Judgment:
(Prayer: These writ petitions are filed under Articles 226 and 227 of the Constitution of India praying to quash the second respondent’s notification dated 16.3.2011 published in the State Gazette vide Annexure – C, and the fifth respondent’s consequential communication dated 13.5.2011 (Amendment) inspn vide Annexure-D and etc.)
1. In all these petitions, the challenge is raised to the State Government’s notification, dated 16.3.2011 issued under Section 1(5) of the Employee’s State Insurance Act, 1948 (‘ESI Act’ for short) extending the operation of the ESI Act to the educational institutions in Karnataka.
2. Sri K.V.Dhananjay, the learned counsel for the petitioners in W.P.No.28326-28328/2011 submits that the State Government has not consulted the Employees State Insurance Corporation (‘ESI Corporation’ for short) and has not taken the prior approval of the Central Government before issuing the impugned notification. He submits that the Government of Karnataka has merely acted in concert with other States like Jharkhand, Bihar, Rajasthan, Punjab, West Bengal and Andhra Pradesh.
3. The learned counsel submits that there is an acute shortage of the infrastructure to cater to the needs of the existing insures under the ESI Act. In the city of Bangalore, there are only two ESI hospitals – one in Indiranagar and the other in Rajajinagar. The ESI Corporation’s infrastructure is so very inadequate that it is in no position to take care of the future insures under the ESI Act. More efficacious alternatives are put in place by the petitioner-institutions. The medicare facilities introduced by some of the educational institutions are better and higher than those being given to the insures under the ESI Act.
4. He pressed into service the doctrine of desuetude. He submits that if the preliminary or intention notification is not acted upon for 6 – 7 years, then it is to be treated as a spent notification. It stands repealed expressly or impliedly.
5. He submits that the culpability in issuing the impugned notification is not at all explained. In para 16 of the rejoinder filed on behalf of the petitioners, this is what is stated:
“As such, the justification presented by the respondents to this Hon’ble Court is in the nature of ratifying a criminal activity. Therefore, as a matter of law and in consideration of sound public policy, this Hon’ble Court cannot and should not accept such justification in support of the impugned notification.
6. He points out that in the second intention notification, there is no reference to the obtaining of the approval of the Central Government. When the intentment notification refers to the consultation with the ESI Corporation, nothing prevented the State Government from stating that the Central Government’s approval is obtained. He also takes exception to the two incompatible intention notifications that too with respect to the same final notification. The discretion vested in the State Government does not clothe it with an unfettered discretion. He submits that the principle that a welfare oriented legislation should be liberally construed is not a principle of universal application.
7. Sri S. Basavaraj, the learned counsel for the petitioners in W.P,Nos.31457-31460/2011, W.P.Nos.40388-40393/2011, W.P.No.42946/2011 submits that the impugned order is marked by total non-application of mind. He submits that there are no ESI hospitals in many districts of the State. He submits that the impugned notification does not specify that the educational institutions include the unaided institutions also. He submits that he would therefore be content, if a clarification is issued to the effect that the impugned notification has no application for the employees of the unaided institutions.
8. Sri B.M.Arun, the learned counsel for the petitioners in W.P.Nos.44578-44579/2011 submits that the appropriate Government is required to give six months’ prior notice in the official gazette of its intentions. In the instant case, the prescribed procedure is not followed. He also submits that the petitioners have comprehensive medi-claim policy. The impugned notification is also ultra vires of Section 1(5), as the approval of the Central Government is not obtained. Annexure-R1 has no application for the impugned notification, as the pre-requirement of approval of the Central Government is not complied with. He submits that the notification, dated 16.3.2011 does not state that it is issued with the approval of the Central Government and that the ESI Corporation is consulted in the matter.
9. Sri Arun submits that the notification, dated 31.1.2004 (Annexure-R2) to the ESI Corporation’s counter, which is said to be containing the intention, only speaks of the educational institutions. On the other hand, the impugned notification; dated 16.3.2011 covers shops, hotels, restaurants, road motor transport establishments, cinemas, newspaper establishments, educational institutions and medical institutions. He would therefore contend that the notification, dated 10.2.2004 cannot be taken as the preliminary notification or the notification containing the intention for issuing the impugned final notification.
10. He also points out that the impugned final notification does not refer to the notification, dated 31.1.2004 containing the intention. He also brings to my notice that the 2004 notification of intention indeed speaks of the consultation with the ESI Corporation and approval of the Central Government, whereas the subsequent notification, dated 6.12.2010 is silent on the approval from the Central Government.
11. Sri Andrew Lobo appearing for Sri B.M.Arun brings to my notice that the counter is not filed by the Government of Karnataka. He submits that there are contradictions between the two intention notifications. As the first intention notification has the threshold coverage for 20 or more employees and the second notification is for 10 or more employees, for the reduction in the threshold coverage, the requirements of taking the prior approval of the central Government before issuing the final notification cannot be dispensed with.
12. Sri G.R.Mohan, the learned counsel for the petitioners in W.P.No.22828/2011 makes the submissions akin to the submissions made by the other learned advocates appearing for the petitioners in the connected petitions. He submits that the only amendment to Section 1(5) of ESI Act is that the period is reduced from 6 months to one month for the purpose of giving the notice of intention to extent the provisions of ESI Act to the other establishments, otherwise there are no changes in the requirements of consulting the ESI Corporation and obtaining the approval of the Central Government. The learned counsel submits that neither the employees of the educational institutions fall within the meaning of ‘employee’; as given in Section 2(9) of the ESI Act nor an educational institution falls within the meaning of ‘factory’ as given in Section 2(12) of the ESI Act.
13. Smt.M.P.Geethadevi, the learned counsel for the respondent ESI Corporation and its Regional office, Bangalore has raised a preliminary objection. None of the employees of the petitioner institutions, for those benefit the impugned notification is issued, have challenged the said notification, as obviously they are not aggrieved by the same. She further submits that the petitioning institutions have not made their employees or their representative bodies as the respondents to these petitions. She has relied on the following authorities for buttressing her submission that unless the employees or their representatives are made parties, the sustainability of the notification cannot be gone into;
i) (2009) 9 SCC 485 – Fertilizers’ and Chemicals Travancore Ltd v. ESIC.
ii) (2009) 10 SCC 671 – ESIC v. Bhakra Beas Management Board.
14. She has also raised the question as to who are the members of the first petitioner in W.P.Nos.31457-31460/2011 – Management of Independent CBSE Schools Association Karnataka. According to her, the impugned notification is sought to be quashed, as if it is in public interest. She has raised similar objections in respect of the other petitioners also.
15. She submits that the ESI Act is a socio-economic welfare oriented legislation. It is brought in with the avowed objective of securing the social and economic justice and for upholding the human dignity. The post independent legislation also goes a long way in effectuating the Directive principles of State Policy enshrined in Articles 38, 39, 41 and 42 of the Constitution. The learned counsel submits that the ESI coverage has a wise amplitude, a it embraces not only the medical benefits but also the maternity, disablement, dependent and death benefits.
16. She submits that the impugned notification is not exhaustive or enumerative. The expression ‘educational institutions’ used is of inclusive nature. She would contend that the said expression or term includes the unaided institutions also.
17. On the allegation of the inadequacy of the infrastructural facilities, it is her submission that ESI Corporation has tie-up with many hospitals including the super-speciality hospitals and referral hospitals. She submits that it runs many dispensaries and diagnostic centres. She submits that the similar notifications issued by other State Governments are upheld by their respective High Courts. In this regard, she brings to my notice the following authorities:
i) 2010 (II) LLJ 240 – CBSE School Managements Association v. State of Kerala.
ii) W.P.Nos.2471-3234 of 2007 and other cases. Do 4.1.2011 – Muthu Rathina Arangam Matriculation Schools v. Government of Pondicherry.
iii) W.P.Nos.2872 of 2011 and other connected petitions – Maharaja College of Arts and Science and others vs. The State of Tamil Nadu and another. Do 14.3.2011.
iv) Appeal No.1651 of 2010 – Ideal Private Schools Association Navodaya Vidyaniketan.
v) CWJC No.5052 of 2009 (High Court of Judicature of Patna) – Bihar Institute of Law v. State of Bihar. DD 18.5.2011.
vi) (2009) 1 LLN 351 – Maharishi Shiksha Samsthan v. State of UP.
18. She submit that the impugned notification is issued with the approval of the Central Government and after consulting the ESI Corporation.
19. She submits that the intention notifications are issued on 31.1.2004 (Annexure-R2) and 6.12.2010 (Annexure-R1). It is her submission that while reducing the threshold coverage for non-factory establishments, there is no need for the State Government to approach the Central Government again for its approval, as the Central Government by its letter, dated 15.10.2010 has conveyed its general approval for the issuance of the notification by the State Governments under Section 1(5) of the ESI Act for reducing the threshold of coverage for non-factory establishments. The said communication requires the State Government to issue the notification at the earliest under the intimation to the Central Government.
20. She points out that the vires of Section 1(5) of the ESI Act are not under the challenge in any of these petitions.
21. Sri B. Palakshaiah, the learned Central Government Standing Counsel submits that the Central Government has given the prior approval to the State Government for the issuance of the impugned notification. He submits that the change in the threshold coverage is for giving the benefits to more number of employees. He submits that the cause of action, if any, on account of the issuance of the impugned notification can accrue only to the individuals; there cannot be collective action by the managements in such matters.
22. Sri N.B.Vishwanath, the learned Additional Government Advocate appearing for the State submits that the impugned notification is in keeping with the spirit of Article 39(e) of the Constitution of India.
23. In the course of rejoinder, Sri S. Basavaraj submits that the issue of prior approval of the Central Government never fell for consideration in the cases decided by the other High Courts. What fell for consideration is only the word ‘otherwise’ used in Section 1(5) of the ESI Act.
24. Without prejudice to his submission that there has been no consultation with the ESI Corporation and no prior approval of the Central Government, Sri Basavaraj contends that even assuming that such a consultation took place and the approval was obtained, it was prior to the amendment, which has come into force with effect from 1.6.2010, reducing the time-gap from six months to one month for notifying the intention. He submits that the notification containing the intention itself is in respect of the institutions where 20 or more persons are employed. When the notification of intention is in respect of the institutions having atleast 20 employees, it cannot now be extended to establishments having less than 20 employees. If the number of employees is to be reduced from 20 t0 10, the fresh consultation and fresh approval have to precede the issuance of the notification under Section 1(5) of the said Act.
25. Sri Basavaraj submits that the letter, dated 15.10./2010 produced by the ESI Corporation is virtually in the nature of internal correspondence. By no stretch of imagination it can be taken as the approval of the Government for issuing the notification under Section 1(5) of the ESI Act reducing the threshold coverage from 20 to 10 employees in the case of educational institutions. He repeatedly submits that the ESI Corporation is making the mockery of the statutory provisions.
26. On hearing the learned advocates, the questions falling for consideration are being answered as seratum.
27. Question No.1; Whether the approval of the Central Government and the consultation with the ESI Corporation have preceded the issuance of the impugned notification?
28. The notification, dated 31.1.2004 (Annexure-R2) to the ESI Corporation’s counter contains the intention to extend the provisions of the ESI Act to the educational institutions. It refers to the consultation with the ESI Corporation and the approval of the Central Government.
29. Both the learned advocates appearing for the ESI Corporation and the Central Government admit of the position that the approval of the Central Government is obtained and that the ESI Corporation ahs been consulted.
30. The second notification of intention, dated 6.12.2010 (Annexure-R1) to the ESI Corporation’s counter appears to have been issued, as the State Government wanted to apply it to the smaller educational institutions also. The first notification of intention was for the institutions, where 20 or more persons are employed. The second notification of intention, dated 6.12.2010 was again for the educational institutions, but which had only 10 ore more employees. Now that is argued on behalf of some of the petitioners is that when the minimum number of employees is sought to be reduced from 20 to 10, fresh consultation has to take place. This argument does not commend itself to me. The first notification of intention, dated 31.1.2004 covers the educational institutions. The same came to be issued after obtaining the approval from the Central Government and after consulting the ERSI Corporation. For re-fixing the minimum number of employees of an institution for the purpose of applying the provisions of ESI Act, fresh consultation and fresh approval are not necessary.
31. Further, the second intention notification is issued on 06.12.2010. The same is preceded by the Central Government’s communication, dated 15.10.2010 indicating its general approval to the issuance of the notification by the State Governments to reduce the threshold of coverage for the non-factory establishments. It further requires the State Government to issue the final notification at the earliest. The intention and the earnestness of the Central Government in the matter are as clear as a day.
32. The non-mentioning by the State Government in the impugned notification that it has consulted ESI Corporation and that it has obtained the approval of Central Government does not render the notification void or unsustainable.
33. The very purpose of introducing amendment to the ESI Act by Act No.18 of 2010 is to cover more number of establishments at a short notice of one month. This well meaning legislative intendment cannot be diluted by holding that one more round of counseling has to take place with the ESI Corporation and fresh approval of the Central Government is to be obtained on the commencement of Act No. 18 of 2010.
34. It is beneficial to refer to the Apex Court’s judgment in the case of E.S.I.Corporation, Indore v. Siara (Smt.) and Anr. (1999 II LIJ 394) wherein it is held that the ESI Act being benevolent legislation cannot be permitted to be defeated by the technical objections; it should be interpreted in favour of the beneficiaries of the ESI Act. In the case of Employees State Insurance Corporation v. New Empire Tailors (1985 II LLN 101), the Division bench of the Andhra Pradesh High Court has expressed the considered view that the social perspective must play upon the interpretative process. In the case of Regional Director, Employees State Insurance Corporation, Madras v. South India Floor Mills (P) Ltd. and Ors. (SIR 1986 II LLJ 304 (SC)), the Apex Court has this to say” “In an enactment of this nature, the endeavour of the Court should be to interpret the provisions liberally in favour of the persons for whose benefit the enactment has been made.”
35. It is also profitable to refer to the Hon’ble Supreme Court’s decision in the case of Bombay Anand Bhavan Restaurant vs. Deputy Director, ESI Corporation and another reported in (2009) 9 SCC 61, para 20 of the said judgment reads as follows:
“20. The Employees’ State Insurance Act is a beneficial legislation. The main purpose of the enactment as the Preamble suggests, is to provide for certain benefits to employees of a factory in case of sickness, maternity and employment injury and to make provision for certain other matters in relation therein. The Employees’ State Insurance Act is a social security legislation and the canons of interpreting a social legislation are different from the canons of interpretation of taxation law. The courts must not countenance any subterfuge which would defeat the provisions of social legislation and the courts must even, if necessary, strain the language of the Act in order to achieve the purpose which the legislature had in placing this legislation on the statute book. The Act, therefore, must receive a liberal construction so as to promote its objects.”
36. The objections that the State Government has not obtained the prior approval of the Central Government and had no prior consultation with the ESI Corporation were available to the petitioners, when the two notifications of intentions, dated 31.1.2004 and 6.12.2010 were issued. Admittedly none of the petitioners filed the objections to the two preliminary or intention notifications. It is only when they file their objections and when their objections are rejected that they can maintain the writ petition. In this context, it is profitable to refer to the Madras High Court’s judgment in the case of Maharaja College of Arts and Science vs. The State of Tamil Nadu passed in W.P.No.2872/2011 and other connected petitions disposed of on 14.03.2011. The relevant portion of the said decision reads as follows:. “The petitioners who have not raised any particular objections cannot be now be heard to plead that either they were not heard or there was not satisfaction by the Government in finalizing the satisfaction.
37. Question No.2: Whether the time-gap between the intention notification and the final notification can exceed six month or one month, as the case may be?
38. The answer is emphatic ‘yes’. The statute does not prescribe any time limit for issuing the final notification. On the ground that the final notification is issued after 6-7 years of the issuance of the intentment no9tification, the former cannot be invalidated. When the statute itself does not contain any restriction, prohibition or embargo in the matter, this Court would not venture to prescribe any time-limit. That apart, no prejudice is caused to the petitioning association/institutions by the delay of 7 years. If anybody’s interest are affected by the inordinate delay, it is only the employees’ interest. The Madras High Court in the case of Maharaja College (supra) has laudably considered the ground of delay as follows:
“Further the plea that notification came to be issued after 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 delay. There cannot be said to be any prejudice by the said delay. On the other hand, the coverage such 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.”
39. The doctrine of desuetude also does not come to the rescue of the petitioners in any way. The said doctrine means that a statutory provision has become a dead letter on account of not only its disuse but also contrary practice for some long duration. The second factor of contrary practice or usage is not shown in the instant case. This Court finds it horrendously difficult to hold that there is implied or quasi withdrawal of the earlier notification of intention.
40. Question No.3:
Whether the employees of educational institutions can be brought within the purview of the ESI Act?
41. To answer this question, it is necessary to read Section 1(5) of the E.S.I. Act. It 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 gibing one month’s 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.”
42. The last word ‘otherwise’ used in Section 1(5) of the ESI Act has wide amplitude. The legislature, in exercise of its wisdom, has empowered the Government to bring in not merely the industrial, commercial or agricultural establishments, but also other establishments including the educational establishments. When the provisions of the ESI Act can be made applicable to educational establishments or the institutions, then the word ‘employee’ would accordingly apply to the employees working therein.
43. The word ‘otherwise’ used in Section 1(5) of the ESI Act cannot be given restrictive meaning by applying the principle of ejusdem generis. The legislature has closed all the escape routes by consciously using the word ‘otherwise’.
44. The question is therefore answered in the affirmative.
45. Question No.4: Whether the provisions of the ESI Act can be made applicable for the self-financing, that is, for the unaided institutions?
46. There is no legal impediment in bringing such institutions also within the purview of this Act, Section 1(5) of the ESI Act enables the State Government to extend the scheme to any establishments or class of establishments, unaided educational institutions being no exception. The educational institutions are at Sl.No.7 in the impugned notification. It reads as follows: “Educational institutions (including public, private, aided or partially aided) run by individuals, trustees, societies or other organization.”
47. The inclusive definition comes in only to expand the concept and not to restrict it. It have no hesitation in holding that the educational institutions include self-financing institutions too. The clarification sought by the learned advocate that the impugned notification has no application for the unaided educational institutions is being noticed but only to be rejected.
48. Question NO.5: Whether the petitioners are offering the better medical facilities than the ones being offered by the ESI Corporation?
49. The arguments advanced on behalf of the petitioners are that ESI Corporation’s infrastructure and network are awfully poor. The petitioners are offering better medical facilities to their employees.
50. This argument is controverted by the ESI Corporation by stating that the ESI Corporation has good infrastructure, that it has tie-up with many super speciality hospitals and referral hospitals and that it runs dispensaries and diagnostic centres.
51. Whether the petitioners have better medical facilities is a disputed question of facts, which cannot be resolved in the proceedings under Article 226 of the Constitution.
52. For two other reasons also, I refuse to answer this question. None of the employees or their representative bodies have filed these petitions, nor they are arraigned as the respondents to these petitions. In their absence, it is not desirable to decide whether the petitioning institutions have better medical facilities and that therefore their employees are required to remain attached to the petitioners’ schemes, coverage or alternatives.
53. Yet another reason for not answering this question is that the ESI Act is not merely for giving the medical benefits. The coverage under the ESI Act is for the multiple objects of giving sickness benefits, maternity benefits, disability benefits, dependent benefits, death benefits, etc.
54. If a concerned party is in a position to demonstrate that he/she/it is offering better benefits or facilities, it is always open to him/her/it to seek the exemption from the operation of the ESI Act before the Government invoking the relevant provisions contained in Chapter VIII of the ESI Act.
55. The judgments of other High Courts may not be binding on this Court, but they have persuasive value. When the identical notifications are already upheld by the other High Courts and when there is no reason for this Court to take a different view in the matter, these petitions are liable to be dismissed.
56. In the result, these petitions are dismissed, but by reserving the liberty to the petitioning institutions by file the exemption petitions before the Government, if they are so advised. No order as to costs.