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CASE NO.: Appeal (civil)  313 of 2005

PETITIONER: Employees State Insurance Corporation            

RESPONDENT: All India I.T.D.C. Employees Union & Ors.        

DATE OF JUDGMENT: 24/03/2006

BENCH: ARIJIT PASAYAT & TARUN CHATTERJEE

JUDGMENT: J U D G M E N T With C.A. No. 315 OF 2005

ARIJIT PASAYAT, J.

                        These two appeals are inter-linked and are, therefore,  taken up for disposal together.  Challenge in these appeals is  to the legality of the judgment rendered by a Division Bench of  the Rajasthan High Court at Jodhpur confirming the order  passed by a learned Single Judge, who while dismissing the  writ petition filed by the respondent no.1 (hereinafter referred  to as the ’Union’) in Civil Appeal No.313 of 2005 gave certain  directions.  The judgments in the said case were followed in  the connected Civil Appeal No.313 of 2005.

       Background facts in a nutshell are as follows :

       Pursuant to the amendment made in the provisions of  the Employees’ State Insurance (Central) Rules, 1950 (in short  the ’Rules’) framed under Employees State Insurance Act,  1948 (in short the ’Act’) vide Notification dated 23.12.1996  which became effective with effect from the date 01.01.1997,   the employees who were drawing monthly salary of Rs.6,500/-  which limit was earlier Rs.3,000/- were required to make  contributions at the enhanced rate of 1.75 % in place of the  earlier figure of 1.5%. The employers contribution was  increased from 4% to 4.75%.  In view of the Notification those  employees who were drawing salary upto Rs.6,500/- were  required to secure new insurance cards after filing requisite  declaration. The concerned employer notified the employees  accordingly. The Union challenged the employer’s notice on  the ground that in view of proviso to Section 1(4) of the Act,  the amendment as brought in by the Notification had no  application to the concerned employees. However, prayer in  the writ petition was to grant exemption. In the case of ITDC  which were subsequently taken over by Laxmi Vilas Palace  Hotel, Udaipur, stand was that the employer-hotel was a  Government of India undertaking and is State within the  meaning of Article 12 of the Constitution of India (in short the  ’Constitution’). According to the Union, the applicability of the  Act cannot be extended to the employees of the said  establishment.  Therefore, the demand for payment for  contribution from the concerned employees to be deducted  from their salaries is not warranted.  The Employees State  Insurance Corporation (in short the ’Corporation’) raised  preliminary objections as regards the maintainability of the  writ petition. It was pointed out that since the Notification in  question was issued by the Union of India, without making the

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Union of India as a party the petition was not maintainable.  A  further plea was taken that in view of the alternative remedy  available under the Industrial Disputes Act, 1947 (in short the  ’ID Act’) the writ petition was not maintainable. Learned Single  Judge found the writ petition to be not maintainable in view of  the alternative remedy provided.  It, however, gave following  direction:

       "It would be appropriate to direct the  E.S.I. Corporation to consider that since the  petitioners have not availed the facility of E.S.I.  from then they should waive the realization of  the contribution for this period from the  petitioners in the aforesaid circumstances and  the necessary orders in this regard would be  issued by the E.S.I. Corporation."

                                               (Underlined for emphasis)

       This direction was given on the basis that operation of  the Notification was stayed by order dated 26.2.1996 in the  writ petition. Both the Corporation and the Union filed appeals  before the Division Bench.  By the impugned judgment the  Division Bench gave the following directions:

"1.     The deduction of the employees’  contribution will be made by the employer and  along with the employees’ contribution,  employer’s contribution shall be deposited with  the ESI Corporation. 2.      Such deposits shall be kept in separate  account by the ESI Corporation for a period of  three months. 3.      If within the said period of three months,  any dispute is raised about the applicability of  the Act to the establishment in question by the  employer or employees before the appropriate  forum, the said arrangement of regular  deposits of the contribution and maintenance  of the separate account by the Corporation  shall continue until the adjudication of that  dispute by the said forum. 4.      However, if no such application is made  within three months, the amount of  contribution of the employee’s and the  employer’s so deposited with the corporation  shall be appropriated to the normal fund in  accordance with the law. 5.      If any such dispute is raised and the  petitioners succeed, the refund of the amount  can appropriately be ordered at the end of  such adjudication."

In the appeal filed by the Corporation the aforesaid  directions were given, while the appeal filed by the Union was  dismissed.  In the connected case the writ petitioner was the  J.K. White Cement Mazdoor Sangh (in short the ’Sangh’) and  the decision which forms the challenge in the Civil Appeal  No.313 of 2005 was followed.

Mr. C.S. Rajan, learned counsel for the appellant  submitted that merely because of the order of stay was  granted, there was no bar on the Corporation recovering the  amounts.  The High Court’s order virtually means that the  Notification has to operate prospectively.  Such a direction

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cannot be given by the High Court.

Learned counsel for the respondents i.e. Union and the  concerned employers supported the order. It was their stand  that because of the stay order, recovery was not made and,  therefore, the direction given by the High Court needs no  interference.

The question relating to the jurisdiction of the High Court  to direct that statute shall operate prospectively is no longer  res integra.  A few decisions of this Court can be noted by way  of illustration.

In Kanoria Chemicals and Industries Ltd. and others v.   U.P. State Electricity Board and Others (1997(5) SCC 772 ), it  was observed. "11. \005\005.it is equally well settled that an order  of stay granted pending disposal of a writ  petition/suit or other proceeding, comes to an  end with the dismissal of the substantive  proceeding and that it is the duty of the court  in such a case to put the parties in the same  position they would have been but for the  interim orders of the court. Any other view  would result in the act or order of the court  prejudicing a party (Board in this case) for no  fault of its and would also mean rewarding a  writ petitioner in spite of his failure. We do not  think that any such unjust consequence can  be countenanced by the courts. As a matter of  fact, the contention of the consumers herein,  extended logically should mean that even the  enhanced rates are also not payable for the  period covered by the order of stay because the  operation of the very notification  revising/enhancing the tariff rates was stayed.  Mercifully, no such argument was urged by the  appellants. It is ununderstandable how the  enhanced rates can be said to be payable but  not the late payment surcharge thereon, when  both the enhancement and the late payment  surcharge are provided by the same  notification-the operation of which was stayed.  12. As has been pointed out by S. C. Agrawal,  J., speaking for a three-Judge Bench in Shree  Chamundi Mopeds Ltd. v. Church of South  India Trust Assn. [(1992) 3 SCC 1] : (SCC p. 9,  para 10)  "While considering the effect of  an interim order staying the  operation of the order under  challenge, a distinction has to be  made between quashing of an order  and stay of operation of an order.  Quashing of an order results in the  restoration of the position as it  stood on the date of the passing of  the order which has been quashed.  The stay of operation of an order  does not, however, lead to such a  result. It only means that the order  which has been stayed would not be  operative from the date of the  passing of the stay order and it does  not mean that the said order has

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been wiped out from existence."  

In Union of India and Another v.  Murugan Talkies  (1996  (1) SCC 504) it was observed as follows:   "3. It is contended for the respondents that the  High Court has granted the relief taking into  consideration that some workmen had retired  and it would be inequitable to deduct from the  meager wages of existing employees with  retrospective period.  Therefore, the High Court  directed deduction of their share from the date  of the judgment.  It is needless to mention that  since some of the workmen have already  retired and from some existing workmen  deduction from date of enforcement of the  notification would cause great hardship to  them, so it cannot be made to bear the burden  of their contribution with retrospective effect  from the date of the notification towards their  share of contribution.

4.      To that extent, the order of the High  Court is upheld.  As regards the liability of the  owners of the theaters who approached the  High Court, the operation of the notification  had stayed at their instance.  We find that the  High Court was wholly unjustified in granting  the same relief to these owners/licensees.   After their writ petitions were dismissed, they  were to bear the liability from the date of the  enforcement of the notification as held by this  Court. It is, therefore, necessary that from the  date on which the respective owners of the  theaters or the licensees, who had filed the  writ petition in the High Court, are made liable  to deposit their share of contribution towards  provident fund account under the scheme."

In Employees’ State Insurance Corpn.  v. Kerala State  Handloom Development Corpn. Employees Union (CITU),  Kannur, Dist. Kannur, Kerala and others  1994(1) SCC 268 it  was observed as follows :

"3.     We are of the view that the High Court fell  into patent error in postponing the date of the  operation of the notification.  The notification,  amending the Rules, was legislative act.  The  amendment of the Rules being a delegated  legislation, the High Could could not have  interfered with the date of operation of the  notification."

In U.P. State Sugar Corporation and Another  v.  Mahalchand M. Kothari and Others (2005(1) SCC 348) it was  observed in paras 35, 36 & 37  as follows:

"35.            xxx             xxx                     xxx       During course of the writ petition filed by the  owner of the sugar mill in which the  constitutional validity of the Ordinance/Act  was challenged, a stay order, on the limited  terms and conditions, was passed on 9.7.1971.   The terms and conditions of the order  reproduced above, restored the de jure

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possession of the sugar mill to the erstwhile  owner but de facto possession and  management of the sugar mill was allowed to  remain undisturbed with the Receiver  although with limited powers to him.  The  Receiver was specifically allowed in accordance  with Term 3 of the stay order to sell sugar,  molasses and other waste products. By virtue  of the order of stay passed by the High Court,  during pendency of the writ petition, the  Receiver appointed under the Act of 1950,  continued to manage the sugar mill subject to  the ultimate result of the writ petition.  The  writ petition ultimately came to be dismissed  on 3.5.1979 and the stay order containing the  terms and conditions passed on 9.7.1971  stood automatically vacated.  The natural  consequence was restoration of full operation  of the provisions of the Ordinance/Act as was  originally passed.  In accordance with Section  3 of the Act, the sugar mill stood transferred  and vested in the Corporation from the  appointed date 3.7.1971.  On vacation of the  stay order with effect from the appointed day  3.7.1971, the operation of the Ordinance/Act  was revived.  The liability arising from breach  of contract committed by the Receiver was not  of the Corporation.  It was an obligation  attached to the property of the sugar mill  which was under the management of the  Receiver, initially under the 1950 Act and  continued under the order of stay passed by  the High Court.  Since the liability towards  breach of contract was attached to the sugar  mill under the management of the Receiver,  the Corporation in whom title of the sugar mill  stands vested under Section 3 of the Act  cannot avoid the liability \026 it being a burden  on the said property and recoverable from it.

36.     It is of no importance or consequence  that actual or de facto possession of the  property was received by the Corporation  under a formal order of the Collector, Deoria  on 23.5.1979, only after dismissal of the writ  petition on 3.5.1979 and consequent discharge  of the Receiver.

37.     The Ordinance was stayed by the High  Court to restore status quo ante existing on  2.7.1971, that is, a day prior to the appointed  date 3.7.1971.  But on the dismissal of the  writ petition and automatic vacation of the  stay order of the High Court, the operation of  the Ordinance/Act with all legal consequences  flowing from the said law stood restored from  the appointed date.  The trial court and the  High Court are perfectly right in holding in  their judgments that the order of stay passed  in the writ petition could have no effect of  postponing the "appointed day" statutorily  fixed under Section 3 of the Ordinance/Act."

But it is really unnecessary to go into said question  because the order of the High Court really did not give a

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positive direction. Relevant portion of the learned single  Judge’s order which has been extracted above, clearly goes to  show that the learned Single Judge left the matter to be  decided by the Corporation.  The direction was to "consider"  and in that sense there was no positive direction.   

We may, in this context, examine the significance and  meaning of a direction given by the Court to "consider" a case.  When a court directs an authority to ’consider’, it requires the  authority to apply its mind to the facts and circumstances of  the case and then take a decision thereon in accordance with  law. There is a reason for a large number of writ petitions filed  in High Courts being disposed of with a direction to "consider"  the claim/case/representation of the petitioner(s) in the writ  petitions.

       Where an order or action of the State or an authority is  found to be illegal, or in contravention of prescribed  procedure, or in breach of the rules of natural justice, or  arbitrary/unreasonable/irrational, or prompted by mala fides  or extraneous consideration, or the result of abuse of power,  such action is open to judicial review. When the High Court  finds that the order or action requires interference and  exercises the power of judicial review, thereby resulting in the  action/order of the State or authority being quashed, the High  Court will not proceed to substitute its own decision in the  matter, as that will amount to exercising appellate power, but  require the authority to ’consider’ and decide the matter again.  The power of judicial review under Article 226 concentrates  and lays emphasis on the decision making process, rather  than the decision itself.  

       The High Courts also direct authorities to ’consider’ , in a  different category of cases. Where an authority vested with the  power to decide a matter, fails to do so in spite of a request,  the person aggrieved approaches the High Court, which in  exercise of power of judicial review, directs the authority to  ’consider’ and decide the matter. In such cases, while  exercising the power of judicial review, the High Court directs  ’consideration’ without examining the facts or the legal  question(s) involved and without recording any findings on the  issues. The High Court may also direct the authority to  ’consider’ afresh, where the authority had decided a matter  without considering the relevant facts and circumstances, or  by taking extraneous or irrelevant matters into consideration.  In such cases also, High Court may not examine the validity or  tenability of the claim on merits, but require the authority to  do so.

       Where the High Court finds the decision-making process  erroneous and records its findings as to the manner in which  the decision should be made, and then directs the authority to  ’consider’ the matter, the authority will have to consider and  decide the matter in the light of  findings or observations of  the Court. But where the High Court without recording any  findings, or without expressing any view, merely directs the  authority to ’consider’ the matter, the authority will have to  consider the matter in accordance with law, with reference to  the facts and circumstances of the case, its power not being  circumscribed by any  observations or findings of the Court.

       We may also note that sometimes the High Courts  dispose of matter merely with a direction to the authority to  ’consider’ the matter without examining the issue raised even  though the facts necessary to decide the correctness of the

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order are available. Neither pressure of work nor the  complexity of the issue can be a reason for the Court, to avoid  deciding the issue which requires to be decided, and disposing  of the matter with a direction to ’consider’ the matter afresh.  

       There are also several instances where unscrupulous  petitioners with the connivance of ’pliable’ authorities have  misused the direction ’to consider’ issued by court. We may  illustrate by an example. A claim, which is stale, time-barred  or untenable, is put forth in the form of a representation. On  the ground that the authority has not disposed of the  representation within a reasonable time the person making the  representation approaches the High Court with an innocuous  prayer to direct the authority to ’consider’ and dispose of the  representation. When the Court disposes of the petition with a  direction to ’consider’, the authority grants the relief, taking  shelter under the order of the Court directing it to ’consider’ .  Instances are also not wanting where authorities, unfamiliar  with the process and practice relating to writ proceedings and  the nuances of judicial review, have interpreted or understood  the order ’to consider’ as directing grant of relief sought in the  representation and consequently granting reliefs which  otherwise could not have been granted. Thus, action of the  authorities granting undeserving relief, in pursuance of orders  to ’consider’, may be on account of ignorance, or on account of  bona fide belief that they should grant relief in view of Court’s  direction to ’consider’ the claim or on account of  collusion/connivance between the person making the  representation and the authority deciding it.  

       Therefore, while disposing of writ petitions with a  direction to ’consider’, there is a need for the High Court to  make the direction clear and specific. The order should clearly  indicate whether the High Court is recording any finding about  the entitlement of the petitioner to the relief or whether the  petition is being disposed of without examining the claim on  merits.           The aforesaid aspects were highlighted recently in  A.P.S.R.T.C. & Ors. v. G. Srinivas Reddy and Ors. (AIR 2006  SCW 1108).

It is true as contended by learned counsel for the  Corporation that the use of the expression "should" gives a  scope for entertaining a doubt that there was a positive  direction.  It is, therefore, necessary to clarify that what  learned Single Judge in the direction said was only  consideration by the Corporation and there was no positive  direction.  In that view of the matter the Corporation shall now  give opportunity to the concerned parties i.e. respondents 1, 2  & 3 in each case to present their respective stand before the  Corporation so that after consideration necessary order can be  passed in accordance with law.  We express no opinion on that  aspect.  The appeals are disposed of accordingly with no order  as to costs.