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

(1) W. P. 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 writ of certiorari quashing the order of suspension passed against him by the Regional Director, Employees State

Insurance Corporation on 12-7-1966, the charge Memo dated 17-8-1966 and the order dated 16-11-1966 directing an enquiry. W. P. 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 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.

(2) The two writ petitions relate to the same matter, W. P. No. 2823 of 1966 being by one of the employees, while W. P. 162 of 1967 being by

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

(3) The petitioner in W. P. 2823 of 1966 joined the service of the Employees State Insurance Corporation on 14-12-1954 and was promoted as

Head clerk on 27-9-1963. The employees of the State Insurance Corporation staged demonstrations, hunger strike and work to work manual in

response to the call by the Federation of employees. The Regional Director, Madras in his proceedings dated 12-7-1966 Madras in his

proceedings date 12-7-1966 placed the petitioner under suspension with effect from 12-7-1966. Charges were framed against the petitioner and a

charge sheet was given to him on 17-8-1966. The petitioner replied on 14-8-1966. In his reply the petitioner questioned the propriety and legality

of the rules and regulations under which proceedings have been initiated. On 16-11-1966, the Regional Director, Employees State Insurance

Corporation, Madras, appointed the Deputy Regional Director, Madras as the Enquiry Officer to enquire into the charges framed against the

petitioner. The petitioner''s contention is that the proceeding 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:

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:

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 Sec. 9-A of the Industrial Disputes Act, the rules are no valid; and

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 Services Conduct Rules are not applicable"".

The Employees State Insurance Act (Central Act 34 of 1948) was passed for providing certain benefits to employees in case of sickness,

maternity and employment in case of sickness, maternity and employment injury and making provision for certain other matters in relation thereto.

By Sec. 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 Sec. 8 of the Act, consisting of a Chairman nominated by the Central Government

and members representing the various interests. Sec. 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 allowances, 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. S. 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 allowances, 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 under Sec. 97(1) by an amendment in Act 53 of 1951 was made

not applicable to any regulation of the nature specified in Cl. (xxi) of sub-sec. (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.

(4) In pursuance of the powers conferred on the Corporation under Sec. 97(1) a sub-committee was found 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 10-5-1950 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. These were approved on 15-

12-1959 and were notified on 16-12-1959. The Regulations, according to Sec. 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 14-12-1959. 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 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.

(5) 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 under the Act are not 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 came 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

Employments (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.

(6) ""Industrial establishments"" is defined under Sec. 2(e) of the Industrial Employment (Standing Orders) Act, 1956. Clauses (i) to (iii) of sub-sec.

(e) to Sec. 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-sec. (e) of Sec. 2 would bring in the establishment within the purview of the Act. Sec. 2(e)(iv) runs 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, employees 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 employees 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 any industrial establishment. This contention is

unacceptable as Clause (iv) of sub-sec. (e) to Sec. 2 brings within its fold only establishments, which for the purpose of fulfilling a contract with the

owner of the establishment employees workmen. Admittedly there is no contract between the Employees State Insurance Corporation and any

industrial establishments. 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.

(7) It is common ground that the Industrial Disputes Act is applicable to the employees of the Employees State Insurance Corporation. Sec. 9-A

of the Industrial Disputes Act prohibits an employer from giving effect to any change in the conditions of service applicable to any workman 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 the effected. The change shall not be effected within the 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 alternation 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 workmen. The provision as to notice of change was

introduced by the Industrial Disputes (Amendment and Miscellaneous Provisions) Act 36 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 53 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 under Sec. 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 for the regulations regulating the conditions of service came into force for the first time in 1959. The prohibition under Sec. 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 workman entered service should not be changed to his prejudice without giving notice to the workmen. The

prohibition in Sec. 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 Sec. 9-A and submitted that the

rule is not confined merely to changed 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 the service has to be rejected.

(8) 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 in 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 22-5-1961 had notified in pursuance of Cl. (b) of the proviso to Sec. 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 workmen 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 S. 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

Sec. 2 of the Act. It is no doubt true that the State Government was the appropriate Government till 1944. By G. O. Ms. No. 2698 Labour dated

3rd May 1960 the Governor of Madras in exercise of the powers conferred by Art. 258-A of the Constitution of India entrusted 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 under Sec. 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 under S. 9-A of the Industrial Disputes Act can

be effected after the date of the notification without notice to the employees.

(9) In this view it is unnecessary to consider the contention of the learned Government Pleader that even if it is held that Sec. 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.

(10) The contentions raised by the learned counsel for the petitioner fail and W. P. 2823 of 1966 is dismissed. No order as to costs. Regarding

W. P. 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 W. P. No. 372 etc. of 1961 and 774 of 1962

(U.R.S. Veerappa v. Estates Abolition Tribunal Ramanathapuram where it has been held that each of the persons aggrieved should file a separate

writ petition. W. P. 162 of 1967 is dismissed. There will be no order as to costs.

(11) Order accordingly.