Reserved Judgment IN THE HIGH COURT OF UTTARAKHAND AT NAINITAL Writ Petition No. 1007(M/S) of 2007 (Old No. 1519(M/S) of 1988) Nagar Palika Hardwar, through its Administrator … Petitioner Vs. Employee State Insurance Corporation and others … Respondents Mr. Pankaj Miglani, Advocate for the petitioner. Mr. C.K. Sharma, Advocate for respondent No.1. Mr. Subhash Upadhyay, Brief Holder for respondents 2 &3. (Hon’ble B.S. Verma, J.) By means of this petition, the petitioner has sought the following relief- (1) to issue a writ, order or direction in the nature of certiorari quashing the citation to appear and pay, dated 28-10-1987 (annexure no.5 to the writ petition), on the basis of the recovery certificate issued by respondent no.1. (2) to issue a writ in the nature of mandamus commanding the respondents 2 and 3 not to take proceedings against the petitioner in pursuance of the recovery certificate issued by respondent no.1 against the petitioner. (3) to issue any other writ, order or direction which in the circumstances of the case this Hon’ble Court may deem fit and proper in the interest of justice. (4) award the cost of the writ petition to the petitioner. 2 The brief facts giving rise to the instant writ petition, are that prior to January 1976, the petitioner, Nagar Palika Haridwar, had two departments of Electricity and Water Works, in order to supply water and electricity to the people who resided within the territorial jurisdiction of petitioner. On 1st January, 1976, the Electricity Department of the petitioner was taken over by U.P. State Electricity Board and since then all the employees of the petitioner’s Electricity Department became the employees of State Electricity Board and the petitioner has got no concern in the management and running of that department. In January, 1970, Employee State Insurance Corporation Saharanpur, the respondent no.1, had informed the petitioner that the provisions of Employees State Insurance Act 1948 (in short ESI Act) will be applicable to the Electricity and Water Department of the petitioner since 1st February, 1970. But the employees of both the departments of the petitioner as well as their unions opposed the implementation of the provision of the ESI Act, as well as deduction from their salary towards Employees State Insurance Scheme and the petitioner and the Manager informed the government about it. On 5- 10-1971 the then President of Nagar Palika Haridwar passed an order directing that no amount will be deducted from the salary of the employees and the government as well as respondent no.1 were intimated about it. It is further alleged in the petition that vide G.O. No. 4968 T/9-17-9-9 Sa/77, dated 9-6-1978 the State Government extended the medical facility etc to all the Nagar Palikas, Town Areas, Notified Areas etc as a result whereof the facilities contemplated by the ESI Act became nugatory and the petitioner is providing the facilities of leave encashment, travelling allowance, holidays, medical facilities, benefit of group insurance, week rest etc. to its employees. It is further alleged by the petitioner that the 3 respondent No.1 did not give any notice or letter calling upon the petitioner to pay the contribution and all of a sudden a recovery certificate was issued by the respondent No.1 to the respondents 2 and 3 for realizing a sum of Rs. 8,41,358-45P. from the petitioner and pursuant to the recovery certificate, impugned citation dated 28.10.1987 was issued by the respondent no.3, Tehsildar Haridwar for the recovery of the aforesaid amount. It is also alleged by the petitioner that the provisions of ESI Act were never implemented in the petitioner’s department and the impugned action of the respondents is against the rule of natural justice in as much as no opportunity of hearing was at all afforded to the petitioner before saddling the liability to pay the amount. Hence this petition. The respondent no.1 Employees State Insurance Corporation contested the writ petition by filing counter affidavit and alleged that the petitioner never submitted any information regarding transfer of Electricity Department to the State. The respondent further alleged that the sickness benefit, disablement benefit, permanent disablement benefit, maternity benefit and funeral benefit were being provided by ESI Corporation through its local office, Haridwar and the medical benefits were being provided through the State for which a Dispensary was running at Haridwar for O.P.D. treatment of the insured persons. The petitioner was using machinery in pumping and supply of the water and also in transformation of electricity with the help of machines and equipments which are manufacturing process and the petitioner was covered under Section 2(12) of the ESI Act, therefore, the impugned recovery is being made in accordance with the rules. The petitioner also filed rejoinder affidavit and reiterated the facts mentioned in the writ petition. The 4 petitioner also alleged that during the pendency of the writ petition vide G.O. dated 5.8.2002 the Water Works Department of the petitioner had also been transferred to Garhwal Jal Sansthan and the provisions of the ESI Act are not applicable in the present case. I have heard learned counsel for the parties and perused the entire record. Learned counsel for the petitioner has submitted that the petitioner i.e. Nagar Palika Parishad Haridwar, District Saharanpur (now District Haridwar) is a local body duly constituted under the Constitution of India. The powers, authority and responsibilities of Municipalities have been enumerated under Article 243-W of Constitution of India. As per section 1(4) of the ESI Act, the provisions of ESI Act apply to the employees of factories including factories belonging to the government other than seasonal factories and the petitioner does not fall within the category of factory, therefore, the petitioner does not come within the purview of ESI Act. Learned counsel for the petitioner also submitted that employees of the petitioner are also eligible to medical facilities and reimbursement of the amounts spent by the employees, towards medical expenses, akin to other State Government employees, therefore, there is no coverage of employees of the petitioner under the ESI Act. On the other hand learned counsel appearing on behalf of the respondent/ Employees State Insurance Corporation has vehemently submitted that the petitioner was using machinery in pumping and supply of the water and also in transformation of electricity with the help of machines and equipments which are manufacturing process, therefore, petitioner was covered under Section 2(12) of the ESI Act. 5 The main question involved in the instant writ petition is whether the employees of Nagar Palika Parishad are also covered under the Employees State Insurance Act?. It is an admitted fact that petitioner had two departments of Electricity and Water Works, in order to supply electricity and water to the people residing within the territorial limits of the petitioner and on 1st January, 1976 the Electricity Department of the petitioner was taken over by U.P. State Electricity Board and since then all the employees of the petitioner’s Electricity Board became the employees of State Electricity Board and that department was solely managed and controlled by U.P. Electricity Board. During the pendency of the writ petition vide G.O. dated 5.8.2002 and the orders dated 7.8.2002 passed by the then Administrator/ District Magistrate the Water Works Department, its employees, assets and liabilities were transferred to Garhwal Jal Sansthan. According to the petitioner the employees of both the departments as well as their union opposed the implementation of the provision of ESI Act. They also opposed the deduction from their salary under ESI scheme. In this regard the employees and their Union had sent representations (annexures 1 to 3 to the writ petition), to the Chairman, Nagar Palika Samiti Haridwar, showing their unwillingness to the implementation of the scheme under ESI Act and the Manager of Nagar Palika Samiti Haridwar, also passed an order, directing that no amount will be deducted from the salary of the employees and this fact was also brought to the notice of the Government as well as the respondent No.1. Now to ascertain this fact whether petitioner is covered under the ESI Act, it would be relevant to go through the provision of Section 1(4) of the ESI Act, which runs as under- 6 “1.Short title, extent, commencement and application- (1) This Act may be called the Employees’ State Insurance Act, 1948. (2) It extends to the whole of India. (3) It shall come into force on such date or dates as the Central Government may, by notification in the Official Gazette, appoint, and different dates may be appointed for different provisions of this Act and [for different States or for different parts thereof]. (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].” Thus from perusal of above provision, it is quite clear that the ESI Act, in the first instance, is applicable to all factories, including factories belonging to the Government, other than seasonal factories. The proviso excludes those employees of a factory or establishment belonging or under the control of the government, from the coverage of ESI Act, who are otherwise in receipt of benefits substantially similar or superior to the benefits provided under this Act. It is also appropriate to go through the provision of Section 2(12) of ESI Act, which define ‘factory’, which is quoted below- “2(12) “factory” means any premises including the precincts thereof- (a) whereon ten or more persons are employed or were employed for wages on any day of the 7 preceding twelve months, and in any part of which a manufacturing process is being carried on with the aid of power or is ordinarily so carried on, or (b) whereon twenty or more persons are employed or were employed for wages on any day of the preceding twelve months, and in any part of which a manufacturing process is being carried on without the aid of power or is ordinarily so carried on, but does not include a mine subject to the operation of the Mines Act, 1952 (35 of 1952) or a railway running shed.” The petitioner is a statutory body created under Section (9) of the U.P. Municipality Act and the Municipalities have now acquired a constitutional status inasmuch as it is now an institution of Self Government. Thus it is a local body duly constituted under the Constitution of India. Therefore, in view of above provision of law, the petitioner does not come within the category of ‘factory’ and the provisions of ESI Act do not apply to the petitioner’s employees. Further, annexure No.4 to the writ petition, which is the copy of G.O. No. 4968/T/9-17-9-9 Sa/77 dated 9th June 1978, shows that the Government has extended the medical facilities to the employees of Nagar Palikas/ Town Areas/ Notified Areas akin to the employees of State Government. In the aforesaid G.O. facility of reimbursement of medical expenses was also provided to the employees of the petitioner. Learned counsel for the petitioner also submitted that in an exactly similar case the Hon’ble Apex Court has held in its judgment Municipal Committee Abohar Vs. Regional Commissioner, ESIC & Another, reported in (1996) 7 Supreme Court Cases 488, that since the 8 employees working in Water Works Department of Municipal Committee are provided with the health scheme and eligible to medical facilities and reimbursement of medical expenses, hence the coverage of those employees under the ESI Act is per se illegal. The question before the Hon’ble Apex Court in the above cited case, was whether employees of the Municipal Corporation were covered under the Employees State Insurance Act, 1948 or not?. The Hon’ble Apex Court has held as below – “ The employees of the Corporation are governed by the statutory rules made under the Act and in some cases in other States the benefits of the government scales of pay etc. have been extended. However, the fact remains that they are provided with the health scheme and are also eligible to medical facilities and reimbursement of the amounts spent by the employees concerned. Under these circumstances, the coverage of employees under the Act is per se illegal.” I am fortified in my view that the controversy involved in the present case has been dealt with by the Hon’ble Apex Court in the above mentioned case. Since the Government has extended the benefits of medical facilities and reimbursement of the amounts spent by the employees of the petitioner and the employees of the petitioner are governed by the statutory rules and in some cases in other States the benefits of the government scales of pay etc have also been extended, therefore, the coverage of employees under the Act is per se illegal. It will also not be out of place to mention here that the respondent ESI Corporation also did not dispute the implementation of G.O. dated 9th June 1978, by which medical facilities and facility of reimbursement of the 9 amount spent by the employees have been extended to the employees of all Nagar Palika Parishad, Town Area and Notified Area. Further, the respondent ESI Corporation also did not dispute the transfer of Electricity Department and Water Works Department from the petitioner to U.P. Electricity Board and Garhwal Jal Sansthan in the year 1976 and 2003 respectively and the respondent ESI Corporation has not been able to establish this fact that prior to implementation of G.O. dated 9th June 1978, the employees were covered under the provision of ESI Act and some specific amount was deducted from the salary of employees towards the ESI Scheme. In view of foregoing discussions and keeping in mind the observations made by the Hon’ble Apex Court in the Municipal Committee Abohar case (supra), I am of the considered view that the employees of the petitioner have been provided with the health scheme and are eligible to medical facilities and reimbursement of the amounts spent by the employees concerned, therefore, under these circumstances they are not covered under the provision of ESI Act and the recovery sought to be made against the petitioner is illegal and liable to be quashed. The petition is allowed. The citation to appear and pay dated 28-10-1987, Annexure No.5 to the writ petition, issued by respondent no.3, on the basis of the recovery certificate issued by the respondent no.1, is hereby quashed. No order as to costs. Dated: October 07, 2010 (B.S. Verma, J.) ISB