Appellate Authority u/s 45 AA of the ESI Act – Part I

The following are excerpts from the application sent by Mr. P. Ramar on 10.10.2009 to the Ministry of Law on the amendment then proposed for having an Appellate Authority under the ESI Act:

1. Sec. 74 of the Principal Act provides for a full-time domestic tribunal as part of the ESI Corporation exclusively for deciding the cases pertaining to the ESI Corporation. The expenditure pertaining to that Tribunal was intended to be met from the ESI Fund as per Sec. 28 (vii) of the ESI Act, 1948 which authorises that the ESI Fund shall be expended for “defraying the cost (including all expenses) of the Employees’ Insurance Courts set up under this Act”. Accordingly, full time E.I.Courts had been set-up and were functioning upto the mid-seventies, although the expenditure of such E.I.Courts had been met only by the concerned State Governments. At that time, the disposal of the cases was fast and the E.I.Courts functioned as specialized institutions on matters pertaining to the ESI Act.

2. Now, all of a sudden a provision is attempted to be made for having an Appellate Authority with reference to the orders issued under Sec. 45-A pertaining to Contribution. The Statement of Objects and Reasons for the Bill do not explain the problems, if any, faced by the organization for want of such an Appellate Authority and the necessity for such an amendment.

3. The Bill is totally silent with reference to Sec. 85-B under which the same ESI Authorities issue orders regarding Damages by exercising the same powers and extending the same opportunity to the employers as per the principles of natural justice.

4. The fact is that there is no need for an internal appellate authority under Sec. 45 and the present proposal as per Clause 9 is only intended to preclude the E.I.Courts from playing their legitimate role.

5. All that the ESIC has to do, under Sec. 74 is

1. a)to ask the State Governments to make the E.I. Courts as full-time courts to attend only to the cases pertaining to the ESI matters;
2. b)to ask the State Governments to nominate judges for these courts with reference to the EI Court rules already framed by them,
3. c)to inform the State Governments that the ESI Corporation would meet the entire cost of running the courts from the ESI Fund.

6. But, the ESI Corporation had, over a period of time, simply left it to the concerned State Governments to do whatever they pleased. No money has been spent from the ESI Fund for running the E.I. Courts. So, the State Governments have, instead of appointing full-time EI Courts simply allotted the work to the Labour Courts. The judges of the Labour Courts, overloaded already with their main work, began to consider the ESI work as a part of their other works. Because of this overload, there is significant delay in the disposal of cases.

7. The prime factor for consideration is that the authors of the Principal Act had very wisely understood the need for having an appellate authority who will not be a civil court but in-house tribunal. But, later, because of the ignorance and inaction of the ESI Authorities of the nuances of the subject-matter, the State Governments had not been informed of the financial assistance available to them as per Sec. 28 (viii). As a result, the ESI Corporation had been suffering all along because of the delay in the disposal of cases.

8. Delay in the disposal of cases cannot, therefore, be a reason for moving an amendment as per Clause 9 of the ESI (Amendment) Bill, 2009. Proper understanding of the significance behind Sec. 74 and Sec. 28 would help set-up full-time EI Courts and clear the arrears. The present amendment is an attempt to make things chaotic without enforcing Sec. 28.

The Clause 9 of the ESI (Amendment) Bill, 2009 introduced in the Lok Sabha is reproduced below:
9. After section 45A of the principal Act, the following section shall be inserted, namely:—

“45AA. If an employer is not satisfied with the order referred to in section 45A, he may prefer an appeal to an appellate authority as may be provided by regulation, within sixty days of the date of such order after depositing twenty-five per cent. of the contribution so ordered or the contribution as per his own calculation, whichever is higher, with the Corporation:

Provided that if the employer finally succeeds in the appeal, the Corporation shall refund such deposit to the employer together with such interest as may be specified in the regulation.”.

Para 2 of the Memorandum Regarding Delegated Legislation is reproduced below:

2. Clause 9 of the Bill seeks to empower the Employees’ State Insurance Corporation to provide an appellate authority by regulation for hearing appeal from an employer against the determination of contribution payable in respect of employees and to specify the interest on the deposit made by the employer in case the employer is finally succeeds in the appeal.

Para 5 of the Memorandum Regarding Delegated Legislation is reproduced below:

5. The matters in respect of which the rules or regulations, as the case may be, to be made, are of administrative and procedural details and it is not practicable to provide for them in the Bill itself. The delegation of legislative power is, therefore, of a normal character.

9. There is no provision in the Bill to provide for a Section similar to Sec. 45 – A (2) to make the orders of the Appellate Authority enforceable.

10. Moreover, the Amendment Bill seeks to vest the power in the ESI Corporation to decide the (a) Constitution and appointment of Appellate Authority, (b) Powers and (c) procedure to be followed by the said authority. These matters have been left to the purview of delegated legislation.

11. If the ESI Authorities had moved the proposal by giving the impression that the EI Court is a Civil Court and that there is a requirement for an intra-departmental remedy for reviewing the orders issued under Sec. 45 A, their contention is wrong.

1. a)“The E.I. Court is not a Civil Court but a domestic tribunal specially constituted for the purposes of deciding any controversy that may arise and the matters enumerable in Sec. 73 A”. (ESIC Vs. Zeckra 1969 (36) FJR 110.).
2. b)Punjab High Court has held that the E.I. Court is not an ordinary civil court but a domestic tribunal specially constituted for the purpose of deciding any controversy that may arise in the matters enumerated in Sec. 75 of the Act.(ESIC Vs. Ram Lakhan, AIR 1960 Punj.559). The Bombay High Court has described the E.I.Court as a persona designate.
3. c)In Virendra Kumar Vs. State of Punjab (AIR 1956 SC 153), the Supreme Court has made the following observations: “It is a familiar feature of modern legislation to set up bodies and tribunals and entrust them with the work of judicial character, but they are not courts in the accepted sense of that term though they may possess some of the trappings of a Court.”
4. d)The mere fact that a judicial officer presiding over a Civil Court is appointed a judge would not, while he is performing his functions as a judge of the E.I. court, make him a civil court. “All the powers of a Civil Court cannot be exercised by an E.I. Court and only such power has been conferred by sub-section 1 of Section 78 upon it as are common with the powers of a civil court.” (ESIC vs. Shashi Kant Arc Khandi and another 1983 (47) FLR 269). There are only deeming premises made by Sec.78 (4) for the enforcement of orders of the EI Court in the same manner as done for the orders of Civil Court.

12. The “Commentaries on ESI Act, 1948” by M.R. Mallick published by the Eastern Law House, Kolkata in the year 1974 analyses the issue in depth and you could find more references in that book. It would thus become clear that the Principal Act has already placed a Domestic Tribunal for immediate remedy with reference to any issue that may arise between the employers and the ESI Corporation.

13. There is, therefore, no need for an additional departmental authority to become an appellate authority to decide any issue that may arise between the employers and the ESI Corporation under Sec. 45A. Yet, the Ministry of Law has become a party to the decision to vest some arbitrary powers in the ESI authorities to nominate the Appellate Authorities even without examining the fact that the ESI Corporation is not utilizing the powers vested in it to establish a full-time Tribunal under Sec. 74 meeting the required expenditure for it under Sec. 28.

14. The present bill aims at obtaining the approval of the Hon’ble Members of the Parliament to appoint an Appellate Authority in the ESI Corporation for the purpose of revising and reconsidering the orders under Sec. 45-A without informing the Hon’ble Members the manner in which such Appellate Authority is going to be appointed. The Bill aims at delegating arbitrary power to the Corporation to do as it pleases in such an important quasi-judicial matter.

1. 1.Please, therefore, intimate, with reference to your office records, the details of the difficulties faced by the ESI Corporation, at present, because of the absence of any departmental officer to function as an Appellate Authority.
2. 2.Please intimate whether the Ministry of Law had actually examined beforehand the manner in which the ESI Corporation is going to frame the delegated legislation regarding the appointment and powers of the proposed Appellate Authority.
3. 3.Please intimate whether an Appellate Authority can be appointed and vested with powers as per Delegated Legislation when the Inspector and the Quasi-Judicial Authority and the E.I. Courts are appointed under Sec. 45 and Sec. 74 respectively and are deriving powers as per the Principal Act.
4. 4.Please intimate whether the Ministry of Law is aware that the same officers who pass the orders under Sec.45-A regarding contribution happen to pass orders under Sec. 85-B regarding damages also following the same principles of affording the opportunity of principles of natural justice. In that case, please intimate whether you had examined the reason behind the fact that the ESI Authorities did not bother themselves about having the same Appellate Machinery regarding the Damages ordered under Sec. 85-B of the ESI Act, 1948.

1. 5.Please intimate whether the orders of the proposed Appellate Authority under Sec. 45 AA are enforceable without there being any provision under the said Sec. 45 AA, corresponding to the Sec. 45-A (2) available under Sec. 45 A.

A sum of Rs.10 towards fee under the Right to Information Act,2005 has been paid in the form of Indian Postal Order for Rs.10/- drawn in favour of Secretary, Ministry of Law payable at New Delhi the details of which are asunder: