IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE M.N.KRISHNAN THURSDAY, THE 7TH OCTOBER 2010 / 15TH ASWINA 1932 Ins.APP.No. 9 of 2010 (B) ----------------------- ( IC.78/2009 of EMPLOYEES' INSURANCE COURT, PALAKKAD) .................... APPELLANT/OPP. PARTY --------------------------------------- E.S.I.CORPORATION REPRESENTED BY ITS REGIONAL DIRECTOR, SWARAJ ROUND NORTH, THRISSUR 680 020. BY ADV. SMT.T.D.RAJALAKSHMI RESPONDENT/APPLICANT -------------------------------------- PANICKAVEETTIL SIR SEBASTIAN PUBLIC SCHOOL, POST VAYALAR, CHERTHALA, REPRESENTED BY ITS MANAGER FR. LEENOSE.P.S ADDL. R2 IMPLEADED ADDL.R2. GOVT. OF KERALA, LABOUR REHABILITATION (G) DEPT., SECRETARIAT, TRIVANDRUM , REPRESENTED BY ITS SECRETARY; ADDL. R2 IMPLEADED AS PER ORDER DT. 31.8.10 IN IA. 1052/10. R1 BY ADV. SRI.M.B.PRAJITH BY SENIOR COUNSEL, SRI.N.N.SUGUNAPALAN THIS INSURANCE APPEALS HAVING BEEN FINALLY HEARD ON 07/10/2010 ALONG WITH INAP NO.13/2010 & INAP NO.25/2010, THE COURT ON THE SAME DAY PASSED THE FOLLOWING: Ins.APP.No. 9 of 2010 (B) ----------------------- ORDER ON IA NO.370/2010 IN INS. APPEAL NO.9/2010 DISMISSED 7.10.2010 Sd/- M.N.KRISHAN, JUDGE / TRUE COPY / P.S. TO JUDGE VK M.N.KRISHNAN, J ===================== INAP Nos.9, 13 & 25 OF 2010 ===================== Dated this the 7th day of October 2010 JUDGMENT INAP No.9/2010 is filed against the preliminary order passed in I.C.No.78/2009, INAP No.13/2010 is filed against the preliminary order passed in I.C.No.64/2009 and INAP No.25/2010 is filed against the preliminary order passed in I.C.No.105/2009 by the E.I.Court, Palakkad. All these insurance cases were filed by the employers challenging the order passed by the Employees State Insurance Corporation (for short 'the Corporation') under Section 75 of the Employees State Insurance Act(for short 'the ESI Act'). 2. When the matter came up for consideration, the Corporation raised an objection regarding the territorial jurisdiction of the court to deal with the matters. It was contended that by virtue of the provisions under Section 76(1) INAP 9/2010 & con.cases -:2:- of the ESI Act the proceedings can be instituted only before the court appointed for the local area in which the insured person was working at the time the question or dispute arose. That was seriously challenged by the applicants before the EI Court and after elaborate consideration of the arguments of both sides, the court held that action can be initiated for the reason that the Regional Director representing the Corporation is having his office at Thrissur which comes within the jurisdiction of the Palakkad EI Court. It is aggrieved by that decision, the Corporation has come up in appeal. 3. Heard the learned counsel on both sides. Before analysing the matter, it is relevant to understand the provisions regarding the adjudication of disputes and claims under the ESI Act. Section 74 of the ESI Act empowers the State Government to constitute an Employees' Insurance Court for such local area as may be specified in the notification. There INAP 9/2010 & con.cases -:3:- are other sub sections relating to additional courts, etc. Section 75 deals with the matters to be decided by Employees' Insurance Court. It takes in the dispute between a principal employer and the Corporation, or between a principal employer and an immediate employer, etc. A perusal of the same would reveal that some of the disputes enumerated under Section 75(2) are between the employer and immediate employer, etc. where really the junction of the worker or the insured person is not necessary. Then comes the disputed question and the provisions. Under Section 76 of the ESI Act subject to the provisions of this Act and any rules made by the State Government, all proceedings before the EI Court shall be instituted in the Court appointed for the local area in which the insured person was working at the time the question or dispute arose. Section 76 envisages a situation where the insured person is involved in the dispute. Then taking recourse to Section 96 of the ESI Act and also Section 76 the INAP 9/2010 & con.cases -:4:- State Governments are empowered to make rules regarding proceedings to be conducted. Accordingly the Kerala Government had framed the Kerala Employees Insurance Courts Rules 1958 as per the powers conferred on it under Section 96(1) of the ESI Act, 1948(Central Act XXXIV of 1948). The relevant rule which requires attention is Rule 16 which is having the heading 'place of suing'. It reads as follows: “Place of suing-In cases not falling under sub-section (1) of section 76, a proceeding against any person shall be instituted in the Court within the local limits of whose jurisdiction. (a) the opposite party or each of the opposite parties where there are more than one, at the time of commencement of the proceedings, actually and voluntarily resides, or carries on business, or personally works for gain, or (b)any of the opposite parties, where there are more than one, at the time of the commencement of the proceedings, actually and voluntarily resides, or carries on business, or personally works for gain, provided that in such case either the leave of the court is given, or the opposite parties who do not reside, carry on business or personally work for gain, as aforesaid, acquiesce in such institution; or (c)the cause of action, wholly or in part arose”. INAP 9/2010 & con.cases -:5:- 4. So a reading of Rule 16 would make it clear that it will be applicable only to cases not falling under sub section (1) of Section 76. If it does not fall within the section then necessarily the parameters of the jurisdiction are provided in the said rule. Now the argument of the learned counsel appearing for the Corporation is to the effect that the insured person is the affected person and in all cases and the Supreme Court has held that where his interest is involved, the worker or the representative of the worker is a necessary party to the proceeding. But the learned counsel for the employers would contend that the Supreme Court has classified it in a later judgment with the prefix ordinarily and therefore it is not necessary in all cases to have the insured impleaded. It is profitable to refer to the two decisions of the Supreme Court in FACT Ltd. v. ESI Corporation(2009(3) KLT 946). The Supreme Court in paragraph 10 of its judgment made it clear that “it may be seen that S.75 of the Act does not mention who INAP 9/2010 & con.cases -:6:- 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”. In paragraph 12 again it is reiterated that “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”. In a later decision in ESI Corporation v. Bhakra Beas Management Board and another(2009(10) SCC 671), the Supreme Court reiterated that “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 INAP 9/2010 & con.cases -:7:- 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”. 5. In all the cases before me the dispute is relating to the liability of the employer to pay contribution. The said contribution is intended and is for the benefit of the worker who comes under the definition of 'insured' under the Act. 6. Now I will consider the other line of argument projected by the learned senior counsel appearing for the employers. It has been brought to my notice that a Division Bench of the Madras High Court had taken a view regarding the jurisdictional aspect after considering Section 76(1) as well as Rule 16 of the Madras Rules which are identical with the INAP 9/2010 & con.cases -:8:- Kerala Rules. A Division Bench of the Madras High Court in Modern Radio Service v. Regional Director, ESI Corporation (2006(1) LLJ59) has considered this point. The Employees Insurance Corporation at Madras issued a notice determining the contribution under Section 45A of the ESI Act. It was challenged before the EI Court at Madras, which had returned the petition for presentation before proper court. The appellant's establishment was at Kumbakonam. So it was contended that the petition should be filed within the jurisdiction of the court under which Kumbakonam comes. The Division Bench held that since part of cause of action had arisen at Madras, under Rule 16 that court will have also jurisdiction. It was stated that at the time of rendering the decision in Sree Karpagambal Mills Ltd. Rule 16 was not brought to the notice of the Judge who decided that case. The Division Bench of the Madras High Court then relied on and referred to the decision of a learned single Judge of the same INAP 9/2010 & con.cases -:9:- Court in Sree Lakshmi Medicals, etc. v. Regional Director, ESI Corporation(1999(1) LW 204). There the question arose whether Rule 16 can be extended in a case where demand is made. The learned Judge was of the opinion that since the insured was not directly involved in the litigation Section 76(1) will not apply and therefore the rules framed under the ESI Act will govern the field and therefore the EI Court has the power to exercise jurisdiction under Rule 16 of the Rules. The learned Judge in that case considered the question of an insured person and held that since there is no direct involvement Rule 16 can be invoked. If that is the position of law as on today also, I will also agree with the learned senior counsel for the employers that Rule 16 of the Kerala Rules also can be made applicable and if the cause of action arises in full or part within the area mentioned. But, by virtue of the latest authoritative pronouncement by the Supreme Court when the interest of the worker is involved in an employees' INAP 9/2010 & con.cases -:10:- State insurance case and as the worker is the beneficiary and the Corporation is only acting as an agent to implement the provisions of the welfare legislation, when an employer comes denying the right of a worker or entitlement of a worker then necessarily the worker has to be heard before pronouncing an order for or against the employer. Or, in other words, in all type of these matters where the ultimate beneficiary is the worker either the worker or the representative of the worker has to be heard by impleading them as parties. In the light of the changed circumstances and in view of the decision of the Apex court now we have to analyse the present case. Now the dispute is with respect to the coverage of establishment. If it is covered it is beneficial to the employee or the insured. If it is not covered, it is detrimental to his interest if he is not heard. Therefore in all these type of cases, since the junction of the employee is a must the court, viz., the EI Court has to give direction to the persons concerned to implead the workers or INAP 9/2010 & con.cases -:11:- the representative of the workers or the representative of the union to be impleaded before a final decision is taken in the matter. 7. How this will affect the jurisdiction of a court is the next question. Certainly it will affect the jurisdiction of the court fundamentally for the reason that if the interest of a worker or an insured is involved in a dispute, then Section 76 (1) of the Act makes it very clear that it has to be filed in a court where he had worked or where he was working or the question or dispute arose. When the said principle is applied Section 76(1) comes into play. When Section 76(1) comes into play Rule 16 goes out for the reason that Rule 16 starts with the words “in cases not falling under sub-section (1) of Section 76”. Therefore when rule 16 goes, the contentions raised by the learned senior counsel cannot be accepted and looked into. Therefore, I hold that in view of these developments and as Section 76(1) is directly involved, only the courts stipulated INAP 9/2010 & con.cases -:12:- in that section will have jurisdiction over the matter. Learned counsel appearing for the Corporation had produced the notification relating to all courts where they had conferred the powers exercising the functions under the ESI Act. It is in order. So as the interest of the insured is involved Section 76(1) will govern the field and therefore the orders passed by the learned insurance court have to be set aside and I do so. In the result, all the appeals are allowed and orders under challenge are set aside. The applications are to be filed in the respective courts as contemplated under Section 76(1)(b) of the Act and therefore the court below is directed to send the applications to the respective courts empowered to deal with it and shall inform the applicants and the opposite party accordingly. I make it very clear that the ESI Corporation shall not proceed to recover the amount for a period of two months from today as a matter of precaution to safeguard the interest of the applicants to obtain appropriate orders from the INAP 9/2010 & con.cases -:13:- appropriate courts. M.N.KRISHNAN, JUDGE Cdp/-