JUDGMENT O. P. Garg, J.
1. The petitioner is the registered union of the employees of the Lohiya Machines Ltd.. C-10, site II, Panki Industrial Area. Kanpur and has come forward to espouse the cause of its members. By means of the present writ petition under Article 226 of the Constitution of India, the Government order dated 3.10.1997 rejecting the application of the petitioner, whereby exemption from the operation of the provisions of Employees' State Insurance Act, 1948 (hereinafter referred to as 'the Act') was sought, has been challenged on a variety of grounds, inter alia , that the petitioner has not, at all. been given an opportunity of hearing and the order has been passed in a most cursory and perfunctory manner without recording any reasons.
2. Put briefly, the facts of the case are that by notification No. G. S. R. 582 (E) dated 23rd December, 1996. Employee's State Insurance (Central) Rules. 1950 were amended by the Amendment Rules of 1996. to come into force w.e.f. 1st January, 1997. The effect of this amendment/notification was that the employees who were drawing wages/salary ranging between Rs. 3.000 and 6,500 also came within the sweep of the Act. The petitioner addressed an application to the Labour Secretary, Union of India, New Delhi on 7.1.1997. Annexure-5 to the writ petition, praying for exemption from the operation of notification dated 23rd December, 1996 on the ground that the medical facilities and other privileges which the members of the petitioner are enjoying under the employer are much better and far superior than the benefits available through the agencies prescribed under the Act. It appears that no action was taken on the said application and consequently, the petitioner preferred Civil Misc. Writ No. 7844 of 1997 before this Court. It was finally disposed of by order dated 4th March, 1997. The relevant portion of the order runs as follows :
"However, I direct that if the petitioner moves such an application before the State Government within two weeks' from today, the impugned circular dated 1.1.1997 shall remain stayed until the disposal of the said exemption application. The State Government will decide the said exemption application within a period of three months of production of a certified copy of this order in accordance with law after hearing the parties concerned."
An application for modification of the aforesaid order was moved. The above order was modified by this Court on 12.3.1997 to the following extent :
"On the facts of the case, I direct that respondent No. 3 will not make deduction of E.S.I, contribution from the salary of the members of the petitioner and shall provide medical benefits to them which they were getting prior to 1.1.997 until the decision of the State Government on the exemption application. My judgment dated 4.3. 1997 stands modified accordingly. Let the modification be made in the certified copy also."
In terms of the directions made by this Court in the aforesaid writ petition, the petitioner made a representation to the Secretary, Labour Department, U. P. Government on 10.3.1997, a copy of which is Annexure-8 to the writ petition. Through letter dated 9.9.1998, the Deputy Director of the Employees' State Insurance Corporation established under the Act informed the respondent No. 3 M/s. Lohiya Machines Ltd.. that the State Government has refused to grant exemption as prayed by the petitioner. A copy of the Government order dated 3.10.1997, which is Annexure-11 to the writ petition, was also enclosed. It was through this communication that the petitioner came to know of the rejection of their application for exemption moved by them. Consequence of the rejection of the exemption application is that the members of the petitioner, who are drawing salary/wages between Rs. 3,000-6.500 have come within the ambit of the Act and in view of Section 39 of the Act. and the rules framed thereunder, deductions have to be made to remit their share of contribution to the Corporation.
3. Heard Sri V, B. Singh. learned counsel for the petitioner, Sri Rajesh Tewari appearing on behalf of the respondent No. 2 Employee's State Insurance Corporation [for short 'E.S.I.C.'] and learned standing counsel on behalf of the State of . U. P., at considerable length.
4. The grievance of the petitioner is that the State Government has passed the impugned order dated 3.10.1997 refusing to grant exemption from the provisions of the Act without hearing the employers and the officebearers of the Karmachari Sangh or any one of its members. It was also urged that the order in question has been passed in most cursory, perfunctory and casual manner without assigning any reason. Sri Rajesh Tewari appearing on behalf of the respondent No. 2-E.S.I.C. and the learned standing counsel on behalf of the State Government took the stand that a plain reading of the various provisions with regard to the exemption contained in Chapter VII of the Act indicates that no opportunity of hearing is required to be given by the State Government before passing the requisite orders. Sri V. B. Singh, learned counsel for the petitioner pointed out that besides the order of this Court dated 4.3.1997 in Writ Petition No. 7844 of 1997 in which it was specifically directed that the State Government will decide the exemption application within the specified period in accordance with law after hearing the parties concerned, a requirement of hearing is to be read in the exemption provisions itself as the State Government performs the quasi-judicial function to come to the conclusion whether exemption from the operation of the Act is to be granted or not. The implications of the order passed by the Government are of far reaching consequences and, therefore, an opportunity, of hearing is implicit in the provisions even though explicit provision for hearing may not have been made. This submission made on behalf of the petitioner cannot be easily brushed aside as it is quite weighty and apt. The application for exemption was moved by the petitioner under Section 88 of the Act. This section reads as follows :
"Exemption of persons or class of persons.--The appropriate Government may, by notification in the Official Gazette and subject to such conditions as it may deem fit to impose, exempt any person or class of persons employed in any factory or establishment or class of factories or establishments to which this Act applies from the operation of the Act."
There are other provisions relating to exemption in different circumstances, contained in Chapter VII. The present slant of the doctrine of applicability of principles of natural justice which embraces within Its ambit affording of reasonable opportunity of hearing is that unless a particular provision in the Statute expressly or by necessary implication excludes recording of reasons, it is implicit that the principles of natural justice or fair play do require affording of reasonable opportunity and recording of reasons as a part of fair procedure.
5. Now comes the key question whether the impugned order withstands the test of scrutiny at the alter of the principles of natural justice. A brief survey of the decisions on the point may usefully be made. In the process of development of doctrine of natural justice as applicable to administrative bodies, the law laid" down by the Apex Court in the case of A. K. Kraipak and others v. Union of India, 1970 II) SCR-457, is a turning point. It was said that under our Constitution, the rule of law pervades over the entire field of administration. Even organ of the State under our Constitution is regulated and controlled by the rule of law. The concept of rule of law would lose its vitality if the instrumentalities of the State are not charged with the duty of discharging their functions in a fair and just manner. The requirement of acting judicially in essence is nothing but a requirement to Act justly and fairly and not arbitrarily or capriciously. The procedures which are considered inherent in the exercise of a Judicial power are merely those which facilitate if not ensure a just and fair decision. In the case of Keshav Mills Co. Ltd. v. Union of India, 1973 (3) SCR 22, it was observed that the administrative authorities concerned should act fairly, impartially and reasonably and where the administrative officers are concerned, the duty is not so much to act judicially but to act fairly. The oft quoted celebrated observations of Justice Krishna Iyer of the Apex Court in the case of Mahendra Singh Gill v. Chief Election Commissioner, 3978 (1) SCC 405, have left an indelible impact on the development of the law on the point. It was commented that the natural justice though varying is the soul of the rule as fair play in action. It extends to both the fields of judicial and administrative. The administrative power in a democratic set up is not allergic to fairness in action and discretionary executive Justice cannot be degenerated into unilateral justice. Good administration demands fair play in action and this simple desideratum is the fount of natural justice. Fairness is flexible and is intended for improving the quality of Government by injecting fair-play into its wheels. In Siuadeshi Cotton Mills v. Union of India, 1981 (42) FLR 225 (SC), Sarkaria. J., speaking for himself and Desi, J., said that Irrespective of whether the power conferred on a statutory body or tribunal is administrative or quasi-judicial a duly to act fairly, that is, in consonance with fundamental principles of substantive justice is generally implied. The presumption is that in a democratic polity wedded to the rule of law, the State or the Legislature does not intend that in the exercise of their statutory powers its functionaries should act unfairly or unjustly. The citations on the point may be multiplied since fairly abundant case law has come into existence. The modern concept of administrative law is that the State functionaries must act fairly and reasonably. In Management M/s. M. S. Nally Bharat Engineering Co, Ltd. v. State of Bihar and others, 1990 (60) FLR (SC) 785, it was observed that what is thus important in the modern administration is the fairness of procedure with elimination of element of arbitrariness. The State functionaries must act fairly and reasonably. That is, however, not the same thing to state that they must act Judicially or quosi-judicially.
6. The decisions with regard to the question of applicability of the principle of natural justice do not all speak in the same voice and sometimes it is difficult to reconcile them. Nevertheless, a duty has- been cast on the administrative authorities to act fairly, i.e., in consonance with the fundamental principles of substantial justice.
7. After having gone through the various illuminating decisions of the Apex Court on the question of observance of the fundamental principles of natural justice, such as. Sam Dutt v. Union of India, AIR 1969 SC 414 : Union of India v. Mohan Lal Kapoor, (1978) 2 SCC 836 ; Gurdian Singh Fijji v. State of Punjab, (1979) 2 SCC 368 ; Baldev Singh and others v. State of Mimachal Pradesh, (1987) 2 SCC 510 ; Mahavir Auto Stores and others v. Indian Oil Corporation and others, (1990) 3 SCC 752 ; S. N. Mukherji v. Union of India, (1990) 4 SCC 594 ; Maharashtra State Board of Secondary and Higher Secondary Education u. K. S. Gandhi and others, (1991) 2 SCC 716 ; Managing Director E.S.I.L. Hyderabad v. B. Karunakaran, JT 1993 (6) SC 1 ; and M. J. Sivani and others v. State of Karnataka and others, AIR 1995 SC 1770. one cannot escape from the conclusion that the applicability of the principles of natural justice is not a rule of thumb or strait-jacket formula or an abstract proposition of law. It depends upon the facts of the case, nature of the enquiry and the effect of the order/decision on the rights of the person and attendant circumstances. It is noticeable feature that the Courts have not hesitated in moulding the concept of natural justice to suit the exigencies and situations.
8. Expanding horizon of the concept of principles of natural justice has gone even to the extent that there is another general principle that an administrative or statutory body should always and in every case give reason in support of its decision. An administrative decision must contain reasons even though the requirement to do so may not flow from the Rules. In S, N. Mukherjee's ease (supra), the Constitution Bench of the Apex Court after surveying the entire case laws on the point has held that except in cases where the requirement has been dispensed with, expressly or by necessary implication, an administrative authority exercising judicial or quasi-judicial function, is required to record reasons for its decision. In para 36 of the report, at pages 612 and 613. it was further held that the recording of reasons...excludes chances of arbitrariness and ensures a degree of fairness in the process of decision making. The said principle would apply equally to all decisions and its implications cannot be confined to the decisions which are subject to appeal, revision or judicial review. The same view was reiterated in the case of Maharashtra State Board of Secondary and Higher Secondary Education (supra). The Apex Court observed in para 21 of the report as follows :
21. Thus, it is settled law that the reasons are harbinger between the mind of the maker of the order to the controversy In question and the decision or conclusion arrived at. It also excludes the chances to reach arbitrary, whimsical or capricious decision or conclusion. The reasons assure an in-built support to the conclusion/decision reached. The order when it affects the right of a citizen or a person, irrespective of the fact, whether it is quasi-judicial or administrative fair play requires recording of germane and relevant precise reasons. The recording of reasons is also an assurance that the authority concerned consciously applied its mind to the facts on record..."
The extent and nature of the reasons would depend on particular facts and circumstances. What is necessary is that the reasons are clear and explicit so as to indicate that the authority has given the consideration to the -points in controversy. In M. J. Sivani and others (supra), it has been observed in para 32 of the report, as under:
"32. It is also settled law that the order need not contain detailed reasons like Court order. Administrative order itself may contain reasons or the file may disclose reasons to arrive at the decision showing application of mind to the facts in issue. It would be discernible from the reasons stated in the order or the contemporaneous record contained. Reasons are the link between the order and the mind of its maker. When rules direct to record reasons, it is a sine qua non and condition precedent for valid order. Appropriate brief reasons, though not like a judgment, are necessary concomitant for a valid order in support of the action or decision taken by the authority or its instrumentality of the state."
9. No hard and fast rule can be laid down for testing the question as to whether the principles of natural justice have been complied with or not as no strait-jacket formula has been provided for the observance of principles of natural Justice. It depends on the nature of the proceedings and the procedure adopted by the Court, Tribunal or authority. In Managing Director E.S.I.L. Hyderabad v. B. Karunkaran, JT 1993 (6) SC 1, the Hon'ble Supreme Court held as follows :
"......The theory of reasonable opportunity and the principles of natural justice has been evolved to uphold the rule of law and to assist the individual to vindicate his just rights. They are not Incantations to be invoked nor rites to be performed on all the sundry occasions. Whether in fact. prejudice has been caused to the employee or not on account of the denial to him of the report, has to be considered on the fats and circumstances of each case...."
In the oft quoted celebrated decision of the Apex Court in Union of India v. Mohan Lal Kapoor (supra), It was held in paragraph 28 of the report, at page 834 that the reasons are the links between materials on which certain conclusions are based to the actual conclusions. They disclose how mind is applied to the subject-matter for a decision whether it is purely administrative or quasi-Judicial. They would reveal nexus between the facts considered and the conclusions reached. This view as reiterated in Gurdial Singh Fijji v. State of Punjab, (1979) 2 SCC 368. In Mohan Lal Kapoor's case (supra), rules and regulations required recording of reasons in support of the conclusions, as mandatory.
10. There is another thinking which necessitates the recording of reasons to support the conclusions. It is well-settled law that every action of the State or Instrumentality of the State must be informed by reason. Actions uninformed by reason may tantamount to arbitrariness. The State action must be just, fair and reasonable. Fair play and natural justice are part of public administration ; non-arbitrariness and absence of discrimination are said to be hallmarks for good governance under the rule of law. One cannot, therefore, escape from the conclusion that it is imperative on the State Government to Inform its order by recording reasons to reach a particular conclusion. With this caution in mind, and in the perspective of the law, as mentioned above, the question is whether the impugned order withstands the test of scrutiny at the altar of the principles of natural justice or not and if it is found that the reasons are conspicuously missing to arrive at the conclusion, a further question would be whether omission to record reasons vitiates the Impugned order or is in violation of the principles of natural justice.
11. There is a direct authority of Orissa High Court on the point which is in Orissa Industries Ltd. and another v. Union of India and others. 1992 LLJ 182. In that case, the Government was called upon to deal with the application of the employer and Union for seeking exemption from provisions of the Act. It was held that before deciding whether benefits provided by employer are substantially similar or superior to benefits provided under the Act, it is just and proper that parties concerned should be heard. The State Government is to examine whether the benefits provided by the employer are substantially similar or superior to the benefits provided under the Act. It is, therefore, necessary, for the State Government to give a hearing. Such a procedure has been held to be just and proper. It was further observed that the fact that a particular provision does not speak about giving a hearing to the employer does not mean that no hearing is to be given to the employer/union of the workmen under any circumstances. A valuable right of the employer/union is involved and, therefore, before decision is taken in the rnatter of exemption, employer/union must be heard. In the said case, reliance was placed on the decisions of the Apex Court in M. S. Gill (supra) and S. L. Kapoor (supra).
12. The tone and tenor of the impugned order passed by the State Government on the representation for exemption made by the petitioner pursuant to the orders passed by this Court in Civil Misc. Writ Petition No. 7844 of 1997 makes it clear that the State Government did not apply judicial mind to the crucial question whether the benefits provided by the employer are substantially similar or superior to the benefits provided under the Act. Even an empty ritual of hearing the employer/union as well as E.S.I.C. was not performed. It is also sad and bad that the order passed by the State Government completely omits the reasons, which impelled it to reject the prayer for exemption. One does not get any information from the order. As said above, the order should contain the well informed reasons, even though precise in nature. The idea is that the party applying for exemption should at least know the reasons which weighed with the State Government either to grant or to refuse the exemption.
13. For the reasons stated above, non-speaking slip shod impugned order passed by the State Government, dated 3.10.1997 rejecting the application for exemption in a cryptic manner cannot be sustained.
14. The submission of the learned counsel for the petitioner that the State Government should have granted exemption as the benefits provided by the employer are far superior and of better quality than the facilities which may or may not be provided under the Act and there is unanimity between the employer and the employees on the point, cannot be sifted by this Court. It is a matter of policy decision to be taken by the State Government after taking into consideration the various Imponderables. The Court fears to tread the path leading to a policy decision which the State Government has to take after taking into consideration the rival contentions of the parties. It is for this reason that this Court refrains from making any observation one way or the other-lest it may Influence the process of making the decision by the State Government. It may also be made clear that the provisions of the Act are all pervading and apply to the establishments and their employees in the situations contemplated by the Act. A law is usually enacted because the Legislature feels that it is necessary. So long as exemption is not granted, the provisions of the Act shall have their full play. Exemption implies immunity from "it particular provisions of law. The provisions of the Act. therefore, shall continue to be operative till appropriate orders for exemption or otherwise are passed by the State Government.
15. In the light of the above facis, this writ petition is finally disposed of with the direction that the Slate Government shall give a fresh look to the application for exemption from the operation of the Act moved by the petitioner-Sangh and decide the same afresh after giving opportunity of hearing to all the concerned parties, particularly the employers, the Union of the employees (petitioner) and the E.S.I.C. The well reasoned and speaking order shall be passed by the State Government on the representation of the petitioner positively within a period of three months from the date of production of a certified copy of this order before the Secretary. Labour Department, Uttar Pradesh Shashan, Vidhan Bhavan Lucknow. A copy of this order shall be produced by the petitioner or by the respondent No. 2 before the Secretary, Labour Department. Uttar Pradesh Shashan. Vidhan Bhavan, Lucknow by 10th of June 1999.