Employees' State Insurance Corporation Ltd. vs Ranjit Kumar Goel and Others

K. Kannan, J.—The writ petition and the FAO relate to the applicability of the Employees State Insurance Act, 1948 (for short ''the Act'') to the Markfed Cotton Seed Processing Plant Factory, a factory, against which the provisions of the Act were sought to be applied through the notice from the ESI Corporation. The workmen in the factory who had been paid the medical allowances stopped receiving the benefit when the management withdrew the benefit by order dated 20/21.1.1984. The workmen raised a dispute and a reference was made to the Industrial Tribunal for an adjudication of whether action of the management in withdrawing the medical allowance was justified. Simultaneously, the management was contending before the ESI Court that the Act was not applicable. The Court, while referring to the judgment of the Andhra Pradesh High Court in Employees State Insurance Corporation v. J.C. Oil Products (P.) Ltd., 1980(41) FLR 358 (AP) took a view that the nature of the activities of the respondent-factory were seasonal and that, therefore, the factory was liable to be exempted from the applicability of ESI Act. Against the order passed by the ESI Court, FAO No. 734 of 1987 has been filed contending that reliance on the judgment of the Andhra Pradesh is not appropriate and it does not conclude the issue. In the reference brought before the Industrial Tribunal, the workmen obtained the benefits of medical allowance and that is a subject of challenge in C.W.P. No. 16636 of 1989.

The decision of whether ESI Act is applicable or not ought to conclude the issue whether the workmen would be entitled of the medical allowances from the management in lieu of the benefit of ESI Scheme.

Learned Counsel appearing on behalf of the appellant-ESI Corporation refers to me two decisions of this Court that have dealt with the case of cotton ginning and processing activities as not seasonal and if extraction of oil from the seeds were to be taken as an activity which is independent of cotton ginning and processing, it must be seen that extraction activity is merely incidental and cotton ginning and processing cannot partake a seasonal character. Learned Counsel refers to Maya Ram Vs. Ram Kishan, . where the Court held that a factory engaged in the business of extraction of oil from groundnut was an incidental activity, but a manufacturing process of decortication of ground-nut will not be taken as a seasonal activity. A Division Bench of this Court in a subsequent ruling in Laxmi Ginning and Oil Mills Vs. The Regional Director, Employees State Insurance Corporation and Another, . held that decortication and extraction of ground-nut of oil from ground-nut were separate and independent processes and the activity engaged by the workers in such a factory would not come within the ambit of seasonal factory. Although the decortication of groundnut and extraction of oil was the point taken in issue, the Court was also considering the judgment of the Andhra Pradesh in ESI Corporation, Hyderabad v. J.C. & O. Products (P) Ltd., 1980(41) FLR 358 (AP). the decision, which was relied by the ESI Court for accepting the plea of the workmen that ESI Act cannot be applicable. The Division Bench of this Court found itself unable to accept the reasoning given by the Andhra Pradesh Court and dealt with the issue of cotton ginning and other processing as well and, while applying the'' principle for understanding whether decortication of ground and extraction of oil would be seasonal factory, observed that cotton ginning and processing cannot also be a seasonal activity, the same way as decortication cannot be so held. The reasoning adopted in the judgment of Laxmi Ginning & Oil Mills, Khanna (supra) would be directly apply to the respondent factory which is engaged in cotton ginning and processing and by the application of the legal principle, consequence would be inevitable that the respondent factory''s activity cannot be treated as seasonal and the ESI Act is applicable. I, therefore, set aside the order passed by the ESI Court and allow the appeal.

Certain events have taken place during the proceedings which are required to be considered for making the scheme work and reasonable to both the parties. The workman who were getting medical allowances were suddenly deprived of the same when a notice from the ESI authorities in the year 1984 was received. We have already seen that in the order passed on a reference to the Industrial Tribunal, the workmen came by a benefit of the medical allowances in view of the decision that had been passed by the ESI Court exempting the respondent factory from the application of ESI Act. However, taking note of the subsequent event and the representation made by the management itself, the Industrial Tribunal had directed all the medical allowances to be given. When a challenge had been brought to this Court in CWP No. 16636 of 1989, I also directed that all the medical allowances payable to the employees must be released to them. The management which has paid the medical allowances to the workmen cannot be now compelled to pay the ESI contribution also for it will secure no benefit to the workmen for all the time they secured no benefit from the ESI hospital or any facility which the Act provides.

Learned Counsel on behalf of the management would point out that the management has paid the medical allowance between 1984 to 1987 and it also made contribution to the ESI from 1984 to 1987. It is therefore argued that they shall have the remedy of recovery of the amount paid to the workman if ESI Act were to be made applicable.

Learned Counsel appearing for the workers union states that many of the workmen have already retired or some of them have even died and any direction for refund of any amount paid would work great hardship.

In view of the fact that the decision for applicability of the Act itself has been made only now and the order of the ESI Court has been reversed, it will only be appropriate that the contribution shall also commence for the relevant year pertaining to the date of disposal of this case, namely today. The workmen shall not any longer will be entitled to the medical allowances from the date when the Act is now made applicable through this order. Here after the benefits shall be under the provisions of the ESI Act. Any contribution already made by the management to the ESI between the year 1984 to 1987 would be adjusted against the contribution to be hereafter made by the management and the same be properly reckoned and the notice served by the ESI Corporation to the management. The credit which the management will obtain from the contribution made before the year 1984 to 1987 shall doubtless be only with reference to the management part of the contribution. As regards the contribution secured from the workmen during the period from 1984-1987, the amount shall be refunded to the respective workman. It shall be competent of the management to give details of the contribution which they have made on behalf of the workmen and secure them for the benefit of the workmen. The Union or the representatives will properly communicate the credit available for the respective workmen and make possible that disbursement to all the persons, who are alive and if they are deal, the amount shall be refunded to the legal representatives of the deceased workmen. I also clarify that since I am applying the ESI Act only from today when the order is passed, the management''s liability to pay the medical allowances shall subsist till today as found already by the Industrial Tribunal. If the medical allowances have not been paid, they shall be calculated upto date and shall be paid within a period of eight weeks from today. Consequently, the FAO is allowed and the writ petition is disposed of in terms of the direction hereinbefore given.