Employees State Insurance Corporation vs M/s. Vettoor Hotels

In all these appeals, the ESI Corporation is challenging orders passed by the E.I Court, rejecting the Miscellaneous Petitions filed by the Corporation in four Insurance Cases, disputing the jurisdiction of the Court to entertain the respective Insurance Cases. According to the ESI Corporation, the applicants in all insurance cases are establishments functioning in districts not within the jurisdiction of the E.I Court, Alappuzha. The applicant in I.C. No.14/2017 is a hotel functioning at Kottayam. Applicants in other three Insurance Cases is a hospital functioning at Thodupuzha in Idukki district. Kottayam and Idukki districts are within the jurisdiction of the E.I Court Idukki.

The Corporation raised principally two contentions before the Insurance Court. It contended that it is incumbent on the applicants in the Insurance Cases to implead at least some of the employees or their unions as parties to the proceedings, in view of the law laid down by the Hon’ble Supreme Court in Fertilisers & Chemicals Travancore Ltd. v. E.S.I. Corporation [2009 (3) KLT 946] and reiterated in Employees' State Insurance Corporation v. Bhakra Beas Management Board and another [(2009) 10 SCC 671]. The Corporation relied on Section 76(1) of the ESI Act and contended that all proceedings before the Employees Insurance 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. It was therefore contended before the Insurance Court that the insured persons in all four cases were working at the time when the dispute arose, beyond the jurisdiction of the E.I. Court, Alappuzha and therefore the Insurance Cases were not maintainable before the said Court. The Corporation relied on the judgment of a learned Single Judge of this Court in ESI Corporation v. Panickaveettil Sir Sebastian Public School [2010 (4) KLT 976] and another judgment of a Division Bench of this Court in Regional Director v. Bishop Moore Vidyapith [2012 (2) KHC 388].

Conversely, the applicants in the Insurance Cases contended before the E.I Court that in view of Rule 16 of the Kerala Employees' Insurance Court Rules, 1958, the Insurance Cases were perfectly maintainable before the E.I Court, Alappuzha. They contended that impleadment of the employees is not mandatory in every case as contended by the ESI Corporation. In I.C. Nos.121/2013, 6/2017 and 32/2017 the applicant contended that the hospital is run by a Christian congregation and nuns associated with the congregation were offering services in the hospital. The applicant submitted that the hospital was run on a charitable basis and that the persons working there were not being paid “wages” as defined under the ESI Act. It was therefore contended that the persons who are serving in the hospital are not “employees” as defined under the ESI Act, and hence, impleadment of any of them was not required. The applicant further contended that if no employees are parties to the Insurance Case, then Section 76(1) can have no application and the question of jurisdiction would be governed by Rule 16 of the Employees' Insurance Court Rules, 1958.

The learned Judge of the Insurance Court heard the parties and rejected the Miscellaneous Petitions filed by the ESI Corporation, by the orders impugned in these appeals. The learned Judge held that the opposite parties in all Insurance Cases are officers of the ESI Corporation having their offices at Ernakulam. The learned Judge therefore held that in view of Rule 16 of the Employees' Insurance Court Rules, 1958, the Insurance Cases were impeccably maintainable before the E.I. Court, Alappuzha, having jurisdiction over Ernakulam District. In response to the contention of the ESI Corporation pertaining to non-impleadment of employees, the learned Judge held that the applicant is the master of his case, and it is for the applicant to decide who shall be impleaded as the respondent. It was further held that respondent or any other person cannot compel the applicant to implead any party. The learned Judge distinguished the judgments of this Court cited by the ESI Corporation by holding that as far as employees are not impleaded, law laid down in those cases would not have any relevance in the Insurance Cases concerned.

Following are the common substantial questions of law raised in the memorandum of appeals by the appellant:

The learned Standing Counsel for the ESI Corporation referred to the judgment of the Hon’ble Supreme Court in Fertilisers & Chemicals Travancore Ltd. (supra) and invited the attention of the Court specifically to Paragraph Nos.8 to 12 of the judgment. For ready reference, the relevant paragraphs are extracted hereunder:

[Emphasis added]

The Apex Court explicitly held that, whenever a petition is filed by an employer under Section 75 of the Act, the employer must implead not only the ESI Corporation but also at least some of the workers concerned or the Trade Union representing those workers. It was further held that if this is not done and a decision is rendered in favour of the employer, such a decision would be in violation of the rules of natural justice.

The Hon’ble Supreme Court reiterated the same view in Bhakra Beas Management Board (supra). The learned Standing Counsel also pointed out that the law laid down by the Hon’ble Supreme Court in Fertilisers & Chemicals Travancore Ltd. (supra), was taken note of and followed by this Court in Panickaveettil Sir Sebastian Public School (supra) and Bishop Moore Vidyapith (supra). He therefore submitted that, in all four Insurance Cases that pertain to these appeals, it was obligatory on the part of the applicants to implead the employees or their union. He submitted that once the employees are impleaded, then the question of jurisdiction will be squarely covered by the provisions of Section 76(1) of the ESI Act. If that be so, since the insured persons were not working at the time when the dispute arose within the jurisdiction of the E.I. Court, Alappuzha, the said Court would be incompetent to entertain the Insurance Cases. The learned Standing Counsel submitted that the binding law declared by the Hon’ble Supreme Court was lightly disregarded by the learned judge of the E.I Court, by holding that it is for the applicant to decide who shall be impleaded in the case.

I find considerable force in the submission made by the learned Standing Counsel for the ESI Corporation that the law declared by the Hon’ble Supreme Court in Fertilisers & Chemicals Travancore Ltd. (supra) and followed by this Court in various judgments was not properly appreciated and followed by the learned judge of the E.I Court. The approach adopted by the learned judge in this regard, to say the least, was inappropriate. As noted above, the Hon’ble Supreme Court in unequivocal terms held that in all cases filed under Section 75 of the Employees’ State Insurance Act, the employees or their unions shall unvaryingly be made parties. In Som Mittal v. Govt of Karnataka [(2008) 3 SCC 753], the Apex Court reiterated that the decisions of the Supreme Court and High Court must be respected and carried out by the subordinate courts punctually and faithfully. If the applicants fail to implead the employees or their unions in any case filed under S.75 of the ESI Act, it is the onus of the E.I Court to direct the applicants to implead the employees or their unions in compliance with the law declared by the Hon’ble Supreme Court. Following the law declared by the Apex Court is not optional but obligatory. Instead of following the law laid down by the Hon’ble Supreme Court, rather ignoring the same, the learned judge of the E.I Court ventured to hold that the applicant is the master of the case and no one can compel the applicant to implead any persons other than those who are chosen by the applicant. The said supposition of the learned judge is plainly against the law declared in Fertilisers & Chemicals Travancore Ltd. (supra) and hence indecorous and illegal.

Principal argument of the learned counsel for the 1^st respondent in Insurance Appeal Nos.8/2018, 9/2018 and 11/2018 is that the hospital is operated by a Christian religious congregation with nuns from the congregation offering their services therein. He therefore submitted that those who are working in the hospital do not meet the criteria of the definition of “employees” under the Employees Insurance Act, and hence, impleadment of any of them is not required in the instant case.

If such a contention is accepted as an excuse to omit compliance of the law declared by the Apex Court, what would be the outcome? In every case wherein the employer has taken up a contention that the persons who were reckoned as employees by the ESI Corporation for assessing coverage and determining contribution payable were not “employees” as defined under the Act, the employer would be in a position to circumvent the stipulation regarding impleadment of employees laid down in Fertilisers & Chemicals Travancore Ltd. (supra). That will lead to unjust results as the Apex Court has made it clear that when the case of the employer regarding non applicability of coverage under the Act is accepted, the losers will be the employees and hence any decision rendered against their interest, without their junction, would be in violation of the principles of natural justice. Consequently, if a verdict is given by the EI Court in favour of the management in a case filed under S.75 of the Act, without impleading the employees or their unions, the same would contravene the principles of natural justice and therefore be bad in law. If the exact essence of the law laid down by the Apex Court in Fertilisers & Chemicals Travancore Ltd. (supra) is imbibed, it follows that even in cases wherein the management has a contention as aforesaid, the requirement of impleading the employees or their unions cannot be dispensed with. Nonetheless, the impleadment as such shall not be construed as waiver of the contentions of the employer.

Proceedings under Section 45A of the Act are initiated by the ESI Corporation generally on the basis of the reports furnished by the Social Security Officers who conduct inspections in the establishments. In the case at hand, it is submitted by the learned Standing Counsel for the ESI Corporation as also the learned counsel for the hospital management that an inspection was conducted by the Social Security Officer and it was reported that 85 employees were working in the hospital. The Social Security Officer also added that 55 among them were nuns. Even if the contention of the learned counsel for the hospital management that nuns were working without accepting any remuneration and they were not employees under the Act is accepted, going by the report of the Social Security Officer, there were many other employees also in the hospital. Whether the hospital is liable to be covered by the provisions of the Act and whether there are more than ten employees working in the establishment who fall within the definition of "employee" under the Employees' State Insurance Act are entirely matters to be adjudicated by the E.I. Court. Therefore, I do not propose to express any opinion relating to the said issue. However, fact remains that the Social Security Officer submitted a report that 85 employees were working in the hospital and the ESI Corporation found that the establishment would fall within the coverage of the Act and was liable to pay contribution. In such a situation, in the light of the directions issued by the Hon’ble Supreme Court in Fertilisers & Chemicals Travancore Ltd. (supra), it is essential for the hospital management to implead at least some of the employees in representative capacity. It is open to the hospital management to implead some of the persons working in the hospital without prejudice to its contentions, to comply with the direction issued by the Hon’ble Supreme Court in Fertilisers & Chemicals Travancore Ltd. (supra). Without the joinder of any of the employees who were found by the Social Security Officer to be working in the hospital, in my view, the insurance cases would not be maintainable in the light of the law laid down by the Hon'ble Supreme Court.

If any of the employees are impleaded in the IC’s, then as rightly contended by the learned Standing Counsel for the ESI Corporation, the jurisdiction to consider the cases will be governed by Section 76(1) of the ESI Act, extracted hereunder :

As held by this Court in Panickaveettil Sir Sebastian Public School (supra) if the factual situation is governed by S.76 (1) of the Act, then Rule 16 of the Employees Insurance Court Rules, 1958 can have no application. For ready reference the Rule is also extracted hereunder :

ESI Act is a labour welfare legislation. Provisions of the Act hence deserve to be construed bearing in mind the interest of the employees. It is stipulated under S.76 (1) that all proceedings before the Employees’ Insurance 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, subject to Rules that may be framed by the State Government. Apparently, the intention is to ensure that the cases are instituted in the court convenient to the employees. Opening words of Rule 16 of the Kerala Rules makes it clear that the said provision would apply only in cases not covered by S.76(1). Thus, the requirement under S.76(1) is well-preserved under Rule 16 also. Hence the endeavour of the EI Court shall be to give effect to the provisions of S.76(1) and it shall not permit the applicants to tinker with the same.

It was held in Panickaveettil Sir Sebastian Public School (supra) as under :

I find that an identical situation was considered by a learned Single Judge of this Court in Panickaveettil Sir Sebastian Public School (supra). The said judgment was noted with approval and was followed by a Division Bench of this Court in Bishop Moore Vidyapith (supra). In view of the principles laid down in those cases, I am of the view that the impugned orders cannot be sustained.

Given the preceding discussion, impleadment of employees or their unions is indispensable in the Insurance Cases pertinent to these appeals. If that is the case, the E.I Court, Alappuzha, would not have jurisdiction to entertain those cases. Substantial questions of law raised in these appeals are hence answered in favour of the appellant corporation.

Accordingly, the appeals are allowed, orders impugned in all these appeals are set aside.

Applicants in the Insurance Cases shall implead all employees or at least some of them in representative capacity or else their unions in all Insurance Cases involved in these appeals. The E.I Court, Alappuzha, is directed to transfer I.C. No.121/2013, 6/2017, 14/2017 and 32/2017 to the E.I Court Idukki forthwith.

The E.I. Court, Idukki, on receipt of the files, shall issue notice to the parties, fixing date of appearance and thereafter proceed with the matter in accordance with law, once the employees are impleaded as directed above.

Appeals are allowed as above.

ANNEXURE I TRUE COPY OF THE NOTIFICATION GO(P) NO. 103/2016/LBR DATED 02.07.2016 ISSUED BY THE GOVERNMENT OF KERALA.