ESI Enforcement and Schemes for Others

What follows. The Corporation may, on being satisfied in the prescribed manner that the benefit is payable, pay the employee the benefit at the rate to which he is entitled, or would have been entitled had the failure or neglect not occurred. It is then entitled to recover from the employer, subject to the employer being given an opportunity of being heard, the capitalised value of the benefit paid, calculated in the prescribed manner.

The proviso. The capitalised value may be adjusted for the payment of any contribution and interest or damages the employer is liable to pay for delay in payment or non-payment of the contribution.

Section 42(2), recovery. The amount may be recovered as if it were an arrear of land revenue, or in the manner specified in sections 129 to 132.

Three points worth carrying into an answer. The worker gets what he would have had, not a reduced amount. The employer gets a hearing before recovery, so this is not a summary confiscation. And the recovery is of the capitalised value, meaning the whole future cost of the benefit, which for a dependants' pension can be very large indeed. That is the deterrent.

Section 43: excessive sickness caused by insanitary conditions

Section 43(1), the claim. Where the Corporation considers that the incidence of sickness among Insured Persons is excessive by reason of:

• (a) insanitary working conditions in a factory or other establishment, or the neglect of its owner or occupier to observe health regulations enjoined on him by any enactment; or
• (b) insanitary conditions of tenements or lodgings occupied by Insured Persons, attributable to the neglect of the owner of those tenements or lodgings to observe such health regulations,

the Corporation may send the owner or occupier a claim for the amount of the extra expenditure it incurred as sickness benefit. If the claim is not settled by agreement, the Corporation may refer the matter, with a statement in support, to the appropriate Government.

Section 43(2), inquiry. If the appropriate Government is of opinion that a prima facie case for inquiry is made out, it may appoint a competent person or persons to hold an inquiry.

Section 43(3), determination. If it is proved to the satisfaction of the person holding the inquiry that the excess is due to the default or neglect of the owner or occupier, he shall determine the amount of the extra expenditure and who is to pay the whole or part of it to the Corporation.

Section 43(4), enforcement. A determination under sub-section (3) may be enforced as if it were a decree for payment of money passed in a suit by a Civil Court.

Section 43(5), who counts as owner. For this section, "owner" of tenements or lodgings includes any agent of the owner and any person entitled to collect the rent as a lessee of the owner.

Note that section 43 reaches the landlord as well as the employer. Housing is treated as part of the cause of industrial sickness, which is a point worth a sentence in an essay about the social purpose of the Chapter.

Section 44: schemes for other beneficiaries

Notwithstanding anything in the Chapter, the Central Government may by notification frame, amend, vary or rescind a scheme for other beneficiaries and the members of their families, for providing medical facility in any hospital established by the Corporation in any area which is underutilised, on payment of user charges, and prescribe the terms and conditions on which the scheme may be operated.

The Explanation defines the three terms:

• "other beneficiaries" means persons other than employees insured under section 28;
• "underutilised hospital" means any hospital not fully utilised by employees insured under section 28;
• "user charges" means the amount charged from other beneficiaries for medical facilities, as specified in the regulations after prior approval of the Central Government.

Read this with the proviso to section 25(1), which deems those user charges to be contributions forming part of the Employees' State Insurance Fund. The two provisions together let spare capacity in the Corporation's hospitals be sold to the public and the money returned to the insurance fund.

Section 45: schemes for unorganised, gig and platform workers

Notwithstanding anything in the Chapter, the Central Government may by notification frame a scheme for unorganised workers, gig workers and platform workers and the members of their families, for providing benefits admissible under the Chapter by the Corporation. The contribution, user charges, scale of benefits, qualifying and eligibility conditions and other terms are as specified in the scheme.

This is a small section with a large idea, and it is a second route into the Code for the unorganised sector alongside Chapter IX. The difference is worth stating: Chapter IX schemes are framed for those workers on their own footing; a section 45 scheme delivers Chapter IV's own benefits to them through the Corporation's existing machinery.

Section 46: exemption of Government establishments

The appropriate Government may, after consultation with the Corporation, by notification and subject to specified conditions, exempt any factory or other establishment belonging to the Government or any local authority from the operation of the Chapter, if the employees in it are otherwise in receipt of benefits substantially similar or superior to those the Chapter provides.

Note the condition. This is not a general power to exempt public employers; it applies only where the employees already have benefits substantially similar or superior. The purpose is to avoid duplication, not to reduce cover.

Section 47: priority of the Corporation's dues

Notwithstanding anything in any other law, any amount due under the Chapter shall be a charge on the assets of the establishment to which it relates, and shall be paid in priority in accordance with the provisions of the Insolvency and Bankruptcy Code 2016.

This is word for word the same rule as section 19 for provident fund. Cite whichever matches the Chapter in issue.

A worked example

Bright Metals employs thirty people. It never registered Vinod, who was hurt by a press in the third month of his employment and is permanently disabled.

Is Vinod outside the scheme? No. Section 28(1) insures every employee in a covered establishment, and section 28(2) makes an employee who is insurable, and in respect of whom contributions were payable, an Insured Person.

Who pays him? The Corporation. Section 42(1)(a) applies: the employer failed or neglected to insure him at the time of appointment, as a result of which he became disentitled to benefit. The Corporation may pay him the benefit at the rate to which he would have been entitled had the failure not occurred.

What does the employer face? Recovery by the Corporation of the capitalised value of the benefit paid, calculated as prescribed, after being given an opportunity of being heard, and adjusted under the proviso for contributions, interest and damages he owes. It is recoverable as an arrear of land revenue or under sections 129 to 132.

Suppose instead Bright Metals had registered Vinod the day after the accident. That is section 42(1)(b), and the consequence is the same.

Now suppose the Corporation notices that sickness among Bright Metals' workers is far above normal, because the workshop has no ventilation and no clean water. Section 43(1)(a) applies. The Corporation may claim the extra expenditure it incurred as sickness benefit, and if that is not settled by agreement it may refer the matter to the appropriate Government, which may order an inquiry if a prima facie case is made out. A determination is enforceable as a decree of a Civil Court.

And if the sickness comes from the insanitary chawl the workers rent nearby? Section 43(1)(b) reaches the owner of the tenements, and section 43(5) extends "owner" to his agent and to anyone entitled to collect the rent as his lessee.

Bright Metals goes into liquidation owing contributions. Section 47 makes the amount a charge on the assets, paid in priority in accordance with the Insolvency and Bankruptcy Code 2016.

What this does NOT mean

Section 42 does not punish the worker for the employer's default. The Corporation pays what the worker would have had.

Section 42 is not summary. Recovery of the capitalised value is expressly subject to the employer being given an opportunity of being heard.

Section 43 is not a penalty. What is recovered is the extra expenditure the Corporation actually incurred, determined on inquiry, and only where the excess is proved to be due to the default or neglect of the person charged.

Section 44 does not open the insurance scheme to the public. It opens underutilised hospital capacity to non-insured persons on payment of user charges. They do not become Insured Persons.

Section 46 is not a general exemption for Government employers. It requires that the employees be otherwise in receipt of benefits substantially similar or superior.

Limits and criticism

Section 42 depends on the Corporation noticing. The section is triggered by the Corporation being satisfied that a benefit is payable, which in practice usually means the worker has come forward after an accident.

Section 43 has a long route. Claim, then failure to agree, then reference to the appropriate Government, then a prima facie view, then an inquiry, then a determination. It is unsurprising that the section is rarely used.

Section 45 is enabling only. No unorganised, gig or platform worker gets a Chapter IV benefit until a scheme is framed and funded.

Section 44's user charges are deemed contributions by the proviso to section 25(1), which blurs the line between an insurance fund built from contributions and a fund partly built from paying patients.

Quick revision

• Section 42: three defaults, (a) failure to insure at appointment, (b) insuring on or after the accident, (c) failure to pay contributions. The Corporation pays the worker what he would have had, and recovers the capitalised value from the employer after a hearing, adjustable for contributions, interest and damages; recoverable as an arrear of land revenue or under sections 129 to 132.
• Section 43: excessive sickness from insanitary working conditions or insanitary tenements or lodgings; claim, reference to the appropriate Government, prima facie view, inquiry, determination of amount and payer; enforceable as a decree of a Civil Court; "owner" includes an agent and a rent collecting lessee.
• Section 44: schemes for other beneficiaries, meaning persons other than those insured under section 28, in underutilised Corporation hospitals, on user charges specified in regulations with prior Central Government approval.
• Section 45: schemes for unorganised, gig and platform workers and their families, delivering Chapter IV benefits through the Corporation.
• Section 46: exemption of a Government or local authority factory or establishment, after consultation with the Corporation, only where employees already have benefits substantially similar or superior.
• Section 47: dues are a charge on the assets, paid in priority in accordance with the Insolvency and Bankruptcy Code 2016. Same rule as section 19 for provident fund.

Test yourself

1. An employer never registered a worker who is later injured. What can the Corporation do? Under section 42(1)(a) it may pay the worker the benefit at the rate to which he would have been entitled had the failure not occurred, and then recover from the employer, after giving him an opportunity of being heard, the capitalised value of the benefit paid, calculated as prescribed.

2. How is that amount recovered? As if it were an arrear of land revenue, or in the manner specified in sections 129 to 132: section 42(2).

3. Who may be made liable under section 43, and for what? The owner or occupier of a factory or other establishment, or the owner of tenements or lodgings occupied by Insured Persons, for the extra expenditure the Corporation incurred as sickness benefit where the excessive incidence of sickness is due to insanitary conditions attributable to their neglect of health regulations. "Owner" includes an agent and a person entitled to collect the rent as a lessee.

4. Who are "other beneficiaries" under section 44? Persons other than employees insured under section 28, who may be given medical facilities in an underutilised Corporation hospital on payment of user charges.

5. On what condition may a Government establishment be exempted from Chapter IV? Only if its employees are otherwise in receipt of benefits substantially similar or superior to those provided by the Chapter, and only after consultation with the Corporation: section 46.

6. Compare sections 19 and 47. They are the same rule in two Chapters. Section 19 makes provident fund dues, and section 47 makes insurance dues, a charge on the assets of the establishment, paid in priority in accordance with the Insolvency and Bankruptcy Code 2016.