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Judgment
K. Chandru, J.—The Petitioner is Puducherry Slum Clearance Board represented by its Chief Executive Officer. They have filed the writ
petition, seeking for a direction to the Respondents 1 and 2 ESI from proceeding to take any action under the Employees State Insurance Act,
1948 as amended by Central Act, 29/1989 against the Petitioner Board including recovery action by way of freezing its Bank Accounts and
collecting the contribution amount till the third Respondent viz., Union of India passes an order on the Petitioner''s application made u/s 90 of the
ESI Act sent on various dates including 13.08.1997, 13.02.2002, 07.04.2006, 27.02.2007 etc., and the application made u/s 1(4) of the ESI Act
dated 16.04.2007.
The writ petition was admitted on 22.05.2007. Pending the writ petition, this Court granted an interim injunction in M.P. No. 1 of 2007. In
M.P. No. 2 of 2007, the Petitioner Board sought for refund of the amount of Rs. 2,98,566/- collected from the two current Accounts maintained
by the Petitioner Board with the State Bank of India, Main Branch, Puducherry. In that interim application, only notice was ordered.
It is an admitted fact that till date the Petitioner Board had not got any exemption from the third Respondent Union of India represented by the
Secretary to Government, Union Territory of Puducherry. As per the averments made, the Petitioner Board had sent representations dated
13.08.1997 and 13.02.2002 claiming exemption from the provisions of the E.S.I. Act in respect of the Petitioner Board. By a communication
dated 23.02.2006, the Labour Department, Puducherry informed them to submit a fresh application in the prescribed proforma for grant of
exemption. Accordingly, the Petitioner Board sent a fresh application along with the covering letter dated 07.04.2006. In the meanwhile, the Bank
account of the Petitioner Board was sought to be attached by the Respondents ESI and through that a sum of Rs. 2,98,566/- was recovered.
It is the contention of the Petitioner Board that they are having good medical scheme so as to eligible to be exempted under the Act. In the
meanwhile, the Joint Secretary of the Labour Department attached to the Government of Puducherry sent a communication dated 20.03.2007
stating that by virtue of Section 1(4) of the E.S.I. Act, the employees of the Board were governed by Central Civil Service (Medical Attendance)
Rules, wherein, the benefits substantially similar or superior to the E.S.I. Act has been provided. It was also stated that the Petitioner Board has
been created by Slum Areas (Improvement and Clearance) Act, 1956 and incorporated by virtue of the Slum Areas (Improvement and
Clearance)(Pondicherry Amendment) Act, 1986. Section 39 of the said Act has an overriding effect over anything inconsistent therewith in any
other law. Therefore, E.S.I. Act is not applicable to the Petitioner Board.
Subsequently, the Petitioner sent a representation dated 25.04.2007 to the Labour Department, Government of Puducherry, stating that by the
amendment made to Section 1(4) of the E.S.I. Act, 1948, wherein by the introduction of the proviso, the provisions of the E.S.I. Act will not apply
to any factory or establishment belonging to or under the control of the Government whose employees are otherwise in receipt of benefits
substantially similar or superior to the benefits provided under this Act. Therefore, they sought for a declaration that the provisions contained in the
E.S.I. Act will not apply to the Petitioner Board and request for an appropriate notification. When there was no reply from the Government, the
writ petition came to be filed as noted already.
Mr. T.P. Manoharan, learned Counsel for the Petitioner Board submitted that by virtue of the introduction to Section 1(4) of the Act, it is
necessary to make any application claiming exception u/s 90. He further submitted that the Board has framed Rules providing for medical
assistance. The C.C.S. (MA) Rules are more superior or similar to the benefits provided under the E.S.I. Act. It is further claimed that the Trade
Union which is functioning in the Petitioner establishment had sent a letter dated 10.01.2007 stating that the members are not willing for coverage
by E.S.I. Act. He further submitted that the Union Territory for reasons best known had not passed any order. In the meanwhile, the Respondents
ESI are threatening for recovery action. Therefore, until the Union of India passes an order, they should not be allowed to recover amounts
allegedly due and payable to the E.S.I. It was further submitted that even after the introduction of Section 91AA by the latest amendment by
Central Act 18/2010, wherein the Central Government alone is the appropriate Government to grant exemption. It is contended that nothing bars
the State Government from granting a declaration u/s 1(4) as now the exemption is not claimed under Chapter VIII of the E.S.I. Act and since
proviso to Section 1(4) was brought in before the present amendment which came into effect from 01.06.2010, there is no impediment for the
grant of directions prayed for.
In the light of the above contentions, the following questions arise for consideration by this Court:
i) Whether the Petitioner Board is an establishment belonging to or under the control of the Government?
ii) Even for applying the exemption under proviso to Section 1(4), whether any exemption should be formerly given by the appropriate
Government?
iii) Whether a direction to the third Respondent can be given in the light of insertion to Section 91AA of the Act?
iv) Whether any exemption can be granted retrospectively for the past period?
With reference to the first question that the Puducherry Slum Clearance Board is an establishment belonging to or under the control of the
Government, it must be noted that the Petitioner themselves have stated in their application that it is created by the Slum Areas (Improvement and
Clearance) Act, 1956 which is a separate enactment and therefore, it is an independent body.
u/s 2(24) of the E.S.I. Act, if certain words are not defined for use under the E.S.I. Act but were defined under the Industrial Disputes Act, it
will have the similar meaning assigned to them in the I.D. Act. Section 2(24) may be usefully extracted below:
all other words and expressions used but not defined in this Act and defined in the Industrial Disputes Act, 1947 (14 of 1947), shall have the
meanings respectively assigned to them in that Act.
The term ''establishment'' belonging to or under the control of the Government is not defined in the E.S.I. Act. But the said term more or less
similar term appears in Section 2(a)(i) of the I.D. Act, wherein an Industry which is carried on by or under the authority of the Central Government
is referred to.
The said definition came up for consideration by the Supreme Court in more than one decision. When a similar language is found under the
Contract Labour Abolition and Regulation Act, 1970, the Supreme Court in Steel Authority of India Ltd. and Others etc. etc. Vs. National Union
Water Front Workers and Others etc. etc., dealt with the definition of the word ""appropriate Government"". That case was referred to by the
Supreme Court in Tata Memorial Hospital Workers Union Vs. Tata Memorial Centre and Another, , wherein it held in paragraphs 40 to 47 as
follows:
The question concerning interpretation of the concept of ''appropriate Government'' in Section 2(1)(a) of the CLRA Act, 1970 and in Section
2(a) of the Industrial Disputes Act, 1947 was subsequently referred to a Constitution Bench in SAIL v. National Union Waterfront Workers1. The
Constitution Bench examined the relevant provisions and the judgments including those in Ramana Dayaram Shetty212 and Ajay Hasia313. The
question decided by the Constitution Bench of this Court in Ajay Hasia13 was with respect to Jammu and Kashmir Regional Engineering College,
Srinagar, which was registered as a society under the Jammu and Kashmir Registration of Societies Act, 1898 and wherein it was held to be State
within the meaning of Article 12 of the Constitution.
In SCC para 37 of the judgment in SAIL1, this Court held that merely because the government companies, corporations and societies are
instrumentalities or agencies of the Government, they do not become agents of the Central or the State Government for all purposes. The Court
held as follows: (SCC p.27)
We wish to clear the air that the principle, while discharging public functions and duties the government companies/corporations/societies which
are instrumentalities or agencies of the Government must be subjected to the same limitations in the field of public law-constitutional or
administrative law-as the Government itself, does not lead to the inference that they become agents of the Centre/State Government for all
purposes so as to bind such Government for all their acts, liabilities and obligations under various Central and/or State Acts or under private law.
In SCC para 38, this Court thereafter held as follows: (SAIL case1, SCC pp.27-28)
From the above discussion, it follows that the fact of being an instrumentality of a Central/State Government or being ''State'' within the
meaning of Article 12 of the Constitution cannot be determinative of the question as to whether an industry carried on by a company/corporation
or an instrumentality of the Government is by or under the authority of the Central Government for the purpose of or within the meaning of the
definition of ''appropriate Government'' in the CLRA Act. ... Further, the definition of ''establishment'' in the CLRA Act takes in its fold purely
private undertakings which cannot be brought within the meaning of Article 12 of the Constitution. In such a case, how is ''appropriate
Government'' determined for the purposes of the CLRA Act or the Industrial Disputes Act? In our view, the test which is determinative is: whether
the industry carried on by the establishment in question is under the authority of the Central Government. Obviously, there cannot be one test for
one part of the definition of ''establishment'' and another test for another part. Thus, it is clear that the criterion is whether an
undertaking/instrumentality of the Government is carrying on an industry under the authority of the Central Government and not whether the
undertaking is an instrumentality or agency of the Government for purposes of Article 12 of the Constitution, be it of the Central Government or the
State Government.
(emphasis supplied)
In SCC para 39, this Court further held as follows: (SAIL case1, SCC p.28)
... To hold that the Central Government is ''the appropriate Government'' in relation to an establishment, the Court must be satisfied that the
particular industry in question is carried on by or under the authority of the Central Government. If this aspect is kept in mind it would be clear that
the Central Government will be the ''appropriate Government'' under the CLRA Act and the ID Act provided the industry in question is carried on
by a Central Government company/an undertaking under the authority of the Central Government. Such an authority may be conferred, either by a
statute or by virtue of the relationship of principal and agent or delegation of power. Where the authority, to carry on any industry for or on behalf
of the Central Government, is conferred on the government company/any undertaking by the statute under which it is created, no further question
arises. But, if it is not so, the question that arises is whether there is any conferment of authority on the government company/any undertaking by
the Central Government to carry on the industry in question. This is a question of fact and has to be ascertained on the facts and in the
circumstances of each case.
In para 40 of SAIL case the Constitution Bench states that it shall refer to the cases of this Court on this point and thereafter examines in paras
41 to 44 the earlier referred judgments in Heavy Engg. Mazdoor Union, Hindustan Aeronautics, Rashtriya Mill Mazdoor Sangh and Food
Corporation of India.
In para 41 of the judgment in SAIL case, the Constitution Bench examined the judgment in Heavy Engg. Mazdoor Union case. In Heavy Engg.
Mazdoor Union2 the Court had observed that an inference that the corporation was the agent of the Government might be drawn where it was
performing in substance governmental and not commercial functions.
The Constitution Bench disagreed with the distinction thus made between the governmental activity and commercial function of government
companies. Barring this limited disagreement, however at the end of para 41 the Constitution Bench observed that it is evident that the Court
correctly posed the question whether the State Government or the Central Government was the ""appropriate Government"" and rightly answered it.
In para 42, the Constitution Bench examined the judgment of Hindustan Aeronautics Ltd.7 The Constitution Bench noted that the judgment in
Heavy Engg. Mazdoor Union case2 was followed in Hindustan Aeronautics7 and it had taken note of the factor that if there was any disturbance
of industrial peace in Barrackpore, the ""appropriate Government"" concerned for the maintenance of internal peace was the West Bengal
Government. The Court observed that the factors which weighed with the Court could not be said to be irrelevant.
In para 43 of SAIL case the Constitution Bench examined the judgment in Rashtriya Mill Mazdoor Sangh wherein although an authorised
Controller was appointed to replace the management of the Respondent Model Mill, Rashtriya Mill Mazdoor Sangh8 judgment had held that the
undertaking could not be held to be carried on under the authority of the Central Government. The Constitution Bench quoted the observations
from the judgment with approval. In para 44 the Constitution Bench referred to the Food Corporation of India case. It noted that Food
Corporation of India judgment had followed the judgments in Heavy Engg. Mazdoor Union2 and Rashtriya Mazdoor Mill Sangh8 to hold that the
State Government was the ""appropriate Government"" pertaining to the regional offices and warehouses of FCI under the CLRA Act. At the end of
this para the Constitution Bench concluded ""we find no illegality either in the approach or in the conclusion arrived at by the Court in these cases.
(emphasis supplied)
In paras 45 and 46, thereafter once again the Constitution Bench turned to the judgment in Air India case111 and in SCC para 46 it concluded
as follows: (SAIL case1, SCC pp.32-33)
We have held above that in the case of a Central Government company/undertaking, an instrumentality of the Government, carrying on an
industry, the criteria to determine whether the Central Government is the appropriate Government within the meaning of the CLRA Act, is that the
industry must be carried on by or under the authority of the Central Government and not that the company/undertaking is an instrumentality or an
agency of the Central Government for purposes of Article 12 of the Constitution; such an authority may be conferred either by a statute or by
virtue of the relationship of principal and agent or delegation of power and this fact has to be ascertained on the facts and in the circumstances of
each case. In view of this conclusion, with due respect, we are unable to agree with the view expressed by the learned Judges on interpretation of
the expression ''appropriate Government'' in Air India case.
(emphasis supplied)
After referring to various judgments on the above issue, the Supreme Court in the same judgment in paragraphs 59 to 63 held as follows:
As far as an industry ""carried on by the Central Government"" is concerned, there need not be much controversy inasmuch as it would mean the
industries such as the Railways or the Posts and Telegraphs, which are carried on departmentally by the Central Government itself. The difficulty
arises while deciding the industry which is carried on, not by but ""under the authority of the Central Government"". Now, as has been noted above,
in the Constitution Bench judgment in SAIL1, the approach of the different Benches in the four earlier judgments has been specifically approved
and the view expressed in Air India111 has been disagreed with. The phrase ""under the authority"" has been interpreted in Heavy Engg.2 to mean
pursuant to the authority"" such as where an agent or servant acts under authority of his principal or master. That obviously cannot be said of a
company incorporated under the Companies Act, as laid down in Heavy Engg. Mazdoor Union case2. However, where a statute setting up a
corporation so provides specifically, it can easily be identified as an agent of the State.
The judgment in Heavy Engg. Mazdoor Union2 observed that the inference that a corporation was an agent of the Government might also be
drawn where it was performing in substance governmental and noncommercial functions. The Constitution Bench in SAIL case1 has disagreed
with this view in para 41 of its judgment. Hence, even a corporation which is carrying on commercial activities can also be an agent of the State in
a given situation. Heavy Engg.2 judgment is otherwise completely approved, wherein it is made clear that the fact that the members or Directors of
corporation and he is entitled to call for information, to give directions regarding functioning which are binding on the Directors and to supervise
over the conduct of the business of the corporation does not render the corporation an agent of the Government. The fact that entire capital is
contributed by the Central Government and wages and salaries are determined by it, was also held to be not relevant.
In Hindustan Aeronautics7 the fact that the industrial dispute had arisen in West Bengal and that the ""appropriate Government"" in the instant
case for maintaining industrial peace was West Bengal was held to be relevant for the Governor of West Bengal to refer the dispute for
adjudication. In Rashtriya Mill Mazdoor case8 the fact that the authorised Controller was appointed by the Central Government to supervise the
undertaking was held as not making any difference. The fact that he was to work under the directions of the Central Government was held not to
render the industrial undertaking an agent of the Central Government.
In Food Corporation of India010 in spite of the fact that FCI is a specified industry u/s 2(a)(i) of the ID Act, 1947, this Court considered the
definition of ""appropriate Government"" in the CLRA Act, 1970, and the State Governments were held to be the ""appropriate Governments"" for
the regional offices and the warehouses situated in various States wherein the demand for regularisation of the services under the CLRA Act had
arisen.
The propositions in SAIL1 are to be seen on this background viz. that merely because the government companies/corporations and societies
are discharging public functions and duties that does not by itself make them agents of the Central or the State Government. The industry or
undertaking has to be carried under the authority of the Central Government or the State Government. That authority may be conferred either by a
statute or by virtue of a relationship of principal and agent, or delegation of power. When it comes to conferring power by statute, there is not
much difficulty. However, where it is not so, and whether the undertaking is functioning under authority is a question of fact. It is to be decided on
the facts and circumstances of each case.
Further, this Court had an occasion to consider the scope of Section 32(iv) of the Payment of Bonus Act, 1965 in relation to the Puducherry
Housing Board which is a sister concern of the Petitioner Board.
Section 32(iv) of the Bonus Act reads as follows:
Nothing in this Act shall apply to (i) to (iii) omitted (iv) employes employed by an establishment engaged in any industry carried on by or under
the authority of any department of the Central Government or a State Government or a local authority.
Taking advantage of the said exemption, it was contended by the Puducherry Housing Board that they are not bound to pay bonus under the
Payment of Bonus Act. In this context, the Supreme Court in Housing Board of Haryana v. Haryana Housing Board Employees Union and Ors.
reported in 1996 (1) LLN 1 dealt with the scope of Section 32(iv) and to the exact meaning of the term local authority. In that case, the Supreme
Court rejected the contention that the Haryana Housing Board was a local authority and hence exempted by virtue of Section 32(iv) of the Bonus
Act. In Paras.35 and 3 6 at page 7, of the said judgment, the Supreme Court dealt with that issue, which reads as follows:
It will be seen that the Legislature itself has given the Board limited status of ''local authority1 only for the purpose of Land Acquisition Act as
also the parent Act, namely, the Haryana Housing Board Act, 1971, under which the Board has been constituted and established. The Legislature
has given this status only fictionally as the Board, in reality, is not a ""local authority1 and that too only for the limited purpose. The Legislature could
well have given this status to the Board for purposes of other Acts also including the Payment of Bonus Act but this has not been done and
consequently the Board, cannot, specially in view of what has been stated above, be treated as ""local authority"", under the Payment of Bonus Act.
There does not, therefore, appear to be any reason to differ from the view expressed by the learned Single Judge or by the Division Bench (in
appeal) of the Punjab and Haryana High Court that the Board is not a ''local authority1 as it does not possess the attributes indicated by this Court
in the case of R.C. Jain (1981 (1) LLN 569) (vide supra).
Therefore, in the light of the Supreme Court judgment, the plea made by the Puducherry Housing Board was rejected by this Court vide
judgment in Pondicherry Housing Board Employees'' Union v. Government of Pondicherry reported in 2009 (3) L.L.N. 473. Therefore, it cannot
be held that the Petitioner Board is covered by the proviso to Section 1(4) so as to be eligible for getting exemption under the E.S.I. Act. Section
1(4) of the E.S.I. Act only formerly grants declaratory relief. But to get the benefit under the proviso to Section 1(4) as it is saddle with riders
namely that the employees of such establishment must be in respect of benefits substantially similar or superior to the benefits provided under the
E.S.I. Act, they should necessarily approach the appropriate Government under Chapter VIII of the E.S.I. Act. A definition under the Section
found in the Act by itself cannot be treated as power to grant exemption. Though by amendment made by Central Act, 29 of 1989, the word
''government'' found u/s 90 has been removed and the power to grant exemption in respect of an establishment belonging to local authority vest
only with appropriate Government and the Petitioner Board being local authority must necessarily file an application to the appropriate Government
for the grant of exemption. That was the reason why the Petitioner themselves have moved the Government for such a relief and the present prayer
is only for a direction to that effect. The requirement of moving the appropriate Government is all the more necessary because before grant of
exemption, the Government is mandate to consult E.S.I. Corporation and the E.S.I. Corporation can always convince the Government that the
benefits granted by an applicant is neither substantially similar nor superior to the benefits provided under the E.S.I. Act. Therefore, the second
question must be answered against the Petitioner.
With reference to the third question, even during the pendency of various correspondence between the parties and the pendency of the writ
petition, the Parliament has amended the E.S.I. Act by Central Act 18 of 2010. The new provision in Section 91AA reads as follows:
91AA. Not with standing anything contained in this Act, in respect of establishments located in the States where medical benefit is provided by the
Corporation, the Central Government shall be the appropriate Government.
Therefore, any exemption, henceforth can be granted only by the Central Government and not by the third Respondent, which is only Union
Territory of Pondicherry. Though the term ''appropriate Government'' is defined u/s 2(1) to include both Central and State Government by virtue of
Section 91AA, it is the Central Government alone which can grant exemption. The Union Territory of Pondicherry is neither a State Government
nor a Central Government u/s 2(1) and therefore, they should move the Central Government for exemption. Therefore, the third question also must
be answered against the Petitioner Board.
Further Section 91A earlier empowering the Government to grant exemptions either prospectively or retrospectively has been amended and
henceforth any exemption order can be granted prospectively by the Government. Therefore, if at all the Petitioner Board seeks for any future
exemption that has to be done only by the Central Government that too it can be done only prospectively. Hence the fourth question stood
answered against the writ Petitioner Board.
In the light of the above, the relief claimed by the Petitioner Board cannot be countenanced by this Court. Hence, the writ petition stands
dismissed. No costs. Consequently, connected miscellaneous petitions are closed.