O R D E R
1. The petitioner is Puducherry Slum Clearance Board represented by its Chief Executive Officer. They have filed the writ petition, seeking for a direction to the respondents 1 and 2 ESI from proceeding to take any action under the Employees State Insurance Act, 1948 as amended by Central Act, 29/1989 against the petitioner Board including recovery action by way of freezing its Bank Accounts and collecting the contribution amount till the third respondent viz., Union of India passes an order on the petitioner's application made under Section 90 of the ESI Act sent on various dates including 13.08.1997, 13.02.2002, 07.04.2006, 27.02.2007 etc., and the application made under Section 1(4) of the ESI Act dated 16.04.2007.
2. The writ petition was admitted on 22.05.2007. Pending the writ petition, this Court granted an interim injunction in M.P.No.1 of 2007. In M.P.No.2 of 2007, the petitioner Board sought for refund of the amount of Rs.2,98,566/- collected from the two current Accounts maintained by the petitioner Board with the State Bank of India, Main Branch, Puducherry. In that interim application, only notice was ordered.
3. It is an admitted fact that till date the petitioner Board had not got any exemption from the third respondent Union of India represented by the Secretary to Government, Union Territory of Puducherry. As per the averments made, the petitioner Board had sent representations dated 13.08.1997 and 13.02.2002 claiming exemption from the provisions of the E.S.I.Act in respect of the petitioner Board. By a communication dated 23.02.2006, the Labour Department, Puducherry informed them to submit a fresh application in the prescribed proforma for grant of exemption. Accordingly, the petitioner Board sent a fresh application along with the covering letter dated 07.04.2006. In the meanwhile, the Bank account of the petitioner Board was sought to be attached by the respondents ESI and through that a sum of Rs.2,98,566/- was recovered.
4. It is the contention of the petitioner Board that they are having good medical scheme so as to eligible to be exempted under the Act. In the meanwhile, the Joint Secretary of the Labour Department attached to the Government of Puducherry sent a communication dated 20.03.2007 stating that by virtue of Section 1(4) of the E.S.I.Act, the employees of the Board were governed by Central Civil Service (Medical Attendance) Rules, wherein, the benefits substantially similar or superior to the E.S.I.Act has been provided. It was also stated that the petitioner Board has been created by Slum Areas (Improvement and Clearance) Act, 1956 and incorporated by virtue of the Slum Areas (Improvement and Clearance)(Pondicherry Amendment) Act, 1986. Section 39 of the said Act has an overriding effect over anything inconsistent therewith in any other law. Therefore, E.S.I.Act is not applicable to the petitioner Board.
5. Subsequently, the petitioner sent a representation dated 25.04.2007 to the Labour Department, Government of Puducherry, stating that by the amendment made to Section 1(4) of the E.S.I.Act, 1948, wherein by the introduction of the proviso, the provisions of the E.S.I.Act will not apply to any 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. Therefore, they sought for a declaration that the provisions contained in the E.S.I.Act will not apply to the petitioner Board and request for an appropriate notification. When there was no reply from the Government, the writ petition came to be filed as noted already.
6. Mr.T.P.Manoharan, learned counsel for the petitioner Board submitted that by virtue of the introduction to Section 1(4) of the Act, it is necessary to make any application claiming exception under Section 90. He further submitted that the Board has framed Rules providing for medical assistance. The C.C.S.(MA)Rules are more superior or similar to the benefits provided under the E.S.I.Act. It is further claimed that the Trade Union which is functioning in the petitioner establishment had sent a letter dated 10.01.2007 stating that the members are not willing for coverage by E.S.I.Act. He further submitted that the Union Territory for reasons best known had not passed any order. In the meanwhile, the respondents ESI are threatening for recovery action. Therefore, until the Union of India passes an order, they should not be allowed to recover amounts allegedly due and payable to the E.S.I. It was further submitted that even after the introduction of Section 91AA by the latest amendment by Central Act 18/2010, wherein the Central Government alone is the appropriate Government to grant exemption. It is contended that nothing bars the State Government from granting a declaration under Section 1(4) as now the exemption is not claimed under Chapter VIII of the E.S.I.Act and since proviso to Section 1(4) was brought in before the present amendment which came into effect from 01.06.2010, there is no impediment for the grant of directions prayed for.
7. In the light of the above contentions, the following questions arise for consideration by this Court:
i) Whether the petitioner Board is an establishment belonging to or under the control of the Government?
ii)Even for applying the exemption under proviso to Section 1(4), whether any exemption should be formerly given by the appropriate Government?
iii)Whether a direction to the third respondent can be given in the light of insertion to Section 91AA of the Act?
iv)Whether any exemption can be granted retrospectively for the past period?
8. With reference to the first question that the Puducherry Slum Clearance Board is an establishment belonging to or under the control of the Government, it must be noted that the petitioner themselves have stated in their application that it is created by the Slum Areas (Improvement and Clearance) Act, 1956 which is a separate enactment and therefore, it is an independent body.
9. Under Section 2(24) of the E.S.I.Act, if certain words are not defined for use under the E.S.I.Act but were defined under the Industrial Disputes Act, it will have the similar meaning assigned to them in the I.D.Act. Section 2(24) may be usefully extracted below: "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."
10. The term 'establishment' belonging to or under the control of the Government is not defined in the E.S.I.Act. But the said term more or less similar term appears in Section 2(a)(i) of the I.D.Act, wherein an Industry which is carried on by or under the authority of the Central Government is referred to.
11. The said definition came up for consideration by the Supreme Court in more than one decision. When a similar language is found under the Contract Labour Abolition and Regulation Act, 1970, the Supreme Court in SAIL v. National Union Waterfront Workers reported in 2001 (7) SCC 1 dealt with the definition of the word "appropriate Government". That case was referred to by the Supreme Court in Tata Memorial Hospital Workers Union v. Tata Memorial Centre reported in 2010 (8) SCC 480, wherein it held in paragraphs 40 to 47 as follows: "40.The question concerning interpretation of the concept of 'appropriate Government' in Section 2(1)(a) of the CLRA Act, 1970 and in Section 2(a) of the Industrial Disputes Act, 1947 was subsequently referred to a Constitution Bench in SAIL v. National Union Waterfront Workers1. The Constitution Bench examined the relevant provisions and the judgments including those in Ramana Dayaram Shetty212 and Ajay Hasia313. The question decided by the Constitution Bench of this Court in Ajay Hasia13 was with respect to Jammu and Kashmir Regional Engineering College, Srinagar, which was registered as a society under the Jammu and Kashmir Registration of Societies Act, 1898 and wherein it was held to be State within the meaning of Article 12 of the Constitution.
41. In SCC para 37 of the judgment in SAIL1, this Court held that merely because the government companies, corporations and societies are instrumentalities or agencies of the Government, they do not become agents of the Central or the State Government for all purposes. The Court held as follows: (SCC p.27) "37. We wish to clear the air that the principle, while discharging public functions and duties the government companies/corporations/ societies which are instrumentalities or agencies of the Government must be subjected to the same limitations in the field of public law - constitutional or administrative law - as the Government itself, does not lead to the inference that they become agents of the Centre/State Government for all purposes so as to bind such Government for all their acts, liabilities and obligations under various Central and/or State Acts or under private law."
42. In SCC para 38, this Court thereafter held as follows: (SAIL case1, SCC pp.27-28)
"38. From the above discussion, it follows that the fact of being an instrumentality of a Central/State Government or being State within the meaning of Article 12 of the Constitution cannot be determinative of the question as to whether an industry carried on by a company/corporation or an instrumentality of the Government is by or under the authority of the Central Government for the purpose of or within the meaning of the definition of appropriate Government in the CLRA Act. Further, the definition of establishment in the CLRA Act takes in its fold purely private undertakings which cannot be brought within the meaning of Article 12 of the Constitution. In such a case, how is appropriate Government determined for the purposes of the CLRA Act or the Industrial Disputes Act? In our view, the test which is determinative is: whether the industry carried on by the establishment in question is under the authority of the Central Government. Obviously, there cannot be one test for one part of the definition of establishment and another test for another part. Thus, it is clear that the criterion is whether an undertaking/instrumentality of the Government is carrying on an industry under the authority of the Central Government and not whether the undertaking is an instrumentality or agency of the Government for purposes of Article 12 of the Constitution, be it of the Central Government or the State Government." (emphasis supplied)
43. In SCC para 39, this Court further held as follows: (SAIL case1, SCC p.28)
"39. ... To hold that the Central Government is the appropriate Government in relation to an establishment, the court must be satisfied that the particular industry in question is carried on by or under the authority of the Central Government. If this aspect is kept in mind it would be clear that the Central Government will be the appropriate Government under the CLRA Act and the ID Act provided the industry in question is carried on by a Central Government company/an undertaking under the authority of the Central Government. Such an authority may be conferred, either by a statute or by virtue of the relationship of principal and agent or delegation of power. Where the authority, to carry on any industry for or on behalf of the Central Government, is conferred on the government company/any undertaking by the statute under which it is created, no further question arises. But, if it is not so, the question that arises is whether there is any conferment of authority on the government company/any undertaking by the Central Government to carry on the industry in question. This is a question of fact and has to be ascertained on the facts and in the circumstances of each case."
44. In para 40 of SAIL case the Constitution Bench states that it shall refer to the cases of this Court on this point and thereafter examines in paras 41 to 44 the earlier referred judgments in Heavy Engg. Mazdoor Union, Hindustan Aeronautics, Rashtriya Mill Mazdoor Sangh and Food Corporation of India.
45. In para 41 of the judgment in SAIL case, the Constitution Bench examined the judgment in Heavy Engg. Mazdoor Union case. In Heavy Engg. Mazdoor Union2 the Court had observed that an inference that the corporation was the agent of the Government might be drawn where it was performing in substance governmental and not commercial functions. The Constitution Bench disagreed with the distinction thus made between the governmental activity and commercial function of government companies. Barring this limited disagreement, however at the end of para 41 the Constitution Bench observed that it is evident that the Court correctly posed the question whether the State Government or the Central Government was the appropriate Government and rightly answered it. In para 42, the Constitution Bench examined the judgment of Hindustan Aeronautics Ltd.7 The Constitution Bench noted that the judgment in Heavy Engg. Mazdoor Union case2 was followed in Hindustan Aeronautics7 and it had taken note of the factor that if there was any disturbance of industrial peace in Barrackpore, the appropriate Government concerned for the maintenance of internal peace was the West Bengal Government. The Court observed that the factors which weighed with the Court could not be said to be irrelevant.
46. In para 43 of SAIL case the Constitution Bench examined the judgment in Rashtriya Mill Mazdoor Sangh wherein although an authorised Controller was appointed to replace the management of the respondent Model Mill, Rashtriya Mill Mazdoor Sangh8 judgment had held that the undertaking could not be held to be carried on under the authority of the Central Government. The Constitution Bench quoted the observations from the judgment with approval. In para 44 the Constitution Bench referred to the Food Corporation of India case. It noted that Food Corporation of India judgment had followed the judgments in Heavy Engg. Mazdoor Union2 and Rashtriya Mazdoor Mill Sangh8 to hold that the State Government was the "appropriate Government" pertaining to the regional offices and warehouses of FCI under the CLRA Act. At the end of this para the Constitution Bench concluded we find no illegality either in the approach or in the conclusion arrived at by the court in these cases. (emphasis supplied)
47. In paras 45 and 46, thereafter once again the Constitution Bench turned to the judgment in Air India case111 and in SCC para 46 it concluded as follows: (SAIL case1, SCC pp.32-33)
"46. We have held above that in the case of a Central Government company/undertaking, an instrumentality of the Government, carrying on an industry, the criteria to determine whether the Central Government is the appropriate Government within the meaning of the CLRA Act, is that the industry must be carried on by or under the authority of the Central Government and not that the company/undertaking is an instrumentality or an agency of the Central Government for purposes of Article 12 of the Constitution; such an authority may be conferred either by a statute or by virtue of the relationship of principal and agent or delegation of power and this fact has to be ascertained on the facts and in the circumstances of each case. In view of this conclusion, with due respect, we are unable to agree with the view expressed by the learned Judges on interpretation of the expression appropriate Government in Air India case." (emphasis supplied)
12. After referring to various judgments on the above issue, the Supreme Court in the same judgment in paragraphs 59 to 63 held as follows:
"59.As far as an industry carried on by the Central Government is concerned, there need not be much controversy inasmuch as it would mean the industries such as the Railways or the Posts and Telegraphs, which are carried on departmentally by the Central Government itself. The difficulty arises while deciding the industry which is carried on, not by but under the authority of the Central Government. Now, as has been noted above, in the Constitution Bench judgment in SAIL1, the approach of the different Benches in the four earlier judgments has been specifically approved and the view expressed in Air India111 has been disagreed with. The phrase under the authority has been interpreted in Heavy Engg.2 to mean pursuant to the authority such as where an agent or servant acts under authority of his principal or master. That obviously cannot be said of a company incorporated under the Companies Act, as laid down in Heavy Engg. Mazdoor Union case2. However, where a statute setting up a corporation so provides specifically, it can easily be identified as an agent of the State.
60.The judgment in Heavy Engg. Mazdoor Union2 observed that the inference that a corporation was an agent of the Government might also be drawn where it was performing in substance governmental and non-commercial functions. The Constitution Bench in SAIL case1 has disagreed with this view in para 41 of its judgment. Hence, even a corporation which is carrying on commercial activities can also be an agent of the State in a given situation. Heavy Engg.2 judgment is otherwise completely approved, wherein it is made clear that the fact that the members or Directors of corporation and he is entitled to call for information, to give directions regarding functioning which are binding on the Directors and to supervise over the conduct of the business of the corporation does not render the corporation an agent of the Government. The fact that entire capital is contributed by the Central Government and wages and salaries are determined by it, was also held to be not relevant.
61.In Hindustan Aeronautics7 the fact that the industrial dispute had arisen in West Bengal and that the appropriate Government in the instant case for maintaining industrial peace was West Bengal was held to be relevant for the Governor of West Bengal to refer the dispute for adjudication. In Rashtriya Mill Mazdoor case8 the fact that the authorised Controller was appointed by the Central Government to supervise the undertaking was held as not making any difference. The fact that he was to work under the directions of the Central Government was held not to render the industrial undertaking an agent of the Central Government.
62.In Food Corporation of India010 in spite of the fact that FCI is a specified industry under Section 2(a)(i) of the ID Act, 1947, this Court considered the definition of appropriate Government in the CLRA Act, 1970, and the State Governments were held to be the appropriate Governments for the regional offices and the warehouses situated in various States wherein the demand for regularisation of the services under the CLRA Act had arisen.
63.The propositions in SAIL1 are to be seen on this background viz. that merely because the government companies/corporations and societies are discharging public functions and duties that does not by itself make them agents of the Central or the State Government. The industry or undertaking has to be carried under the authority of the Central Government or the State Government. That authority may be conferred either by a statute or by virtue of a relationship of principal and agent, or delegation of power. When it comes to conferring power by statute, there is not much difficulty. However, where it is not so, and whether the undertaking is functioning under authority is a question of fact. It is to be decided on the facts and circumstances of each case."
13. Further, this Court had an occasion to consider the scope of Section 32 (iv) of the Payment of Bonus Act, 1965 in relation to the Puducherry Housing Board which is a sister concern of the petitioner Board. 14. Section 32(iv) of the Bonus Act reads as follows:-
"32. Nothing in this Act shall apply to (i) to (iii) omitted
(iv) employes employed by an establishment engaged in any industry carried on by or under the authority of any department of the Central Government or a State Government or a local authority."
15. Taking advantage of the said exemption, it was contended by the Puducherry Housing Board that they are not bound to pay bonus under the Payment of Bonus Act. In this context, the Supreme Court in Housing Board of Haryana v. Haryana Housing Board Employees Union and others reported in 1996 (1) LLN 1 dealt with the scope of Section 32(iv) and to the exact meaning of the term local authority. In that case, the Supreme Court rejected the contention that the Haryana Housing Board was a local authority and hence exempted by virtue of S.32(iv) of the Bonus Act. In Paras.35 and 36 at page 7, of the said judgment, the Supreme Court dealt with that issue, which reads as follows:
"35.It will be seen that the Legislature itself has given the Board limited status of 'local authority' only for the purpose of Land Acquisition Act as also the parent Act, namely, the Haryana Housing Board Act, 1971, under which the Board has been constituted and established. The Legislature has given this status only fictionally as the Board, in reality, is not a 'local authority' and that too only for the limited purpose. The Legislature could well have given this status to the Board for purposes of other Acts also including the Payment of Bonus Act but this has not been done and consequently the Board, cannot, specially in view of what has been stated above, be treated as "local authority", under the Payment of Bonus Act.
36. There does not, therefore, appear to be any reason to differ from the view expressed by the learned Single Judge or by the Division Bench (in appeal) of the Punjab and Haryana High Court that the Board is not a 'local authority' as it does not possess the attributes indicated by this Court in the case of R.C.Jain (1981 (1) LLN 569) (vide supra)."
16. Therefore, in the light of the Supreme Court judgment, the plea made by the Puducherry Housing Board was rejected by this Court vide judgment in Pondicherry Housing Board Employees' Union v. Government of Pondicherry reported in 2009 (3) L.L.N.473. Therefore, it cannot be held that the petitioner Board is covered by the proviso to Section 1(4) so as to be eligible for getting exemption under the E.S.I.Act. Section 1(4) of the E.S.I. Act only formerly grants declaratory relief. But to get the benefit under the proviso to Section 1(4) as it is saddle with riders namely that the employees of such establishment must be in respect of benefits substantially similar or superior to the benefits provided under the E.S.I.Act, they should necessarily approach the appropriate Government under Chapter VIII of the E.S.I.Act. A definition under the Section found in the Act by itself cannot be treated as power to grant exemption. Though by amendment made by Central Act, 29 of 1989, the word 'government' found under Section 90 has been removed and the power to grant exemption in respect of an establishment belonging to local authority vest only with appropriate Government and the petitioner Board being local authority must necessarily file an application to the appropriate Government for the grant of exemption. That was the reason why the petitioner themselves have moved the Government for such a relief and the present prayer is only for a direction to that effect. The requirement of moving the appropriate Government is all the more necessary because before grant of exemption, the Government is mandate to consult E.S.I.Corporation and the E.S.I.Corporation can always convince the Government that the benefits granted by an applicant is neither substantially similar nor superior to the benefits provided under the E.S.I.Act. Therefore, the second question must be answered against the petitioner.
17. With reference to the third question, even during the pendency of various correspondence between the parties and the pendency of the writ petition, the Parliament has amended the E.S.I.Act by Central Act 18 of 2010. The new provision in Section 91AA reads as follows:-
"91AA. Notwithstanding anything contained in this Act, in respect of establishments located in the States where medical benefit is provided by the Corporation, the Central Government shall be the appropriate Government".
18. Therefore, any exemption, henceforth can be granted only by the Central Government and not by the third respondent, which is only Union Territory of Pondicherry. Though the term 'appropriate Government' is defined under Section 2(1) to include both Central and State Government by virtue of Section 91AA, it is the Central Government alone which can grant exemption. The Union Territory of Pondicherry is neither a State Government nor a Central Government under Section 2(1) and therefore, they should move the Central Government for exemption. Therefore, the third question also must be answered against the petitioner Board.
19. Further Section 91A earlier empowering the Government to grant exemptions either prospectively or retrospectively has been amended and henceforth any exemption order can be granted prospectively by the Government. Therefore, if at all the petitioner Board seeks for any future exemption that has to be done only by the Central Government that too it can be done only prospectively. Hence the fourth question stood answered against the writ Petitioner Board.
20. In the light of the above, the relief claimed by the petitioner Board cannot be countenanced by this Court. Hence, the writ petition stands dismissed. No costs. Consequently, connected miscellaneous petitions are closed.