Mr. O.A. Hameed, former A.C, on the Validation Clause!

Dear Readers,

Mr. O.A. Hameed, former Additional Commissioner in the Hqrs. Office of the ESI Corporation with illustrious track record in various capacities including his service as Regional Director in many regions has expressed his views on the Post dated 3.10.2012 on the Validation Clause in this website ( https://flourishingesic.info/2012/10/03/amendment-2010-the-amazing-validation-clause/). His analysis is comprehensive and deals with two aspects. One, the general Principles and Practices of Validation Clauses; two, the Validation Clause in the ESI (Amendment) Act, 2010 and its effect.

The depth of his write-up necessitates its display in the website as a separate post. Readers are welcome to get the benefit of his analysis. Now, Mr. Hameed speaks:

The concept of Validation Clause

Validation of previous action or what is called Retrospective amendment of law is not an unusual practice in India or countries like Australia, Canada, etc. where the legislative drafting policy in on similar line.  Though this practice is frowned upon and creates uncertainty in matters like taxation, frightening away investors, it is also a cover to ratify steps, which may have corrupt motives. Validating Legislation is passed when the executive arm of government, has acted relying on an erroneous view of the law. If an executive acting in tandem with the Political head of his realm, namely the Minister, wants something to be done in great hurry involving large outlay of money, and not sure that he or his Political master will survive for enough time to get proper law passed, such executive can go ahead and do whatever he chooses, often with corrupt motive or to unlawfully nurture a particular constituency (say Gulbarga, the only place in the country where all the four different medical institution of ESIC is sanctioned, though the major factory there is permanently closed and the IP population is paltry), and then seek a retrospective validation.

Sanctioning over 12000 crores of Rupees and releasing good part of it to contractors for over 42 medical education institutions all over the country in a short span of time, on the face of well-reasoned opinion that existing provision in Section 19 will not be adequate for such a venture, could be one such reason when the political Master agrees to this and promises to get law passed with Validation clause and rush the matter.

The Indira Gandhi election case is classic example when Government made retrospective amendment to Election law just to get over the adverse judgment of Allahabad High Court unseating her, but the Supreme Court reversed that judgment, upholding the retrospective and favorable judgment, which according to Court is technically permissible however unpleasant it may be.  Very recently in the ITC tax case, government brought in an ordinance to retrospectively modify several previous notification, so as to reverse the SC judgment, because the government always felt the law to be different from the interpretation that Court gave subsequently and felt that it is within the legislative competence to retrospectively amend the law to restate what was meant to be its interpretation.

However I think such retrospective validation or enactment cannot be done in Criminal matters so that what was not an offense cannot be deemed to be an offense now or it may not be permissible to impose penal provision, retrospectively.  I believe there are judgments to this effect.  While the Court has upheld retrospective amendment in tax matters, as in case of ITC case, I personally feel it should not have held so as such steps will create great uncertainty in tax regime that will keep away honest investors.

Validation Clause in ESI Amendment Act of 2010

What Section 19 of ESI Amendment Act of 2010 did was to make the entire Amendment Act applicable retrospectively from 3rd July 2008, with no explanation as to significance of this date. The Statement of Objects and reasons accompanying the Bill, that has become Act, does not say anything as why this date of 3rd July 2008 is selected for validating all the new amendment.  It is true, the ordinance of 2008 was notified on this date and if the intention was to superimpose the provisions of this ordinance into the new amendment Bill/Act, then only those provisions in the ordinance could be validated and not the other provisions not covered by the said ordinance.

In fact, if some provisions of an Act are not clear or are beset with ambiguity, the court can look into the “Objective Resolution” or what is now called the “Statement of Objects and Reasons” accompanying the bill placed in Parliament, to know what was the intention of Parliament. And in this case, the issue is what was the significance of date 3^rd July 2008. In the case of the ESI Amendment Act 2010, there is no clarity at all as to significance of the date 3^rd July 2008, in the light of validating every new provision in the act (like say amendment of term Factory, five year cap for assessment under Section 45A, enlargement of definition of dependent, etc.,). The only  “coincidence” is that, the previous ordinance was notified from that date and the intention could have been to validate everything done under that Notification.  But the Catch-22 situation is that the Ordinance of 2008 notified on 3.7.2008, dealt only with introduction of new Chapter VA, to provide Scheme for other Beneficiaries, and nothing more.   Para 2 of the Statement of Object and Reasons, placed before Parliament accompanying the Amendment bill (which became act subsequently), talked only about the extension of ESI Hospital facilities to RSYB beneficiaries.  Let me quote from this Objective resolution of the bill presented by Minister: “It was, therefore, considered essential and urgent to enable the Employees’ State Insurance Corporation to participate in the Scheme (RSYB) with immediate effect. By providing health services to the unorganised sector workers under the Rashtriya Swasthya BimaYojana Scheme, both unorganised sector workers and the Employees’ State Insurance Corporation would benefit by the Employees’ State Insurance Corporation making available its vast network of hospitals for providing medical care on user charges, wherever the same were underutilised. In view of the urgency as pointed out above, the Employees’ State Insurance (Amendment) Ordinance, 2008 was promulgated on the 3rd July, 2008.”

Thus validation, if required, could only be for Chapter VA of the amendment Act and not for any other provision, particularly since the date 3rd July 2008 is mentioned in section 19 of amendment act and this date has only significance to the ordinance which dealt only with Chapter VA.

The problem is who will bell the cat, or more precisely who will agitate the matter through courts till SC?

All cases are filed by Employers generally and they agitate only against payment of money by themselves and care a hoot as to how the money deposited by them is spent.

Great Trade Union leaders on the ESIC council never had any time to go through the papers presented and in case never want to upset the authorities.

Employees of ESIC are generally of two categories, those wanting transfer and those not wanting transfer, and as for salary they are assured whatever is given to Central Government employees, and now the ESIC authorities are humoring them by promotions and benefits, unheard of before, no matter they are dipping into trust money of poorer section of workers, so that no one bothers to question the fundamentals of the scheme.

Pensioner? Poor fellows, they are old and wish to spend quite retirement, counting the six monthly DA increase and nothing beyond!