Saturday, September 26, 2009

Fertilizers & Chemicals Versus Regional Director, ESIC & Ors

Natural justice -  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 concerned persons are not the  employees of the petitioner, and that determination is given  even without hearing the concerned persons, it will be  clearly against the rules of natural justice.




              CIVIL APPEAL NOS. 917-918 OF 2004

 Fertilizers & Chemicals .... Appellant Travancore Ltd.


Regional Director, ESIC & Ors. .... Respondents    O R D E R

1. Heard learned counsel for the parties.

2. These appeals have been filed against the common  impugned judgment and order
dated 30.10.2002 of the High  Court of Kerala at Ernakulam whereby the appeal
filed by the  respondent-Employees State Insurance Corporation  (hereinafter for
short the 'ESIC') under Section 82(2) of  the Employees State Insurance Act,
1948 (hereinafter for  short 'the Act') has been allowed and the appeal filed by
the appellant herein has been dismissed.

3. It appears that a demand notice was sent against the  appellant company under
Section 45A of the Act in respect of  the employers contribution under the Act.
The appellant  challenged the said demand notice by filing a petition under 2

Section 75 of the Act before the Employees Insurance Court,  Alleppey. The
Employees Insurance Court in its order dated  4.2.1993 made the following

       "12. If reliance is made on the rational laid down by the High Court
in the abovesaid

       decisions it is very clear that the identities of the employees should be
an essential factor for bringing under coverage employees and paying
contribution in respect of them. Here, in this case, because of the peculiar

       of the work arrangement, at Depots, it is impossible to register an
employee engaged in the loading and unloading work under the ESI

       Scheme. If there is requirement, a group of headload workers will come
and they do the work collectively and payments are received on tonnage basis. On
behalf of this group engaged, one person will collect payment from the depot and
distribute the same among themselves. Such labourers coming on one day may not
be the same in next day. That is because of this peculiar nature of arrangement
among workers on the basis of understanding or agreement reached between trade
unions. After completing work in the depot they will go elsewhere and do
identical nature of work. If such is the nature of work it is quite improper to
compel the applicant to pay contribution on the payments given in various 3

      depots merely because they obtained the services of such workers. However
as a principal employer the applicant cannot absolve themselves from the
responsibility of covering such employees under the scheme because those
employees are rendering service to them. Therefore it would be appropriate that
in close co-operation with the ESI Corporation they should take effort at least

      now to ascertain the identities of those headload workers so as to cover
them also under the ESI Scheme. The ESI Corporation will also make immediate
arrangement for bringing all the loading and unloading workers in the depots
under the ESI Scheme. The ESI Corporation shall work out the modus operandi for
bringing these workers under the coverage. On such registration of the headload

      under the scheme, the applicant will pay contribution from the date of
passing of the

      order passed under Sec. 45-A of the ESI Act

      viz., 15.6.1989. The ESI corporation shall work out the contribution from
that date in

      respect of workers who are brought under scheme and who were found to be
working from

      that day onwards.

                    With the above observation and direction, this application
is disposed of."

4. Aggrieved against the said order dated 4.2.1993 of  the Employees Insurance
Court, both the appellant herein as 4

well as the Employees State Insurance Corporation filed  appeals before the High
Court under Section 82 of the Act.  The appeal filed by the respondent-ESIC has
been allowed and  the appeal filed by the appellant herein has been dismissed.
Hence, the appellant is before us by way of the present  appeal by special

5. It may be noted that in its petition before the  Employees Insurance Court,
the appellant herein only  impleaded the 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.

6. 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  concerned workmen
must be made a party. Hence, in our  opinion the appellant (petitioner before
the Employees  Insurance Court) should have impleaded atleast some of the
persons concerned, as respondents.

7. The case of the appellant was that, in fact, none of  the concerned persons
was its employee and it was difficult  to identify them.


8. 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
employer's 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  concerned person has to be heard before a determination is  made against
him that he is not an employee of the employer  concerned.

9. 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 concerned persons are not the  employees
of the petitioner, and that determination is given  even without hearing the
concerned persons, it will be  clearly against the rules of natural justice.

10. It may be seen that Section 75 of the Act does not  mention that 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 6

before passing any order by the authority/court.

11. In our opinion, wherever any petition is filed by an  employer under Section
75 of the Act, the employer has not  only to implead the ESIC but has also to
implead atleast  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 concerned parties in labour matters are the  employer and the
workers. The ESI Corporation will not be  in any way affected if the demand
notice sent by it under  Section 45A/45B is quashed.

12. 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
the ESI Corporation. The 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 7

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.

13. In the present case the workmen concerned were not  made parties before the
Employees Insurance Court, nor was  notice issued to them by the said Court.

14. Also, the order of the Employees Insurance Court  dated 4.2.1993, relevant
portion of which we have quoted, is  not a very happy one as no proper
determination has been  made therein as to whether the workmen concerned are the
employees of the appellant and whether they are entitled to  the benefit of the
Act. No doubt some observations have  been made that some labourers come on one
day but they may  not come on the next day. Having said so, a direction has
been given that the ESI Corporation will after making  inquiries about the
identities of the said workers will  register them and then extend the benefit
of the Act.

15. In our opinion, the Employees Insurance Court should  have itself made a
proper investigation of the facts after  getting evidence from the parties,
including the workmen  concerned, and after impleading them as party in the
petition, it should have determined the question as to 8

whether the persons concerned were the employees of the  appellant or not.

16. For the reasons stated above, we set aside the  impugned judgment and order
of the High Court as well as the  order dated 4.2.1993 passed by the Employees
Insurance Court  and remand the matter to the Insurance Court for deciding  the
same afresh after impleading some of the workmen, if not  all of them, or their
trade union in a representative  capacity. Needless to say, the Employees
Insurance Court  will grant an opportunity to all the parties, including the
alleged workmen, to lead documentary evidence or oral  evidence and thereafter
proceed in accordance with law.

17. We make it clear that nothing stated hereinabove  shall be construed as an
expression of opinion on the merits  of the controversy involved. All questions
of law and fact  are left open for the parties to be raised before the
Insurance Court.

           Appeals allowed. No order as to the costs.    .....................J.

                                               (MARKANDEY KATJU)


                                               (ASOK KUMAR GANGULY)



AUGUST 20, 2009


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