Under Section 2(12) The Act is applicable to the factories employing 10 or more persons irrespective of whether power is used in the process of manufacturing or not.
A factory, under the ESI Act includes any premises (i) wherein ten or more persons are employed for wages and in any part of which a manufacturing process is being carried on with the aid of power, or (ii) wherein twenty or more persons are employed for wages and in any part of which a manufacturing process is being carried on without the aid of power. The definition of manufacturing process refers back to the Factories Act, 1948 (Factories Act) and inter alia includes "making, altering, repairing, ornamenting, finishing, packing, oiling, washing, cleaning, breaking up, demolishing, or otherwise treating or adapting any article or substance with a view to its use sale, transport, delivery or disposal." The Bombay High Court held that the terms 'making, altering, treating, adapting' etc. used in the definition above were to be interpreted widely to cover activities such as software development and application.