ESI coverage depends on employee connection and employer control, not business predominance or sales turnover.

The Employees' State Insurance Act, 1948 was held applicable to the appellant's regional offices because employees engaged in work connected with the factory's products fell within the statutory definition, and the decisive test was the connection with the establishment and the principal employer's control, not whether sales or turnover predominated. The welfare character of the Act required a liberal construction, so contribution was payable in respect of the workmen at the regional offices. The earlier dismissal of the special leave petition was treated as fact-specific and not as res judicata or a binding determination of the larger issue, so that plea was rejected.

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Issues: (i) Whether the Employees' State Insurance Act, 1948 applied to the appellant's regional offices at Secunderabad and Bangalore, and whether contribution was payable in respect of the workmen employed there. (ii) Whether the earlier dismissal of the special leave petition arising from the Orissa decision operated as res judicata or otherwise concluded the issue between the parties.

Issue (i): Whether the Employees' State Insurance Act, 1948 applied to the appellant's regional offices at Secunderabad and Bangalore, and whether contribution was payable in respect of the workmen employed there.

Analysis: The expression "employee" under Section 2(9) was held to include persons employed in connection with the work of a factory or establishment, including work connected with distribution or sale of the factory's products. The principal employer under Section 2(17) was treated as the person having supervision and control over the establishment. On that basis, the relevant test was not predominance of sales or turnover, but the connection of the regional offices with the factory's products and the control exercised by the principal employer. The welfare object of the Act and the constitutional emphasis on health, social security, and just conditions of work supported a liberal construction. The view that only predominant business activity could attract the Act was rejected.

Conclusion: The Act applied to the regional offices, and the appellant was liable to pay contribution under Section 39 read with the First Schedule to the Act.

Issue (ii): Whether the earlier dismissal of the special leave petition arising from the Orissa decision operated as res judicata or otherwise concluded the issue between the parties.

Analysis: The earlier special leave dismissal was on the peculiar facts and did not lay down any law. It was therefore not treated as a binding precedent or as creating res judicata on the larger controversy then pending for decision.

Conclusion: The plea of res judicata was rejected.

Final Conclusion: The regional offices were held to fall within the coverage of the Act, the contribution demand was sustained, and the appeals failed.

Ratio Decidendi: For the Employees' State Insurance Act, the relevant test is the employee's connection with the factory or establishment and the principal employer's control, not the predominance of business activity or sales turnover.

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