Bench Sr.No v. Employees State Insurance Corporation & Ors.

Judgment

(per Hon’ble Sri Justice Challa Gunaranjan) All these writ appeals since involve the very same question of law as to applicability of provisions of the Employees’ State Insurance Act, 1948 (for short, the “ESI Act”) to various municipal corporations, the same are heard together and disposed of by this common judgment. 2 HCJ & CGR, J. W.A.No.80 of 2024 & batch

#2. For the sake of convenience, the facts emanating in Writ Appeal No. 80 of 2024 are stated as under.

#3. (a) The appellant-writ petitioner is a statutory corporation established under the provisions of the Andhra Pradesh Municipal Corporations Act, 1994 and governed by the Greater Hyderabad Municipal Corporation Act, 1955. The corporation provides civic amenities such as services in health, sanitation, maintenance and development of roads, urban forestry, street lighting and maintenance of works, playgrounds, etc., which are essential functions envisaged under the provisions of the Corporation Act. (b) In order to perform aforesaid functions, the corporation engages the services of outsourcing workers provided by self-help groups/contractors. Though the said workers engaged by such independent self-help groups/contractors are not employees of the corporation, nevertheless, as a welfare measure, the corporation has been extending benefits under various enactments, such as payment of minimum wages, ESI and provident fund contributions, etc. (c) It is stated that though the appellant was not notified by the appropriate Government as required under Section 1(5) of the ESI Act, bringing it within the purview of provisions of said Act as an establishment, the corporation on its own was providing the benefits of ESI contribution. Despite the appellant not being governed by provisions 3 HCJ & CGR, J. W.A.No.80 of 2024 & batch of the ESI Act and regulations made thereunder, 1st respondent ESI corporation, by order, dated 20.05.2016, levied damages of Rs.31,52,988/- for delayed payment of contribution for the period from October 2010 to December 2014, in terms of Section 85-B of the ESI Act, treating the corporation as an establishment.

(d) The appellant Corporation had challenged the said orders in W.P. No. 19581 of 2016, which eventually came to be disposed of by setting aside impugned order on the ground that said order was passed without deciding as to whether damages were at all leviable or not, and whether there was any mens rea, accordingly, the matter was remanded to decide the issue afresh after conducting a detailed enquiry. In pursuance to the same, during the inquiry, appellant had raised a jurisdictional issue of applicability of the ESI Act in the absence of a statutory notification under Section 1(5) of the ESI Act and also sought to place reliance on order, dated 05.12.2018, passed in ESI Case No.13 of 2018 and batch relating to GHMC, which decided the issue in its favour, therefore, pleaded that question of imposing damages does not arise. However, the 1st respondent has passed order, dated 29.11.2019, confirming the damages. Assailing the same, appellant corporation preferred W.P. No. 374 of 2019. (e) After filing of the writ petition, Government of Andhra Pradesh, vide G.O.Ms.No.2, Labour, Factories, Boilers & Insurance Medical 4 HCJ & CGR, J. W.A.No.80 of 2024 & batch Services (IMS&VIG) Department, dated 19.04.2023, issued notification in terms of Section 1(5) of the ESI Act, extending the provisions of ESI Act to all classes of establishments viz., municipal bodies including municipal corporations, municipal councils, nagar palikas and other urban local bodies run by the State Government, wherein ten or more persons on casual or contractual or both basis are employed, or were employed for wages on any day of the preceding 12 months. Even the respondent ESI Corporation issued circular, dated

22.05.2023, to the effect that Government of Andhra Pradesh had issued draft notification, dated 28.11.2022, and thereafter, final notification, dated 19.04.2023, under Section 1(5) of the ESI Act for coverage of casual or contractual workers engaged under municipal corporations and municipal councils, which had post-facto approval of the Central Government. Therefore, all appellant corporations came to be covered by the provisions of the ESI Act with effect from 19.04.2023. The learned Single Judge dismissed the writ petitions on the ground of availability of alternative remedy under Section 75 of the ESI Act and accordingly, relegated the appellant Corporations to avail the same. Assailing the same, the present appeals are filed. (f) In all the other writ appeals, the facts are more or less similar except for the quantum of damages imposed. Therefore, the facts in each case are not set out separately. 5 HCJ & CGR, J. W.A.No.80 of 2024 & batch

#4. Heard Mr.Koka Satyanarayana Rao, learned counsel appearing for the appellant Corporations and Mr.K.Sangan Naidu, learned counsel appearing for the 1st & 3rd respondents - ESI Corporation.

#5. (a) Learned counsel for the appellant corporations contended that the impugned orders, passed by the 1st respondent ESI Corporation, in levying and demanding damages purported to be under Section 85-B of the ESI Act, are without jurisdiction, particularly, in the absence of a proper notification under Section 1(5) of the ESI Act notifying the appellant Corporation to be establishments falling within the purview of the said Act. Once the appellants are not properly brought under the purview of the ESI Act, in the manner as envisaged thereunder, question of insisting the appellants to make ESI contributions or levying damages thereon does not arise. It is further contended that mere issuance of proceedings in Rc.No.1994/2007, dated 24.04.2007, by Commissioner and Director, Municipal Administration Department, Government of Andhra Pradesh, instructing all urban local bodies to ensure contributions are made towards ESI on account of engaging the municipal workers by itself cannot be treated as a proper notification as envisaged under Section 1(5) of the ESI Act. (b) It is contended that circular, dated 24.04.2007, cannot be construed as a proper notification under Section 1(5) of the ESI Act, but the proper notification was the one issued in G.O.Ms.No.2, dated 6 HCJ & CGR, J. W.A.No.80 of 2024 & batch

19.04.2023, which meets the requirements of the provisions of the Act. Therefore, the appellants cannot be compelled to comply with the provisions of the Act or be made liable for contributions, interest or damages for the period prior to issuance of the notification. (c) It is further contended that it is the basic principle of law long settled that if the manner of doing a particular act is prescribed under any statute, then the act must be done in that manner, thus, the appellant corporations would have been brought within the purview of the Act only through proper notification issued in the manner as envisaged under the Act, in the facts and circumstances of the case, such notification came to be issued only vide G.O.Ms.No.2, dated 19.04.2023. Even the respondent ESI Corporation also issued a circular, dated 22.05.2023, to the effect that the Government of Andhra Pradesh had issued draft notification, dated 28.11.2022, and thereafter, final notification, dated

19.04.2023, under Section 1(5) of the ESI Act, for coverage of casual and contractual workers engaged under the municipal corporations and municipal councils, which had post facto approval of the Central Government. Therefore, all the appellant corporations came to be governed by the provisions of the ESI Act with effect from 19.04.2023. In support of the aforesaid submissions, learned counsel made this Court go through orders passed by the ESI Court in E.I.C.No.13 of 2018 and batch, wherein the very same issue has been decided in favour of the 7 HCJ & CGR, J. W.A.No.80 of 2024 & batch corporation therein by holding that unless proper notification under Section 1(5) of the ESI Act is issued in the manner as envisaged under the Act, question of extending the provisions of the ESI Act and thereby levying and demanding any damages does not arise. Further, reliance has also been placed on the judgment of the Hon’ble Apex Court in Brajendra Singh Yambem v. Union of India1 and also Single Judge of the Bombay High Court in Edelstahi Agencies (P) Ltd. v. Regional Provident Fund Commissioner2 to the same effect. (d) Lastly, it is contended that the learned Single Judge was not right in dismissing the writ petitions on the ground of alternative remedy, inasmuch as when the impugned orders are assailed wholly to be without jurisdiction, following the ratio laid down by the Hon’ble Apex Court in Whirlpool Corporation v. Registrar of Trade Marks, Mumbai3, the writ petitions are very much entertainable.

#6. (a) Per contra, learned counsel respondent ESI Corporation, while vehemently opposing the submissions made above, tried to support the impugned order passed by the learned Single Judge. It is contended that the appellants since have by themselves been deducting and paying the ESI contribution, even if it were to be voluntarily, they have accepted the applicability of the provisions of the