JUDGMENT
Rajesh Balia, J.
1. Heard learned counsel for the parties.
2. The petitioner, which is a Public Limited Company, has filed this writ petition apart from pursuing the regular remedy provided to it under the Employees’ State Insurance Act, 1948 (in short “the Act”) inter alia on the ground that the condition imposed Under/Section 75(2-B) of the the act of 1948 for availing the right of remedy against the claim laid by ESI Corporation is unreasonably onerous and renders the aggrieved party’s right seeking adjudication of its application illusory. The contention is that, even if, the the Corporation raises an unreasonably high-patched demand towards contribution to be made to it by the employer in breach of principles of natural justice or which is not otherwise sustainable in law against the entrepreneur, still the aggrieved party cannot avail the right. of making application unless it deposits 50% of illegal demand with the Corporation.
3. Shri N.M. Lodha, learned counsel for Union of India, states that right to challenge the order of Corporation before any forum for being reviewed is not an inherent right as a right to file suit, but is akin to right of appeal, which depends upon the scheme of the Statute. That being so, right if it is hedged with certain condition, such right has to be accepted with such condition.
4. It is also contended by Mr. N.M. Lodha, learned counsel for the Union of India that even otherwise the provisions of Section 75(2-B) cannot be held to be unreasonably onerous so as to render the right conferred on the aggrieved party illusory as it vests a discretion in the ESI Court either to stay the whole or part of the claim laid by the Corporation during the pendency of proceedings before it, which substantively and substantially mitigate the rigor of provision in appropriate and genuine cases.
5. We may take a brief view of the relevant provisions for the present purpose. The provisions relating to contribution are contained in Chapter IV of the Act of 1948.
6. Section 38 provides that subject to the provisions of the Act, all the employees in factories or establishments to which the Act applies shall be insured in the manner provided by the Act.
7. Section 39 provides that contribution payable under the Act in respect of an employee shall comprise contribution payable by the employer which is known as employer’s contribution as well as contribution payable by the employee known as employee’s contribution. The rates of such contributions are to be determined by the Central Government.
8. Section 40 obligates primarily the principal employer, in the first instance, to pay contributions of both of them; employer and employee, either by himself or through an immediate employer to the Corporation and employees’ contribution becomes recoverable from the employee by way of deduction from his wages. It also ordains that the recovery of employees’ contribution cannot be made otherwise than by deducting it from wages of such employees.
9. Section 42 provides the class of employees in respect of whom the contributions are not payable.
10. Section 43 deals with method of making payment of contribution with which we are not currently concerned.
11. So far as determination of amount payable by the employer’s contribution to the Corporation is concerned, Section 44 obligates the employers to furnish returns and to maintain registers containing such particulars relating to persons employed by him. It also enables the Corporation in cases where it has reason to believe that existence of any factory or establishment, a return should have been furnished, but has not been furnished to call upon the person incharge of such factory or establishment to furnish such particulars as it may be considered necessary for the purpose of enabling the Corporation to decide whether the factory or establishment is a factory or establishment to which this Act applies.
12. Section 45 empowers the Corporation to appoint Inspectors for the purpose of collecting the information about the employers’ factories, establishments and other information, which is required to be maintained particularly by the employers in respect of persons employed by them.
13. Section 45A, which was inserted in the Act by way of amendment [by Act No. 44 of 1966 w.e.f. 17.6.67] confers power upon the Corporation to determine the amount of contributions payable in respect of the employees of a particular factory or establishment clothing the Corporation with character of quasi judicial authority by providing that no such order shall be passed by the Corporation unless the principal or immediate employer or the person incharge of the factory or establishment has been given a reasonable opportunity of being heard. One such an order has been made by the Corporation, It is considered to be sufficient proof of the claim of the Corporation under Section 75 or for recovery of the amount determined by such order as an arrear of land revenue under Section 45B or for taking recourse to proceedings for the recovery under Section 45C to Section 45I, as the case may be.
14. The aforesaid provisions reveal the power of the Corporation to determine the question Under/Section 44 whether the Act applies to any particular factory or establishment and Section 45A enables the Corporation to determine its claim to contribution, which a person in-charge of a factory or establishment is liable to make over to the Corporation after affording an opportunity of hearing to him.
15. Once the determination is made by the Corporation and amount becomes recoverable, a certificate of recovery may be issued to be Recovery Officer. Under section 45F, the Recovery Officer has been given power to grant time in making payment of the amount and stay the proceedings until the expiry of the period so granted.
16. The remedial provisions against claim or determination made by the Corporation in respect of employer’s liability (i) to pay the employer’s contribution, or (ii) about the right of wages or average daily wages of the employees for the purpose of Act or (iii) about the right of contribution payable by the principal employer in respect of any employee or (iv) about the identity of person, who is or was the principal employer in respect of any employee or (v) about the right of any person to any benefit and as to the amount and duration thereof or (vi) about any direction issued by the Corporation under Section 55A on a review of any payment of dependents benefits or (vii) any other matter, which is not in dispute before the principal employer and the Corporation or between a principal employer and an immediate employer or between a person or between an employee and a principal or immediate employer, in respect of any contribution or benefit or other dues payable or recoverable under the Act.
17. Such disputes can be raised before the Employees’ Insurance Court by making an application. The Employees’ Insurance Court is constituted Under/Section 74 of the Act by the State Govt. by issuing a Notification in the official gazette in that regard. Such court is presided over by a person, who had been a judicial officer or is a legal practitioner of five years’ standing. On such disputes being raised Under/Section 75 as has been stated in Section 75(I) to which reference we have made hereinabove, the Employees’ Insurance Court is to decide the claim for the recovery of contribution from the principal employer, claim by a principal employer to recover the contributions from any immediate employer, the claim against a principal employer under Section 68 and claim under Section 70 for the recovery of the value or amount of the benefits received by a person when is not lawfully entitled thereto and any claim for the recovery of any benefit admissible under this Act.
18. Sub-section (2-B) of Section 75, which is bone of contention in this petition, provides a rider on the right of principal employer the rise dispute in respect of any contribution or any other dues, which have been made by the Corporation, he is required to deposit with the Court 50% of the amount claimed from him as due by the Corporation. However, the power has also been conferred on the court for the reasons to be recorded in writing either to waive or reduce the amount to be deposited under this sub-section.
19. We have to consider whether sub-section (2-B) of Section 75, which provides a condition so onerous as to render the provision for remedy made available to a principal employer against the claim of contribution or other dues raised by the Corporation so illusory as to violate Article 14 of the Constitution of India, which is principal plank of challenge to its validity.
20. Sub-section (2B) of Section 75 of the Act reads as under:-
(2-B) No matter which is in dispute between a principal employer and the Corporation in respect of any contribution or any other dues shall be raised by the principal employer in the Employees’ Insurance Court unless he has deposited with the Court fifty per cent of the amount due from him as claimed by the Corporation:
Provided that the Court may, for reasons to be recorded in writing waive or reduce the amount to be deposited under this sub-section.
21. In its term, the provision not only provides for deposit of 50% of the claim made by ESI Corporation and a condition for maintaining application, it also makes a softening provision in the form of proviso. In appropriate case where facts and circumstances of the case make it unduly harsh for the entrepreneur to fulfil the condition, the ESI Court is vested with power to waive the whole or reduce the requisite deposit of course reason for exercise of such power has to be recorded in rightly. In other words, order exercising power Under Section. 75(2B) must be a speaking or reasoned order.
22. There cannot be any exhaustive list or a straitjacket formulae to govern the exercise of discretion by the ESI Court, which like any other discretion ought to be exercised judiciously and the order must inform reasons that made the Court exercising its discretion in mitigating spectre. Ordinarily where the amount claimed is very large and fulfillment of condition is perceived as unduly harsh, keeping in view the merit of the contention, the Court may be justified to exercise such discretion. Like, where the claim of the Corporation is challenged on the ground, that are unimpeachable or the claimant makes out a cast iron case, the court may be required to exercise its discretion. At the same time, mere raising of dispute about the claim made by the Corporation or raising arguable issue by itself may not be enough to invoke the discretion. Ultimately, it must depend on facts and circumstances of each case. It must also be observed that ESI Court cannot deny itself the power to make mitigating order is appropriate case, even if, case for exercise of power is made out. It is a power coupled with duty to be exercised if appropriate conditions for exercising of power are shown to exist in any particular case.
23. At the outset, it must be noticed that the Statute has not left the determination made by the Corporation without providing for any remedy that can be availed against the Corporation. We have also noticed the scheme of the Act that amount becomes due and payable either on the volition of the employer, otherwise on determination made by the Corporation. It may also be noticed that provision of the Act of 1948 is beneficial legislation for the purpose of providing minimum security to the workers employed in factories and other establishments primarily providing such employees with the health services. It is in that context, the contributions required to be made by the employees and employers, are considered as an premium paid for taking up such insurance as the spirit of the Act is to provide the insurance Under/Section 36, noticed by us above, for covering the benefits detailed in the Act, which need not be enlisted here. This also makes it obvious the object behind the impugned provision that the substantive part of claim raised by the Corporation against any establishment towards contribution to ESI Fund may reach fund and does not remain in abeyance and in suspended animus until the adjudication is finally made.
24. In this context, it is also to be understood that since it is in the nature of premium payable for securing insurance, no amount of contribution is refundable, but in to be utilized for providing services to cover the insurance. Hence, provision has been made that such expenses one incurred, the employee’s contribution must be recovered by deducting the same from wages, but not otherwise.
25. The question that arises for consideration is whether such right conferred on the principal employer or immediate employer to raise disputes about the claim of the Corporation regarding contributions to be made by him towards the fund maintained by the ESI Corporation under the Act and renders it illusory.
26. The catena of decisions by the apex court and others courts to which we will presently advert to make to abundantly clear that so far as the question of undiluted rigorous provision putting the remedy under strait-jacket stringent condition is concerned, the Apex Court has refrained from expressing any opinion, but there is uniformity in reaching the conclusion that where the right of remedy is provided with condition of deposit of amount claimed due under any particular stature, vests powers to mitigate its rigour in some or other authority, such provision has been held to be not so unreasonably onerous so as to embellish it with the dynamics of unreasonableness.
27. In Anant Mills Co. Ltd. v. State of Gujarat (1), the Apex Court was considering the question of right of appeal provided under the Bombay Provincial Municipal Corporation Act, 1949, which inter alia provided Under/Section 406(2)(e) that no appeal against a reteable value or tax fixed or charged under the Act shall be entertained by the Judge in the case of an appeal against a tax or in the case of an appeal made against a rateable value after a bill for any property tax assessed upon such value has been presented to the appellant unless the amount claimed from the appellant has been deposited by him with the Commissioner. It also provided by a proviso like impugned proviso in the present case that where in any particular case the Judge is of the opinion that the deposit of the amount by the appellant will cause undue hardship to him, the Judge may in his discretion dispense with such deposit or part thereof, either unconditionally or subject to such conditions as he may deem fit.
28. Upholding the validity of provision challenged on the like grounds as has been raised before us, the Court opined that the object of the above provision apparently is to ensure the deposit of the amount claimed from an appellant in case he seeks to file an appeal against a tax or against a ratable value after a bill for pending property tax assessed upon such value has been presented to him. Power at the same time, is given to the appellate Judge to relieve the appellant from the rigour of the above provision in case the Judge is of the opinion that it would cause undue hardship to the appellant. The requirement about the deposit of amount claimed as a condition precedent to the entertainment of an appeal which seeks to challenge the imposition or the quantum of that tax, has not the effect of nullifying the right of appeal, especially when we keep in view the fact that discretion is rested in the appellate Judge to dispense with the compliance of the above requirement. All that the statutory provision seeks to do is to Regulate the exercise of the right of appeal. The object of the above provision ins to keep in balance the right or appeal, which is conferred upon a person who is aggrieved with the demand of tax made from him, and the right of the Corporation to speedy recovery of the tax.
29. The Court further observed that “the right of appeal is the creature of the Statute. Without a statutory provision, creating such a right, the person aggrieved is not entitled to file an appeal. We fail to understand as to why the legislature while granting the right of appeal can not impose conditions for the exercise of such right. In the absence of any special reasons, there appears to be no legal or constitutional impediment to the imposition of such conditions.”
30. In coming to this conclusion, the Court quoted with approval, the following observations from the case of Hannah Cohen V. Beneficial Industrial Loan Corporation (2), which was dealing with the case of conditioning the right to make a petition subject to condition of depositing of the cost of the opposite side in conducting the litigation and it has been challenge violating the due process clause of the Federal Constitution:-
“A State statute which requires that in a stock-holders derivative action a plaintiff who owns less than 5% of the defendant Corporation’s outstanding shares, or shares having market value not exceeding $ 50,000, give security for the reasonable expenses, including counsel fees, incurred by the Corporation and by other parties defendant and which makes the plaintiff liable for such expenses if he does not make good his claims, and subjects the amount of security to increase if the progress of the litigation reveals that it is inadequate or to decrease if it is proved to be excessive, does not violate the contract class or the due process clause, or the equal protection clause of the Federal Constitution.”
31. The principle was re-stated in Seth Nand Lal v. State of Haryana (3), which arose out of right of appeal provided under the Haryana Ceiling on Land Holdings Act, 1972. Section 18 of the Act imposes a condition that all appeals under Sec-Section(4) would be entertained only on the appellant or the petitioner depositing with the appellate or the revisions authority a sum equal to 30 times the land holdings tax payable in respect of the disputed surplus area. The contention was raised that such a fetter was put on this unrestricted right which was unconstitutional; secondly, even the mellowing down of the condition by Act No. 18 of 1978 did not have the effect of removing the vice of unconstitutionality. Repelling the contention, the Court referred to decision in Anant Mills Ltd.’s case (supra) and said:-
“It is well settled by several decisions of this Court that the right of appeal is a creature of a statute and there is no reason why the Legislature while granting the right cannot impose conditions for the exercise of such right so long as the conditions are not so onerous as to amount to unreasonable restrictions rendering the right almost illusory.”
32. After referring to the salient features of the Haryana Act, the Court said:-
“Having regard to those aspects, particularly the meagre rate of the annal land tax payable, the fetter imposed on the right of appeal/revision even in the absence of a provision conferring discretion on the appellate, revisional authority to relax or waive the condition, cannot be regarded as onerous or unreasonable. The challenge to Section 18(7) must, therefore, fail.”
33. The matter again came up before the Supreme Court in Vijay Prakash D. Mehta v. Collector of Customs (Preventive) Bombay (4). The question cropped up was about like provision in the Customs Act, 1962. Section 129E of the Customs Act provided a conditional right of appeal in respect of an appeal against the duty demanded or penalty levied. Although the substantive provision did not expressly provide for rejection of the appeal for non-deposit of duty of penalty, yet it made obligatory on the appellant to deposit the duty or penalty, pending the appeal, failing which the Appellate Tribunal is made fully competent to reject the appeal. However, the the proviso to the substantive provision provided that where in any particular case the Collector (Appeals) or the Appellate Tribunal is of the opinion that the deposit of duty demanded or penalty levied would cause undue hardship to such person, the Collector (Appeals) or as the case may be, the Appellate Tribunal may dispense with such deposit subject to such conditions as he or it may deem fit to impose so as to safeguard the interests of revenue. The challenge to the validity of condition making remedial provision to be illusory, was repelled.
34. Distinguishing the decision rendered by the Supreme Court in Collector of Customs and Excise, Cochin v. M/s. A.S. Bava (5), which concerned with the right of appeal Under the Excise Act, as it was then existing, the Court said:-
“the right given under Section 129-A of the Act as controlled by Section 129-E of the Act, and that right is with a condition and thus a conditional right. The petitioner in this case has no absolute right of stay. He could obtain a stay of realisation of tax levied or penalty imposed in an appeal subject to the limitations of Section 129-E. The proviso gives a discretion to the authority to dispense with the obligation to deposit in case of “undue hardships”. The discretion must be exercised on relevant material, honestly, bona fide and objectively. Once that position is established, it cannot be contended that there was any improper exercise of the jurisdiction by the appellate Authority. In this Case, is is manifest that the order of the Tribunal was passed honestly, bona fide and having regard to the plea of ‘undue hardship’ as canvassed by the appellant.”
The Court further observed:-
“Right of appeal is neither an absolute right nor an ingredient of natural justice the principles of which must be followed in all judicial and quasi judicial adjudications. The right to appeal is a statutory right and it can be circumscribed by the conditions in the grant.”
35. In Shyam Kishore and Ors. v. Municipal Corporation of Delhi and Anr. (6), again the Supreme Court had occasion to discuss the question in detail in the context of Delhi Municipal Corporation Act, 1957. It has been contended before the Supreme Court that if Section 170(b) is interpreted as mandating that an appeal cannot be entertained, but will have to be dismissed in limine if the tax in dispute is not paid along with the memorandum of appeal, that would place a very onerous condition on the right of appeal particularly in cases where there is a substantial amount involved in the appeal and the points raised in the appeal are really contentions and debatable. It should not also be forgotten that, once the assessment list is amended after hearing the assessee it may stand adopted for several subsequent years and demands for all these years will have to be met until the assessment for the first year is altered in appeal. It was argued that the right of appeal itself becomes illusory, if subjected to such a rigid and absolute condition. The provision could, therefore, be invalid as imposing an unreasonably restriction on the fundamental right on the appellant assessee.
36. The Court referred to the decision of Bombay High Court in Elora Construction Company v. Municipal Corporation of Greater Bombay (8) and Calcutta High Court in Chatter Singh Baid v. Corporation of Calcutta (9), who have upheld the validity of a rigid provision banning the entertainment of an appeal altogether where the taxes are not paid. The Court also referred to the decisions of Anant Mills (supra), Vijay Prakash Mehta (supra) and Bava’s case (supra) and observed:-
“The decisions of the Bombay and Calcutta High Courts earlier referred to (Elora and Chatter Singh) have upheld the validity of a rigid provision banning the entertainment of an appeal altother where the taxes are not paid. However, the Supreme Court decisions in Anant Mills, Vijay Prakash Mehta and Bava had occasion to consider only the vires of a milder provision which permitted the appellate authority to waive or relax the condition of deposit……The Court in those cases had no occasion to consider whether the position would be if the conditions placed on the right of appeal were unduly onerous or such as to render the right of appeal totally illusory.”
Thus, pre-facing, the Court further said:-
“The question whether the imposition of a condition which makes a right of appeal illusory can be valid may need careful consideration in an appropriate case.”
37. The Court also referred to the contentions raised by the learned counsel for the respondents and decision of the Supreme Court rendered in Municipal Council, Khurai v. Kamal Kumar (9).
38. After noticing the settled position that even though an appeal, in such cases, may have to be thrown out, the assessee is not without redress, he will always here the alternative remedy of taking recourse to proceedings under Article 226 of the Constitution of India before the High Court and in appropriate cases, where a case of hardship is made out, the High Court court has the extensive powers to grant relief. While the court said that it is true that the High Court would not ordinarily entertain the petition under Article 226 of the Constitution when the alternative remedy of appeal is available to the party but it must be said that the High Court has the jurisdiction to grant such a relief it thinks proper to do so in the circumstances of any case. Reference to this principal enunciated in Municipal Council, Khurai v. Kamal Kumar was referred to that “though the District Judge under the Delhi Municipal Act had no jurisdiction to stay the collection of the tax pending disposal of appeal before him, but he has the power to adjourn the hearing of the appeal or pass interim order enabling the assessee to pay up the taxes before the appeal is actually heard and determined, was held no unreasonable so as to warrant declaration of Section 170(b) to be ultra vires.”
39. The above chain of decision leave no room of doubt where the original determination is required to be made after adhering to the principles of natural justice an d any challenge to such claim for contribution to be made to the Corporation or dues paid to the Corporation as claimed by the Corporation, raised by the employer he is ordinarily required to deposit 50% of such claim made by the Corporation along with making application. However, the requirement is not absolute in term. There is a mitigating power under the provisions itself which enables the Court in appropriate cases for reasons to be recorded in writing to waive or reduce the amount to be deposited under sub-section (2B) of Section 75 like any other discretion which vest in any Court the discretion is also required to be exercised by the Court judiciously and not capriciously or on whims.
40. It cannot be said in view of proviso to Section 75(2B) that there is absolute ban on the employer raising contention about claim of contribution or any other dues made by the Corporation to avail him remedy provided under the Act. In any circumstances he had the opportunity to apprise the Court about the different parameters which may be germane in considering necessity to permit reduction of amount of deposit claimed by the Corporation, it also cannot be doubted that if in any particular case the discretion has not been exercised judiciously, the remedy against such non-exercise of judicious discretion can be availed by the person aggrieved though the proper proceedings including invoking the extraordinary jurisdiction under Article 226 for judicial review.
41. The authority relied on by the learned counsel for the petitioner in St. Mary’s School and Ors. v. Cantonment Board, Meerut and Ors. (10), in our opinion, does not assist or furthers the cause of the petitioner in any manner. St Mary’s School’s case throws light in connection with the provisions of Containments Act, 1924, which contained the like provisions as as before the Supreme Court in Shyam Kishore’s case (supra). Section 87 of the Act was challenged on the ground that it places onerous conditions on right of appeal, after quoting the following passage from Shyam Kishore’s case, the contention raised against validity of the said provision was repelled:-
“We see nothing wrong in interpreting the provision as permitting the appellate authority to adjourn the hearing of the appeal thus giving time to the assessee to pay the tax or even specifically granting time or installments to enable the assessee to deposit the disputed tax where the case merits it, so long as it does not unduly interfere wit the appellate court’s calendar of hearings. His powers, however, should stop short of staying the recovery of the tax till the disposal of the appeal. We say this because it is one thing for the Judge to adjourn the hearing leaving it to the assessee to pay up the tax before the adjourned date or permitting the assessee to pay up the tax, if he can, in accordance with his directions before the appeal is heard. In doing so, he does not and cannot injunct the Department from recovering the tax, if they wish to do so. He is only giving a chance to the assessee to pay up the tax if the wants the appeal to be heard, it is, however, totally different thing for the Judge to stay the recovery till the disposal of the appeal; that would result in modifying the language of the proviso to read: “no appeal shall be disposed of until the tax is paid”. Short of this, however, there is no reason to restrict the power unduly; all he has to do is to ensure that the entire tax in dispute is paid up by the time the appeal is actually heard on its merits. We would, therefore, read clause (b) of Section 170 only as a bar to the hearing of the appeal and its disposal on merit and not as a bar to the entertainment of the appeal itself.”
42. The Court did not express any opinion about the validity of provision making pre-deposit of amount as so onerous to hold it unconstitutional.
43. It cannot also be said that Section 75(2-B) puts a ban even on entertaining application without deposit. The provision is made that “no matter…. in respect of any contribution or any other duties shall be raised…..unless he has deposited with the Court fifty per cane of the amount due from him as claimed by Corporation.” The stage for raising dispute will reach only after application is filed and taken up for hearing. In term of principle enunciated inSt. Mary’s School’s case (supra) and Shyam Kishore’s case (supra), even the ESI Court has power to give time to deposit amount required before matter is heard, apart from having power to waive or reduce the requirement of deposit.
44. Applying the aforesaid test to case at hand, we hold sub-section (2-B) of Section 75 to be intra vires as the condition of pre-deposit for entertaining application Under/Section 75 is not in absolute but necessary authority vest in ESI Court to mitigate the rigor of condition in appropriate cases by reducing or warranting whole or any part of requisite deposit as the same is already subject matter of pending Special Appeal No. 16/2004.
45. The petition is, accordingly, dismissed with no order as to costs.
46. Before parting with this, we may notice that pursuit of this petition challenging vires of Section 75(B) to seek relief so far as it concerns rejection of petitioner’s prayer for waiving or reducing the amount of deposit required by him also is ill-advised as the same is otherwise being pursued by a separate proceeding. This decision will not effect the contention of the petitioner on merit about the rejection of his prayer by the ESI Court, which is subject matter of D.B. Civil Special Appeal No. 16/2004 which shall also be presently decided on merit independently.
