Court No. - 7
Case :- WRIT - C No. - 32496 of 2018
Petitioner :- New Okhla Industrial Development Authority Respondent :- Employees State Insurance Corporation, Noida Counsel for Petitioner :- Kartikeya Saran
Counsel for Respondent :- Rajesh Tewari
Hon'ble Saumitra Dayal Singh, J.
1. Heard Sri Navin Sinha, learned Senior Counsel assisted by Sri Kartikeya Saran, learned counsel for the petitioner and Sri Rajesh Tewari, learned counsel for the respondent Corporation.
2. Challenge has been raised in this writ petition to the order dated 23.07.2018 passed by the Assistant Director, Employees State Insurance Corporation (hereinafter referred to as the 'Corporation') in compliance of the order of this Court dated 23.04.2018 passed in Writ – C No. 14092 of 2018. By the impugned order, the Assistant Director of the Corporation has held that the petitioner/NOIDA is an 'establishment' under Section 1(5) of the Employees' State Insurance Act, 1948 (hereinafter referred to as the Act). While reaching that conclusion, it has been reasoned that the NOIDA falls under the category of 'shop' and therefore it is covered by a notification issued under Section 1(5) of the Act. Consequently, a demand of Rs. 2,09,72,58,404/- has been raised against NOIDA.
3. Briefly, the present writ petition has its genesis in the earlier order of this Court dated 23.04.2018 passed in Writ – C No. 14092 of 2018. At that stage, the Corporation had passed an order dated 22.03.2018 raising a demand of Rs. 2,13,28,35,938/- for the period April, 2013 to October, 2017. The principal objection raised by the petitioner as was also noted in that order was to the effect that though the aforesaid order was preceded by a notice, however, the petitioner had not been afforded adequate opportunity to reply to the same. Thus, violation of rules of natural justice had been pleaded. That challenge had been sustained to a limited extent inasmuch as this Court provided that the operation and effect of the order dated 22.03.2018 may remain stayed initially for a period of six weeks subject to the petitioner filing all objections before the Corporation which, if filed, were required to be decided after affording opportunity of hearing. Subject to the petitioner complying with the direction contained in that order, the recovery proceedings were directed to be stayed during pendency of the objections.
4. It is also worthwhile to mention that at that stage, an objection of alternative remedy had been raised, however, the Court negatived that plea by observing that violation of the principles of natural justice and since sufficient opportunity had not been granted, the bar of alternative remedy may not be applied.
5. Admittedly, in compliance of the order dated 23.04.2018, the petitioner filed its further reply on 03.06.2018, copy of which has also been annexed with the present writ petition. In paragraphs 9 and 11 of those objections, a specific plea of bar of jurisdiction was raised by the petitioner to the effect that in the first place, petitioner was not a factory and therefore, it did not fall within the coverage of the Act by virtue of Section 1(4) of the Act and then it was further stated that no notification had been issued to render the petitioner an establishment amenable to the Act.
6. By the impugned order, the objections raised by the petitioner have been rejected. In paragraph 4 of the impugned order, it has been observed that any establishment rendering service for price may fall under the category of 'shop'. Then, without taking the issue any further, without offering any reasoning as to how the petitioner would have rendered any service that may make it fall under the category of 'shop', it has been observed that the petitioner had been engaging contractual workers to get different works executed. Since contractual workers fall within the definition of contractual employee under Section 2(9) of the Act, then making reference to certain decisions of the Supreme Court, it has been concluded that the petitioner/NOIDA fell within the coverage of the Act.
7. Last, it has been observed that the requirement of Section 1(5) of the Act did not mandate specification of each and every establishment for the purpose of making them fall within the coverage of the Act.
8. Assailing the aforesaid order, learned Senior Counsel appearing for the petitioner submits that undisputedly, the Act applies in the first place to factories by virtue of Section 1(4) of the Act fall within the establishment under that Section. Clearly and admittedly, the petitioner has not been treated as a factory and therefore, this issue need not be noted any further, as no other discussion is required on this aspect.
9. As to the applicability of Section 1(5) of the Act, it has been submitted that no establishment may fall under the coverage of the Act by itself except upon issuance of a notification. In this regard, it has been submitted that neither in the impugned order nor in the counter affidavit filed to the writ petition has the Corporation disclosed or made reference to any notification that may have been issued under Section 1(5) of the Act and which may be pressed against the petitioner. However, learned counsel for the respondent has, at the stage of hearing, placed reliance on notification no. 5387/36-535(I)/74 dated 24.02.1976. Upon that reliance being placed, learned Senior Counsel has advanced his submissions in that regard. Perusal of the notification reveals that certain establishments mentioned in column (1) of that notification have been notified under Section 1(5) of the Act. By virtue of clause (3) of column (1) of that notification - (a) hotel, (b) restaurant, (c) shops etc. have been notified.
10. Learned Senior Counsel for the petitioner submits that even in that regard, the petitioner had raised detailed objections by virtue of paragraph 12 onwards of its written objections filed on 03.06.2018 to establish that it was a statutory corporation established under the U.P. Industrial Area Development Act, 1976 for the objects enumerated in Section 6 of that Act itself. Referring to the various activities engaged in by Noida (detailed in the objections), it was submitted that the petitioner was not an establishment or entity that was engaged in any systematic, economic or commercial activity as may make it fall within the ambit of shop establishment notified under Section 1(5) of the Act.
11. In any case, it has been submitted that the Additional Director of the Corporation failed to apply his mind to the aforesaid specific written objections and without adverting to the same, has merely recorded his conclusion that the petitioner is an establishment under the Act being a shop. Such over simplistic conclusion could not have been drawn. Insofar as no reasoning has been offered in the impugned order, learned Senior Counsel would submit that there does not arise any presumption in that regard and the order as passed cannot be sustained. He would further submit that before any declaration could be made to treat the petitioner to be a shop, the specific objections raised by the petitioner ought to have been dealt with and decided and no comparison could be made to any other commercial establishment in the case of a Development Authority.
12. As to the second limb of the reasoning in the impugned order, it has been submitted that merely because the definition of employee under Section 2 (9) of the Act may include contractual workers, the same may never be enough to bring an entity under the ambit of the Act or to describe the same as a notified establishment under the Act. The issue of lack of notification hits the jurisdiction of the authorities under the Act and unless that notification is first shown to exist and unless it is established that the petitioner is covered under such notification, the provisions of Section 9 which pertain to applicability or enforceability of the specific provisions of the Act cannot be looked into. In fact, the same may remain extraneous to the issue of jurisdiction.
13. Shri Rajesh Tiwari, learned counsel for the respondent Corporation, on the other hand, submits that the present writ petition is barred by statutory alternative remedy. In this regard, it has been submitted that the petitioner has a remedy of appeal under Section 45- AA of the Act before the higher authority of the Corporation as also under Section 75(1)(g) of the Act before the Employees Insurance Court. He would, therefore, submit that the petitioner may raise all objections on fact and law before either of those authorities but may not be permitted to invoke the extraordinary jurisdiction of this Court under Article 226 of the Constitution of India. Then, it has been submitted that the beneficiaries, for whose benefit the Corporation has created the demand against the petitioner, have not been impleaded as a party either individually or in a representative capacity. Therefore, relying on a decision of the Supreme Court in the case of Employees State Insurance Corporation Vs. Bhakra Beas Management Board, (2009) 10 SCC 671, it has been submitted that the present writ petition is liable to be dismissed for non-impleadment of necessary parties.
14. Third, referring to Sections 40 and 41 of the Act, it has been submitted that the petitioner as the principal employer was liable to discharge the default committed by the immediate employer, i.e. contractors and it was further enabled to make recoveries of such amounts from the concerned contractors. Therefore, no real prejudice has arisen to the petitioner.
15. Next, it has been submitted that the petitioner is clearly an establishment notified under the Act, inasmuch as it is no longer in dispute that the word 'shop' notified under Section 1(5) of the Act does not refer to a shop establishment as commonly understood but that word has to be interpreted not in the ordinary meaning of the word but as a reference to any systematic, economic or commercial activity. A reference in this regard has been made to a further decision of the Supreme Court in the case of Bangalore Turf Club Ltd. Vs. Regional Director, ESI Corporation, (2014) 9 SCC 657. Elaborating his submissions, learned counsel has relied on an earlier communication dated 02.04.2004 issued by the Deputy Director of the Corporation which has been annexed by way of Annexure CA-1 to the counter affidavit. It has thus been submitted that the petitioner was declared to be covered under the scheme by virtue of the notification issued under Section 1(5) of the Act.
16. Having heard learned counsel for the parties and having gone through the record, in the first place, the objections as to the alternative remedy has to be seen in the context of the earlier order passed by this Court. The present is not the first writ petition being filed by the petitioner against the demand created against Noida. As noted above, earlier a demand of Rs. 2,13,28,35,938/- for the period April 2013 to October 2017 had been issued by the Corporation on 22.03.2018. It is that demand which was put in abeyance by the order dated 23.04.2018 requiring the respondent Corporation to re-adjudicate the issue in light of the issue that was specifically permitted to be raised by the petitioner. To that extent, there is no dispute between the parties. Then, it also cannot be disputed that in compliance of the aforesaid direction, the petitioner did file its objections in writing on 03.06.2018. Relevant to the present controversy paragraphs 9 and 11 of those objections may be noted. They read thus:
“9. That as per Section 1(4) of the Act, the Employees'
State Insurance Act, 1948 (hereinafter referred to as the 'Act'), the Act shall apply in the first instance to all factories belonging to the Government other than seasonal factories.
Provided that nothing contained in this sub-section shall apply to a factory or an 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.
The appropriate Government may, in consultation with the Corporation and [where the appropriate Government is a State Government, with the approval of the Central Government], after giving [one month's] notice of it's intention of so doing by notification in the Official Gazette, extend the provisions of this Act or any of them, to any other establishment, or class of establishments, industrial, commercial agricultural or otherwise.
[Provided that where the provisions of this Act have been brought into force in any part of a State, the said provisions shall stand extended to any such establishment or class of establishments within that part if the provisions have already been extended to similar establishment or class of establishments in another part of that State.] It may kindly be appreciated that the term 'establishment' has not been defined under the Act. It may kindly further be appreciated that the provisions of the Act are not applicable to every other 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 the Act even after notification under sub-section 5 of Section 1 of the Act.
11. That no notification has been issued in the Official Gazette which renders the Respondent establishment amenable to the provisions of the Act, as would be delineated/demonstrated herein below;
THE SET UP OF NOIDA, ITS AIMS, OBJECTS & FUNCTIONS AS A BODY CORPORATE:”
17. It may also be noted that detailed facts were stated from paragraph 12 onwards (running into several pages) to bring out the objections of incorporation of the petitioner Corporation as also the scope, extent and limit of its activities.
18. Essentially, the petitioner set up a case that it was not an establishment notified under the Act by virtue of the nature of its object of formation and activities engaged in. The exact nature of the activities which were adverted to in the objections are not being referred to herein above for the reason that the same have not been dealt with at all by the authority and reference to the same may only add to the bulk of this order when no finding may returned on the issue at this stage.
19. That objection having been raised, the impugned order makes short work of the same by only recording the conclusion that the petitioner is an establishment being a 'shop'. While it is true that shop is not to be interpreted in its ordinary meaning, however, it also does not lead to the conclusion that each and every activity that may have some economic or commercial implications would be rendered a shop for the purpose of the Act. A proper application of mind and formation of reasons would be necessary in the facts of each and every case before a person may be held to be a notified establishment under Section 1(5) of the Act. In that regard, the respondent authorities appear to have misdirected itself in looking only at the contents of paragraph 11 of the objections but not looking at the facts stated therein below. The petitioner had clearly referred to the facts contained in paragraph 12 onwards to claim that it was not an establishment. The impugned order however does not make any reference to any of those objections but perhaps has drawn an over simplistic conclusion merely looking at the contents of paragraph 11 of the objections. Whatever be the real reason, it cannot be denied that specific objections and grounds raised in paragraph 12 onwards of the reply furnished by the petitioner have not been considered till now. Therefore, it cannot be said that the earlier order passed by this Court dated 23.04.2018 in Writ-C No.14092 of 2018 had been complied inasmuch as this Court had required the respondent authority to apply its mind and decide the objections (that were allowed to be filed) and pass a reasoned order thereon. Insofar as the earlier order of this Court does not appear to have been complied with, the plea of alternative remedy that was specifically repelled in the earlier writ petition, cannot be allowed to be raised or sustained at this stage. The same is therefore rejected.
20. Coming to the objections raised by the learned counsel for the respondents that the beneficiaries have not been impleaded as respondents, though, from the judgment relied upon by learned counsel for the respondents, the case of Employees State Insurance Corporation Vs. Bhakra Beas Managment Board (supra) does appear to indicate that in such cases, the beneficiaries may be made a party, however, it cannot be lost sight of the fact that that was a case pertaining to determination of liability. The issue of jurisdiction of basic coverage of the Act was never involved in that case. Once it was held that an establishment falls under the coverage of the Act, the rights of the beneficiaries which may be sought to be affected would have to be necessarily impleaded. However, at this stage, principally the matter is between the Corporation and the petitioner as an employer. The issue of coverage has to be decided between these parties. The action has been initiated by the respondent Corporation by issuance of the demand notice without reference to beneficiaries.
21. Also, as noted above, the present is not an independent proceeding but continuation of the proceedings that had resulted in the earlier order of this Court dated 23.04.2018 in Writ-C No. 14092 of 2018. The beneficiaries were not parties in the earlier writ petition as well. Therefore, at this stage, it does not appear that the present petition suffers from the defect of non-impleadment of necessary or proper party.
22. Third objection raised by the learned counsel for the respondent that the petitioner being a principal employer and by virtue of Section 2(9) read Sections 40 and 41 of the Act, it would be liable for the contribution and it may recover the same from the contractors, the same cannot be accepted till it gets determined that the petitioner falls within the coverage of the Act. The fact that the petitioner may have engaged workers on contract basis would never be sufficient to make the petitioner fall within the coverage of the Act. The issue of coverage has to be decided independent of the provisions for determination and recovery. For the purpose of deciding that issue the provisions of Section 1(4) and Section 1(5) of the Act read with the relevant notification alone are to be seen and at that stage and in those proceedings, the other provisions of the Act would never come into play. Therefore, the fact that the petitioner may be enabled to recover the amounts from the contractors can never be cited as a ground to resist a challenge to the jurisdiction.
23. Last, as to the submission advanced by learned counsel for the respondent that the petitioner is an establishment, as have been noted above, no finding has yet been returned by the respondent authority based on the objections raised by the petitioners. The conclusion referred to in the impugned order cannot be sustained in absence of any consideration on specific issues and objections raised by the petitioner or till those objections are met, it would be pre-mature to rush to the conclusion that the petitioner is an establishment being a 'shop' notified under the Act by applying the principle laid down by the Supreme Court in the case of Bangalore Turf Club Ltd. Vs. Regional Director ESI Corporation (supra). Once the facts are ascertained by the respondent-authority, it may remain a further issue before that authority to decide whether on the principle laid down by the Supreme Court in the above noted case, the petitioner may be classified as a 'shop' establishment. However, that discussion having not been made and the objections of the petitioner having not been met, it is not for this Court in the judicial review to engage on that disputed question or to record any finding or to make any observation in that regard. It would remain for the statutory authority/respondent-Corporation to make that exercise and pass an appropriate order by giving specific reasoning dealing with the objections.
24. In this regard, the fact that the petitioner may not have challenged the earlier declaration dated 02.04.2004 may not come in the way of the petitioner inasmuch as, the issue being a purely of jurisdiction and that having been raised in compliance of the directions issued by this Court, it was incumbent on the respondent-authority to have necessarily dealt with the same by passing a reasoned and speaking order.
25. In view of the above, the impugned order dated 23.07.2018 is set aside and the matter is remitted to the respondent-authority to pass a fresh order, making strict compliance of the directions issued by this Court order dated 23.04.2018 passed in Writ – C No. 14092 of 2018 within a period of two months from today.
26. The petitioner further undertakes not to seek any undue or long adjournments.
27. The present writ petition is accordingly allowed.
Order Date :- 24.1.2019 Abhilash