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IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED : 14.03.2011
CORAM
THE HONOURABLE MR.JUSTICE K.CHANDRU
W.P.NOs.2872, 2873, 4570, 4722, 5084, 5257 of 2011
and
M.P.NOs.1,1,1,1 and 1 AND 2,2,2,2,2 and 2 OF 2011
Maharaja College of Arts and Science,
represented by its Chairman, Neelambur, Arasur,
Coimbatore-641 407. .. Petitioner in W.P.No.2872 of 2011
Association of Management of Coimbatore
Anna University Affiliated Colleges
(Registration No.140/2008),
represented by its President,
119,Bhavani Road,
Erode-638 004. .. Petitioner in W.P.No.2873 of 2011
Tamil Nadu Nursery, Primary,
Matriculation and Higher Secondary
Schools Managements Association,
represented by its General Secretary, Mr.D.Christdass
Old No.64, New No.122, T.P.Koil Street,
Triplicane,Chennai-600 005. .. Petitioner in W.P.No.4570 of 2011
Federation of Association of Private
Schools in Tamil Nadu, represented by its President
Mrs.R.Visalakshi,
No.6A, New No.11, P.T.Rajan Road,
20th Avenue, Ashok Nagar,
Chennai-600 083. .. Petitioner in W.P.No.4722 of 2011
R.V.S.College of Arts & Science, represented by its
Chairman,
K.V.Kuppusamy,
Door No.242-B,Trichy Road,
Sulur, Coimbatore-641 402. .. Petitioner in W.P.No.5084 of 2011
Tamil Nadu Self Financing College of
Education Management Association,
represented by its Secretary Mr.S.Vijayakumar
Old No.7, New No.11, 3rd Cross Street,
West C.I.T. Nagar,Chennai-600 035. .. Petitioner in W.P.No.5257 of
2011
Vs.
1.The State of Tamil Nadu, represented by its
Principal Secretary to Government,
Labour and Employment Department,
Fort St. George,
Chennai-600 009. .. 1st respondent in all writ petitions
2.Employees' State Insurance Corporation,
represented by Assistant Director (Inspection),
1897, Trichy Road,
Panchdeep Complex,
Ramanathapuram, Coimbatore-641 045. .. 2nd respondent in
W.P.Nos.2872, 2873, 5084, of 2011
2.Employees' State Insurance Corporation, represented
by its Regional Director,
"Panchdeep", Sterling Road,
Nungambakkam,
Chennai-600 034. .. 2nd Respondent in W.P.Nos.4570 and 5257 of 2011
2.Employees' State Insurance Corporation, represented
by its Additional Commissioner and
Regional Director,
143, Sterling Road,
Nungambakkam,
Chennai-600 034. .. 2nd respondent in W.P.No.4722 of 2011
W.P.Nos.2872, 2873 and 5084 of 2011 are preferred
under Article 226 of the Constitution of India praying for the issue
of a writ of certiorari to call for the records relating to the
G.O.Ms.No.237, Labour and Employment (K1) Department, dated
26.11.2010 and published at page 879 of Part II Section 2 of the
Tamil Nadu Government Gazette No.51, dated 29.12.2010 and the order
of the second respondent in No.56/8/II/12/2(SSO)/Inspn/2011 dated
04.01.2011 and to quash the same insofar as they relate to the
petitioner and the members of the petitioner herein.
W.P.No.4722 of 2011 is preferred under Article 226 of
the Constitution of India praying for the issue of a writ of
certiorari to call for the records relating to the G.O.Ms.No.237,
Labour and Employment (K1) Department, dated 26.11.2010 passed by
the first respondent and to quash the same.
W.P.Nos.4570 and 5257 of 2011 are preferred under
Article 226 of the Constitution of India praying for the issue of a
writ of certiorari to call for the records in respect of the
impugned notification issued by the first respondent in
G.O.Ms.No.237, Labour and Employment (K1) Department, dated
26.11.2010 as published in the Tamil Nadu Government Gazette No.51,
dated 29.12.2010 in Part II Section II and to quash the same.
For Petitioners :
Mr.Kandan Doraisami in W.P.Nos.2872 and 2873 of 2011
Mr.R.Sureshkumar in W.P.Nos.4570 and 5257 of 2011
Mr.K.Selvaraj in W.P.No.5084 of 2011
Mr.AR.L.Sundaresan, SC for Mr.K.Surendar in W.P.No.4722 of 2011
For Respondents :
Mr.S.Sivashanmugam, GA for R1 in W.P.Nos.2872, 2873,
4570, 5084 and 5257 of 2011
Ms.C.Devi, GA for R-1 in W.P.No.4722 of 2011
Mrs.S.Jayakumari for R-2 in all writ petitions
COMMON ORDER
Heard the arguments of learned counsels in
W.P.Nos.2872, 2873, 4570, 5084 and 5257 of 2011 on 10.3.2011 and in
W.P.No.4722 of 2011 on 11.3.2011.
2.The short question that arises for consideration in
these writ petitions is whether the attempt by the State Government
in covering the educational institutions employing 20 or more
persons under the provisions of the Employees' State Insurance Act,
1948 (for short ESI Act) is legally valid? If the coverage of such
institutions are legally valid whether the exclusion of the
educational institutions run by the Government and Government Aided
institutions from the purview of the notification is discriminatory?
and that the impugned notification covering the petitioners alone
are liable to be struck down on ground of Article 14 of the
Constitution of India.
3.The State Government by the exercise of its power
under Section 1(5) of the ESI Act had issued a preliminary
notification by G.O.No.58, Labour and Employment Department, dated
15.4.2005 notifying the educational institutions, excluding the
Government and Government Aided institutions, run by various types
of bodies and individuals employing more than 20 to be brought
within the purview of Section 1(3) of the ESI Act. By the said
notification, the Government had expressed its intention to extend
the provisions of the ESI Act to these institutions any day on or
after six months after publication of the notification in the Tamil
Nadu Government Gazette. The said notification was published in Part
II Section 2 of the Tamil Nadu Government Gazette, dated 11.5.2005.
The said notification reads as follows:
Extension of Employees' State Insurance Scheme to
certain New Sectors of Establishments in all the Implemented area
under Employees' State Insurance Act. [G.O.No.58, Labour and
Employment (K1), 15th April, 2005.]
No.II(2)/LE/366/2005.-In exercise of the powers
conferred by sub-section (5) of Section 1 of the Employees' State
Insurance Act, 1948 (Central Act XXXIV of 1948), the Governor of
Tamil Nadu in consultation with the Employees State Insurance
Corporation and with the approval of the Central Government hereby
gives notice of its intention to extend the provisions of the said
Act to the class of establishments specified in column (1) of the
Schedule below situated in the areas specified in the corresponding
entries in column (2) thereof, on or after six months from the date
of publication of this Notification in the Tamil Nadu Government
Gazette.
THE SCHEDULE
----------------------------------------------------------------------------------------------
Description of class of
Areas in which the
establishments
establishments are situated.
-----------------------------------------------------------------------------------------------
(1) (2)
--------------------------------------------------------------------------------------------------
Educational Institutions
(excluding Areas where the
Scheme
Government and Government Aided
has already been brought
Institutions), run by individuals,
trustees, into force under sub-
societies or other organisations,
wherein section (3) of Section 1
20 or more persons are employed or
and sub-section (5) of
were employed on any day of the
Section 1 of the Act.
preceding twelve months.
------------------------------------------------------------------------------------------------
4.The petitioners herein were not able to pinpoint
any objection raised by any one of the petitioners with reference to
the preliminary notification. Though vague allegations were made
that some of them have sent their representations, neither copies of
such representations were enclosed in the typed set nor any attempt
to produce those copies during the hearing was made by the counsel
for the petitioners. On the other hand, some of the counsel for
petitioners have fairly admitted that no representations were sent
by them as there was no wide publicity on the said notification.
They had also taken this as a ground for impugning the final
notification. In any event, the State Government subsequent to the
expression of its intention to notify the educational institutions
had published a final notification vide G.O.Ms.No.237, Labour and
Employment Department, dated 26.11.2010 and the same was also
published in the Tamil Nadu Government Gazette as required under
Section 1(5) of the ESI Act. The said notification reads as follows:
LABOUR AND EMPLOYMENT DEPARTMENT
Extension of Employees' State Insurance Scheme to
Private Educational Institutions in all the implemented area under
Employees' State Insurance Act.
[G.O.Ms.No.237, Labour and Employment (K1), 26th
November 2010, Karthigai 10, Thiruvalluvar
Aandu-2041.]
No.II(2)/LE/767/2010.-In exercise of the powers
conferred by sub-section (5) of Section 1 of the Employees' State
Insurance Act, 1948 (Central Act XXXIV of 1948), the Governor of
Tamil Nadu, in consultation with the Employees' State Insurance
Corporation and with the approval of the Central Government, after
complying with the statutory requirement of giving six months notice
of the intention of the Tamil Nadu Government vide Labour and
Employment Department Notification No.II (2)LE/265/2008, published
at page 206 of Part-II Section 2 of the Tamil Nadu Government
Gazette, dated the 4th June 2008, hereby extends the provisions of
the said Act, to the educational Institutions (excluding Government
and Government aided institutions) run by individuals, trustees,
societies or other organizations, wherein twenty or more persons are
employed or were employed on any day of preceding twelve months,
with effect from the date of publication of this Notification.
T.PRABHAKARA RAO,
Principal
Secretary to Government.
5.The object of the Employees' State Insurance Act,
1948 (Central Act 34 of 1948) reads as follows:
"An Act to provide for certain benefits to employees
in case of sickness, maternity and employment injury and to make
provision for certain other matters in relation thereto."
6.The Statement of Objects and Reasons attached to
the Bill sets out the purpose for which the Act is enacted, which
reads as follows:
"Statement of Objects and Reasons.- The introduction
of a scheme of Health Insurance for industrial workers has been
under the consideration of the Government of India for a long time.
The necessity for such a scheme has become more urgent in view of
the conditions brought about by war. The scheme envisaged is one of
compulsory State Insurance providing for certain benefits in the
event of sickness, maternity and employment injury to workmen
employed in or in connection with the work in factories other than
seasonal factories.
(2)A scheme of this nature has to be planned on an
all-India basis and administered uniformly throughout the country.
With this object, the administration of the Scheme is proposed to be
entrusted to a Corporation constituted by central legislation."
7.The ESI Act was enacted after India had achieved
its independence and was made on 19.4.1948. Even before India's
independence, the British Indian Government was a member of the
International Labour Organization (ILO). But no welfare legislation
concerning labours were ever brought into force for reasons best
known. The colonial Government was indifferent to such issues. The
plight of the labours in India was recognised by the freedom
fighters of our Country. They had resolved that no sooner India
became independent, the conventions of the International Labour
Organization to which our Country was a party will be translated to
ground realities through appropriate legislations. The ILO
Convention No.24 related to sickness and insurance to workers in
industry, commercial and domestic service. It was adopted on
15.7.1928. Likewise recommendation No.69 adopted by the ILO on
20.4.1944 related to medical care for workers. Detailed guidelines
were made with reference to medical care, coverage, etc. However,
those conventions and recommendations became a ground reality only
on 19.4.1948 the day when the ESI Act was enacted as the Central Act
34/1948. But, even then different sections of the labour force were
made to wait for coverage through subsequent notifications made
under the said Act.
8. Initially the ESI Act was made applicable only to
the factories including the factories belonging to the Government.
But subsequently, by an amendment made by the Central Act 29/1989, a
proviso was inserted to Section 1(4) thereby the Act was made
inapplicable in respect of factories or establishments belonging to
or under the control of the Government, whose employees are
otherwise in receipt of benefits substantially similar or superior
to the benefit provided under the ESI Act. Section 1(4) 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.]"
9.Under Section 1(5), the Act also empowered the
appropriate Government to notify the other establishments such as
industrial, commercial, agricultural or otherwise by giving six
months' notice of its intention of doing so and publishing the same
in the official Gazette. Section 1(5) reads as follows:
"1(5)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 six months' notice of its 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:"
(Emphasis added)
10.Subsequent to the enactment of the ESI Act, the
Constitution of India was adopted and was brought into force with
effect from 26.1.1950. Part IV of the Constitution made specific
directive principles of State Policy. Though they were not
enforceable by any Court, the principles set out therein were made
fundamental to the governance of the Country. The State was given
its duty to apply those principles in making laws.
11.Articles 39(e), 41, 42 and 43 of the Constitution
of India reads as follows:
"39.Certain principles of policy to be followed by
the State.-The State shall, in particular, direct its policy towards
securing-
(a) to (d) omitted
(e) that the health and strength of workers, men and women, and the
tender age of children are not abused and that citizens are not
forced by economic necessity to enter avocations unsuited to their
age or strength;
41.Right to work, to education and to public
assistance in certain cases.-The State shall, within the limits of
its economic capacity and development, make effective provision for
securing the right to work, to education and to public assistance in
cases of unemployment, old age, sickness and disablement, and in
other cases of undeserved want.
42.Provision for just and humane conditions of work
and maternity relief.-The State shall make provision for securing
just and humane conditions of work and for maternity relief.
43. Living wage, etc., for workers.-The State shall
endeavour to secure, by suitable legislation or economic
organisation or in any other way, to all workers, agricultural,
industrial or otherwise, work, a living wage, conditions of work
ensuring a decent standard of life and full enjoyment of leisure and
social and cultural opportunities and , in particular, the State
shall endeavour to promote cottage industries on an individual or
co-operative basis in rural areas." (Emphasis
added)
12.The substance of these Articles only reinforce the
principles of the State policy to enact laws with a view to taking
care of health and safety of workers and provide benefits for old
age, sickness, disablement, maternity relief and conditions of work
ensuring decent standard of life. Therefore, the ESI Act and the
subsequent amendment and the notification were in effect to fulfill
the State's obligation in safeguarding the rights provided under
Part IV of the Constitution.
13. It must also be noted that until New Educational
Policy (NEP) was made by the Central Government in the year 1986,
education was dealt with by the State Governments and the Central
Government with some exceptions. Some Private Managements who were
allowed to run institutions were assured of State's assistance.
There was no concept of any self financing educational institutions
at the relevant time. The employees of the State Governments and the
Central Government as well as local body employees were given decent
pay which were revised from time to time by successive Pay
Commissions. Health care of those Government servants and their
family members were taken care of by suitable rules framed by the
Government either under Article 309 of the Constitution, by various
executive orders and by other statutory rules. Subsequently, even
the employees (both teachers and non teaching staff) employed by the
private educational institutions (governed by the grant-in-aid code
of the State Government) were slowly extended to the benefits
applicable to Government servants. Today, in the State of Tamil Nadu,
it can be said without fear of contradiction that employees (whether
teachers or non teaching staff) employed by Aided schools or
Colleges have been brought almost on par with Government servants in
the matter of pay scales, conditions of service and retirement
benefits including health care.
14. Even after getting aid from the State, the
educational institutions who are entitled to protection under
Article 30(1) of the Constitution were resisting the application of
several labour legislations on the specious plea that those
legislations were in conflict with the minority right given to them
under Article 30(1) of the Constitution. Therefore, such of those
legislations which interfered with their "right to establish and
administer" educational institutions of their choice were per se
unconstitutional. But their attempt in this regard was rejected by
the Supreme Court vide its judgment in Christian Medical College
Hospital Employees' Union v. C.M.C. Vellore Assn., reported in
(1987) 4 SCC 691.
15. The Supreme Court in the said judgment had
categorically held that in the matter of application of laws
relating to public health, taxation, municipal laws and labour
legislation, the minority managements cannot claim any privilege and
those laws must be uniformly applied to the workmen employed by
those institutions irrespective of character of those institutions.
The Supreme Court had forewarned that if not done in that fashion,
it may result in maladministration of those institutions. It is
necessary to extract the following passages found in paragraph 18 of
the said judgment which reads as follows:
"18.... It has to be borne in mind that these
provisions have been conceived and enacted in accordance with the
principles accepted by the International Labour Organisation and the
United Nations Economic, Social and Cultural Organisation. The
International Covenant on Economic, Social and Cultural Rights, 1966
which is a basic document declaring certain specific human rights in
addition to proclaiming the right to work as a human right treats
equitable conditions of work, prohibition of forced labour,
provision for adequate remuneration, the right to a limitation of
work hours, to rest and leisure, the right to form and join trade
unions of ones choice, the right to strike etc. also as human
right. The Preamble to our Constitution says that our country is a
socialist republic. Article 41 of the Constitution provides that the
State shall make effective provision for securing right to work.
Article 42 of the Constitution provides that the State shall make
provision for securing just and humane conditions of work and for
maternity relief. Article 43 of the Constitution states that the
State shall endeavour to secure by suitable legislation or economic
organisation or in any other way to all workers agricultural,
industrial or otherwise work, a living wage, conditions of work
ensuring a decent standard of life and full enjoyment of leisure and
social and cultural opportunities. These rights which are enforced
through the several pieces of labour legislation in India have got
to be applied to every workman irrespective of the character of the
management. Even the management of a minority educational
institution has got to respect these rights and implement them.
Implementation of these rights involves the obedience to several
labour laws including the Act which is under consideration in this
case which are brought into force in the country. Due obedience to
those laws would assist in the smooth working of the educational
institutions and would facilitate proper administration of such
educational institutions. If such laws are made inapplicable to
minority educational institutions, there is very likelihood of such
institutions being subjected to maladministration. Merely because an
impartial tribunal is entrusted with the duty of resolving disputes
relating to employment, unemployment, security of work and other
conditions of workmen it cannot be said that the right guaranteed
under Article 30(1) of the Constitution of India is violated. If a
creditor of a minority educational institution or a contractor who
has built the building of such institution is permitted to file a
suit for recovery of the money or damages as the case may be due to
him against such institution and to bring the properties of such
institution to sale to realise the decretal amount due under the
decree passed in such suit is Article 30(1) violated? Certainly not.
Similarly the right guaranteed under Article 30(1) of the
Constitution is not violated, if a minority school is ordered to be
closed when an epidemic breaks out in the neighbourhood, if a
minority school building is ordered to be pulled down when it is
constructed contrary to town planning law or if a decree for
possession is passed in favour of the true owner of the land when a
school is built on a land which is not owned by the management of a
minority school. In the same way if a dispute is raised by an
employee against the management of a minority educational
institution such dispute will have necessarily to be resolved by
providing appropriate machinery for that purpose. Laws are now
passed by all the civilised countries providing for such a
machinery....."
16. From the above, it can be safely concluded that
whether an educational institution run by minority or by non
minority, with reference to application of welfare legislation there
is no distinction and they should be treated on par. In this batch
of writ petitions, there was no challenge on the touchstone of
Article 30(1) of the Constitution. Even otherwise, the observations
made by the Supreme Court will clearly show that these legislations
were made on an obligation arising out of conventions of
International Labour Organization and they should be implemented
uniformly to all employees.
17. It is only after the New Educational Policy
conceived, there were mushroom growth of educational institutions
in the private sector. It gave rise to multiple problems relating to
service conditions of employees working in those institutions.
Therefore, the State belatedly woke up to the conditions of
employees both teaching and non teaching staff working in these
so-called self financing educational institutions so as to bring
reasonable conditions of work. It is with this view as well as to
safeguard the Health of the employees, the preliminary notification
came to be published. Subsequently, in accordance with Section 1(5),
a final notification was also issued. Once a notification under
Section 1(5) is issued covering the establishment, then under
Section 2-A, it is the obligation of the establishments to register
themselves within such time and in such manner as specified in the
regulation with the authorities under the ESI Act. Regulation 10-B
of the ESI General Regulations, 1950 provides the manner by which an
establishment can be registered. The Act obliges both employer and
employees to contribute towards ESI. The contributions were levied
in terms of Rule 51 of the ESI Central Rules 1950 obliges an
employer to pay 4.75% of wages payable to an employee as their
contribution and it is 1.75% in respect of employee's contribution
for coverage under the Act. Both employer and employee will
contribute 6.50% of wages payable to an employee towards the ESI
Fund. An employee of an institution covered by the ESI Act if he
draws Rs.15000/-, which is the maximum wage limit, his contribution
will only come to Rs.113/- per month. The total contribution by both
will be Rs.875/-. This is the contribution for an highest paid
employee. Based upon this contribution, which will be kept by the
ESI Corporation in a special fund, the employees were paid various
benefits including for sickness, maternity, disablement, dependent
benefits, funeral payments, medical care and treatment. But for the
benefit derived from the Act for such a limited payment, the
contribution is enormous as it takes care of an umbrella services as
noted above.
18. The term "employee" is defined under Section 2(9)
of the ESI Act and it does not exclude any person and couched in a
general term. In fact, the ESI Act covers even the contract labours
who are engaged through an agency. As per the notification issued on
20.4.2010 by G.S.R. 349E, the Central Government has now fixed the
wage limit at Rs.15000/- per month for coverage in terms of Section
95(2)(a) of the ESI Act.
19. Since the petitioners are running educational
institutions both schools and colleges and if the Government/UGC
scales as well as pay commission recommendations are paid to them as
required under law, there will be hardly any teacher employed by
these institutions will be covered by the provisions of the ESI Act
in view of the wage limit prescribed thereunder. Even in respect of
the non teaching staff, the highly paid staff like clerical and
laboratory assistants will also be not covered by the Act if the
Government scales of pay are an indicator for payment of salary to
those employees. After the coverage of the Act, hardly few employees
like watchmen, conductors, drivers, canteen and hostel staff and
other menials, such as sweeper and scavengers alone will be covered
by the provisions of the Act. If case of any institutions having
health benefits if they are substantially similar or superior to the
benefits provided under the ESI Act, Chapter VIII provides for
various exemptions that can be obtained from the Government.
Therefore, there is no difficulty for the institutions seeking
exemptions if only the benefits extended by them are substantially
similar or superior benefits than the ESI Act. Even otherwise, in
this batch of writ petitions, no contentions were raised that their
employees are in receipt of benefits substantially similar or
superior to the benefits provided under the Act.
20. Further, in respect of application of similar
notification to educational institutions situated in the Union
Territory of Puducherry, this Court had an occasion to deal with the
same elaborately vide in W.P.Nos.W.P.NOs.2471, 3234, 30509 and 16273
of 2007, etc batch cases in Muthu Rathina Arangam Matriculation
school Vs. The Government of Pondicherry, represented by Additional
Secretary to Government (Labour), Labour Department, General
Secretariat, Puducherry. By judgment, dated 04.01.2011, this Court
upheld similar notifications issued by the Administrator of the
Union Territory of Puducherry. Notwithstanding the said judgment,
the counsel for the petitioners urged several grounds and they may
be briefly set out below :
(i) The ESI Act is essentially covered the factories
and other industries and it will not apply to educational
institutions.
(ii)The Supreme Court vide its judgment in T.M.A. Pai
Foundation v. State of Karnataka, reported in (2002) 8 SCC 481 held
that once it is not an industry, then it cannot be covered by the
provisions of the ESI Act.
(iii) The Supreme Court had given guidelines for
fixing fees received from the students. There is oversight Committee
to oversee the fees receivable from students whether the
institutions have not received more than what has been fixed by the
Committee. At the time of fixation of fees, this additional burden
was not taken into account. Therefore, the State was not entitled to
levy more amount than what was contemplated under law.
(iv) Even assuming an educational institution can be
an "industry" within the meaning of Section 2(j) of the Industrial
Disputes Act as held by the Supreme Court vide its judgment in
Bangalore Water Supply and Sewerage Board v. A. Rajappa reported in
(1978) 2 SCC 213, the said judgment of seven Judges bench has been
doubted by an another smaller bench of five Judges in State of U.P.
Vs. Jai Bir Singh reported in (2005) 5 SCC 1 and the issue has been
referred to the Chief Justice of India for constituting a larger
bench. Therefore, the view of the Bangalore Water Supply and
Sewerage Board case (cited supra) will have no efficacy.
(v) Further, the Supreme Court in A.Sundarambal Vs.
Government of Goa, Daman and Diu reported in (1988) 4 SCC 42 has
held that a teacher is not a workman within a meaning of Section
2(s) of the Industrial Disputes Act, 1947. The predominant activity
of the educational institution is to impart education and majority
employees are teachers. The notification applying the Act to the
entire institution including their teachers is invalid.
(vi) The State Government while issuing notification
had not adopted due procedure, Principles of fair play in
consultation or natural justice to the extent necessary.
(vii) The exercise of power is conditional
legislation and satisfaction arrived at by the Government was not
based upon any objective consideration and relevant data. Hence the
impugned notification was invalid. Reliance was also placed upon a
judgment of the Supreme Court in State of Tamil Nadu Vs.
K.Sabanayagam reported in (1998) 1 SCC 318.
(viii) The impugned notification so far as it
excludes the aided educational institutions which are also running
unaided courses is discriminatory. Therefore, it is violative of
Article 14 of the Constitution.
(ix) The preliminary notification was issued by the
State Government on 4.6.2008. Immediately after six months, a final
notification was not published. On the other hand, the Government
had published the final notification only on 29.12.2010 nearly after
a period of 2-1/2 years. Therefore, the notification was invalid as
it had become stale. On the ground of delay in publishing the final
notification, the impugned order should be set aside.
21. On the side of the respondents, a preliminary
objection was raised regarding maintainability of the writ petitions
in W.P.Nos.2873, 4570, 4722 and 5257 of 2011 which were admittedly
filed by the societies comprising of various educational
institutions. Such writ petitions are not maintainable as they were
filed by societies and they have no locus standi to maintain the
writ petitions.
22. In the light of the rival contentions, it has to
be seen whether the petitioners have made out any case?
23. The first six contentions can be taken up
together. In respect of the objection that the educational
institutions cannot be covered by the provisions of the ESI Act and
that the impugned notification covers the educational institutions
within the purview of the ESI Act, it was contended by the counsel
for the petitioners that the educational institutions cannot be
covered by the ESI Act as they were not commercial or industrial
enterprises. Reliance was placed upon the judgment of the Supreme
Court in Haryana Unrecognised Schools' Association v. State of
Haryana reported in (1996) 4 SCC 225. In that case, the Supreme
Court held that a teacher in an educational institution is not
employed to do any skilled or unskilled manual or clerical work and
therefore, once he is not an employee within the meaning of Section
2(i) of the Minimum Wages Act, the State Government by adding
employments in educational institutions into the schedule to the
Minimum Wages Act by virtue of the power conferred under Section 27
was not valid and it was beyond its competence. Therefore, insofar
as the teacher of the educational institutions being covered by the
provisions of the Minimum Wages Act was invalid. But in that case,
the only question that was considered was whether teachers in
educational institutions can be brought within the purview of the
Minimum Wages Act. It was found that the definition of the term
"employee" defined under Section 2(i) of the Minimum Wages Act was
not covering the teachers. In fact, the said definition more or less
borrows the definition of term "workman" found under Section 2(s) of
the Industrial Disputes Act. Therefore, the observation of the
Supreme Court in A.Sundarambal Vs. Government of Goa, Daman and Diu
reported in 1988 (4) SCC 42 was quoted with approval. In paragraphs
10 and 11, it was observed as follows:
"10....Since the teachers of an educational
institution are not employed to do any skilled or unskilled or
manual or clerical work and therefore could not be held to be an
employee under Section 2(i) of the Act, it is beyond the competence
of the State Government to bring them under the purview of the Act
by adding the employment in educational institution in the Schedule
in exercise of power under Section 27 of the Act. This Court while
examining the question whether the teachers employed in a school are
workmen under the Industrial Disputes Act had observed in A.
Sundarambal v. Govt. of Goa, Daman & Diu3: (SCC p.48, para 10)
We are of the view that the teachers employed by
educational institutions whether the said institutions are imparting
primary, secondary, graduate or postgraduate education cannot be
called as 'workmen' within the meaning of Section 2(s) of the Act.
Imparting of education which is the main function of teachers cannot
be considered as skilled or unskilled manual work or supervisory
work or technical work or clerical work. Imparting of education is
in the nature of a mission or a noble vocation. A teacher educates
children, he moulds their character, builds up their personality and
makes them fit to become responsible citizens. Children grow under
the care of teachers. The clerical work, if any they may do, is only
incidental to their principal work of teaching.
11.Applying the aforesaid dictum to the definition of
employee under Section 2 (i) of the Act it may be held that a
teacher would not come within the said definition. In the aforesaid
premises we are of the considered opinion that the teachers of an
educational institution cannot be brought within the purview of the
Act and the State Government in exercise of powers under the Act is
not entitled to fix the minimum wage of such teachers. The impugned
notifications so far as the teachers of the educational institution
are concerned are accordingly quashed. This appeal is allowed. Writ
petition filed succeeds to the extent mentioned above. There will be
no order as to costs."
24. Reliance was also placed upon a judgment of the
Supreme Court in Ruth Soren v. Managing Committee, East I.S.S.D.A.,
reported in (2001) 2 SCC 115 wherein the Supreme Court considered
whether an educational institution is an establishment within the
meaning of Bihar Shops and Establishments Act, 1953. It was held
that though it may be an industry within the meaning of Section 2(j)
of the I.D.Act, it cannot be an establishment within the meaning of
Bihar Shops and Establishments Act. In that context, the Supreme
Court in paragraphs 4 and 5 observed as follows:
"4.An establishment for the purposes of the Act
means an establishment which carries on any business, trade or
profession or any work in connection with, or incidental or
ancillary thereto. Concept of industry, as defined under the
Industrial Disputes Act, would include any business, trade,
undertaking, manufacture or calling of employers and includes any
calling service, employment, handicraft, or industrial occupation or
avocation of workmen. There is an organised activity between
employers and employees to impart education. Such an activity,
though may be industry will not be a profession, trade or business
for the purposes of Article 19(1)(g) of the Constitution, would not
be one falling within the scope of establishment under the Act.
Therefore, the view taken by the Division Bench of the High Court is
unexceptionable. The High Court did appreciate that Unni Krishnan
case1 itself made a distinction between what was stated in Bangalore
Water Supply & Sewerage Board v. A. Rajappa2.
5. In Corpn. of City of Nagpur v. Employees 4,
LLJ at p.(540) this Court held the Education Department of the
Corporation to be an industry. The reason given is that imparting
education amounts to service and can be done by a private person
also. In University of Delhi v. Ram Nath5 this Court held that
imparting education is not an industry as the work of the University
cannot be assimilated to the position of trade, calling, business or
service and hence cannot be an industry. The majority view in
Bangalore Water Supply & Sewerage Board v. A. Rajappa2 a decision of
seven-Judge Bench, is that in the case of an educational
institution, the nature of activity is exhypothesi and imparting
education being service to community is an industry. Various other
activities of the institution such as printing press, transport
department, clerical, etc. can be severed from teaching activities
and these operations either cumulatively or separately form an
industry. Even so, the question for consideration is whether
educational institution falls within the definition of
'establishment' carrying business, trade or profession or incidental
activities thereto. 'Establishment', as defined under the Act, is
not as wide as 'industry' as defined under the Industrial Disputes
Act. Hence reliance on Bangalore Water Supply & Sewerage Board v. A.
Rajappa2 for the appellant is not of any help."
25. Therefore, it was contended that the educational
institution also is not an establishment within the meaning of
Section 1(5) of the ESI Act. But, however unlike the Bihar Shops
Act, which was considered by the Supreme Court, the term
"establishment" was not defined in the ESI Act. On the other hand,
Section 1(5) of the ESI Act is couched in a language which can
include establishments which necessarily need not have the
characteristics as industrial, commercial or agricultural
establishments. They can even include the other types of
establishments. Section 1(5) of the ESI Act reads as follows:
"1(5)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 six months' notice of its 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."
(Emphasis added)
26. The term "otherwise" found in Section 1(5) came
to be considered by the Allahabad High Court in Maharishi Shiksha
Sansthan and another Vs. State of Uttar Pradesh and another
reported in 2009 (1) LLN 381. In paragraphs 9 and 10, it was
observed as follows:
"9.Learned counsel for the petitioner has argued that
the word "establishment" must have some relation with factory and
educational institution is not even remotely connected with the
activity, which is carried out in factories. This argument is not
tenable for the reason that under S.1(5), there is no such
restriction. Thereafter, learned counsel for the petitioner has
argued that the aforesaid sub-section suffers from the vice of
excessive delegation as the power to bring any establishment under
the Act has been conferred upon the Government without providing any
guidelines.
10.This argument is also not acceptable. The purpose
of the Act is to confer certain benefits upon the employees and
employees of any establishment may deserve such benefits. This
question has also been considered in the Supreme Court authority in
Hindu Jea Band, Jaipur V. Regional Director, Employees' State
Insurance Corporation, and others [1987 (1) L.L.N. 778],..."
27.The very same question also came to be considered
by a division bench of the Kerala High Court in CBSE School
Management's Association Vs. State of Kerala reported in 2010
(II) LLJ 240 (Ker). In paragraphs 17 and 18, the Kerala High Court
observed as follows:
"17.We hold that the notification under Section 1(5)
of the ESI Act can cover an educational institution for two
reasons:- Our first reason is that, the educational institutions
like schools are industrial establishments, in view of the decision
of the Apex Court in Bangalore Water Supply and Sewerage Board's
case, (supra). Though a few Benches of lesser strength
have expressed the necessity for reconsidering the dictum in
Bangalore Water Supply and Sewerage Board's case, (supra), until
such a reconsideration is done by a larger Bench, we are absolutely
bound by the decision of the Apex Court in Bangalore Water Supply
and Sewerage Board's case, (supra). If that be so, the only
possible view that could be taken in the face of the words contained
in Section 1(5) of the ESI Act is that educational institutions
are also covered by the expression 'industrial establishment'. The
main thrust of the argument of the writ petitioners was that
educational institution is not an industry. In view of the binding
precedent mentioned above, we cannot accept that contention.
Further, the interpretation of the definition of "industry" in
Section 2(j) of the Industrial Disputes Act is applicable to the
interpretation of the word "industrial" in Section 1(5) of the E.S.I.
Act, in view of Section 2(24) of the latter Act which reads as
follows:
"2. Definitions:-
xxx xxx xxx
(24) all other words and expressions used but not
defined in this Act and defined in the Industrial Disputes Act, 1947
(14 of 1947), shall have the meanings respectively assigned to them
in that Act.".
18. Our second reason is that, the words employed 'or
otherwise' should be given the widest possible meaning and
therefore, they will cover the educational institutions also. The
petitioners contend that the words 'or otherwise' should be given
a restricted meaning, following the principle of ejusdem generis.
Whether the words should be given a restricted meaning will depend
upon the context in which they are used. There cannot be any
principle of universal application concerning this. The learned
author, Sri.G.P.Singh, in his book, Principles of Statutory
Interpretation, 10th Edition, 2006, points out that the words "or
otherwise" are not usually considered ejusdem generis. The learned
author has stated as follows:
"It also appears that the words 'or otherwise' have
not been usually considered ejusdem generis. They are words of
wide import, but context may limit their scope...".
The learned author has stated the above principle,
referring to various decisions of the Apex Court. The decisions
cited by the learned counsel for the petitioners to persuade this
Court to give a restricted meaning, applying ejusdem generis cannot
be upheld, having regard to the context in which the words "or
otherwise" are used. We are not referring to each and every decision
cited by the petitioners, but we would point out that those are
decisions which are rendered under various other enactments and do
not lay down any binding precedent to be followed in this case.
Further, having regard to the words employed in the above
sub-section, the principle of ejusdem generis cannot be pressed into
service. There is nothing in common between industrial
establishment and agricultural establishment. They do not belong to
the same genus. The doctrine of ejusdem generis is applied where the
words of the same category are used, followed by general words. In
that context, the meaning of the general words can be read down to
mean only something similar to the category mentioned preceding
them. For the above reasons, the contentions of the writ petitioners
that this Court should give a restricted meaning to the words 'or
otherwise' cannot be upheld."
28. Apart from the decisions of the Allahabad High
Court and Kerala High Court, the issue can also be looked into in a
different angle. The Supreme Court in Bangalore Water Supply and
Sewerage Board Vs. A.Rajappa and others reported in 1978 (2) SCC
213 [(which was distinguished by the Supreme Court in the context of
the term establishment found in Bihar Shops and Establishments Act,
but followed by the Kerala High Court in the context of Section 1(5)
in CBSE School Management's Association (cited supra))] considered
the term "educational institution" as an industry within the meaning
of Section 2(j) of the I.D.Act. It was held that though majority of
persons working in educational institutions are teachers, but that
cannot be a factor to decide the term "industry" found under the
Industrial Disputes Act. On the other hand, even in respect of an
educational institution, even if few persons are employed as non
teaching staff, they can be covered by the provisions of the
Industrial Disputes Act. Therefore, Ruth Soren's case (cited
supra), rendered in the context of Bihar Shops and Establishments
Act cannot have any relevance to decide a matter under the ESI Act.
29. Similarly, the decision of the Supreme Court in
Haryana Unrecognised Schools' Association (cited supra) in relation
to the minimum Wages Act has no application. The term "otherwise"
found under Section 1(5) has got wider application as held by the
Allahabad and Kerala High Courts. At this stage, it is unnecessary
to go into the question whether majority of persons employed in the
petitioners institutions will be covered by the ESI Act pursuant to
the impugned notification since the definition of employee found in
Section 2(9) do not correspond with any other definition in any
other law. If ultimately the petitioners want to dispute the
coverage of a particular person being covered by the scheme, the Act
itself provides disputes to be raised under Section 75 of the ESI
Act. Such issues need not be decided on an academic basis at this
stage. It is also worthwhile to note that by amendment to ESI
Central Rules, 2010, dated 20.4.2010, the scheme only covers the
employees who are drawing wages not exceeding Rs.15000/-. Therefore,
as to how many persons will be covered by the scheme itself has to
be determined only if the respondent ESI issues an appropriate
notice and determine the liability of the petitioners under Section
45-A of the ESI Act.
30. Further, the Supreme Court in Osmania
University v. Regional Director, ESI Corporation reported in
(1985) 4 SCC 514 held that even if the printing press run by the
University if it is otherwise covered by the ESI Act, the provisions
of the Act can be made applicable and the employees of the printing
press must be covered by the ESI Scheme. Therefore, even if a part
of the employees in an establishment are covered the Act can be
made applicable in respect of those persons.
31.In construing the definition of the term
"establishment" found under Section 1(3)(b) of the Payment of
Gratuity Act, the Supreme Court in its judgment in State of
Punjab v. Labour Court reported in (1980) 1 SCC 4 has held that
the term "establishment" need not be having any reference to the
establishments covered by the provisions of the Shops and
Establishments Act and it should have a general meaning. It also
held that if the term "establishment" is defined in any other law,
for the time being in force it will also be covered by the
provisions of the Gratuity Act. The following passage found in
paragraph 3 of the said judgment may be extracted below:
"3.In this appeal, the learned Additional Solicitor
General contends on behalf of the appellant that the Payment of
Gratuity Act, 1972 cannot be invoked by the respondents because the
Project does not fall within the scope of Section 1(3) of that Act.
Section 1(3) provides that the Act will apply to:
(a) every factory, mine, oilfield, plantation, port
and railway company;
(b) every shop or establishment within the meaning of
any law for the time being in force in relation to shops and
establishments in a State, in which ten or more persons are
employed, or were employed, on any day of the preceding twelve
months;
(c) such other establishments or class of
establishments, in which ten or more employees are employed, or were
employed, on any day of the preceding twelve months, as the Central
Government may, by notification, specify in this behalf.
According to the parties, it is clause (b) alone
which needs to be considered for deciding whether the Act applies to
the Project. The Labour Court has held that the Project is an
establishment within the meaning of the Payment of Wages Act,
Section 2(ii)(g) of which defines an 'industrial establishment' to
mean any 'establishment in which any work relating to the
construction development or maintenance of buildings, roads, bridges
or canals, relating to operations connected with navigation,
irrigation or the supply of water, or relating to the generation,
transmission and distribution of electricity or any other form of
power is being carried on'. It is urged for the appellant that the
Payment of Wages Act is not an enactment contemplated by Section
1(3)(b) of the Payment of Gratuity Act. The Payment of Wages Act, it
is pointed out, is a Central enactment and Section 1(3)(b), it is
said, refers to a law enacted by the State Legislature. We are
unable to accept the contention. Section 1(3)(b) speaks of 'any law
for the time being in force in relation to shops and establishments
in a State'. There can be no dispute that the Payment of Wages Act
is in force in the State of Punjab. Then, it is submitted, the
Payment of Wages Act is not a law in relation to 'shops and
establishments'. As to that, the Payment of Wages Act is a statute
which, while it may not relate to shops, relates to a class of
establishments, that is to say, industrial establishments. But, it
is contended, the law referred to under Section 1(3)(b) must be a
law which relates to both shops and establishments, such as the
Punjab Shops and Commercial Establishments Act, 1958. It is
difficult to accept that contention because there is no warrant for
so limiting the meaning of the expression 'law' in Section 1(3)(b).
The expression is comprehensive in its scope, and can mean a law in
relation to shops as well as, separately, a law in relation to
establishments, or a law in relation to shops and commercial
establishments and a law in relation to non-commercial
establishments. Had Section 1(3)(b) intended to refer to a single
enactment, surely the appellant would have been able to point to
such a statute, that is to say, a statute relating to shops and
establishments, both commercial and non-commercial. The Punjab Shops
and Commercial Establishments Act does not relate to all kinds of
establishments. Besides shops, it relates to commercial
establishments alone. Had the intention of Parliament been, when
enacting Section 1(3)(b), to refer to a law relating to commercial
establishments, it would not have left the expression
'establishments' unqualified. We have carefully examined the various
provisions of the Payment of Gratuity Act, and we are unable to
discern any reason for giving the limited meaning to Section 1(3)(b)
urged before us on behalf of the appellant. Section 1(3)(b) applies
to every establishment within the meaning of any law for the time
being in force in relation to establishments in a State. Such an
establishment would include an industrial establishment within the
meaning of Section 2(ii)(g) of the Payment of Wages Act.
Accordingly, we are of opinion that the Payment of Gratuity Act
applies to an establishment in which any work relating to the
construction, development or maintenance of buildings, roads,
bridges or canals, or relating to operations connected with
navigation, irrigation or the supply of water, or relating to the
generation, transmission and distribution of electricity or any
other form of power is being carried on. The Hydel Upper Bari Doab
Construction Project is such an establishment, and the Payment of
Gratuity Act applies to it." (Emphasis added)
32. Therefore, as correctly held by the Allahabad and
Kerala High Courts, the term "establishment" under Section 1(5) will
include every establishment which need not have the characteristics
of industrial, commercial or agricultural establishments. Any
Establishments can be validly notified by the appropriate Government
to be covered by the provisions of the Act. Therefore, the
contentions made in this regard must fail.
33.It is rather unfortunate that the counsel should
press into service a judgment of TMA Pai's case (cited supra)
without any relevance to the facts on hand. Whether an educational
institution is an industry within the meaning of Section 2(j) of the
ID Act may not be relevant while considering the application of the
ESI Act, since such phraseology is not applied here. The power is
vested with the Government to notify the establishment and it can be
any type of establishments. The term "otherwise" found along with
the term "industrial, commercial or agricultural" under Section 1(5)
need not take colour from the preceding one and it could have an
independent application as noted above. The purpose of the
legislation is to cover the health aspects of employees. Therefore,
the impugned notification on the ground does not suffer from want of
jurisdiction. Even reference made by the subsequent smaller bench
(State of U.P. v. Jai Bir Singh) for reviewing the Bangalore Water
Supply and Sewerage Board case (cited supra) need not be looked into
as it is only an order of reference. Even after 15 years have gone
by the successive Chief Justices of India have not thought it fit to
constitute any larger bench to review the earlier judgment. So long
as that judgment is not reversed in the manner known to law, that
judgment will be a binding precedent. No one can rely upon an order
of reference to disobey a binding precedent of a larger bench of the
Supreme Court.
34. It must also be noted that subsequent to the
Bangalore Water Supply and Sewerage Board case (cited supra), the
Parliament itself has amended Section 2(j) and defined the term
"industry" and brought it in tune with the ratio of the said
judgment by an amendment Act 46/1982. Since alternative modes of
redressal of grievance after excluding those establishment from the
I.D. Act have not been made, the said section is yet to be brought
into force. Nevertheless, it is the intention of the Parliament to
fall in line with the decision of the larger bench is a matter of
record.
35. The reference to A. Sundarambal's case (cited
supra) holding that teachers are not workmen has no relevance for
two reasons. The term "employee" as found in the ESI Act is not
similar to the word "workmen" under Section 2(s) of the ID Act.
Further assuming that teacher is not a workman, the Act even then
can apply to the non teaching staff employed by educational
institutions, who are admittedly covered within the meaning of
Section 2(s) of the ID Act. Further, that stage had not arisen in
the present case.
36. Further, first of all after the impugned
notification has come into existence, the petitioners institutions
will have to register themselves under Section 2-A. Only when a
doubt arises as to whether persons from whom contributions are to be
deducted, a decision will have to be taken initially by the ESI
Corporation under Section 45A of the ESI Act. If there is any
further dispute, a petition can be filed before the appropriate ESI
Court under Section 75 to determine the employees to be covered and
the contributions to be recovered under the ESI Act. There is
further appeal to this Court against an order of the ESI Court under
Section 82. Therefore, there is time enough to decide such issues
for every management.
37. It is suffice to state that those issues are not
germane for the purpose of validating the impugned notification.
Even otherwise, as held by the Supreme Court in Osmania University
case (cited supra), if a particular activity of the educational
institution is covered, notwithstanding the other areas are not
covered, still the ESI Act will apply. Therefore, the contentions
raised in this regard have to be rejected.
38. The contention that the notification under
Section 1(5) being a conditional legislation and the satisfaction of
the delegate has to be based on objective consideration of relevant
data for and against the exercise of such power should be there,
reliance was placed upon a judgment of the Supreme Court in State of
T.N. v. K. Sabanayagam, reported in (1998) 1 SCC 318. The following
passage found in paragraph 22 may be usefully reproduced below:
"22. But there may be a third category of cases
wherein the exercise of conditional legislation would depend upon
satisfaction of the delegate on objective facts placed by one class
of persons seeking benefit of such an exercise with a view to
deprive the rival class of persons who otherwise might have already
got statutory benefits under the Act and who are likely to lose the
existing benefit because of exercise of such a power by the
delegate. In such type of cases the satisfaction of the delegate has
necessarily to be based on objective consideration of the relevant
data for and against the exercise of such power. Maybe such an
exercise may not amount to any judicial or quasi-judicial function,
still it has to be treated to be one which requires objective
consideration of relevant factual data pressed into service by one
side and which could be tried to be rebutted by the other side who
would be adversely affected if such exercise of power is undertaken
by the delegate. In such a third category of cases of conditional
legislation the legislature fixes up objective conditions for the
exercise of power by the delegate to be applied to past or existing
facts and for deciding whether the rights or liabilities created by
the Act are to be denied or extended to particular areas, persons or
groups. This exercise is not left to his subjective satisfaction nor
is it a mere ministerial exercise. Section 36 of the Act with which
we are concerned falls in this third category of conditional
legislative functions....."
39. It is not clear as to how the said judgment will
have any relevance to the case on hand. In that case, employees who
are entitled for bonus under the Payment of Bonus Act, 1965 were
sought to be deprived by grant of exemption which power was
exercised under Section 36 of the Payment of Bonus Act. Section 36
reads as follows:
"36.Power of exemption.-If the appropriate
Government, having regard to the financial position and other
relevant circumstances of any establishment or class of
establishments, is of opinion that it will not be in public interest
to apply all or any of the provisions of this Act thereto, it may,
by notification in the Official Gazette, exempt for such period as
may be specified therein and subject to such conditions as it may
think fit to impose, such establishment or class of establishments
from all or any of the provisions of this Act." (Emphasis added)
40. It is also necessary to refer to a judgment of
the Supreme Court in Hindu Jea Band v. Regional Director, ESI
Corpn., reported in (1987) 2 SCC 101 where similar contentions
were rejected by the Supreme Court in the context of the ESI Act
itself. The following passage found in paragraph 5 may be usefully
reproduced below:
"5. Alongwith the special leave petition the
petitioner has presented before this Court a writ petition under
Article 32 of the Constitution questioning the validity of the
notification issued by the State Government on the ground that the
power conferred under the Act on the State Government by sub-section
(5) of Section 1 authorising the State Government to extend all or
any of the provisions of the Act to other establishments in the
State suffers from the vice of excessive delegation of essential
legislative powers. It is also contended that the application of the
Act to businesses like the one which is being carried on by the
petitioner during certain seasons only of the year is violative of
Article 14, Article 19(1)(g) and Article 21 of the Constitution.
Having carefully considered the submission made by the learned
Counsel for the petitioner we find no merit in any of the
contentions urged in the writ petition. The writ petition is also,
therefore, dismissed."
41. In the case of the Bonus Act, the legislation
itself obliges the exempting authority to deal with the request for
exemption by legislative guidelines and hence those observations
came to be made. But in the present case, the impugned notification
extends the provisions of the ESI Act to a class of establishment.
The only requirement is the expression of previous intent through a
gazetted notification which was done in this case. The petitioners
who have not raised any particular objection, cannot now be heard to
plead that either they were not heard or there was no satisfaction
by the Government in finalizing the notification. Further the plea
that notification came to be issued after 2-1/2 years from the
preliminary notification and hence it is invalid also cannot be
accepted as the petitioners are not bound to be losers by such
delay. There cannot be said to be any prejudice by the said delay.
On the other hand, the coverage of establishment only starts from a
final notification. If at all, to some extent the petitioners were
said to be benefited by the delay. It may be their employees who are
affected by the belated coverage and they are said to have lost
valuable benefits arising out of the labour legislation. Therefore,
the contention based upon non application of mind in passing the
order pursuant to the conditional legislation will not arise.
42. In the context of Section 5 of the Minimum Wages
Act, the Courts have considered the question of delay in publishing
a final notification will invalidate such a notification. The Bombay
High Court in Ramkrishna Ramnath, Nagpur and another Vs. The
state of Maharashtra and another reported in AIR 1964 Bombay 51
held in paragraph 35 as follows:
"35....There is however nothing in the statute which
requires that Government should consider it on that very date and
not thereafter. In fact, it seems to us that it will be impossible
for Government to consider all the representations received on one
and the same date, namely, the date specified."
43. Further, a Full Bench of the Kerala High Court in
Malayalam Plantations Limited and others Vs. State of Kerala and
others reported in 1976 (I) LLJ 114 (FB) held in paragraph 11
as follows:
"11....We do not think that the selection enables any
person to contend that notwithstanding the specification of a date
within which the representations have to be filed the notification
revising/fixing minimum wages would be bad if the proposals are not
taken up for consideration on the date specified. Nor does the
section, according to us, provide for a right to file
representations till the moment the proposals are actually taken up
for final decision. There must necessarily be an interval between
the last moment for filing the representations and the final
decision, the length of the interval depending upon the nature of
the representations, the necessity for deliberations on such
representations, the time taken for the proceedings of the Advisory
Board and the period that the Government would usually take for
reaching a final decision on such matters. The fact that the final
notification fixing or revising the minimum wages or the decision of
the Government is made on a date subsequent to the specified date
does not by itself give any right to any person likely to be
affected by the proposal to claim that he is, as of right, entitled
to file the representation till the last moment." (Emphasis added)
44. It is further doubtful the power exercise herein
is at all conditional legislation. On the other hand, the nature of
power vested with the State Government is only delegated
legislation. Therefore, if the objective consideration of
legislation are satisfied, than the Government by following the
statutory prescription can notify an establishment.
45. The petitioners cannot be heard to contend as
there was only gazette notification and that they did not have any
notice, is also not relevant. The ESI Act is not like the Land
Acquisition Act where Section 4(1) notification is not only gazetted,
but also published in a prominent place in the locality as well as
in two newspapers having wide circulation in that area. Each
legislation has to be seen only in the context in which it has been
made. No other legislation can be telescoped into another
legislation for the purpose of deciding the vires of that law. Hence
that objection must also fail.
46. The other argument that aided educational
institutions are exempted is discriminatory and violative of Article
14 of the Constitution also cannot be a valid objection and they
stand a class apart. First of all, in theoretical term "employee" of
an educational institution is more or less on par with the employees
of Government institutions and also in respect of conditions of
service including health, insurance. Therefore, it is a valid
classification not hit by the mischief of Article 14. It is also to
be noted that the proviso to Section 1(4) of the Act itself exempts
an establishment belonging to or under the control of the Government
whose employees otherwise are in receipt of benefits substantially
similar or superior to the benefits provided under the Act. Hence
they are exempted from the purview of the Act. Therefore, the
statute itself contemplates exempting the establishment owned by
the Government from the purview of the Act with a rider that those
employees must receive substantially similar or superior benefits
provided under the Act. The same conditions are also available to a
private employer for the purpose of getting exemption in terms of
the provisions available under Chapter VIII of the ESI Act.
47.As to whether an aided educational institution can
also be said to be falling under the definition of "establishment"
belonging to or under the control of the Central or State Government
came to be considered in the context of similar provisions under the
Employees' Provident Funds and Miscellaneous Provisions Act, 1952 by
the Supreme Court vide its judgment in Regional Provident Fund
Commissioner Vs. Sanatan Dharam Girls Secondary School and Others
reported in 2007 (1) SCC 268. The Supreme Court while construing
similar definition provided under Section 16(1)(b) of the said Act
in relation to aided schools, in paragraphs 26 to 29, 31,32 and 35
held as follows:
"26.Section 16(1)(b) of the EPF Act, 1952 provides as
under:
'16. (1) This Act shall not apply
(a) * * *
(b) to any other establishment belonging to or under
the control of the Central Government or a State Government and
whose employees are entitled to the benefit of contributory
provident fund or old age pension in accordance with any scheme or
rule framed by the Central Government or the State Government
governing such benefits; or
(c)-(e) * * *
27. In order to be covered under the exception to the
EPF Act, 1952 stated above, the following two conditions have to be
satisfied by the establishment seeking to be exempted from the
provisions of the EPF Act, 1952:
(1) it must be an establishment belonging to or under
the control of the Central Government or a State Government, and
(2) it must be an establishment whose employees are
entitled to the benefit of contributory provident fund or old age
pension in accordance with any scheme or rule framed by the Central
Government or the State Government governing such benefits.
28. We heard the parties in detail. The submissions
made by the learned counsel appearing for the respondents merit
acceptance. It is not in dispute that the respondent institutions
have been paying the provident fund dues to the State Government in
accordance with the scheme framed by the State Government under the
State Act and thus the employees of the respondent institutions are
entitled to the benefit of the provident fund. By the orders
impugned by the respondent institutions, the State Government has
sought to transfer the balance standing to its credit to the
Regional Provident Fund Commissioner. Thus it is clear that the
respondent institutions have been paying in accordance with the
scheme and there is no grievance with regard to the same.
29.In respect to the contention of the respondent
that the establishment belonging to or under the control of the
Central Government or a State Government, it was submitted that the
establishments must either be (a) belonging to, or (b) under the
control of the Central Government or the State Government. In our
view, the two words used in the said section have different
connotations. The words 'belonging to' signify ownership i.e. the
Government-owned institutions would be covered under the said part
and the words 'under the control of' signify control other than
ownership since ownership has already been covered under the words
'belonging to'. It must also be noted that the two words are
separated by the word 'or' and therefore these two words refer to
two mutually exclusive categories of institutions. While the
institutions 'belonging' to the Central or the State Government
would imply the control of the State but the privately-owned
institutions can be 'under the control of' the Government in various
ways.
31.The State Government also exercises administrative
control over the institution. Section 17 deals with the manner of
recruitment and Section 18 deals with the procedure by which the
employees may be removed or dismissed or reduced in rank. Section 28
permits the State Government to prescribe the code of conduct of the
employees and Section 29 enjoins upon the institutions not to give
to its employees a pay lesser than the scales of pay and the
allowances paid to similar categories of the State Government.
32. In our view, the State Act is a complete code in
itself with regard to the educational institutions and the State
Government exercises substantive control over the institutions even
though the institutions are not 'owned' by it. The word 'control'
has not been defined under the EPF Act, 1952.
35. We further observe that the State Government has
the power of superintendence or the authority to direct, restrict or
regulate the working of the educational institutions. It was,
therefore, submitted that the institutions had satisfied both
Conditions (1) and (2) mentioned above and as such they would fall
within the exception contained under Section 16(1)(b) of the EPF
Act, 1952."
Hence it can be safely held that there are any
discrimination in leaving out the aided institutions for the purpose
of the notification.
48.Though it was stated by the petitioner that within
the aided educational institutions, there are self financing courses
conducted by them and for which staff are employed and that they may
not receive similar benefits, it must also be noted that there are
no pleadings to that effect in the present writ petitions. Even
otherwise, the petitioners cannot said to be aggrieved parties. If
those employees employed in the aided institutions do not have
similar benefits, as and when those employees make grievance, it is
always open to the State Government to issue appropriate
notification covering even those employees who do not have similar
or superior benefits given under the ESI Act in respect of those
institutions. On this ground, the impugned notification cannot be
invalidated.
49. Even assuming as held by the T.M.A. Pai's case
(cited supra), carrying on educational institution is an
"occupation" covered by Article 19(1)(g). Article 19(6) do not
prevent the State from making any law in the interest of general
public and impose reasonable restrictions on the exercise of the
right conferred by the sub clause. Providing health care and
disablement benefits to the employees engaged by the private
entrepreneur is the concern of the Government and mandated by
Chapter IV of the Constitution. It cannot be said to be an
unreasonable restriction on the right of the employer to carry on
his trade or occupation as the case may be.
50. The fact that contributions payable towards ESI
was not conceived while fixing fee structure in respect of private
educational institutions and therefore, the present notification
imposing unreasonable burden on them cannot be accepted as any legal
plea. First of all, the contribution payable in terms of Rule 51 as
noted elsewhere is only fraction of expenditure incurred by any
institution. Secondly, the wage ceiling imposed for covering number
of employees by the impugned notification will minimise the
percentage of total number of work force in the establishment. The
petitioners are making mountain out of mole hill and are making
imaginary pleas, which are not based upon factual foundation. Even
if there are more number of work force, granting health care
including disablement benefits on them is a constitutional
imperative which will have to be extended either by the employers
themselves or by a law made by the State as mandated by Part IV of
the Constitution. It is only in cases where an employer pleads that
he has already extended the said benefits, an exemption provision
conceived under the Act. Therefore, this court is not inclined to
accept the submissions made by the petitioners in this regard.
51.Though the counsel for the respondent State and
the Standing Counsel for the ESI contended that writ petitions at
the instance of the Association of private schools and college
management are not maintainable and also referred to certain
decisions and the same was also countered by Mr.A R. L. Sundaresan,
learned Senior counsel appearing for the petitioner in W.P.No.4722
of 2011, it is unnecessary to go into the said issue. Because in
W.P.Nos.2872 and 5084 of 2011, the petitioners are individual
colleges and in respect of those two writ petitions, the legal
questions raised will have to be gone into. Hence this Court is not
willing to undertake an exercise to reject the cases of
Associations, who are before this court. That issue can be relegated
to a future occasion. The merits of the contentions have already
been dealt with in these writ petitions.
52. But at the same time, it must be noted that since
the petitioners seek to challenge the impugned notification which
are in favour of their employees and in none of the writ petitions,
employees who are to be benefited by the application of the ESI Act
have been made as parties. Hence, these writ petitions are liable to
be rejected on that ground also.
53. The Supreme Court in the context of exclusion of
the ESI Act in its application to the employees clearly stipulated
that in such cases, the employees should be made either individually
or in a representative capacity as parties to such proceedings
without which the court cannot adjudicate such issue. Reference was
made to a judgment of the Supreme Court in Fertilizers &
Chemicals Travancore Ltd. v. ESI Corpn., reported in (2009) 9
SCC 485. The following passages found in paragraphs 5 to 9 may be
usefully extracted below:
"5. It may be noted that in its petition before the
Employees' Insurance Court, the appellant herein only impleaded
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 employer's 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."
54. The very same judgment came to be subsequently
followed by the Supreme Court in ESI Corporation v. Bhakra Beas
Management Board, reported in (2009) 10 SCC 671. The following
passage found in paragraph 5 may be reproduced below:
"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."
55. In the light of the above factual matrix and the
legal precedents, there is no case made out by the writ petitioners.
Hence all the writ petitions will stand dismissed. However, there
will be no order as to costs. Consequently, connected miscellaneous
petitions stand closed.
vvk
To
1.The Principal Secretary to Government,
The State of Tamil Nadu,
Labour and Employment Department,
Fort St. George,
Chennai-600 009.
2.The Assistant Director (Inspection),
Employees' State Insurance Corporation,
1897, Trichy Road,
Panchdeep Complex,
Ramanathapuram, Coimbatore-641 045.
3.The Regional Director,
Employees' State Insurance Corporation,
"Panchdeep", Sterling Road,
Nungambakkam,
Chennai-600 034.
4.The Additional Commissioner and Regional Director,
Employees' State Insurance Corporation,
143, Sterling Road,
Nungambakkam,
Chennai 600 034
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