Holding

The Employees Insurance Court must implead the workers (or their representative union) as parties before deciding any dispute under Section 75, and orders made without such hearing are set aside.

Summary

Fertilizers & Chemicals Travancore Ltd challenged a demand notice for employer's contribution under Section 45A of the Employees State Insurance Act, 1948 by filing a petition under Section 75 before the Employees Insurance Court (EIC). The EIC observed that the headload workers employed on a day‑to‑day basis could not be readily identified but directed the ESIC to devise a scheme to bring them under the insurance. The appellant appealed, but had not impleaded any of the workers or their union as respondents. The Supreme Court held that labour statutes are for the benefit of workmen and, consistent with natural justice, the workers (or a representative union) must be made parties before the EIC decides any dispute. Consequently, the Court set aside the High Court and EIC orders and remanded the matter to the EIC to rehear after impleading the workers or their representative.

Issues considered

Whether an employer filing a petition under Section 75 of the Employees State Insurance Act must implead the workers or their representative union as parties before the Employees Insurance Court.
Whether the failure to give the workers an opportunity to be heard violates the principles of natural justice.
Whether the Employees Insurance Court's order determining the employer's liability without hearing the workers is valid.

Legislation cited

Employees' State Insurance Act, 1948s. 45A, s. 46, s. 75, s. 82(2)

Subjects

Employees State Insurance ActSection 75natural justicelabour lawparty impleadmentemployer contributionheadload workersquasi‑judicial determination

Judgment

[2009] 13 (ADDL.) S.C.R. 437

FERTILIZERS & CHEMICALS TRAVANCORE LTD. A
v.
REGIONAL DIRECTOR, ESIC & ORS.
(Civil Appeal Nos. 917-918 of 2004)
AUGUST 20, 2009
8
[MARKANDEY KATJU AND ASOK KUMAR
GANGULY, JJ.]
"( .J
LABOUR LAW:
c
EMPLOYEES' STATE INSURANCE ACT, 1948 :

ss.45-A and 75 - Parties before Employees' Insurance
Court - Demand notice for employees' contribution in respect
I
of head loaders challenged by employer before Employees'
~ _.J. Insurance Court - Neither workmen nor their representative D
body made party - Employees' Insurance Court holding that
identities of workmen not determinable as different workers
stated to report for work on different days, and as such, it was
impossible to register workers under the ES/ Scheme -
However, it directed the ES/ Corporation to work out modalities E
in close cooperation with employer to bring workers in different
depots under ES/ Scheme - HELD: Principal beneficiary of
A the Act is workman - Labour statutes are meant for benefit of
'if workmen - Ordinarily, in all cases under labour statutes
workmen or the trade union representing them must be made F
a party - Though s. 75 of the Act does not mention who will
be the parties before the Employees' Insurance Court, but
since the determination by the said Court is a quasi-judicial
determination, natural justice requires that any party which
may be adversely affected or may suffer civil consequences G
by such determination, must be heard before passing any
'-· _..__,..

- order by the authority/court - Petitioner should have
impfeaded at least some of the workmen as respondents -
In a petition uls 75 employer has not only to implead ESIC
437 H
.,

- ' -
438 SUPREME COURT REPORTS [2009] 13 (ADDL.) S.C.R.

A but also at least some of the workers concerned in
representative capacity or their trade union - If that is not done
+
and a decision is given in favour of employer, the same will
be violative of principles of natural justice - Besides, in the
instant case, Employees' Insurance Court has not determined
B the question as to whether the workmen concerned were
employees of the petitioner and were entitled to benefit of the
Act - Order of High Court and Employees' Insurance Court
set aside - Matter remitted to Employees' Insurance Court to ~.,

decide it afresh after impleading at least some of the workmen
c in representative capacity or their trade union and giving
opportunity to all parties - Principle of natural justice - Party.

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 917-
918 of 2004.

D From the Judgment & Order dated 30.10.2002 of the High
Court of Kerala at Ernakulam in MFA No. 19 of 1994 and MFA ...
No. 921 of 1993 (C).

C.N. Sree Kumar, P.R. Nayak, D. Prashar for the
Appellant
E
G. Prakash, B. Anand, V.J. Francis, Anupam Mishra for
the Respondents.
...
The following Order of the Court was delivered '¥
F
ORDER

1. Heard learned counsel for the parties.

2. These appeals have been filed against the common
G impugned judgment and order dated 30.10.2002 of the High
Court of Kerala·at Ernakulam whereby-the appeal filed by the
respondent-Employees State Insurance Corporation -4. . .
(hereinafter for short the 'ESIC') under Section 82(2) of the
Employees State Insurance Act, 1948 (hereinafter for short 'the
H Act') has been allowed and the appeal filed by the appellant
FERTILIZERS & CHEMICALS TRAVANCORE LTD. v. 439
REGIONAL DIRECTOR, ESIC & ORS.
herein has been dismissed. A
-+·
3. It appears that a demand notice was sent against the
appellant company under Section 45A of the Act in respect of
the employers contribution under the Act. The appellant
challenged the said demand notice by filing a petition under B
Section 75 of the Act before the Employees Insurance Court,
Alleppey. The Employees Insurance Court in its order dated
._ -I 4.2.1993 made the following observations:-

"12. If reliance is made on the rational laid down by the
High Court in the abovesaid decisions it is very clear that c
the identities of the employees should be an essential
factor for bringing under coverage employees and paying
contribution in respect of them. Here, in this case, because
of the peculiar nature of the work arrangement, at Depots,
it is impossible to register an employee engaged in the D
.J loading and unloading work under the ESI Scheme. If there
is requirement, a group of headload workers will come and
they do the work collectively and payments are received
on tonnage basis. On behalf of this group engaged, one
person will collect payment from the depot and distribute E
the same among themselves. Such labourers ·coming on
one day may not be the same in next day. That is because
~
of this peculiar nature of arrangement among workers on
'If' the basis of understanding or agreement reached between
trade unions. After completing work in the depot they will F
go elsewhere and do identical nature of work. If such is
the nature of work it is quite improper to compel the
applicant to pay contribution on the payments given in
various depots merely because they obtained the services
of such workers. However as a principal employer the
G
applicant cannot absolve themselves from the
.. --4-- responsibility of covering such employees under the
scheme because those employees are rendering service
to them. Therefore it would be appropriate that in close co-
operation with the ESI Corporation they should take effort
H
440 SUPREME COURT REPORTS [2009] 13 (ADDL.) S.C.R.

A at least now to ascertain the identities of those headload
workers so as to cover them also under the ESI Scheme.
+
The ESI Corporation will also make immediate
arrangement for bringing all the loading and unloading
workers in the depots under the ESI Scheme. The ESI
B Corporation shall work out the modus operandi for bringing
these workers under the coverage. On such registration of
the head load workers under the scheme, the applicant will
pay contribution from the date of passing of the order . ~,

passed under Sec. 45-A of the ESI Act viz., 15.6.1989.
c The ESI corporation shall work out the contribution from
that date in respect of workers who are brought under
scheme and who were found to be working from that day
onwards.

With the above observation and direction, this
D application is disposed of." j
~

4. Aggrieved against the said order dated 4.2.1993 of the I
,•
Employees Insurance Court, both the appellant herein as well
as the Employees State Insurance Corporation filed appeals
E before the High Court under Section 82 of the Act. The appeal
filed by the respondent-ESIC has been allowed and the appeal
filed by the appellant herein has been dismissed. Hence, the
appellant is before us by way of the present appeal by special A.
leave. '+
F 5. It may be noted that in its petition before the Employees
Insurance Court, the appellant herein only impleaded the
Employees State Insurance Corporation and the District
Collectors of Alleppey, Palaghat and Cannanore as the
respondents but did not implead even a single workman as a
G respondent.
-~-~ )

6. Labour statutes are meant for the benefit of the -'
workmen. Hence, ordinarily in all cases under labour statutes
the workmen, or at least some of them in a representative
H capacity, or the trade-union representing the concerned
-'
I
FERTILIZERS & CHEMICALS TRAVANCORE LTD. v. 441
REGIONAL DIRECTOR, ESIC & ORS.
+ workmen must be made a party. Hence, in our opinion the A
appellant (petitioner before the Employees Insurance Court)
should have impleaded atleast some of the persons concerned,
as respondents.

7. The case of the appellant was that, in fact, none of the B
concerned persons was its employee and it was difficult to
identify them.
"' -{
8. In this connection we may refer to Section 75(1)(a) of
the Act whrch states that if any question or dispute arises as
to whether any person is an employee of the employer c
concerned, or whether the employer is liable to pay the
employer's contribution towards the said persons' insurance,
that is a matter that has to be decided by the Employees
Insurance Court. Hence, in our opinion, the concerned person
~ has to be heard before a determination is made against him D
that he ls not an employee of the employer concerned.

9. The rules of natural justice require that if ahy adverse
order is made against any party, he/she must be heard. Thus
if a determination is given by the Employees Insurance Court
E
that the concerned persons are not the employees of the
petitioner, and that determination is given even without hearing
J.
.,.., the concerned persons, it will be clearly against the rules of
natural justice.

10. It may be seen that Section 75 of the Act does not F
mention who will be the parties before the Insurance Court.
Since the determination by the Insurance Court is a quasi-
judicial determination, natural justice requires that any party
which may be adversely affected or may suffer civil
consequences by such determination, must be heard before G
~---11---
passing any order by the authority/court.

11. In our opinion, wherever any petition is filed by an
employer under Section 75 of the Act, the employer has not only
to implead the ESIC but has also to implead atleast some of
H
442 SUPREME COURT REPORTS [2009] 13 (ADDL.) S.C.R.

A the wofkers concerned (in a representative capacity if there are +
a large number of workers) or the trade-union representing the
said workers. If that is not done, and a decision is given in favour
of the employer, the same will be in violation of the rules of
natural justice. After all, the real concerned parties in labour
B matters are the employer and the W<?rkers. The ESI Corporation
will not be in any way affected if the demand notice sent by it
under Section 45A/458 is quashed.
)- ~
· 12. It most be remembered that the Act has been enacted
for the benefit of the workers to give them medical benefits,
c which have been mentioned in Section 46 of the Act. Henc~. t
I

the principal beneficiary
. of the Act is the workmen and not the.
ESI Corporation. The ESI Corporation is only the agency to
~
implement and carry out the object of the Act and it has nothing ~ I

to lose if the decision of the Employees Insurance Court is
D given in favour of the employer. It is only the workmen who have ·+. r
to lose if a decision is given ·in favour of the employer. Hence,
the workmen (or at least some of them in a representative
capacity, or their trade union) have to be necessarily made a ~
party/parties because the Act is a labour Jegislation made for ~
E the benefit of the workmen.

13. In the present case the workmen concerned were not
made parties before the Employees Insurance Court, nor was 4.

notice issued to them by the said Court. 'T
F 14. Also, the order of the Employees Insurance Court r-

dated 4.2.1993, relevant portion of which we have quoted, is
not a very happy one as no proper determination has been
made therein as to whether the workmen concerned are the
employees of the appellant and whether they are entitled to the
G benefit of the Act. No doubt some observations have been
made that some labourers come on one day but they may not -~-"
come on the next day. Having said so, a direction has been
given that the ESI Corporation will after making inquiries about
the identities of the said workers will register them and then
H
FERTILIZERS & CHEMICALS TRAVANCORE LTD. v. 443
REGIONAL DIRECTOR, ESIC & ORS.

+ extend the benefit of the Act. . A

15. In our opinion, the Employees Insurance Court should
have itself made a proper investigation of the facts after getting
evidence from the parties, including the workmen concerned,
and after impleading them as party in the petition, it should have
B
determined the question as to whether the persons concerned

. ...(
were the employees of the appellant or not.

16. For the reasons stated above, we set aside the
impugned judgment and order of the High Court as well as the
order dated 4.2.1993 passed by the Employees Insurance c
Court and remand the matter to the Insurance Court for deciding
the same afresh after impleading some of the workmen, if not
~II of them, or thei~· trade union in a representative capacity.
f Needless to say, tile Employees Insurance Court will grant an
...... opportunity to all the parties, including the alleged workmen, to D
lead documentary f)Vidence or oral evidence and thereafter
proceed in accordance with law.
17. We make it clear that nothing stated hereinabove shall
be construed as an expression of opinion on the merits of the
E
controversy involved. All questions of law and fact are left open
for the parties to be raised before the Insurance Court.
• ,., Appeals allowed. No order as to the costs.
R.P. Appeals allowed. F