Supreme Court Invalidates Section 4(2) Kerala Fishermen's Welfare Fund Act

KOLUTHARA EXPORTS LTD. Versus STATE OF KERALA & ORS.

KOLUTHARA EXPORTS LTD. Versus STATE OF KERALA & ORS. - 2002 AIR 973, 2002 (2) SCC 459, 2002 (1) SCR 775 Issues Involved:
1. Constitutional validity of Section 4(2) read with Section 2(d) of the Kerala Fishermen's Welfare Fund Act, 1985.
2. Legislative competence of the State of Kerala to levy impost by way of contribution under Section 4(2) of the Act.

Summary:

Issue 1: Constitutional Validity of Section 4(2) read with Section 2(d) of the Act

The Supreme Court examined the constitutional validity of Section 4(2) read with Section 2(d) of the Kerala Fishermen's Welfare Fund Act, 1985. The appellant contended that there was no employer-employee relationship between them and the fishermen, and thus, the Legislature could not levy an impost by way of contribution. The High Court had upheld the Act, stating that the fishermen are the ultimate beneficiaries of this benevolent legislation, and there is an intimate nexus between the fishermen and the exporters of marine products. The High Court opined that the fishermen are the backbone of the industry, and their welfare is essential for the industry's survival.

Issue 2: Legislative Competence of the State of Kerala

The Supreme Court analyzed whether the State of Kerala had the legislative competence to impose the contribution under Section 4(2) of the Act. The Court noted that the legislative competence must be demonstrated with reference to one or more of the Entries in Lists II and III of the Seventh Schedule of the Constitution. The State relied on Entry 23 of the Concurrent List, which pertains to social security and social insurance. The Court acknowledged that Entry 23 enables the State Legislature to enact laws for social security and welfare measures but emphasized that the burden of an impost could only be placed when there exists an employer-employee relationship between the contributor and the beneficiary.

The Court referred to previous judgments, including Gasket Radiators Pvt. Ltd. vs. Employees' State Insurance Corporation & Anr. and Mangalore Ganesh Beedi Works vs. Union of India, which supported the view that contributions for social security could be imposed on employers for the benefit of employees. However, the Court found that in the present case, the nexus between the purchasers/exporters and the fishermen was insufficient to justify the impost under Entry 23 of List III.

Conclusion:

The Supreme Court declared Section 4(2) of the Act unconstitutional for lack of legislative competence. The Court set aside the order under challenge and allowed the writ petition to that extent. The Court also directed that the amounts already paid by dealers under Section 4(2) would not be refunded by the Board. The appeal was allowed with no order as to costs.