Authority: High Court of Andhra Pradesh at Amaravati

Order Date: 11 August 2026

Case Overview

  • Parties: Guntur Municipal Corporation (and other municipal corporations) as appellants; Employees State Insurance Corporation (ESI Corp) and others as respondents.
  • Nature: Writ appeals (Nos. 80, 81, 120, 291, 292, 293, 299, 305, 368, 415, 416, 443, 478, 481, 504, 526, 530, 531, 555, 556, 566, 588, 605, 606, 614, 640, 647, 648, 650, 651, 652, 654, 660, 662 of 2024) challenging damages imposed under Section 85‑B of the Employees’ State Insurance Act, 1948 for delayed ESI contributions for the period October 2010 to December 2014.
  • Background: Municipal corporations engaged casual/contract workers via self‑help groups, voluntarily paid ESI contributions despite not being notified under Section 1(5) of the Act. ESI Corp levied damages of Rs 31,52,988. Earlier litigation (W.P. No. 19581 of 2016, W.P. No. 374 of 2019) dealt with jurisdictional issues. The Government of Andhra Pradesh issued a preliminary notification on 28 Nov 2022 and a final notification (G.O. Ms.No.2) on 19 Apr 2023 extending the ESI Act to municipal bodies. The respondent also issued a circular on 22 May 2023 confirming the extension.
  • Legal Issues: (i) Whether municipal corporations were covered by the ESI Act prior to the 19‑Apr‑2023 notification; (ii) Whether damages under Section 85‑B could be levied for the pre‑notification period; (iii) Whether the 2007 circular qualifies as a statutory notification; (iv) Whether the alternative‑remedy argument bars the writ petitions.

Final Outcome

  • The Court held that only the G.O. dated 19 Apr 2023 satisfies the statutory requirement of a notification under Section 1(5); the 2007 circular does not.
  • Accordingly, the municipal corporations came within the purview of the ESI Act only from 19 Apr 2023 and cannot be compelled to make contributions or face damages for periods earlier than that date.
  • All damages orders issued by the ESI Corporation under Section 85‑B for the pre‑notification period are set aside as being without jurisdiction.
  • The ESI Corporation must refund any amounts already recovered as damages within eight weeks of receipt of this judgment.
  • All writ appeals are allowed; any pending miscellaneous petitions are closed; no order as to costs.

Topics: ESI Act applicability, Municipal corporation liability