1. Court’s decision
The Delhi High Court has dismissed a writ petition seeking (i) quashing of the ESIC’s 09.09.2016 order refusing enhancement of Permanent Disablement Benefit (PDB), and (ii) a declaration that Rules 54, 57 and 60 of the Employees’ State Insurance (Central) Rules, 1950 are unconstitutional for not aligning disablement benefits with minimum wages.
The Court upheld the ESIC Rules, holding them neither ultra vires nor violative of Articles 14 and 21. It found that PDB is a statutory social security benefit linked exclusively to “Standard Benefit Rate” under the ESI Act, and that minimum wages cannot be imported into the ESI framework.
The Court, however, expressed deep concern over the inadequacy of existing PDB amounts and urged the Central Government and ESIC to constitute a committee to periodically reassess disability benefits in light of inflation, market standards and living costs.
The petition was disposed of with no order as to costs.
2. Facts
The petitioner, employed with a rubber factory, suffered a catastrophic workplace accident in 1989 resulting in the amputation of both hands. ESIC granted him PDB in 1990 at ₹14/day, subsequently revised periodically. He continued working for ten more years before being terminated in 1999 on grounds of incapacity.
The Labour Court upheld his termination, but a Single Judge reversed it in 2012, holding termination illegal and granting ₹2 lakh compensation instead of reinstatement due to factory closure. In LPA against this order, a Division Bench in 2016 restored the Labour Court’s finding of valid termination but stressed that ESIC must ensure fair compensation aligned at least with minimum wages. ESIC was directed to reassess PDB.
ESIC’s consequential order dated 09.09.2016 reaffirmed the petitioner’s entitlement as per Rule 57 and declined enhancement. The petitioner filed contempt proceedings which failed, leading to the present substantive writ petition challenging the statutory framework itself.
3. Issues
The High Court analysed the following core questions:
- Whether ESIC’s refusal to enhance PDB was contrary to the Act or the 2016 LPA judgment.
- Whether Rules 54, 57 and 60 of the ESIC Rules are unconstitutional for failing to align PDB with minimum wages.
- Whether disablement benefits under the ESI Act are required to increase in tandem with minimum wage revisions.
- Whether the ESIC has statutory power to enhance PDB independent of Central Government rule-making.
4. Petitioner’s arguments
The petitioner argued that Rules 57(3) and related provisions artificially cap disablement benefits at 90% of the Standard Benefit Rate of the year of injury, preventing the benefit from keeping pace with increases in minimum wages. This, it was argued, violates Articles 14 and 21 since two similarly situated disabled workmen injured in different years receive drastically different benefits.
He claimed that receiving merely ₹49.14/day for total loss of both hands is grossly inadequate, amounts to payment below minimum wages, and is contrary to Section 22 of the Minimum Wages Act. Relying on D.S. Nakara, Olga Tellis, Francis De Costa, and Subhash Chandra Bose, he asserted that social security must reflect dignity and subsistence.
The petitioner also contended that statutory interpretation must harmonise minimum wage protections with social security entitlements, and therefore benefit revision should be constitutionally mandated.
5. Respondent’s arguments
ESIC argued that PDB is a statutory social insurance benefit paid out of the ESI Fund, not wages under a contract of employment. Rule 57(3) mandates calculation of disablement benefit at 90% of the Standard Benefit Rate defined by statute; ESIC has no discretion to enhance it.
The respondents submitted that the ESI scheme is holistic—covering medical care, rehabilitation, sickness benefit, maternity benefit, funeral expenses and more—and cannot be conflated with wage legislation. They argued that the Minimum Wages Act applies only to remuneration for work performed; disablement benefit is compensation for loss of earning capacity and cannot be equated with wages.
They relied on ESIC v. New Forge Company, Texmo Industries, and Smitha Rajendran to emphasize that minimum wage concepts cannot be imported into ESI computation, and that the statutory formula is exclusive.
6. Analysis of the law
The Court began by reaffirming that the ESI Act is a social welfare legislation, intended to provide structured, statutory benefits in cases of sickness, maternity and employment injury. Under Section 51 read with Section 95, the Central Government is empowered to prescribe rates and conditions for disablement benefits.
Crucially, the Court examined the legislative history of Section 99. Before the 1989 amendment, ESIC had the power to enhance benefits. Post-amendment, however, Section 99 permits only provision for medical care of families; the power to enhance PDB no longer exists. Therefore, the Court held, ESIC cannot be compelled to increase PDB beyond the statutory formula.
The 2011 amendment, which deleted Rule 54 and redefined the “Standard Benefit Rate” to be directly linked to average daily wages, reaffirms a wage-period-based formula—not minimum wage parity. Rule 57(3) expressly mandates the benefit at 90% of that rate.
The Court noted that disablement benefits are conceptual compensation for earning capacity loss, not remuneration. They operate in a legal sphere independent of minimum wage obligations.
Thus, importing the Minimum Wages Act into the ESI framework would distort legislative intent, disrupt the actuarial balance of the insurance fund, and violate statutory design.
7. Precedent analysis
The Court applied several landmark principles from existing judgments:
ESIC v. New Forge Company (Karnataka HC) — Minimum wages cannot be adopted for ESI benefit calculation; doing so defeats the scheme of the Act. Applied directly.
Texmo Industries (Supreme Court) — ESI benefits must follow statutory formulae; courts cannot rewrite them. Applied to reaffirm rule-bound computation.
Smitha Rajendran (Kerala HC) — ESI and Minimum Wages Acts operate in separate domains. Affirmed.
The Court distinguished D.S. Nakara and Olga Tellis, noting that while they articulate the importance of social security and livelihood, they do not empower courts to rewrite insurance schemes created by statute.
8. Court’s reasoning
The Court held:
• The petitioner’s request for PDB equal to minimum wages is outside the scope of the ESI Act.
• Rules 54, 57 and 60 are constitutionally valid and apply uniformly. There is no violation of Articles 14 or 21.
• The Court cannot compel ESIC to act contrary to statutory rules or expand benefits through judicial intervention.
• The petitioner himself admitted in rejoinder that the PDB calculation under the ESIC formula was correct, eliminating grounds to quash the 2016 ESIC order.
Importantly, while upholding the statutory scheme, the Court recorded strong concern that the existing PDB amounts are inadequate for even basic survival, especially for a 100% disabled workman. It urged institutional reform, recommending creation of a biennial expert committee by ESIC and the Central Government to review benefit adequacy.
9. Conclusion
The writ petition was disposed of by upholding the validity of the ESIC Rules. The Court declined to strike down Rules 54 (now omitted), 57 and 60 or direct enhancement of PDB to minimum wage levels.
However, recognizing the hardship faced by permanently disabled workers, the Court called upon ESIC and the Central Government to create a periodic review mechanism to reconsider disability benefit adequacy.
No costs were awarded.
10. Implications
This judgment reinforces the separation between statutory social insurance benefits and minimum wage protections, clarifying that courts cannot rewrite actuarial benefits mandated by the ESI Act.
The ruling preserves the stability of the ESI Fund by preventing judicial inflation of benefit levels outside statutory authority. At the same time, it spotlights the urgent policy need to modernize PDB rates, signaling to the legislature and executive that decades-old benefit scales are incompatible with contemporary living standards.
This judgment will have significant implications for future challenges seeking minimum-wage parity in ESI benefits and will likely influence national disability policy discourse.
Case Law References
ESIC v. New Forge Company, Bangalore (Karnataka HC) — Held that minimum wage concepts cannot be imported into ESI calculations; applied in full.
ESI Corporation v. Texmo Industries (Supreme Court) — Reaffirmed that ESI benefits must follow the statutory formula; courts cannot override rules.
Smitha Rajendran v. ESIC (Kerala HC) — Distinguished wage-related entitlements from insurance-based benefits; applied.
D.S. Nakara, Francis De Costa, Olga Tellis, Subhash Chandra Bose — Cited by petitioner to argue constitutional guarantees, but not applied to rewrite statutory benefits.
FAQs
1. Can Permanent Disablement Benefit under the ESI Act be increased to match minimum wages?
No. The High Court held that ESI disablement benefits are governed exclusively by Rule 57(3) and cannot be equated to minimum wage payments.
2. Are ESIC Rules 54, 57 and 60 unconstitutional for not aligning benefits with inflation or wage levels?
No. The Court upheld their constitutional validity, finding no violation of Articles 14 or 21.
3. Can courts direct ESIC to enhance disablement benefits based on fairness or hardship?
No. Enhancement of PDB is a legislative function. Courts cannot rewrite the ESI Act’s statutory formula.