Case: EMPLOYEES’ STATE INSURANCE CORPORATION Vs. KAKINADA MUNICIPALITY &amp; ORS

1. Respondent No. 1 is a municipality. There is a factory which ran under the name and style of M/s. Victoria Water Works and controlled by the first respondent. The said factory was covered under the Employees State Insurance Act, 1948 (hereinafter referred to as Act for brevity) from 12.01.1965. Contributions under the Act were paid by the respondent No. 1, according to the appellant till 31.12.1996. The appellant issued show cause notices proposing assessment for the period from which the first respondent was in default in the matter of payment of contributions. Various orders demanding sums as found due from the first respondent were issued. A speaking order under Section 45A of the Act was passed on 04.10.2001. It is on 05.02.2002 that the first respondent filed application purporting to be under Section 75(1)(g) of the Act before the Employees Insurance Court. The reliefs which have been sought in the said application are noticed as follows:(1) to declare that the Petitioner Municipality being a local self Government, functioning under the statute and providing better amenities to its employees is covered by the provisions to sub-section 4 of Section 1 of ESI Act, 1948.(2) To declare that the provisions of ESI Act are not applicable to the employees working in Water Works Department of the Petitoiner Municipality as the Petitioner Municipality is providing better and superior benefits and facilities than by the 1st Respondent Corporation.(3) Alternately direct the Respondents to grant exemption under Section 90 of ESI Act, 1948 and also set aside the attachment order dated 15.01.2002.(4) And pass such other relief/reliefs to which the petitioner may entitled to in law and equality.(5) To pass such other or further orders as it deems fit and proper.2. The Insurance Court, in fact, granted a stay, on payment by respondent No. 1 of Rs.3 lakhs. Evidence was taken and the Insurance Court rejected the application which must be treated as essentially an application under Section 75 of the Act. Against the same, the first respondent filed a statutory appeal as provided under Section 82 of the Act. It is by the impugned judgment, the High Court allowed the appeal filed by the first respondent and proceeded to set aside the impugned order passed by the Insurance Court.

Court's reasoning:
10. In the facts of this case, there is no dispute that the first respondent was running a factory within the meaning of the Act, insofar as it is undertaking manufacturing activities within the meaning of the expression manufacturing process as defined in Section 14AA. The proviso to Section 1(4), undoubtedly, operates as an exception to the main provision. In other words, from the generality of factories that stand covered under the Act, the legislature has carved out an inroad by providing that the Act would not apply to the factory which belonged to the Government. It also makes it clear that the provisions of the Act will not apply to a factory under the control of the Government. This is however subject to the further condition in the proviso that the employees of such a factory, which is either owned or controlled by the Government, should be otherwise in receipt of benefits substantially similar or superior to the benefits provided under the Act. It is upon satisfaction of these conditions that even a factory which is owned or controlled by the Government would stand exempted from the purview of the Act.11. As far as the facts of this case is concerned, the first respondent does not have the case that the factory in question is a factory which is owned by the Government. As far as the question relating to control of the Government is concerned, learned senior counsel for the first respondent has, in fact, upon being queried as to whether he has a case that it is under the control of the Government, he does not address us on the issue on the lines that the Government controls the factory. He very fairly does submit that the factory is under the control of the first respondent. The first respondent is a local body. It might be true that it is a creature of statute, being created under the relevant Act. It also has a constitutional position after the amendment of the Constitution. But the words used in the Act are that the factory must be under the control of the Government. Any further doubt, in this regard, which we may entertain, is banished by the provisions of Section 90.The position, therefore, is that in respect of a factory, which is belonging to a local authority, unless power of exemption is exercised by the Government, it would be covered by provisions of section 1(4) of the Act. In other words, it would be a factory like any other factory. It would have to be compliant with the provisions of the Act. This is for the reason that a factory or an establishment belonging to or under the control of the Government alone are within the purview of the proviso, which in turn is subject to the imperative condition or rather the indispensable requirement that the employees are in receipt of the substantially similar or superior benefits than provided under the Act.13. Having reached the said conclusions, the time is ripe for us to notice the law as laid down by this Court in Zuari Cement Limited (supra). In the said case also, which emanated from the same High Court, the appellant therein sought an exemption from the Act but by approaching the Court under Section 75. The argument ran that the Court had jurisdiction by virtue of Section 75(1)(g). The discussion is to be found in paragraphs 12, 13 and 14:12. As discussed earlier, in terms of Section 87 of the Act, only the appropriate government has the power to grant exemption to a factory or establishment or class of factories or establishments from the operation of the Act. In fact, the appellant-factory itself has obtained exemption from the appropriate Government-State Government under Section 87 of the Act for the period from 1986 to 1993. Likewise, the rejection of exemption was also under Section 87 of the Act. While so seeking the relief of declaration from the ESI Court that the appellant is entitled to exemption from the operation of the Act is misconceived. Contrary to the scheme of the statute, the High Court, in our view, cannot confer jurisdiction upon the ESI Court to determine the issue of exemption. The ESI Corporation, of course, did not raise any objection and subjected itself to the jurisdiction of the ESI Court. The objection as to want of jurisdiction can be raised at any stage when the Court lacks jurisdiction, the fact that the parties earlier acquiesced in the proceedings is of no consequence.13. The Employees Insurance Court is a tribunal specially constituted for the purpose of deciding any controversy that may arise on the matters enumerated in Section 75 of the Act. A reading of Section 75 of the Act would show that the ESI Court has full jurisdiction to decide all the matters arising between the employer and the Corporation under the Act. Section 75 of the Act sets out the matters to be decided by the ESI Court. As per Section 75(1)(g) of the Act, the ESI Court is empowered to decide any matter which is in dispute between the employer and the Corporation in respect of any contribution or benefit or other dues payable or recoverable under the Act or any other matter required to be or which may be decided by the ESI Court under the Act and such question or dispute subject to the provisions of sub-section (2-A) shall be decided by the ESI Court in accordance with the provisions of the Act. When considered in the light of clauses (a) to (d) in Section 75 (1) of the Act, the expression any other matter occurring in Section 75(1) (g) only means any other dispute between an employer and corporation or a person and Corporation pertaining to the contribution or benefit or other dues payable under the Act or any other matter required to be decided by the ESI Court under the provisions of the Act. Grant or refusal of exemption by the appropriate government cannot be said to be a dispute between the employer and the Corporation. For grant or refusal of exemption, a specific provision is prescribed under the Act, it cannot be brought within the ambit of any other matter required to be decided by the Employees Insurance Court under this Act.14. As per the scheme of the Act, the appropriate government alone could grant or refuse exemption. When the statute prescribed the procedure for grant or refusal of exemption from the operation of the Act, it is to be done in that manner and not in any other manner. In State of Jharkhand v. Ambay Cements, (2005) 1 SCC 368,  it was held that26………….It is the cardinal rule of interpretation that where a statute provides that a particular thing should be done, it should be done in the manner prescribed and not in any other way.14. We have no reason to take a different view. The power of exemption is indeed only with the appropriate Government. If a factory or establishment is covered under the Act then subject to the power of the Government to take it out of the purview of the Act by an act of exemption, which, in turn, can be done only after consulting the E.S.I. Corporation and by following the other requirements as provided therein, the said power cannot be availed of by the Insurance Court while deciding an application under Section 75 of the Act.15. We have already noticed the reliefs which have been sought in this case. We have also found that section 1(4) applies. The proviso to section 1(4) does not apply. The result is none of the reliefs which have been sought for by the first respondent could have been given. The reliefs were rightly refused by the Insurance Court. The Insurance court did not frame the issue and find that the first respondent was providing superior benefits.16. However, the High Court has proceeded to rely upon judgment of this Court in Municipal Commitee, Abohar v. Regional Commissioner, E.S.I. Corpn. and Another (1996) 7 SCC 488 . The High Court has premised its stand partly on the judgment of this Court in Municipal Commitee, Abohar (supra).17. It is rightly pointed out by Shri Santosh Krishnan, learned counsel for the appellant, that it is an order.In the said case, no doubt, the appellant was a municipality running Waterworks; the employees were sought to be covered under the Act and after notice was issued, an order under section 45-A of the Act was passed against which an appeal was carried to the Insurance Court which confirmed that the employees were covered under the Act. Thereafter, we notice the following:3. The question is whether the employees of the Municipal Corporation are also covered under the Act? 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.We may notice that the said order does not reveal any discussion of the legal issues. There is no consideration of the statutory provisions in question.We see merit in the argument of the learned counsel for the appellant that the High Court should not have treated this as a precedent which it should follow, particularly, having regard to the factual matrix in this case and the statutory provisions in place.18. The upshot of the above discussion is that the impugned judgment of the High Court is unsustainable and is liable to be set aside.19. There is another aspect of the matter. Having noticed that the first respondent is obliged by the provisions of the Act to made contributions in regard to the employees of the factory and the attempt made before the Insurance Court to seek and get an exemption was without foundation in law, the fact remains that the power is lodged under Section 90 of the Act to grant exemption. In other words, the fact that the impugned judgment is being set aside would not stand in the way of the appellant seeking the benefit of exemption under Section 90 of the Act.