Employees State Insurance Corporation Vs. All India I.T.D.C. Employees Union & Ors
 Insc 148 (24 March 2006)
Arijit Pasayat & Tarun
With C.A. No. 315 OF 2005
ARIJIT PASAYAT, J.
two appeals are inter-linked and are, therefore, taken up for disposal
together. Challenge in these appeals is to the legality of the judgment
rendered by a Division Bench of the Rajasthan High Court at Jodhpur confirming
the order passed by a learned Single Judge, who while dismissing the writ
petition filed by the respondent no.1 (hereinafter referred to as the 'Union')
in Civil Appeal No.313 of 2005 gave certain directions. The judgments in the
said case were followed in the connected Civil Appeal No.313 of 2005.
Background facts in a nutshell are
as follows :
to the amendment made in the provisions of the Employees' State Insurance
(Central) Rules, 1950 (in short the 'Rules') framed under Employees State
Insurance Act, 1948 (in short the 'Act') vide Notification dated 23.12.1996
which became effective with effect from the date 01.01.1997, the employees who
were drawing monthly salary of Rs.6,500/- which limit was earlier Rs.3,000/-
were required to make contributions at the enhanced rate of 1.75 % in place of
the earlier figure of 1.5%. The employers contribution
was increased from 4% to 4.75%. In view of the Notification those employees who
were drawing salary upto Rs.6,500/-
were required to secure new insurance cards after filing requisite declaration.
The concerned employer notified the employees accordingly. The Union challenged the employer's notice on
the ground that in view of proviso to Section 1(4) of the Act, the amendment as
brought in by the Notification had no application to the concerned employees.
However, prayer in the writ petition was to grant exemption. In the case of
ITDC which were subsequently taken over by Laxmi
Vilas Palace Hotel, Udaipur, stand was that the
employer-hotel was a Government of India undertaking and is State within the
meaning of Article 12 of the Constitution of India (in short the
'Constitution'). According to the Union, the applicability of the Act cannot be extended to the
employees of the said establishment. Therefore, the demand for payment for
contribution from the concerned employees to be deducted from their salaries is
not warranted. The Employees State Insurance Corporation (in short the
'Corporation') raised preliminary objections as regards the maintainability of
the writ petition. It was pointed out that since the Notification in question
was issued by the Union of India, without making the Union of India as a party
the petition was not maintainable. A further plea was taken that in view of the
alternative remedy available under the Industrial Disputes Act, 1947 (in short
the 'ID Act') the writ petition was not maintainable. Learned Single Judge
found the writ petition to be not maintainable in view of the alternative
remedy provided. It, however, gave following direction:
would be appropriate to direct the E.S.I. Corporation to consider that since
the petitioners have not availed the facility of E.S.I. from then they should
waive the realization of the contribution for this period from the petitioners
in the aforesaid circumstances and the necessary orders in this regard would be
issued by the E.S.I. Corporation." (Underlined for emphasis) This
direction was given on the basis that operation of the Notification was stayed
by order dated 26.2.1996 in the writ petition. Both the Corporation and the Union filed appeals before the Division
Bench. By the impugned judgment the Division Bench gave the following
"The deduction of the
employees' contribution will be made by the employer and along with the
employees' contribution, employer's contribution shall
be deposited with the ESI Corporation.
Such deposits shall be kept in
separate account by the ESI Corporation for a period of three months.
If within the said period of three
months, any dispute is raised about the applicability of the Act to the
establishment in question by the employer or employees before the appropriate
forum, the said arrangement of regular deposits of the contribution and
maintenance of the separate account by the Corporation shall continue until the
adjudication of that dispute by the said forum.
However, if no such application is
made within three months, the amount of contribution of the employee's and the
employer's so deposited with the corporation shall be appropriated to the
normal fund in accordance with the law.
If any such dispute is raised and
the petitioners succeed, the refund of the amount can appropriately be ordered
at the end of such adjudication." In the appeal filed by the Corporation
the aforesaid directions were given, while the appeal filed by the Union was dismissed. In the connected
case the writ petitioner was the J.K. White Cement Mazdoor
Sangh (in short the 'Sangh')
and the decision which forms the challenge in the Civil Appeal No.313 of 2005
C.S. Rajan, learned counsel for the appellant
submitted that merely because of the order of stay was granted, there was no
bar on the Corporation recovering the amounts. The High Court's order virtually
means that the Notification has to operate prospectively. Such a direction
cannot be given by the High Court. Learned counsel for the respondents i.e. Union and the concerned employers
supported the order. It was their stand that because of the stay order,
recovery was not made and, therefore, the direction given by the High Court
needs no interference.
question relating to the jurisdiction of the High Court to direct that statute
shall operate prospectively is no longer res integra. A few decisions of this Court can be noted by way
of illustration. In Kanoria Chemicals and Industries
Ltd. and others v. U.P. State Electricity Board and Others (1997(5) SCC 772 ), it was observed.
".it is equally well settled
that an order of stay granted pending disposal of a writ petition/suit or other
proceeding, comes to an end with the dismissal of the substantive proceeding
and that it is the duty of the court in such a case to put the parties in the
same position they would have been but for the interim orders of the court. Any
other view would result in the act or order of the court prejudicing a party
(Board in this case) for no fault of its and would
also mean rewarding a writ petitioner in spite of his failure. We do not think
that any such unjust consequence can be countenanced by the courts. As a matter
of fact, the contention of the consumers herein, extended logically should mean
that even the enhanced rates are also not payable for the period covered by the
order of stay because the operation of the very notification revising/enhancing
the tariff rates was stayed.
no such argument was urged by the appellants. It is ununderstandable
how the enhanced rates can be said to be payable but not the late payment
surcharge thereon, when both the enhancement and the late payment surcharge are
provided by the same notification-the operation of which was stayed.
As has been pointed out by S. C. Agrawal, J., speaking for a three-Judge Bench in Shree Chamundi Mopeds Ltd. v.
Church of South India Trust Assn. [(1992) 3 SCC 1] :
(SCC p. 9, para 10) "While considering the
effect of an interim order staying the operation of the order under challenge,
a distinction has to be made between quashing of an order and stay of operation
of an order.
of an order results in the restoration of the position as it stood on the date
of the passing of the order which has been quashed.
stay of operation of an order does not, however, lead to such a result. It only
means that the order which has been stayed would not be operative from the date
of the passing of the stay order and it does not mean that the said order has
been wiped out from existence." In Union of India and Another v. Murugan Talkies (1996 (1) SCC 504) it was observed as
"It is contended for the
respondents that the High Court has granted the relief taking into
consideration that some workmen had retired and it would be inequitable to
deduct from the meager wages of existing employees with retrospective period.
Therefore, the High Court directed deduction of their share from the date of
the judgment. It is needless to mention that since some of the workmen have
already retired and from some existing workmen deduction from date of
enforcement of the notification would cause great hardship to them, so it
cannot be made to bear the burden of their contribution with retrospective
effect from the date of the notification towards their share of contribution.
To that extent, the order of the
High Court is upheld. As regards the liability of the owners of the theaters
who approached the High Court, the operation of the notification had stayed at
their instance. We find that the High Court was wholly unjustified in granting
the same relief to these owners/licensees.
their writ petitions were dismissed, they were to bear the liability from the
date of the enforcement of the notification as held by this Court. It is,
therefore, necessary that from the date on which the respective owners of the
theaters or the licensees, who had filed the writ petition in the High Court,
are made liable to deposit their share of contribution towards provident fund
account under the scheme." In Employees' State Insurance Corpn. v.
Kerala State Handloom Development Corpn. Employees Union (CITU), Kannur,
Dist. Kannur, Kerala and
others 1994(1) SCC 268 it was observed as follows :
"We are of the view that the
High Court fell into patent error in postponing the date of the operation of
the notification. The notification, amending the Rules, was legislative act.
The amendment of the Rules being a delegated legislation, the High Could could not have interfered with the date of operation of the
notification." In U.P. State Sugar Corporation and Another v. Mahalchand M. Kothari and Others
(2005(1) SCC 348) it was observed in paras 35, 36
& 37 as follows:
"xxx xxx xxx During course of the writ petition filed by the owner
of the sugar mill in which the constitutional validity of the Ordinance/Act was
challenged, a stay order, on the limited terms and conditions, was passed on
terms and conditions of the order reproduced above, restored the de jure possession of the sugar mill to the erstwhile owner
but de facto possession and management of the sugar mill was allowed to remain
undisturbed with the Receiver although with limited powers to him. The Receiver
was specifically allowed in accordance with Term 3 of the stay order to sell
sugar, molasses and other waste products. By virtue of the order of stay passed
by the High Court, during pendency of the writ
petition, the Receiver appointed under the Act of 1950, continued to manage the
sugar mill subject to the ultimate result of the writ petition. The writ
petition ultimately came to be dismissed on 3.5.1979 and the stay order
containing the terms and conditions passed on 9.7.1971 stood automatically
vacated. The natural consequence was restoration of full operation of the
provisions of the Ordinance/Act as was originally passed. In accordance with
Section 3 of the Act, the sugar mill stood transferred and vested in the
Corporation from the appointed date 3.7.1971. On vacation of the stay order
with effect from the appointed day 3.7.1971, the operation of the Ordinance/Act
was revived. The liability arising from breach of contract committed by the
Receiver was not of the Corporation. It was an obligation attached to the
property of the sugar mill which was under the management of the Receiver,
initially under the 1950 Act and continued under the order of stay passed by
the High Court. Since the liability towards breach of contract was attached to
the sugar mill under the management of the Receiver, the Corporation in whom
title of the sugar mill stands vested under Section 3 of the Act cannot avoid
the liability it being a burden on the
said property and recoverable from it.
It is of no importance or
consequence that actual or de facto possession of the property was received by
the Corporation under a formal order of the Collector, Deoria
on 23.5.1979, only after dismissal of the writ petition on 3.5.1979 and
consequent discharge of the Receiver.
The Ordinance was stayed by the High
Court to restore status quo ante existing on 2.7.1971, that is, a day prior to
the appointed date 3.7.1971. But on the dismissal of the writ petition and
automatic vacation of the stay order of the High Court, the operation of the
Ordinance/Act with all legal consequences flowing from the said law stood
restored from the appointed date. The trial court and the High Court are
perfectly right in holding in their judgments that the order of stay passed in
the writ petition could have no effect of postponing the "appointed
day" statutorily fixed under Section 3 of the Ordinance/Act." But it
is really unnecessary to go into said question because the order of the High
Court really did not give a positive direction. Relevant portion of the learned
single Judge's order which has been extracted above,
clearly goes to show that the learned Single Judge left the matter to be
decided by the Corporation. The direction was to "consider" and in
that sense there was no positive direction.
may, in this context, examine the significance and meaning of a direction given
by the Court to "consider" a case. When a court directs an authority
to 'consider', it requires the authority to apply its mind to the facts and
circumstances of the case and then take a decision thereon in accordance with
law. There is a reason for a large number of writ petitions filed in High
Courts being disposed of with a direction to "consider" the
claim/case/representation of the petitioner(s) in the writ petitions.
an order or action of the State or an authority is found to be illegal, or in
contravention of prescribed procedure, or in breach of the rules of natural
justice, or arbitrary/unreasonable/irrational, or prompted by mala fides or extraneous consideration, or the result of
abuse of power, such action is open to judicial review. When the High Court
finds that the order or action requires interference and exercises the power of
judicial review, thereby resulting in the action/order of the State or
authority being quashed, the High Court will not proceed to substitute its own
decision in the matter, as that will amount to exercising appellate power, but
require the authority to 'consider' and decide the matter again.
power of judicial review under Article 226 concentrates and lays emphasis on
the decision making process, rather than the decision itself.
High Courts also direct authorities to 'consider' , in
a different category of cases. Where an authority vested with the power to
decide a matter, fails to do so in spite of a request, the person aggrieved
approaches the High Court, which in exercise of power of judicial review,
directs the authority to 'consider' and decide the matter. In such cases, while
exercising the power of judicial review, the High Court directs 'consideration'
without examining the facts or the legal question(s) involved and without
recording any findings on the issues. The High Court may also direct the
authority to 'consider' afresh, where the authority had decided a matter
without considering the relevant facts and circumstances, or by taking
extraneous or irrelevant matters into consideration.
such cases also, High Court may not examine the validity or tenability of the
claim on merits, but require the authority to do so.
the High Court finds the decision-making process erroneous and records its
findings as to the manner in which the decision should be made, and then
directs the authority to 'consider' the matter, the authority will have to
consider and decide the matter in the light of findings or observations of the
Court. But where the High Court without recording any findings, or without
expressing any view, merely directs the authority to 'consider' the matter, the
authority will have to consider the matter in accordance with law, with
reference to the facts and circumstances of the case, its power not being circumscribed
by any observations or findings of the Court.
also note that sometimes the High Courts dispose of matter merely with a
direction to the authority to 'consider' the matter without examining the issue
raised even though the facts necessary to decide the correctness of the order
are available. Neither pressure of work nor the complexity of the issue can be
a reason for the Court, to avoid deciding the issue which requires to be
decided, and disposing of the matter with a direction to 'consider' the matter
are also several instances where unscrupulous petitioners with the connivance
of 'pliable' authorities have misused the direction 'to consider' issued by
court. We may illustrate by an example. A claim, which is stale, time-barred or
untenable, is put forth in the form of a representation. On the ground that the
authority has not disposed of the representation within a reasonable time the
person making the representation approaches the High Court with an innocuous
prayer to direct the authority to 'consider' and dispose of the representation.
When the Court disposes of the petition with a direction to 'consider', the
authority grants the relief, taking shelter under the order of the Court
directing it to 'consider' .
are also not wanting where authorities, unfamiliar with the process and
practice relating to writ proceedings and the nuances of judicial review, have
interpreted or understood the order 'to consider' as directing grant of relief
sought in the representation and consequently granting reliefs
which otherwise could not have been granted. Thus, action of the authorities
granting undeserving relief, in pursuance of orders to 'consider', may be on
account of ignorance, or on account of bona fide belief that they should grant
relief in view of Court's direction to 'consider' the claim or on account of
collusion/connivance between the person making the representation and the
authority deciding it.
while disposing of writ petitions with a direction to 'consider', there is a
need for the High Court to make the direction clear and specific. The order
should clearly indicate whether the High Court is recording any finding about
the entitlement of the petitioner to the relief or whether the petition is
being disposed of without examining the claim on merits.
aforesaid aspects were highlighted recently in A.P.S.R.T.C. & Ors. v. G. Srinivas Reddy and Ors. (AIR 2006 SCW 1108).
true as contended by learned counsel for the Corporation that the use of the expression
"should" gives a scope for entertaining a doubt that there was a
positive direction. It is, therefore, necessary to clarify that what learned
Single Judge in the direction said was only consideration by the Corporation
and there was no positive direction. In that view of the matter the Corporation
shall now give opportunity to the concerned parties i.e. respondents 1, 2 &
3 in each case to present their respective stand before the Corporation so that
after consideration necessary order can be passed in accordance with law. We
express no opinion on that aspect. The appeals are disposed of accordingly with
no order as to costs.