IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 04.01.2011 CORAM THE HONOURABLE MR.JUSTICE K.CHANDRU W.P.NOs.2471, 3234, 30509 and 16273 of 2007, 10131, 17326 and 24350 to 24352 of 2008, 6287 and 19395 of 2009, 10028, 21034 and 24691 of 2010 and M.P.NOS.2,2 and 2 OF 2007, 2,2,2,2,3,3 and 3 of 2008, 2,1 and 2 of 2009, 2, 2 and 2 of 2010 Muthu Rathina Arangam Matriculation school, Kundanpalayam, Puducherry-605 009 represented by its Principal Mr.V.Balakrishnan .. Petitioner in W.P.No.2471 of 2007 Senthil Education Society running Senthil Matriculation Hr. Sec. School, No.36, Thiyagaraja Street, Puducherry-605 001. represented by its Correspondent cum Principal Mr.B.Dhandapany .. Petitioner in W.P.No.3234 of 2007 Sri Lakshmi Narayana Institute of Medical Sciences, (Constituent of Bharat University) Agaram Village, Villianur Commune, Kudapakkam Post, Puducherry 605 502 rep. By its Chairperson .. Petitioner in W.P.No.30509 of 2007 The Association of Private Schools and their Managements in Pondicherry represented by its Secretary, Fr.S.Antonisamy. .. Petitioner in W.P.No.16273 of 2007 Vasavi College of Education, No.45-A, Villupuram Main Road, Madagadipet, Puducherry-605 107, represented by its Chairman, Mr.K.P.Thiyagarajan .. Petitioner in W.P.No.10131 of 2008 https://hcservices.ecourts.gov.in/hcservices/ Immaculate College of Education, represented by its Principal, Pakkamudayanpet, Puducherry-605 008. .. Petitioner in W.P.No.17326 of 2008 Acharya Bala Siksha Mandir, Estd. By Acharya Educational Trust, rep. By its Managing Trustee J.Arawindan, 5,Villupuram Main Road, Villianur, Puducherry-605 110. .. Petitioner in W.P.No.24350 of 2008 Acharya College of Education, Estd. By Acharya Educational Trust, rep. By its Managing Trustee J.Arawindan, 5,Villupuram Main Road, Villianur, Puducherry-605 110. .. Petitioner in W.P.No.24351 of 2008 Acharya Siksha Mandir, Estd. By Acharya Educational Trust, rep. By its Managing Trustee J.Arawindan, 5,Villupuram Main Road, Villianur, Puducherry-605 110. .. Petitioner in W.P.No.24352 of 2008 Nirmala Ranee Girls' Higher Secondary School, rep by its Principal, 33, Nehru Street, Karaikal-609 602. .. Petitioner in W.P.No.6287 of 2009 Sri Ramakrishna Vidyalaya Higher Secondary School, No.44,Zally, Tollandal Street, Puducherry-605 001 rep by its Secretary. .. Petitioner in W.P.No.19395 of 2009 Santhamani English High school, rep by its Correspondent, No.2,Indira Nagar, Thuruvandar Koil, Puducherry-605 102. .. Petitioner in W.P.No.10028 of 2010 https://hcservices.ecourts.gov.in/hcservices/ Wiseman Higher Secondary school, rep. By its Manager/Principal Mrs.S.Saroja, W/o.Babu Ansardeen, Ericarai Main Road, Velrampet, Mudaliarpet, Puducherry-605 004. .. Petitioner in W.P.No.21034 of 2010 Sri Saimatha English High School rep by its Correspondent, Mr.V.Balakrishnan, S/o.Venkatesan, Draupathi Amman Koil Street, Dharmapuri, Puducherry-605 009. .. Petitioner in W.P.No.24691 of 2010 Vs. 1.The Government of Pondicherry, represented by Additional Secretary to Government (Labour), Labour Department, General Secretariat, Puducherry. 2.The Employees' State Insurance Corporation, Regional Office (Puducherry), represented by its Regional Directorate Bouvankare Street, Mudaliarpet, Puducherry-605 004. .. Respondents 1 and 2 in W.P.Nos.2471, 3234, 30509 and 16273 of 2007, 10131, 17326 of 2008, 6287 and19395 of 2009, 10028, 21034 and 24691 of 2010 The Deputy Director, The Employees' State Insurance Corporation, Regional Office (Puducherry), represented by its Regional Director, Bouvenkare Street, Mudaliarpet, Puducherry-605 004. .. Respondent No.3 in W.P.No.17326 of 2008, 6287 and19395 of 2009, 10028, 21034 and 24691 of 2010 1.Union of India, Union Territory of Puducherry, rep. By Chief Secretary, Govt. of Puducherry, Puducherry. https://hcservices.ecourts.gov.in/hcservices/ 2.The Additional Secretary to Government, Labour Department, Govt. of Puducherry, Puducherry 3.The Regional Director, Employees State Insurance Corpn., Regional Office, Bouvankare Street, Mudaliarpet, Puducherry-605 004. .. Respondents in W.P.Nos.24350 to 24352 of 2008 The Assistant Director, Authorised Officer, ESI Corporation, No.178,100 Feet Road, Ansari Duraisamy Nagar, Puducherry-605 004. .. 4th respondent in W.P.No.24691 of 2010 W.P.No.2471 of 2007 is preferred under Article 226 of the Constitution of India praying for the issue of a writ of certiorari to call for the records relating to order No.6563/Lab/K/2004, dated 24.06.2005 passed by the first respondent, Order No.55-42257- E1/1118, dated 23.06.2006 and PY/D5/INS/55-42257-E1/522, dated 29.12.2005 passed by the second respondent and to quash the same. W.P.No.3234 of 2007 is preferred under Article 226 of the Constitution of India praying for the issue of a writ of certiorari to call for the records relating to order No.6563/Lab/K/2004, dated 24.06.2005 passed by the first respondent, Order No.55-42299- E1/1161, dated 28.6.2006 and order No.PY/Ins/55/42299-E1/1161, dated 17.7.2006 and order No.PDY/RECY/ESICP-16/55-42299-E1, dated 8.1.2007 passed by the second respondent and to quash the same. W.P.No.30509 of 2007 is preferred under Article 226 of the Constitution of India praying for the issue of a writ of certiorari to call for the records comprises in the proceedings of the first respondent in notification, dated 27.1.2006 in No.4894/Lab/K/2005 and published in the Puducherry Government Gazette, dated 14.2.2006 and to quash the same as illegal, ultra vires and unenforceable as against the petitioner. W.P.Nos.16273 of 2007 and 17326 of 2008, 6287, 19395 of 2009, 10028 and 21034 of 2010 are preferred under Article 226 of the Constitution of India praying for the issue of a writ of certiorari to call for the records relating to order No.6563/Lab/K/2004, dated 24.06.2005 passed by the first respondent and to quash the same so far as petitioners are concerned. W.P.No.10131 of 2008 is preferred under Article 226 of the Constitution of India praying for the issue of a writ of certiorari to call for the records relating to order No.6563/Lab/K/2004, dated 24.6.2005 passed by the first respondent, proceedings No.55-42571- E1/C-18)Adhoc/2167 dated 31.3.2008 and proceedings No.55-42571- https://hcservices.ecourts.gov.in/hcservices/ E1/1059, dated 31.3.2008 passed by the second respondent and to quash the same. W.P.Nos.24350 to 24352 of 2008 are preferred under Article 226 of the Constitution of India praying for the issue of a writ of declaration declaring the notification bearing No.6563/Lab/K/2004 dated 24.09.2004 issued by the second respondent published in the Gazette of Pondicherry on 12.10.2004 and the consequential notification bearing No.6563/Lab/K/2004, dated 24.06.2005 issued by the second respondent published in the Gazette of Pondicherry on 12.07.2005 as null and void and ultravires the provisions of the Employees State Insurance Act, 1948 (ESI Act) and violative of provisions of the Constitution of India. W.P.No.24691 of 2010 is preferred under Article 226 of the Constitution of India praying for the issue of a writ of certiorari to call for the records relating to order No.6563/Lab/K/2004, dated 24.6.2005 passed by the first respondent and proceeding No.55-00- 042259-000-1302/C-18(Adhoc)/2996, dated 11.8.2010 passed by the fourth respondent and to quash the same. For Petitioners : Mr.P.V.S.Giridhar for M/s.P.V.S.Giridhar Associates in W.P.Nos.2471, 3234 and 16273 of 2007, 10131, 17326, of 2008, 6287 and 19395 of 2009, 10028, 21034 and 24691 of 2010 Mr.Satish Parasaran in W.P.No.30509 of 2007 Mr.G.Masilamani, SC for M/s.G.M.Mani Associates in W.P.Nos.24350 to 24352 of 2008 For Respondents : Ms.N.Mala, GA(Puducherry) for R-1 in W.P.Nos.2471, 3234, 30509 and 16273 of 2007, 10131 and 17326 of 2008, 6287 and 19395 of 2009, 10028 and 21034 of 2010 for RR1 and 2 in W.P.Nos.24350 to 24352/2008 Ms.A.S.Bharathi, GA(Puducherry) for R-1 in W.P.No.24691 of 2010 Mr.A.Paramasivam for R-2 in W.P.Nos.2471 of 2007 Mrs.Jayakumari for R-2 in W.P.No.30509 of 2007, 10131 of 2008 Mr.S.Vaidyanathan for R-2 in W.P.No.16273 of 2007 for R-3 in W.P.Nos.24350 to 24352 of 2008 for ESI in W.P.Nos.17326 of 2008, 6287/2009 and 3234 of 2007 Mr.G.Bharadwaj for RR2 and 3 in W.P.No.19395 of 2009 and 10028 and 21034 of 2010 for RR2 to 4 in W.P.No.24691 of 2010 https://hcservices.ecourts.gov.in/hcservices/ COMMON ORDER Except in W.P.No.30509 of 2007 filed by Sri Lakshmi Narayana Institute of Medical Sciences, in all other writ petitions, the challenge is to the order passed by the Lieutenant Governor of Union Territory of Puducherry under Section 1(5) of the Employees' State Insurance Act, 1948 (for short ESI Act) in notifying the educational institutions including public, private, aided or partially aided employees run by individuals, trustees, societies or other organisations, wherein 20 or more persons are employed or were employed for wages on any day of the preceding twelve months to be covered by the provisions of the ESI Act by a notification, dated 24.6.2005. 2.Before issuance of the said notification, they issued a preliminary notification, dated 24.9.2004. The preliminary notification dated 24.9.2004 reads as follows: GOVERNMENT OF PONDICHERRY Labour Department No.6563/Lab./K/2004 Pondicherry, the 24th September, 2004. NOTIFICATION In exercise of the powers conferred by sub-section (5) of section 1 of the Employees State Insurance Act, 1948, the Lieutenant-Governor, Pondicherry in consultation with the Employees State Insurance Corporation and with the approval of the Central Government, is hereby pleased to notify his intention to extend the provisions of the said Act to the classes of establishments specified in the schedule annexed hereunder, on expiry of 6 months from the date of publication of this notification in the official gazette of Pondicherry, namely:- SCHEDULE ------------------------------------------------------------------ Description of Area in which the establishments establishments are situated (1) (2) ------------------------------------------------------------------ Educational institutions (including The whole or the Union public, private, aided or partially Territory of Pondicherry. aided) run by individuals, trustees, societies or other organisations, wherein 20 or more persons are employed or were employed on any day of the preceding twelve months. ------------------------------------------------------------------ (By order of the Lieutenant-Governor) (Emphasis added) https://hcservices.ecourts.gov.in/hcservices/ 3.Subsequently, the Lieutenant Governor of Union Territory of Puducherry issued a final notification, dated 24.6.2005, which reads as follows: GOVERNMENT OF PONDICHERRY LABOUR DEPARTMENT No.6563/Lab./K/2004, Pondicherry, the 24th June 2005. NOTIFICATION In exercise of the powers conferred by sub-section (5) of section 1 of the Employees' State Insurance Act, 1948 (Central Act 34 of 1948), the Lieutenant-Governor, Pondicherry, having already given six months' notice as required thereunder vide Notification No.6563/Lab./K/2004, dated 24-9-2004 of the Labour Department, Pondicherry and published in the Official Gazette No.41, dated 12.10.2004, hereby appoints the date of publication of this notification in the official gazette as the date on which all the provisions of the said Act shall extent to the establishments specified under column (1) of the Schedule below and within the area specified under column (2) of the said Schedule, namely:- SCHEDULE ------------------------------------------------------------------ Description of Area in which the establishment establishments are situated (1) (2) ------------------------------------------------------------------ Educational institutions (including The whole or the Union public, private, aided or partially Territory of Pondicherry. aided) run by individuals, trustees, societies or other organisations, wherein 20 or more persons are employed or were employed for wages on any day of the preceding twelve months. ------------------------------------------------------------------ (By order of the Lieutenant-Governor) (Emphasis added) 4.After the issuance of the notification, the respondent ESI sent notices to the petitioners and directed them to cover their employees under the Act. In many cases, after show cause notices, order under Section 45-A came to be issued. In some cases, prosecution notices were issued to the petitioners. In some of the cases, they were threatened with levy of damages under Section 85-B of the ESI Act. Some of them have also paid the amounts either fully or partially. On one case, it was stated that they had https://hcservices.ecourts.gov.in/hcservices/ approached the ESI Court challenging the amounts demanded. None of the petitioners have moved the machinery provided under the Act to dispute either their liability or coverage in terms of Section 75 of the ESI Act before the appropriate ESI Court. On the other hand, long after the notification, dated 24.6.2005 and after protracted correspondence, they moved this court impugning the notification, dated 24.06.2005 only in the year 2007. The delay in moving the court was not explained in any of the affidavit filed by the petitioners. 5.In W.P.Nos.24350, 24351 and 24352 of 2008, not only the final notification was under challenge, but even the preliminary notification, dated 24.9.2004 is also under challenge. 6.In W.P.No.30509 of 2007, the petitioner is a private medical college. They have challenged the preliminary notification issued in respect of private medical institutions, dated 27.1.2006. The said notification reads as follows: GOVERNMENT OF PONDICHERRY Labour Department No.4894/Lab/K/2005 Pondicherry 27th January 2006 NOTIFICATION In exercise of the powers conferred by Sub-section (5) of Section 1 of the Employees State Insurance Act, 1948, the Lieutenant Governor, Pondicherry in constitution with the Employees State Insurance Corporation and with the approval of the Central Government, is hereby pleased to notify his intention to extend the provisions of the said Act to the classes of establishments specified in the Schedule below, on expiry of 6 months from the date of publication of this notification in the official gazette of Pondicherry, namely:- SCHEDULE ------------------------------------------------------------------ Description of Establishments Areas in which the establishments are situated ------------------------------------------------------------------- All private Medical Institutions (including The whole of the Union corporate, joint sector, trust, charitable Territory of Pondicherry and private ownership hospitals, nursing homes, diagnostic centres, pathological labs) wherein 20 or more persons are employed or were employed on any day of the preceding twelve months. ------------------------------------------------------------------ (By order of the Lieutenant-Governor) https://hcservices.ecourts.gov.in/hcservices/ 7.It is also not the case of the petitioner medical college in that writ petition that they have sent any objection regarding the coverage under the Act. Notice regarding admission was given on 20.9.2007 and an interim stay was granted. Therefore, the respondents have not published any final notification since last three years due to pendency of the said writ petition. 8.In all writ petitions, the main contentions raised by the petitioners were twofold. One was that the Lieutenant Government of Union Territory of Puducherry lacks legislative sanction for the issuance of the notification under Section 1(5) of the ESI Act. According to the petitioners, it is only the Central Government which can issue such a notification. The second contention was that an educational institution cannot be covered by the provisions of the ESI Act as it is not an "establishment" within the meaning of Section 1(5). The term "otherwise" found in Section 1(5) after the words industrial, commercial and agricultural should have the same meaning as that of the previous words and that the concept of "ejusdem generis" will apply. There was also a minor contention, i.e. before issuing the final notification, the Lieutenant Governor must separately express his mind to cover the Act and only thereafter, a final notification can be issued. 9.In W.P.No.30509 of 2007, the contention was that no other State had covered the private medical colleges and hence it is discriminatory. It is also stated that the hospital run by them is a teaching hospital covered by the provisions of the MCI Act. Hence it cannot be covered by the ESI Act. 10.This court had admitted most of the writ petitions and also granted interim stay of the impugned order either with condition or without conditions. On notices from this court, the respondents have filed counter affidavits, justifying the impugned notification. In addition to justification of the impugned notifications, the respondent ESI also contended that the petitioners having been served with orders under Section 45-A or Section 85-B, their recourse can only be by raising a dispute under Section 75 and not to challenge those proceedings under Article 226 of the Constitution. 11.W.P.Nos.2471, 3234 and 30509 of 2007, 17326 and 24350 to 24352 of 2008, 6287 and 19395 of 2009, 10028 and 21034 of 2010 were heard on 15.12.2010, W.P.Nos.16273 of 2007 and 10131 of 2008 were heard on 16.12.2010 and W.P.No.24691 of 2010 were heard on 20.12.2010. 12.As noted already, the impugned notification issued by the Union Territory of Puducherry is mainly challenged on the following two grounds. They are as follows: (a)The Union Territory of Puducherry is not the "appropriate Government" for making the notification under Section 1(5) of the ESI Act. The Union Territory of Puducherry cannot be https://hcservices.ecourts.gov.in/hcservices/ called as a State Government as found under Section 2(1) of the ESI Act. If it is not a State Government within the meaning of the said provision, then the appropriate Government in respect of any institution in the Union Territory of Puducherry is only the Central Government. Therefore, the impugned notification is invalid. (b)The petitioners are running educational institutions and it cannot be called as an establishment within the meaning of proviso to Section 1(5) of the ESI Act. 13.Before proceeding to deal with these issues, it is necessary to refer to Section 2(1) of the ESI Act which reads as follows: "2.Definitions.-In this Act, unless there is anything repugnant in the subject or context,- (1)"appropriate Government" means, in respect of establishments under the control of the Central Government or [a railway administration] or a major port or a mine or oil-field, the Central Government, and in all other cases, the [State] Government;" 14.In order to establish that the Union Territory of Puducherry is not the State Government, the counsel for the petitioners placed heavy reliance upon a judgment of the Supreme Court in Goa Sampling Employees' Assn. v. General Superintendence Co., reported in (1985) 1 SCC 206. In that case, the Supreme Court while dealing with the term "appropriate Government" found under Section 2(a) of the Industrial Disputes Act, 1947 held that the Administrator of the Union Territory cannot be called as the State Government. In respect of the industrial dispute, a reference can be made under Section 10(1) only by the Central Government as the Central Government alone is an appropriate Government in respect of the industries located in an Union Territory. Therefore, it was argued that the said ratio rendered under the Industrial Disputes act will automatically apply to application of ESI Act in the Union Territory. The said judgment has been quoted out of context to support their arguments by the counsel for the petitioners. 15.In that case, before the Supreme Court, the question came up for consideration was whether the reference given by the Central Government in respect of an industrial dispute relating to an employee engaged by the Iron Ore Sampling companies was valid or not? On behalf of the employers, preliminary objections were raised before the industrial tribunal. The matter finally reached the Supreme Court. The Supreme Court after construing the Constitutional provision enshrined under Article 239(1) of the Constitution of India held that an Union Territory cannot be called as a State Government and constitutionally speaking, it is some thing other than a State. To understand the ratio of the Supreme Court, it is necessary to extract the following passages found in paragraphs 16, 17 and 18, which are as follows: https://hcservices.ecourts.gov.in/hcservices/ "16.It was then pointed out that the definition of the expression “appropriate Government” in Section 2(a)(i) of the Act unless it is shown in relation to any industrial dispute concerning any industry carried on by or under the authority of the Central Government or the enumerated industries or a banking or an insurance company, a mine, an oilfield, a Cantonment Board, or a major port, the appropriate Government will be the Central Government and in any other case a State Government. It was therefore, submitted that unless it is shown that in relation to the industrial dispute raised by the Association, the appropriate Government would be the Central Government, the case would fall under the residuary provision, namely, that in relation to any other industrial dispute, the appropriate Government would be the State Government. The submission does not commend to us because before one can say that the appropriate Government is the State Government in relation to an industrial dispute, there has to be some State Government in which power must be located for making the reference. If there is no State Government but there is some other Government called the Administration of Union Territory, the question would arise whether in such a situation the Administration of Union Territory should be described as State Government for the purpose of Section 2(a)(i) read with Section 10(1)? 17.The High Court clearly fell into an error when it observed that the inclusive definition of the expression “State Government” does not necessarily enlarge the scope of the expression, but may occasionally point to the contrary. Let us assume it to be so without deciding it. But where the High Court fell into the error was when it held that the President representing the Central Government and the Administrator, and appointee of the President and subject to all orders of the President constitute two different Governments for a Union Territory. The position, the power, the duties and functions of the Administrator in relation to the President have been overlooked. On a conspectus of the relevant provisions of the Constitution and the 1963 Act, it clearly transpires that the concept of State Government is foreign to the administration of Union Territory and Article 239 provides that every Union Territory is to be administered by the President. The President may act through an Administrator appointed by him. Administrator is thus the delegate of the President. His position is wholly different from that of a Governor of a State. Administrator can differ with his Minister and he must then obtain the orders of the President meaning thereby of the Central Government. https://hcservices.ecourts.gov.in/hcservices/ Therefore, at any rate the Administrator of Union Territory does not qualify for the description of a State Government. Therefore, the Central Government is the “appropriate Government”. 18.If the Central Government as the appropriate Government has made the reference, the High Court was clearly in error in quashing the reference." 16.It is only in this context, the reference made by the Central Government was upheld by the Supreme Court. It is not clear as to how this judgment is of any assistance to the petitioners. On the contrary, if Article 239(1) is correctly understood, then it could only mean that the Union Territory is to be administered by the President acting to such an extent as he things fit through the Administrator to be appointed by him with such designation as he may specify. 17.It is also necessary to refer to the definition of the terms "Central Government", "State Government" and "Union Territory" as found under the General Clauses Act, 1897 (omitting the words not relevant for the present purpose), which reads as follows: “(8) ‘Central Government’ shall— (a) * * * (b) in relation to anything done or to be done after the commencement of the Constitution, mean the President; and shall include, (i)-(ii) * * * (iii) in relation to the administration of a Union Territory, the Administrator thereof acting within the scope of the authority given to him under Article 239 of the Constitution.” The expression “State Government” is defined in Section 3(60) (omitting the words not necessary for the present purpose) as under: “(60) ‘State Government’,— (a)-(b) * * * (c) as respects anything done or to be done after the commencement of the Constitution (Seventh Amendment) Act, 1956, shall mean, in a State, the Governor, and in a Union Territory, the Central Government;” The expression “Union Territory” is defined in Section 3(62-A) to mean “Union Territory specified in the First Schedule to the Constitution and shall include https://hcservices.ecourts.gov.in/hcservices/ any other territory comprised within the territory of India but not specified in that Schedule”." 18.It is necessary to refer to certain decisions of the Supreme Court interpreting the scope of Article 239 of the Constitution and also the powers of an Administrator of an Union Territory. In State of Bombay v. Salat Pragji Karamsi reported in 1957 SCR 745 = AIR 1957 SC 517, the Supreme Court held that the Chief Commissioner of the Union Territory acting under the orders of the President can issue statutory notifications under the powers vested in any statute. In paragraphs 14 and 15 of the judgment, the Supreme Court observed as follows: "14.Article 239 of the Constitution relates to administration of Part C States and provides: “Subject to the other provisions of this Part, a State specified in Part C of the First Schedule shall be administered by the President acting, to such extent as he thinks fit, through a Chief Commissioner or a Lieutenant-Governor to be appointed by him....” 15. This Article has been relied upon for urging that in a Part C State, the administration had to be carried on by the President acting through a Chief Commissioner. But this does not take away the powers of the Chief Commissioner given to him under any other Statute or Order. The Chief Commissioner of Kutch under Section 1 of the Bombay Act, had the power to issue notifications making that Act operative in Kutch or any part of Kutch and those powers were not affected by Article 239 of the Constitution particularly because of clause 15 of the Adaptation of Laws