IN THE HIGH COURT OF KERALA AT ERNAKULAM
Ins.APP.No. 9 of 2010()
1. E.S.I.CORPORATION REPRESENTED BY ITS
... Petitioner
Vs
1. PANICKAVEETTIL SIR SEBASTIAN PUBLIC
... Respondent
For Petitioner :SMT.T.D.RAJALAKSHMI
For Respondent :SRI.M.B.PRAJITH
The Hon'ble MR. Justice M.N.KRISHNAN
Dated :07/10/2010
O R D E R
M.N.KRISHNAN, J
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INAP Nos.9, 13 & 25 OF 2010
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Dated this the 7th day of October 2010
JUDGMENT
INAP No.9/2010 is filed against the preliminary order
passed in I.C.No.78/2009, INAP No.13/2010 is filed against the
preliminary order passed in I.C.No.64/2009 and INAP
No.25/2010 is filed against the preliminary order passed in
I.C.No.105/2009 by the E.I.Court, Palakkad. All these
insurance cases were filed by the employers challenging the
order passed by the Employees State Insurance Corporation
(for short ‘the Corporation’) under Section 75 of the
Employees State Insurance Act(for short ‘the ESI Act’).
2. When the matter came up for consideration, the
Corporation raised an objection regarding the territorial
jurisdiction of the court to deal with the matters. It was
contended that by virtue of the provisions under Section 76(1)
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of the ESI Act the proceedings can be instituted only before
the court appointed for the local area in which the insured
person was working at the time the question or dispute arose.
That was seriously challenged by the applicants before the EI
Court and after elaborate consideration of the arguments of
both sides, the court held that action can be initiated for the
reason that the Regional Director representing the
Corporation is having his office at Thrissur which comes
within the jurisdiction of the Palakkad EI Court. It is
aggrieved by that decision, the Corporation has come up in
appeal.
3. Heard the learned counsel on both sides. Before
analysing the matter, it is relevant to understand the provisions
regarding the adjudication of disputes and claims under the
ESI Act. Section 74 of the ESI Act empowers the State
Government to constitute an Employees’ Insurance Court for
such local area as may be specified in the notification. There
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are other sub sections relating to additional courts, etc.
Section 75 deals with the matters to be decided by Employees’
Insurance Court. It takes in the dispute between a principal
employer and the Corporation, or between a principal
employer and an immediate employer, etc. A perusal of the
same would reveal that some of the disputes enumerated under
Section 75(2) are between the employer and immediate
employer, etc. where really the junction of the worker or the
insured person is not necessary. Then comes the disputed
question and the provisions. Under Section 76 of the ESI Act
subject to the provisions of this Act and any rules made by the
State Government, all proceedings before the EI Court shall be
instituted in the Court appointed for the local area in which the
insured person was working at the time the question or
dispute arose. Section 76 envisages a situation where the
insured person is involved in the dispute. Then taking
recourse to Section 96 of the ESI Act and also Section 76 the
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State Governments are empowered to make rules regarding
proceedings to be conducted. Accordingly the Kerala
Government had framed the Kerala Employees Insurance
Courts Rules 1958 as per the powers conferred on it under
Section 96(1) of the ESI Act, 1948(Central Act XXXIV of
1948). The relevant rule which requires attention is Rule 16
which is having the heading ‘place of suing’. It reads as follows:
“Place of suing-In cases not falling under
sub-section (1) of section 76, a proceeding against
any person shall be instituted in the Court within
the local limits of whose jurisdiction.
(a) the opposite party or each of the opposite
parties where there are more than one, at the time
of commencement of the proceedings, actually and
voluntarily resides, or carries on business, or
personally works for gain, or
(b)any of the opposite parties, where there
are more than one, at the time of the
commencement of the proceedings, actually and
voluntarily resides, or carries on business, or
personally works for gain, provided that in such
case either the leave of the court is given, or the
opposite parties who do not reside, carry on
business or personally work for gain, as aforesaid,
acquiesce in such institution; or
(c)the cause of action, wholly or in part arose”.
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4. So a reading of Rule 16 would make it clear that it will
be applicable only to cases not falling under sub section (1) of
Section 76. If it does not fall within the section then necessarily
the parameters of the jurisdiction are provided in the said rule.
Now the argument of the learned counsel appearing for the
Corporation is to the effect that the insured person is the
affected person and in all cases and the Supreme Court has
held that where his interest is involved, the worker or the
representative of the worker is a necessary party to the
proceeding. But the learned counsel for the employers would
contend that the Supreme Court has classified it in a later
judgment with the prefix ordinarily and therefore it is not
necessary in all cases to have the insured impleaded. It is
profitable to refer to the two decisions of the Supreme Court in
FACT Ltd. v. ESI Corporation(2009(3) KLT 946). The
Supreme Court in paragraph 10 of its judgment made it clear
that “it may be seen that S.75 of the Act does not mention who
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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 before passing any order
by the authority/court”. In paragraph 12 again it is reiterated
that “hence, the 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”. In a later
decision in ESI Corporation v. Bhakra Beas Management
Board and another(2009(10) SCC 671), the Supreme Court
reiterated that “thus, if a determination is given by the
Employees’ Insurance Court that the persons concerned are
not the employees of the petitioner, and that determination is
given even without hearing the persons concerned,it will be
clearly against the rules of natural justice. It may be seen that
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Section 75 of the Act does not mention 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 before passing any order by the
authority/court”.
5. In all the cases before me the dispute is relating to the
liability of the employer to pay contribution. The said
contribution is intended and is for the benefit of the worker
who comes under the definition of ‘insured’ under the Act.
6. Now I will consider the other line of argument
projected by the learned senior counsel appearing for the
employers. It has been brought to my notice that a Division
Bench of the Madras High Court had taken a view regarding
the jurisdictional aspect after considering Section 76(1) as well
as Rule 16 of the Madras Rules which are identical with the
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Kerala Rules. A Division Bench of the Madras High Court in
Modern Radio Service v. Regional Director, ESI Corporation
(2006(1) LLJ59) has considered this point. The Employees
Insurance Corporation at Madras issued a notice determining
the contribution under Section 45A of the ESI Act. It was
challenged before the EI Court at Madras, which had returned
the petition for presentation before proper court. The
appellant’s establishment was at Kumbakonam. So it was
contended that the petition should be filed within the
jurisdiction of the court under which Kumbakonam comes.
The Division Bench held that since part of cause of action had
arisen at Madras, under Rule 16 that court will have also
jurisdiction. It was stated that at the time of rendering the
decision in Sree Karpagambal Mills Ltd. Rule 16 was not
brought to the notice of the Judge who decided that case. The
Division Bench of the Madras High Court then relied on and
referred to the decision of a learned single Judge of the same
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Court in Sree Lakshmi Medicals, etc. v. Regional Director, ESI
Corporation(1999(1) LW 204). There the question arose
whether Rule 16 can be extended in a case where demand is
made. The learned Judge was of the opinion that since the
insured was not directly involved in the litigation Section 76(1)
will not apply and therefore the rules framed under the ESI
Act will govern the field and therefore the EI Court has the
power to exercise jurisdiction under Rule 16 of the Rules. The
learned Judge in that case considered the question of an
insured person and held that since there is no direct
involvement Rule 16 can be invoked. If that is the position of
law as on today also, I will also agree with the learned senior
counsel for the employers that Rule 16 of the Kerala Rules
also can be made applicable and if the cause of action arises in
full or part within the area mentioned. But, by virtue of the
latest authoritative pronouncement by the Supreme Court
when the interest of the worker is involved in an employees’
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State insurance case and as the worker is the beneficiary and
the Corporation is only acting as an agent to implement the
provisions of the welfare legislation, when an employer comes
denying the right of a worker or entitlement of a worker then
necessarily the worker has to be heard before pronouncing an
order for or against the employer. Or, in other words, in all
type of these matters where the ultimate beneficiary is the
worker either the worker or the representative of the worker
has to be heard by impleading them as parties. In the light of
the changed circumstances and in view of the decision of the
Apex court now we have to analyse the present case. Now the
dispute is with respect to the coverage of establishment. If it is
covered it is beneficial to the employee or the insured. If it is
not covered, it is detrimental to his interest if he is not heard.
Therefore in all these type of cases, since the junction of the
employee is a must the court, viz., the EI Court has to give
direction to the persons concerned to implead the workers or
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the representative of the workers or the representative of the
union to be impleaded before a final decision is taken in the
matter.
7. How this will affect the jurisdiction of a court is the
next question. Certainly it will affect the jurisdiction of the
court fundamentally for the reason that if the interest of a
worker or an insured is involved in a dispute, then Section 76
(1) of the Act makes it very clear that it has to be filed in a
court where he had worked or where he was working or the
question or dispute arose. When the said principle is applied
Section 76(1) comes into play. When Section 76(1) comes into
play Rule 16 goes out for the reason that Rule 16 starts with
the words “in cases not falling under sub-section (1) of Section
76”. Therefore when rule 16 goes, the contentions raised by
the learned senior counsel cannot be accepted and looked into.
Therefore, I hold that in view of these developments and as
Section 76(1) is directly involved, only the courts stipulated
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in that section will have jurisdiction over the matter. Learned
counsel appearing for the Corporation had produced the
notification relating to all courts where they had conferred the
powers exercising the functions under the ESI Act. It is in
order. So as the interest of the insured is involved Section 76(1)
will govern the field and therefore the orders passed by the
learned insurance court have to be set aside and I do so.
In the result, all the appeals are allowed and orders under
challenge are set aside. The applications are to be filed in the
respective courts as contemplated under Section 76(1)(b) of the
Act and therefore the court below is directed to send the
applications to the respective courts empowered to deal with it
and shall inform the applicants and the opposite party
accordingly. I make it very clear that the ESI Corporation
shall not proceed to recover the amount for a period of two
months from today as a matter of precaution to safeguard the
interest of the applicants to obtain appropriate orders from the
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appropriate courts.
M.N.KRISHNAN, JUDGE
Cdp/-