Whereas M/s.Pondicherry Agro Service and Industries Corporation Limited (A Government of Puducherry Undertaking), Puducherry (hereinafter referred to as PASIC), applied for grant of exemption under section 87 of the ESI Act, 1948 vide their letter No.6-272/PASIC/Estt./91, dated 19-7-1991; And whereas it was informed to PASIC that as per proviso to sub-section (4) of section 1 of the Employees State Insurance Act, 1948, (hereinafter referred to as the ESI Act), establishments under the control of the Government, whose employees are in receipt of benefits, substantially similar or superior to the benefits provided under the ESI Act have been excluded from the coverage of the ESI Act, vide letter No.10080/91/Lab./K/ESIS, dated 18-9-1991;
And whereas M/s.PASIC, Puducherry has applied for grant of exemption from the provisions of the ESI Act by invoking the proviso to
section 1(4) of the Employees State Insurance Act, 1948 for the reason that the establishment belongs to the Government and that they are extending various benefits that are better than the benefits provided by the Government to its employees and for superior than the benefits provided under the Act, and accordingly requested to issue appropriate notification in this regard vide their letter No.4908/PASIC/Estt,/ESI/2003, dated 4-5-2005 enclosing an application, dated 16-9-2004;
And whereas M/s.PASIC, Puducherry have stated in their representations, dated 17-2-2006 and 7-7-2006 that the benefits are extended to all the workers of the Corporation including daily rated and casual workers;
And whereas the management of PASIC vide their letter No.4908/PASIC/Estt./ESI/03, dated 17-2-2006 and 7-7-2006 and the PASIC Employees Federation have unanimously requested this department for grant of exemption under the ESI Act, 1948 vide their letters No.15/PEF/2005-2006, dated 13-5-2005 and No.30/PEF/2005-06, dated 31.1.2006 by submitting individual option letters from the employees including regular, daily rated and casual workers to continue to avail the benefits provided by the PASIC and not to extent ESI Act;
And whereas the management of PASIC vide its letter No.4098/PASIC/Estt./ESI/03, dated 14.9.2006 have also stated that they had not at all received/enjoyed any benefits from the Employees State Insurance Corporation since its inception and that the Employees State Insurance Corporation has so far not registered and allotted any registration number to any of the employees of the PASIC for getting medical benefits;
And whereas PASIC is a Corporation, owned and controlled by the Government of Puducherry and is extending benefits to its employees on par with those provided to the employees of the Government of Puducherry;
And whereas in response to the Labour Department's letter No.10080/Lab./K/91, dated 11.1.2007 calling on the Employees State Insurance Corporation for a discussion on 19.1.2007 with regard to the medical benefits extended by the management of M/s.PASIC to its employees, by their letter No.55/P/13/11/35-IP (Exemption), dated 18.1.2007 the Corporation had furnished a comparative study of the benefits available under the Employees State Insurance Scheme and those provided by the employer viz., M/s.PASIC for being taken on record and have at the same time not recommended the grant of exemption from the purview of the ESI Act as sought for by M/s.PASIC;
And whereas simultaneously M/s.PASIC were called upon for a discussion on the said date viz., 19.1.2007 for the same purpose referred to in pre para and in pursuance of the said discussion M/s.PASIC by letter No.4098/PASIC/Estt./ESI/03, dated 20.2.2007 have furnished their justification for non-applicability of the provisions of the ESI Act to their establishment;
And whereas after careful consideration of the submissions made by both viz., the Employees State Insurance Corporation and M/s.PASIC and also the documents produced by them, it is found that the medical benefits provided by M/s.PASIC to their employees are substantially similar to those provided by the Employees State Insurance Corporation;
Now, therefore, since the Pondicherry Agro Services and Industries Corporation, Puducherry is an establishment belonging to and under the control of the Government and whose employees are categorised as being in receipt of substantially similar or superior to the benefits provided under the ESI Act, the said Corporation is squarely covered by the proviso to sub-section (4) of section 1 of the ESI Act, 1948 by virtue of which the provisions of the said Act have been made inapplicable to the said Corporation.
(By order of the Lieutenant-Governor) S.D.Sundaresan, Joint Secretary to Government (Labour).
4.The writ petition was admitted on 7.8.2008. Pending the writ petition this court granted an interim stay. Subsequently, after one extension, on 26.10.2010, the interim stay was made absolute. On notice from this court, the first respondent has filed a counter affidavit, dated 24.9.2008. The second respondent has also filed a counter affidavit, dated 25.6.2009.
5.Mr.S.Vaidyanathan, learned counsel appearing for the ESI Corporation made the following submissions:
(a)The impugned order, dated 18.2.2008 inasmuch as passed under
Section 1(4) of the ESI Act that too with retrospective effect is not valid. The provisio to
Section 1(4) was introduced by the Central Act, 29/1989 with effect from 20.10.1989. Therefore, the Union Territory administration could not have passed the order earlier to introduction of the proviso. Hence it is invalid.
(b)The Union Territory on an earlier occasion, i.e. on 14.9.2004 rejected the request of the first respondent for exemption. Therefore, it cannot pass an another order ignoring the same. The present impugned order came to be passed after consulting the petitioner ESI Corporation, but ignoring the opinion given by it.
(c)This Court earlier in W.P.No.34205 of 2004, dated 12.4.2005 directed the second respondent to consider the application of the first respondent, dated 16.9.2004, which order came to be passed without notice to them.
(d)The power of exemption can be exercised only when there are materials to show that the benefits given by the employer are substantially similar or superior to the benefits extended by the Act and then only such exemption can be granted. In the present case, there are no materials with the second respondent to arrive at the conclusion as per the impugned order, and
(e)In any event, when the petitioner Corporation had rejected the plea made by the first respondent, the first respondent ought to have proceeded before the ESI Court and established on facts that they are providing similar or superior benefits than the ESI Act by filing a petition under Section 75.
6.In the counter affidavit, the second respondent had stated that the management of the first respondent had furnished a comparative study of benefits available under the ESI scheme. They are of the opinion that the benefits provided by the first respondent was substantially similar or superior to the benefits under the ESI Act and hence the exemption was granted.
7.The first respondent in their counter affidavit had stated that there are 373 employees working in their organization. They have given letters, dated 13.5.2005 and 31.1.2006 stating that they did not want the application of ESI Act and wanted the benefits given by the first respondent to continue. It was also claimed that by coercive process, the petitioner ESI Corporation through a garnishee order had taken away a sum of Rs.37,27,475.93 from the bank account without any justification. The writ petition is defective inasmuch as the employees who have a right under the exemption order were not made as parties to the writ petition.
8.It was also stated that from the date of the establishment of the first respondent, they are providing by PASIC Staff Welfare Rules, 1993 the benefits like sickness, medical, maternity, accident, injury, disablement, death, education, etc. They are also providing medical reimbursement to their employees. Some of them had got treated in the very many big hospitals at Chennai. For the year 2003 alone, they had spent Rs.60 lakhs for the health care of their workers, which is five times more than the contribution payable to the petitioner Corporation.
9.Before going into the rival submissions, first of all, it must be determined whether the petitioner ESI Corporation has any locus standi to question the exemption order passed by the second respondent which is impugned in the writ petition. Hence it is necessary to refer to certain provisions of the Act.
Section 1(4) of the Act reads as follows:
"1(4)It shall apply, in the first instance, to all factories (including factories belonging to the [Government]) other than seasonal factories.
[Provided that nothing contained in this sub-section shall apply to a factory or establishment belonging to or under the control of the Government whose employees are otherwise in receipt of benefits substantially similar or superior to the benefits provided under this Act.]."
10.
Section 90 providing for exemption of establishments belonging to the Government or any local authority, reads as follows:
90.Exemption of factories or establishments belonging to Government or any local authority.-The appropriate Government may, [after consultation with the Corporation], by notification in the Official Gazette and subject to such conditions as may be specified in the notification, exempt any factory or establishment belonging to any local authority, [from the operation of this Act] if the employees in any such factory, or establishment are otherwise in receipt of benefits substantially similar or superior to the benefits provided under this Act."
11.Section 91-A providing for exemption even with retrospective effect reads as follows:
"[91-A.Exemptions to be either prospective or retrospective.-Any notification granting exemption under section 87,
section 88,section 90 or
section 91 may be issued so as to take effect either prospectively or by retrospectively on such date as may be specified therein.]
12.The Government had referred to
<act id=VbGwPokB_szha0nW78-Y section=1>Section 1(4) </act>as its power for the grant of exemption. But, actually the power of exemption is found under Chapter VIII more particularly Sections 90 to 91-A of the ESI Act, which are extracted above. As per Section 91-A which was introduced by the Central Act 44/1966 with effect from 17.6.1967, exemption can be granted even retrospectively provided the Government is of the opinion that the establishment belonging to the Government is providing benefits substantially similar or superior than what was provided under the ESI Act. Therefore, it cannot be said that the Union Territory of Puducherry is lacking power to grant exemption even though a wrong provision of law might have been quoted in the impugned order. So long as the power exists and is exercised, reference to a wrong provision will not denude the power of an appropriate authority. Reliance placed upon to proviso to
<act id=VbGwPokB_szha0nW78-Y section=1>Section 1(4) </act>is misconceived. Even though proviso to
<act id=VbGwPokB_szha0nW78-Y section=1>Section 1(4) </act>was introduced only with effect from 20.10.1989, power under Section 91-A is always available to them even before that date. Therefore, the first submission made by the petitioner must fail.
13.The other submissions made by the petitioner that the parties must move the ESI Court under Section 75 to establish that they are granting similar or superior benefits than the scheme under ESI Act is also misconceived. The ESI Court constituted under Section 75 has no jurisdiction to take up or sit over the decision given under section 87 of the Act granting an exemption. On the contrary, the power to grant exemption is a plenary power given to an appropriate Government. The court constituted under Section 75 cannot decide such matters including the validity of an exemption notification or that it should provide the basis for grant of an exemption.
14.In this context, it is necessary to refer to the judgment of a division bench of the Andhra Pradesh High Court in Regional Director, Employees State Insurance Corporation, Hyderabad Vs. M/s.Zuari Cement Ltd. and others reported in 2008 Lab I.C 1602. The following passage found in paragraph 14 may be usefully extracted below:
"14.....There is no power specifically conferred thereunder to provide any sort of remedy like appeal, revision or review to fall well within the powers of jurisdiction under Section 75 of the Act to consider, go into or sit over any decision or order which has been taken under Section 87 of the Act. The power of exemption is provided for in a different Chapter i.e. Chapter-VIII. The said power is specifically conferred on the Government to decide on the question of exemption of an industry from the operation of the Act. The reasons could be many, especially, including the benefits which the employer provides are substantially similar or superior to the benefits which the Act provides. However, as against the said order, either way, granting or refusing to grant exemption, no remedy by way of appeal or revision has been provided for under the Act. Therefore, any order passed therein becomes final unless taken in appropriate proceedings under
Article 226 of the Constitution of India by way of writ. Thus, a reading of these two provisions amply shows that the ESI Court acting under the powers as conferred under Section 75 of the Act has no jurisdiction to take up or sit over the decision given under Section 87 of the Act. Even if it is found that the employer is providing far better benefits or similar benefits, it would not also constitute any basis or ground to interdict the decisions under Section 87 of the Act by the Court under Section 75 of the Act. Irrespective of the fact whether the order passed under Section 87 of the Act is in any way can be assailed by way of appropriate grounds, be it for want of reasons or lacunae or violation of principles of natural justice, it is not for the Employees Insurance Court acting under Section 75 of the Act to assail or set aside the same. The said order granting or rejecting exemption under Section 87 of the Act is very much binding and conclusive on the Employees Insurance Court as constituted under Section 74 of the Act...." (Emphasis added)
15.As found in Section 90 of the ESI Act, the State Government can exercise its power after consultation with the ESI Corporation. In the present case, the impugned order shows that the petitioner corporation was consulted and they were also called for a discussion on 19.1.2007. The Corporation had furnished a comparative study of the benefit available with them and with the first respondent. The word "consultation" does not mean a consent. Therefore, the petitioner ESI Corporation do not have veto power in torpedoing a decision made by the appropriate Government. The term "consultation" as found under
Article 217 of the Constitution came to be considered by the Supreme Court vide decision in S.P.Gupta Vs. Union of India reported in 1981 (Supp) SCC 87. It was held that the word "consultation" does not mean "consent".
16.The writ petition also suffers from non impleadment of workers while challenging the order of exemption granted by the Government. In the present case, the impugned order clearly showed that the trade union representing the workers, i.e. PASIC Employees Federation unanimously requested for the grant of exemption. They had also submitted individual option letters from the employees. Therefore, in challenging the said notification, the workers are necessary and proper parties before this court. The petitioner had not made any one of them as party.
17.In this context, it is necessary to refer to the judgment of the Supreme Court in State of Tamil Nadu Vs. K. Sabanayagam reported in 1998 (1) LLN 383 = (1998) 1 SCC 318, wherein the Supreme Court had held that the Government before grant of exemption must necessarily hear the workers, who are vitally interested in having the welfare legislation in their favour. Though the said judgment arose under the Payment of Bonus Act, the law laid down by the Supreme Court will squarely apply to the case on hand.
18.Very recently, the Supreme Court in Employees' State Insurance Corporation Vs. Bhakra Beas Management Board and another reported in 2009 (10) SCC 671 has held that even before the ESI Court while hearing a matter under Section 75 regarding the coverage, workers must be made as parties either in individual capacity or in a representing capacity. It is necessary to refer to paragraphs 4 and 5 of the said judgment which is as follows:
"4.This Court has recently held in Fertilizer & Chemicals Travancore Ltd. v. ESI Corpn.1 as under: (SCC pp. 487-88, paras 5-10) 5. It may be noted that in its petition before the Employees Insurance Court, the appellant herein only impleaded the Employees State Insurance Corporation and the District Collectors of Alleppey, Palaghat and Cannanore as the respondents but did not implead even a single workman as a respondent. Labour statutes are meant for the benefit of the workmen. Hence, ordinarily in all cases under labour statutes the workmen, or at least some of them in a representative capacity, or the trade union representing the workmen concerned must be made a party. Hence, in our opinion the appellant (petitioner before the Employees Insurance Court) should have impleaded at least some of the persons concerned, as respondents.
6. The case of the appellant was that, in fact, none of the persons concerned was its employee and it was difficult to identify them. In this connection we may refer to Section 75(1)(a) of the Act which states that if any question or dispute arises as to whether any person is an employee of the employer concerned, or whether the employer is liable to pay the employers contribution towards the said persons insurance, that is a matter that has to be decided by the Employees Insurance Court. Hence, in our opinion, the person concerned has to be heard before a determination is made against him that he is not an employee of the employer concerned.
7. The rules of natural justice require that if any adverse order is made against any party, he/she must be heard. Thus, if a determination is given by the Employees Insurance Court that the persons concerned are not the employees of the petitioner, and that determination is given even without hearing the persons concerned, it will be clearly against the rules of natural justice. It may be seen that Section 75 of the Act does not mention who will be the parties before the Insurance Court. Since the determination by the Insurance Court is a quasi-judicial determination, natural justice requires that any party which may be adversely affected or may suffer civil consequences by such determination, must be heard before passing any order by the authority/court.
8. In our opinion, wherever any petition is filed by an employer under Section 75 of the Act, the employer has not only to implead ESIC but has also to implead at least some of the workers concerned (in a representative capacity if there are a large number of workers) or the trade union representing the said workers. If that is not done, and a decision is given in favour of the employer, the same will be in violation of the rules of natural justice. After all, the real parties concerned in labour matters are the employer and the workers. ESI Corporation will not be in any way affected if the demand notice sent by it under Sections 45-A/45-B is quashed.
9. It must be remembered that the Act has been enacted for the benefit of the workers to give them medical benefits, which have been mentioned in Section 46 of the Act. Hence, the principal beneficiary of the Act is the workmen and not ESI Corporation. ESI Corporation is only the agency to implement and carry out the object of the Act and it has nothing to lose if the decision of the Employees Insurance Court is given in favour of the employer. It is only the workmen who have to lose if a decision is given in favour of the employer. Hence, the workmen (or at least some of them in a representative capacity, or their trade union) have to be necessarily made a party/parties because the Act is a labour legislation made for the benefit of the workmen.
10. In the present case the workmen concerned were not made parties before the Employees Insurance Court, nor was notice issued to them by the said court.
5.Neither the workers of Respondent 1 nor any one of them in representative capacity were impleaded either before the Employees State Insurance Court or before the High Court. In our opinion, this is in violation of the principles of natural justice."
If the employees are necessary parties either at the time of grant of exemption or before the ESI Court in a petition under Section 75, they are necessary and proper parties before this court in a petition challenging an exemption notification. Therefore, the present writ petition also is liable to be rejected on the ground of non joinder of proper and necessary parties.
19.Though it was contended that in the earlier order, the Government had declined to grant exemption, that does not mean in a change of circumstances, a fresh request cannot be considered. In the present case, there was a direction by this court to consider the case of the first respondent. Even otherwise such issues can be gone into only when proper parties i.e. employer or employees, came before this court and challenged an order granting exemption from the ESI Act.
20.De hors the rival contentions made, the fundamental question that has to be decided in the present case is whether the petitioner ESI Corporation which is a creature under the ESI Act is entitled to challenge the exercise of the power of an appropriate Government in granting exemption under Chapter VIII of the ESI Act.
21.As can be seen from Section 90, the role of the ESI Corporation is only a consultative body and not beyond that. Thus, in case where a dispute is determined under Section 75, a decision of the ESIC may be set aside by the ESI Court. In those circumstances, the ESI Corporation can certainly file an appeal under Section 82 before this court or challenge it in a given case by filing a writ petition under
Article 226 of the Constitution. In cases where the very order of the ESI was negatived or nullified by the ESI Court, they may have locus standi to file an appeal or writ petition. But where an exemption is granted thereby the very Act itself is made inapplicable there is no scope for the ESI Corporation to challenge the same. In other words, they do not exist in the eye of law in respect of an establishment which is exempted under the Act. They cannot be said to be an aggrieved party in challenging such an order. The Act do not give any such locus standi to the ESI Corporation to challenge such orders.
22.Before concluding the case, the prayer made by the first respondent must be considered. In paragraph 19(A) of the counter filed by the first respondent, it was averred as follows:
"19(A)As stated above, the petitioner has malafide, illegally and forcibly taken away a sum of Rs.37,27,475.93 from the Bank Account of the 1st respondent and keeping the same with it from 20.01.2006. Hence, it is bound to refund the said amount along with interest at 24% p.a. to the 1st respondent. Therefore, the 1st respondent has sent letters dt.14.03.2008 & 30.04.2008, requesting the petitioner to refund the said amount along with interest. However, the petitioner had not refunded the said amount and the 1st respondent was insisting it to refund the same. Now, only in an attempt to delay and defeat the said demand for refund, the petitioner has filed the above W.P., praying to quash the order dt.18.02.2008...."
23.The Allahabad High Court vide its decision in U.P. State Road Transport Corporation Vs. ESIC reported in 2009 (2) LLN 130 = 2009 (1) LLN 247 has held that when once the ESI Act exempts an establishment, the ESIC must refund the amounts collected from the establishment with interest. In view of the fact that the amounts have been recovered through garnishee order payable by the first respondent, the petitioner ESI Corporation is hereby directed to refund the amount of Rs.37,27,475.93 which was recovered through coercive process within eight weeks from the date of receipt of the order. However, this court is not inclined to order any interest on the payment as claimed by the first respondent. The writ petition is dismissed with the above directions. No costs.
vvk To
1.M/s.Pondicherry Agro Service and Industries Corporation Limited, (A Government of Pondicherry Undertaking), Pondicherry.
2.The Joint Secretary to Government (Labour), The Government of Puducherry, Labour Department, Puducherry