C.I. Kannan vs The Employees' State Insurance Corporation and Another

P.S. Kailasam, J.—Writ Petition No. 2823 of 1966 is preferred by the Head Clerk in the office of the Regional Director, Employees'' State

Insurance Corporation, Madras, for the issue of a writ of certiorari quashing the order of suspension passed against him by the Regional Director,

Employees'' State Insurance Corporation on 12th July, 1966, the charge memo dated 17th August, 1966 and the order dated 16th November,

1966 directing an enquiry. Writ Petition No. 162 of 1967 is preferred by the employees of the Employees'' State Insurance Corporation

represented by the All-India Employees'' State Insurance Corporation Employees Federation for the issue of a writ of prohibition prohibiting the

Employees'' State Insurance Corporation or its officers from initiating or conducting action against the employees of the Employees'' State

Insurance Corporation or from enforcing decisions taken against the said employees for their participation in the agitation held in July, 1966.

The two writ petitions relate to the same matter, Writ Petition No. 2823 of 1966 being by one of the employees, while Writ Petition No. 162 of

1967 being by the Employees Federation on behalf of the same question may be dealt with together.

The petitioner in Writ Petition No. 2823 of 1966 joined the service of the Employees'' State Insurance Corporation on 14th December, 1954

and was promoted as Head Clerk on 27th September, 1963. The employees of the State Insurance Corporation staged demonstrations, hunger

strikes and work to work manual in response to the call by the Federation of Employees. The Regional Director, Madras, in his proceedings dated

12th July, 1966 placed the petitioner under suspension with effect from 12th July, 1966. Charges were framed against the petitioner and a charge-

sheet was given to him on 17th August, 1966. The petitioner replied on 14th September, 1966. In his reply the petitioner questioned the propriety

and legality of the rules and regulations under which proceedings have been initiated. On 16th November, 1966 the Regional Director, Employees''

State Insurance Corporation, Madras, appointed the Deputy Regional Director, Madras, as the Enquiry Officer to inquire into the charges framed

against the petitioner. The petitioner''s contention is that the proceedings of the Regional Director, Employees'' State Insurance Corporation,

Madras, is illegal and as such should be quashed by this Court. The contentions may be summarised as follows:

(1) The Employees'' State Insurance Corporation (Staff and Conditions of Service) Regulations 1959, and the Civil Services Conduct Rules of the

Central Government are not applicable to the employees of the Employees'' State Insurance Corporation;

(2) The Industrial Disputes Act is applicable to the employees and no change of conditions of service could be made without due notice to the

employees, and as the rules relied on are in contravention of Section 9-A of the Industrial Disputes Act, the rules are not valid; and

(3) The employees are governed by the Industrial Disputes (Standing Orders) Act, 1946, and the Employees'' State Insurance Corporation (Staff

and Conditions of Service) Regulations, 1959 and Central Civil Service Conduct Rules are not applicable.

The Employees'' State Insurance Act (Central Act XXXIV of 1948) was passed for providing certain benefits to employees in case of sickness,

maternity and employment injury and making provision for certain other matters in relation thereto. By Section 3, the Employees'' State Insurance

Corporation was established. The Corporation is a body corporate having perpetual succession and a common seal. A Standing Committee was

also constituted by Section 8 of the Act consisting of a Chairman nominated by the Central Government and members representing the various

interests. Section 16 of the Act provided for the appointment of Principal Officers of the Corporation. Section 17 empowers the Corporation to

employ staff and officers other than the principal Officers as may be necessary for efficient transaction of its business, provided sanction of the

Central Government was obtained for the creation of any post with a maximum salary of five hundred rupees and above. Section 17(2) authorises

the Corporation to make regulations regarding the method of recruitment, pay and allowance, discipline, superannuation benefits and other

conditions of service of the members of its staff with the approval of the Central Government. Section 95 enables the Central Government to make

rules for the purpose of giving effect to the provisions of this Act. Section 96 empowers the State Government to make rules in regard to matters

specified in the section. Section 97 empowers the Corporation, subject to the condition of previous publication, to make regulations not

inconsistent with the Act and the rules made thereunder for the administration, of the affairs of the Corporation and for carrying into effect the

provisions of the Act. Section 97(2)(xxi) enables the Corporation to make regulations regarding the method of recruitment, pay and allowance,

discipline, superannuation benefits and other conditions of service of the officers and servants of the Corporation other than the principal officers.

The condition as to previous publication required u/s 97(1) by an amendment in Act LIII of 1951 was made not applicable to any regulation of the

nature specified in Clause (xxi) of Sub-section (2). As a result of this amendment the necessity for previous publication was dispensed with in the

case of rules relating to method of recruitment, pay and allowances, discipline, superannuation benefits and other conditions of service of the

officers and servants of the Corporation.

In pursuance of the powers conferred on the Corporation u/s 97(1) a sub-committee was formed for the purpose of framing regulations soon

after the Act came into force. In September, 1949 it prepared the draft regulations, which were published in the gazette in or about January, 1950.

Objections were received and were considered in May, 1950. The committee approved the draft regulations on 10th May, 1950 and the

regulations were sent to the Government for approval in July, 1950. The draft regulations were received by the Corporation only in April, 1959.

The draft regulations with the suggestions of the Central Government were circulated to the Staff Council in May, 1959. They were approved on

15th December, 1959 and were notified on 16th December, 1959. The Regulations, according to Section 97(3), when published in the Gazette of

India, shall have effect as if enacted in the Act. The Employees'' State Insurance Corporation (Staff and Conditions of Service) Regulations, 1959

came into effect as if enacted in the Act on 16th December, 1959. Regulation 23 provides that subject to the provisions of these regulations the

employees of the Corporation shall be subject mutatis mutandis to a code of conduct similar to the one prescribed by the Central Government for

Central Government servants. Rule 7 of the Central Civil Service (Conduct) Rules, 1964, prohibits a Government servant from engaging himself or

participating in any demonstration which is prejudicial to the interests of the sovereignty and integrity of India, the security of the State, friendly

relations with foreign states, public order, decency or morality, or which involves contempt of Court, defamation or incitement to an offence, or

resorting to or in any way abetting any form of strike in connection with any matter pertaining to his service or the service of any other Government

servant. If the Employees'' State Insurance Corporation (Staff and Conditions of Service) Regulations, 1959 are valid and if the employees are

subject to a code of conduct similar to the one prescribed by the Central Government for Central Government servants, the proceedings against

the petitioner cannot be questioned.

The applicability of these rules is questioned as being invalid, in that they are opposed to the provisions of the Industrial Disputes Act, 1947, and

the Industrial Employment (Standing Orders) Act, 1946. The Industrial Employment (Standing Orders) Act, 1946 was enacted to require

employers in industrial establishments formally to define conditions of employment under them. The Act provides for submission of draft standing

orders by industrial establishments to Certifying Officer within six months from the date on which the Act became applicable to such industrial

establishments. The Standing Orders are to be certified by the Certifying Officer. Standing Orders finally certified under the Act are not to be

modified except on agreement between the employer and the workmen until the expiry of six months from the date on which the standing orders

come into operation. Provision is also made in the Act for temporary application of model standing orders for the period commencing from the

date on which the Act became applicable to an industrial establishment and ending with the date on which the standing orders as finally certified

under the Act came into operation. Thus under the Industrial Employment (Standing Orders) Act, 1946 the industrial establishments are under an

obligation to submit draft standing orders and get them certified, and pending such certification the model standing orders are to be in force. The

question that arises in this case is whether the Employees'' State Insurance Corporation is governed by this Act.

''Industrial establishment'' is defined u/s 2(e) of the Industrial Employment (Standing Orders) Act, 1946. Clauses (i) to (iii) of Sub-section (e) to

Section 2 have no application to the Employees'' State Insurance Act, 1948. It is submitted by the learned Counsel for the petitioner that Clause

(iv) of Sub-section (e) to Section 2 would bring in the establishment within the purview of the Act. Section 2(e)(iv) reads as follows:

''Industrial establishment'' means the establishment of a person who, for the purpose of fulfilling a contract with the owner of any industrial

establishment, employs workmen.

The contention of Mr. Ganapathi Subramaniam, learned Counsel for the petitioner is that under the Employees'' State Insurance Act the industrial

establishment is under an obligation to insure the employee in the establishment and pay contribution. It is submitted that as the Employees'' State

Insurance Corporation is discharging the duties of an industrial establishment in collecting the contributions and insuring all the employees, it must

be found that the Employees'' State Insurance Corporation is fulfilling a contract with the owner of an industrial establishment. This contention is

unacceptable as Clause (iv) of Sub-section (e) to Section 2 brings within its fold only establishments, which for the purpose of fulfilling a contract

with the owner of the establishment employs workmen. Admittedly there is no contract between the Employees'' State Insurance Corporation and

any industrial establishment. The Corporation is under the statute bound to discharge certain functions and the industrial establishment is under an

obligation to insure the employees, pay contribution, etc. But it cannot be said that the Employees'' State Insurance Corporation is fulfilling a

contract with the industrial establishment. The word ''contract'' cannot include statutory obligations cast on the parties. The Employees'' State

Insurance Corporation cannot be brought within the term ''industrial establishment'', and therefore the Industrial Employment (Standing Orders)

Act, 1946 will have no application. The contention that the Industrial Employment (Standing Orders) Act, 1946 is applicable and that in the

absence of certified standing orders the model standing orders would govern the relationship between the Employees'' State Insurance Corporation

and its employees, has therefore to be rejected.

It is common ground that the Industrial Disputes Act is applicable to the employees of the Employees'' State Insurance Corporation. Section 9-

A of the Industrial Disputes Act prohibits an employer from giving effect to any change in the conditions of service applicable to any workmen in

respect of any matter specified in the Fourth Schedule without giving to the workman likely to be affected by such change a notice in the

prescribed manner of the nature of the change proposed to be effected. The change shall not be effected within twenty one days of giving such

notice. Item 9 in the Fourth Schedule to the Act relates to introduction of new rules of discipline, or alteration of existing rules, except in so far as

they are provided in standing orders. The effect of Section 9-A read along with item 9 of the Fourth Schedule is that no new rules of discipline shall

be introduced or the existing rules altered without giving the prescribed notice to the workman. The provision as to notice of change was

introduced by the Industrial Disputes (Amendment and Miscellaneous Provisions) Act (XXXVI of 1956). As the Employees'' State Insurance

Corporation (Staff and Conditions of Service) Regulations, 1959 came into force in 1959, that is after Section 9-A of the Industrial Disputes Act

came into force, it is submitted that the change in the conditions of service introduced by the Regulations cannot take effect without the prescribed

notice. It may be remembered that the condition requiring the previous publication of the regulations regarding the method of recruitment, pay and

allowances discipline, superannuation benefits and other conditions of service of the officers and servants of the Corporation was dispensed with

by Act (LIII of 1951) and therefore the validity of the regulations standing by themselves cannot be challenged. But the contention is that these

regulations which came into force in 1959 effected a change in their conditions of service and therefore cannot take effect unless the prescribed

notice u/s 9-A of the Industrial Disputes Act was given. The contention thus put appears plausible but on a closer examination it will be seen that it

has to be rejected. Though the Employees'' State Insurance Act, 1948 was passed in 1948, there was inordinate delay in framing the regulations

relating to the service conditions of the employees of the Employees'' State Insurance Corporation. Though the draft regulations were ready in

September, 1949 and published early in January, 1950 and after consideration of the objections in May, 1950 the approved draft regulations were

sent to the Government in July, 1950, they were received back only in April, 1959 and finally notified in December, 1959. Between 1948 and

1959 there were no regulations regulating the service conditions of the employees. The regulations for the first time came into force in 1959. The

employees were taken into the service of the Corporation on the undertaking that they would abide by the regulations that might be framed. In the

circumstances it cannot be said that there was any change in the conditions of service for the Regulations regulating the conditions of service came

into force for the first time in 1959. The prohibition u/s 9-A of the Industrial Disputes Act is as regards the change in the conditions of service

applicable to any workman. The object seems to be that the conditions of service in force at the time when a workman entered service should not

be changed to his prejudice without giving notice to the workman. The prohibition in Section 9-A does not appear to be applicable to the

regulations regulating the conditions of service which are brought into force for the first time, unless it could be shown that since the employee

entered the service, the conditions of service are changed by the regulations which are brought into force for the first time. Learned Counsel for the

petitioner relied on item 9 in the Fourth Schedule to the Industrial Disputes Act, which mentions the introduction of new rules of discipline or

alteration of existing rules as coming within the purview of Section 9-A and submitted that the rule is not confined merely to change in the

conditions of service. The introduction of new rules of discipline would only mean introduction of certain rules of discipline, which were not

applicable to the employee on the date of his employment and would not relate to the rules that were framed for the first time. The contention of

the learned Counsel for the petitioner that the Employees'' State Insurance Corporation (Staff and Conditions of Service) Regulations, 1959,

brought about any change in the conditions of service has to be rejected.

In this connection, the effect of the proviso to Section 9-A of the Industrial Disputes Act may also be considered. The proviso indicates that no

notice shall be required for effecting any change to the conditions of service when the workmen likely to be affected by the change are persons to

whom the rules or regulations that may be notified in this behalf by the appropriate Government in the Official Gazette apply. The Central

Government by a notification dated 22nd May, 1961 had notified in pursuance of Clause (b) of the proviso to Section 9-A of the Industrial

Disputes Act, 1947 that no notice under the said section shall be required for effecting any change referred to therein, where the workman likely to

be affected by the change are persons to whom the Employees'' State Insurance Corporation (Staff and Conditions of Service) Regulations, 1959

apply. The power of the Government under Clause (b) of the proviso to Section 9-A cannot be questioned. It was submitted that the appropriate

Government regarding the Employees'' State Insurance Corporation on the date of notification in 1961 would not be the Central Government

according to the definition in Section 2 of the Act. It is no doubt true that the State Government was the appropriate Government till 1964. By

G.O. No. 2698(Lab) dated 30th May, 1960 the Governor of Madras in exercise of the powers conferred by Article 258-A of the Constitution of

India entrusted to the Government of India, with their consent the function of the State Government as the ''appropriate Government'' under the

Industrial Disputes Act 1947(Central Act XIV of 1947) in respect of Industrial Disputes concerning the Employees'' State Insurance Corporation

constituted u/s 3 of the Employees'' State Insurance Act, 1948(Central Act XXXIV of 1948). Though the Central Government was not the

appropriate Government till 1964, because of the delegation of the power of the Madras Government the Central Government was authorised to

issue the notification. The validity of the notification therefore cannot be questioned. Any change of the conditions of service u/s 9-A of the

Industrial Disputes Act can be effected after the date of the notification without notice to the employees.

In this view it is unnecessary to consider the contention of the learned Government Pleader that even if it is held that Section 9-A of the

Industrial Disputes Act is applicable there is substantial compliance in that the draft regulations were published and objections were called for from

the public and the workers had ample opportunities to make their representations. It is also not necessary to consider the contention that the

employees acquiesced in the regulations in that the Union of the employees were taking part in the affairs of the Corporation on the basis of the

regulations.

The contentions raised by the learned Counsel for the petitioner fail and Writ Petition No. 2823 of 1966 is dismissed. No order as to costs.

Regarding Writ Petition No. 162 of 1967 learned Government Pleader raised a preliminary objection that a writ petition by the Federation on

behalf of the workers is not maintainable. This contention will have to be upheld in view of the decision of this Court in U.R.S. Veerappan and 12

Ors. v. The Estates Abolition Tribunal, Rmanathapuram and 3 Ors. W.Ps. Nos. 372 etc.of 1961 and 774 of 1962 where it has been held that

each of the persons aggrieved should file a separate writ petition. Writ Petition No. 162 of 1967 is dismissed. There will be order as to costs.