Case: Director General, ESI &amp; Another Vs. T. Abdul Razak

2. The Employees State Insurance Corporation (for short `the Corporation) is a statutory corporation established under the provisions of the Employees State Insurance Corporation Act, 1948 (hereinafter referred to as `the Act). Under Section 16 of the Act the Director General of the Employees State Insurance Corporation (for short `the Director General) is the Chief Executive Officer of the Corporation and is one of the principal officers. Section 17 of the Act makes provisions with regard to staff other than the Principal Officers. In sub-section (2) of Section 17 it is provided that the Corporation shall, with the approval of the Central Government, make regulations regarding the method of recruitment, pay and allowances, discipline, superannuation benefits and other conditions of service of the members of its staff. Section 94-A, wherein provision has been made for delegation of powers, provides that the Corporation, and subject to the regulations made by the Corporation in this behalf, the Standing Committee may direct that all or any of the powers and functions which may be exercised by the Corporation or the Standing Committee, as the case may be, may, in relation to such matters and subject to such conditions, if any as may be specified, be also exercisable by any officer or authority subordinate to the Corporation. Sub-section (1) of Section 95 of the Act empowers the Central Government to make rules not inconsistent with the Act for the purpose of giving effect to the provisions thereof. Under clause (d) of sub- section (2) of Section 95 such rules may provide for the powers and duties of the principal officers and the conditions of their service. Sub-section (1) of Section 97 empowers the Corporation to make regulations not inconsistent with the Act and the rules made thereunder for the administration of the affairs of the Corporation and for carrying into effect the provisions of the Act. Under clause (xxi) of sub-section (2) of Section 97 such regulations may provide for the method of recruitment, pay and allowances, discipline, superannuation benefits and other conditions of service of officers and servants of the Corporation other than the principal officer.3. The Rules have been framed by the Central Government in exercise of the powers conferred by Section 95 of the Act.T. Abdul Razak (respondent in Civil Appeal Nos. 3952 of 1988 and 3953 of 1988) was employed as Insurance Manager Grade-II/Inspector with the Corporation. Disciplinary proceedings were initiated against him by the Regional Director of Karnataka Region on the basis of Memorandum dated October 20, 1983. In the said proceedings after holding an enquiry an order was passed by the Director General on March 6, 1987 imposing the penalty of reduction in rank to the post of Head Clerk/Manager Grade-III for a period of one year. The said respondent filed an application (Application No. 473 of 1987) before the Tribunal assailing the said order. Disciplinary proceedings were started against the said respondent by the Regional Director of Karnataka Region on the basis of another Memorandum dated January 23, 1985. A writ petition was filed by the said respondent in the Karnataka High Court challenging the said memorandum and the competence of the Regional Director to initiate the disciplinary proceedings. The said writ petition was subsequently transferred to the Tribunal and was registered as Application No. 1678 of 1986.10. P.K. Philip (respondent in Civil Appeal No. 1913 of 1989) was employed as Manager Grade-II. Disciplinary proceedings were initiated against him by the Regional Director on the basis of Memorandum dated July, 18/25, 1986. The said respondent filed an application (Application No. 474 of 1987) before the Tribunal challenging the very initiation of said proceedings against him by the Regional Director.11. All the three petitions, namely, Application No. 1678 of 1986 and Application No. 473 of 1987 filed by T. Abdul Razak and Application No. 474 of 1987 filed by P.K. Philip have been disposed of by the Tribunal by the impugned judgment dated January 29, 1988 whereby the Tribunal has struck down Rule 16(2) of the Rules in its entirety, the words "or the authority specified in this behalf by a general or special order of the Director General" in Regulation 12(2) and the words "or any other authority empowered by him by general or special order may" in Regulation 13(1) of the Regulations. The resolution of the Standing Committee of the Corporation dated May 24, 1968 as well as orders dated May 10, 1974 and April 9, 1981 passed by the Director General have also been quashed. The Tribunal has also quashed the memoranda dated October 20, 1983, January 21, 1985 and July 18/25, 1986 regarding initiation of disciplinary proceedings against both the respondents by the Regional Director of Karnataka Region as well as the order of punishment dated March 6, 1987 passed by the Director General against the respondent, T. Abdul Razak.12. The Tribunal has held that there was delegation of the powers of the Corporation to the Director General and it was not permissible in law for the Director General to further delegate the said powers to the Regional Director. In taking the said view the Tribunal has proceeded on the basis that the powers of the Corporation have been delegated to the Director General under Section 94-A of the Act and since Section 94-A does not make provision for further delegation by the Director General of the power so delegated the resolution of the Standing Committee dated May 24, 1968 as well as Rule 16(2) and Regulations 12(2) and 13(1) by empowering the Director General to specify any other person to exercise the said powers permit sub-delegation by the delegate of the powers delegated to him which is not permissible in view of the well known principle delegatus non potest delegare. The Tribunal has placed reliance on the decision of the Karnataka High Court in The Employees State Insurance Corporation, Bangalore v. Shoba Engineers, Bangalore and others, 1982(44) FLR 100, construing the provisions of Section 94-A of the Act.

Court's reasoning:
Therefore, in so far as the validity of the memoranda regarding initiation of disciplinary proceedings against the respondents is concerned the question regarding delegation of powers by the Director General did not arise for consideration and the Tribunal was not required to deal with the question regarding validity of Rule 16(2), Regulations 12(2) and 13(1), the resolution of the Standing Committee dated May 24, 1968 and the orders of the Director General dated May 10, 1974 and April 9, 1981. With regard to initiation of disciplinary proceedings by the Regional Director, we find that the legal position is well settled that it is not necessary that the authority competent to impose the penalty must initiate the disciplinary proceedings and that the proceedings can be initiated by any superior authority who can be held to be the controlling authority who may be an officer subordinate to the appointing authorityRegional Director, being the officer in charge of the region, was the controlling authority in respect of the respondents. He could institute the disciplinary proceedings against the respondents even in the absence of specific conferment of a power in that regard. The memoranda dated October 20, 1983 January 21, 1985 and July 18/25 1986 regarding initiation of disciplinary proceedings against the respondents by the Regional Director, therefore, do not suffer from any legal infirmity and the applications filed by the respondents before the Tribunal are liable to be dismissed. But since the Tribunal has pronounced upon the validity of Rule 16(2), Regulations 12(2) and 13(1) the resolution of the Standing Committee dated May 24, 1968 and orders dated May 10, 1974 and April 9, 1981 passed by the Director General it becomes necessary to examine the correctness of the decision of the Tribunal in that regard.14. The law is well settled that in accordance with the maxim delegatus potest delegare, a statutory power must be exercised only by the body or officer in whom it has been confided, unless sub-delegation of the power is authorised by express words or necessary implication.On that view of the matter Regulations 12 and 13 must be construed as conferring independent powers on the Director General and it cannot be said to be the powers and functions of the Corporation or the Standing Committee that have been delegated to the Director General by the Corporation or the Standing Committee under Section 94-A. Regulation 12(2) which empowers the Director General to specify by general or special order the authority which can also act as a disciplinary authority and Regulation 13(1) which authorises the Director General to empower by general or special order any other authority to institute disciplinary proceedings against an employee, cannot be regarded as empowering further delegation by the Director General of powers delegated to him. The Tribunal was, therefore, in error in striking down the words "or any other authority specified in this behalf by a General or special order of the Director General" in Regulation 12(2) and the words "or any other authority empowered by him by general or special order may" in Regulation 13(1) on the view that they permit further delegation by the Director General of the powers delegated to him which is impermissible. The decision of the Tribunal in this regard cannot be upheld and the offending words in Regulations 12(2) and 13(1) must be treated as a valid conferment of power on the Director General to delegate his powers under the said Regulations. The orders dated May 10, 1974 and April 9, 1981 were passed by the Director General in exercise of the powers conferred on him under Regulation 12(2). By the said orders the Director General delegated the powers to impose minor penalties specified in clauses (i) to (iv) of Regulation 11 in respect of certain categories of employees and the officers specified in the said orders. Since the offending part of Regulation 12(2) has been found to be valid the said orders dated May 10, 1974 and April 9, 1981 must be held to have been validly issued in exercise of the power of delegation conferred on the Director General under Regulation 12(2).17. Rule 16(2) and the resolution of the Standing Committee dated May 24, 1968 go together. Under Rule 16(2) the Director General has been empowered to delegate any of his powers or duties under the Rules or the Regulations or under any resolution of the Corporation or the Standing Committee, as the case may be, to any person subordinate to him. For the purpose of such delegation it is necessary for the Director General to obtain the approval of the Standing Committee. Resolution of the Standing Committee dated May 24, 1968 accords such approval to the Director General. The power of delegation under Rule 16(2) can be divided into two parts; one relating to delegation of the powers or duties under the rules or the Regulations and the other relating to the powers and duties under any resolution of the Corporation or the Standing Committee. Insofar as the powers or duties under the Rules or the Regulations are concerned, the conferment on the Director General the power to delegate the same is not violative of the principle of sub-delegation as indicated earlier because the said powers and duties are in the nature of independent statutory powers conferred on the Director General under the Rules or the Regulations. No infirmity can, therefore, be found either in Rule 16(2) or in the resolution of the Standing Committee dated May 24, 1968 empowering the Director General to delegate any of this powers or duties under the Rules or the Regulations. The position is, however, different in respect of the powers and duties conferred on the Director General under any resolution of the Corporation or the Standing Committee. The conferment of such powers or duties under a resolution of the Corporation or the Standing Committee could be by way of delegation of the powers of the Corporation or the Standing Committee under Section 94-A of the Act and empowering the Director General to further delegate the said powers or duties would amount to sub-delegation of a power delegated to him which is impermissible in view of the law laid down in Sahni Silk Mills (supra). Rule 16(2) and the resolution of the Standing Committee dated May 24, 1968, to the extent they empower the Director General to further delegate the powers or duties delegated to him by the Corporation or the Standing Committee under a resolution referable to Section 94-A, have to be held to be invalid.18. For the reasons aforementioned, the impugned judgment of the Tribunal is set aside insofar as it strikes down the words "or any other authority specified in this behalf by a general or special order of the Director General" in Regulation 12(2) and the words "or any other authority empowered by him by general or special order may" in Regulation 13(1) of the Regulations and quashes the orders dated May 10, 1974 and April 9, 1981 passed by the Director General, the memoranda dated October 20, 1983, January 21, 1985 and July 18/25, 1986 and the order dated March 18, 1987. Rule 16(2) and the resolution of the Standing Committee, to the extent they empower the Director General to delegate the powers or duties delegated to him under any resolution of the Corporation or the Standing Committee referable to Section 94-A, are invalid but the rest of the said Rule and the resolution are valid.