Holding

The Supreme Court upheld the High Court’s order that the wage‑limit amendment be applied prospectively from the date of the judgment, finding the direction equitable and within the Court’s power under Articles 136 and 142.

Summary

The Employees State Insurance Corporation (ESIC) challenged a High Court order that required employers to implement a wage‑limit amendment (raising the ceiling from Rs 3,000 to Rs 6,500) only from the date of the judgment (16 Mar 2004) rather than from the date of the notification (1 Jan 1997). The amendment was made by a 1996 notification under the Employees State Insurance Act, 1948. The Supreme Court examined whether the amendment was ultra vires, whether the High Court could order prospective operation of the amendment, and whether employers could be forced to pay ESIC contributions for the period they had been barred from deducting them by injunction. Relying on principles of equity, the maxim *lex non cogit ad impossibilia*, and the doctrine of prospective overruling under Articles 136, 142 of the Constitution, the Court held that the High Court’s direction was justified to avoid grave hardship to employers who had already spent large sums providing medical facilities. Consequently, the appeals were dismissed and the High Court’s order upheld.

Issues considered

The amendment of Rules 50, 51 and 54 of the ESIC (Central) Rules, 1950 raising the wage ceiling, is it ultra vires the Employees State Insurance Act, 1948.
Whether a High Court may direct that a statutory amendment be applied prospectively from the date of its judgment rather than from the date of the notification.
Whether employers can be compelled to pay ESIC contributions retrospectively for a period during which they were under a court‑issued injunction preventing deduction.
Whether the doctrine of prospective overruling under Articles 136 and 142 of the Constitution is applicable in this statutory context.

Legislation cited

Constitution of Indias. Article 136, s. Article 142, s. Article 226
Employees' State Insurance Act, 1948s. 26, s. 28, s. 2(9)(b), s. 87, s. 88, s. 91A
Employees' State Insurance (Central) Rules, 1950s. Rule 50, s. Rule 51, s. Rule 54

Subjects

Employees State Insurance Actwage ceiling amendmentprospective applicationultra viresArticle 136Article 142equityundue hardshiplex non cogit ad impossibiliacontributionsmedical benefits

Judgment

- -J
EMPLOYEES STATE INSURANCE CORPORATION AND ORS. A
v.
JARDINE HENDERSON STAFF ASSOCIATION AND ORS.

JULY 25, 2006

[DR. AR. LAKSHMANAN AND LOKESHWAR SINGH PANTA, JJ.] B

Employees State Insurance Act, 1948:

Section 2(9)(b); Employees State Insurance (Central) Rules, 1950, Rules
50, 51 and 54-Writ petition challenging Notification amending Rules 50, 51 C
and 54 by which the wage limit for coverage of an employee under the Act
enhanced from Rs.3000 to Rs.6500-By interim order, High Court restrained
employers from deducting ES/ contribution, however, directed them to provide
medical facilities-High Court upheld the validity of Notification-Further
directed employers to enforce Not!ficationfiwn date ofjudgment-Justification D
of challenged on the ground that enforcement of Notification ought to be from
date of Notification-Held: High Court's direction for enforcement of
Notification w. e.f the date ofjudgment is pe1fectly justified, fair and judicious
considering the facts and equity and hence calls for no interference under
Article 136-Employers-Companies have spent large amount of money on
employees in providing medical facilities, it would cause extreme and grave E
hardship to them if they are required to pay contribution for the past several
years for no fault of their own-This apart, employee-union included workmen
who have left or expired and hence deduction of their contribution from
salary is not workable-Constitution of India, 1950, Articles 226, 136, 142.

Employees State Insurance (Central) Rules, 1950 : F

Rules 50, 51 and 54-Amendment of Rules 50, 51 and 54 enhancing
wage limit-For coverage of employees under the Act-From Rs.3000 to
Rs.6500 -Held: Is not ultravires-Employees State Insurance Act, 1948-
Section 2(9)(b).
G
Equity :

Act of court should not prejudice any party-No party to suffer because

27
·- H
28 SUPREME COURT REPORTS [2006] SUPP. 4 S.C.R.

A of 1he orders of the Court if duly complied with. ~ .

Maxim:

lex non cogit ad impossibilia--App/icabi/ity of

B Pursuant to the issuance of Notification dated 23.12.1996, Rules 50,
51 and 54 of the Employees State Insurance (Central) Rules, 1950, were
amended by virtue of which the wage limit for coverage of an employee
u/s. 2(9)(b) of the Employees State Insurance Act, 1948 was enhanced from
Rs.3000/- to Rs.6500/-. Various Employees Unions challenged the vires of
the Notification by filing Writ Petitions before High Court. By an interim
C order, High Court restrained employers from deducting the ESI
contributions required to be deposited with the Corporation but continue
to provide existing medical facilities to the employees till the disposal of
Writ petitions.

The Single Judge of High Court disposed of all the Writ Petitions
D by quashing the amendment of the Rules of 1950. Corporation and Union
of India filed appeals against that part of Order by which amendment was
quashed. On t 6.3.2004, Division Bench allowed the appeals holding that
the enhancement could not be termed as u/1ra vires for the purpose of the
.
Act and that all interim orders passed in this connection staying the
E operation of the said enhancement are vacated. The High Court further
directed that the employers who had stay order in their favour, will
implement the amendment only from the date of the impugned judgment
of the High Court dated 16.03.2004 though the amendment came into
operation w.e.f. 01.01.1997. The said interim order was n_ot appealed or
challenged by the Corporation nor was it stayed during the pendency of
F the appeal before the Division Bench. Hence these appeals by Corporation.

Appellant-Corporation contended that once the Notification is
enforced, the applicability of the same will be from the date of Notification
and not from any future date.

G Dismissing the appeals, the Court

HELD: I. The respondent-Companies have spent large amount of
money on the employees and provided medical facilities in view of the
order of the High Court granting stay/injunction etc. If the High Court
H had not passed the order of injunction, the respondent-companies would
•
EMPLOYEES STATE INSURANCE CORPN. '"JARDINE HENDERSON STAFF ASSON 29

have contributed the ESI contribution instead of spending monies on the A
medical facilities and allowances. In these circumstances, it will cause
extreme and grave hardship to the employer if they are required to pay
contribution for the past several years for no fault of their own. No party
much less the respondents should suffer because of the orders of the Court
if duly complied with. 149-C-EI
B
Rajesh D. Darbar & Ors. v. Narasingrao Krishnaji Kulkari & Ors.,
120031 7 SCC 219; Mohammed Gazi v. State of MP., 120001 4 SCC 342;
Somaiya Organics (India) Ltd. & Anr. v. State of U. P. & Anr., 120011 5 SCC
519; Harsh Dhingra v. State of Haryana & Ors., 120011 9 SCC 550; Raymond
Ltd. v. MP. Electricity Board, 120011 I SCC 534; Ashok Kr. Gupta v. State C
of U.P., 119971 5 SCC 201; Sarwar Kumar v. M. Agarwal, (20021 4 SCC
147; Shree Cement v. State of Rajasthan, 1200011SCC765; British Physical
Lab India Ltd. v. State ofKarnataka, 1199911 SCC 170;West Bengal Hosiery
Association v. State of Bihar & Ors., 119981 4 SCC 134; Council ofScientific
and Industrial Research v. K.G.S. Bhatt, 119891 4 SCC 635; ONGC v.
Sendhabhai Vastram Patel, 120051 6 SCC 454; SBP & Co. v. Patel 0
Engineering Ltd., (20051 8 SCC 618; Union of India & Anr. v. Murugan
Talkies, (1996] I SCC 504 and Municipal Corporation of Faridabad v. Siri
Niwas, [20041 8 SCC 195, referred to.

2. The High Court was fully justified in passing the judicious order
after considering the equities by directing the employer and the employees E
to make ESIC contribution for the future and should not bear with the
liability for the past inasmuch as the employees of the respondents have
not availed any medical facilities from ESIC and at the same time the
employer was providing the medical facilities due to interim orders of the
High Court. The order passed by the High Court meets the ends of justice F
and does not require interference by this Court under Article 136 of the
Constitution of India. (49-F-GI

3. Passing of the final order by the High Court directing the payment
of the ESI contribution from the date of the said judgment does not
amount to postponing the enforcement of notifiration, in view of the G
peculiar circumstances of the case, namely, the non-availability of the
facilities, non-deduction of contribution from the members of the union
for several years and provision of medical relief by the Management. The
High Court's direction for deduction of contribution w.e.f. the date of the
judgment is perfectly justified. This apart, the members of the union H
30 SUPREME COURT REPORTS (20061 SUPP. 4 S.C.R.

A included casual, temporary, contractual and it will be practically
impossible to find each and every member of the union to recover their
contribution for the past several years and in fact some of the workmen
who would have been the employees during all these years would have
left, expired etc. and on account thereof also their contribution cannot be
B recovered. 149-H; 50-A-CI

4.1. The High Court under Article 226 and this Court under Article
136 read with Article 142 of the Constitution of India have the power to
mould the relief in the facts of the case. 151-HI

C Employees' State fo1surance Corpn. v. Kera/a State Handloom
Development Corpn. Employees Union (CITU), Kannur, Dist. Kannur, Kera/a
and Ors., 1199411 SCC 268; J.C. Golak Nath & Ors. v. State of Punjab &
Anr., [19671 2 SCR 762; Managing Director, EC!L, Hyderabad and Ors. v.
B. Karunakar and Ors., [19931 4 SCC 727; Gasket Radiators Pvt. Lid. v.
Employees' State Insurance Corporation and Anr., jl 9851 2 SCC 68;
D Employees' Stale Insurance Corporation v. Hotel Kalpaka International,
j 1993 j 2 SCC 9; i\4afatlal Industries Ltd and Ors. v. Union of India and Ors.,
119971 5 SCC 536 and Bharagath Engineering v. R.Ranganayaki and Anr.,
(2003) 2 sec 138, held inapplicable.

4.2. This Court under Article 142 of the Constitution of India is
E empowered to pass such orders as would do complete justice oetween the
parties. This Court is also empowered to mould the relief in such a manner
so that it is not only just but also equitable even while declaring the law.
It is also permissible in law to prospectively overrule the judgment. If the
respondent is now allowed to recover from the erstwhile covered
F employees, it would severely affect industrial relations. Reversal of the
impugned order would lead to prosecution, penalty and also interest
against the respondent without any faua of the respondent. [52-E, Fl

Employees' State Insurance Corpn. v. All India !TDC Employees' Union
and Ors., [20061 4 SCC 257, distingui:;hed.
G
ONGC Ltd. v. Sendhabhai Vastram Patel and Ors., [20051 6 SCC 454;
Raj Kumar and Ors. v. Union of India and Anr., 120061 I SCC 737 and SBP
Co. v. Patel Engineering Ltd., 12005[ 8 SCC 618, relied on.

5. l. The maxim of equity which is founded upon justice and good
H sense is applied as well as other maxim: lex non cogit ad impossibi/ia (i.e.
EMPLOYEES ST ATE INSURANCE CORPN. "·JARDINE HENDERSON STAFF AS SON. 3J

the law does not compel a man to do what he cannot possibly perform). A
153-81

Raj Kumar Dey and Ors. v. Tarapada Dey and Ors., 1198714 SCC 398
and Gursharan Singh and Ors. v. New Delhi Municipal Committee and Ors.,
119961 2 sec 459, relied on.
B
5.2. The act of Court can prejudice no party either the ESI or the
respondent-companies. The respondents are therefore relieved from
making any contributions for the period in question and are directed to
make the contribution as directed by the Division Bench of the High Court.
[53-E-F) C
Employees State Insurance Corporation v. Distilleries & Chemical
Mazdoor Union & Ors., (2006) 6 JT 443 and Chandra Singh and Ors. v. State
of Rajasthan and Anr., 12003) 6 SCC 545, relied on.

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1726 of2005. D
From the Judgment and Order and dated 16.3.2004 of the High Court
--'! of Calcutta, in A.P.O. No. 124/2001 from W.P. No. 24811997.

WITH

C.A. Nos. 3132, 3133, 3134, 3135, 3136, 3137, 3138, 3139, 3140, E
3142, 3143, 3144, 3145, 3146, 3147, 3148, 3149, 3150 of 2006.

C.S. Rajan, R. Venkatramani, V.J. Francis, Jenis V. Francis, Anupam
Mishra, Anjali K. Verma, Niraj Gupta, Meera Mathur, S.B. Upadhyay and
Shiv Mangal Sharma for the Appellants.

Gaurab Kumar Banerjee, Pradip Ghosh, Kailash Vasdev, Anil Divan, F
B.C. Sharma, N.P. Agarwalla, P.H. Parekh, Sameer Parekh, Sumeet Lall,
Shakun Sharma, Mary Mita for (P.H. Parekh & Co.), Gaurav Agarwal, Ajit
Bhattacharjee, Pinaky Addy, Chiranjan Addy, Chanchal Kumar Ganguli,
Vaibhav Gaggar, E.C. Agrawala, S.S. Jauhar, K.V. Vishwanathan, Rahul
Ray, S. Rakshit for (Khaitan & Co.), Rauf Rahim, Mohamr.:~-:<'..!qbal, Prashant G
Kumar, Suresh Kumar, Dinesh Verma, Nand Lal, Satish Pandey, Medhavi
Kumar, A.P. Mohanty, Dr. Sumeet Bhardwaj, Mridula Ray Bhardwaj, Vipin
Gogia, Jaspreet Gogia, Maninder Singh, Pratibha M. Singh, Gaurav Sharma,
Rahul Ajatshatru, Tejveer S. Bhatia, Meera Mathur, Deepak Sabharwal, Vikrant
Yadav, B.R. Sabharwal, S. Rajappa, Jay Savla, Corporate Law Group, Raj
Kumar Gupta, Sheo Kumar Gupta, Bhanu Pratap Gupta, Rakhi Banerjee, H
32 SUPREME COCRT REPORTS [2006J SUPP. -I S.C'.R.

A A.N. Bardiyar. Rajindra Dhawan. Sefali Dhawan, Parmanand Gaur. P.N. Jha, •·
Anitha Shenoy, Dhruv Mehta, Harshvardhan Jha. Yashraj Singh Deora, K.L.
Mehta & Co .. A. Bhattacharya, Rana Mukherjee, Siddha1ih Gambhir. Goodwill
lndeevar, Arun Kumar Si!lha. Mukesh Kumar Sinha. K.V. Mohan, Krishnendu
Datta. Nitin Jain. Kumud Lata Das, Kishan Datta. Sushi! Kumar Jain, Sarad
Singhaniya, H.D. Thawri, Puneet Jain, Rani Maheshwari, Bharat Sangal, R.R.
B Kumar, Samyadip Chatterji. L. Roshmani, Jatin Zaveri, Pradeep Misra, Shalini
Kumar. Vairav Gaggar. Rikusarma, Ghanshyam Joshi, Partha Gil, Mahesh
Agarwal and Rishi Agarwal for the Respondents.

The Judgment of the Court was delivered by
c DR. AR. LAKSHMANAN, J. Leave granted m the special leave
petitions.

Civil Appeal Nos. 1726 of 2005 and 119 special leave petitions (now
civil appeals) have been filed by the Employees State Insurance Corporation
D (in short the "Corporation") against the common final judgment and order
dated 16.03.2004 passed by the Division Bench of High Court at Calcutta in
APO No. 124 of 200 I.
.
Civil Appeal No. 1726 of 2005 arises out of the writ petition filed by
Jardine Henderson Staff Association and Others wherein they challenged the
E Notification dated 23.12.1996. The Notification was issued by the Union of
India by which the Central Government amended Rules 50, 51 and 54 of the
Employees State Insurance (Central) Rules, 1950, pursuant to which the wage
limit for coverage of an employee under Section 2(9)(b) of the Employees
State Insurance Act (in short 'the Act') was enhanced from Rs.3,000/- to
Rs.6,500/- instead of the existing wage ceiling of Rs.3,000/- p.m. Various
F Employees Associations challenged the Notification. They prayed for quashing
the Notification and also, in some of the appeals, for declaring the Amended •
Rules as ultra vires. Petitions were filed mostly by the Employees Union
both in the original side and the appellate side of the High Court at Calcutta.

A learned Single Judge of the High Court disposed off all the writ
G petitions by a common judgment and order, by quashing the amendment of
the Rules of 1950 with the result that there was no enhancement of wage
ceiling. About 63 appeals were filed by the Corporation as well as by the
Union of India against that part of the order by which the amendment was
quashed. No appeals and/or cross appeals were filed by any of the writ
H petitioners. Therefore, the Division Bencj of the High Court, by the impugned
EMPLOYEES STATE INSURANCE CORPN. "·JARDINE HENDERSON STAFF ASSON. [LAKSHMANAN, J J JJ
common judgment, allowed the appeals and set aside the judgment of the A
learned Single Judge of the High Court. The High Court held that the
enhancement could not be termed as ultra vires for the purpose of the Act
or being inconsistent therewith as held by the learned Single Judge. The High
Court further held that all interim orders passed in this connection, inter alia,
Slaying the operation of the said enhancement are vacated. However, the
High Court did not stop at that, but, proceeded to direct that the employers B
who had stay order in their favour, will implement the amendment only from
). the date of the impugned judgment of the High Court dated 16.03.2004
though the amendment came into operation w.e.f. 01.01.1997.

The Corporation, being aggrieved of this direction of the High Court C
giving liberty to the employers to comply with the Notification on and from
16.03.2004, preferred the above civil appeals. The High Court also gave
liberty to the employers to apply for exemption and directed the State
Government to dispose off the same within two months.

Mr. C.S. Rajan, learned senior counsel ably assisted by Mr. V.J. Francis, D
learned counsel argued the case on behalf of the Corporation.

Mr. Rajan submitted that the condition imposed by the Division Bench
of the High Court is not proper for the reason that once the Notification is
enforced, the applicability of the same will be from the date of Notification
and not from any future date. This submission, according to him, was upheld E
by this Court in the case of Employees' State Insurance Corpn. v. Kerala
State Handloom Development Corpn. Employees Union (CITU), Kannur, Dist.
Kannur, Kera/a and Ors., [1994) I SCC 268 and that the interim orders
passed at different stages will not have any effect on the applicability and
enforceability. p
Mr. Rajan further argued that the principle of prospective overruling
was laid down for the first time by this Court in the case of J.C. Go/ak Nath
& Ors. v. State of Punjab & Anr., [1967) 2 SCR 762 and applied by this
Court in a series of decisions till now, will not be applicable to the present
case coming under the Act for various reasons. Another Constitution Bench G
of this Court reiterating the above principles has also observed in the case of
Managing Director, ECJL, Hyderabad and Ors. v. B. Karunakar and Ors.,
[I 993) 4 sec 727 as under:

... "It is now well settled that the courts can make the law laid down by
them prospective in operation to prevent unsettlement of the settled H
34 SUPREME COURT REPORTS (20061 SUPP. 4 S.C.R.

A positions, to prevent administrative chaos and to meet the ends of
justice"

According to Mr. Rajan, the law is well settled in this case i.e. the
upward revision from Rs. 400/- p.m. in the ceiling of wages has been upheld
by various High Courts and also by this Court inasmuch as that with the
B upward revision more employees will be eligible to the benefits under the
Act and they will have to make a little contribution @ I. 75% from their
wages every month. The employees share is to the extent of 4.75% p.m.
under Rule 51 of the Employees State Insurance (Central) Rules, 1950. The
law is also settled to the effect that once interim stay is granted with regard
C to the operation of the new law, and the writ petition is dismissed subsequently,
the operation of the law will relate back to the original date of enforcement
and, therefore, there is nothing in this case to unsettle the settled law which
would have effect on past transactions and, therefore, it is not necessary to
bring in the principle. Moreover, in this case, the Act is made applicable for
giving medical benefits to all those employees only, whose wages do not
D exceed the prescribed limit ,1otified by the Central Government as stated
above. In this case, there was no dispute about the applicability of the Act
but the question was about the ceiling limit. The reason, as pointed out
above, is to give benefits to more number of employees. The employees will
not get benefit unless the proper machinery are set up for the purpose. That
E cannot be done overnight but over a period of years.
In this context, the observations made by this Court in Gasket Radiators
Pvt. ltd. v. Employees' State Insurance Corporation and Anr., [1985] 2 SCC
68 was relied on as relevant. Learned senior counsel relies upon the following
observations from that case:
f "In fact, it may often happen that the rendering of a service or the
•
conferment of a benefit may only follow after the consolidation of a
fund from the fee levied. Hospitals, for instance, cannot be built in
a day nor medical facilities provided right from the day of the
commencement of the scheme. It is only after a sufficient nucleus is
G available that one may reasonably expect a compensating return."

x x x
'Therefore, whether the special contribution is to be viewed as a
tax, fee or neither it has sufficient constitutional protection."
H While replying to the arguments advanced by learned counsel for the
EMPLOYEES ST ATE INSURANCE CORPN. ''· JARDINE HENDERSON STAFF AS SON. [LAKSHMANAN, J ] J5
: . ..;
respondents that many employees have retired from service or have left the A
company or organisation, as according to Mr. Rajan, has no relevance because
the liability under the Act continues till the date of employment of the
employee concerned, or till the closure of the establishment. This is also
settled by this Court in the case of Employees' State Insurance Corporation
v. Hotel Kalpaka International, [1993] 2 SCC 9.
B
The Division Bench has also noticed that the Corporation has to spend
approximately Rs.800/- p.a. for each insured employee who has to be given
.).
the benefit. Naturally, therefore, once the machinery is set up it must keep
going and its functioning cannot be stopped merely because some employees
approach the High Court and has obtained stay against extending the benefits C
to more employees.

While answering the complaint of efficiency of the ESIC Health System
as not up to the mark comparing it with other large hospitals in the country,
Mr. Rajan submitted that large hospitals are not available in every part of the
country and it is at that moment the need of an ES! Hospital comes into D
picture. It can never be said at that time that the ES! machinery will not be
useful. It is also well known that the ES! Hospital which is run in a remo+e
area also makes reference of a serious case to a big hospital at the cost of the
Corporation and for that purpose a share from the vcages of the employees
is not deducted and for this purpose there is no limit with regard to the wages
earned by the insured employees. E
Mr. Rajan also made reference to the principles laid down by this Court
in the case of Employees' State Insurance Corpn. v. A/I India JTDC Employees'
Union and Ors., [2006] 4 SCC 257 wherein this Court had accepted, on
principle, the submission of the Corporation that it is not open to the High F
Court that the Notification has to operate prospectively. It is submitted that
the law in this respect has been reiterated by this Court in the said ruling of
this Court and the appellant also relies on the said ruling which is the latest
judgment.

According to Mr. Rajan the amounts that are collected by the Corporation G
goes into the fund maintained under Section 26 of the Act and the same is
utilized as contemplated under Section 28 of the Act. It is laid down in the
case of Hotel Kalpaka International (supra) as under:

"Under Section 26 of the Act all contributions are paid into a common
-).
fund. Such a fund will have to be administered for the purposes of H
36 SUPREME COURT REPORTS [2006] SUPP. 4 S.C.R.
..... ·:..
A the Act as indicated under Section 28. Therefore, the employer cannot
contend that he did not collect the employees' contribution and hence,
he cannot be called upon to pay''.

He also submitted that the principle of unjust enrichment as enunciated
by this Court in the case of Mafatlal lndustri<!s ltd. and Ors. v. Union of
B India and Ors., (1997) 5 sec 536 will not be applicable to this case because
this is not a case where there has been any illegal collection of any levy on
the basis of an enhancement, which was declared unconstitutional and illegal
by the Courts due to which the party who collected the amount had to refund
the amount or otherwise it would have become an unjust enrichment.

c It is also pointed out that this Court has noticed in the case of Bharagath
Engineering v. R.Ranganayaki and Anr., (2003) 2 SCC 138 that even after
the death of the insured employee who survived for a day, and even before
the registration with the Corporation, his dependants are entitled to receive
the benefit under the Act. Therefore, it is submitted that the benefits that are
D granted under the Act are unique. Moreover, if any employee or employer
makes a claim that they are giving better benefits, then it is open to that party
to apply to the appropriate Government for exemption under any of the
provisions of Chapter-VIII of the Act, i.e. Sections 87 to 91A. That only
means that the liability of both the employee and the employer under the Act
continue till the law takes its course as provided under the Act.
E
Mr. Rajan, therefore, submitted that all the 120 appeals filed by the
Corporation against the common judgment of the High Court are fit to be
allowed with such directions as this Court may be inclined to give which will
have the effect under Article 141 of the Constitutional of India.

F On behalf of the respondents, we heard the arguments of Mr. Gaurab ..
Kumar Banerjee, learned senior counsel, Mr. P.H. Parekh, Mr. Gaurav
Agrawal, Mr. Avijit Bhattacharjee learned counsel, Mr. Pradip Ghosh, Mr.
Kailash Vasdev, learned Senior counsel, Mr. E.C. Agrawala, Mr. K.V.
Viswanathan, Mr. Rauf Rahim, Mr. Suresh Kumar, Dr. Sumeet Bhardwaj,
G

-
Mr. Vipin Gogia, Mr. Maninder Singh, Ms. Meera Mathur, Mr. Deepak
Sabharwal, Mr. Chiraranjan Addey, Mr. Rajindra Dhawan, Ms. Anitha Shenoy,
Mr. A. Bhattacharya, Mr. Rana Mukherjee, Mr. Arun Kumar Sinha, Mr. K.V.

H
Mohan, Ms. Kumud Lata Das, Mr. Sushi! Kumar Jain, Mr. Bharat Sangal,
Mr. Jatin Zaveri, Mr. Pradeep Misra, Mr. Vairav Gaggar, Mr. Ghanshyam
Joshi, learned counsel and Mr. R. Venkatramani, learned senior counsel for
their respective parties.
. _
EMPLOYEES STATE INSURANCE CORPN. "·JARDINE HENDERSON STAFF ASSON. [LAKSHMANAN, l] J7
-·r
Mis Jardine Henderson Ltd. submitted a statement of expenditure for A
medical expenses incurred by the Company on the staff, during the period
from the year 2001-2004. Likewise, other respondents have also filed statement
of submissions in the form of affidavit on behalf of their parties.

Lagan Jute Machinery Company Limited - respondent No. 14 in SLP
(Civil) No. I9454 of 2004 in APO No. 80 of 200 I submitted its submissions. B
It was submitted by learned counsel for the said Company that the Company
was prevented by orders of Court from making deductions for ESI contribution
from wages and salaries of the employees. These orders were passed in writ
petitions filed by the Employees Unions and in view of the injunction order
dated 22.05.1997 passed by the Calcutta High Court, the Company was
prevented from deducting ESI contribution and thus was prevented from
c
making any payment to ESL In order to provide medical facilities and benefits
to the employees, the Company entered into a Settlement Agreement with the
Employees Union under which the company has incurred a total expense of
Rs.97,06,0001- for the period 1997-2004 till the time of passing of the
impugned order. It is submitted that in the event the respondent-Company D
was liable to pay ESI contribution, the total paymem would have been
approximate at Rs. 33 lacs. Therefore, as against a total expenditure of Rs.33
lacs under the ES!, the respondent has incurred an expense of Rs. 97 lacs for
providing medical facilities. After the impugned judgment in the year 2004,
the respondent-Company is making payment of ESI contribution. In these
E
circumstances, it is submitted by learned counsel that the respondent should
not be made liable to make payment from the period I 997-2004 to the
Corporation and that the order passed by the Calcutta High Court is just and
fair in the facts and circumstances of the case.

Mis Philips India Limited - respondent Nos. 8 & 9 (arising out of APO F
No. 82 of 2001) also filed their statement. Mr. Jay Savla, learned counsel
submitted that in the year 1999, a Memorandum of Settlement was arrived
at between this Company and the Workmen Union and by virtue of the said
Memorandum, benefits extended to the employees were far superior in
comparison to the medical benefits extended under the said Act. The
Memorandum of Settlement has also been annexed as Annexure-R2 with the G
counter affidavit filed by them. The said settlement was amended in the year
2000 and thereafter in 2002 (Annexure-R3). He made the following legal
submissions:

(a) the Division Bench while upholding the Notification has held that
; ~ H
38 SlJPRE~E COCRT REPORTS (20061 SUPP. 4 S.C.R.

A the same would apply from the date of the judgment. The said observation, '-
according to the learned counsel, is justified in view of the following legal
submissions:

(i) Principles of Actus Curiae Neminem CJravabit - No party shall he
prejudiced for the act of Court.
B
It is submitted that interim stay order was granted on 25.03.97 which continued
till the passing of the Division Bench judgment dated 16.3.2004. By the
interim order, the respondents were restrained from deducting the contribution
required to be deposited with the Corporation. Further, the respondents were
C directed to continue to provide existing medical benefits. Under Section 39
of the ES! Act employees' contribution is to be deducted from their salary.
The contribution by the employer is to be made as per Rule 51 of The
Employees' State Insurance (Central) Rules, 1950 which is given below.
Rule 51 of the Employees' State Insurance (Central) Rules, 1950 is as follows:

.. Rates of contribution - The amount of contribution for a wage period
D
shall be in respect of-

(a) employer's contribution, a sum (rounded to the next higher
multiple of five paise) equal to [four and three-fourth per cent]
of the wages payable to an employee; and
E (b) employee's contribution, ~a sum (rounded to the next higher
multiple of five paise) equal to [one and three-fourth per cent]
of the wages payable to an employee"

In view of interim stay order which continued for almost seven years, the
employers were restrained from making any deduction. Whereas, the employers
F continued to provide satisfactory medical benefits to its employees. The said
interim order was not appealed or challenged by the Corporation nor was it
stayed during the pendency of the appeal before the Division Bench.
•

It is further submitted that with the passage of time several employees
would have left the organization and to deduct the employees contribution
G from their salary is not workable.

In the matter of Rajesh D. Darbar & Ors. v. Narasingrao Krishnaji
Ku/kari & Ors., (2003] 7 SCC 219, this Court held that where the nature of
-
relief, as originally sought, has become obsolete or unserviceable on account
H of developments subsequent to the suit or even during appellate stage, it is
EMPLOYEES ST ATE INSURANCE CORPN. "· JAROINEllENDERSON STAFF AS SON. [LAKSHMANAN, J.] 39

unfair that the relief is moulded, varied or reshaped in the light of the updated A
facts.

In the matter of Mohammed Gazi v. State of MP., [2000] 4 SCC 342,
the facts were that on account of litigation initiated by one of the respondents,
the appellant was prevented from taking benefit of the acceptance of his
tender notice. For no fault of his, the appellant was prevented from collecting B
the tendu leaves. The High Court directed that a sum of Rs. 30,000/- be
deducted from the earnest money of the appellant. Such a direction was not
sustained by this Court.

The maxim of equity which is founded upon justice and good sense
was applied as well as other maxim "lex non cogit ad impossibilia" - the law C
does not compel a man to do what he cannot possibly perform. The
applicability of the aforesaid maxim has been approved by this Court in Raj
Kumar Dey v. Tarapada Dey (supra) and Gursharan Singh v. New Delhi
Municipal Committee (supra).
D
.
' (ii) Prospective applicability/ overruling of the Judgment: It is well
settled that declaration of law can be made prospective i.e. operative from the
date of the judgment. This Court in several decisions has laid down the law
and declared it to be operative only prospectively. The Constitution Bench of
this Court in the matter of Somaiya Organics (India) Ltd. & Anr. v. State of
u. P. & Anr., reported in [200 I] 5 sec 519 has discussed at length the E
principles of Prospective over-ruling which are enunciated in the following
paras:-"

27. In the ultimate analysis, prospective overruling, despite the
terminology, is only a recognition of the principle that the court
moulds the reliefs claimed to meet the justice of the case - justice not F
in its logical but in its equitable sense. As far as this country is
concerned, the power has been expressly conferred by Article 142 of
the Constitution which allows this Court to "pass such decree or
make such order as is necessary for doing complete justice in any
cause or matter pending before it." In exercise of this power, this G
Court has often denied the relief claimed despite holding in the
claimants' favour in order to do "complete justice."

28. Given this constitutional discretion, it was perhaps unnecessary to
resort to any principle of prospective overruling, a view which was
expressed in Narayanibai v. State of Maharastra at p. 470 and in H
40 SUPREME COURT REPORTS [20061 SUPP. 4 S.C.R.

A Ashok Kumar Gupta v. State of UP. In the latter case, while dealing
with the "doctrine of prospective overruling", this Court said that it
was a method evolved by the courts to adjust competing rights of
parties so as to save transactions "whether statutory or otherwise, that
were effected by the earlier law". According to this Court, it was a
rule.
B
"of judicial craftsmanship with pragmatism and judicial statesmanship
as a useful outline to bring about smooth transition of the operation
of law without unduly affecting the rights of the people who acted
upon the law operated prior to the date of the judgment overruling
the previous law."
c
Ultimately, it is a question of this Court's discretion and is, for this
reason, r<:Iatable directly to the words of the Court granting the relief."

In the matter of Harsh Dhingra v. State of Haryana & Ors., [2001] 9 SCC
550, this Court held as follows:
D
"7. Prospective declaration of law is a device innovated by this Court
to avoid reopening of settled issues and to prevent multiplicity of
proceedings. It is also a device adopted to avoid uncertainty and
avoidable litigation. By the very object of prospective declaration of
law it is deemed that all actions taken contrary to the declaration of
E law, prior to the date of the declaration are validated. This is done in
larger public interest."

This proposition of prospective overruling has been followed in several other
decisions as well.

F (iii) Undue Hardship: •
It is submitted that if the order of the Division Bench is not held to be
operative prospectively, the same would cause grave and undue hardship to
the employers including Mis Philips India Ltd. Philips India Ltd. have not
G only extended medical benefits by spending huge amount but have further
not deducted any amount statutorily required from the salary of the employees
in view of interim prohibition order. To direct the deposit of monies, for this
period would amount to undue and grave hardship and would be inequitable
to the employer.
-
H Mr. Chiraranjan Addey, who is the counsel for respondent No.3 in civil ~ ·-
EMPLOYEES ST ATE INSURANCE CORPN. "·JARDINE HENDERSON STAFF ASSON. [LAKSHMANAN,J.] 4J

--.' appeal (arising out SLP (C) Nos. 1944 7-45112004 made the following A
submissions:

According to the learned counsel, the Company had spent by way of
medical benefits for such employees who came outside the purview of the
Act pursuant to stay order granted by the Court is estimated for the three
establishments a sum of Rs. 30 lacs upto 16.03.2004 and that the employees B
who have retired from the respondent-Organisation during this period of 7
years when the stay order of the Court was in operation had also availed of
the benefit and, therefore, if the liability of the respondent-Company towards
payment of ES! contribution is made retrospective, the employer will not be
able to recover the contributions from the concerned employees and the C
employer will have to make both the employer's and the employees'
contribution retrospectively, notwithstanding the fact that the company has
incurred huge expenditure for granting liberal medical benefits as coverage
of such employees was stayed.

It is also pointed out that the employers were not the petitioners in the D
writ court and the order was imposed upon them and the management was
compelled to abide by the same and so far as the Corporation is concerned,
J. they are in the most enviable position. The Corporation took full advantage
of the interim order and did not provide any benefit to the employees at all
nor did they move to get the order vacated and yet now they are claiming the
contributions for the past period which was covered by the said interim order E
of the learned Single Judge. That will be an unjust enrichment by the
Corporation at the cost of the employers. Learned counsel also cited the
following decisions for invoking the doctrine of prospective overruling:
Raymond Ltd. v. MP. Electricity Board, [2001] I SCC 534.
F
Managing Director, EC/Lv. B. Karunakar, [1993] 4 SCC 727 (supra).

Ashok Kr. Gupta v. State of U.P., [1997] 5 SCC 201.

Sumaiya Organics Ltd. v. State of U.P., [200 I] 5 SCC 519 (supra),

Sarwar Kumar v. M. Agarwal, [2002] 4 SCC 147. G

In the light of the principles laid down in the aforesaid decisions with
regard to the innovative concept of prospective overruling which are applicable
also in matters arising out of statutory interpretation for the purpose of
substantial justice in the exigencies of peculiar fact situations, the counsel H
42 SUPREME COURT REPORTS 120061 SUPP. 4 S.C.R.

A requested this Court to uphold the decision of the Division Bench of the
Calcutta High Court and that this Court in any event under Article 142 of the
Constitution may make such order as may be warramed in the peculiar facts
and circumstances of this case for doing complete justice.

Mis. Gaurav Agrawal, E.C. Aggarwala, Jay Salve, C.R. Addy, A.N.
B Bardiayar and Mis P.H. Parekh and Co. counsel for the appellants respectively
made their submissions in SLP (Civil) Nos. 20855-64. 19453-57 etc. they
reiterated the submissions made in their special leave petitions and submitted
that, asking the respondent to pay the contribution now will cause undue
hardship by citing the decisions in Shree Cement v. State of Raiasthan, [2000]
C I SCC 765 and British Physical lab India ltd. v. ~late of Karnataka, [ 1999]
1 sec 110.

Mr. K.V. Viswanathan, learned counsel on behalf of respondent No. I/
CESC Ltd. in SLP (Civil) No. 19466-19470 made lengthy submissions both
on facts and on law. A written submission was also made with detc:ils of the
D amounts paid and spent by the management on various items. According to
him, arounci 14,000 employees of the Company availed 1he benelits each
year during the period from 1996-2003 and an amount of Rs.55.30 crores
was incurred by CESC Ltd. in providing such benefits vis-a-vis the cost
incurred for providing such benefits was also furnished. It is submitted that,
as a matter of fact, that on 03.08.2004 the appropriate authority had exempted
E CESC under Section 87 of the Act pursuant to the application filed in February,
1997 and in the proforma prescribed as on 18.11.1997. It is stated that the
delay in disposal of the application was solely due to the inaction on the part
of the Appropriate Authority. In fact as can be seen from the exemption order
the Assistant Director, CESC had himself reported that CESC Ltd. has been
F providing free medical t~eatment domiciliary, round the clock emergency
treatment, ambulatory facility, hospitalisation facilities irrespective of the
cost involved to all the permanent employees including employees tenned as
apprentices/trainees. It was also noted that Mis CESC Ltd. has tie up
arrangements with 40 different reputed hospitals/nursing homes in Kolkata
and Howrah and that the organization runs as many as 24 dispensaries with
G 28 appointed doctors at the factory locations and has tie-up arrangements
with 36 investigation centres and 42 chemist shops. The Assistant Director,
in his report, has indicated that 98 specialists in and around Kolkata are
empanelled for medical care of CESC employees. The cost of spectacles,
cervical collars, hearing aid etc. are also reimbursed to the employees. After
H noticing this report that the prayer for granting of exemption under Section ~ ,
EMPLOYEES ST ATE INSURANCE CORPN. "·JARDINE HENDERSON STAFF ASSON. [LAKSHMANAN. J.] 4J

87 of the Act for the pennanent employee was granted and that this order has A
also been accepted by the Corporation.

The factual situation that emerges according to Mr. K.V. Yiswanathan,
therefore, are as under:

(I) Today CESC Ltd. pursuant to the application dated 03.02.1997 B
stands exempted by order dated 03.08.2004 under Section 87 of
the Act;
(2) During the period from 1997-2003 because of operation of the
injunction order, it was not able to deduct contribution and pay
its contribution. Moreover, it extended medical facilities as C
directed by the interi;n order;
(3) In the exemption application (page 86 of the paper-book at page
88) the medical benefits given by the company are set out. ·

Mr. K.V. Yiswanathan submitted that once a party is injuncted, then
violating the order would result in party being hauled up for contempt. CESC D
Ltd., the respondent No.1 herein obeyed the orders and granted its own
medical facilities. Order of injunction was passed since workers Union had
obtained reliefs in similar writ petitions. CESC Ltd. did not get any interim
order from which it benefited. In fact it was an order of injunction against
CESC Ltd. and not an order of Stay in its favour. The Corporation did not E
take any steps to vacate such injunction order which was passed on 17.04.1997.
In_ fact, the CESC Ltd. was incurring huge expenditure on medical benefits
and the employees were happy with such arrangement and as of today also
the employees are not aggrieved. Permitting the Corporation to recover
contribution for the year 1996 to 2003, under such circumstances, would
apart from resulting in undue hardship to CESC Ltd. would also result in F
unjustly enriching the Corporati~n. As rightly held by the Division Bench of
the High Court in impugned judgment, undue hardship will be caused to the
CESC Limited if the arrears are asked to be paid as the employees would
have to pay arrear contribution although they did not enjoy any benefits
during the said period. This is a fortiori in a case like the present, wherein G
now the CESC Ltd. has been exempted under Section 87 of the Act on the
ground that its medical benefits are far superior to the medical benefits as
provided by the Corporation.

Mr. K. Y. Yiswanathan cited the following two decisions on the principles
of justice, equity and good conscience. By citing the same, he submitted that H
44 SUPREME COURT REPORTS (20061 SUPP. 4 S.C.R.

A this Court has the power to relieve a party from undue hardship.
I. West Bengal Hosie1y Association v. State of Bihar & Ors., [ 1998] 4
SCC 134 and 2. Sree Cement ltd and Anr. v. State of Rajasthan & Ors.,
[200 l J 1 sec 765

B He next submitted that the act of Court can prejudice no party. He said
the maxim "actus curiae neminum gravebit" fully applies to the present case
as pointed out in Mohammed Ga::i v. State of Madhya Pradesh and Ors..
(20001 4 sec 342.

According to the learned counsel, the judgment cited by the counsel for
C the Corporation in All India !TDC Employees Union case (supra) has no
application to the facts of the present case. This is for the reason that the
nature of relief sought by the Petitioner in the said case was different and also
the interim order as passed in the said case was different from the present
case. In the said case relied by the Corporation, the prayer in the Writ Petition
D was for exemption on the ground that the employer was the Government of
India undertaking and employee stood covered under Section I(4) of the Act.
Furthermore in the said case there was no positive direction injuncting the
employer from making contributions and deductions and the only order in
that case was an order of stay. This can be distinguished from the present
case as despite being an order of stay, the employer could have made
E contributions and deductions in the said case, however in the present case
since there was a specific order injuncting the CESC Ltd. from making
contributions and deductions such contributions and deductions could not
have been made by the Respondent No. I. Moreover none of the circumstances
which have been set o.ut herein above were present in the said case as cited
F by the Corporation.
Concluding his submission, learned counsel submitted that no case has
been made out by the Corporation which warrants interference by this Court.

Mr. Gaurab Kumar Banerjee, learned senior counsel appearing on behalf
G of respondent Nos. 6 & 7 in civil appeals (arising out of SLP (Civil) Nos.
20841-47 of 2004) Hindustan Lever Ltd submitted that, during the 7 years
period under dispute and as a result of the High Court's order, the Company
has spent far greater amount on the medical facilities to the 39 covered
employees who would otherwise have been covered by the Corporation and
the Corporation would have had to provide the medical benefits. Learned
H senior counsel submitted that this Court will not interfere with an order
EMPLOYEES ST ATE INSURANCE CORPN. •·.JARDINE HENDERSON STAFF ASSON. [LAKSHMANAN. J.} 45

simply because it is lawful to do so even if it has legal errors, if the impugned A
order results in substantial justice. He relied on Council of Scientific and
Industrial Research v. KG.S Bhatt, [1989] 4 SCC 635 (para 12) and para 23
of ONGC v. Sendhabhai Vastram Patel, [2005] 6 SCC 454. He submitted
that under Article 142 of the Constitution, this Court is empowered to pass
such orders as would do complete justice between the parties. It was also
submitted that it is permissible in law to prospectively overrule a judgment B
as has been done recently in the case ofSBP & Co. v. Patel Engineering Ltd.,
[2005] 8 SCC 618. According to the learned senior counsel, the decision of
this Court in All India /TDC Employees Union (supra) is clearly distinguishable
as unlike in the present case. In that case, the High Court did not give any
positive directions and the decision of the High Court was not reversed by C
this Court. Conch1ding his argument, the counsel submitted that if the
respondent now starts recovering from the erstwhile employees, it would
severely affect industrial relations.

Mis K.L. Mehta & Co. advocates argued for respondent No.2 BOC
India Limited. Learned counsel also submitted that the principle of 'actus D
curiae neminem gravabit' i.e. the act of Court shall prejudice no man is fully
applicable and, therefore, the Division Bench qua the respondent directed the
said Notification to operate prospectively. Referring to the decision in Union
of India & Anr. v. Murugan Talkies, [1996] I SCC 504, learned counsel
submitted that this Court has also applied the above principle in several E
decisions including [ 1988] 2 sec 602 and in [1996] I sec 504 and observed
as follows:

"3. It is contended for the respondents that the High Court has granted
the relief taking into consideration that some workmen had retired
and it would be inequitable to deduct from the meagre wagi:s of p
existing employees with retrospective period. Therefore, the High
Court directed deduction of their share from the date of the judgment.
It is needless to mention that since some of the workmen have already
retired and from some existing workmen deduction from date of
enforcement of the notification would cause great hardship to them,
so it cannot be made to bear the burden of their contribution with G
retrospective effect from the date of the notification towards their
share of contribution.

4. To that extent, the order of the High Court is upheld .... ".

Learned counsel further submitted that because of the interim/final order H
46 SUPREME COCRT REPORTS [2006J SUPP. 4 S.C.R.

A passed by the High Court, the Corporation has not rendered any service like
medical benefits to the employees whose wages were above Rs.3.000/- but
less than Rs.6,500/- p.m. Therefore, in absence of any quid pro quo for the
said period of 7 years, no contribution can be claimed by the ESI either from
the respondent-Company or from the employees especially, when no service/
benefit was rendered to the concerned employees.
B
Mr. liaurab Banerji, learned senior counsel also made >ubmissions on
behalf of respondent No.4 Modern Food Industries Ltd. in SLP (Civil) No.
2086 lof 2004. He made similar submissions and cited the same authorities
as others did.
c Mr. Rana Mukherjee, learned counsel appearing on behalf ofrespondent
No.5, Engel India Machines & Tools ( 1987) Limited made the following
submissions.

He submitted that various Jabour Unions of different industries including
D that of respondent No.5 challenged the said Notification by filing separate
writ petitions in the Calcutta High Court and the High Court by different
orders from time to time granted injunction with regard to the said Notification.
The said injunction was extended from time to time which, in effect, injuncted
the Management from either collecting or making any contributions toward;;
the Corporation. Such injunctions were extended and continued from time to
E time. On 30.06.1997, by judgment and order, the learned Single Judge of the
High Court declared the said amendments as ultra vires. Being aggrieved by
the said order. the appellant-Corporation filed 120 appeals before the Division
Bench of the High Court which stood disposed off by the impugned judgment
and order on 16.03.2004. It is submitted that respondent No.5 by way of
F abundant caution had also in the meantime applied for exemption for the said
period of 1997-2004 i.e. the date of the impugned judgment and order under
Sectiun 87 of the Act of 1948 which is still pending before the appropriate
Government. Learned counsel has also annexed certificates, ddails of
expenditure and extracts from the annual report. It is submitted that the
respondent should not be proceeded against by the Corporation under Section
G 68 of 1948 inasmuch as the contributions towards ESI fund had not been
made during the period since the Company was prevented by an order of
injunction of the Calcutta High Court and that the said directions, therefore,
require no interference by this Court and this Court may exercise its powers
under Article 142 of the Constitution of India to do complete justice to the
H respondent No.5-herein.
EMPLOYEES ST ATE INSURANCE CORPN. "·JARDINE HENDERSON STAFF ASSON. [LAKSl'MANAN. l.J 4f

Ms. Mridula Ray Bhardwaj, learned counsel for the respondent in Civil A
appeal arising out of SLP 20882-20891 of 2004 etc. submitted repeatedly the
same arguments on behalf of respondent No.5 Westinghouse Saxby Farmer
Limited. An application in the prescribed Proforma-A for exemption from
the provisions of the Act as per and after the Calcutta High Court's direction
passed in this order dated 07 .06.2004 in writ petition No. 8791 of 2004. On B
03.08.2004, the Company further submitted another set of application in
Proforma-A as asked for by the West Bengal Labour Department's letter
dated 22.07.2004. Thereafter, pursuant to the Government of West Bengal
Labour Department's notice dated 30.08.2004, 29.10.2004, 16.11.2004 and
26.11.2004, the Company's representative duly attended the hearing in
connection with the Company's exemption application. It is stated that the C
Company has submitted the Comparative Table of Benefits given by the
Company to its employees and benefits under the ES! scheme etc. However,
no order has yet been passed or communicated by the Labour Department in
regard to the respondent-Company's application for exemption. Learned
counsel has also furnished the amount of medical expenses paid by the
respondent-Company to its employees since 1996-97. D
Mr. C.K. Ganguli, learned counsel for the respondent in civil appeal
(arising out of SLP (Civil) Nos. 20933-20939 of 2004 made submissions on
behalf ofHahnemann Publishing Company Ltd. The learned counsel furnished
the details about the medical allowances given to the employees and submitted E
that if the liability is made retrospective, the employer will not be able to
recover the contributions from the concerned employees and the employer
will have to make both employers and employees contribution.
Notwithstanding the fact that the company has incurred huge expenditure for
granting liberal medical benefits as coverage of such employees since the
notification was stayed. F
The Central Inland Water Transport Corporation, respondent No. 21
through Mr. S.D. Gupta who is the Head of the Central Inland Water Transport
Corporation Ltd. filed an affidavit. It is stated that some employees/workers
Union/Associations in CIWIC filed a writ petition in the High Court praying
for their exemption from the provisions of the ES! Act, 1948. That pursuant G
to an order dated 07.09.2004 passed by the High Court, the Government of
India, Ministry of Labour and Employment issued a notice dated 16.02.2005
informing that in connection with exemption from provisions of the Act it
has been decided that hearing would be held on 04.03.2005 in the said
Ministry and all the concerned parties were requested to attend the hearing H
48 SUPREME COURT REPORTS 12006] SUPP. 4 S.C.R.

A and make their submissions. The representative of crwrc Ltd. attended the
aforesaid hearing on 04.03.2005 and made his submissions. As decided in the
said meeting, CIWIC under cover of its letter dated 23.03.2005 submitted
two separate applications both dated 22.03.2005 for exemption from the
provisions of the ES! Act as amended upto date in respect of its factory
B establishments which were covered under the provisions of the said Act. That
due consideration of the aforesaid appeal and the two applications dated
22.03.2005, the Ministry of labour and Employment issued a notification S-
380141612005-SSS-l dated 05.01.2006 thereby granting exemption to CIWIC
•
Ltd. From the operation of the ESI Act, 1948 for the period from 01.01.1997
to 30.09. The order reads as follows:-
c "Jn exercise of the power conferred by section 88 read with section
91-A of the Employees' State Insurance Act, 1948 (34 of 1948) the
Central Government hereby exempts the regular employees in respe::t
of two units of Mis Central Inland Water Transport Corporation
Limited i.e. Mis. Marine Workshop and Mis Rajabagan Dock yard
D both in Kolkata, West Bengal from the operation of the said Act for
the period from 01.01.1997 to 30 .09 .2006"

A copy of the said Notification has also been annexed and marked as
R-4.

E It is submitted that in view of the above, CIWJC has been exempted
from the provisions and operations of the ES! Act, 1948 for the relevant
period from 01.01.1997 to 15.03.2004 for which the special leave petition
has been filed by the Corporation. It is also further submitted that the
Corporation has also been granted exemption from the operation of the ES!
Act for further period upto September, 2006. In view of the above. learned
F counsel submitted that the special leave petition Nos. 20938 and 39 of 2004
be dismissed against respondent No. 21.

Mr. P. Gaur, learned counsel for respondent No.4 in S.L.P. No. 20840
of 2004 (Siemens Workers Union & Others) submitted that this Court will be
G reluctant to interfere with the discretion exercised by the High Court. In this
connection, he cited Municipal Corporation of Faridabad v. Siri Niwas, [2004]
8 SCC 195. He also submitted that it is not the case of the Corporation that
the said exercise of jurisdiction is irrational.

In Union of India v. Murugan Talkies (supra) similar relief granted by
H the High Court was not interfered with by this Court. Therefore, he submitted .,
~
• EMPLOYEES STATE INSURANCE CORPN. v. JARDINE HENDERSON STAFF AS SON. [LAKSHMANAN, J] 49

that the discretion exercised by the High Court is justified in view of various A
facts and circumstances and thus prayed that the appeal filed by the Corporation
be dismissed.

We have given our thoughtful consideration to the questions and issues
involved in this matter. We have also perused the pleadings, the order passed
by the learned Single Judge and the orders passed by the Division Bench and B
the written submissions made by the respective parties along with the annexures
filed therein.

We have already noticed that the respondent-Companies have spent
large amount of money on the employees and provided medical facilities in
view of the order of the High Court granting stay/injunction etc. If the High c
Court had not passed the order of injunction, the respondent-companies would
have contributed the ESI contribution instead of spending monies on the
medical facilities and allowances. In these circumstances, the submissions
made by learned senior counsel appearing for the respondents that it would
be unfair and unjust to make the employer to pay contribution towards ESIC D
.. _,,,
since in lieu of the contribution to ESIC, the employer provided better medical
facilities, in our view holds water and it would cause extreme and grave
hardship to the employer if they are required to pay contribution for the past
several years for no fault of their own. In our view, no party much less the
respondents should suffer because of the orders of the Court if duly complied
with. E

We see much force, substance and merit in the submissions made by
the learned senior counsel appearing for the respective respondents and as
duly adopted by the other learned counsel appearing for other civil appeals.
> In our opinion, the High Court was fully justified in passing the judicious F
order after considering the equities by directing the employer and the
employees to make ESIC contribution fo; the future and should not bear with
the liability for the past inasmuch as the employees of the respondents have
not availed any medical facilities from ESIC and at the same time the employer
was providing the medical facilities due to interim orders of the High Court. G
The order passed by the High Court, in our considered opinion, meets the
ends of justice and does not require interference by this Court under Article
136 of the Constitution of India.

In our view, passing of the final order by the High Court directing the
payment of the ES! contribution from the date of the said judgment does not H
50 SUPREME COURT REPORTS 12006] SUPP. 4 S.C.R.

A amount tu postponing the enforcement of notification and the same is also
not in violation of the principles laid down by this Court in various judgments
referred tu above. There has been no postponing of the enforcement of the
Notification in view of the peculiar circumstances of the case, namely, the
non-availability of the facilitks, non-deduction of contribution from the
B members of the union for several years and provision of medical relief by the
Management. The High Court's direction for deduction of contribution w.e.f.
the date of the judgment in our view. is perfectly justified. This apart. the
members of the union included casual. temporary contractual and it will be
practically impossible to find each and every member of the union to recover
their contribution for the past several years and in fact some of the workmen
C who would have been the employees during all these years would have left,
exrired etc. and on account thereof also their contribution cannot be recovered.
The order passed by the High Court, in our opinion, is perfectly justified in
view of the peculiar facts and circumstances of the case.

The High Court, in our opinion, while disposing of the matter has taken
D a just. pragmatic. fair and judicious view after considering all the equities and
facts and circumstances of the case. Extreme hardship might have been caused
to both the employer as well as the employee since no medical facilities
admittedly have been availed by the workmen from ESlC and the employer
had provided medical facilities to the workmen as per the Court orders and
E in view of the interim order also had paid medical allowances.

A similar view was taken by us in the case of Employees State Insurance
Corporation v. Distilleries & Chemical Mazdoor Uniun & Ors. in Civil Appeal
Nos. 1727 of2005, 3002 and 3003 of2006 by the very same Bench comprising
of Dr. AR. Lakshmanan and Lokeshwar Singh Panta, JJ. We have also
F considen:d the submissions both factual and legal made by Mr. C.S.Rajan,
learned senior counsel appearing on behalf of the ESI Corporation. In our
opinion, his argument has no merits in the facts and circumstances of this
case and the interim orders passed by the High Court which prevented
employer and employee from making any contribution towards ESL

G In the present case. the law as well as the facts are in favour of the
respondents. The High Col.Jr! has correctly appreciated the tremendous hardship
that will be caused if arrears are sought to be paid and nobody stands to gain.
neither the employer nor the employee under the circumstances. Even assuming
that the law is in favour of the ES!, keeping in view the special facts and
H circumstances of the present case, relief can be denied under Article 136 of
EMPLOYEES ST ATE INSURANCE CORPN "· JARDINE HENDERSON STAFF AS SON. (LAKSMMANAN.1.J 51
the Constitution of India. In view of the judgment reported in Chandra Singh A .
and Ors. v. State of Rajasthan and Anr., [2003] 6 SCC 545 (Three Judges
Bench), Dr. AR. Lakshmanan, J speaking for the Bench held as follows:-

"42. In any event, even assuming that there is some force in the
contention of the appellants, this Court will be justified in following
Taherakhatoon v. Salambin Mohammad, [1999] 2 SCC 635 wherein B
this Court declared that even if the appellants contention is right in
law having regard to the overall circumstances of the case, this Court
would be justified in declining to grant relief under Article 136 while
declaring the law in favour of the appellants.

43. Issuance of a writ of Certiorari is a discretionary remedy. [See C
Champa/al Binani v. CIT, West Bengal, AIR (1970) SC 645. The
High Court and consequently this Court while exercising their
extraordinary jurisdiction under Article 226 or 32 of the Constitution
of India may not strike down an illegal order although it would be
lawful to do so. In a given case, the High Court or this Court may D
refuse to extend the benefit of a discretionary relief to the applicant.
Furthermore, this Court exercised its discretionary jurisdiction under
Article 136 of the Constitution of India which need not be exercised
in a case where the impugned judgment is found to be erroneous if
by reason thereof substantial justice is being done. [See S.D.S. Shipping
Pvt. Ltd. v. Jay Container Sen>ices Co. Pvt. Ltd. & Ors., (2003) 4 E
Supreme 44]. Such a relief can be denied, inter alia, when it would
be opposed to public policy or in a case where quashing of an illegal
order would revive another illegal one. This Court also in exercise of
its jurisdiction under Article 142 of the Constitution of India is entitled
to pass such order which will do complete justice to the parties.
F
44 .......................................................... .

45. This Court said that this principle applies to all kinds of appeals
admitted by special leave under Article 13 6, irrespective of the nature
of the subject-matter. So even after the appeal is admitted and special
leave is granted, the appellant must show that exceptional and special G
circumstances exist, and that, if there is no interference, substantial
and grave injustice will result and that the case has features of sufficient
gravity to warrant a review of the decision appealed against on merits.
So this Court may declare the law or point out the lower courts' error,
still it may not interfere if special circumstances are not shown to H
52 SUPREME COURT REPORTS [20061 SUPP. 4 S.C.R.

A exist and the justice of the case on facts does not require interference
or if it feels the relief could be moulded in a different fashion.

46. The observations made in paras 15-20 of the Taherakhatoon (supra)
can be usefully applied to the facts and circumstances of the case on
hand.
B
47. In the instant case, we are dealing with the higher judicial officers.
We have already noticed the observations made by the committee of
three Judges. The nature of judicial service is such that it cannot
afford to suffer continuance in service of persons of doubtful integrity
or who have lost their utility.
c 48 ............................................................ .

49. We, therefore, would although dismiss the appeals, but we would
direct the High Court and the State government to pay all retiral
benefits to the appellants herein as expeditiously as possible preferably
D within a period of three months from the date of communication of
this order. No Costs."

This Court under Article 142 of the Constitution of India is empowered
to pass such orders as would do complete justice between the parties. This
Court is also empowered to mould the relief in such a manner so that it is
E not only just but also equitable even while declaring the law as observed in
para 25 of ONGC Ltd. v. Sendhabhai Vastram Patel and Ors.. [2005] 6 SCC
454 and Raj Kumar and Ors. v. Union of India and Anr., [2006] 1 SCC 737.
It is also permissible in law to prospectively overrule the judgment as has
been done recently in the case of SBP Co. v. Patel Engineering Ltd, [2005]
8 SCC 618. If the respondent is now allowed to recover from the erstwhile
F covered employees, it would severely affect industrial relations. Reversal of
the impugned order would lead to prosecution, penalty and also interest
against the respondent without any fault of the respondent. The decision of
this Court in /TDC Employees Union (supra) is clearly distinguishable as
unlike in the present case. In that case, the High Court did not give any
G positive direction. The decision of the High Court was not reversed by this
Court.
-
H
The High Court under Article 226 and this Court under Article 136
read with Article 142 of the Constitution of India have the power to mould
the relief in the facts of the case.
.._
EMPLOYEES STATE INSURANCECORPN "·JARDINE HENDERSON STAFF ASSON. [LAKSHMANAN. J.] 53
...I
Likewise, the judgment cited by learned counsel for the appellant- A
Corporation are in a different context altogether and the ratio of the said
cases are not applicable to the present case.

This apart the maxim of equity which is founded upon justice and good
sense was applied as well as other maxim: lex non cogit ad impossibilia (i.e.
the law does not compel a man to do what he cannot possibly perform) The B
applicability of the aforesaid maxim has been approved by this Court in Raj
Kumar Dey and Ors. v. Tarapada Dey and Ors., [1987] 4 SCC 398 and
Gursharan Singh and Ors. v. New Delhi Municipal Committee and Ors.,
[1996] 2 sec 459.

The ESI Act has enacted to provide for certain benefits to employees c
in case of sickness, maternity and employment injury. Under the scheme of
the Act, function of the ES! Corporation is to derive insurance fund from the
contribution from employees and workmen. The employer is entitled to recover
workmen's share from the wages of the workmen concerned. It was argued
by the respondent that the employer is providing better medical facilities to
the workmen and. therefore, the object and purpose of the Act has been fully D
satisfied. It is pertinent to notice that none of the employees of the Union
have complained about medical services provided by the employer since the
object is otherwise fulfilled. No further direction, in our opinion, is required
to be passed.

The act of Court can prejudice no party either the ES! or the respondent- E
companies. We, therefore, relieve the respondents from making any
contributions for the period in question and direct them to make the
contribution as directed by the Division Bench of the High Court. It is stated
that some of the respondents have already filed exemption applications and
that the appellant-Corporation has also granted them necessary relief. We F
)
also permit the other respondents who have not filed any exemption application
may now file the same and if such application for exemption is filed, it is for
the authorities to consider the same on merits and in accordance with law.

For the foregoing reasons, we dismiss all the appeals filed by the
appellant-Corporation in the peculiar facts and circumstances of the cases. G
The High Court while upholding the Notification has held that the same
would apply from the date of the judgment. The said observation is justified
in view of the facts and circumstances and the legal submissions made and
considered in paragraphs supra. No costs.

- D.G. Appeals dismissed. H