07.2026

COURT: High Court of Gurajat

BENCH: Justice J.C. Doshi

FACTS:

The dispute arose after the Employees' State Insurance Corporation (ESIC) issued notices demanding ESI contributions from Shree Mahila Gruh Udyog Lijjat Papad, a society registered under the Societies Registration Act, 1960, and the Bombay Public Trusts Act, 1950. The society, which operated through several branches across India, consisted of thousands of women members engaged in rolling papads. The women collected raw materials from the society, prepared papads in their own homes without direct supervision, and returned the finished products to the society for marketing under the "Lijjat Papad" brand. The society maintained that its primary objective was the economic upliftment of women from weaker sections of society, with profits distributed among its members rather than paid as wages, and therefore it did not constitute an establishment attracting liability under the Employees' State Insurance Act, 1948.

Invoking Section 75 of the Employees' State Insurance Act, the society challenged the ESIC's demand notices before the Employees' Insurance Court, Rajkot. The ESI Court accepted the society's contention and held that the women engaged in rolling papads were members of the society and not "employees" within the meaning of Section 2(9) of the Act, as they neither worked under the supervision of the society nor received wages in the conventional sense. Consequently, the Court held that the society did not qualify as an establishment under Section 2(12) of the Act and quashed the contribution demands. Aggrieved by this decision, the Employees' State Insurance Corporation preferred appeals before the Gujarat High Court, contending that the women were employees engaged in the manufacturing process and that the society was liable to comply with the provisions of the ESI Act.

ISSUES:

The principal issue before the Gujarat High Court was whether Shree Mahila Gruh Udyog Lijjat Papad constituted an "establishment" within the meaning of Section 2(12) of the Employees' State Insurance Act, 1948, and whether the women members engaged in rolling papads at their homes could be regarded as "employees" under Section 2(9) of the Act. The Court also had to determine whether the Employees' Insurance Court had correctly quashed the ESIC's demand notices or whether the matter required reconsideration in light of the applicable statutory provisions and the Supreme Court's earlier decisions

JUDGEMENT WITH REASONING:

The Gujarat High Court allowed the appeals in part by setting aside the orders of the Employees' Insurance Court and remanding the matter for fresh adjudication. The Court restored the ESI applications to the Employees' Insurance Court, granted liberty to both parties to adduce additional evidence, and directed the Court to reconsider the issues afresh in light of the relevant statutory provisions and binding judicial precedents, preferably within nine months.

The High Court observed that the Employees' Insurance Court had decided the matter without considering the significant legal developments emerging from the Supreme Court's decision in Shri Mahila Griha Udyog Lijjat Papad v. Union of India (1999) 6 SCC 38, wherein the Supreme Court had recognized women preparing papads from home using raw materials supplied by the society as employees for the purposes of the Employees' Provident Funds legislation. The High Court noted that the factual matrix in the present case closely resembled the circumstances considered by the Supreme Court, particularly since the women collected raw materials from the Rajkot branch, prepared papads at home, and returned the finished products to the society for commercial sale. As this binding precedent had not been brought to the notice of the ESI Court, the High Court held that the earlier decision required reconsideration in light of its potential applicability.

The Court further held that the determination of whether the society constituted an establishment and whether its women members fell within the definition of "employees" under Sections 2(9) and 2(12) of the Employees' State Insurance Act involved a detailed factual inquiry that had not been adequately undertaken. It observed that several relevant aspects—including the constitutional framework of the society, the degree of supervision exercised over the women, the nature of payments made to them, the legal effect of their membership status, and the exemption granted to the society in Maharashtra, required comprehensive evaluation based on evidence. Since these questions had neither been fully examined nor tested against the applicable legal principles, the High Court considered it inappropriate to render a final determination on merits. Instead, it concluded that the interests of justice would be best served by remanding the matter to the Employees' Insurance Court with liberty to both parties to produce fresh evidence and have the issues adjudicated afresh in accordance with law.

ANALYSIS:

The Gujarat High Court's decision underscores the importance of correctly applying the statutory definitions of "employee" and "establishment" under the Employees' State Insurance Act, 1948, through a careful examination of the factual relationship between the parties rather than relying solely on the nomenclature adopted by an organization. Although Shree Mahila Gruh Udyog Lijjat Papad characterized the women engaged in rolling papads as members of a cooperative-style society working for social and economic upliftment, the Court recognized that such a characterization is not conclusive for determining statutory liability under labour welfare legislation. The judgment highlights that beneficial social welfare statutes such as the ESI Act must be interpreted in a manner that advances the objective of extending social security benefits to workers. Consequently, the Court found that the Employees' Insurance Court had prematurely concluded that the women were not employees without adequately examining the actual nature of their engagement, the degree of supervision exercised by the society, and the legal implications of the work performed in connection with the society's commercial activities.

The decision also demonstrates judicial restraint by declining to conclusively determine the applicability of the ESI Act on an incomplete factual record. Instead of affirming or reversing the findings on merits, the High Court emphasized that the controversy required a comprehensive evidentiary assessment, particularly in light of the Supreme Court's binding decision in Shri Mahila Griha Udyog Lijjat Papad v. Union of India (1999) 6 SCC 38, which had recognized similarly situated women as employees under another social welfare legislation. By remanding the matter, the Court ensured that the Employees' Insurance Court would reassess the issues after considering all relevant evidence, including the constitutional framework of the society, the nature of the women's membership, the manner of remuneration, the extent of supervision, and the applicability of previous judicial precedents. The judgment thus reinforces the principle that disputes involving the coverage of beneficial labour legislation should be decided on a thorough evaluation of substantive employment relationships rather than on formal organizational structures or labels adopted by the parties.