Bharat Barrel & Drum Mfg. Co. Ltd.
& ANR Vs. Employees State Insurance Corporation  INSC 261 (23
REDDY, P. JAGANMOHAN REDDY, P. JAGANMOHAN
CITATION: 1972 AIR 1935 1972 SCR (1) 867 1972
SCC (2) 860
Employees' State Insurance Act, 1948, s.
96(1)(b)-Power to prescribe by rules "the procedure to be followed in
proceedings before the court"-If includes power to prescribe period of
limitation for claims under s. 75.
Limitation, Statutes of-Nature.
In exercise of the power conferred by s.
96(1)(b) of the Employees' State Insurance Act, 1948, to "Prescribe by
rule the procedure to be followed in proceedings" before the Insurance
Court, the State Government made r. 17 prescribing a period of limitation of
twelve months for every application to the Court. The Employees' State
Insurance Corporation filed an application before the Court claiming payment of
the contribution due from the appellant. The appellant took the plea that the
application was barred as it was not presented within the period prescribed.
The High Court, on a reference, held that s. 96(1) (b) did not grant power to
Government to make a rule prescribing a period of limitation on claims
enumerated in s. 75(2) and, therefore, r. 17 was ultra vires the rule making
power under s. 96(1).
On the question whether the power to
prescribe a period of limitation 'for initiating proceedings before the court
is a part of, and is included in, the power to prescribe "the procedure to
be followed in proceedings" before such courts,
HELD : The power under s. 96(1) (b) does not
empower the government to prescribe by rule a period of limitation for claims
under s. 75.
(i) The law of limitation to remedies
because, the rule is that claims in respect of rights cannot be entertained if
not commenced within the time prescribed by the statute in respect of that
right. The object of the statutes of limitation is to compel a person to
exercise his right to take action within a reasonable time, as also, to
discourage and suppress stale, fake and, fraudulent claims. While this is so,
there are two aspects of the statutes of limitation, the one concerns the
extinguishment of the right if a claim or action is not commenced within a
particular time; the other merely bars the claim without affecting the right
which either remains merely a moral obligation or can be availed of to furnish
the consideration for fresh enforceable obligation. Where a statute prescribing
limitation extinguishes the right it affects substantive rights, while, that
which purely pertains to the commencement of action without touching the right
is procedural. The statement that substantive law determines rights and
procedural law deals with remedies is not wholly valid, for, neither the entire
law of remedies belongs to procedure, because, rights are hidden even in the
"interstices of procedure". There is, therefore, no clear cut
division between the two. [872 G, 873 C-E, 874 B] (ii)There is difference
between the manner in which jurisprudential lawyers consider the question and
the way in which judges view the matter. Where a question of limitation arises,
the present tendency is towards the view that statutes of limitation may not
prove to be a determining factor. But, what has to be considered is whether the
statute 868 extinguishes merely the remedy, or extinguishes the substantive
right as well as the remedy. The safest course would be to examine each case on
its own facts and circumstances and determine, for in-stance, whether it
affects substantive 'rights and extinguishes them, whether it merely concerns a
procedural rule only dealing with remedies, whether the intendment to Prescribe
limitation is discernible in the scheme of the Act, or whether it is
inconsistent with the rule making power., [876 H] (iii) Apart from the
implications inherent in the term "Procedure" appearing in s. 96(1)
the word in furnishes a clue, to the controversy, that the procedure must be in
relation to the proceedings in court after it has taken se is in of the matter.
Therefore, the application by which the court is asked to adjudicate a matter
covered by s. 75(2) is outside the scope of the rule-making power. [877 D]
(iv)The provisions of the Act clearly indicate that the whole scheme is
dependent upon the contributions made by the employer not only in respect of
the amounts payable by him but also in respect of those payable by the employee.
No limitation has been fixed for the recovery of these amounts by the
Corporation from the employer; on the other hand s.
68 empowers the Corporation to resort to
If any such steps are proposed to be taken by
the Corporation and the employee is aggrieved he has a right to file and apply
to the Insurance Court and have his claim adjudicated by it in the same way as
the Corporation can prefer a claim in a case where the liability to pay is
disputed. Section 75(2) (d) clearly envisages this course when it provides that
the claim against a principal employer under s. 68 shall be decided by the
Insurance Court. The fact that neither s. 75(2) (d) nor s. 68, nor s. 77 which
deals with the commencement of the proceedings, prescribe any period of limitation,
while a period of limitation is provided in the case of a claim by an employee
for the payment of any benefit under the regulations, clearly shows that the
legislatures did not intend to fetter the claim under s. 75 (2) (d). Where the
legislature clearly intends to provide specifically the period of limitation in
'respect of claims arising there under, it cannot be considered to have left
such matters in respect of claim under some similar provisions to be provided
for by the rules to be made by, government under its delegated powers to
prescribe the procedure to be followed in proceedings before such court. [878
H-879 C, 880 F] (v)Nor does s. 78(2) delegate any power to thegovernment to
make rules. The section only requires the Insurance Court to follow "such
procedure as may be prescribed by rules made by the State Government". And
these rules can only be made under s. 96 of the Act. [882 D] (vi)Further, the
nature of the rule bars the claim itself and extinguishes the right which is
not in the pale of procedure. A provision by which an employee loses his right
to 'receive payment of any benefit conferred 'by the Act, if he does not file
an application within 12 months after the claim has become due, affects
substantive rights, and must, therefore. be dealt with by the legislature
itself and is not to be inferred from the rule-making power conferred for
regulating the procedure unless that is specifically provided for. The
legislature does not part with the power to prescribe limitation which it jealously
retains to itself unless it intends to do so in clear and unambiguous terms or
by necessary intendment. [881 B-F] Employees' State insurance Corporation V.
Madhya Pradesh Government & Ors., A.I.R. 1964 (51) M.P. 75, M/s. Solar
Works, Madras v. Employees' State Insurance Corporation, Madras A.I.R. 1964
869 376, United India Timber Works, Yamunagar
& Anr. v. Employees' State Insurance Corporation, Amritsar A.I.R. 1967 (54)
Punjab, 166 (FB) and E.S.L.C. Hyderabad v. A.P. State Electricity Board,
Hyderabad, 1970 Labour & Industrial cases 921, approved.
View contra in M/s. A. K. Brothers v.
Employees' State Insurance Corporation, A.I.R. 1965 (52) All. 410, disapproved.
Roshan Industries Pvt. Ltd., Yamunagar v.
Employees' State Insurance Corporation, A.I.R. 1968 (55) Punjab 56 (SB).
Manoel Francisco Lonez A Ors. v. Lieut.
Godoluhin James Burslem, (1843) IV M.I.A. 300, Ruckmaboye v. Lulloobhoy
Mottichund, (1849-54) V M.I.A. 234, Sennimalai Goundan v.
Palani Gonndan & Anr. A.I.R. 1917 Madras
957, Krishnamzchariar v. Srirangammal & Ors., I.L.R. 47 Madras 824,
Bendredas v. Thakurdev, I.L.R. 53 Bom. 453, Velu Pillai v.
Sevuga Perumal Pillai, A.I.R. 1958 Madras
392, Narsingh Sahai v. Sheo Prasad,  I.L.R. 40 All 1(FB), Chunilal
Jethabhai v. Dhyabhai Amulakh,  I.L.R. 93 Bom. 14(FB).
Union of India v. Ram Kanwar & Ors..
 3 S.C.R. 313, Punjab Cooperative Bank Ltd. v. Official Liquidators
Punjab Cotton Press Company Ltd. (in Liquidation), A.I.R. 1941 Lah.
57 (FB), and East & West Steamship
Company, George Town, Madras v. S. K. Ramalingam Chettiar,  3 S.C.R. 820,
CIVIL APPELLATE JURISDICTION: Civil Appeal
No. 563 of 1967.
Appeal from the judgment and order dated
September 15, 16, 19, 1966 of the Bombay High Court in Civil Reference No. 8 of
G.B. Pai, Bhuvanesh Kumari and O. C. Mathur,
for the appellants.
L. M. Singhvi, Ram Panjawani and S. P. Nayar,
for the respondent.
The Judgment of the Court was delivered by P.
Jaganmohan Reddy, J. In exercise of the powers under Sec. 96(1)(b)of the
Employees State Insurance Act 1948 (hereinafter referred to as 'the Act')
relating to "the procedure to be followed in proceedings before such
Courts and the execution of orders made by such Courts", the Government of
Bombay made the following Rule;
(1) Every application to the Court shall be
brought within twelve months from the date on which the cause of action arose
or as the case may be the claim became due :
Provided that the Court may entertain an
application after the said period of twelve months if it is satisfied that the
applicant had sufficient reasons for not making the application within the said
870 (2)Subject as aforesaid the provisions of
Part II and III of the Indian Limitation Act, 1908 (IX of (1908), shall so far
as may be appli ed to very such application", The vires of this Rule was
challenged by the Employees State Insurance Corporation (hereinafter referred
to as 'the Corporation) when it filed an application on 7th October 1963
against the Appellant in the Employees Insurance Court (hereinafter referred to
as the Insurance Court') claiming payment of the contributions due from it for
the period 1st September 1957 to 31st July 1963. In those proceedings the
Appellant had 'taken the plea that the application was barred under Rule 17 as
it was not presented within twelve months from the date when the cause of
action arose or as the case may be when the amount became due. As the plea
raised before' it was important the Insurance Court made a reference under
Section 81 of the Act on the following question for the decision of the High
Court of Bombay :(1)Whether rule 17 of the Employees' State Insurance Rule is
ultra vires the rule making power of the State Government under Sec. 96(1) of
the Employees State Insurance Act ? (2)If yes, what, if any, limitation applies
to applicationsfiled by the Corporation to the Employees' Insurance Court ? The
High Court of Bombay having considered the several cases and the contentions
and submissions mad-. before it held that the clear and unambiguous terms of s.
96 (1) (b) exclude the grant of the power to any State Government to make a
rule prescribing a period of limitation on claims ennumerated in Sec.75(2). It
was lb further of the view that where two interpretations of the terms of Sec.
96(1) (b) were possible that interpretation should be accepted which excludes
the grant of such a power, because it appeared to it clear from the scheme of
the Act and the provisos thereof that the legislature did not intend to confer
such power on the State Governments. It therefore answered the first question
in affirmative namely that Rule 17 is ultra vires the rule making power of the
State Government under See.
96(1) (b) of the Act. On the second question
it held that an application filed in a Court before 1-1-1964 for relief under
Sec. 75 of the Act was not subject to any period of limitation, but an
application filed on or after 11 -64, would, however, be covered by Art. 137 of
the Limitation Act of 1963 which provides a limitation of 3 years from the date
when the right to apply accrues. This appeal has been filed against that
decision by certificate under Art. 1 3 3 (1) (c) of the Constitution.
871 This question has been the subject matter
of the decisions in Employees State Insurance Corporation v. Madhya Pradesh
Government & Ors. (1) M/s Solar Works, Madras v.
Employees State Insurance cc Corporation,
Madras & Anr.(2) M/s. A. K. Brothers v. Employees' State Insurance
Corporation, ( 3 ) United India Timber Works, Yamunanagar & Anr. v.
Employees State Insurance Corporation, Amritsar, ( 4 ) Roshan Industries Pvt.
Ltd. Yamunagar v. Employees' State Insurance Corporation(3), E.S.L.C. Hyderabad
v. A. P.
State Electricity Board, Hyderabad (6) . All
the High Courts in these cases except that of Allahabad held that the rule is
ultra vires the powers conferred on the State Government under Sec. 9 6 ( 1 )
(b) inasmuch as it is not empowered to make rules prescribing periods of
limitation for applications to be filed before the Court, though in Madhya
Pradesh case it was also said that "Even if it be taken that clause (b) of
96(1), as it is worded, is wide enough to
cover a rule of limitation, that cannot authorize the Government to frame a
rule regulating limitation for the recovery of contributions...............
because according toit the validity of the
rule does not necessarily depend on the ascertainment of "whether it
confers rights or merely regulates procedure, but by determining whether it is
in conformity with the powers conferred by the statute and whether it is
consistent with the provisions of the statute". These decisions also held
that the scheme of the Act was such that the Legislature did not and could not
have intended to confer any power upon the State Government to make rules
prescribing a period of limitation for application under Sec. 75(2).
The question which directly confronts us is
whether the power to prescribe periods of limitation for initiating proceedings
before the Court is a part of, and is included, in the power to prescribe
"the procedure to be followed in proceedings before such Courts". The
answer to this question would involve the determination of the further question
whether the law relating to limitation is procedural or substantive or partly
procedural and partly substantive. If it is procedural law does it make any
difference whether it relates to the time of filing application for initiation
of proceedings before the Court or whether it relates to interlocutory
applications or other statements filed before it after the initiation of such
proceedings,. The contention on behalf of the Appellant is that the law
relating to limitation is merely procedural, as such it makes (1) AIR 1964
(Vol. 51) Madhya Pradesh 75.
(2) AIR 1964 (Vol. 51) Madras 376.
(3) AIR 1965 (Vol. 52) Allahabad 410.
(4) AIR 1967 (Vol. 54) Punjab 166 (FB).
(5) AIR 1968 (Vol. 55) Punjab 56 (SB).
(6) 1970 Labour & Industrial cases 921.
872 no difference whether it relates to the
time of filing an application or it deals with the time for filing
interlocutory applications or other statements. There is also it is submitted
no indication in the scheme of the Act that it is otherwise or that there is
any impediment for the Government to prescribe under the rule making authority
the period of limitation for applications under Sec. 75 (2).
Before we consider the scheme of the Act it
may be necessary to examine the scope and ambit of the terms 'procedure' as used
in Sec. 96(1)(b).
The topic of procedure has been the subject
of academic debate and scrutiny as well as of judicial decisions over a long
period but in spite of it, it has defied the formulation of a logical test or
definition which enables us, to determine and demarcate the bounds where
procedural law ends and substantive law begins, or in other words it hardly
facilitates us in distinguishing in a given case whether the subject of
controversy concerns procedural law or substantive law. The reason for this
appears to be obvious, because substantive law deals with right and is
fundamental while procedure is concerned with legal process involving actions
and remedies, which Salmond defines "as that branch of law which governs
the process of litigation", or to put it in another way, substantive law
is that which we enforce while procedure deals with rules by which we enforce
it. We are tempted in this regard to cite a picturesque aphorism of Therman
Arnold when he says "Substantive law is canonised procedure. Procedure is
unfrocked substantive law(1)".
The manner of this approach may be open to
the criticism of having over simplified the distinction, but nonetheless this
will ,enable us to grasp the essential requisites of each of the concepts which
at any rate "has been found to be a workable concept to point out the real
and valid difference between the rules in which stability is of prime
importance and those in which flexibility is a more important value (2 )
". Keeping these basic assumptions in view it will be appropriate to
examine whether the topic of limitation belongs to the Branch of procedural law
or is outside it. if it is a part of the procedure whether the entire topic is
covered by it or only a part of it and if so what part of it and the tests for
ascertaining them. The law of limitation appertains to remedies because the
rule is that claims in respect of rights cannot be entertained if not commenced
within the time prescribed by the statute in respect of that right. Apart from
Legislative action prescribing the time, there is no period of limitation
recognised under the general law and therefore any time fixed by the statute is
neces(1) XLV Harvard Law Journal-617 & 645.
(2) American Juris-prudence-Vol. 51 (Second
873 sarily to be arbitrary. A, statute
prescribing limitation however does not confer a right of action nor speaking
generally does it confer on a person a right to relief which has been barred by
eflux of time prescribed by the law. The necessity for enacting periods of
limitation is to ensure that actions are commenced within a particular period,
firstly to assure the availability of evidence documentary as well as oral to
enable the defendant to contest the claim against him; secondly to give effect
to the principle that law does not assist a person who is inactive and sleeps
over his lights by allowing them when challenged or disputed to remain dormant,
without asserting them in a court of law.
The, principle which forms the basis of this
rule is expressed in the maxim vigilantibus, non dormientibus jura subveniunt
(the laws give help to those who are watchful and not to those who sleep).
Therefore the, object of the statutes of limitations is to compel a person to
exercise his right to action within a reasonable time as also to discourage and
suppress stale, fake or fraudulent claims.
While this is so there are two aspects of the
statutes of limitation the one concerns the extinguishment of the right if a
claim or action is not commenced with a particular time and the other merely
bars the claim without affecting the right which either remains merely as a
moral obligation or can be availed of to furnish the consideration for a fresh
enforceable obligation. Where a statute prescribing the limitation extinguishes
the right, it affects substantive rights while that which purely pertains to
the commencement of action without touching the right is said to be procedural.
According to Salmond the law of procedure is that branch of the law of actions
which governs the process of litigation, both Civil and Criminal. "All the
residue" he says "is substantive law, and relates not to the process
of litigation but to its purposes and sub-, ject matter".
It may be stated that much water has flown
under the bridges since the original English theory justifying a statute of
limitation on the ground that a debt long overdue was presumed to have been
paid and discharged or that such statutes are merely procedural. Historically
there was a period when substantive law was inextricably intermixed with
at a later period procedural law seems to
have reigned supreme when forms of action ruled. In the words of Maine "So
great is the ascendancy of the Law of Actions in the infancy of Courts of
Justice, that substantive law has at first the look of being gradually secreted
in the interstices of procedure()". Even after the forms of action were
abolished Maitland in his Equity was still able to say "The forms of
action we have buried but they still rule us from their graves", to which
Salmond added "In their life they were powers of evil and even in death
they have not wholly ceased from troubling(2)". Oliver Wendal Holmes had
however observed in "The (1) Maine, Early Law and Custom 389.
(2) 21 L.Q.R. 43.
874 Common Law", "wherever we trace
a leading doctrine of sub stantive law far enough back, we are likely to find
some forgotten circumstance of procedure at its source". It does not
therefore appear that the statement that substantive law determ.nes rights and
procedural law deals with remedies is wholly valid, for neither the entire law
of remedies belongs to procedure nor are rights merely confined to substantive
law, because as already noticed rights are hidden even "in the interstices
of procedure". There is therefore no clear cut division between the two.
A large number of decisions have been
referred before us both English and Indian some of antiquity in support of the
proposition that the law prescribing the time within which an action can be
commenced is purely procedural and therefore when a statute empowers the Govt.
to make rules in respect of procedure it confers upon it also the rights to
prescribe limitation. To this end have been cited the cases of Manoel Francisco
Lopez & Ors. v. Lieut. Godolnhon James Burslem(l), and Ruckmaboye v.
Lulloobhoy Mottichund(2). An examination of these cases would. show that what
was being considered was whether the law of limitation was part of the lex fori
which foreigners and persons not domiciled in the country have to follow if
they have to have recourse to actions in that country. In the latter case the
Privy Council observed at page 265 "The arguments in support of the plea
are founded upon the legal character of a law of limitation or prescription,
and it is insisted, and the Committee are of opinion, correctly insisted, that
such legal character of 'the law of prescription has been so much considered
and discussed among writers upon jurisprudence, and has been so often the
subject of legal decision in the courts of law of this and other countries,
that it is no longer subject to doubt and uncertainty. In truth, it has become
almost an axiom in jurisprudence, that is law of prescription, or law of
limitation, which is meant by that denomination, is a law relating to procedure
having reference only to the lex fori".
These observations as well as those in the
earlier case must be understood in the light of the principles governing
conflict of laws. What was in fact being examined was whether they are part of
the procedural law in the sense that the Municipal laws will be applicable on
the question of limitation for the commencement of actions because if
limitation was purely a question of substantive law that would be governed by
the law of the country of the (2) (1849-54)_(V_Moore Indian Appeals 234).
875 domicile of the person who is having
recourse to the Courts of the other country. In other words the substantive
rights of the parties to an action are governed by a foreign law while all
matters pertaining to procedure are governed exclusively by the lex fori.
The cases cited at the Bar, of the various
High Courts in this country show that they were construing the rules
prescribing limitation in respect of proceedings in Court i.e. proceedings
after the institution of the suit or filing of the Appeal. In Sennimalai
Goundan v. Palani Goundan & 4nr.(1), the question was. whether &,,a
High Court by framing a rule under Sec. 122 Civil Procedure Code could make
Section 5 of the Limitation Act applicable to applications under sub-rule (2)
of Rule 13 of Order IX.
While holding that it could, Coutts-Trotter,
J as he then was made this pertinent observation :
"Whatever may be the case of the statute
prescribing say 3 years for an action to be brought I am quite clear that the
Articles in the Act limiting applications of this nature which are almost
entirely interlocutory deal clearly with matters of procedure............
This was also the view of the Full Bench in
Krishnamachariar v. Srirangammal & Ors.(2), which was followed by the
Bombay High Court in Bandredas v. Thakurdev ( 3 ). It was contended in Velu
Pillai v. Sevuga Perumal Pillai(4), that rule 41 (A) (2) of the Appellate side
Rules of the Madras High Court providing for the presentation of a petition to
the High Court within 90 days from the date of the order passed in an execution
proceedings was ultra vires, because the High Courts were not entitled by rules
to regulate or enlarge the periods in the Limitation Act in respect of the
proceedings to which the Limitation, Act apply'This contention was negatived on
the ground that such a powerwas inherent in Sec. 122 of the Civil Procedure
Code. The argument of the petitioner that he had a vested right to go up in
revision at any time and that the decision of the Full Bench in
Krishnamachariar v. Srirangammal & Ors. (2 ) does not affect his right, was
rejected on the ground that Sec. 122 Civil Procedure Code empowers the High
Courts to make rules regulating their own procedure and the procedure of the
subordinate Courts subject to their superintendence.
There were earlier decisions of the Allahabad
High Court and Lahore High Court as also a decision of the Bombay High Court
rendered under Sec. 602 of the old Civil Procedure Code 1. AIR 1917 Madras 957.
(2) ILR 47 Madras 824.
(3) ILR 53 Bombay 453.
(4) AIR 1958 Madras 392.
876 referred to by Krishnan, J., in his
referring order in Krishnamachariar's case which took the view that the High
Court has riot the power by rule under Sec. 122 or the corresponding Sec. 602
of the old Civil Procedure Code to make rules for altering the period of
limitation prescribed by the Indian Limitation Act see Narsingh Sahai v. Sheo
Prasad(l), and Chunilal Jethabhai v. Dahvabhai Amulakh(2).
Again a similar question arose as to whether
clause 27 of the Letters Patent of the Lahore High Court (there are similar
clauses in the Letters Patent of the other High Courts) could validly empower
the making of rule 4 prescribing a period for filing an appeal under Clause 10
of the Letters Patent. Clause 27 of the Letters Patent empowered the High Court
from time to time to make rules and orders for regulating the practice of the
Court etc. This Court in Union of India v. Ram Kanwar & Ors. ( 3 ) ,
approved the view of a Full Bench of the Punjab High Court in Punjab
Cooperative Bank Ltd. v. Official Liquidators Punjab Cotton Press Company Ltd.
(in liquidation) (4), where it was held that rule 4 is a special law within the
meaning of Sec. 29 (2) of the Limitation Act. Subba Rao, J., as he then was
said at page 320 "Rule 4 is made by the High Court in exercise of the
legislative power conferred upon the said High 'Court under cl. 27 of the
Letters Patent. As the said rule is a law made in respect of special cases
covered by it, it would certainly be a special law within the meaning of S.
29(2) of the Limitation Act".
In that case no question was raised as to
whether rule 4 was dealing with a procedural matter or dealt with a substantive
right. These cases are of little assistance and if at all they lay down the
principle that interlocutory proceedings before the Court do not deal with
substantive rights and are concerned with mere procedure and can be dealt with
by rules made under the powers conferred on the High Court to regulate the
procedure. It is therefore apparent that whether the fulfillment of a
particular formality as a condition of enforceability of a particular right is
procedural or substantive has not been, as we had already noticed free from
difficulty. What appears to be a self evident principle will not become so
evident when we begin to devise tests for distinguishing procedural rule from
substantive law. It appears to us that there is a difference between the manner
in which the jurisprudential lawyers consider the question and the %way in
which the Judges view the matter. The present tendency (1)  I.L.R 40 All.
(2)  I.L.R 32, Bom. 14 (FB).
877 is that where a question of limitation
arises, the distinction between so-called substantive and procedural statutes
of limitation may not prove to be a determining factor but what has to be
considered is whether the statute extinguishes merely the remedy or
extinguishes the substantive right as well as the remedy. Instead of
generalising on a principal the safest course would IV to' examine each case on
its own facts and circumstances and determine for instance whether it affects
substantive rights and extinguishes% them or whether it merely concerns a
procedural rule only dealing with remedies or whether the intendment to
prescribe limitation is discernible from the scheme of the Act or is
inconsistent with the rule making power etc, Apart from the implications
inherent in the term procedure appearing in Sec. 96(1)(b) the power to
prescribe by rules any matter falling within the ambit of the term must be the
"Procedure to be followed in proceedings be-fore such Court". The
word 'in', emphasised by us, furnishes a clue to the controversy that the
procedure must be in relation to proceedings in Court after it has taken
decision of the matter, which obviously it takes when moved by an application
presented before it. If such be the meaning the application by which the Court
is asked to adjudicate on a matter covered by Sec. 75(2) is outside the scope
of the rule making power conferred on the Government.
In the East & West Steamship Company,
George Town, Madras v. S. K. Ramalingam Chettiar(1), one of the questions that
was considered by this Court was whether the clause that provides for a suit to
be brought within one year after the delivery of the goods or the date when the
goods should have been delivered, only prescribes a rule of limitation or does
it also provide for the extinction of the right to compensation after certain
period of time. It was observed by Das Gupta, J, at page 836 :
"The distinction between the extinction
of a right and the extinction of a remedy for the enforcement of that right,
though fine, is of great importance. The legislature could not but have been
conscious of this distinction when using the words "discharged from all
liability" in an article purporting to prescribe rights and immunities of
the ship owners. The words are apt to express an intention of total extinction
of the liability and should, specially in view of the international character
of the legislation, be construed in that sense.
878 It is hardly necessary to add that once
the liability is extinguished under this clause, there is no scope of any
acknowledgement of liability thereafter".
What we have to consider is, apart from the
question that the Government on the terms of Sec. 96(1) (b) is not empowered to
fix periods of limitation for filing applications under Sec. 75 (2) to move the
Court, whether on an examination of the Scheme of the Act, rule 17 affects
substantive rights by extinguishing the claim of the Corporation to enforce the
liability for contributions payable by the Appellant.
An examination of the purpose and intendment
of the Act and the scheme which it effectuates, leaves no doubt that it was
enacted for the benefit of the employees and their dependents, in case of
sickness, maternity and 'employment injury', as also to make provision for
certain other matters. Sec. 40 makes the employer liable in the first instance
to pay the contributions of the employer as well as the employee to the
Corporation subject to the recovery from the employee of the. Amount he is
liable to contribute.
This liability on the employer is categorial
He is further required under Sec. 44 to
submit to the Corporation returns as specified therein. Chapter V comprised of
Sections 46 to 73, deals with the benefits which includes among others,
sickness and disablement benefit of the employee, his eligibility for receiving
the compensation payable to his dependents.
If the employee fails or neglects to pay the contributions as required, the
Corporation has the right to recover from him under Sec. 68, the amounts
specified in that Section as an arrear of land revenue. Sec. 94 provides that
the contributions due to a corporation are deemed to be included in the debts
under the Insolvency Acts and the Company's Act, and are given priority over
other debts in the distribution of the property of the insolvent or in the
distribution of the assets of a Company in liquidation. Chapter VI deals with
adjudication of disputes and claims, of which Secprovi des for the Constitution
of the Insurance Court; Sec.
74 specifies the matters to be decided by
that Court; Sec. 76 and Sec. 77 deal with the institution and commencement of
proceedings and Sec. 78 with the powers of the Insurance Court. Sec. 80 deals
with the non-admissibility of the claim, if not made within twelve months after
the claim is due while Sec. 82(3) prescribes the period within which an appeal
should be filed against the order of the Insurance Court. These provisions in our
view unmistakably indicate that the whole scheme is dependent upon the
contributions made by the employer not only with respect to the amounts payable
by him but also in respect of those payable by the employee. No limitation has
been fixed for the recovery of these amounts 879 by the Corporation from the
employer; on the other hand Sec.
68 empowers the Corporation to resort to
If any such steps are proposed to be taken by
the Corporation and the employer is aggrieved he has a right to file and apply
to the Insurance Court and have his claim adjudicated by it in the same way as
the Corporation can prefer a claim in a case where the liability to pay is
disputed. Sec. 75 (2) (d) clearly envisages this course when it provides that
"the claim against a principal employer under Sec. 68" shall be
decided by the Employees Insurance Court. It may be useful to read Sec. 68 and
75 (2) (d) which are given below Sec. 68 (1)If any principal employer fails or
neglects to pay any contribution which under this Act he is liable to pay in
respect of any employee and by reason thereof such person becomes disentitled
to any benefit or entitled to a benefit on a lower scale, the Corporation
should have been paid by the principal employer, pay to the person the benefit
at the rate to which he would have been paid by the principal employer, pay to
the person the benefit at the rate to which he would have been entitled if the
failure or neglect had not occurred and the Corporation shall be entitled to
recover from the principal employer either(i) the difference between the amount
of benefit which is paid by the Corporation to the said person and the amount
of the benefit which would have been payable on the basis of the contributions
which were in fact paid by the employer; or (ii) twice the amount of the
contribution which the employer failed or neglected to pay;
whichever is greater.
(2)The amount recoverable under this Section
may be recovered as if it were on arrear of land revenue.
Sec.75 (2) The following claim shall be
decided by the Employees' Insurance Court, namely (d)Claim against a principal
employer under Section 68;
It is contended by the learned Advocates for
the Appellant that Sec. 68 is a crucial provision as it indicates that the
right of the Corporation to enforce its claim for payment has been preserved
880 subject to tile provision that the omission or neglect by the principal
employer to make contribution deprives the employee of any benefit either
totally or 'at a reduced scale. It is only in these circumstances he submits
that the Corporation can recover the amount by coercive process but in any
other case the Corporation's claim to recover by an application to the
Insurance Court can be made subject to a period of limitation by a rule made under
We are unable to appreciate the logic of this
submission because the benefit of an employee can be negatived or partially
admitted for instance either by reason of the employer not showing him in the
return as an employee of his or showing him as drawing a lesser wage than what
he is entitled to or as it may happen mostly, when he fails to make the
payments even according to the returns-made by him.
In all these cases the employee's benefits
will be affected because the basis of the scheme of conferring benefit on the
employee is the contribution of both the employer and the employee. It is clear
therefore that the right of the Corporation to recover these amounts by
coercive process is not restricted by any limitation nor could the Government
by recourse to the rule making power prescribe a period in the teeth of Sec.
68. What Sec. 75(2) is empowering is not necessarily the recovery of the
amounts due to the Corporation from the employer by recourse to the Insurance
Court but also the settlement of the dispute of a claim by the Corporation
against the principal employer which implies that the principal employer also
can, where he disputes the claim made and action is proposed to be taken
against him by the Corporation under See. 68 to recover the amounts said to be
due from him. While this is so there is also no impediment for the Corporation
itself to apply to the Insurance Court to determine a dispute against an
employer where it is satisfied that such a dispute exists. In either case neither
Sec. 69 nor Sec. 75 (2) (d) prescribes a period of limitation. It may also be
mentioned that Sec. 77 which deals with the commencement of the proceedings,
does not provide for any limitation for filing an application to the Insurance
Court even though it provides under sub-sec. (2) of that Section that every
such application shall be in such form and shall contain such particulars and
shall be accompanied by such fee, if any, that may be prescribed by rules made
by the State Government in consultation with the Corporation. This was probably
an appropriate provision in which the legislature if it had intended to
prescribe a time for such applications could have provided. Be that as it may
in our view the omission to provide a period of limitation in any of these
provisions while providing for a limitation of a claim by an employee for the
payment of any benefit under the regulations, shows clearly that the legislature
did not intend to fetter the claim under Sec.
75(2)(d). It appears to us that where the
legislature clearly intends to pro 881 vide specifically the period of
limitation in respect of claims arising there under it cannot be considered to
have left such matters in respect of claims under some similar provisions to be
provided for by the rules to be made by the Government under its delegated
powers to prescribe the procedure to be. followed in proceedings before such
What is sought to be conferred is the power
to make rules for regulating the procedure before the Insurance Court after an
application has been filed and when it is seized of the matter. That apart the
nature of the rule bars the claim itself and extinguishes the right which is
not within the pale of procedure. Rule 17 is of such a nature and is similar in
terms to Sec. 80. There is no gain-saying the fact that if an employee does not
file an application before the Insurance Court within 12 months after the claim
has become due or he is unable to satisfy the Insurance Court that there was a
reasonable excuse for him in not doing so, his right to receive payment of any
benefit conferred by the Act is lost. Such a provision affects substantive
rights and must therefore be dealt with by the legislature itself and is not to
be inferred from the rule making power conferred for regulating the procedure
unless that is specifically provided for. It was pointed out that in the
Constitution also where the Supreme Court was authorised with the approval of
the President to make rules for regulating generally the practice and procedure
of the Court, a specific power was given to it by Art. 145 (1) (b) to prescribe
limitation for entertaining appeals before it.
It is therefore apparent that the legislature
does not part with the power to prescribe limitation which it jealously retains
to itself unless it intends to do so in clear and unambiguous terms or by
necessary intendment. The view taken by the Madhya Pradesh, Madras, Punjab and
Andhra Pradesh High Courts in the cases already referred to are in consonance
with the view we have taken. In the decision of the Punjab High Court, Dua, J,
as he then was expressed the view of the Full Bench with which Palshaw C. J.,
and Mahajan J, agreed. After examining the provisions of the Act he observed at
page 170-171 "At this stage, I consider it appropriate to point out, what
is fairly well-recognised, that what is necessarily or clearly implied in a
statute is an effectual as that, which is expressed because it often speaks as
plainly by necessary inference as in any other manner.
The purposes and aims of an Act as
discernible from its statutory scheme are accordingly important guideposts in
discovering the true legislative intent. One who considers only the letter, of
an enactment, goes but, skin deep into its true meaning; to be able to fathom
the real statutory intent it is always helpful to inquire into the object
intended to be accomplished.
882 Considering the entire scheme of the Act
before us, it is quite clear that fixation of any period of limitation for the
Corporation to realise the contributions from the employer may tend seriously
to obstruct the effective working and enforcement of the scheme of
It may be of interest to notice that Palshaw
C. J. had earlier taken a different view in Chanan Singh v. Regional Director,
Employees State Insurance Corporation(1), but said that he, had no hesitation
in agreeing with Dua J's view because he realised that his earlier view was
based on an over-simplification. In the latest case the Andhra Pradesh High
Court also following the earlier decision of Madhya Pradesh, Madras and Punjab
held that the State Government had exceeded its powers to frame Rule 17 as no
such power to prescribe limitation under the provisions ,of Sec. 96 (1 ) (b) or
under Sec. 78 (2) can be said to have been delegated to the State Government.
We, however, find that Sec. 78(2) does not delegate any power to the Government
to make rules but only requires the Insurance Court to follow "such procedure
as may be prescribed by rules made by the State Government" which rules
can only be made under Sec. 96 of the Act. In the view we have taken it is
unnecessary to examine the question whether legislative practice also leads to
the same conclusion though in the Madras and the Punjab decisions that was also
one of the grounds given in support of their respective conclusions. The
contrary view expressed by a Bench of the Allahabad High Court is in our
opinion not good law. We may before parting with this case point out that the
legislature since chosen to specifically prescribe 3 years as limitation period
by addition of subsec. (1A) to Sec. 77 while deleting Sec. 80. See 77(1A)
provides that "Every such application shall be made within a period of
three years from the date on which the cause of action arose". By this
amendment the claim under clause (d), as well as, the one under clause (f) of
sub-section (2) of Section 75 which provides for the adjudication of a claim by
the Insurance Court for the recovery of any benefit admissible under the Act
for which a separate limitation was fixed under Sec. 80, is now to be made
within 3 years from the date of the accrual of the cause of action. This.
amendment also confirms the view taken by
this Court that the power under Section 96 (1) (b) does not empower the
Government to prescribe by rules a period of limitation for claims under Sec.
75. In the result this appeal is dismissed with costs.
K.B.N. Appeal dismissed.