HIGH COURT OF ORISSA: CUTTACK W.P.(C) Nos.17955 & 17956 of 2012 In the matter of applications under Articles 226 and 227 of the Constitution of India. ----------National Aluminium Company Ltd. and others … Petitioners … Opp. Parties (In both the cases) -VersusEmployees State Insurance Corporation and others For Petitioners : For Opp. Parties : M/s. B.Rath, S.K. Jethy & S.K. Mishra Mr. P.P. Ray [For O.P.Nos. 1 &
2) (In both the cases) ----------- ------- P R E S E N T: THE HONOURABLE SHRI JUSTICE B.N.MAHAPATRA Date of Judgement :
05. 11.2012 B.N. Mahapatra, J.These two writ petitions have been filed with identical prayer to quash Annexures-11,12 and 17 on the ground that those are bad in law and in operative. The further prayer in both the writ petitions is to issue a writ of mandamus directing opp. party no.1Employees State Insurance Corporation and opp. party no.2-Deputy Director (Revenue), Employees’ State Insurance Corporation not to insist implementation of the provisions of Employees’ State Insurance Act,1948 (in short, “ESI Act”.) and the scheme framed therein until the 2 ESI Dispensary functions effectively and starts parallel service to such Contract Labourers. Annexure-11 is a show-cause notice dated 25.7.2012 issued by opp. party no.2 to the petitioner to show-cause within ten days from the date of that show-cause notice as to why the petitioner as one of the factory of M/s.Nalco (Project) should not be prosecuted for non-compliance with the provisions of the ESI Act, 1948 and Regulations framed thereunder. Annexure-12 is also a show-cause notice dated 25.7.2012 issued by opp. party no.2 to the petitioner to show-cause within fifteen days as to why assessment should not be made as proposed in the said letter with further opportunity to file statement showing full particulars of contribution and for personal hearing. Annexure-17 is also a show-cause notice dated 6.8.2012 issued by opp. party no.2 to the petitioner-Company to show-cause within ten days from the date of that show-cause notice as to why the petitioner as one of the Principal Employer of their factory M/s.Nalco(Project) should not be prosecuted for non-compliance with the provisions of the ESI Act, 1948 and Regulations framed thereunder.
2. Since the issues involved and the relief sought for in both the writ petitions are identical, they are dealt with together by this common judgment.
3. Petitioners’ case in a nutshell is that NALCO is a Government of India Public Sector Company having its Head Office 3 at Bhubaneswar and Unit Office at Angul as well as Damanjodi. The petitioner manages some of its work in the Project establishment through Contractors by way of tender works and at present its project establishment has total strength of 517 contract labourers. Such works are generally conducted through tender process to different Contractors and as per conditions the Contractors used to have their own E.S.I. Code as well as P.F. Code and under the terms of contract they are bound to follow the statutory provisions and responsibility of NALCO comes only when such contractors fail in undertaking such statutory obligations. NALCO has its own hospital at all its units including Damanjodi. The hospitals of NALCO are providing the hospital benefits only to its regular employees and providing medical facility to the Contractors’ workers as per the settlement, the Management of NALCO at Damanjodi entered into a settlement with the Utkal Contractors Association representing the Contractors working there at Damanjodi and the Alumina Mazdoor Sangh at Damanjodi representing such workmen on 26.02.2007 . Under Clause-3 of the said settlement the NALCO Management has agreed to provide medical allowance @ 4.75% of the earned wages to the contract labourers w.e.f.01.02.2007 and to continue such facilities till the workmen are covered under the E.S.I. Scheme. The said settlement even though was operative up to 25.02.2008, but the condition as narrated above is allowed to continue as on date and all the contractors workers are being paid by their employer the aforesaid benefits every month and their employer used to get the 4 same reimbursed from NALCO. While the matter stood thus, the petitioners received a letter dated 29.10.2010 indicating therein that the Factory of NALCO has been covered under E.S.I. Act, 1948 w.e.f. 01.01.2010 and was allotted Code No.44000071450000501 vide letter No.6885 dated 29.10.2010 and in the said letter the NALCO was directed for starting the deposit of the ESI dues in respect of the contractor workers from January, 2010, besides submitting details of the Contract Labourers.
4. The petitioners objected to the coverage of the ESI Act to its establishment in respect of contractors’ workers raising several grounds. The opp. parties without considering the same, issued two letters dated 22.7.2010 asking the petitioner to show-cause as to why the assessment so made will not be recovered and simultaneously also issued the other notice to show-cause as to why the petitioners shall not be prosecuted for non-compliance with the provisions of the ESI Act, 1948 and Regulations framed therein. In response to the said notices dated 22.7.2010, the petitioner submitted its reply on 5.8.2010. In spite of the objection of the petitioner, the opp. parties raised a demand of Rs.62,96,648/- as ESI contribution for the period from 01.07.2010 to 30.09.2010 and further asked the NALCO authority to show-cause within fifteen days as to why the proposed assessment should not be made and further asked to produce all relevant records for arriving at actual assessment. Vide letter dated 13/15.11.2010, the petitioner indicated the reason not to apply the provisions of ESI Act requested 5 the ESI Authority to treat the show-cause notice as withdrawn and waive the demand under assessment. However, the ESI Authority made the final assessment raising Rs.60,92,873/- for the period from 1.1.2010 to 30.9.2010 in respect of Contractors’ employees engaged in its Project Establishment (Annexure-9). Challenging the said final assessment order under Annexure-9, the petitioners filed an ESI Case before Employees’ State Insurance Court, Bhubaneswar under Section 75 of the Employees’ State Insurance Act, 1948 which was registered as ESI Misc. Case No.105/2011. On 28.6.2011, the ESI Court directed the Employees State Insurance Corporation not to take any coercive action. The same order is being extended from time to time and continued till 25.9.2012. Till date in the said ESI Misc. Case, no counter has been filed by the parties, though interim order has been passed by the Employees State Insurance Court. In spite of the same, vide communication letter dated 25.7.2012, the opp. parties issued show-cause notices under Annexures-11 and 12 as stated above.
5. The petitioner-Company is very much aware that there is absolutely no infrastructure of the ESI Authority in the locality to provide the benefit to the members under the scheme even though there has been some appointments for the ESI Dispensary to be taken place at Damanjodi but it is only paper sake. The so-called dispensary at the instance of ESI Corporation is yet to be inaugurated. The Insurance Medical Officer I/C, ESI Dispensary, Damanjodi, District Koraput vide his letter dated 16.7.2012 has 6 written to the State Medical Commissioner, ESI Corporation, Bhubaneswar indicating therein that the estimated cost for inaugural function of ESI Dispensary, Damanjodi and claimed therein a sum of Rs.80,000/- for the said purpose.
6. There is heavy resentment amongst the contractors’ labourers and the contractors for the irrational behaviour of the ESI Authorities enforcing the scheme on the poor labourers even if it is not in proper shape and in the meanwhile apart from their exhibiting protest through various forums, there is stiff opposition to such switching over. All the operating unions have submitted their written protest with the Regional Director of ESI Corporation with copy to National Aluminum Company Ltd. strongly opposing the move to bring them under such a badly shaped ESI Dispensary. While protesting the union has also therein requested the ESI Authority to start the Dispensary with proper infrastructure, ambulance, Laboratory Equipments/Sufficient Medicine/ Medical Staff so that its workmen can be motivated. At this juncture, the ESI Authorities issued a show-cause dated 6.8.2012 (Annexure-17).
7. Mr. B. Rath, learned counsel appearing on behalf of NALCO Authority submitted that there is no ESI Dispensary at Damanjodi and therefore, the ESI authority is not entitled to apply the provisions of the ESI Act on the petitioner’s establishment. In view of the settlement between the contractors’ union and the workers’ representatives dated 26.2.2007, the provisions of ESI Act should not have been enforced on the petitioner’s establishment. As 7 there was no Dispensary of the ESI Corporation, the immediate employer i.e. the Contractor has not made the necessary deduction from the Contractor’s employee. Rather it goes on paying its employees engaged in NALCO, the ESI benefits of 4.75% of the earned wages subject to reimbursement of the same from NALCO, the Principal Employer. Deduction in this regard in absence of ESI Hospital in the locality may not be practical and will face resentment amongst the workers leading to industrial unrest. Being insisted by ESI authorities, NALCO Authority immediately provided the contractors and the workers with registration form and enrolment form, yet there is no move to file the same and submit the same with the management for their further action in the matter. NALCO management vide communication letter dated 4.2.2012 has already intimated this aspect to the ESI Authorities. NALCO authorities also informed the ESI authorities that infrastructure like posting of Pharmacist, Paramedical Staff, Path laboratory and sufficient medicine have not yet been provided and for this reason, the contractors’ workers are in no mood to switch over to ESI scheme. Forcing the contractors’ workers to join the ESI Scheme even before proper functioning of the dispensary will lead to law and order problem and create bad industrial relation seriously affecting the functioning of the factory. Factory of the petitioner is depending on the contractors’ labourers in many of its operation and it cannot jeopardise its position and invite problem on these small issues. The Utkal Contractors’ Association vide their letter dated 25.7.2012 also 8 requested the ESI Authorities to take steps for functioning of the ESI Hospital. Mr. Rath further submitted that the issues involved in this case cannot be decided by the ESI Court.
8. Mr. P.P. Ray, learned counsel appearing on behalf of opp. Parties-ESI Corporation challenges the maintainability of the writ petitions on the ground that in the writ petitions only the showcause notices have been challenged and at this stage this Court should not interfere. He further submitted that the ground taken in the writ petition challenging the impugned orders can be taken before the ESI Court. The payment of employees’ contribution has no relevance with regard to the medical benefit extended by the ESI authorities. The questions raised in the writ petitions are covered under Section 75 of the ESI Act for the previous period. The petitioner-company has filed ESI Case before ESI Court for previous period. It was further submitted that once the notification made, the ESI authority has to implement the provisions of the ESI Act. ESI contribution is made not only for the medical facility, but also for other benefits like payment of compensation etc. Settlement between the parties cannot suspend the operation of the statutory provisions. In support of his contentions, Mr. Ray, relied upon some decisions of the Hon’ble Supreme Court as well as the High Court.
9. On the rival contentions of the parties, the questions that arise for consideration by this Court are as follows:
9. (i) Whether in order to discharge statutory obligation, the petitioner-management can impose any condition which is not provided under the statute?. (ii) Whether there is any relation between the contribution made by the employer and employee and the benefit availed by the employees ?. (iii) Whether the operation of the statutory provisions can be suspended in view of any settlement entered into between the petitioner-management and the representatives of the union of contractor labourers?. (iv) Whether any writ of mandamus can be issued directing opp. party nos.1 and 2 not to insist implementation of the provisions of ESI Act and scheme framed therein until the ESI Dispensary functions effectively and starts parallel service to such contractor labourers ?.
10. Since the question Nos.(i) and (ii) are interlinked, they are dealt with together. The Employees State Insurance Act, 1948 provides for certain benefits to industrial employees in case of sickness, maternity, employment injury. Under the statute, the liability to pay the entire contribution under Section 39 of the ESI Act is on the employer. This is because of the mandatory obligation fastened under Section 39 read with Section 40 of the ESI Act. Section 40 of the ESI Act says that the Principal Employer shall pay in respect of every employee, whether directly employed by him or by or through an immediate employer, both the employer’s contribution 10 and the employee’s contribution. However, Section 40(2) of the ESI Act authorises the employer to recover the employee’s contribution by deducting the same from his wages. But the primary liability to pay contribution envisaged under Section 39 is that of the employer.
11. The Hon’ble Supreme Court in the case of E.S.I.C. V. C.C. Santhakumar, 2007 LAB I.C. 597 held that the provisions of ESI Act unmistakably indicate that the whole scheme is dependent upon the contributions made by the employer not only with respect to the amounts payable by him but also in respect of those payable by the employee. There is no dispute that in the present case, the petitioner-employer has not paid his own contribution and the employee’s contribution. This is a clear case of violation of statutory provision. The plea of the management that the ESI authorities have not established the ESI Hospital providing facilities to the contractor labourers cannot exonerate the employer from discharging its statutory obligation of payment of the employer’s contribution and employee’s contribution which has no relation with the benefit to be provided by the Corporation to the employees under the Employees’ State Insurance Act.
12. The Hon’ble Supreme Court in the case of Employees’ State Insurance Corpn., vs. M/s.Harrison Malayalam Pvt. Ltd., 1994 LAB I.C. 24, held that there is no relation between contribution made and the benefit availed of. The contribution is uniform for all workmen and is percentage of the wages earned by them. It has no relation to the risks against which a workman stands statutorily 11 insured. It is for this reason, the Act envisages automatic obligation to pay the contribution. Once the factory or the establishment is covered by the Act, the obligation to pay the contribution commences from the date of application of the Act to such factory or establishment. The obligation ceases only when the Act ceases to apply to the factory/establishment. The obligation to make contribution does not depend upon whether any particular employee or employees cease to be employee/employees after expiry of the contribution period and the benefit period.
13. Needless to say that it is the statutory duty of the employer to deposit its own contribution and employees’ contribution once the factory or establishment is covered by the Act.
14. The Punjab and Haryana High Court in the case of Employees’ State Insurance Corporation, Chandigarh V. T.C. Vermani, 1984 LAB I.C. 1406, held that there is no provision under the Act which enjoins a duty on the Corporation to keep on informing the factory owners that they are covered by the Act. The Corporation is not their advisor. On the contrary, the duty is enjoined on the principal employer of the factory to discharge statutory obligation the moment it stands covered by the provisions of the Act. If the employer fails to deduct the employees’ contribution, no fault can be found with the Corporation. Section 40 of the Act fixes the responsibility on the Principal employer to pay the contributions”
15. Similar view has also been taken by the Madras High Court in the case of Regional Director of Employees’ State Insurance Corporation V. Amalgamation Repeo Ltd., 1982 LAB I.C. 1691 wherein it has been held that management is liable to contribute on its own accord and such payment is not made conditional on any demand by the Employees’ State Insurance Corporation.
16. In view of the above, all the pleas taken by the petitioners not to discharge its statutory obligation are not legally sustainable. This Court is shocked to note that a Central Government Public Sector Undertaking is avoiding to discharge its statutory obligation on some plea or other which is not at all tenable under the law.
17. The petitioner-employer is bound to discharge its statutory obligation under the E.S.I. Act and cannot impose any condition which is not provided under the statute to discharge its statutory obligation.
18. So far question no.(iii) is concerned for the reasons stated above and in absence of any statutory provision any settlement reached representatives of by the the Union petitioner-Management of and Contractor-Labourers the cannot exonerate the petitioner-Management from discharging its statutory liabilities under the E.S.I. Act.
19. Therefore, under the Act duty is cast on the employer to deposit with the Employees’ State Insurance Corporation its share of 13 contribution as well as the share of contribution of the employees irrespective of whether the Corporation has provided full-fledged hospital or not or that the employees are willing or not to be covered under the ESI Scheme or that any kind of settlement has been entered into between the petitioner-Management and the representatives of Union of Contractor Labourers.
20. So far question No.(iv) is concerned, for the reasons stated above, the prayer made in the writ petition for issuance of a direction to opp. party nos.1 and 2 not to insist implementation of the provisions of ESI Act and scheme framed therein until the ESI Dispensary functions effectively and starts parallel service to such Contractor Labourers cannot be granted to the petitioner. It may be noted that the benefit provided under the ESI Act is not confined to hospital facility; the benefit covers to sickness, maternity, employment injury etc.
21. Apart from the above, the notices challenged by the petitioners in the present writ petitions, are all show cause notices. It does not appear that show cause notices have been issued by opposite parties without having authority of law or without having jurisdiction.
22. In A.V. Venkateswaran Collector of Customs, Bombay vs. Ramchand Sobhraj Wadhwani & Anr., AIR 196.SC 1506.the Constitution Bench of the Hon’ble Supreme Court held that where there is a complete lack of jurisdiction of any officer or 14 authority who takes the action impugned, the writ jurisdiction should be exercised.
23. The Hon’ble Supreme Court in the case of State of Uttar Pradesh vs. Shri Brahm Datt Sharma and another, AIR 198.SC 943.held as under:
“9. The High Court was not justified in quashing the show cause notice. When a show cause notice is issued to a government servant under a statutory provision calling upon him to show cause, ordinarily the government servant must place his case before the authority concerned by showing cause and the courts should be reluctant to interfere with the notice at that stage unless the notice is shown to have been issued palpably without any authority of law. ‘The purpose of issuing show cause notice is to afford opportunity of hearing to the government servant and once cause is shown it is open to the Government to consider the matter in the light of the facts and submissions placed by the government servant and only thereafter a final decision in the matter could be taken. Interference by the court before that stage would be premature, the High Court in our opinion ought not have interfered with the show cause notice.”
24. This Court in the case of Rohit Kumar Behera vs. State of Orissa, 2012 (II) ILR-CUT-395, held as under:
“21. Law is well settled that unless it is shown that the notice to show cause has been issued palpably without any authority of law, the show cause notice cannot be quashed in exercise of writ jurisdiction under Articles 226 and 227 of the Constitution.”
25. Moreover, challenging the identical show cause notices issued for the previous period, the petitioners have approached the 15 Employees’ State Insurance Court under Section 75 of the ESI Act, 1948.
26. In the above premises, it is not a fit case where interference of this Court in exercise of its extraordinary jurisdiction under Article 226 of the Constitution of India is called for. Thus, this Court is not inclined to entertain the writ petitions. Accordingly, both the writ petitions are dismissed. No order as to costs. …….…………………… B.N. Mahapatra,J.Orissa High Court, Cuttack The 5th November, 2012/bkb.