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Madras High Court
Maharaja College Of Arts And ... vs The State Of Tamil Nadu on 14 March, 2011
DATED : 14.03.2011
CORAM
THE HONOURABLE MR.JUSTICE K.CHANDRU
W.P.NOs.2872, 2873, 4570, 4722, 5084, 5257 of 2011
and
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M.P.NOs.1,1,1,1 and 1 AND 2,2,2,2,2 and 2 OF 2011
Maharaja College of Arts and Science,
represented by its Chairman,
Neelambur, Arasur,
Coimbatore-641 407. .. Petitioner in
W.P.No.2872 of 2011
Association of Management of Coimbatore
Anna University Affiliated Colleges
(Registration No.140/2008),
represented by its President,
119,Bhavani Road,
Erode-638 004. .. Petitioner in
W.P.No.2873 of 2011
Tamil Nadu Nursery, Primary,
Matriculation and Higher Secondary
Schools Managements Association,
rep by its General Secretary,
Mr.D.Christdass
Old No.64, New No.122, T.P.Koil Street,
Triplicane,Chennai-600 005. .. Petitioner in
W.P.No.4570 of 2011
Federation of Association of Private
Schools in Tamil Nadu,
represented by its President Mrs.R.Visalakshi,
No.6A, New No.11, P.T.Rajan Road,
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20th Avenue, Ashok Nagar,
Chennai-600 083. .. Petitioner in
W.P.No.4722 of 2011
R.V.S.College of Arts & Science,
rep by its Chairman,
K.V.Kuppusamy,
Door No.242-B,Trichy Road,
Sulur, Coimbatore-641 402. .. Petitioner in
W.P.No.5084 of 2011
Tamil Nadu Self Financing College of
Education Management Association,
rep by its Secretary Mr.S.Vijayakumar
Old No.7, New No.11, 3rd Cross Street,
West C.I.T. Nagar,Chennai-600 035. .. Petitioner in
W.P.No.5257 of 2011
Vs.
1.The State of Tamil Nadu,
rep by its Principal Secretary to Government,
Labour and Employment Department,
Fort St. George,
Chennai-600 009. .. 1st respondent in
all writ petitions
2.Employees' State Insurance Corporation,
represented by Assistant Director (Inspection),
1897, Trichy Road,
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Panchdeep Complex,
Ramanathapuram, Coimbatore-641 045. .. 2nd respondent in
W.P.Nos.2872, 2873,
5084, of 2011
2.Employees' State Insurance Corporation,
rep by its Regional Director,
"Panchdeep", Sterling Road,
Nungambakkam,
Chennai-600 034. .. 2nd Respondent in
W.P.Nos.4570 and
5257 of 2011
2.Employees' State Insurance Corporation,
rep by its Additional Commissioner and
Regional Director,
143, Sterling Road,
Nungambakkam,
Chennai-600 034. .. 2nd respondent in
W.P.No.4722 of 2011
W.P.Nos.2872, 2873 and 5084 of 2011 are preferred under Article 226 of the Constitution of India praying for
the issue of a writ of certiorari to call for the records relating to the G.O.Ms.No.237, Labour and Employment
(K1) Department, dated 26.11.2010 and published at page 879 of Part II Section 2 of the Tamil Nadu
Government Gazette No.51, dated 29.12.2010 and the order of the second respondent in
No.56/8/II/12/2(SSO)/Inspn/2011 dated 04.01.2011 and to quash the same insofar as they relate to the
petitioner and the members of the petitioner herein. W.P.No.4722 of 2011 is preferred under Article 226 of the
Constitution of India praying for the issue of a writ of certiorari to call for the records relating to the
G.O.Ms.No.237, Labour and Employment (K1) Department, dated 26.11.2010 passed by the first respondent
and to quash the same. W.P.Nos.4570 and 5257 of 2011 are preferred under Article 226 of the Constitution of
India praying for the issue of a writ of certiorari to call for the records in respect of the impugned notification
issued by the first respondent in G.O.Ms.No.237, Labour and Employment (K1) Department, dated
26.11.2010 as published in the Tamil Nadu Government Gazette No.51, dated 29.12.2010 in Part II Section II
and to quash the same.
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For Petitioners : Mr.Kandan Doraisami
in W.P.Nos.2872 and 2873 of 2011
Mr.R.Sureshkumar
in W.P.Nos.4570 and 5257 of 2011
Mr.K.Selvaraj in W.P.No.5084 of 2011
Mr.AR.L.Sundaresan, SC
for Mr.K.Surendar in W.P.No.4722 of 2011
For Respondents : Mr.S.Sivashanmugam, GA for R1
in W.P.Nos.2872, 2873, 4570, 5084 and
5257 of 2011
Ms.C.Devi, GA for R-1 in W.P.No.4722 of 2011
Mrs.S.Jayakumari for R-2
in all writ petitions
- - - -
COMMON ORDER
Heard the arguments of learned counsels in W.P.Nos.2872, 2873, 4570, 5084 and 5257 of 2011 on 10.3.2011
and in W.P.No.4722 of 2011 on 11.3.2011. 2.The short question that arises for consideration in these writ
petitions is whether the attempt by the State Government in covering the educational institutions employing 20 or
more persons under the provisions of the Employees' State Insurance Act, 1948 (for short ESI Act) is legally
valid? If the coverage of such institutions are legally valid whether the exclusion of the educational institutions run
by the Government and Government Aided institutions from the purview of the notification is discriminatory? and
that the impugned notification covering the petitioners alone are liable to be struck down on ground of Article 14
of the Constitution of India.
3.The State Government by the exercise of its power under Section 1(5) of the ESI Act had issued a preliminary
notification by G.O.No.58, Labour and Employment Department, dated 15.4.2005 notifying the educational
institutions, excluding the Government and Government Aided institutions, run by various types of bodies and
individuals employing more than 20 to be brought within the purview of Section 1(3) of the ESI Act. By the said
notification, the Government had expressed its intention to extend the provisions of the ESI Act to these
institutions any day on or after six months after publication of the notification in the Tamil Nadu Government
Gazette. The said notification was published in Part II Section 2 of the Tamil Nadu Government Gazette, dated
11.5.2005. The said notification reads as follows: Extension of Employees' State Insurance Scheme to certain
New
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Sectors of Establishments in all the Implemented area under
Employees' State Insurance Act.
[G.O.No.58, Labour and Employment (K1),
15th April, 2005.]
No.II(2)/LE/366/2005.-In exercise of the powers conferred by sub-section (5) of Section 1 of the Employees'
State Insurance Act, 1948 (Central Act XXXIV of 1948), the Governor of Tamil Nadu in consultation with the
Employees State Insurance Corporation and with the approval of the Central Government hereby gives notice of
its intention to extend the provisions of the said Act to the class of establishments specified in column (1) of the
Schedule below situated in the areas specified in the corresponding entries in column (2) thereof, on or after six
months from the date of publication of this Notification in the Tamil Nadu Government Gazette.
THE SCHEDULE
------------------------------------------------------------------------------------------------------------
Description of class of Areas in which the
establishments establishments are situated.
-------------------------------------------------------------------------------------------------------------
(1) (2)
------------------------------------------------------------------------------------------------------------
Educational Institutions (excluding Areas where the Scheme
Government and Government Aided has already been brought
Institutions), run by individuals, trustees, into force under sub-
societies or other organisations, wherein section (3) of Section 1
20 or more persons are employed or and sub-section (5) of
were employed on any day of the Section 1 of the Act.
preceding twelve months.
-------------------------------------------------------------------------------------------------------------
4.The petitioners herein were not able to pinpoint any objection raised by any one of the petitioners with
reference to the preliminary notification. Though vague allegations were made that some of them have sent their
representations, neither copies of such representations were enclosed in the typed set nor any attempt to
produce those copies during the hearing was made by the counsel for the petitioners. On the other hand, some of
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the counsel for petitioners have fairly admitted that no representations were sent by them as there was no wide
publicity on the said notification. They had also taken this as a ground for impugning the final notification. In any
event, the State Government subsequent to the expression of its intention to notify the educational institutions had
published a final notification vide G.O.Ms.No.237, Labour and Employment Department, dated 26.11.2010 and
the same was also published in the Tamil Nadu Government Gazette as required under Section 1(5) of the ESI
Act. The said notification reads as follows: LABOUR AND EMPLOYMENT DEPARTMENT
Extension of Employees' State Insurance Scheme to
Private Educational Institutions in all the implemented
area under Employees' State Insurance Act.
[G.O.Ms.No.237, Labour and Employment (K1),
26th November 2010, Karthigai 10,
Thiruvalluvar Aandu-2041.]
No.II(2)/LE/767/2010.-In exercise of the powers conferred by sub-section (5) of Section 1 of the Employees'
State Insurance Act, 1948 (Central Act XXXIV of 1948), the Governor of Tamil Nadu, in consultation with the
Employees' State Insurance Corporation and with the approval of the Central Government, after complying with
the statutory requirement of giving six months notice of the intention of the Tamil Nadu Government vide Labour
and Employment Department Notification No.II (2)LE/265/2008, published at page 206 of Part-II Section 2 of
the Tamil Nadu Government Gazette, dated the 4th June 2008, hereby extends the provisions of the said Act, to
the educational Institutions (excluding Government and Government aided institutions) run by individuals,
trustees, societies or other organizations, wherein twenty or more persons are employed or were employed on
any day of preceding twelve months, with effect from the date of publication of this Notification.
T.PRABHAKARA RAO,
Principal Secretary to Government.
5.The object of the Employees' State Insurance Act, 1948 (Central Act 34 of 1948) reads as follows:
"An Act to provide for certain benefits to employees in case of sickness, maternity and employment injury
and to make provision for certain other matters in relation thereto."
6.The Statement of Objects and Reasons attached to the Bill sets out the purpose for which the Act is enacted,
which reads as follows:
"Statement of Objects and Reasons.- The introduction of a scheme of Health Insurance for industrial
workers has been under the consideration of the Government of India for a long time. The necessity for such a
scheme has become more urgent in view of the conditions brought about by war. The scheme envisaged is one
of compulsory State Insurance providing for certain benefits in the event of sickness, maternity and employment
injury to workmen employed in or in connection with the work in factories other than seasonal factories. (2)A
scheme of this nature has to be planned on an all-India basis and administered uniformly throughout the country.
With this object, the administration of the Scheme is proposed to be entrusted to a Corporation constituted by
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central legislation."
7.The ESI Act was enacted after India had achieved its independence and was made on 19.4.1948. Even
before India's independence, the British Indian Government was a member of the International Labour
Organization (ILO). But no welfare legislation concerning labours were ever brought into force for reasons best
known. The colonial Government was indifferent to such issues. The plight of the labours in India was recognised
by the freedom fighters of our Country. They had resolved that no sooner India became independent, the
conventions of the International Labour Organization to which our Country was a party will be translated to
ground realities through appropriate legislations. The ILO Convention No.24 related to sickness and insurance to
workers in industry, commercial and domestic service. It was adopted on 15.7.1928. Likewise recommendation
No.69 adopted by the ILO on 20.4.1944 related to medical care for workers. Detailed guidelines were made
with reference to medical care, coverage, etc. However, those conventions and recommendations became a
ground reality only on 19.4.1948 the day when the ESI Act was enacted as the Central Act 34/1948. But, even
then different sections of the labour force were made to wait for coverage through subsequent notifications made
under the said Act.
8.Initially the ESI Act was made applicable only to the factories including the factories belonging to the
Government. But subsequently, by an amendment made by the Central Act 29/1989, a proviso was inserted to
Section 1(4) thereby the Act was made inapplicable in respect of factories or establishments belonging to or
under the control of the Government, whose employees are otherwise in receipt of benefits substantially similar
or superior to the benefit provided under the ESI Act. Section 1(4) reads as follows: "1(4)It shall apply, in
the first instance, to all factories (including factories belonging to the Government) other than seasonal factories:
[Provided that nothing contained in this sub-section shall apply to a 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.]"
9.Under Section 1(5), the Act also empowered the appropriate Government to notify the other establishments
such as industrial, commercial, agricultural or otherwise by giving six months' notice of its intention of doing so
and publishing the same in the official Gazette. Section 1(5) reads as follows: "1(5)The appropriate
Government may, in consultation with the Corporation and [where the appropriate Government is a State
Government, with the approval of the Central Government], after giving six months' notice of its intention of so
doing by notification in the Official Gazette, extend the provisions of this Act or any of them, to any other
establishment or class of establishments, industrial, commercial, agricultural or otherwise:" (Emphasis
added)
10.Subsequent to the enactment of the ESI Act, the Constitution of India was adopted and was brought into
force with effect from 26.1.1950. Part IV of the Constitution made specific directive principles of State Policy.
Though they were not enforceable by any Court, the principles set out therein were made fundamental to the
governance of the Country. The State was given its duty to apply those principles in making laws.
11.Articles 39(e), 41, 42 and 43 of the Constitution of India reads as follows:
"39.Certain principles of policy to be followed by the State.-The State shall, in particular, direct its policy
towards securing-
(a) to (d) omitted
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(e)that the health and strength of workers, men and women, and the tender age of children are not abused and
that citizens are not forced by economic necessity to enter avocations unsuited to their age or strength;
41.Right to work, to education and to public assistance in certain cases.-The State shall, within the limits of its
economic capacity and development, make effective provision for securing the right to work, to education and to
public assistance in cases of unemployment, old age, sickness and disablement, and in other cases of undeserved
want.
42.Provision for just and humane conditions of work and maternity relief.-The State shall make provision for
securing just and humane conditions of work and for maternity relief.
43.Living wage, etc., for workers.-The State shall endeavour to secure, by suitable legislation or economic
organisation or in any other way, to all workers, agricultural, industrial or otherwise, work, a living wage,
conditions of work ensuring a decent standard of life and full enjoyment of leisure and social and cultural
opportunities and , in particular, the State shall endeavour to promote cottage industries on an individual or co-
operative basis in rural areas." (Emphasis added)
12.The substance of these Articles only reinforce the principles of the State policy to enact laws with a view to
taking care of health and safety of workers and provide benefits for old age, sickness, disablement, maternity
relief and conditions of work ensuring decent standard of life. Therefore, the ESI Act and the subsequent
amendment and the notification were in effect to fulfill the State's obligation in safeguarding the rights provided
under Part IV of the Constitution.
13.It must also be noted that until New Educational Policy (NEP) was made by the Central Government in the
year 1986, education was dealt with by the State Governments and the Central Government with some
exceptions. Some Private Managements who were allowed to run institutions were assured of State's assistance.
There was no concept of any self financing educational institutions at the relevant time. The employees of the
State Governments and the Central Government as well as local body employees were given decent pay which
were revised from time to time by successive Pay Commissions. Health care of those Government servants and
their family members were taken care of by suitable rules framed by the Government either under Article 309 of
the Constitution, by various executive orders and by other statutory rules. Subsequently, even the employees
(both teachers and non teaching staff) employed by the private educational institutions (governed by the grant-in-
aid code of the State Government) were slowly extended to the benefits applicable to Government servants.
Today, in the State of Tamil Nadu, it can be said without fear of contradiction that employees (whether teachers
or non teaching staff) employed by Aided schools or Colleges have been brought almost on par with
Government servants in the matter of pay scales, conditions of service and retirement benefits including health
care.
14.Even after getting aid from the State, the educational institutions who are entitled to protection under Article
30(1) of the Constitution were resisting the application of several labour legislations on the specious plea that
those legislations were in conflict with the minority right given to them under Article 30(1) of the Constitution.
Therefore, such of those legislations which interfered with their "right to establish and administer"
educational institutions of their choice were per se unconstitutional. But their attempt in this regard was rejected
by the Supreme Court vide its judgment in Christian Medical College Hospital Employees' Union v. C.M.C.
Vellore Assn., reported in (1987) 4 SCC 691.
15.The Supreme Court in the said judgment had categorically held that in the matter of application of laws
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relating to public health, taxation, municipal laws and labour legislation, the minority managements cannot claim
any privilege and those laws must be uniformly applied to the workmen employed by those institutions
irrespective of character of those institutions. The Supreme Court had forewarned that if not done in that fashion,
it may result in maladministration of those institutions. It is necessary to extract the following passages found in
paragraph 18 of the said judgment which reads as follows: "18.... It has to be borne in mind that these
provisions have been conceived and enacted in accordance with the principles accepted by the International
Labour Organisation and the United Nations Economic, Social and Cultural Organisation. The International
Covenant on Economic, Social and Cultural Rights, 1966 which is a basic document declaring certain specific
human rights in addition to proclaiming the right to work as a human right treats equitable conditions of work,
prohibition of forced labour, provision for adequate remuneration, the right to a limitation of work hours, to rest
and leisure, the right to form and join trade unions of ones choice, the right to strike etc. also as human right. The
Preamble to our Constitution says that our country is a socialist republic. Article 41 of the Constitution provides
that the State shall make effective provision for securing right to work. Article 42 of the Constitution provides
that the State shall make provision for securing just and humane conditions of work and for maternity relief.
Article 43 of the Constitution states that the State shall endeavour to secure by suitable legislation or economic
organisation or in any other way to all workers agricultural, industrial or otherwise work, a living wage,
conditions of work ensuring a decent standard of life and full enjoyment of leisure and social and cultural
opportunities. These rights which are enforced through the several pieces of labour legislation in India have got to
be applied to every workman irrespective of the character of the management. Even the management of a
minority educational institution has got to respect these rights and implement them. Implementation of these rights
involves the obedience to several labour laws including the Act which is under consideration in this case which
are brought into force in the country. Due obedience to those laws would assist in the smooth working of the
educational institutions and would facilitate proper administration of such educational institutions. If such laws are
made inapplicable to minority educational institutions, there is very likelihood of such institutions being subjected
to maladministration. Merely because an impartial tribunal is entrusted with the duty of resolving disputes relating
to employment, unemployment, security of work and other conditions of workmen it cannot be said that the right
guaranteed under Article 30(1) of the Constitution of India is violated. If a creditor of a minority educational
institution or a contractor who has built the building of such institution is permitted to file a suit for recovery of the
money or damages as the case may be due to him against such institution and to bring the properties of such
institution to sale to realise the decretal amount due under the decree passed in such suit is Article 30(1)
violated? Certainly not. Similarly the right guaranteed under Article 30(1) of the Constitution is not violated, if a
minority school is ordered to be closed when an epidemic breaks out in the neighbourhood, if a minority school
building is ordered to be pulled down when it is constructed contrary to town planning law or if a decree for
possession is passed in favour of the true owner of the land when a school is built on a land which is not owned
by the management of a minority school. In the same way if a dispute is raised by an employee against the
management of a minority educational institution such dispute will have necessarily to be resolved by providing
appropriate machinery for that purpose. Laws are now passed by all the civilised countries providing for such a
machinery....."
16.From the above, it can be safely concluded that whether an educational institution run by minority or by non
minority, with reference to application of welfare legislation there is no distinction and they should be treated on
par. In this batch of writ petitions, there was no challenge on the touchstone of Article 30(1) of the Constitution.
Even otherwise, the observations made by the Supreme Court will clearly show that these legislations were made
on an obligation arising out of conventions of International Labour Organization and they should be implemented
uniformly to all employees.
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17.It is only after the New Educational Policy conceived, there were mushroom growth of educational institutions
in the private sector. It gave rise to multiple problems relating to service conditions of employees working in
those institutions. Therefore, the State belatedly woke up to the conditions of employees both teaching and non
teaching staff working in these so-called self financing educational institutions so as to bring reasonable conditions
of work. It is with this view as well as to safeguard the Health of the employees, the preliminary notification came
to be published. Subsequently, in accordance with Section 1(5), a final notification was also issued. Once a
notification under Section 1(5) is issued covering the establishment, then under Section 2-A, it is the obligation of
the establishments to register themselves within such time and in such manner as specified in the regulation with
the authorities under the ESI Act. Regulation 10-B of the ESI General Regulations, 1950 provides the manner by
which an establishment can be registered. The Act obliges both employer and employees to contribute towards
ESI. The contributions were levied in terms of Rule 51 of the ESI Central Rules 1950 obliges an employer to
pay 4.75% of wages payable to an employee as their contribution and it is 1.75% in respect of employee's
contribution for coverage under the Act. Both employer and employee will contribute 6.50% of wages payable
to an employee towards the ESI Fund. An employee of an institution covered by the ESI Act if he draws
Rs.15000/-, which is the maximum wage limit, his contribution will only come to Rs.113/- per month. The total
contribution by both will be Rs.875/-. This is the contribution for an highest paid employee. Based upon this
contribution, which will be kept by the ESI Corporation in a special fund, the employees were paid various
benefits including for sickness, maternity, disablement, dependent benefits, funeral payments, medical care and
treatment. But for the benefit derived from the Act for such a limited payment, the contribution is enormous as it
takes care of an umbrella services as noted above.
18.The term "employee" is defined under Section 2(9) of the ESI Act and it does not exclude any
person and couched in a general term. In fact, the ESI Act covers even the contract labours who are engaged
through an agency. As per the notification issued on 20.4.2010 by G.S.R. 349E, the Central Government has
now fixed the wage limit at Rs.15000/- per month for coverage in terms of Section 95(2)(a) of the ESI Act.
19.Since the petitioners are running educational institutions both schools and colleges and if the
Government/UGC scales as well as pay commission recommendations are paid to them as required under law,
there will be hardly any teacher employed by these institutions will be covered by the provisions of the ESI Act in
view of the wage limit prescribed thereunder. Even in respect of the non teaching staff, the highly paid staff like
clerical and laboratory assistants will also be not covered by the Act if the Government scales of pay are an
indicator for payment of salary to those employees. After the coverage of the Act, hardly few employees like
watchmen, conductors, drivers, canteen and hostel staff and other menials, such as sweeper and scavengers
alone will be covered by the provisions of the Act. If case of any institutions having health benefits if they are
substantially similar or superior to the benefits provided under the ESI Act, Chapter VIII provides for various
exemptions that can be obtained from the Government. Therefore, there is no difficulty for the institutions seeking
exemptions if only the benefits extended by them are substantially similar or superior benefits than the ESI Act.
Even otherwise, in this batch of writ petitions, no contentions were raised that their employees are in receipt of
benefits substantially similar or superior to the benefits provided under the Act.
20.Further, in respect of application of similar notification to educational institutions situated in the Union
Territory of Puducherry, this Court had an occasion to deal with the same elaborately vide in
W.P.Nos.W.P.NOs.2471, 3234, 30509 and 16273 of 2007, etc batch cases in Muthu Rathina Arangam
Matriculation school Vs. The Government of Pondicherry, represented by Additional Secretary to Government
(Labour), Labour Department, General Secretariat, Puducherry. By judgment, dated 04.01.2011, this Court
upheld similar notifications issued by the Administrator of the Union Territory of Puducherry. Notwithstanding the
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said judgment, the counsel for the petitioners urged several grounds and they may be briefly set out below :
(i)The ESI Act is essentially covered the factories and other industries and it will not apply to educational
institutions.
(ii)The Supreme Court vide its judgment in T.M.A. Pai Foundation v. State of Karnataka, reported in (2002) 8
SCC 481 held that once it is not an industry, then it cannot be covered by the provisions of the ESI Act.
(iii)The Supreme Court had given guidelines for fixing fees received from the students. There is oversight
Committee to oversee the fees receivable from students whether the institutions have not received more than
what has been fixed by the Committee. At the time of fixation of fees, this additional burden was not taken into
account. Therefore, the State was not entitled to levy more amount than what was contemplated under law.
(iv)Even assuming an educational institution can be an "industry" within the meaning of Section 2(j)
of the Industrial Disputes Act as held by the Supreme Court vide its judgment in Bangalore Water Supply and
Sewerage Board v. A. Rajappa reported in (1978) 2 SCC 213, the said judgment of seven Judges bench has
been doubted by an another smaller bench of five Judges in State of U.P. Vs. Jai Bir Singh reported in (2005) 5
SCC 1 and the issue has been referred to the Chief Justice of India for constituting a larger bench. Therefore, the
view of the Bangalore Water Supply and Sewerage Board case (cited supra) will have no efficacy. (v)Further,
the Supreme Court in A.Sundarambal Vs. Government of Goa, Daman and Diu reported in (1988) 4 SCC 42
has held that a teacher is not a workman within a meaning of Section 2(s) of the Industrial Disputes Act, 1947.
The predominant activity of the educational institution is to impart education and majority employees are
teachers. The notification applying the Act to the entire institution including their teachers is invalid. (vi)The State
Government while issuing notification had not adopted due procedure, Principles of fair play in consultation or
natural justice to the extent necessary.
(vii)The exercise of power is conditional legislation and satisfaction arrived at by the Government was not based
upon any objective consideration and relevant data. Hence the impugned notification was invalid. Reliance was
also placed upon a judgment of the Supreme Court in State of Tamil Nadu Vs. K.Sabanayagam reported in
(1998) 1 SCC 318. (viii)The impugned notification so far as it excludes the aided educational institutions which
are also running unaided courses is discriminatory. Therefore, it is violative of Article 14 of the Constitution.
(ix)The preliminary notification was issued by the State Government on 4.6.2008. Immediately after six months,
a final notification was not published. On the other hand, the Government had published the final notification only
on 29.12.2010 nearly after a period of 2-1/2 years. Therefore, the notification was invalid as it had become
stale. On the ground of delay in publishing the final notification, the impugned order should be set aside.
21.On the side of the respondents, a preliminary objection was raised regarding maintainability of the writ
petitions in W.P.Nos.2873, 4570, 4722 and 5257 of 2011 which were admittedly filed by the societies
comprising of various educational institutions. Such writ petitions are not maintainable as they were filed by
societies and they have no locus standi to maintain the writ petitions.
22.In the light of the rival contentions, it has to be seen whether the petitioners have made out any case?
23.The first six contentions can be taken up together. In respect of the objection that the educational institutions
cannot be covered by the provisions of the ESI Act and that the impugned notification covers the educational
institutions within the purview of the ESI Act, it was contended by the counsel for the petitioners that the
educational institutions cannot be covered by the ESI Act as they were not commercial or industrial enterprises.
Reliance was placed upon the judgment of the Supreme Court in Haryana Unrecognised Schools' Association v.
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State of Haryana reported in (1996) 4 SCC 225. In that case, the Supreme Court held that a teacher in an
educational institution is not employed to do any skilled or unskilled manual or clerical work and therefore, once
he is not an employee within the meaning of Section 2(i) of the Minimum Wages Act, the State Government by
adding employments in educational institutions into the schedule to the Minimum Wages Act by virtue of the
power conferred under Section 27 was not valid and it was beyond its competence. Therefore, insofar as the
teacher of the educational institutions being covered by the provisions of the Minimum Wages Act was invalid.
But in that case, the only question that was considered was whether teachers in educational institutions can be
brought within the purview of the Minimum Wages Act. It was found that the definition of the term
"employee" defined under Section 2(i) of the Minimum Wages Act was not covering the teachers. In
fact, the said definition more or less borrows the definition of term "workman" found under Section
2(s) of the Industrial Disputes Act. Therefore, the observation of the Supreme Court in A.Sundarambal Vs.
Government of Goa, Daman and Diu reported in 1988 (4) SCC 42 was quoted with approval. In paragraphs 10
and 11, it was observed as follows: "10....Since the teachers of an educational institution are not employed
to do any skilled or unskilled or manual or clerical work and therefore could not be held to be an employee
under Section 2(i) of the Act, it is beyond the competence of the State Government to bring them under the
purview of the Act by adding the employment in educational institution in the Schedule in exercise of power
under Section 27 of the Act. This Court while examining the question whether the teachers employed in a school
are workmen under the Industrial Disputes Act had observed in A. Sundarambal v. Govt. of Goa, Daman
& Diu3: (SCC p.48, para 10) We are of the view that the teachers employed by educational institutions
whether the said institutions are imparting primary, secondary, graduate or postgraduate education cannot be
called as workmen within the meaning of Section 2(s) of the Act. Imparting of education which is the main
function of teachers cannot be considered as skilled or unskilled manual work or supervisory work or technical
work or clerical work. Imparting of education is in the nature of a mission or a noble vocation. A teacher
educates children, he moulds their character, builds up their personality and makes them fit to become
responsible citizens. Children grow under the care of teachers. The clerical work, if any they may do, is only
incidental to their principal work of teaching.
11.Applying the aforesaid dictum to the definition of employee under Section 2(i) of the Act it may be held that a
teacher would not come within the said definition. In the aforesaid premises we are of the considered opinion that
the teachers of an educational institution cannot be brought within the purview of the Act and the State
Government in exercise of powers under the Act is not entitled to fix the minimum wage of such teachers. The
impugned notifications so far as the teachers of the educational institution are concerned are accordingly
quashed. This appeal is allowed. Writ petition filed succeeds to the extent mentioned above. There will be no
order as to costs."
24.Reliance was also placed upon a judgment of the Supreme Court in Ruth Soren v. Managing Committee,
East I.S.S.D.A., reported in (2001) 2 SCC 115 wherein the Supreme Court considered whether an educational
institution is an establishment within the meaning of Bihar Shops and Establishments Act, 1953. It was held that
though it may be an industry within the meaning of Section 2(j) of the I.D.Act, it cannot be an establishment
within the meaning of Bihar Shops and Establishments Act. In that context, the Supreme Court in paragraphs 4
and 5 observed as follows: "4.An establishment for the purposes of the Act means an establishment which
carries on any business, trade or profession or any work in connection with, or incidental or ancillary thereto.
Concept of industry, as defined under the Industrial Disputes Act, would include any business, trade,
undertaking, manufacture or calling of employers and includes any calling service, employment, handicraft, or
industrial occupation or avocation of workmen. There is an organised activity between employers and employees
to impart education. Such an activity, though may be industry will not be a profession, trade or business for the
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purposes of Article 19(1)(g) of the Constitution, would not be one falling within the scope of establishment under
the Act. Therefore, the view taken by the Division Bench of the High Court is unexceptionable. The High Court
did appreciate that Unni Krishnan case1 itself made a distinction between what was stated in Bangalore Water
Supply & Sewerage Board v. A. Rajappa2.
5.In Corpn. of City of Nagpur v. Employees4, LLJ at p.(540) this Court held the Education Department of the
Corporation to be an industry. The reason given is that imparting education amounts to service and can be done
by a private person also. In University of Delhi v. Ram Nath5 this Court held that imparting education is not an
industry as the work of the University cannot be assimilated to the position of trade, calling, business or service
and hence cannot be an industry. The majority view in Bangalore Water Supply & Sewerage Board v. A.
Rajappa2 a decision of seven-Judge Bench, is that in the case of an educational institution, the nature of activity
is exhypothesi and imparting education being service to community is an industry. Various other activities of the
institution such as printing press, transport department, clerical, etc. can be severed from teaching activities and
these operations either cumulatively or separately form an industry. Even so, the question for consideration is
whether educational institution falls within the definition of establishment carrying business, trade or profession or
incidental activities thereto. Establishment, as defined under the Act, is not as wide as industry as defined under
the Industrial Disputes Act. Hence reliance on Bangalore Water Supply & Sewerage Board v. A. Rajappa2
for the appellant is not of any help."
25.Therefore, it was contended that the educational institution also is not an establishment within the meaning of
Section 1(5) of the ESI Act. But, however unlike the Bihar Shops Act, which was considered by the Supreme
Court, the term "establishment" was not defined in the ESI Act. On the other hand, Section 1(5) of
the ESI Act is couched in a language which can include establishments which necessarily need not have the
characteristics as industrial, commercial or agricultural establishments. They can even include the other types of
establishments. Section 1(5) of the ESI Act reads as follows: "1(5)The appropriate Government may, in
consultation with the Corporation and [where the appropriate Government is a State Government, with the
approval of the Central Government], after giving six months' notice of its intention of so doing by notification in
the Official Gazette, extend the provisions of this Act or any of them, to any other establishment, or class of
establishments, industrial, commercial, agricultural or otherwise." (Emphasis added)
26.The term "otherwise" found in Section 1(5) came to be considered by the Allahabad High Court
in Maharishi Shiksha Sansthan and another Vs. State of Uttar Pradesh and another reported in 2009 (1) LLN
381. In paragraphs 9 and 10, it was observed as follows: "9.Learned counsel for the petitioner has argued
that the word "establishment" must have some relation with factory and educational institution is not
even remotely connected with the activity, which is carried out in factories. This argument is not tenable for the
reason that under S.1(5), there is no such restriction. Thereafter, learned counsel for the petitioner has argued
that the aforesaid sub-section suffers from the vice of excessive delegation as the power to bring any
establishment under the Act has been conferred upon the Government without providing any guidelines.
10.This argument is also not acceptable. The purpose of the Act is to confer certain benefits upon the employees
and employees of any establishment may deserve such benefits. This question has also been considered in the
Supreme Court authority in Hindu Jea Band, Jaipur V. Regional Director, Employees' State Insurance
Corporation, and others [1987 (1) L.L.N. 778],..."
27.The very same question also came to be considered by a division bench of the Kerala High Court in CBSE
School Management's Association Vs. State of Kerala reported in 2010 (II) LLJ 240 (Ker). In paragraphs 17
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and 18, the Kerala High Court observed as follows: "17.We hold that the notification under Section 1(5)
of the ESI Act can cover an educational institution for two reasons:- Our first reason is that, the educational
institutions like schools are industrial establishments, in view of the decision of the Apex Court in Bangalore
Water Supply and Sewerage Board's case, (supra). Though a few Benches of lesser strength have expressed the
necessity for reconsidering the dictum in Bangalore Water Supply and Sewerage Board's case, (supra), until
such a reconsideration is done by a larger Bench, we are absolutely bound by the decision of the Apex Court in
Bangalore Water Supply and Sewerage Board's case, (supra). If that be so, the only possible view that could be
taken in the face of the words contained in Section 1(5) of the ESI Act is that educational institutions are also
covered by the expression 'industrial establishment'. The main thrust of the argument of the writ petitioners was
that educational institution is not an industry. In view of the binding precedent mentioned above, we cannot
accept that contention. Further, the interpretation of the definition of "industry" in Section 2(j) of the
Industrial Disputes Act is applicable to the interpretation of the word "industrial" in Section 1(5) of
the E.S.I. Act, in view of Section 2(24) of the latter Act which reads as follows:
"2. Definitions:-
xxx xxx xxx
(24)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.".
18.Our second reason is that, the words employed 'or otherwise' should be given the widest possible meaning
and therefore, they will cover the educational institutions also. The petitioners contend that the words 'or
otherwise' should be given a restricted meaning, following the principle of ejusdem generis. Whether the words
should be given a restricted meaning will depend upon the context in which they are used. There cannot be any
principle of universal application concerning this. The learned author, Sri.G.P.Singh, in his book, Principles of
Statutory Interpretation, 10th Edition, 2006, points out that the words "or otherwise" are not usually
considered ejusdem generis. The learned author has stated as follows:
"It also appears that the words 'or otherwise' have not been usually considered ejusdem generis. They are
words of wide import, but context may limit their scope...".
The learned author has stated the above principle, referring to various decisions of the Apex Court. The
decisions cited by the learned counsel for the petitioners to persuade this Court to give a restricted meaning,
applying ejusdem generis cannot be upheld, having regard to the context in which the words "or
otherwise" are used. We are not referring to each and every decision cited by the petitioners, but we
would point out that those are decisions which are rendered under various other enactments and do not lay down
any binding precedent to be followed in this case. Further, having regard to the words employed in the above
sub-section, the principle of ejusdem generis cannot be pressed into service. There is nothing in common
between industrial establishment and agricultural establishment. They do not belong to the same genus. The
doctrine of ejusdem generis is applied where the words of the same category are used, followed by general
words. In that context, the meaning of the general words can be read down to mean only something similar to the
category mentioned preceding them. For the above reasons, the contentions of the writ petitioners that this Court
should give a restricted meaning to the words 'or otherwise' cannot be upheld."
28.Apart from the decisions of the Allahabad High Court and Kerala High Court, the issue can also be looked
into in a different angle. The Supreme Court in Bangalore Water Supply and Sewerage Board Vs. A.Rajappa
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and others reported in 1978 (2) SCC 213 [(which was distinguished by the Supreme Court in the context of the
term establishment found in Bihar Shops and Establishments Act, but followed by the Kerala High Court in the
context of Section 1(5) in CBSE School Management's Association (cited supra))] considered the term
"educational institution" as an industry within the meaning of Section 2(j) of the I.D.Act. It was held
that though majority of persons working in educational institutions are teachers, but that cannot be a factor to
decide the term "industry" found under the Industrial Disputes Act. On the other hand, even in
respect of an educational institution, even if few persons are employed as non teaching staff, they can be covered
by the provisions of the Industrial Disputes Act. Therefore, Ruth Soren's case (cited supra), rendered in the
context of Bihar Shops and Establishments Act cannot have any relevance to decide a matter under the ESI Act.
29.Similarly, the decision of the Supreme Court in Haryana Unrecognised Schools' Association (cited supra) in
relation to the minimum Wages Act has no application. The term "otherwise" found under Section
1(5) has got wider application as held by the Allahabad and Kerala High Courts. At this stage, it is unnecessary
to go into the question whether majority of persons employed in the petitioners institutions will be covered by the
ESI Act pursuant to the impugned notification since the definition of employee found in Section 2(9) do not
correspond with any other definition in any other law. If ultimately the petitioners want to dispute the coverage of
a particular person being covered by the scheme, the Act itself provides disputes to be raised under Section 75
of the ESI Act. Such issues need not be decided on an academic basis at this stage. It is also worthwhile to note
that by amendment to ESI Central Rules, 2010, dated 20.4.2010, the scheme only covers the employees who
are drawing wages not exceeding Rs.15000/-. Therefore, as to how many persons will be covered by the
scheme itself has to be determined only if the respondent ESI issues an appropriate notice and determine the
liability of the petitioners under Section 45-A of the ESI Act.
30.Further, the Supreme Court in Osmania University v. Regional Director, ESI Corporation reported in (1985)
4 SCC 514 held that even if the printing press run by the University if it is otherwise covered by the ESI Act, the
provisions of the Act can be made applicable and the employees of the printing press must be covered by the
ESI Scheme. Therefore, even if a part of the employees in an establishment are covered the Act can be made
applicable in respect of those persons.
31.In construing the definition of the term "establishment" found under Section 1(3)(b) of the
Payment of Gratuity Act, the Supreme Court in its judgment in State of Punjab v. Labour Court reported in
(1980) 1 SCC 4 has held that the term "establishment" need not be having any reference to the
establishments covered by the provisions of the Shops and Establishments Act and it should have a general
meaning. It also held that if the term "establishment" is defined in any other law, for the time being in
force it will also be covered by the provisions of the Gratuity Act. The following passage found in paragraph 3 of
the said judgment may be extracted below: "3.In this appeal, the learned Additional Solicitor General
contends on behalf of the appellant that the Payment of Gratuity Act, 1972 cannot be invoked by the
respondents because the Project does not fall within the scope of Section 1(3) of that Act. Section 1(3) provides
that the Act will apply to: (a) every factory, mine, oilfield, plantation, port and railway company;
(b) every shop or establishment within the meaning of any law for the time being in force in relation to shops and
establishments in a State, in which ten or more persons are employed, or were employed, on any day of the
preceding twelve months; (c) such other establishments or class of establishments, in which ten or more
employees are employed, or were employed, on any day of the preceding twelve months, as the Central
Government may, by notification, specify in this behalf.
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According to the parties, it is clause (b) alone which needs to be considered for deciding whether the Act applies
to the Project. The Labour Court has held that the Project is an establishment within the meaning of the Payment
of Wages Act, Section 2(ii)(g) of which defines an industrial establishment to mean any establishment in which
any work relating to the construction development or maintenance of buildings, roads, bridges or canals, relating
to operations connected with navigation, irrigation or the supply of water, or relating to the generation,
transmission and distribution of electricity or any other form of power is being carried on. It is urged for the
appellant that the Payment of Wages Act is not an enactment contemplated by Section 1(3)(b) of the Payment of
Gratuity Act. The Payment of Wages Act, it is pointed out, is a Central enactment and Section 1(3)(b), it is said,
refers to a law enacted by the State Legislature. We are unable to accept the contention. Section 1(3)(b) speaks
of any law for the time being in force in relation to shops and establishments in a State. There can be no dispute
that the Payment of Wages Act is in force in the State of Punjab. Then, it is submitted, the Payment of Wages
Act is not a law in relation to shops and establishments. As to that, the Payment of Wages Act is a statute which,
while it may not relate to shops, relates to a class of establishments, that is to say, industrial establishments. But, it
is contended, the law referred to under Section 1(3)(b) must be a law which relates to both shops and
establishments, such as the Punjab Shops and Commercial Establishments Act, 1958. It is difficult to accept that
contention because there is no warrant for so limiting the meaning of the expression law in Section 1(3)(b). The
expression is comprehensive in its scope, and can mean a law in relation to shops as well as, separately, a law in
relation to establishments, or a law in relation to shops and commercial establishments and a law in relation to
non-commercial establishments. Had Section 1(3)(b) intended to refer to a single enactment, surely the appellant
would have been able to point to such a statute, that is to say, a statute relating to shops and establishments, both
commercial and non-commercial. The Punjab Shops and Commercial Establishments Act does not relate to all
kinds of establishments. Besides shops, it relates to commercial establishments alone. Had the intention of
Parliament been, when enacting Section 1(3)(b), to refer to a law relating to commercial establishments, it would
not have left the expression establishments unqualified. We have carefully examined the various provisions of the
Payment of Gratuity Act, and we are unable to discern any reason for giving the limited meaning to Section 1(3)
(b) urged before us on behalf of the appellant. Section 1(3)(b) applies to every establishment within the meaning
of any law for the time being in force in relation to establishments in a State. Such an establishment would include
an industrial establishment within the meaning of Section 2(ii)(g) of the Payment of Wages Act. Accordingly, we
are of opinion that the Payment of Gratuity Act applies to an establishment in which any work relating to the
construction, development or maintenance of buildings, roads, bridges or canals, or relating to operations
connected with navigation, irrigation or the supply of water, or relating to the generation, transmission and
distribution of electricity or any other form of power is being carried on. The Hydel Upper Bari Doab
Construction Project is such an establishment, and the Payment of Gratuity Act applies to it." (Emphasis
added)
32.Therefore, as correctly held by the Allahabad and Kerala High Courts, the term "establishment"
under Section 1(5) will include every establishment which need not have the characteristics of industrial,
commercial or agricultural establishments. Any Establishments can be validly notified by the appropriate
Government to be covered by the provisions of the Act. Therefore, the contentions made in this regard must fail.
33.It is rather unfortunate that the counsel should press into service a judgment of TMA Pai's case (cited supra)
without any relevance to the facts on hand. Whether an educational institution is an industry within the meaning of
Section 2(j) of the ID Act may not be relevant while considering the application of the ESI Act, since such
phraseology is not applied here. The power is vested with the Government to notify the establishment and it can
be any type of establishments. The term "otherwise" found along with the term "industrial,
commercial or agricultural" under Section 1(5) need not take colour from the preceding one and it could
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have an independent application as noted above. The purpose of the legislation is to cover the health aspects of
employees. Therefore, the impugned notification on the ground does not suffer from want of jurisdiction. Even
reference made by the subsequent smaller bench (State of U.P. v. Jai Bir Singh) for reviewing the Bangalore
Water Supply and Sewerage Board case (cited supra) need not be looked into as it is only an order of
reference. Even after 15 years have gone by the successive Chief Justices of India have not thought it fit to
constitute any larger bench to review the earlier judgment. So long as that judgment is not reversed in the manner
known to law, that judgment will be a binding precedent. No one can rely upon an order of reference to disobey
a binding precedent of a larger bench of the Supreme Court.
34.It must also be noted that subsequent to the Bangalore Water Supply and Sewerage Board case (cited
supra), the Parliament itself has amended Section 2(j) and defined the term "industry" and brought it
in tune with the ratio of the said judgment by an amendment Act 46/1982. Since alternative modes of redressal
of grievance after excluding those establishment from the I.D. Act have not been made, the said section is yet to
be brought into force. Nevertheless, it is the intention of the Parliament to fall in line with the decision of the larger
bench is a matter of record.
35.The reference to A.Sundarambal's case (cited supra) holding that teachers are not workmen has no relevance
for two reasons. The term "employee" as found in the ESI Act is not similar to the word
"workmen" under Section 2(s) of the ID Act. Further assuming that teacher is not a workman, the
Act even then can apply to the non teaching staff employed by educational institutions, who are admittedly
covered within the meaning of Section 2(s) of the ID Act. Further, that stage had not arisen in the present case.
36.Further, first of all after the impugned notification has come into existence, the petitioners institutions will have
to register themselves under Section 2-A. Only when a doubt arises as to whether persons from whom
contributions are to be deducted, a decision will have to be taken initially by the ESI Corporation under Section
45A of the ESI Act. If there is any further dispute, a petition can be filed before the appropriate ESI Court under
Section 75 to determine the employees to be covered and the contributions to be recovered under the ESI Act.
There is further appeal to this Court against an order of the ESI Court under Section 82. Therefore, there is time
enough to decide such issues for every management.
37.It is suffice to state that those issues are not germane for the purpose of validating the impugned notification.
Even otherwise, as held by the Supreme Court in Osmania University case (cited supra), if a particular activity of
the educational institution is covered, notwithstanding the other areas are not covered, still the ESI Act will apply.
Therefore, the contentions raised in this regard have to be rejected.
38.The contention that the notification under Section 1(5) being a conditional legislation and the satisfaction of the
delegate has to be based on objective consideration of relevant data for and against the exercise of such power
should be there, reliance was placed upon a judgment of the Supreme Court in State of T.N. v. K.
Sabanayagam, reported in (1998) 1 SCC 318. The following passage found in paragraph 22 may be usefully
reproduced below: "22.But there may be a third category of cases wherein the exercise of conditional
legislation would depend upon satisfaction of the delegate on objective facts placed by one class of persons
seeking benefit of such an exercise with a view to deprive the rival class of persons who otherwise might have
already got statutory benefits under the Act and who are likely to lose the existing benefit because of exercise of
such a power by the delegate. In such type of cases the satisfaction of the delegate has necessarily to be based
on objective consideration of the relevant data for and against the exercise of such power. Maybe such an
exercise may not amount to any judicial or quasi-judicial function, still it has to be treated to be one which
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requires objective consideration of relevant factual data pressed into service by one side and which could be
tried to be rebutted by the other side who would be adversely affected if such exercise of power is undertaken
by the delegate. In such a third category of cases of conditional legislation the legislature fixes up objective
conditions for the exercise of power by the delegate to be applied to past or existing facts and for deciding
whether the rights or liabilities created by the Act are to be denied or extended to particular areas, persons or
groups. This exercise is not left to his subjective satisfaction nor is it a mere ministerial exercise. Section 36 of the
Act with which we are concerned falls in this third category of conditional legislative functions....."
39.It is not clear as to how the said judgment will have any relevance to the case on hand. In that case,
employees who are entitled for bonus under the Payment of Bonus Act, 1965 were sought to be deprived by
grant of exemption which power was exercised under Section 36 of the Payment of Bonus Act. Section 36
reads as follows: "36.Power of exemption.-If the appropriate Government, having regard to the financial
position and other relevant circumstances of any establishment or class of establishments, is of opinion that it will
not be in public interest to apply all or any of the provisions of this Act thereto, it may, by notification in the
Official Gazette, exempt for such period as may be specified therein and subject to such conditions as it may
think fit to impose, such establishment or class of establishments from all or any of the provisions of this
Act." (Emphasis added)
40.It is also necessary to refer to a judgment of the Supreme Court in Hindu Jea Band v. Regional Director, ESI
Corpn., reported in (1987) 2 SCC 101 where similar contentions were rejected by the Supreme Court in the
context of the ESI Act itself. The following passage found in paragraph 5 may be usefully reproduced below:
"5.Alongwith the special leave petition the petitioner has presented before this Court a writ petition under
Article 32 of the Constitution questioning the validity of the notification issued by the State Government on the
ground that the power conferred under the Act on the State Government by sub-section (5) of Section 1
authorising the State Government to extend all or any of the provisions of the Act to other establishments in the
State suffers from the vice of excessive delegation of essential legislative powers. It is also contended that the
application of the Act to businesses like the one which is being carried on by the petitioner during certain seasons
only of the year is violative of Article 14, Article 19(1)(g) and Article 21 of the Constitution. Having carefully
considered the submission made by the learned Counsel for the petitioner we find no merit in any of the
contentions urged in the writ petition. The writ petition is also, therefore, dismissed."
41.In the case of the Bonus Act, the legislation itself obliges the exempting authority to deal with the request for
exemption by legislative guidelines and hence those observations came to be made. But in the present case, the
impugned notification extends the provisions of the ESI Act to a class of establishment. The only requirement is
the expression of previous intent through a gazetted notification which was done in this case. The petitioners who
have not raised any particular objection, cannot now be heard to plead that either they were not heard or there
was no satisfaction by the Government in finalizing the notification. Further the plea that notification came to be
issued after 2-1/2 years from the preliminary notification and hence it is invalid also cannot be accepted as the
petitioners are not bound to be losers by such delay. There cannot be said to be any prejudice by the said delay.
On the other hand, the coverage of establishment only starts from a final notification. If at all, to some extent the
petitioners were said to be benefited by the delay. It may be their employees who are affected by the belated
coverage and they are said to have lost valuable benefits arising out of the labour legislation. Therefore, the
contention based upon non application of mind in passing the order pursuant to the conditional legislation will not
arise.
42.In the context of Section 5 of the Minimum Wages Act, the Courts have considered the question of delay in
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publishing a final notification will invalidate such a notification. The Bombay High Court in Ramkrishna Ramnath,
Nagpur and another Vs. The state of Maharashtra and another reported in AIR 1964 Bombay 51 held in
paragraph 35 as follows: "35....There is however nothing in the statute which requires that Government
should consider it on that very date and not thereafter. In fact, it seems to us that it will be impossible for
Government to consider all the representations received on one and the same date, namely, the date
specified."
43.Further, a Full Bench of the Kerala High Court in Malayalam Plantations Limited and others Vs. State of
Kerala and others reported in 1976 (I) LLJ 114 (FB) held in paragraph 11 as follows:
"11....We do not think that the selection enables any person to contend that notwithstanding the
specification of a date within which the representations have to be filed the notification revising/fixing minimum
wages would be bad if the proposals are not taken up for consideration on the date specified. Nor does the
section, according to us, provide for a right to file representations till the moment the proposals are actually taken
up for final decision. There must necessarily be an interval between the last moment for filing the representations
and the final decision, the length of the interval depending upon the nature of the representations, the necessity for
deliberations on such representations, the time taken for the proceedings of the Advisory Board and the period
that the Government would usually take for reaching a final decision on such matters. The fact that the final
notification fixing or revising the minimum wages or the decision of the Government is made on a date subsequent
to the specified date does not by itself give any right to any person likely to be affected by the proposal to claim
that he is, as of right, entitled to file the representation till the last moment." (Emphasis added)
44.It is further doubtful the power exercise herein is at all conditional legislation. On the other hand, the nature of
power vested with the State Government is only delegated legislation. Therefore, if the objective consideration of
legislation are satisfied, than the Government by following the statutory prescription can notify an establishment.
45.The petitioners cannot be heard to contend as there was only gazette notification and that they did not have
any notice, is also not relevant. The ESI Act is not like the Land Acquisition Act where Section 4(1) notification
is not only gazetted, but also published in a prominent place in the locality as well as in two newspapers having
wide circulation in that area. Each legislation has to be seen only in the context in which it has been made. No
other legislation can be telescoped into another legislation for the purpose of deciding the vires of that law. Hence
that objection must also fail.
46.The other argument that aided educational institutions are exempted is discriminatory and violative of Article
14 of the Constitution also cannot be a valid objection and they stand a class apart. First of all, in theoretical term
"employee" of an educational institution is more or less on par with the employees of Government
institutions and also in respect of conditions of service including health, insurance. Therefore, it is a valid
classification not hit by the mischief of Article 14. It is also to be noted that the proviso to Section 1(4) of the Act
itself exempts an establishment belonging to or under the control of the Government whose employees otherwise
are in receipt of benefits substantially similar or superior to the benefits provided under the Act. Hence they are
exempted from the purview of the Act. Therefore, the statute itself contemplates exempting the establishment
owned by the Government from the purview of the Act with a rider that those employees must receive
substantially similar or superior benefits provided under the Act. The same conditions are also available to a
private employer for the purpose of getting exemption in terms of the provisions available under Chapter VIII of
the ESI Act.
47.As to whether an aided educational institution can also be said to be falling under the definition of
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"establishment" belonging to or under the control of the Central or State Government came to be
considered in the context of similar provisions under the Employees' Provident Funds and Miscellaneous
Provisions Act, 1952 by the Supreme Court vide its judgment in Regional Provident Fund Commissioner Vs.
Sanatan Dharam Girls Secondary School and Others reported in 2007 (1) SCC 268. The Supreme Court while
construing similar definition provided under Section 16(1)(b) of the said Act in relation to aided schools, in
paragraphs 26 to 29, 31,32 and 35 held as follows: "26.Section 16(1)(b) of the EPF Act, 1952 provides
as under:
16. (1) This Act shall not apply
(a) * * *
(b) to any other establishment belonging to or under the control of the Central Government or a State
Government and whose employees are entitled to the benefit of contributory provident fund or old age pension in
accordance with any scheme or rule framed by the Central Government or the State Government governing such
benefits; or (c)-(e) * * *
27.In order to be covered under the exception to the EPF Act, 1952 stated above, the following two conditions
have to be satisfied by the establishment seeking to be exempted from the provisions of the EPF Act, 1952:
(1) it must be an establishment belonging to or under the control of the Central Government or a State
Government, and
(2) it must be an establishment whose employees are entitled to the benefit of contributory provident fund or old
age pension in accordance with any scheme or rule framed by the Central Government or the State Government
governing such benefits.
28.We heard the parties in detail. The submissions made by the learned counsel appearing for the respondents
merit acceptance. It is not in dispute that the respondent institutions have been paying the provident fund dues to
the State Government in accordance with the scheme framed by the State Government under the State Act and
thus the employees of the respondent institutions are entitled to the benefit of the provident fund. By the orders
impugned by the respondent institutions, the State Government has sought to transfer the balance standing to its
credit to the Regional Provident Fund Commissioner. Thus it is clear that the respondent institutions have been
paying in accordance with the scheme and there is no grievance with regard to the same.
29.In respect to the contention of the respondent that the establishment belonging to or under the control of the
Central Government or a State Government, it was submitted that the establishments must either be (a) belonging
to, or (b) under the control of the Central Government or the State Government. In our view, the two words
used in the said section have different connotations. The words belonging to signify ownership i.e. the
Government-owned institutions would be covered under the said part and the words under the control of signify
control other than ownership since ownership has already been covered under the words belonging to . It must
also be noted that the two words are separated by the word or and therefore these two words refer to two
mutually exclusive categories of institutions. While the institutions belonging to the Central or the State
Government would imply the control of the State but the privately-owned institutions can be under the control of
the Government in various ways.
31.The State Government also exercises administrative control over the institution. Section 17 deals with the
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manner of recruitment and Section 18 deals with the procedure by which the employees may be removed or
dismissed or reduced in rank. Section 28 permits the State Government to prescribe the code of conduct of the
employees and Section 29 enjoins upon the institutions not to give to its employees a pay lesser than the scales of
pay and the allowances paid to similar categories of the State Government.
32.In our view, the State Act is a complete code in itself with regard to the educational institutions and the State
Government exercises substantive control over the institutions even though the institutions are not owned by it.
The word control has not been defined under the EPF Act, 1952.
35.We further observe that the State Government has the power of superintendence or the authority to direct,
restrict or regulate the working of the educational institutions. It was, therefore, submitted that the institutions had
satisfied both Conditions (1) and (2) mentioned above and as such they would fall within the exception contained
under Section 16(1)(b) of the EPF Act, 1952." Hence it can be safely held that there are any
discrimination in leaving out the aided institutions for the purpose of the notification.
48.Though it was stated by the petitioner that within the aided educational institutions, there are self financing
courses conducted by them and for which staff are employed and that they may not receive similar benefits, it
must also be noted that there are no pleadings to that effect in the present writ petitions. Even otherwise, the
petitioners cannot said to be aggrieved parties. If those employees employed in the aided institutions do not have
similar benefits, as and when those employees make grievance, it is always open to the State Government to
issue appropriate notification covering even those employees who do not have similar or superior benefits given
under the ESI Act in respect of those institutions. On this ground, the impugned notification cannot be
invalidated.
49.Even assuming as held by the T.M.A. Pai's case (cited supra), carrying on educational institution is an
"occupation" covered by Article 19(1)(g). Article 19(6) do not prevent the State from making any
law in the interest of general public and impose reasonable restrictions on the exercise of the right conferred by
the sub clause. Providing health care and disablement benefits to the employees engaged by the private
entrepreneur is the concern of the Government and mandated by Chapter IV of the Constitution. It cannot be
said to be an unreasonable restriction on the right of the employer to carry on his trade or occupation as the case
may be.
50.The fact that contributions payable towards ESI was not conceived while fixing fee structure in respect of
private educational institutions and therefore, the present notification imposing unreasonable burden on them
cannot be accepted as any legal plea. First of all, the contribution payable in terms of Rule 51 as noted elsewhere
is only fraction of expenditure incurred by any institution. Secondly, the wage ceiling imposed for covering
number of employees by the impugned notification will minimise the percentage of total number of work force in
the establishment. The petitioners are making mountain out of mole hill and are making imaginary pleas, which are
not based upon factual foundation. Even if there are more number of work force, granting health care including
disablement benefits on them is a constitutional imperative which will have to be extended either by the
employers themselves or by a law made by the State as mandated by Part IV of the Constitution. It is only in
cases where an employer pleads that he has already extended the said benefits, an exemption provision
conceived under the Act. Therefore, this court is not inclined to accept the submissions made by the petitioners in
this regard.
51.Though the counsel for the respondent State and the Standing Counsel for the ESI contended that writ
petitions at the instance of the Association of private schools and college management are not maintainable and
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also referred to certain decisions and the same was also countered by Mr.AR.L.Sundaresan, learned Senior
counsel appearing for the petitioner in W.P.No.4722 of 2011, it is unnecessary to go into the said issue. Because
in W.P.Nos.2872 and 5084 of 2011, the petitioners are individual colleges and in respect of those two writ
petitions, the legal questions raised will have to be gone into. Hence this Court is not willing to undertake an
exercise to reject the cases of Associations, who are before this court. That issue can be relegated to a future
occasion. The merits of the contentions have already been dealt with in these writ petitions.
52.But at the same time, it must be noted that since the petitioners seek to challenge the impugned notification
which are in favour of their employees and in none of the writ petitions, employees who are to be benefited by
the application of the ESI Act have been made as parties. Hence, these writ petitions are liable to be rejected on
that ground also.
53.The Supreme Court in the context of exclusion of the ESI Act in its application to the employees clearly
stipulated that in such cases, the employees should be made either individually or in a representative capacity as
parties to such proceedings without which the court cannot adjudicate such issue. Reference was made to a
judgment of the Supreme Court in Fertilizers & Chemicals Travancore Ltd. v. ESI Corpn., reported in
(2009) 9 SCC 485. The following passages found in paragraphs 5 to 9 may be usefully extracted below:
"5.It may be noted that in its petition before the Employees Insurance Court, the appellant herein only
impleaded Employees State Insurance Corporation and the District Collectors of Alleppey, Palaghat and
Cannanore as the respondents but did not implead even a single workman as a respondent. 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 workmen concerned must be
made a party. Hence, in our opinion the appellant (petitioner before the Employees Insurance Court) should have
impleaded at least some of the persons concerned, as respondents.
6.The case of the appellant was that, in fact, none of the persons concerned was its employee and it was difficult
to identify them. In this connection we may refer to Section 75(1)(a) of the Act which states that if any question
or dispute arises as to whether any person is an employee of the employer concerned, or whether the employer
is liable to pay the employers contribution towards the said persons insurance, that is a matter that has to be
decided by the Employees Insurance Court. Hence, in our opinion, the person concerned has to be heard before
a determination is made against him that he is not an employee of the employer concerned.
7.The rules of natural justice require that if any adverse order is made against any party, he/she must be heard.
Thus if a determination is given by the Employees Insurance Court that the persons concerned are not the
employees of the petitioner, and that determination is given even without hearing the persons concerned, it will be
clearly against the rules of natural justice. It may be seen that Section 75 of the Act does not mention who will be
the parties before the Insurance Court. Since the determination by the Insurance Court is a quasi-judicial
determination, natural justice requires that any party which may be adversely affected or may suffer civil
consequences by such determination, must be heard before passing any order by the authority/court.
8.In our opinion, wherever any petition is filed by an employer under Section 75 of the Act, the employer has not
only to implead ESIC 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 parties concerned in labour matters are the employer and the workers. ESI Corporation will
not be in any way affected if the demand notice sent by it under Sections 45-A/45-B is quashed.
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9.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 Section 46 of the Act. Hence the principal beneficiary of the Act is the
workmen and not ESI Corporation. ESI 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."
54.The very same judgment came to be subsequently followed by the Supreme Court in ESI Corporation v.
Bhakra Beas Management Board, reported in (2009) 10 SCC 671. The following passage found in paragraph 5
may be reproduced below:
"5.Neither the workers of Respondent 1 nor any one of them in representative capacity were impleaded
either before the Employees State Insurance Court or before the High Court. In our opinion, this is in violation of
the principles of natural justice."
55.In the light of the above factual matrix and the legal precedents, there is no case made out by the writ
petitioners. Hence all the writ petitions will stand dismissed. However, there will be no order as to costs.
Consequently, connected miscellaneous petitions stand closed.
vvk
To
1.The Principal Secretary to Government,
The State of Tamil Nadu,
Labour and Employment Department,
Fort St. George,
Chennai-600 009.
2.The Assistant Director (Inspection),
Employees' State Insurance Corporation,
1897, Trichy Road,
Panchdeep Complex,
Ramanathapuram, Coimbatore-641 045.
3.The Regional Director,
Employees' State Insurance Corporation,
"Panchdeep", Sterling Road,
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Nungambakkam,
Chennai-600 034.
4.The Additional Commissioner and
Regional Director,
Employees' State Insurance Corporation,
143, Sterling Road,
Nungambakkam,
Chennai 600 034