Case Study: CA Firms ≠ “Shops” Under ESI Act

Case

Santosh Choudhary & Associates v. Employees’ State Insurance Corporation & Anr.
WPA 6417/2024

Court and Date

Calcutta High Court – Hon’ble Mr. Justice Arindam Mukherjee
Judgment Date: 12 April 2024

Relevant Law

• Employees’ State Insurance Act, 1948: 1(5), 45A, 45AA, 75
• Constitution of India: Article 226 (writ jurisdiction)
• WB Government Notification (10-02-2011) extending ESI to “shops”
• Definitions of “shop” and tests distinguishing profession vs trade/business
• “Articles” under the Chartered Accountants Act (trainees)

Background

ESIC inspected a Chartered Accountants (CA) firm and, treating it as a “shop” with 10+ persons (by counting articles/trainees as employees), allotted an ESI code and raised contribution demands via §45A orders. The firm denied ESI applicability, saying it is a professional establishment, not a shop, and also did not have 10 employees. It invoked Article 226 to challenge the proceedings.

Legal Issue

1. Is a CA firm an “establishment/shop” covered by §1(5) ESI Act?
2. Can articles (CA trainees) be treated as employees for coverage?
3. Was a writ maintainable despite alternate remedy?

Key Legal Findings

• Profession ≠ Trade/Business: A CA/CA firm renders professional services based on personal skill and intelligence, not services to “customers” in a commercial sense; hence not a “shop.”
• Articles not employees: Stipends to articles aren’t wages; articles do not qualify as employees under the ESI Act.
• Jurisdictional error: ESIC passed §45A orders without first deciding applicability (whether the firm is a shop). Such a threshold error is challengeable in writ; alternate remedy is not an absolute bar.
• Reliance on precedents including Devendra M. Surti (doctor’s clinic not commercial establishment) and several CA-firm rulings affirming the profession vs trade distinction.

Judgment

The Court allowed the writ, holding the petitioner is not a “shop” under the ESI Act and not liable to ESI contributions. Show-cause notices, coverage/code allotment, and §45A orders were set aside. The writ was held maintainable.

Conclusion

ESI coverage extended to “shops” cannot automatically rope in professional firms like CA practices. Before raising dues, ESIC must determine applicability and employee strength correctly; articles cannot be counted as employees.

Key Learning

• Professional establishments (CA firms) are outside ESI “shop” ambit unless statute/notification clearly covers them.
• Articles/trainees ≠ employees; stipends ≠ wages.
• Applicability is foundational – ESIC must decide it first; otherwise orders are jurisdictionally flawed.
• Writ remedy lies for pure questions of law even where alternate remedies exist.

Download the PDF copy of this Case:

Join the community that’s changing the way businesses handle compliance in India.