High Court Decision on Employees' State Insurance Rule Authority

BHARAT BARREL & DRUM MFG. CO. LTD. & ANR. Versus EMPLOYEES STATE INSURANCE CORPORATION

BHARAT BARREL & DRUM MFG. CO. LTD. & ANR. Versus EMPLOYEES STATE INSURANCE CORPORATION - 1972 AIR 1935, 1972 (1) SCR 867, 1972 (2) SCC 860 Issues Involved:
1. Whether Rule 17 of the Employees' State Insurance Rule is ultra vires the rule-making power of the State Government under Sec. 96(1) of the Employees' State Insurance Act.
2. If Rule 17 is ultra vires, what limitation applies to applications filed by the Corporation to the Employees' Insurance CourtRs.

Issue-Wise Detailed Analysis:

1. Whether Rule 17 of the Employees' State Insurance Rule is ultra vires the rule-making power of the State Government under Sec. 96(1) of the Employees' State Insurance Act:
The Supreme Court examined whether the State Government had the authority under Sec. 96(1)(b) of the Employees' State Insurance Act to prescribe a period of limitation for applications filed in the Employees' Insurance Court. The Court noted that Rule 17, which imposed a twelve-month limitation period for applications, was challenged by the Employees' State Insurance Corporation. The High Court of Bombay had previously held that the clear terms of Sec. 96(1)(b) did not grant the State Government the power to prescribe such a limitation period. The Court observed that the power to prescribe procedural rules did not extend to substantive rights, and the limitation period significantly affected substantive rights by extinguishing claims.

The Supreme Court agreed with the High Court's interpretation, emphasizing that procedural rules should govern the process of litigation and not affect substantive rights. The Court cited various academic and judicial perspectives to distinguish between procedural and substantive law, concluding that prescribing a limitation period falls within the realm of substantive law. Therefore, Rule 17 was deemed ultra vires as it exceeded the State Government's rule-making authority under Sec. 96(1)(b).

2. If Rule 17 is ultra vires, what limitation applies to applications filed by the Corporation to the Employees' Insurance CourtRs.
The Supreme Court addressed the limitation applicable to applications filed by the Corporation if Rule 17 was found ultra vires. The High Court of Bombay had ruled that applications filed before January 1, 1964, were not subject to any limitation period, while applications filed on or after that date would be governed by Art. 137 of the Limitation Act of 1963, which prescribes a three-year limitation period from the date when the right to apply accrues.

The Supreme Court examined the scheme and purpose of the Employees' State Insurance Act, noting that it was enacted to benefit employees and their dependents in cases of sickness, maternity, and employment injury. The Court highlighted that the Act did not specify a limitation period for the Corporation to recover contributions from employers, indicating that the legislature did not intend to impose such a limitation. The Court also noted that Sec. 68 of the Act allowed the Corporation to recover contributions as arrears of land revenue without any limitation period.

The Court concluded that the omission of a limitation period in the Act for the Corporation's claims was deliberate and aligned with the Act's scheme. The legislature's subsequent amendment to Sec. 77, prescribing a three-year limitation period for applications, further confirmed that the power to prescribe limitation periods was not delegated to the State Government under Sec. 96(1)(b). Therefore, the Court upheld the High Court's decision, affirming that Rule 17 was ultra vires and that the limitation period for applications filed by the Corporation would be governed by Art. 137 of the Limitation Act of 1963.

Conclusion:
The Supreme Court dismissed the appeal, affirming the High Court's decision that Rule 17 is ultra vires the rule-making power of the State Government under Sec. 96(1)(b) of the Employees' State Insurance Act. Consequently, applications filed by the Corporation to the Employees' Insurance Court are subject to a three-year limitation period under Art. 137 of the Limitation Act of 1963. The appeal was dismissed with costs.