A newly incorporated company obtained ESI registration through a single-window licensing system and initially employed 25 workers. However, after two years, the workforce decreased to 20 employees. The company received a

Answer 6(d) Applicability of the Employees' State Insurance (ESI) Act, 1948: The ESI Act, 1948 applies to: The ESI Act is applicable to all non-seasonal factories employing 10 or more persons [Section -1(2) read with Section 2(12) and Section 2(19A)]. The State Governments have extended the coverage under Section 1(5) of the Act to Shops, Hotel, Restaurants, Cinema including preview theatres, Road-motor transport undertakings, Newspaper establishments, Private Medical Institutions, Educational Institutions and to contract and casual employees of Municipal Corporation/Municipal Bodies employing 10 or more persons in the certain States/ UTs, where State Govt. is the appropriate Government. The Central Govt. has extended the coverage under Section 1(5) to Shops, Hotels, Restaurants, Road Motor Transport establishments, Cinema including preview theatres, Newspaper establishments, establishment engaged in Insurance Business, Non-Banking Financial Companies, Port Trust, Airport Authorities, Warehousing establishments employing 20 or more Persons, where Central Government is the appropriate Government. Under the Employees' State Insurance (ESI) Act, 1948, an establishment that initially falls within the ambit of the Act continues to be governed by its provisions even if the number of employees subsequently falls below the prescribed threshold (generally 10 or 20 employees, depending on the applicability rules of the state). This principle, known as the 'once covered, always covered' rule, ensures that establishments that have once qualified under the Act continue to comply with its provisions, including contribution payments and return filings, unless formally deregistered. In this case, since the company initially had 25 employees and obtained ESI registration, it remains liable to comply with the ESI Act, including filing returns and making contributions, even after the number of employees dropped to 20. The company's contention that ESI is no longer applicable due to a reduced workforce is not valid under the ESI Act, 1948. It remains obligated to fulfil all compliance requirements unless it has obtained formal deregistration from the ESI authorities.