Kerala High Court
Palakkad Sarvodaya Sangham vs State Of Kerala
Author: Alexander Thomas
Bench: Alexander Thomas
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT:
THE HONOURABLE MR. JUSTICE ALEXANDER THOMAS
WEDNESDAY, THE 13TH DAY OF JANUARY 2016/23RD POUSHA, 1937
WP(C).No. 35183 of 2008 (L)
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PETITIONER(S):
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PALAKKAD SARVODAYA SANGHAM, OTTAPALAM,
REP .BY ITS SECRETARY K.GOPINATHAN, AGED 51 YEARS
S/O. LATE BALAKRISHNAN NAIR, DIVYALAYAM
PARUTHIPULLI P.O., PALAKKAD DISTRICT.
BY ADVS.SRI.SANTHEEP ANKARATH
SRI.V.C.MADHAVANKUTTY
RESPONDENT(S):
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1. STATE OF KERALA, REPRESENTED BY
SECRETARY TO GOVERNMENT, LABOUR AND
REHABILITATION DEPARTMENT, TRIVANDRUM.
2. REGIONAL DIRECTOR, EMPLOYEES STATE
INSURANCE CORPORATION, PANCHADEEP BHAVAN
NORTH SWARAJ ROUND, TRICHUR-680020.
3. THE RECOVERY OFFICER, EMPLOYEES STATE
INSURANCE CORPORATION, PANCHADEEP BHAVAN
NORTH SWARAJ ROUND, TRICHUR.
R1 BY GOVERNMENT PLEADER SRI.P.V.ELIAS
R2-R3 BY ADV. SRI.SANDESH RAJA. K
THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 13-01-2016,
THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:
W.P.(C).No. 35183/2008
APPENDIX
PETITIONER(S)' EXHIBITS
P1. COPY OF THE GOVT. ORDER DTD.13.10.2005.
P2. COPY OF THE EXPLANATION DTD.13.11.2006 BY THE PETITIONER.
P3. COPY OF THE ORDER DTD.23.9.2006 ISSUED BY THE GOVT. OF KERALA.
P4. COPY OF THE NOTICE DATED 16.1.2007 BY R2 TO R3.
P5. COPY OF THE ORDER DTD.14.12.2007 BY R1.
P6. COPY OF THE ORDER DTD.31.10.2007 BY GOVT. OF KERALA.
P7. COPY OF THE ORDER DTD.29.4.2008 BY GOVT. OF KERALA, LABOUR
DEPARTMENT.
RESPONDENT(S)' EXHIBITS:
NIL.
sdk+
///True copy///
P.S. to Judge
ALEXANDER THOMAS, J.
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W.P.(C).No. 35183 of 2008
Dated==================2016
this the 13th day of January,
J U D G M E N T
The petitioner, Palakkad Sarvodaya Sangham, is aided by the All India Khadi and Village Industries Commission and is functioning as a Society registered under the Societies Act 1860. It is the case of the petitioner that they have initially employed 44 persons as employees at the material time and that the employees were paid wage either on daily or weekly basis. It is also the specific case of the petitioner that at present, they have employed 22 persons and they are paid medical aid for the year and all employees have executed documents, whereby they have categorically undertaken that they may not be granted the benefit under the E.S.I Act and that they are contented with the present benefits granted by the petitioner organisation. That for various reasons, the petitioner organisation had faced a lot of financial hardships and despite that, they have been endeavouring to realise their cherished objectives of making handicrafts and Khadi products. Due to various financial hardships faced by the Company and on the basis of the W.P.(C).35183/08 - : 2 :-
understanding with the employees, the petitioner had earlier applied for getting exemption from the purview of the Employees' State Insurance Act, 1948 and the competent authority viz., the 1st respondent-State Government, had consistently granted them exemption from the provisions of the E.S.I Act by resort to the power conferred under Sec.87 of the said Act, for the years preceding 2005-06. Ext.P1 is the order dated 13.10.2005, whereby the petitioner organisation has secured exemption from the purview of the E.S.I Act for the year 2004-05 as per the Gazette notification issued by the Government of Kerala in the Labour and Rehabilitation Department. The petitioner had duly made an application for getting exemption from the purview of the E.S.I. Act for the year 2005-06 (for the period from 1.4.2005 to 31.3.2006). Without considering the said exemption application pending before the Government, coercive steps have been taken by the 2nd and 3rd respondents for enforcing the liabilities under the E.S.I. Act for the year 2005-06. This was done without waiting for the orders of the Government for exemption application for that year. Thereupon, the petitioner moved the State Government for appropriate interim orders for keeping in abeyance such recovery proceedings and as W.P.(C).35183/08 - : 3 :-
per Ext.P-3 dated 23.9.2006, the 1st respondent-Government had directed the 2nd respondent-Regional Directorate of E.S.I Corporation to keep in abeyance the recovery proceedings till a decision on the request for exemption is taken. Ext.P3 order dated 23.9.2006 was duly communicated by the State Government to the E.S.I. Authorities. It is stated that in spite of the issuance of Ext.P-3 stay order, the 2nd respondent, as per letter No. 54-12146-15-INS V dated 13.10.2006, had threatened further action in the matter for the enforcement of E.S.I dues for the said year. Thereupon, the petitioner submitted Ext.P2 representation dated 13.11.2006 to the 2nd respondent Regional Director of E.S.I. pointing out the facts regarding issuance of Ext.P3 stay order and further stating about the financial sickness and the problems faced by the petitioner organisation and that they are not in a position to do the day-today requirements and none of the employees have insisted for that benefit and accordingly, requested to drop those proceedings pending final decision from the State Government for exemption for the year 2005-06. In spite of this, the 2nd respondent E.S.I, Directorate issued Ext.P-4 dated 16.1.2007 for initiating recovery proceedings for the amount of Rs.1,57,137/- plus interest amount W.P.(C).35183/08 - : 4 :-
of Rs. 22,126/- for the period from 1.4.2005 to 31.3.2006 (2005-
06), thus totaling an amount of Rs.1,79,263/-. Even at that time the 1st respondent Government did not pass orders on the exemption request for 2005-06. While so, the Government as per Ext.P6 order dated 31.10.2006 had issued formal orders granting exemption from the purview of the E.S.I Act to another similarly placed organisation named M/s.Trivandrum Sarvodaya Sangh, 'Gramodaya'. It is further stated that later the State Government without affording a reasonable opportunity of being heard to the petitioner, unilaterally passed impugned Ext.P-5 order dated 14.2.2007, wherein it was informed that the request of the petitioner for exemption for the period from 1.4.2005 to 31.3.2006 cannot be considered as the facilities provided by the establishment are not similar or superior to the facilities provided under the E.S.I. Act and that action may be taken to bring the employees under the coverage of E.S.I. Scheme. By then, the petitioner had already made requisite application for grant of exemption from the purview of the E.S.I. Act for the next financial year 2006-07 and the State Government duly considered the same and had granted the said request by issuance of Ext.P7 dated 29.4.2008, whereby the W.P.(C).35183/08 - : 5 :-
petitioner organisation was granted exemption from the purview of E.S.I.Act for the year 2006-07. It is pointed out that the petitioner has got exemption for the years previous to 2005-06 and also for the period subsequent to the year 2005-06. The order under challenge is Ext.P-5 dated 14.12.2007 whereby the Government has rejected the request of the petitioner for grant of exemption for the year 2005-06.
2. The 1st respondent Government has filed counter affidavit dated 24.9.2009 resisting the pleas of the writ Petitioner. It is urged that in the ruling of the Allahabad High Court in the case Lohiya Machines Ltd.(LML) Karmachari Sangh v. State of U.P. 1999 LAB IC 3593 it has been held that grant or refusal for grant of exemption form the operation of E.S.I. Act is a policy decision to be taken exclusively by the State Government concerned and that the courts cannot influence the decision making process of the State Government. It is further urged therein that in view of the ruling of the Bombay High Court in the case ESIC, Nagpur v. Navyug Minerals reported in 2005 Lab IC 2430 = 2005 (3) LLJ 71, it has been held that merely because a factory or establishment was exempted as per the earlier notification will not impliedly grant exemption for W.P.(C).35183/08 - : 6 :-
subsequent periods and that a specific notification for the subsequent exemption must be issued and unless it is so issued, the organisations cannot be exempted from the purview of the Act. It is further stated that those establishments including the petitioner cannot claim as a matter of right to get exemption from the purview of the ESI Act as per the provisions of Sec.87 of the Act and that the provisions of the Act do not cast any binding obligation on the State Government to grant exemption in each and every case in which application is submitted. As regards the factual aspects, it is pointed out in para 5 of the counter affidavit of the 1st respondent that the request of the petitioner was duly processed and considered by the Sub Committee dealing with the ESI matters in the Government with the Labour Secretary as Chairman and the Regional Director of the ESI Corporation and employees' representatives as members for the said purpose and the Committee examined the applications for ESI exemption and discussed various benefits provided by the establishments to its employees and it is after taking into account such consideration and recommendations made by the ESI Committee, that the Government was constrained to take a decision in terms of the impugned W.P.(C).35183/08 - : 7 :-
Ext.P-5 proceedings.
3. Respondents 2 and 3 (ESI authorities) have also filed a separate counter affidavit dated 5.1.2009. Therein, a preliminary objection is raised that a dispute as in the present case involving disputation of rejection made by the State Government on the request of an establishment for exemption from the purview of the ESI Act as per Sec.87 of the Act, can be challenged before the Employees' Insurance Court (EI Court) as per the provisions contained in Sec.75 (1)(g) of the ESI Act, 1948 and since there is an alternate efficacious remedy in that regard, this Court may not exercise its extra ordinary jurisdiction conferred under Art.226 of the Constitution of India by entertaining this Writ Petition on merits and that the petitioner is liable to be relegated to such alternate remedy. It is further pointed out that it is only to circumvent the obligation to make pre-deposit of 50% of the disputed amount as mandated in sub section (2B) of Sec.75 that the petitioner has chosen not to opt the statutory remedy under Sec.75(1)(g) and in having chosen to initiate the present writ proceedings, etc. The other general contentions taken by the 1st respondent in their counter affidavit are also reiterated by the said 2nd and 3rd W.P.(C).35183/08 - : 8 :-
respondents in their counter affidavit. Various benefits payable in terms of the ESI Act are also dealt with in detail in the counter affidavit, reference to which may not really be necessary for the disposal of this case.
4. Heard Sri.Arun Mathew Vadakkan, learned counsel appearing for the petitioner, the learned Government Pleader appearing for the 1st respondent State of Kerala and Sri.K.Sandesh Raja, learned Standing Counsel for the ESI appearing for respondents 2 and 3.
5. The factual averments of the petitioner that the petitioner is a financially sick institution and is facing various problems in that regard and that they are not in a position to meet even their day-to-day requirements and that none of the employees has been pressing for this benefit, etc, are not seriously disputed in this case. Presumably it is on account of such factors, that the State Government has been consistently granting exemption to the petitioner organization for the periods previous to 2005-06 and also for the subsequent periods. The only period in the recent times for which exemption has been refused appears to be for 2005-06 as per the impugned Ext.P-5 proceedings.
W.P.(C).35183/08 - : 9 :-
6. At the outset it will be necessary to deal with the preliminary objection raised by the respondents, more particularly respondents 2 and 3, that the petitioner has an alternate efficacious remedy under Sec.75(1)(g) of the Act. Sec.75(1)(g) of the Act reads as follows:
"Sec.75. Matters to be decided by Employees' Insurance Court.- (1) if any question or dispute arises as to -
xxx xxx xxx
(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 provisions of sub-section (2A) shall be decided by the Employees' Insurance Court in accordance with the provisions of this Act."
7. A similar issue has already been considered by the Apex Court in the case Zuari Cement Ltd. v. Regional Director, ESI Corporation, reported in (2015) 7 SCC 690 = AIR 2015 SC 2764. In paragraph 8 of the said ruling, the Apex Court, after noting the provisions contained in Sec.75 observed that a reading of the above provisions would show that the question or dispute can be adjudicated only in terms of what is provided for in clauses (a) to (ee) of sub-section (1) of Sec.75. But that Sec.75(1)(g) of the Act W.P.(C).35183/08 - : 10 :-
essentially deals with any other matter/dispute between the employer and the Corporation or in respect of any contribution or benefits payable or recoverable under the Act in respect of an establishment covered by it. That Sec.75(1)(g) of the Act does not speak of a dispute between the employer and the appropriate State Government, who is the sole repository of plenary power to consider the question of grant of exemption. Further, it is held in para 9 thereof as follows:
"9. As per the scheme of the Act, the power to grant exemption is a plenary power given to an appropriate government. It follows that the ESI Court constituted under Section 74 of the Act has no jurisdiction to take up the question of grant of exemption. The Court constituted under Section 74 of the Act cannot decide such matters including the validity of an exemption notification. The order granting or denying exemption is certainly open to judicial review under Article 226 of the Constitution of India. But the question of exemption under Section 87 cannot be raised under Section 75 of the Act and the ESI Court constituted under Section 74 of the Act, cannot decide the legality or otherwise of an order relating to exemption passed by the appropriate government."
8. The Apex Court also held therein that in the facts of that case, it is only to be held that the decision rendered by the ESI Court on such an issue relating to the grant of exemption under Sec.87 of the Act is vitiated by want of jurisdiction and the said order passed by the ESI Court/Tribunal is a nullity or non-est, etc. Therefore, the ruling in Zuari Cements Ltd.'s case supra is a complete answer to the objection raised by the respondents regarding the alleged non-
W.P.(C).35183/08 - : 11 :- availability of alternate statutory remedy. In the light of the
aforecited ruling, it is only to be held that the jurisprudential nature and character of the power conferred to the Government under Sec.87 of the Act is in the nature of a plenary power and as per the Legislative Scheme and the provisions contained in the ESI Act, made by the Parliament, the sole repository of the power to grant exemption as envisaged under Sec.87 of the Act is vested with the State Government. Since the nature and character of the power is plenary and since Sec.75(1)(g) of the Act does not contemplate either expressly of impliedly a dispute between either the establishment or ESI authorities on the other hand, vis-a-vis the appropriate Government on the issue of exercise of such a plenary power relating to grant or refusal of exemption, there is no question of ESI Court having power to deal with the present issue. Moreover, the ESI Court is a creature of the statute and unless power in that regard is manifestly and unambiguously conferred on such a Court/Tribunal, which is a creature of the Act, it cannot be said that such a forum will have jurisdiction in the matter of an issue like the instant one. Therefore, the objection raised by the respondents regarding the alleged availability of alternate statutory remedy is not W.P.(C).35183/08 - : 12 :-
tenable or sustainable and is overruled.
9. Indisputably the petitioner is engaged in the making of handicrafts and khadi products and is espousing the socio- economic causes championed by the Father of the Nation, which is now facing grave existential crisis due to the constant influx of the market forces of globalisation, consumerism and other attendant economic factors. The petitioner organization is aided by the All India Khadi and Village Industries Commission. It also appears that another organization similar to the petitioner, viz., M/s.Trivandrum Sarvodaya Sangh, 'Gramodaya', has been granted exemption for the disputed year in question, 2005-06, as evident from Ext.P-6 dated 31.10.2007. The petitioner has clearly averred in Ground E of the Writ Petition that the employees of the petitioner have been paid medical aid every year and all the employees have executed documents whereby, they have categorically stated that they may not be granted any benefit under the ESI Act and that they are happy with the present benefits granted by the organization.
10. It is not in dispute that the specific averment of the petitioner that the petitioner was not granted a reasonable opportunity of being heard prior to the issuance of Ext.P-5 rejection W.P.(C).35183/08 - : 13 :-
order is not any way disputed by the respondents, more particularly the 1st respondent. Considering the fact that the petitioner has been consistently granted exemption in the previous years and taking into account the aforestated aspects relating the precarious financial existence of the petitioner and also the fact that the petitioner is engaged in an economic activity, which was championed by the Father of the Nation, this Court has no hesitation to hold that in view of the rudimentary principles of legitimate expectation, fairness and principles of natural justice, the 1st respondent Government ought to have granted a reasonable opportunity of being heard to the petitioner before they had taken an adverse decision as per the impugned Ext.P-5 order. Therefore, the non-grant of a reasonable opportunity of being heard in the matter to the petitioner organization would certainly vitiate the decision making process of the Government. The precarious financial existence of the petitioner, the nature and type of the activity and the products manufactured by the petitioner, the fact that the petitioner is aided by the All India Khadi & Village Industries Commission, the fact that the petitioner has consistently been granted exemption under Sec.87of the Act, etc. are all matters W.P.(C).35183/08 - : 14 :-
which have not been duly considered or adverted to by the 1st respondent in the impugned Ext.P-5 order. Therefore, in the light of these aspects of the matter, the impugned order is liable to be interdicted and the matter is only to be remitted to the State Government for consideration afresh.
11. Therefore, the impugned decision making process is manifestly vitiated by violation of the principles of natural justice and also on account of not taking into account the crucial relevant aspects of the mater. In the light of the aforestated discussion, the impugned Ext.P-5 proceedings dated 14.12.2007 is quashed. The matter is remitted back to the 1st respondent-State Government for fresh consideration. The Government will afford a reasonable opportunity of being heard to the petitioner through their authorised representative/counsel, if any. The Government will take into account the crucial facts that the petitioner has been granted exemption for various previous years as well as for the subsequent period in question. The Government will also take into account the fact that similar organization has been granted exemption for the period in question as per Ext.P-6 and also take into account the precarious financial condition of the petitioner organization and the W.P.(C).35183/08 - : 15 :-
willingness said to have been given by the employees of the petitioner and also the fact that the petitioner is engaged in an economic activity, which has been championed by the Father of the Nation, etc. and any other relevant aspects that may be pointed out by the petitioner or that may be taken into account by the Government after due consideration. The Government will pointedly focus its attention to these relevant aspects in the light of the provisions in Sec.87 as it stood at the material time in 2005-06. Orders in that regard shall be passed without much delay taking into account the fact that more than a decade has elapsed after the expiry of the financial year 2005-06. The decision so taken by the Government shall be duly communicated to the petitioner as well as to the 2nd respondent Regional Director, ESI, by registered post. Until a decision is taken by the Government as directed above, further coercive steps for enforcement of the alleged dues for the year 2005-06 shall be kept in abeyance.
With these observations and directions, the Writ Petition (Civil) stands finally disposed of.
al+ Sd/-
sdk+ ALEXANDER THOMAS, JUDGE
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P.S. To Judge.
W.P.(C).35183/08 - : 16 :-