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Judgment
S.M. Abdul Wahab, J.—This appeal has been preferred by the employer Sree Lakshmi Medicals represented by its Manager Incharge
against the Regional Director, ESI Corporation. The petitioner filed the petition u/s 75 of the Employees'' State Insurance Act, 1948 before the
Principal Judge, City Civil Court, Madras challenging the order No. TN/Ins.II/51-9943-102 dated 12-7-94 demanding a sum of Rs. 43,946/-
towards contribution for the period from 1982 to 1991 with interest. According to the petitioner, sufficient opportunity was not given before the
demand was made. The condition for the application of the Act was not satisfied with reference to the establishment of the petitioner, as there were
no employees numbering more than 20. This petition was numbered as EIOP.SR No. 25269 of 1994. The petitioner filed CMP. No. 128 of 1994
also for waiver of the deposit. These petitions along with the similar other petitions came up before the Employees'' State Insurance Court i.e., the
Principal Judge, City Civil Court Madras on 31.7.1996. On 31.7.1996, the learned Judge while considering the preliminary issue as to whether the
Court at Madras has jurisdiction to entertain the petitions filed by the petitioner, ordered return of the petitions for presentation to proper Court.
Challenging the said order, this Civil Miscellaneous Appeal has been filed in this Court.
The learned counsel for the appellant submits that as per Rule 16(1) of the Madras Employees Insurance Court Rules, 1951, cases not falling
under Sub-Section (1) of Section 76 can be filed where the opposite party resides or carries on business. According to the learned counsel, since
the dispute in this particular case is between the appellant and the Regional Director, ESI Corporation alone, the case falls outside the purview of
Sub-Section (1) of Section 76 of the Act and hence the petitions were maintainable.
Learned counsel for the respondent, on the other hand, contends that since the contribution demanded concerns the employees also, the proper
Court having the jurisdiction is where the employees are working i.e. where the establishment of the petitioner is situated. Section 76(1) of the
Employees'' State Insurance Act reads as follows:-
Subject to the provisions of this Act and any rules made by the State Government, all proceedings before the Employee''s 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"".
Here, the jurisdiction is given to the Court, within the local limits of the area of whose jurisdiction the insured person was working at the time of the
dispute.
Rule 16 of the Madras Employees'' Insurance Courts Rules, 1951 is as follows:-
In cases not falling under Sub-Section (1) of Section 76, a proceeding against any person shall be instituted in the Court within the local limits of
whose jurisdiction:-
a) the opposite party or each of the opposite parties where there are more than one, at the time of commencement of the proceedings, actually and
voluntarily resides, or carries on business, or personally works for gain, or
b) any of the opposite parties, where there are more than one, at the time of the commencement of the proceedings, actually and voluntarily
resides, or carries on business, or personally works for gain, provided that in such case, carry on business or personally work for gain, as
aforesaid, acquiesce in such institution, or
c) the cause of action, wholly or in part, arose"".
When we read Section 76(1), the emphasis is with reference to the insured person and his working place at the time of the dispute.
According to the learned counsel for the respondent, since the contribution is for the benefit of the insured persons, it actually concerns the
employees, namely, the insured persons and it is not a case where damage is claimed u/s 85 of the Act. In case like one u/s 85, the dispute would
be between the employer and the Corporation. The learned counsel for the respondent relied upon the decision reported in Sree Karpagambal
Mills Ltd. v. First Additional City Civil Court (E.S.I. Court) and another 1996 III L.L.J. Sup, 410. In a similar circumstance, where there was a
demand for the payment of contribution against Sree Karpagambal Mills Limited and when the similar objection was raised to the filing of the
petition by the employer challenging the demand, Justice D. Raju, as he then was, has taken a view that the Court appointed to the local area,
covering the establishment of the employer alone had jurisdiction. The learned Judge has stated that the essential requisite laid down in Section
76(1) relating to the institution of the proceedings under the Act is that it should be in the Court appointed for the local area in which the insured
person was working at the time when the question or dispute arose. According to the learned Judge, even a cursory reading of the provision will
go to show that neither the location of the respondent-Corporation nor the residence of the person who initiated the proceedings giving room for
dispute to be raised or even the place where the question of dispute was said to have arisen that are relevant or material to decide the Court before
which the proceedings have to be instituted.
Another decision relied on by the learned counsel for the respondent is M/s. Arokia Match Factory Palani v. ESI Corporation Madras C.M.A.
No. 1098 of 1988 dated 1.9.1997. Therein, the learned single Judge of this Court has followed the aforesaid decision, relying upon Section 76(1)
of the Employees'' State Insurance Act.
The learned counsel for the appellant submits that only when the dispute directly relates to the employee or the insured person and he is a party
to the dispute, then the case necessarily has to be instituted in the local area in which the insured person is working. But as far as the case on hand
is concerned, it is between the employer and the Employees'' State Insurance Corporation. According to the Corporation, the establishment of the
appellant is covered by the Employees'' State Insurance Act, while it is not so according to the employer. It is, no doubt, true that in cases relating
to the contribution, the interest of the employees or insured persons will be involved, though not directly but indirectly.
Here, we have on the one side Section 76(1) of Employees'' State Insurance Act and Rule 16(1) of the Madras Employees'' Insurance Courts
Rules, 1951 on the other side. If a general consideration is given, all matters relating to the contribution will be relating to the employees or insured
persons. But, from the framing of the Section and the Rules, there is scope for distinction between the cases where the insured persons are directly
involved and the cases where their interest is affected'' remotely. Otherwise, there would be no necessity for framing of Rules like Rule 16(1),
which specifically states that cases not falling under Sub-Section (1) of Section 76. The opening of the provision itself shows that there can be
cases which fall under Sub-Section (1) of Section 76. If the general principle is applied, no distinction can be made or there cannot be any
exception to Sub-Section (1) of Section 76 of the Act. Further, Sub-Section (1) of Section 76 of the Employees State Insurance Act leaves some
scope for exemptions, because the Section itself contains the words ""subject to the provision of the Act and Rules made by the said Act"". Only
taking advantage of the provisions of Sub-Section (1) of Section 76, Rule 16 has been made. There is no challenge to Rule 16, and so long as
Rule 16 stands, we have to take it that certain cases will be governed by the provisions contained in it and the proceedings can be instituted as
contemplated by the said Rule.
The demand has been issued by the Corporation to the appellant. The appellant has challenged the demand. The cause of action has certainly
arisen at Madras where the respondent''s office is established. Rule 16(1) (a) of Madras Employees'' Insurance Court Rules enables the parties
like appellant to institute proceedings where the opposite party carries on business. Sub-Rule (c) of Rule 16 enables the institution of proceedings
in the Court within the local limits of jurisdiction the cause of action has arisen. When the respondent has issued a notice from its office at Madras,
certainly cause of action has arisen at Madras as contemplated by Sub-Rule (c) of Rule 16. Therefore, as per Rule 16, proceedings can be
instituted by a party in a Court within whose local limits, the opposite party is carrying on business or where the cause of action has arisen. It
cannot be contended that the cause of action (sic) has not arisen in this case at Madras. There cannot be also any dispute that the respondent-
Regional Director is having his office at Madras. Therefore, in my view, there is a force in the contention of the learned counsel for the appellant.
In the case of M/s. Jay Industries v. Employees State Insurance Corporation (1981 43 I.F..L.R. 118), the learned single Judge of the Punjab
and Haryana High Court has held as follows:-
Section 75 of the Act provides the matters to be decided by the Employees Insurance Court. In most of those matter, the insured person as
defined in Section 2(14) of the Act is likely to be the party to the dispute. As and when the insured is a party to the dispute, then his case will be
governed by the provisions of Sub-Section (1) of Section 76 of the Act and all those proceedings 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 to attract provisions of Rule 16, reproduced above. If
this argument of the learned counsel for the Corporation, that since the Act is for the benefit of insured persons and regarding disputes relating to
the all proceedings must 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 accepted in that event. Rule 16 of the Rules become redundant. The very opening words of Rule 16 provides that ""in cases not
falling under Sub-Section (1) of Section 76, a proceeding against any person shall be instituted in the Court within the local limits of whose
jurisdiction....."". From the language used therein, it is quite clear that the cases, which do not fall within the provisions of Sub-Section (1) of Section
76 of the Act, will be governed by Rule 16 of the Rules"".
The said decision is, in support of my opinion expressed above. Even though the lower Court has taken note of Rule 16 of the Madras
Employees'' Insurance Courts Rules, 1951, the learned Judge has. mainly placed his decision on the decision in W.P. No. 7912 of 1987, as I have
mentioned above. Rule 16 was not brought to the notice of the learned Judge and as there was no opportunity for the learned Judge to consider
the scope of considering the Rule 16 along with Section 76(1) and a necessity has arisen for me to consider both Section 76(1) and Rule 16(1).
Hence, after considering both, I am of the view that in cases where the dispute relates mainly to the employer and the Corporation, the Court
within whose jurisdiction the Corporation is situate, will have the jurisdiction to entertain a petition when the employer is aggrieved by the
proceedings emanated from the Corporation. Therefore, the appeal is allowed. However, there will be no order as to costs. Consequently, CMP.
No. 3893 of 1998 is closed.