IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 05.03.2010 CORAMs THE HONOURABLE MR.JUSTICE K.CHANDRU W.P.NO.4491 of 2010 and M.P.NOs.1 and 2 of 2010 National Cement Workers Union rep. By its Vice President, Regn. No.1873, No.4/194, Annai Nagar, Madukkarai, Coimbatore-641 105. .. Petitioner Vs. 1.Government of Tamil Nadu, rep. By its Principal Secretary, Labour and Employment Department, Fort St. George, Chennai-600 009. 2.The Regional Director, Employees State Insurance Corporation, No.143, Sterling Road, Chennai-600 034. 3.The Management, The Associated Cement Companies Ltd., (now renamed as A.C.C. Ltd.) Madukarai Cement Works, Madukarai, Coimbatore-641 105. .. Respondents This writ petition has been preferred under Article 226 of the Constitution of India praying for the issue of a writ of certiorarified mandamus to call for the records of the first respondent, to quash G.O.(D)No.81, Labour and Employment (L1) Department, dated 3.2.2010 issued by the first respondent and consequently direct the third respondent to refund the contribution deducted from the Staff category of employees from December 1997 and from the operative category of employees from 1.3.1999 onwards to 01.04.2009. For Petitioner : Mr.R.Kamatchi Sundaresan For Respondents : Mr.N.Senthilkumar, AGP for R1 Ms.Jeyakumari, for R2 ESI Corporation https://hcservices.ecourts.gov.in/hcservices/ ORDER The petitioner is a trade union. It has filed the present writ petition, challenging the order of the first respondent State Government made in G.O.(D)No.81, Labour and Employment Department, dated 03.02.2010 and for a consequential order to direct the third respondent to refund the contribution deducted from the staff category of employees from December, 1997 and from the operative category of employees from 1.3.1999 onwards till 01.04.2009. 2.Heard Mr.Kamatchi Sundaresan, leraned counsel for the petitioner, Mr.N.Senthilkumar, AGP for first respondent and Ms.Jeyakumari, learned counsel for the ESI Corporation. 3.The brief facts leading to the case are as follows: The third respondent made an application before the Government on 26.12.1996 seeking for an exemption from the operation of the ESI Act. It was on the premise that the health care provided by them are superior to the one provided under the ESI Scheme. Thereafter, the petitioner union filed a writ petition being W.P.No.2792 of 1997 before this court seeking for an exemption on the basis of their application, dated 17.1.1997 and in accordance with Section 87 of the ESI Act. This court directed them to make a fresh representation. It was observed that if any such representation is made, the Government was directed to consider the same. However, while granting the said direction, in paragraph 6, this court had observed as follows: "6.Regarding ESI contribution till the exemption application is disposed of by the first respondent, the third respondent employer shall collect the ESI employees contribution and keep the same in a separate account. The employer's contribution shall also be kept in the separate account as stated above. The above said contribution has to be made from March 1999." 4.Pursuant to the direction, the State Government passed an order, dated 17.5.1999 and rejected their request for exemption. It was stated therein that the scheme provided by the third respondent management is not comparable or superior to the benefits under the ESI Act. The petitioner union filed another writ petition being W.P.No.10549 of 1999. That came to be dealt with by a division bench of this court. A final order was made on 8.1.2001. In that case, the division bench referred to an earlier order passed by another division bench in W.A.No.254 of 1998, dated 24.09.1998, (wherein the notification issued by the Government, dated 23.12.1996, increasing the coverage from Rs.3000/- p.m. to Rs.6500/- p.m. was upheld) and rejected their request. A review petition was filed by the petitioner union in RA No.67 of 2001. The review petition was allowed on the ground that the Government did not hear them before passing orders. Therefore, in order to given https://hcservices.ecourts.gov.in/hcservices/ them an opportunity, such direction was given. 5.Thereafter, the petitioner union sent a representation on 29.4.2002. The Government gave a notice, dated 18.9.2002. The petitioner union sent a further representation, dated 19.9.2002. Thereafter, the State Government by a well considered order rejected their case for exemption by G.O.(D)No.1107, Labour and Employment Department, dated 26.12.2002. That order came to be challenged once again before this court in W.P.No.804 of 2003. This court by an order, dated 25.8.2009 set aside the earlier order on the ground that the State Government must give an opportunity to both the petitioner and the third respondent management. 6.Reliance was made on the judgment of the Orissa High Court in Orissa Industries Limited Vs. Union of India reported in 1992 (1) LLJ 182. It is not clear as to how the said order came to be passed especially when before passing the impugned order, dated 26.12.2002, the Government gave personal hearing as found in paragraph 8 of the said order. Paragraphs 8 and 9 of the Government Order, dated 26.12.2002 reads as follows: "8.Enclosing this order of the High Court, the National Cement Workers' Union has filed this petition reiterating their request for exemption. Following the Court Order, the National Cement Workers' Union, the Management of The Associated Cement Companies Limited, Madukkarai and the Joint Director, E.S.I. Corporation, Coimbatore were given personal hearing by the Secretary to Government, Labour and Employment Department on 25.9.2002. 9.The petitions of the Union and Management have been examined and their arguments carefully considered. In the application of the Management dated 18.12.97, exemption had been sought for 885 employees. Though exemption was sought under Section 88, the specific class into which these employees should be classified was not clearly stated. In the present petition, the Union has stated that out of a total of 1120 employees 209 are drawing salary above Rs.6500/- per month, 122 are not covered by E.S.I. as they are working in mines and 525 will continue to be covered by E.S.I. Exemption under Section 88 is sought for 264 employees only who get newly covered by E.S.I. consequent on increase of the wage ceiling for coverage from Rs.3,000/- to Rs.6,000/- per month w.e.f. 1.1.1997." (Emphasis added) 7.While making such a direction, this court overlooked the fact of the hearing given to them and held as if the petitioners were never heard. On the contrary, the petitioner themselves in their representation, dated 19.9.2002 thanked the Government for granting them hearing as found in the first paragraph of their https://hcservices.ecourts.gov.in/hcservices/ letter, which reads as follows: "At the outset, we thank you for having given a patient hearing to our Federation's General Secretary Shri N.Nanjappan on 17th instant and for the kind letter under reference above inviting us for a hearing." (Emphasis added) Therefore, the opportunity given by this court was an added bonus to the petitioner. The petitioner submitted a chart of showing as to how their scheme was more superior. This order has also overlooked the earlier order passed by this court granting only a limited opportunity for the petitioner union to be heard by the Government. 8.Pursuant to the said direction, dated 25.8.2009, the State Government after notice to the ESI Corporation passed the impugned order in G.O.(D)No.81, Labour and Employment Department, dated 03.02.2010. In that order, which runs into nearly 16 pages, the Government had elaborately considered the respective schemes, both of the management and the ESI Corporation and also gave one more opportunity as found in paragraph 11, which reads as follows: "11.In pursuance of the judgment dated 25.08.2009 the National Cement Workers Union, The Management of Associated Cement Companies Limited, Madukkarai and the Joint Director, Employees' State Insurance Corporation, Chennai were given personal hearing by the Principal Secretary to Government, Labour and Employment on 9.12.2009. In this personal hearing both the Management and Employees' State Insurance Corporation has filed an application before the Government" 9.After the order came to be passed, the third respondent Management informed the Union and the workmen that in view of the order passed by the Government, the ESI Contribution recovered from the Staff Category of employees from December, 1997 as well as from the operative category from March, 1999 along with employer's contribution to the ESI Corporation will be deposited immediately. Therefore, once again the petitioner union came forward with the writ petition praying for the relief, as noted above. 10.The petitioner union had taken the stand in the affidavit that employees because of their income range were outside the ESI coverage for two spells, i.e. from 1.4.2002 to 31.3.2004 and 01.04.2005 to 30.09.2006. Thereafter, since all employees have gone outside the scope of the coverage under the ESI Act from 1.4.2009, there is no further personal liability. Further, it was stated that since the workmen did not get any corresponding benefits under the provisions of the ESI Act, it was not correct on their part to retain the amount. Therefore, the petitioner wanted either to set aside the Government order or in alternative, https://hcservices.ecourts.gov.in/hcservices/ refund the amounts, which had already recovered pursuant to the order passed by this court in W.P.No.2792 of 1997, dated 19.2.1999 as extracted above. 11.Reliance was placed upon the judgments of the Supreme Court in ESI Corpn. v. Jardine Henderson Staff Assn. reported in (2006) 6 SCC 581 and ESI Corpn. v. Distilleries & Chemical Mazdoor Union reported in (2006) 6 SCC 604. 12.In the first decision, the Supreme Court by the exercise of power under Article 142, gave the direction as found in paragraph 62 of the order. Though it was stated that even the High Court has power under Article 226 to grant such relief, it has to be seen whether the ratio laid down in the judgment will have any application to the facts on hand. In that case, the Supreme Court in paragraphs 66 and 67 had observed as follows: "66. The ESI Act was enacted to provide for certain benefits to employees in case of sickness, maternity and employment injury. Under the scheme of the Act, function of the ESI Corporation is to derive insurance fund from the contribution from employers and workmen. The employer is entitled to recover the workmen’s share from the wages of the workmen concerned. It was argued by the respondent that the employer is providing better medical facilities to the workmen and, therefore, the object and purpose of the Act has been fully satisfied. It is pertinent to notice that none of the employees of the unions have complained about medical services provided by the employers since the object is otherwise fulfilled. No further direction, in our opinion, is required to be passed. 67. The act of court can prejudice no party, either the ESI or the respondent companies. We, therefore, relieve the respondents from making any contributions for the period in question and direct them to make the contribution as directed by the Division Bench of the High Court. It is stated that some of the respondents have already filed exemption applications and that the appellant Corporation has also granted them necessary relief. We also permit the other respondents who have not filed any exemption application may now file the same and if such application for exemption is filed, it is for the authorities to consider the same on merits and in accordance with law." 13.Likewise, in Distilleries & Chemical Mazdoor Union's case, the Supreme Court in paragraphs 27, 29 and 30 had observed as https://hcservices.ecourts.gov.in/hcservices/ follows: "27. This apart it is important to note that in the past 17 years when the interim order passed by the High Court was enforced, several employees have left/retired and were paid the entire salary without any deduction and, therefore, it will be impossible for the employer to recover the part of the employees’ contribution in respect of ESIC from the employees. ...... 29. As regards the question of law raised by the learned counsel for ESIC regarding the view taken by the High Court, we are of the opinion that the view taken by the High Court was on account of the peculiar facts and circumstances of the case. As already noticed, the deduction of contribution of the members of the Union had been specifically stayed by the High Court and the same continued for a period of 18 years till the disposal of the petition and that none of the members of the Union had availed the facilities of ESI. In our view, passing of the final order by the High Court directing the payment of ESI contribution from the date of the said judgment does not amount to postponing the enforcement of the notification and the same is also not in violation of the principles laid down by this Court in the various judgments referred to above. There has been no postponement of the enforcement of the notification in view of the peculiar circumstances of the case, namely, the non- availability of the facilities, non-deduction of contribution from the members of the Union for 18 long years, provision of medical relief by the management. The High Court had directed deduction of contribution with effect from the date of the judgment, which, in our opinion, is perfectly justified. 30. This apart, the members of the Union included casual, temporary, contractual, badli workmen and it will be practically impossible to find each and every member of the Union to recover their contribution for the last 18 years and in fact some of the workmen who would have been the employees during all these years would have left, expired, etc. and on account thereof also their contribution cannot be recovered. The judgments relied on by the counsel for the appellant are distinguishable on facts and on law. The order passed by the High Court, in our opinion, is https://hcservices.ecourts.gov.in/hcservices/ perfectly justified in view of the facts and circumstances of the case and it has been repeatedly held by this Court that such a relief can be granted in the peculiar facts and circumstances of the case and that there can be an exception as in the present case and, therefore, it cannot be said that the directions issued by the High Court are not correct or that they are contrary to the power under Article 226 of the Constitution of India." 14.A reading of the above passages will show that the Supreme Court granted relief only on the ground that the cases were very old and that at this point of time, if collections have to be made from the workers, as many of them may not be in service and some of them may be casual and temporary workers, who might have left the service and hence recoveries should not be made. It was also held that it will impossible for the employers to recover amounts from those workmen. The Supreme Court has also held that this would not amount to postponing the coverage. But, in both the cases, it was held that subsequent to the order of the court, recoveries can be made from the salary of the employees. It is not clear as to how the said judgment will be of any assistance to the petitioner. 15.On the other hand, far from helping the case of the workmen, these two judgments are really against the contentions raised by the workmen. In the present case, at the first time when the workmen came to this court with W.P.No.2792 of 1997, this court by an order dated 19.2.1999, gave a direction that the amounts should be recovered from March, 1999 and kept in a separate account. Therefore, the amounts have been recovered from the employees and kept in a separate account. The employer's contribution was also kept in the said account. Therefore, when the third respondent management wrote to the workmen on 20.2.2010, it informed the workmen that having lost legal battle, monies will have to be deposited with the ESI Contribution. The very fact that for the last 10 years, thanks to the interim orders the employer is deducting and keeping the amounts in a separate account itself is unwarranted. The fact that the petitioners have not enjoyed the benefit under the ESI is immaterial. The well known maxim that no one should be prejudiced by a court order will equally apply to the ESI Corporation. 16.The petitioner who have stalled the application of the scheme and now having got out of the scheme en masse due to the enhancement of salary, cannot ask the money in deposit to be refunded to them. Both in the Jardine Henderson Staff Assn. case (cited supra) and the Distilleries & Chemical Mazdoor Union's case (cited supra), reliefs were granted under Article 142 though it is claimed that the said power is available to Article 226 to this court. But, the reliefs were granted because recoveries will not be possible on account of workers leaving the factory and also the fact that more than 17 years have elapsed. https://hcservices.ecourts.gov.in/hcservices/ 17.In the present case, ever since 1999 litigation, the petitioner Union had come to this court with three rounds. If at all there is any loss, it is the ESI which had lost its money. Though mandated by the Parliament to make recoveries, thanks to the order of the court, they were prevented from doing so. Therefore, there is no equity in favour of the workmen. In fact, because of the order of the court, the ESI was not able to collect even the penal interest and penal damages. Therefore, the decisions relied on by the petitioner are inappropriate and can have no application to the case of the petitioner. 18.It will not be out of place to refer to the judgment of the Supreme Court in ESI Corpn. v. Kerala State Handloom Development Corpn. Employees Union reported in (1994) 1 SCC 268. The following passages found in paragraphs 2 to 4 of the said judgment may be usefully extracted below: "2. The Employees State Insurance (Central) Rules, 1950 were amended by the notification dated March 27, 1992 with effect from April 1, 1992. By the amendment the wage-ceiling for coverage under the Employees State Insurance Act, 1948 (the Act) was enhanced from Rs 1600 to Rs 3000 per month. The amendment was challenged before the High Court on various grounds. While upholding the validity of the amendment a learned Single Judge of the High Court directed that the notification should be enforced with effect from November 1, 1992 instead of April 1, 1992. The judgment of the learned Single Judge was upheld by the Division Bench of the High Court. 3. We have heard learned counsel for the parties. We are of the view that the High Court fell into patent error in postponing the date of the operation of the notification. The notification, amending the Rules, was a legislative act. The amendment of the Rules being a delegated legislation, the High Court could not have interfered with the date of operation of the notification. 4. We set aside the direction given by the High Court regarding the postponement of the enforcement of the notification and we direct that the notification dated March 27, 1992 shall be operative from April 1, 1992." (Emphasis added) 19.The said decision in Kerala State Handloom Development Corpn. Employees Union's case though was quoted with approval in the subsequent Supreme Court judgments, but reiterating the ratio https://hcservices.ecourts.gov.in/hcservices/ after certain distinctions were made, reliefs were granted. Otherwise, the law laid down by the Supreme Court in Kerala State Handloom Development Corpn. Employees Union's case will squarely against the petitioner. 20.The other argument that the G.O., refusing to grant exemption is to be set aside cannot also be accepted. The petitioner had three rounds of litigation and whatever lacuna that has been found has been cured by the respondent. It is the petitioner who have misled this court in the three rounds of litigation as if no personal hearing was given to them and it is contrary to the records. 21.In this context, it is necessary to refer to the judgment of this Court in Madras Race Club represented by its Secretary Mr.Dharmasenan Ebeneser v. The Secretary to Governmen, Labour and Employment Department and others reported in Manu/TN/1319/2008. In paragraphs 10 to 12, it was observed as follows:- "10. ...submitted that the order of the State Government is bereft of any reason and no opportunity was given to the petitioner Club before passing the orders. In this context, he relied upon a judgment of the Allahabad High Court in Lohiya Machines (L.M.L.) Karmachari Sangh, Kanpur v. State of U.P and Ors. reported in 1999-II-LLJ 1023. This is for the purpose to show that the Government must examine the benefits provided by the employer whether they are similar or superior to the benefits provided under the Act and hearing of the employer and union must be afforded. 11.In that case, the State Government on a policy consideration refused to grant exemption, which was found fault with by the Allahabad High Court. But, in the present case, it is not as if on any policy consideration the State Government had refused. But, on the contrary, it was found that the medical and cash benefits provided by the petitioner Club were neither comparable nor superior to the benefits provided under the ESI Act. Further, as stated in the counter affidavit, the petitioner Club is not providing the various benefits given under one umbrella under the ESI Act. It includes, Sickness Benefits, Maternity Benefits, Disablement Benefits, Death Benefit and Funeral Benefit. Such benefits are not provided by the Club. Even in the application sent by the petitioner club dated 06.04.1997 the Annexure appended shows that many of the benefits covered by the ESI Act were not extended. https://hcservices.ecourts.gov.in/hcservices/ 12.In any event, Courts have repeatedly held that an exemption from the operation of a labour legislation is not automatic and there is no vested right on any employer to seek for an exemption. Only the benefits are superior compared to the ESI Act. The ESI Act is a social welfare legislation and the subscription paid by the employer and employees only covers a fraction of the expenditure involved by the Corporation. In the present case, the first respondent State has categorically held that it was not satisfied that the petitioner Corporation deserves an exemption and it had rejected the same on specific grounds. 22.The Supreme Court in ESI Corpn. v. All India ITDC Employees' Union reported in (2006) 4 SCC 257 decided the meaning of a direction given to consider exemption. The following passages found in paragraphs 12 and 13 may be usefully extracted below: "12. But it is really unnecessary to go into the said question because the order of the High Court really did not give a positive direction. Relevant portion of the learned Single Judge’s order which has been extracted above, clearly goes to show that the learned Single Judge left the matter to be decided by the Corporation. The direction was to “consider” and in that sense there was no positive direction. 13. “14. We may, in this context, examine the significance and meaning of a direction given by the court to ‘consider’ a case. When a court directs an authority to ‘consider’, it requires the authority to apply its mind to the facts and circumstances of the case and then take a decision thereon in accordance with law. There is a reason for a large number of writ petitions filed in the High Courts being disposed of with a direction to ‘consider’ the claim/case/representation of the petitioner(s) in the writ petitions. 15. Where an order or action of the State or an authority is found to be illegal, or in contravention of the prescribed procedure, or in breach of the rules of natural justice, or arbitrary/unreasonable/irrational, or prompted by mala fides or extraneous consideration, or the result of abuse of power, such action is open to judicial review. When the High Court finds that the order or action requires interference and exercises the power of judicial review, thereby resulting in the action/order of the State or https://hcservices.ecourts.gov.in/hcservices/ authority being quashed, the High Court will not proceed to substitute its own decision in the matter, as that