Judgment:
C O M M O N O R D E R
1. The petitioner in these three writ petitions is the same Management.
2. In the first writ petition (W.P.No.22145/2005), the challenge was to the order dated 06.07.2005 passed by the third respondent ESI claiming interest for the delayed payment of the dues towards the Corporation. In the second writ petition (W.No.22146/2005), the challenge is to the order of the respondent ESI dated 28.09.1999 and confirmed by a subsequent recovery application dated 10.01.2000 demanding payment of contribution together with interest totalling a sum of Rs.52,44,819/-, which amount had been paid under protest and they seek for a direction to refund the amount. In the third writ petition (W.P.No.22147/2005), the challenge is to the order of the State Government made in G.O.Ms.No.99 Labour and Employment Department, dated 24.06.2005, wherein the State Government cancelled the earlier G.O.(D)No.1108, Labour and Employment Department, dated 26.12.2002 granting exemption from paying interest and damages in terms of Section 88 of the E.S.I.Act in respect of 448 workers and 94 staff with effect from January 1997 to September 1999.
3. The three writ petitions were admitted on 12.07.2005. Pending the writ petitions, an interim stay was granted on condition that the petitioner deposits 50% of the amount claimed.
4. On notice from this Court, the respondents have filed a counter affidavit dated 20.01.2011 in all the three writ petitions.
5. It is the case of the petitioner that they have a factory at Alandur, in which there are 389 workers. During April 1996, the workmen were ceased to be covered under ESI Act as they have started drawing over and above the coverage provided under the ESI Act. In view of workmen not being covered by the ESI Act, the petitioner company introduced a Medical Benefit Scheme in lieu of ESI benefits. On 23.12.1996, a notification was issued increasing the ceiling limit for coverage upto Rs.6,500/- with effect from 01.07.1997. Since the employees were outside the purview of the Act and because of the coverage, they were sought to be included, an application under Section 87 of the ESI Act was filed before the Government seeking for exemption from the purview of the ESI Act.
6. Thereafter, W.P.No.2658 of 1997 was filed by the Trade Union seeking for a direction to the State Government to dispose of their application for exemption dated 31.03.1997. They have also obtained an interim injunction. While the writ petition was pending, the Management filed an application in WPMP No.6987 of 1997 for clarification of the order of interim injunction granted on 27.02.1997 in W.M.P.No.4473 of 1997. This Court by an order dated 01.04.1997 granted interim injunction restraining the ESI from recovering the contribution for the period from 01.01.1997 onwards from the employees and staff of the petitioner company. Subsequently, the writ petition came to be disposed of by a final order dated 23.12.1997. This Court held that the Union is not entitled for any exemption as a matter of right. The petitioner Employer had also not sought for exemption and no writ of mandamus can be issued.
7. It is at that stage, the petitioner Employer themselves filed W.P.No.265 of 2000 seeking for a direction to consider their application for exemption. In that writ petition, a direction was issued on 09.11.2000 to the respondent State Government to consider their application for exemption. Thereafter, the State by a letter dated 25.06.2002 sought for a clarification from the Management whether the Workmen were also interested in seeking exemption. The petitioner was also informed to furnish the consent letters from the staff and employees union of the company.
8. The State Government, thereafter, by G.O.(D)No.1108 Labour and Employment Department, dated 26.12.2002 rejected the application of the petitioner Management for exemption under Section 88 of the E.S.I.Act. In paragraph 12 of the said order, the Government stated as follows:- "12. In the circumstances, the Government hereby reject the application of M/s.Rane Engine Valves for exemption under Section 88 of the ESI Act in respect of 448 workmen and 94 staff from January 1997 to September 1999. The Government also direct the Regional Director, E.S.I.Corporation, Chennai not to claim interest or damages from the company for the period from January 1997 till 21 days after the date of this order."
9. The petitioner Management did not challenge that order but rest contended itself since the State Government had granted waiver of interest/damages for the period from January 1997 till 21 days after the order of the Government. Thereafter, the petitioner Management, by a letter dated 13.01.2003 addressed to the Regional Director, ESI Corporation, wherein it was stated that though they were aggrieved by the order of the Government rejecting their application for exemption, they remitted the balance amount of Rs.39,85,819/- by a Cheque towards the contribution payable, according to them.
10. The respondent ESI subsequently took up the issue with the State Government stating that the order passed by them was erroneous and it requires a review. The power of State Government under Chapter VIII of the ESI Act is only confined to grant of exemption, but there is no power vested with the State Government to grant waiver or reduction of damages or interest. Treating the said communication from the respondent ESI as a review application, the State Government ordered notice to the petitioner Management vide notice dated 06.01.2005. After hearing the parties, passed the impugned order dated 22.02.2005 and revoked the earlier order granting waiver of interest/damages by the impugned G.O.Ms.No.99 Labour and Employment department dated 24.06.2005.
11. The State Government found that there is no power vest with them to waive interest or damages. Attacking this order, W.P.No.22417 of 2005 was filed by the Management. The only question arises in that writ petition is whether the State Government under Chapter VIII of the ESI Act has a power to grant such an exemption. Infact by the earlier Government Order, the State Government refused to grant exemption under Section 87 r/w 88 of the ESI Act. Once refusal is accepted, then there is no scope to exercise power in respect of damages or interest. The provision of interest for delayed payment is provided under Section 39(5) of the ESI Act.
12. On the question of interest, it must be noted that the Supreme Court has held that there cannot be any private negotiations and the interest is an automatic liability on the employer if there were delayed payments. The Supreme Court in Goetze (India) Limited v. Employees' State Insurance Corporation reported in 2008 (8) SCC 705 had observed as follows: "9.As there was delay in making the payment of the contribution the Corporation had issued notice on 29.6.1990 at the first instance and thereafter the order was passed under Section 45-A of the Act on 23.7.1992. The same was challenged before the ESI Court in which an interim stay was granted on 9.10.1992. During the pendency of the matter there was reverification and the quantum payable by the appellant was worked out. The liability to pay interest is statutory. There is no power of waiver. The question of any compromise or settlement does not really arise. Even otherwise the order of the ESI Court referred to and relied upon by the appellant is of no assistance to the appellant. It only noted statement of the appellant that he had deposited the contribution payable. The reference to "no further dues" is obviously relatable to the contribution payable and nothing beyond that."
13. With reference to grant of waiver or reduction of damages, the aggrieved party can only approach the ESI Court under Section 75 failing which an appeal to this Court under Section 82 of the ESI Act. But the power to grant either reduction or waiver towards damages under Section 85-B vest only with the ESI Corporation as provided under second proviso to Section 85-B. The second proviso reads as follows:- "Provided further that the Corporation may reduce or waive the damages recoverable under this section in relation to an establishment which is a sick industrial company in respect of which a scheme for rehabilitation has been sanctioned by the Board for Industrial and Financial Reconstruction established under section 4 of the Sick Industrial Companies (Special Provisions) Act, 19875 (1 of 1986), subject to such terms and conditions as may be specified in regulations."
14. Therefore, when specific power has been vested with some other authority, the State Government in the guise of the power to grant exemption from the application of the Act cannot usurp the power which had not been conferred on them by law. Even in case, any amount of contribution, interest or damages due to the Corporation is irrecoverable, then it can be written-off only by the Central Government in terms of Section 91-C of the ESI Act. Inasmuch as the petitioner Management was heard before reviewing its earlier order and the earlier order itself is without jurisdiction, the challenge to the said order is impermissible.
15. Further, in the very same case in W.P.No.2658 of 1997 filed by them, this Court by an order dated 23.12.1997 has clearly held that matter of exemption is not a right. Though in that case, it was the Trade Union which was the petitioner, the Management was also a party respondent in that writ petition. Hence, W.P.No.22147 of 2005 is liable to be rejected. Accordingly, the same stands dismissed.
16. In the other two writ petitions, Mr.V.Sanjay Mohan, learned Counsel for the petitioner Management contended that in view of the interim order passed by this Court, they were unable to recover the amount from the employees. Therefore, they are not liable to pay either interest or damages. In this context, reliance was placed upon the judgment of the Supreme Court reported in (2006) 6 SCC 581 [Employees State Insurance Corporation and others v. Jardine Henderson Staff Associaton and Others. In that case, the Supreme Court held that the act of Court cannot prejudice any party and therefore, the employers were relieved of their responsibilities to make contributions. In paragraph 42 and 43, the Supreme Court observed as follows:- "42.The ESI Act has enacted to provide for certain benefits to employees in case of sickness, maternity and employment injury. Under the scheme of the Act, function of the ESI Corporation is to derive insurance fund from the contribution from employees and workmen. The employer is entitled to recover workmen's share from the wages of the workmen concerned. It was argued by the respondent that the employer is providing better medical facilities to the workmen and, therefore, the object and purpose of the Act has been fully satisfied. It is pertinent to notice that none of the employees of the Union have complained about medical services provided by the employer since the object is otherwise fulfilled. No further direction, in our opinion, is required to be passed.
43.The act of Court can prejudice no party either the ESI or the respondent-companies. We, therefore, relieve the respondents from making any contributions for the period in question and direct them to make the contribution as directed by the Division Bench of the High Court. It is stated that some of the respondents have already filed exemption applications and that the appellant-Corporation has also granted them necessary relief. We also permit the other respondents who have not filed any exemption application may now file the same and if such application for exemption is filed, it is for the authorities to consider the same on merits and in accordance with law."
17. He also placed reliance upon the subsequent judgments of the Division Bench in W.A.Nos.270 and 388 of 2001 dated 01.11.2006 [T.V.Sundaram Iyengar and Sons Ltd v. The TVS Workers' Union, Rep. By its General Secretary] and W.A.No.423 of 2001 dated 01.11.2006 [Ennore Foundries Limited v. Government of India, Rep. By its Secretary], wherein this Court after following the Supreme Court judgment in Jardine Henderson's case (cited supra) granted waiver of payment of contribution during the stay order was in operation.
18. The learned counsel also referred to another judgment of the Division Bench in W.A.No.23 of 2003 dated 08.12.2008 [Ashok Leyland Limited v. Government of India, Rep. By its Secretary] wherein, this Court ordered refund of the contribution paid during the pendency of the writ petition.
19. But in the present case, it must be noted that while the case of the workmen was pending before this Court in W.P.No.2698 of 1997, where they have obtained interim injunction, it is the Management which took out W.M.P.No.6986 of 1997 in the guise of seeking clarification and obtained an order against ESI from recovery contribution for the period from 01.01.1997. Subsequently, the writ petition came to be dismissed on 23.12.1997. At that time, no relief was claimed either by the Union or by the Management. Thereafter, their only attempt was to seek exemption from the State Government. Though initially an exemption from payment of interest/damages were given, even that was cancelled subsequently. The judgment in Jardine Henderson's case (cited supra) was rendered on the basis of power exercised by the Supreme Court under Article 142. Such power will not enure to the benefit of this Court exercising its jurisdiction under Article 226 of the Constitution. It is only when the State Government reversed its earlier order, the petitioner thought fit to file other two writ petitions claiming the refund of the amount already paid. Though the entire amounts have been paid by the Management but it was under protest.
20. The present writ petitions seeking for refund of the amount either wholly or partly cannot be countenanced by this Court for more than one reason. First of all, when the matter was seized by this Court in W.P.No.2698 of 1997, such a plea should have been made before this Court because in the writ petition because, it is this Court in that writ petition had granted interim injunction against ESI. But long after the disposal of the writ petition (after 13 years), the petitioner cannot seek to set up a fresh case claiming that they were prejudiced by the orders of this Court.
21. In such circumstances, the underlying principles under Order 2 Rule 2 CPC will squarely apply. In this context, the Supreme Court vide its judgment in Executive Engineer, ZP Engg.Divn. and another v. Digambara Rao and others reported in (2004) 8 SCC 262, in paragraphs 15 and 16 held as follows:- "15. ...The respondents, therefore, while filing the writ petition were bound to lay their whole claim having regard to the provisions contained in Order 2 Rule 2 of the Code of Civil Procedure or the principles analogous thereto. The very basis upon which the writ petitions were based was found to be incorrect. It was, thus, obligatory on the part of the respondents herein to question their orders of termination upon placing correct facts before the High Court. They did not choose to do so. They did not pray for and obtain any leave of the Court to raise the contention about the legality or otherwise of the orders of termination before an appropriate forum. Furthermore, their plea to the effect that they were entitled to continue in service was specifically rejected. In that view of the matter, the proceedings initiated before the Labour Court questioning the orders of termination passed against them by the appellants praying for their reinstatement with full back wages, in our opinion, were wholly misconceived. Such a plea was barred under the principles of res judicata. It is now well settled that the general principle of res judicata applies to an industrial adjudication.
16. In P.Kulothungan this Court held: (SCC p.72. 11)
"11. The principle of res judicata operates on the court. It is the courts which are prohibited from tying the issue which was directly and substantially in issue in the earlier proceedings between the same parties, provided the court trying the subsequent proceeding is satisfied that the earlier court was competent to dispose of the earlier proceedings and that the matter had been heard and finally decided by such court. Here the parties to the writ petition filed by the respondent in the Madras High Court and the industrial dispute were the same. The cause of action in both was the refusal of the appellant to allow the respondent to rejoin service. The Madras High Court was competent to decide the issue which it did with a reasoned order on merits and after a contested hearing. This was not a case where the earlier proceedings had been disposed of on any technical ground as was the case in Workmen v. Board of Trustees of the Cochin Port Trust and Pujari Bai v. Madan Gopal. The 'lesser relief' of reinstatement which was the subject-matter of the industrial dispute had already been claimed by the respondent in the writ petition. This was refused by the High Court. The correctness of the decision in the writ proceedings has not been challenged by the respondent. The decision was, therefore, final. Having got an adverse order in the writ petition, it was not open to the respondent to reagitate the issue before the Labour Court and the Labour Court was incompetent to entertain the dispute raised by the respondent and redecide the matter in the face of the earlier decision of the High Court in the writ proceedings".
22. Secondly, when the Union filed the writ petition, they were only concerned with the enhancement of pecuniary limit. But in that writ petition, it is the petitioner Management which had sought an interim injunction against ESI from recovering the amount. Therefore, it is not a case where they were being prejudiced by the order of the Court. On the other hand, knowing fully well that they are statutorily bound to make payments, not only for themselves but also on behalf of the workers, they have obtained an interim order and that interim order came to an end when the writ petition was disposed of on 23.12.1997. Even in the second writ petition filed by them, they only sought for an exemption order from the application of the Act. In the affidavit filed in support of the writ petition, they had claimed that pending their exemption application, it is not open to the respondent to recover the amount.
23. There was no pleading even in the second writ petition about prejudice being caused to them towards payment of either the contribution or the statutory interest. Therefore, for the first time, in the guise of attacking the revocation of illegal exemption order, they have come up with the plea for refund of the amount. Such writ petitions are not maintainable. There is no case with reference to the liability to pay under the ESI Act. When once that position is made clear, the interest component will automatically enure to the benefit of the ESI as held by the Supreme court in Goetze's case (cited supra).
24. This Court is of the view that the petitioner has not made out any case either to quash the demand notice or for refund of the amount already paid in the light of Jardine Henderson's case (cited supra) and the other decisions referred to therein.
25. In the light of the above, all the three writ petitions will stand dismissed. However, there will be no order as to costs. Consequently, connected miscellaneous petition is closed.