IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE K.M.JOSEPH & THE HONOURABLE MR. JUSTICE M.L.JOSEPH FRANCIS THURSDAY, THE 22ND SEPTEMBER 2011 / 31ST BHADRA 1933 INS. .APPEAL .No. 12 of 2010 C ----------------------------------------- (AGAINST THE PRELIMINARY ORDER DATED 23.11.2009 IN I.C.NO.84/2009 ON THE FILE OF THE EMPLOYEES' INSURANCE COURT, PALAKKAD) .................... APPELLANTS/RESPONDENTS ------------------------------------------ 1. THE REGIONAL DIRECTOR, E.S.I.CORPORATION, PANCHADEEP BHAVAN, THRISSUR-20. 2. RECOVERY OFFICER, E.S.I.CORPORATION, ROUND NORTH, THRISSUR. BY ADV. SRI.THOMAS MATHEW NELLIMOOTTIL RESPONDENT(S): APPLICANT ------------------------------------------- M/S.BISHOP MOORE VIDYAPITH, CMS JN,. KALAVAMKODAM PO, CHERTALA, (REPRESENTED BY ITS BURSAR REV.MATHEWS PO.OOMMEN) BY ADV. SRI.M.B.PRAJITH SRI.N.N.SUGUNAPALAN, SENIOR ADVOCATE. THIS INSURANCE APPEAL HAVING BEEN FINALLY HEARD ON 20.7.2011, THE COURT ON 22.9.2011 DELIVERED THE FOLLOWING: K.M. JOSEPH & M. L. JOSEPH FRANCIS, JJ. ----------------------------------------- INS. APPEAL NO.12 OF 2010 C ------------------------------------------ Dated this the 22nd September, 2011 JUDGMENT K.M. Joseph, J. This Appeal is filed under Section 82(2) of the Employees' State Insurance Act (hereinafter referred to as the Act). The appellants are the Regional Director of the ESI Corporation (hereinafter referred to as the Corporation) and its Recovery Officer. They challenge a preliminary order passed by the Insurance Court, Palakkad, finding that it had jurisdiction in the matter. The respondent/applicant challenged the applicability of the Act to its school, that is situated in Alappuzha District. The appellants raised a preliminary objection, namely since the establishment wherein the `insured' are working, is situated in Alappuzha District, the Court at Palakkad does not have jurisdiction. INS. APPEAL NO.12/2010 C 2 Reasoning and finding of the Court: 2. Section 74 of the Act provides for the constitution of the court for such local area as may be specified in the Notification. Section 75 of the Act provides for the disputes that can be decided by the court. Section 76 of the Act provides for the court where the proceedings have to be instituted. Thereafter, it is noted that Section 75 contemplates disputes between the principal employer and the Corporation, between employees and the Corporation and between the principal employer and the immediate employer and their employees and between principal employer and the immediate employer being resolved. Thereafter, the court referred to Rule 16 of the Kerala Employees' Insurance Court Rules,, 1958 (hereinafter referred to as the Rules). The court further reasoned that in view of the provisions of Rule 16 of the Rules, cases not covered by Section 76(1) of the Act, should be filed in the courts where there is jurisdiction under Rule 16. The court also reasoned that the appellants admit that principal office of the Corporation in Kerala INS. APPEAL NO.12/2010 C 3 is the Regional Office at Thrissur and its principal Officer is the Regional Director and, therefore, he is the competent Officer to represent the Corporation in proceedings under Sections 75, 76 and 77 and, therefore, the application is filed against the property party. There are other observations which need not detain us in view of the contentions raised by the parties before us. Contentions of the appellants: 3. Learned counsel for the appellants would contend that the interpretation placed by the court that Section 76 of the Act and Rule 16 cannot be sustained. He would seek support of the judgment of a learned Single Judge of this Court in E.S.I. Corporation v. Panickaveettil Sir Sebastian Public School (2010 (4) KLT 976). He further placed reliance on the judgment of the Apex Court which incidentally was also relied on by the learned Single Judge, namely Fertilisers & Chemicals Travancore Ltd. v. E.S.I. Corporation (2009 (3) KLT 946). He would point out that at least some workers must be impleaded in an action by the INS. APPEAL NO.12/2010 C 4 employer under Section 75, having regard to the decision of the Apex Court referred to in E.S.I. Corporation v. Panickaveettil Sir Sebastian Public School (2010 (4) KLT 976). He would submit that where Section 76 of the Act applies, Rule 16 cannot operate. He would submit that since in this case, admittedly the establishment of the respondent was in Cherthala coming in the Alappuzha District and the employees are working in Cherthala, it cannot be said that the court at Palakkad has jurisdiction. 4. Per contra, Shri N. N. Sugunapalan, learned senior counsel for the respondent would submit that the order does not require interference. Rule 16 applies in this case. This is for the reason that Section 76 would apply only in a case where the insured employee is a party. He also relied on the Judgment of the Madras High Court in Modern Radio Service v. Regional Director, E.S.I. Corporation (2006 (1) LLJ 59) in support of his contention. Section 76(1) of the Act reads as follows: “76. Institution of proceedings, etc.:- (1) INS. APPEAL NO.12/2010 C 5 Subject to the provisions of this Act and any rules made by the State Government, all proceedings before the Employees' Insurance 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.” Rule 16 of the Rules, reads as follows: “16. 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 proceeding, 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, or INS. APPEAL NO.12/2010 C 6 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.” 5. On the one hand, Section 76 which is contained in the parent enactment, provides that subject to the provisions of the Act and any Rules made by the State Government, all proceedings are to 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. Rule 16 made by the State Government within the meaning of Section 76 provides that in cases not falling under sub- section (1) of Section 76, any proceedings against any person shall be instituted in the court within the local limits of whose jurisdiction the opposite party voluntarily resides, carries on business or personal works for gain or the cause of action partly or wholly arises, inter alia. Rule 16, in fact, provides for jurisdiction on lines similar to Section 20 of the Code of Civil Procedure. Thus, the question which essentially arises is whether the present INS. APPEAL NO.12/2010 C 7 case is a case falling under Section 76. If Section 76 applies, clearly Rule 16 will not apply. According to the appellants, Section 76 would apply. Per contra, the contention of the respondent is that Section 76 would apply only in a case where the workman is a party and this is for the reason that Section 76 premises jurisdiction on the basis of the place where the insured person was working. He would submit that Section 75 provides jurisdiction to the court in respect of various types of disputes and questions. We extract Section 75(1) and (2) as follows: “75. Matters to be decided by Employees' Insurance Court:- (1) If any question or dispute arises as to- (a) whether any person is an employee within the meaning of this Act or whether he is liable to pay the employee's contribution, or (b) the rate of wages or average daily wages of an employee for the purposes of this Act, or © the rate of contribution payable by a principal employer in respect of any employee, or (d) the person who is or was the principal INS. APPEAL NO.12/2010 C 8 employer in respect of any employee, or (e) the right of any person to any benefit and as to the amount and duration thereof, or (ee) any direction issued by the Corporation under Section 55-A on a review of any payment of dependants' benefits, or, (f) x x x, or (g) any other matter which is in dispute between a principal employer and the Corporation, or between a principal employer and an immediate employer, or between a person and the Corporation or between an employee and a principal or immediate employer, in respect of any contribution or benefit or other dues payable or recoverable under this Act, or any other matter required to be or which may be decided by the Employees' Insurance Court under this Act, such question or dispute subject to the provision of sub-section (2A), shall be decided by the Employees' Insurance Court in accordance with the provisions of this Act. (2) Subject to the provisions of sub-section (2A), the following claims shall be decided by the Employees' Insurance Court, namely:- INS. APPEAL NO.12/2010 C 9 (a) claim for the recovery of contributions from the principal employer; (b) claim by a principal employer to recover contributions from any immediate employer; © x x x (d) claim against a principal employer under Section 68; (e) claim under Section 70 for the recovery of the value or amount of the benefits received by a person when he is not lawfully entitled thereto; and (f) any claim fr the recovery of any benefit admissible under this Act.” 6. Therefore, Section 75 indeed deals with disputes between principal employer and the Corporation, principal employer and immediate employer, a person and the Corporation, between employee and principal or immediate employer, as is clear from clause (g). According to him, Section 76 would not apply, as there is none who is insured in the facts of this case. No worker is before this court in this case, he points out. It is not a claim by or against an insured. This is an action by the employer against the INS. APPEAL NO.12/2010 C 10 Corporation. In such a case, it is not Section 76 which would apply, but Rule 16, he submits. 7. It is necessary to refer to certain provisions of the Act. Section 2(13A) of the Act defines “insurable employment” as “employment in a factory or establishment to which the Act applies”. Section 2(14) defines “insured person” as follows: “Insured person” means “a person who is or was an employee in respect of whom contributions are or were payable under this Act and who is, by reason thereof, entitled to any of the benefits provided by this Act.” Section 38 of the Act falling under Chapter IV provides, subject to the provisions of the Act, all employees in factories or establishment to which this Act applies, shall be insured in the manner provided by the Act. Section 39 provides for payment of contributions. Section 40 provides that it is the principal employer who is to pay the employer's contributions and the employees' contributions in respect of every employee, whether directly INS. APPEAL NO.12/2010 C 11 employed by him or by or through an immediate employer. Decisions relied on by the parties: 8. In Fertilisers & Chemicals Travancore Ltd. v. E.S.I. Corporation (2009 (3) KLT 946 (SC)), the Apex Court was dealing with a case where a demand notice was sent to the appellant Company under Section 45A of the Act in respect of the employer's contribution. The appellant challenged the notice by filing a petition under Section 75 of the Act. Only the Employees' State Insurance Corporation and the District Collectors of three Districts were made respondents. The matter related apparently to head load workers and their rights. The Apex Court held as follows, inter alia: “6. Labour statutes are meant for the benefit of the workmen. Hence, ordinarily in all cases under labour statutes the workmen, or at least some of them in a representative capacity, or the trade-union representing the concerned workmen must be made a party. Hence, in our opinion the appellant (petitioner before the Employees Insurance Court) should have INS. APPEAL NO.12/2010 C 12 impleaded at least some of the persons concerned, as respondents. 7. The case of the appellant was that, in fact, none of the concerned persons was its employee and it was difficult to identify them. 11. In our opinion, wherever any petition is filed by an employer under S.75 of the Act, the employer has not only to implead the E.S.I.C. but has also to implead at least some of the workers concerned (in a representative capacity if there are a large number of workers) or the trade-union representing the said workers. If that is not done, and a decision is given in favour of the employer, the same will be in violation of the rules of natural justice. After all, the real concerned parties in labour matters are the employer and the workers. The E.S.I. Corporation will not be in any way affected if the demand notice sent by it under S.45A/45B is quashed. 12. It must be remembered that the Act has been enacted for the benefit of the workers to give them medical benefits, which have been mentioned in S. 46 of the Act. Hence the principal beneficiary of the Act is the workmen and not the E.S.I. Corporation. The INS. APPEAL NO.12/2010 C 13 E.S.I. Corporation is only the agency to implement and carry out the object of the Act and it has nothing to lose if the decision of the Employees Insurance Court is given in favour of the employer. It is only the workmen who have to lose if a decision is given in favour of the employer. 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.” 9. In Employees' State Insurance Corporation v. Bhakra Beas Management Board and Another (2009) 10 SCC 671), the brief facts were as follows: The appellant Corporation issued a notice under Section 45A. The respondent Board challenged it before the court in Delhi. Neither the workers of the Board, nor any of them were made parties. The court had decided the matter in favour of the appellant. However, the High Court in Appeal held that the sub stations of the respondent Board were not factories within the INS. APPEAL NO.12/2010 C 14 meaning of the Act. In the Appeal filed by the Corporation, after referring elaborately to the previous decision in Fertilisers & Chemicals Travancore Ltd. v. E.S.I. Corporation (2009 (3) KLT 946), it was held that neither the workers of the respondent, nor any one of them in representative capacity were impleaded either before the court or before the High Court and this was in violation of the principles of natural justice. The Appeal was allowed and the matter remitted for impleading the workers. Both these decisions were referred to in E.S.I. Corporation v. Panickaveettil Sir Sebastian Public School (2010 (4) KLT 976) by a learned Single Judge of this Court wherein almost on similar facts, the Palakkad Court found that it had jurisdiction. The learned Single Judge, inter alia, held as follows: “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 INS. APPEAL NO.12/2010 C 15 aspect after considering S.76(1) as well as R.16 of the Madras Rules which are identical with the Kerala Rules. A Division Bench of the Madras High Court in Modern Radio Service v. regional Director, E.S. I. Corporation (2006 (1) LLJ 59) has considered this point. The Employees Insurance Corporation at Madras issued a notice determining the contribution under S.45A of the E.S.I. Act. It was challenged before the E.I. 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 R16 that court will have also jurisdiction. It was stated that at the time of rendering the decision in Sree Karpagambal Mills Ltd. R.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 Court in Sree Lakshmi Medicals, etc. v. Regional Director, E.S.I. Corporation (1999 (1) INS. APPEAL NO.12/2010 C 16 LW 204). There the question arose whether R.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 S.76 (1) will not apply and therefore the rules framed under the E.S.I. Act will govern the field and therefore the E.I. Court has the power to exercise jurisdiction under R.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 R.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 R. 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' 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 INS. APPEAL NO.12/2010 C 17 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., t4he E.I. Court has to give direction to the persons concerned to implead the workers or 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 S.76(1) of the Act makes it INS. APPEAL NO.12/2010 C 18 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, S.76(1) comes into play. When S.76(1) comes into play R.16 goes out for the reason that R.16 starts with the words “in cases not falling under sub-s.(1) of S.76”. Therefore, when R.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 S.76(1) is directly involved, only the courts stipulated in that section will have jurisdiction over the matter. Learned counsel appearing for the Corporation hasd produced the notification relating to all courts where they had conferred the powers exercising the functions under the E.S.I. Act. It is in order.” The decision which is sought to be referred to by the learned senior counsel for the respondent, has already been referred to by the learned Single Judge also. INS. APPEAL NO.12/2010 C 19 Findings: 10. The application in the present case was filed by the respondent/employer under Section 75 of the Act. It challenges the applicability of the Act to its institutions. No doubt, it is pointed out by the learned counsel for the appellants that the issue itself as to whether the Act applies to the respondent is to be treated as no res integra any longer, in view of the decision of this Court to the effect that Schools affiliated to CBSE are covered under the Act. We feel that in view of the judgments of the Apex Court in Fertilisers & Chemicals Travancore Ltd. v. E.S.I. Corporation (2009 (3) KLT 946) and Employees' State Insurance Corporation v. Bhakra Beas Management Board and Another (2009) 10 SCC 671)m Section 76 must apply, as workers must be impleaded in a proceeding of the nature instituted by the respondent. If any employee or worker is to be impleaded, then certainly Section 76 would apply. In such circumstances, we are inclined to take the view that the reasoning adopted by the learned Single Judge in the INS. APPEAL NO.12/2010 C 20 decision in E.S.I. Corporation v. Panickaveettil Sir Sebastian Public School (2010 (4) KLT 976) represents the correct view. Accordingly, we allow the Appeal and set aside the order passed by the court below. The application is to be filed in the respective court under Section 76 of the Act and the court below is directed to send the application to the respective court for decision. The parties shall be informed of the proceedings. The proceedings initiated by the appellant Corporation shall be kept in abeyance for a period of two months from today. Sd/= K.M. JOSEPH, JUDGE Sd/= M.L. JOSEPH FRANCIS, JUDGE kbk. //True Copy// PS to Judge INS. APPEAL NO.12/2010 C 21