2015 (8) TMI 546 - SC - Indian Laws

ESI Court lacks jurisdiction to grant exemptions under ESI Act. Challenges should be through judicial review.

ZUARI CEMENT LTD. Versus REGIONAL DIRECTOR, E.S.I CORP. & ORS.

The Supreme Court upheld the High Court's decision that the ESI Court lacks jurisdiction to grant exemptions under the Employees State Insurance Act, ... Jurisdiction of ESI Court - exemption under Employees State Insurance Act, 1948 - Held that:- Employees Insurance Court is a tribunal specially constituted for the purpose of deciding any controversy that may arise on the matters enumerated in Section 75 of the Act. A reading of Section 75 of the Act would show that the ESI Court has full jurisdiction to decide all the matters arising between the employer and the Corporation under the Act. Section 75 of the Act sets out the matters to be decided by the ESI Court. As per Section 75(1)(g) of the Act, ESI Court is empowered to decide any matter which is in dispute between the employer and the Corporation in respect of any contribution or benefit or other dues payable or recoverable under the Act or any other matter required to be or which may be decided by the ESI Court under the Act and such question or dispute subject to the provisions of sub-section (2-A) shall be decided by the ESI Court in accordance with the provisions of the Act. - ESI Court did not have the jurisdiction to consider the question of grant of exemption, order passed by the ESI Court granting exemption and consequently setting aside the demand notices is non-est. The High Court, in our view, rightly set aside the order of ESI Court and the impugned judgment does not suffer from any infirmity warranting interference. - Decided against appellant. Issues Involved:1. Jurisdiction of ESI Court under Section 75(1)(g) of the Employees State Insurance Act, 1948.2. Power of the appropriate government under Section 87 of the Act to grant exemptions.3. Validity of the High Court's direction to approach the ESI Court.4. Legality of ESI Court's order granting exemption and setting aside demand notices.5. Judicial review of exemption orders under Article 226 of the Constitution of India.Issue-wise Detailed Analysis:1. Jurisdiction of ESI Court under Section 75(1)(g) of the Employees State Insurance Act, 1948:The primary issue revolves around whether the ESI Court has the jurisdiction to grant exemptions under the Act. The appellant argued that Section 75(1)(g) empowers the ESI Court to decide disputes between the principal employer and the Corporation regarding contributions or benefits payable or recoverable under the Act. However, it was held that Section 75(1)(g) pertains to disputes between the employer and the Corporation concerning contributions or benefits, not exemptions. The Court concluded that the ESI Court does not have the jurisdiction to grant exemptions, as this power is explicitly vested in the appropriate government under Section 87.2. Power of the appropriate government under Section 87 of the Act to grant exemptions:Section 87 of the Act explicitly states that the appropriate government may grant exemptions to factories or establishments from the operation of the Act for periods not exceeding one year. This power includes the ability to renew such exemptions. The judgment emphasized that the power to grant exemptions is a plenary power given to the appropriate government, and the ESI Court cannot assume this role. The judgment also highlighted that the appropriate government must provide the Corporation an opportunity to make representations before granting or denying exemptions, as outlined in Section 89.3. Validity of the High Court's direction to approach the ESI Court:The High Court had earlier directed the appellant to approach the ESI Court for relief, which both the appellant and the ESI Corporation did not challenge. However, the Supreme Court held that neither the High Court's direction nor the parties' consent could confer jurisdiction on the ESI Court to decide on exemptions. The Court clarified that jurisdiction cannot be conferred by consent or acquiescence when it is not provided by the statute.4. Legality of ESI Court's order granting exemption and setting aside demand notices:The ESI Court had granted future exemption to the appellant and set aside demand notices for contributions for the period from 1993 to 1999. The Supreme Court found that the ESI Court acted beyond its jurisdiction in granting such exemptions. The Court held that the ESI Court's order was a nullity and non-est, as it did not have the jurisdiction to grant exemptions. Consequently, the High Court was correct in reversing the ESI Court's order.5. Judicial review of exemption orders under Article 226 of the Constitution of India:The judgment acknowledged that orders granting or denying exemptions by the appropriate government are subject to judicial review under Article 226 of the Constitution of India. However, it reiterated that the ESI Court does not have the jurisdiction to review or decide on exemption matters. The appropriate channel for challenging exemption decisions is through writ petitions in the High Court, not through the ESI Court.Conclusion:The Supreme Court dismissed the appeals, upholding the High Court's decision that the ESI Court does not have the jurisdiction to grant exemptions under the Employees State Insurance Act, 1948. The Court emphasized that the power to grant exemptions lies solely with the appropriate government, and any challenge to exemption decisions must be pursued through judicial review under Article 226 of the Constitution. The ESI Court's order granting exemption and setting aside demand notices was declared null and void.