Supreme Court : Whether amendment to Section 1 of ESI Act - sub-section (6) shall be applicable retrospectively ?
Source: Bombay Chamber's blog
Reference REPORTABLE
IN THE SUPREME
COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 312 OF 2023 (@ SLP(C) NO. 12520 OF 2022)
The ESI Corporation ...Appellant(S) Versus
M/s. Radhika Theatre ...Respondent(S)
J U D G M E N T
M. R. Shah, J.
1.
Feeling aggrieved and dissatisfied with the impugned
judgment and order dated 17.02.2021, passed by the High Court for the State of Telangana at Hyderabad in
Civil Misc. Appeal No.
125/2011, by which, the High Court has allowed
the said appeal and has set aside the order dated 13.12.2010 passed by the Employees
Insurance Court (hereinafter referred to as the EI Court)
dismissing EIC No. 14/2003 in which the respondent herein challenged the demand notice dated 31.08.1994 issued by the ESI Corporation, the ESI Corporation has
preferred the present appeal.
2.
The facts
leading to the present appeal in nutshell are as under: -
2.1
That the
respondent herein was running a Cinema Theatre
since 1981. It
paid ESI contributions up to
September, 1989. However,
thereafter, as its employees
were less than 20 in number, it did not
pay the contributions. Therefore,
the appellant – corporation issued demand notices.
The respondent herein
challenged the demand
notices before the EI Court by
way of EIC No. 14/2003
containing, inter alia, that prior to the insertion of Sub-section (6) of Section
1 of the ESI Act, 1948 w.e.f. 20.10.1989,
it employed less than 20 persons and therefore, it
was not liable
to be covered under the provisions of the ESI Act. The EI Court dismissed
the case vide order dated 13.12.2010. The order passed
by the EI Court confirming the demand notices
was the subject matter of appeal before
the High Court. Before the High Court, it was the case on behalf of the respondent
– original appellant that Sub-section (6) of Section 1 of the ESI Act which
came to be inserted
on 20.10.1989 shall not be made applicable retrospectively and the same would be
effective only on or after
20.10.1989 and not prior to that date.
On the other hand, it was the case on behalf of the ESI Corporation that the ESI Act being a social welfare legislation, greater amplitude is required to be given to the same, as, it is intended for the welfare of the workmen concerned. It was submitted that as per
amended Sub- section (6) of Section
1, all the establishments shall be governed
by the ESI Act, notwithstanding the fact that the number
of persons engaged
therein is less than the prescribed number. However, thereafter, by the impugned judgment and order the High Court has
allowed the appeal preferred by the respondent herein
taking the view that amendment to
Section 1 of the ESI Act by which Sub- section (6) of Section
1 came to be inserted
w.e.f. 20.10.1989, the same shall not be applicable retrospectively and the same shall not be made applicable to an establishment, established prior to 20.10.1989/31.03.1989.
2.2
Feeling aggrieved
and dissatisfied with the impugned
judgment and order passed by the High Court, the ESI Corporation has preferred the present appeal.
3.
Shri Mahesh Srivastava, learned counsel
appearing
on behalf of the appellant – ESI Corporation has vehemently submitted
that the High Court has materially
erred
in allowing
the appeal and setting aside the demand
notices even for the period post 20.10.1989 by holding that amendment to Section 1 by inserting Sub-section
(6) shall not be applicable retrospectively.
3.1
It is vehemently submitted
that the High Court has not properly appreciated the object and
purpose of the ESI Act and that the ESI Act is a social welfare legislation and intended for the
welfare of the workmen concerned. It is submitted that therefore, to achieve
the
object
and purpose
of the ESI Act, the legislature thought
it fit to insert Sub-section (6) to Section
1 of the ESI Act by which a factory or an establishment shall be
governed by the ESI Act notwithstanding the number of persons employed
therein at any time falls
below the limit
specified by or
under
the ESI Act or the manufacturing process
therein ceases to be carried on with the aid of power.
3.2
It is submitted
that demand notices for the period post 20.10.1989, therefore, cannot be said to be illegal
applying Sub-section (6) of Section 1 retrospectively as observed and held by the High Court. It is
submitted that at the most, the demand notices
for the period prior to 20.10.1989
can be said to be bad in law as in that case
Sub-section (6) of Section 1 of the ESI Act can be said to have applied retrospectively.
3.3
It is submitted that in any case in view of insertion of Sub- section (6) of Section 1 w.e.f.
20.10.1989, any factory or establishment
shall have to be governed by the ESI Act notwithstanding
that the number of persons employed therein
at any time falls below the limit specified by or under the ESI Act.
3.4
Making the above submissions and relying upon the decision
of this Court in the case of Bangalore Turf Club
Limited
Vs. Regional Director,
ESIC; (2014) 9 SCC 657,
it is prayed to allow the present appeal.
4.
Though served none has appeared on behalf of the respondent.
5.
Having heard learned counsel
appearing on behalf of the appellant – corporation and having gone through the impugned judgment
and order passed
by the High
Court, the short question
which is posed for consideration of this
Court is whether
with respect to the demand notices post 20.10.1989
a
factory
or an
establishment, established prior to 20.10.1989 shall be governed
by the ESI Act notwithstanding that the number of
persons
employed therein
at any time falls below
the limit specified
by or under the ESI Act?
An incidental question which is also posed for consideration of this Court is whether
the demand notices for the period after 20.10.1989 i.e.,
from the date by which
Sub-section (6) of Section 1 of the ESI Act came be inserted
can it be said that the amended Section 1 of the ESI Act can be said to have been applied
retrospectively?
6.
While answering
the aforesaid issues/questions the object, purpose and preamble of the ESI Act is required to be referred to and considered. The Preamble
of the ESI Act is as under: -
“An Act to provide for certain benefits
to employees in case of sickness, maternity
and employment injury and to make provisions for certain other matters in relation thereto.”
6.1
Thus, the ESI Act being a social welfare
legislation, any interpretation which would lean in favour of the
beneficiary should be given. The object and purpose of the ESI Act has been elaborately considered by this Court in the case of Bangalore
Turf Club Limited
(supra). After considering catena of earlier
decisions under the ESI Act, it
is observed and held that ESI Act should be given liberal interpretation and should be interpreted
in such a manner so that social
security can be given to the employees. In paragraph 16 to 21, it is observed and held as under: -
“16. The primary rule of interpretation
of statutes may be the literal
rule, however, in the case of beneficial legislations and legislations enacted for the welfare of employees, workmen,
this Court has on numerous
occasions adopted the liberal rule of interpretation to ensure that the benefits
extend to those workers who
need to be covered based on the intention of the legislature.
17.
The ESI Act is a welfare
legislation enacted by the Central Government as a consequence of
the urgent need for a scheme of
health insurance for workers. It would be beneficial
to reproduce the Preamble of the ESI Act in this context. It is as under:
“An Act to provide for certain benefits
to employees in case
of sickness, maternity and employment injury and to make provision for certain other matters in relation thereto”
18.
In ESI Corpn. v. Francis De Costa [1993 Supp (4) SCC 100 : 1994 SCC (L&S)
195] , this Court held that : (SCC pp. 105-06, paras 5-6)
“5. The Act seeks to cover sickness,
maternity, employment injury, occupational disease,
etc. The Act is a social security
legislation. It is settled law that to prevent
injustice or to promote justice and to effectuate the object and purpose of the welfare
legislation, broad
interpretation should be given, even if it requires a departure
from literal construction. The court must seek
light from loadstar Articles 38 and 39 and the economic and social justice
envisaged in the Preamble of the Constitution which would enliven
meaningful right to life of the worker under Article 21. The State
is enjoined under Article 39(e) to protect the health of the workers, under Article 41 to secure sickness and disablement benefits
and Article 43 accords decent standard of life. Right to medical and disability benefits
are fundamental human rights under Article
25(2) of the Universal Declaration of Human Rights and Article
7(b) of the International Convention on Economic,
Social and Cultural Rights.
Right to health,
a fundamental human
right stands enshrined
in socio-economic justice
of our Constitution and the Universal Declaration of Human Rights.
Concomitantly right to medical benefit
to a workman is his/her fundamental right. The Act seeks to succour
the maintenance of health of an
insured workman.
The interpretative endeavour
should be to effectuate
the above. Right to medical benefit is, thus, a fundamental right to the workman.
6.
Moreover, even in the realm of interpretation of statutes, rule of law is a dynamic concept
of expansion and fulfilment for which the interpretation
would be so given as to subserve
the social and economic justice
envisioned in the Constitution. Legislation is a conscious attempt, as a social direction, in the process of change.
The fusion between
the law and social change
would be effected only when law is introspected in the context of ordinary social life. Life of
the law has not been logic but has
been experience. It is a means to serve social
purpose and felt necessities of the people.
In times of stress,
disability, injury,
etc. the workman
needs statutory protection and assistance. The Act
fastens in an insured employment,
statutory obligation on the employer and the
employee to contribute in the prescribed proportion and manner towards the welfare fund
constituted under the Act (Sections 38 to 51 of the Act) to
provide sustenance to the workmen
in their hours of need, particularly when they become economically inactive
because of a cause attributable to their employment or disability or death occurred while in employment. The fact
that the employee contributed to the
fund out of his/her hard-earned wages cannot but have
a vital bearing in adjudicating whether the
injury or occupational disease suffered/contracted by an employee is an employment injury. The liability
is based neither
on any contract nor upon any act or omission by the employer but upon the
existence of the relationship which employer bears to the employment during the course of which the employee had
been injured. The Act
supplants the action at law, based not upon the fault but as an aspect of social welfare,
to rehabilitate a physically and economically handicapped workman who is adversely affected by sickness, injury or livelihood of dependents by death of a workman.”
19. A three-Judge Bench of this Court, in reference to the ESI Act, in Transport Corpn. of India v. ESI Corpn. [(2000) 1 SCC 332 : 2000 SCC (L&S) 121]
, held that : (SCC pp. 357-58, paras 27-28)
“27.
Before parting with the discussion on this point, it is necessary to keep in view the salient fact that the Act is a beneficial piece of legislation intended
to provide benefits to employees in
case of sickness, maternity, employment injury and for certain
other matters in relation thereto.
It
is enacted with a view to ensuring social
welfare and for providing safe insurance cover to employees
who were likely to suffer from various physical
illnesses during the course of their employment. Such a beneficial piece of legislation has to be construed in its correct
perspective so as to fructify
the legislative intention
underlying its enactment. When two views are possible
on its applicability to a given set of employees, that view which furthers the legislative intention should be preferred to the one which would frustrate it. …
28. Dealing with this very Act, a
three-Judge Bench of this Court
in Buckingham and
Carnatic Co. Ltd.
v. Venkatiah [AIR 1964 SC 1272] speaking through
Gajendragadkar, J., (as he then was) held, accepting the contention of the learned counsel, Mr
Dolia that : (AIR p. 1277, para 10)
‘10.
… It is a piece of social legislation intended to confer specified benefits on workmen to whom it applies, and so, it would be inappropriate to attempt to construe the relevant
provisions in a technical or a narrow sense. This position cannot be disputed. But in dealing with the plea raised by Mr Dolia that the section
should be liberally
construed, we cannot overlook the fact that the liberal
construction must ultimately flow from the words used in the section. If the words used in the
section are capable of two constructions one of which is shown
patently to assist the achievement of the object of the Act, courts would
be justified in preferring that construction to the other which may not be able to further the object of the Act.’”
20.
In Bombay Anand
Bhavan Restaurant v. ESI Corpn. [Bombay Anand Bhavan Restaurant v.
ESI Corpn., (2009) 9 SCC 61 : (2009) 2 SCC (L&S) 573] , it was observed
that : (SCC p. 66, para 20)
“20. The Employees' State Insurance Act
is a beneficial legislation. The main purpose
of the enactment as the Preamble suggests,
is to provide for certain
benefits to employees of a factory in case of
sickness, maternity and employment injury and to make provision
for certain other matters in relation thereto. The Employees' State Insurance
Act is a social security
legislation and the canons of interpreting a social legislation are different from the canons of interpretation of taxation law. The
courts
must not countenance
any
subterfuge
which would defeat the provisions of social
legislation and the courts must even,
if necessary, strain the language of the Act
in order to achieve the purpose which the legislature had in placing this
legislation on the statute book. The Act, therefore, must receive a liberal
construction so as to promote its objects.”
21.
The legislature
enacted the ESI Act to provide certain benefits to employees in case of sickness, maternity
in case of female employees,
employment injury and to make provision
in certain other matters in relation thereto. The provisions of the ESI Act apply to all the factories other than seasonal factories. The State
Government with the approval of the Central
Government is authorised
to make the provisions of the
ESI Act applicable to any other establishment or establishments. The provisions of
the ESI Act provide that all employees
in factories or establishments to which the ESI Act applies shall be insured in the manner provided under the
ESI Act. Since the ESI Act is passed for conferring certain
benefits to employees in case of sickness, maternity
and employment injury, it is
necessary that the ESI Act should receive a liberal and beneficial construction so as to achieve legislative purpose without doing violence
to the language of the enactment.”
7.
Prior to insertion of Sub-section (6) of Section 1 of the ESI Act, only those establishments/factories
engaging more than 20 employees were governed by the ESI Act. However, thereafter,
Sub-section (6) of Section 1 of the ESI Act has been inserted on 20.10.1989, and after 20.10.1989 there is a radical change and under the amended
provision a factory or establishment to which ESI Act applies would be governed
by the ESI Act notwithstanding that the number
of persons employed therein
at any time falls below the limit specified by or under the ESI Act.
Therefore, on and after 20.10.1989, irrespective of number of persons
employed a factory or an
establishment shall be governed by
the ESI Act. Therefore, for the demand notices for the period after 20.10.1989, there shall be liability of every factory or establishment irrespective of
the number of persons employed
therein. With respect to such a notice it cannot be said that amended Section 1 inserting
Sub- section (6) is applied retrospectively as observed
and held by the High Court. Only in case of demand notice
for the period prior to inserting Sub-section (6) of
Section 1 of the Act, it can be said that the same provision
has been applied
retrospectively. Therefore, the High Court has committed
a very serious error in observing and holding that even
for the demand notices for the period subsequent 20.10.1989 i.e., subsequent to inserting Sub-section (6) of Section
1 the said provision is applied retrospectively and the High Court has erred in allowing
the appeal and setting aside the demand notices even for the period subsequent to 20.10.1989. Sub-section (6) of Section
1
therefore, shall be applicable even with respect
to those establishments, established prior to 31.03.1989/20.10.1989 and the
ESI
Act
shall
be applicable irrespective of the number of
persons employed or notwithstanding that the number of persons
employed at any time falls
below the limit specified by or under the ESI Act.
8.
In view of the
above and for the reasons stated above, the present appeal succeeds. The impugned judgment
and order passed by the High
Court is hereby set aside and the demand
notices for the period post 20.10.1989 are hereby restored. Present appeal is accordingly allowed. No costs.
…………………………………J.
(M. R. SHAH)
NEW DELHI, JANUARY 20, 2023.
…………………………………J.
(C.T. RAVIKUMAR)
REPORTABLE
IN THE SUPREME
COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 312 OF 2023 (@ SLP(C) NO. 12520 OF 2022)
The ESI Corporation ...Appellant(S) Versus
M/s. Radhika Theatre ...Respondent(S)
J U D G M E N T
M. R. Shah, J.
1.
Feeling aggrieved and dissatisfied with the impugned
judgment and order dated 17.02.2021, passed by the High Court for the State of Telangana at Hyderabad in
Civil Misc. Appeal No.
125/2011, by which, the High Court has allowed
the said appeal and has set aside the order dated 13.12.2010 passed by the Employees
Insurance Court (hereinafter referred to as the EI Court)
dismissing EIC No. 14/2003 in which the respondent herein challenged the demand notice dated 31.08.1994 issued by the ESI Corporation, the ESI Corporation has
preferred the present appeal.
2.
The facts
leading to the present appeal in nutshell are as under: -
2.1
That the
respondent herein was running a Cinema Theatre
since 1981. It
paid ESI contributions up to
September, 1989. However,
thereafter, as its employees
were less than 20 in number, it did not
pay the contributions. Therefore,
the appellant – corporation issued demand notices.
The respondent herein
challenged the demand
notices before the EI Court by
way of EIC No. 14/2003
containing, inter alia, that prior to the insertion of Sub-section (6) of Section
1 of the ESI Act, 1948 w.e.f. 20.10.1989,
it employed less than 20 persons and therefore, it
was not liable
to be covered under the provisions of the ESI Act. The EI Court dismissed
the case vide order dated 13.12.2010. The order passed
by the EI Court confirming the demand notices
was the subject matter of appeal before
the High Court. Before the High Court, it was the case on behalf of the respondent
– original appellant that Sub-section (6) of Section 1 of the ESI Act which
came to be inserted
on 20.10.1989 shall not be made applicable retrospectively and the same would be
effective only on or after
20.10.1989 and not prior to that date.
On the other hand, it was the case on behalf of the ESI Corporation that the ESI Act being a social welfare legislation, greater amplitude is required to be given to the same, as, it is intended for the welfare of the workmen concerned. It was submitted that as per
amended Sub- section (6) of Section
1, all the establishments shall be governed
by the ESI Act, notwithstanding the fact that the number
of persons engaged
therein is less than the prescribed number. However, thereafter, by the impugned judgment and order the High Court has
allowed the appeal preferred by the respondent herein
taking the view that amendment to
Section 1 of the ESI Act by which Sub- section (6) of Section
1 came to be inserted
w.e.f. 20.10.1989, the same shall not be applicable retrospectively and the same shall not be made applicable to an establishment, established prior to 20.10.1989/31.03.1989.
2.2
Feeling aggrieved
and dissatisfied with the impugned
judgment and order passed by the High Court, the ESI Corporation has preferred the present appeal.
3.
Shri Mahesh Srivastava, learned counsel
appearing
on behalf of the appellant – ESI Corporation has vehemently submitted
that the High Court has materially
erred
in allowing
the appeal and setting aside the demand
notices even for the period post 20.10.1989 by holding that amendment to Section 1 by inserting Sub-section
(6) shall not be applicable retrospectively.
3.1
It is vehemently submitted
that the High Court has not properly appreciated the object and
purpose of the ESI Act and that the ESI Act is a social welfare legislation and intended for the
welfare of the workmen concerned. It is submitted that therefore, to achieve
the
object
and purpose
of the ESI Act, the legislature thought
it fit to insert Sub-section (6) to Section
1 of the ESI Act by which a factory or an establishment shall be
governed by the ESI Act notwithstanding the number of persons employed
therein at any time falls
below the limit
specified by or
under
the ESI Act or the manufacturing process
therein ceases to be carried on with the aid of power.
3.2
It is submitted
that demand notices for the period post 20.10.1989, therefore, cannot be said to be illegal
applying Sub-section (6) of Section 1 retrospectively as observed and held by the High Court. It is
submitted that at the most, the demand notices
for the period prior to 20.10.1989
can be said to be bad in law as in that case
Sub-section (6) of Section 1 of the ESI Act can be said to have applied retrospectively.
3.3
It is submitted that in any case in view of insertion of Sub- section (6) of Section 1 w.e.f.
20.10.1989, any factory or establishment
shall have to be governed by the ESI Act notwithstanding
that the number of persons employed therein
at any time falls below the limit specified by or under the ESI Act.
3.4
Making the above submissions and relying upon the decision
of this Court in the case of Bangalore Turf Club
Limited
Vs. Regional Director,
ESIC; (2014) 9 SCC 657,
it is prayed to allow the present appeal.
4.
Though served none has appeared on behalf of the respondent.
5.
Having heard learned counsel
appearing on behalf of the appellant – corporation and having gone through the impugned judgment
and order passed
by the High
Court, the short question
which is posed for consideration of this
Court is whether
with respect to the demand notices post 20.10.1989
a
factory
or an
establishment, established prior to 20.10.1989 shall be governed
by the ESI Act notwithstanding that the number of
persons
employed therein
at any time falls below
the limit specified
by or under the ESI Act?
An incidental question which is also posed for consideration of this Court is whether
the demand notices for the period after 20.10.1989 i.e.,
from the date by which
Sub-section (6) of Section 1 of the ESI Act came be inserted
can it be said that the amended Section 1 of the ESI Act can be said to have been applied
retrospectively?
6.
While answering
the aforesaid issues/questions the object, purpose and preamble of the ESI Act is required to be referred to and considered. The Preamble
of the ESI Act is as under: -
“An Act to provide for certain benefits
to employees in case of sickness, maternity
and employment injury and to make provisions for certain other matters in relation thereto.”
6.1
Thus, the ESI Act being a social welfare
legislation, any interpretation which would lean in favour of the
beneficiary should be given. The object and purpose of the ESI Act has been elaborately considered by this Court in the case of Bangalore
Turf Club Limited
(supra). After considering catena of earlier
decisions under the ESI Act, it
is observed and held that ESI Act should be given liberal interpretation and should be interpreted
in such a manner so that social
security can be given to the employees. In paragraph 16 to 21, it is observed and held as under: -
“16. The primary rule of interpretation
of statutes may be the literal
rule, however, in the case of beneficial legislations and legislations enacted for the welfare of employees, workmen,
this Court has on numerous
occasions adopted the liberal rule of interpretation to ensure that the benefits
extend to those workers who
need to be covered based on the intention of the legislature.
17.
The ESI Act is a welfare
legislation enacted by the Central Government as a consequence of
the urgent need for a scheme of
health insurance for workers. It would be beneficial
to reproduce the Preamble of the ESI Act in this context. It is as under:
“An Act to provide for certain benefits
to employees in case
of sickness, maternity and employment injury and to make provision for certain other matters in relation thereto”
18.
In ESI Corpn. v. Francis De Costa [1993 Supp (4) SCC 100 : 1994 SCC (L&S)
195] , this Court held that : (SCC pp. 105-06, paras 5-6)
“5. The Act seeks to cover sickness,
maternity, employment injury, occupational disease,
etc. The Act is a social security
legislation. It is settled law that to prevent
injustice or to promote justice and to effectuate the object and purpose of the welfare
legislation, broad
interpretation should be given, even if it requires a departure
from literal construction. The court must seek
light from loadstar Articles 38 and 39 and the economic and social justice
envisaged in the Preamble of the Constitution which would enliven
meaningful right to life of the worker under Article 21. The State
is enjoined under Article 39(e) to protect the health of the workers, under Article 41 to secure sickness and disablement benefits
and Article 43 accords decent standard of life. Right to medical and disability benefits
are fundamental human rights under Article
25(2) of the Universal Declaration of Human Rights and Article
7(b) of the International Convention on Economic,
Social and Cultural Rights.
Right to health,
a fundamental human
right stands enshrined
in socio-economic justice
of our Constitution and the Universal Declaration of Human Rights.
Concomitantly right to medical benefit
to a workman is his/her fundamental right. The Act seeks to succour
the maintenance of health of an
insured workman.
The interpretative endeavour
should be to effectuate
the above. Right to medical benefit is, thus, a fundamental right to the workman.
6.
Moreover, even in the realm of interpretation of statutes, rule of law is a dynamic concept
of expansion and fulfilment for which the interpretation
would be so given as to subserve
the social and economic justice
envisioned in the Constitution. Legislation is a conscious attempt, as a social direction, in the process of change.
The fusion between
the law and social change
would be effected only when law is introspected in the context of ordinary social life. Life of
the law has not been logic but has
been experience. It is a means to serve social
purpose and felt necessities of the people.
In times of stress,
disability, injury,
etc. the workman
needs statutory protection and assistance. The Act
fastens in an insured employment,
statutory obligation on the employer and the
employee to contribute in the prescribed proportion and manner towards the welfare fund
constituted under the Act (Sections 38 to 51 of the Act) to
provide sustenance to the workmen
in their hours of need, particularly when they become economically inactive
because of a cause attributable to their employment or disability or death occurred while in employment. The fact
that the employee contributed to the
fund out of his/her hard-earned wages cannot but have
a vital bearing in adjudicating whether the
injury or occupational disease suffered/contracted by an employee is an employment injury. The liability
is based neither
on any contract nor upon any act or omission by the employer but upon the
existence of the relationship which employer bears to the employment during the course of which the employee had
been injured. The Act
supplants the action at law, based not upon the fault but as an aspect of social welfare,
to rehabilitate a physically and economically handicapped workman who is adversely affected by sickness, injury or livelihood of dependents by death of a workman.”
19. A three-Judge Bench of this Court, in reference to the ESI Act, in Transport Corpn. of India v. ESI Corpn. [(2000) 1 SCC 332 : 2000 SCC (L&S) 121]
, held that : (SCC pp. 357-58, paras 27-28)
“27.
Before parting with the discussion on this point, it is necessary to keep in view the salient fact that the Act is a beneficial piece of legislation intended
to provide benefits to employees in
case of sickness, maternity, employment injury and for certain
other matters in relation thereto.
It
is enacted with a view to ensuring social
welfare and for providing safe insurance cover to employees
who were likely to suffer from various physical
illnesses during the course of their employment. Such a beneficial piece of legislation has to be construed in its correct
perspective so as to fructify
the legislative intention
underlying its enactment. When two views are possible
on its applicability to a given set of employees, that view which furthers the legislative intention should be preferred to the one which would frustrate it. …
28. Dealing with this very Act, a
three-Judge Bench of this Court
in Buckingham and
Carnatic Co. Ltd.
v. Venkatiah [AIR 1964 SC 1272] speaking through
Gajendragadkar, J., (as he then was) held, accepting the contention of the learned counsel, Mr
Dolia that : (AIR p. 1277, para 10)
‘10.
… It is a piece of social legislation intended to confer specified benefits on workmen to whom it applies, and so, it would be inappropriate to attempt to construe the relevant
provisions in a technical or a narrow sense. This position cannot be disputed. But in dealing with the plea raised by Mr Dolia that the section
should be liberally
construed, we cannot overlook the fact that the liberal
construction must ultimately flow from the words used in the section. If the words used in the
section are capable of two constructions one of which is shown
patently to assist the achievement of the object of the Act, courts would
be justified in preferring that construction to the other which may not be able to further the object of the Act.’”
20.
In Bombay Anand
Bhavan Restaurant v. ESI Corpn. [Bombay Anand Bhavan Restaurant v.
ESI Corpn., (2009) 9 SCC 61 : (2009) 2 SCC (L&S) 573] , it was observed
that : (SCC p. 66, para 20)
“20. The Employees' State Insurance Act
is a beneficial legislation. The main purpose
of the enactment as the Preamble suggests,
is to provide for certain
benefits to employees of a factory in case of
sickness, maternity and employment injury and to make provision
for certain other matters in relation thereto. The Employees' State Insurance
Act is a social security
legislation and the canons of interpreting a social legislation are different from the canons of interpretation of taxation law. The
courts
must not countenance
any
subterfuge
which would defeat the provisions of social
legislation and the courts must even,
if necessary, strain the language of the Act
in order to achieve the purpose which the legislature had in placing this
legislation on the statute book. The Act, therefore, must receive a liberal
construction so as to promote its objects.”
21.
The legislature
enacted the ESI Act to provide certain benefits to employees in case of sickness, maternity
in case of female employees,
employment injury and to make provision
in certain other matters in relation thereto. The provisions of the ESI Act apply to all the factories other than seasonal factories. The State
Government with the approval of the Central
Government is authorised
to make the provisions of the
ESI Act applicable to any other establishment or establishments. The provisions of
the ESI Act provide that all employees
in factories or establishments to which the ESI Act applies shall be insured in the manner provided under the
ESI Act. Since the ESI Act is passed for conferring certain
benefits to employees in case of sickness, maternity
and employment injury, it is
necessary that the ESI Act should receive a liberal and beneficial construction so as to achieve legislative purpose without doing violence
to the language of the enactment.”
7.
Prior to insertion of Sub-section (6) of Section 1 of the ESI Act, only those establishments/factories
engaging more than 20 employees were governed by the ESI Act. However, thereafter,
Sub-section (6) of Section 1 of the ESI Act has been inserted on 20.10.1989, and after 20.10.1989 there is a radical change and under the amended
provision a factory or establishment to which ESI Act applies would be governed
by the ESI Act notwithstanding that the number
of persons employed therein
at any time falls below the limit specified by or under the ESI Act.
Therefore, on and after 20.10.1989, irrespective of number of persons
employed a factory or an
establishment shall be governed by
the ESI Act. Therefore, for the demand notices for the period after 20.10.1989, there shall be liability of every factory or establishment irrespective of
the number of persons employed
therein. With respect to such a notice it cannot be said that amended Section 1 inserting
Sub- section (6) is applied retrospectively as observed
and held by the High Court. Only in case of demand notice
for the period prior to inserting Sub-section (6) of
Section 1 of the Act, it can be said that the same provision
has been applied
retrospectively. Therefore, the High Court has committed
a very serious error in observing and holding that even
for the demand notices for the period subsequent 20.10.1989 i.e., subsequent to inserting Sub-section (6) of Section
1 the said provision is applied retrospectively and the High Court has erred in allowing
the appeal and setting aside the demand notices even for the period subsequent to 20.10.1989. Sub-section (6) of Section
1
therefore, shall be applicable even with respect
to those establishments, established prior to 31.03.1989/20.10.1989 and the
ESI
Act
shall
be applicable irrespective of the number of
persons employed or notwithstanding that the number of persons
employed at any time falls
below the limit specified by or under the ESI Act.
8.
In view of the
above and for the reasons stated above, the present appeal succeeds. The impugned judgment
and order passed by the High
Court is hereby set aside and the demand
notices for the period post 20.10.1989 are hereby restored. Present appeal is accordingly allowed. No costs.
…………………………………J.
(M. R. SHAH)
NEW DELHI, JANUARY 20, 2023.
…………………………………J.
(C.T. RAVIKUMAR)
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