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CASE NO.: Appeal (civil)  1727 of 2005

PETITIONER: Employees State Insurance Corporation

RESPONDENT: Distilleries & Chemical Mazdoor Union & Ors.

DATE OF JUDGMENT: 17/07/2006

BENCH: Dr. AR. Lakshmanan & Lokeshwar Singh Panta

JUDGMENT: J U D G M E N T

WITH Civil Appeal No. 3002/2006 (@ SLP(C) No. 18215 of 2004) and Civil Appeal No. 3003/2006 (@ SLP(C) No. 4202 of 2005)

Dr. AR. Lakshmanan, J.

CIVIL APPEAL NO. 1727 OF 2005  

This appeal was filed by the Employees State Insurance  Corporation (in short the "ESIC") against the final judgment and  order dated 11.05.2004 passed by the High Court of Judicature  at Allahabad in C.M.W.P No. 6920 of 1986.  The High Court  disposed off the writ petition with certain directions which are in  challenge in this appeal by the ESIC.   

C.A. No.                        /2006 @ SLP (C) NO. 18215 OF 2004  Leave granted. This appeal was filed by the ESIC against the final judgment  and order dated 11.05.2004 passed by the said Court in C.M.W.P  No. 27607 of 1998 which was disposed off by the High Court with  certain directions which are in challenge in this appeal.  

C.A. No.                        /2006 @ SLP (C) NO. 4202 OF 2005  Leave granted. This appeal was filed by the ESIC against the final judgment  and order dated 16.09.2004 passed by the said Court in C.M.W.P  No. 32843 of 1997 which was disposed off by the High Court with  certain directions as covered by the earlier decision in C.M.W.P.  No. 6920 of 1986. Since parties to the above three appeals and the question of  law to be decided are the same, by consent of parties, all the  three matters were taken up together for final disposal.   Respective employer, the Trade Union and the State of U.P. have  been impleaded as party respondents in these appeals. We shall now take up the facts mentioned in civil appeal No.  1727 of 2005 for reference.  Since the facts are identical in other  matters we are not stating them in the other cases.   A writ petition No. 6920 of 1986 was filed by the Distilleries  and Chemical Mazdoor Union, Meerut against the State of U.P.,  the ESIC and the Company, namely, Central Distilleries and  Breweries Limited (CSBL) merged with Shaw Wallace Distilleries  Limited (SWDL) for seeking direction in the nature of mandamus  not to realise any contribution from the workmen of respondent

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No.2-herein.  The writ petition was admitted and an interim order was  passed stating that, meanwhile no deduction shall be made  towards the contribution of ESIC from the members of the  petitioners-Union under the ESI Act.     An application was filed on behalf of respondent No.2 herein  for vacation/suitable modification of the order, in order to  safeguard the interest of the Company keeping in view all the  provisions of the Act.  On 17.07.1987, the Court, after hearing all  the parties on the application of the company, confirmed the  previous order dated 19.05.1986 with the modification that "no  deduction shall be made from the employer or the employees  towards the contribution under the ESI Act provided the  respondent-employers shall pay the medical allowance to its  workmen." An application for modification of the order dated  17.07.1987 was filed by respondent No.2 herein to substitute the  words "provide" and "facility" instead of "pay" and "allowance".   The Court modified the above order dated 17.07.1987 as sought  for.  The writ petition remained pending and no contribution was  either deducted or deposited.  Management continued to provide  the medical facility to its workmen as directed by the Court,  which fact has not been disputed either by the ESIC or by the  workmen.  The ESIC did not file any counter affidavit/opposition  to the writ petition.  The writ petition was finally heard and  disposed off along with another writ petition No. 27607 of 1998  which had been filed by another employees Union. Another Union - Distilleries and Breweries Shramik Sangh,  Meerut filed writ petition No. 27607 of 1998 against the State  Government of U.P., ESIC and CDBL on the ground that  no  medical facility has been provided by the ESIC Authority in the  area and the exemption application filed before the Secretary of  Labour Department has not been decided and sought direction  from the Court not to realise any contribution from the workers  of the Union under the ESI Act and also sought exemption from  applicability of the Act for the employees of CDBL. An interim order was passed in the writ petition to the  extent\005.   "No recovery should be made under the ESI Scheme  from the salary of the workmen. Mr. Burman submits  on instruction that all the members of the Union are  agreed and have given undertaking through him that in  case the petition fails in the event amount recoverable  for the period during the interim order remain operative  shall be recovered from their salary in a suitable  monthly instalment."

No counter was filed by the State and the ESIC and the  interim order was confirmed in the said writ petition.  An  application for amendment of the writ petition was filed by the  Union in the said writ petition for extending the coverage to the  daily/contractor workers since they are also the members of their  Union.  The aforesaid amendment application was allowed.  The  CDBL filed an application for stay.  Final arguments were heard  by the High Court and a detailed judgment was passed in the  writ petition No. 6920 of 1986 and by the same order writ  petition No. 27607 of 1998 was also disposed off.   The Court has  ordered:   "Under these circumstances, we direct that no  contribution shall be realized from the employer or  employees till today towards E.S.I contribution, but  from today onwards they will start paying E.S.I  contribution and employee may avail benefit of the E.S.I  Scheme"

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Civil Appeal No.                /2006 @ SLP NO. 4202 OF 2005    This appeal filed against the final judgment and order dated  16.09.2004 in C.M.W.P. No. 32843 of 1997 was disposed off by a  learned Single Judge of the High Court.  The said writ petition  was disposed off on the ground that the controversy in this writ  petition is covered by the decision of the said Court rendered in  writ petition No. 6920 of 1986.  Considering the aforesaid  submission, learned Single Judge disposed off the writ petition  with a direction that no contribution shall be realised from the  employer or employees till today i.e. 16.09.2004, but from  16.09.2004 onwards they will start paying ESI contribution and  the employee may avail benefit of the ESI scheme.  With the  aforesaid observations, the writ petition was disposed off finally.          We heard Mr. C.S.  Rajan, learned senior counsel ably  assisted by Mr. V.J. Francis for the appellant-Corporation and  Mr. Anil Divan, learned senior counsel for the employers and also  heard learned counsel appearing for the respective employees  Union.  Mr. C.S. Rajan, learned senior counsel made the  following submissions:  a)      that the impugned order of stay granted earlier, and  later became part of the final order, does not amount  to postponing the enforcement of notification and,  therefore, is in clear violation of the principles laid  down by this Court in various decisions.  b)      that the impugned direction is not in contravention of  the principles laid down by this Court in Kanoria  Chemicals and Industries Ltd. And Others vs. U.P.  State Electricity Board and Others reported in  (1997) 5 SCC 772. c)      that the directions given by the High Court not to  deduct contributions are not contrary to the law laid  down by this Court in Gasket Radiators Pvt. Ltd. Vs.  Employees’ State Insurance Corporation and  Another reported in (1985) 2 SCC 68. d)      that the High Court has failed to appreciate that after  the dismissal of the main proceedings, the stay and  other interim orders granted therein comes to an end  and it is the duty of the Court to put parties in the  same position they would have been but for the  interim orders of this Court.   e)      that when once the main case has been disposed off  the parties are relegated to the original position and  the management is liable to pay the contributions of  the employer and the employees.  Further, the ESI Act  is a beneficial piece of social security legislation,  provisions of the Act will have to be construed with  that end in view to promote the scheme and avoid any  mischief.  f)      that the impugned order of stay granted earlier and  later became part of the final order, amounted to  postponing the enforcement of the notification and,  therefore, it is in clear violation of the principles laid  down by this Court in Employees’ State Insurance  Corpn. Vs. Kerala State Handloom Development  Corpn. Employees Union (CITU), Kannur, Dist.  Kannur, Kerala and Others, (1994) 1 SCC 268.  The  learned senior counsel has also relied on certain other  judgments of this Court.  g)      that the impugned direction of the High Court will  have far-reaching implications on the enforcement of  the provisions of the Act and will also give benefit to  those employers by themselves or through employees  to obtain stay orders from the High Court under  Article 226 of the Constitution of India and thereby

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assisting them indirectly and, therefore, this is a fit  case for interference by this Court under Article 136 of  the Constitution of India.  Counter affidavit has been filed by respondent No.1  Mazdoor Union and the respondent No.2-employer.   Mr. Anil Divan, learned senior counsel invited our attention  to the various orders passed by the High Court in the writ  petition on 19.05.1986, 17.07.1987, 09.03.1988 and the final  order passed by the High Court in the impugned judgment.  Our  attention was also drawn to the petition to vacate the ex-parte  order dated 19.05.1986 passed by the High Court with a prayer  to suitably modify to safeguard the interest of the management  with regard to the anomalies mentioned in the counter affidavit.   It is stated in the counter affidavit that the workmen got the  facilities contemplated under the ESI Act and that the workmen  did not get the medical allowance but the management pays  more in the form of its ESI contribution than what it would pay  in the form of medical allowance to the workmen.  It is also  stated that the distance of the dispensary from the factory is  nearly 8 kms. which is highly inconvenient for the workmen to  really avail of the facility intended to be provided to them.  In  view of the ex-parte order, the ESI deductions of the members of  the Union have been stopped and in compliance with the Court’s  Order the management was not deducting the ESI contributions  of its workmen.  However, the aforesaid order, according to the  learned senior counsel for the management, though has been  complied with is creating, inter alia, many anomalies. a)      The Court has not made it clear as to what shall be the  effect of the stoppage of the deductions on the statutory  liability of the answering respondent contemplated  under sections 40 and 41 of the ESI Act. b)      It has also not been made clear as to what shall be the  consequences if a workman dies or sustains injury  during the substance of the interim order as it is very  likely that the Corporation in such an event may take a  stand of not compensating the workmen for the injury  sustained as their contribution is not being paid to the  Corporation.  c) That the answering respondent is nevertheless  depositing 5 per cent contribution without any benefit  to its workmen and it is just and proper that so long as  the deductions are not being made the answering  respondent should also not be obliged to pay its E.S.I  contribution with regard to its workmen. With the above averments, the management employer filed  the petition to vacate the ex-parte order granted by the High  Court on 19.05.1986 or to suitably modify the same to safeguard  the interest of the management in regard to the anomalies  mentioned in the paragraphs (supra).  However, the High Court,  by its order dated 17.07.1987 instead of vacating the interim stay  confirmed the same with certain modifications that no deduction  shall be made either from the employer or from the employees  towards the contribution under the ESI Act.  The said order was  again modified on 09.03.1988 to the effect that the words  "payments" and "allowances" occurring in order dated  17.07.1987 shall be substituted by the words "provide" and  "facility".  That the appellant has not referred to or mentioned about  the two important orders that has been passed by the High  Court.  The said order would show that:  "The employer company have initially opposed the writ  petition filed by the Employees Union and had also  prayed for vacation of the ex-parte interim order dated  19.05.1986 passed by the High Court and/or prayed for  suitable modification of the order to safeguard the

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interest of the respondent company (employer), in view  of the provisions of the Act. However, the High Court  after hearing the parties, confirmed the interim order  dated 19.05.1986 and directed that no deduction shall  be made either from the employer or the employees  towards the contribution under ESI Act provided the  respondent employer shall pay medical allowance to its  workmen. Respondent No.2 again applied for  modification instead of medical allowance, Respondent  No.2 was providing/willing to provide medical facilities.  The High Court thereafter by order dated 09.03.1988  substituted the words "payment" and "allowances" with  "provide" and "facilities". Therefore with the modification  of the initial ex parte order dated 19.05.1986 by  subsequent orders dated 17.07.1987 and 09.03.1988,  the respondent No.2 was restrained from making  contribution to ESIC and was directed to provide  medical facilities to the employees.

ESIC was not providing medical facilities to the  employees in asmuch as the employees themselves  contented in the writ petition that the hospital of ESIC  was more than 12 kms away from the factory and even  ordinary medical facilities are not available to them and  it was therefore, impossible for them to avail of the  facilities."

It is submitted by learned senior counsel that under  compulsion of the above order, the employer company did, in  fact, provided medical facilities to the employees as per directions  of the High Court and that the employees were also fully satisfied  with the medical facilities provided by the employer and have  never raised any grievance till date.  It is also submitted that the  respondent-company has spent large amount of money in view of  the order of the High Court for providing medical facilities and  subsequently also paid medical allowances to the employees.  It  is stated that if the High Court had not passed the order of  injunction, the respondent-company would have contributed to  the ESIC instead of spending monies on the medical facilities and  allowances.  In these circumstances, Mr. Anil Divan submitted  that it would be unfair and unjust to make the employer to pay  contribution towards ESIC since in lieu of the contribution to  ESIC, the employer provided medical facilities as per the  directions of the High Court and it would cause extreme and  grave hardship to the employer if it is required to pay  contribution for the past for no fault of its own.  It is also  submitted that no party should suffer because of the orders of  the Court if duly complied with.  We see much force, substance and merit in the above  submission of the learned senior counsel. It is further pertinent to see that the first interim order was  passed by the High Court on 19.05.1986 and it was modified on  the application of the respondent No.2 on 17.07.1987 and  09.03.1988.  The interim orders were not challenged at all by the  ESIC and were thus accepted.  Despite the pendency of the  matter for 17 years, the ESIC did not file any reply or counter  affidavit in the writ petition nor filed any application for  variation/vacation of the stay as stated in the special leave  petition and in fact accepted the interim order.  It was, thus, not  disputed by the ESIC that the employees were not getting any  medical facilities from ESIC and they were in fact getting medical  facilities from the employer.   The High Court observed as follows:- "However, since there was an interim order of this  court dated 19.05.1986 as modified on 17.07.1987,

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which directed that no deduction shall be made from  the employer or employees towards contribution for  E.S.I, and in fact E.S.I facility was not availed by the  employees of respondent No. 3 hence in our opinion it  would be unfair if the respondent No.3 and its  employees are directed to pay contribution for the  period when they never got this facility. Learned  Counsel for respondent No.3 has stated that the  respondent No.3 was giving medical relief to its  employees on its own and no medical benefit was given  by the E.S.I Corporation. Under these circumstances,  we direct that no contribution shall be realized from  the employer or employees till today towards E.S.I  contribution, but from today onwards they will start  paying E.S.I Contribution and employees may avail  benefit of the E.S.I Scheme. With the above  observation, this petition is disposed off finally."

In our opinion, the High Court was fully justified in passing  the judicious order after considering the equities by directing the  employer and the employees to make ESIC contribution for the  future i.e. from the date of disposal of the writ petition and  should not bear with the liability for the past inasmuch as the  employees of the respondent No.2 has not availed any medical  facilities from ESIC and at the same time the employer was  providing the medical facilities due to interim order of the High  Court.  In these circumstances, the order passed by the High  Court, in our considered opinion, meets the ends of justice and  does not require interference by this Court under Article 136 of  the Constitution of India.  This apart it is important to note that in the past 17 years  when the interim orders passed by the High Court was enforced,  several employees have left/retired and were paid the entire  salary without any deduction and, therefore, it will be impossible  for the employer to recover the part of the employees contribution  in respect of the ESIC from the employees.   A separate counter affidavit was filed by the Mazdoor Union  in support of the employer.   As regards the question of law raised by learned counsel for  the ESIC regarding the view taken by the High Court, we are of  the opinion that the view taken by the High Court was on  account of the peculiar facts and circumstances of the case.  As  already noticed, the deduction of contribution of the members of  the Union had been specifically stayed by the High Court and the  same continued for a period of 18 years till the disposal of the  petition and that none of the members of the Union had availed  facilities of the ESI.  In our view, passing of the final order by the  High Court directing the payment of ESI contribution from the  date of the said judgment does not amount to postponing the  enforcement of notification and the same is also not in violation  of the principles laid down by this Court in the various  judgments referred to above.  There has been no postponement of  the enforcement of the notification in view of the peculiar  circumstances of the case, namely, the non-availability of the  facilities, non-deduction of contribution from the members of the  Union for 18 long years, provision of medical relief by the  Management.  The High Court had directed deduction of  contribution with effect from the date of the judgment, which, in  our opinion, is perfectly justified.  This apart, the members of the Union included casual,  temporary, contractual, badli workmen and it will be practically  impossible to find each and every member of the Union to recover  their contribution for the last 18 years and in fact some of the  workmen who would have been the employees during all these  years would have left, expired etc. and on account thereof also

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their contribution cannot be recovered.  The judgments relied on  by counsel for the appellant are distinguishable on facts and on  law.  The order passed by the High Court, in our opinion, is  perfectly justified in view of the facts and circumstances of the  case and it has been repeatedly held by this Court that such a  relief can be granted in the peculiar facts and circumstances of  the case and that there can be an exception as in the present  case and, therefore, it cannot be said that the directions issued  by the High Court are not correct or that they are contrary to the  power under Article 226 of the Constitution of India. The High Court, in our opinion, while disposing off the writ  petition filed by the Union has taken a just, pragmatic, fair and  judicious view after considering all the equities and facts and  circumstances of the case.  Extreme hardship might have been  caused to both the employer as well as the employee since no  medical facilities have been availed by the workmen from ESIC  and the employer had provided medical facilities to the workmen  as per the Court orders and also had paid medical allowances.   In the result, all the three appeals are dismissed and the  judgments passed by the High Court are affirmed.  However,  there will be no order as to costs.            The question of law is left open to be decided in an  appropriate case.