The Basic Structure of the ESIC!

Central Autonomous Body

The E.S.I. Corporation is a Central Autonomous Body. It is a Central Body. It is an Autonomous Body. It is also a Statutory Body. Every Autonomous Body is a Statutory Body too. But, every Statutory Body need not be an Autonomous Body. The intricacies on these aspects can be understood only when we examine Reg. 8 of the ESIC (Staff & Conditions of Service) Regulations, 1959. Reg. 8 would, then, lead us, necessarily, to Reg. 24 and Reg. 24-A and the CCS (Pension) Rules, 1972.

We will then find that ESIC is described as an Autonomous Body in the instructions issued by the Government under Rule 37 (3) of the CCS (Pension) Rules, 1972. One may go through Rule 37B too. (http://ccis.nic.in/WriteReadData/CircularPortal/D3/D03ppw/Notification1_211212.pdf). As per the Explanation given under the said Rule 37 (3), “Body” means autonomous body or statutory body. The word “or” used in the Explanation under Rule 37 makes it clear that a “statutory body” need not necessarily be a “[Central] Autonomous Body”.

As per Rule 37 (3) of the CCS (Pension) Rules, 1972, two factors are taken into account to enable a Central Government employee to claim the benefit of counting of past service when he migrates to an autonomous body or statutory body:

1. (1)Being controlled or (2) being financed by the Central Government.

The existence of any one of the two elements is enough to call an organisation as a Central Autonomous Body.

Rule 37 (3) which carries an Explanation regarding the applicability of the Rule to “Statutory Bodies” has been inserted in the CCS (Pension) Rules, 1972 much later by the DP&PW on 25.6.1997. The Government of India, Dept. of Per. & A.R., O.M. No. F. 27 (16)-PU/79, dated the 27th September, 1980, w.r.to the CCS (Pension) Rules, 1972, as available online shows that the ESI Corporation fulfils the requirement of being a Central Autonomous Body.

The O.M. says, “Since the criterion is satisfied in the case of ESIC in view of the statutory provisions of the ESI Act which confers on the Central Government the power to constitute or supersede the Corporation, to appoint Principal Officer, to accord approval to recruitment rules and to approve the budget, etc. the benefits in terms of the provision of Rule 37 of the CCS (Pension) Rules, are clearly available to the Central Government employees absorbed by ESIC.”

A “Central Autonomous Body” is one which is financed wholly or substantially from cess or Central Government grants.

“Substantially” means that more than 50 per cent of the expenditure of the Autonomous Body is met through cess or Central Government grants.

Does the Central Government meet any expenditure of the ESI Corporation? No. At least, not yet.

But, Section 26 (2) of the ESI Act, 1948 permits the ESI Corporation to accept grants.  It may accept grants, donation and gifts from the Central Government for all or any of the purposes of the Act.  There is, thus, an enabling provision for the ESI Corporation to receive grants from the Central Government.

 As per Section 27 of the ESI Act, 1948, “the Central Government shall, every year, during the first five years, make a grant to the Corporation of a sum equivalent to two-thirds of the administrative expenses of the Corporation not including therein the cost of any benefits provided by or under this Act.”  The mandate was to meet 2/3 of the expenditure.  Thus, the Centre was required to finance the ESI Corporation substantially.  The criteria for being declared as a Central Autonomous Body were fulfilled by the ESI Corporation.

Section 27 however, had been omitted by an amendment w.e.f. 17.6.67.  This is because the ESI Corporation had been functioning in a viable manner with and within the contribution income collected from employers and employees.  Even, now Section 26(2) of the ESI Act remains on statute.  The ESI Corporation is, therefore, eligible to accept grants from the Central Government.  The ESI Corporation, therefore, fulfils all the requirements for being defined as a Central Autonomous body.

But, Sec. 26 shows that although the ESIC is not centrally financed at present, such central financing is possible within the existing provisions, if need arises. The ESIC is, therefore, a Central Autonomous Body which is controlled by the Central Government. It is a Central Autonomous Body which is not but can be financed by the Central Government.

Statutory Body

The ESI Corporation is a Statutory Body. “A statutory body is an institution owing its very existence to a statute which would be the fountain head of its powers” – (Vaish Degree College Vs. Lakshmi Narain – AIR – 1976 – SC – 888, 893). The ESIC is a Statutory Body controlled by the Central Government although not financed by it. One of the elements of that control is through the Director General and Financial Commissioner who are appointed by the Central Government.

The DP&PW, O.M. dated 31.3.1987 read with the O.M. dated 29.8.1984. refer to the term ‘Central Autonomous Body’ stating that the term included Statutory Body also. However, the following organisations have also been classified, therein, as Central Autonomous Bodies:

• ¬The Nationalised Banks
• ¬The LIC of India
• ¬The National Insurance Company Limited, the New India Assurance Company Limited, the Oriental Insurance Company Limited and the United India Insurance Company Limited.

One could see the letter dated 5.6.1992  of the DP&PW given as Note 2 in Appendix 12 in the Swamy’s Pension Compilation also for reference of the term Central Autonomous Bodies.

Reg. 24 & 24 –A of the ESIC (S&CS) Regulations, 1959.

The Employees’ State Insurance Corporation (Staff & Conditions of Service) Regulations, 1959, is not a complete and comprehensive compendium regarding various conditions of Service governing the employees of the ESI Corporation. So, in respect of any condition of service for which no provision or only inadequate provisions had been made in the said ESIC (S&CS) Regulations, 1959, a provision was made through Regulation 24 to enable one to make use of the Central Government rules in such matters.

It is Reg. 24 that enables one to make use of the F.R, S.R, Pension Rules, etc., of the Central Government for regulating various conditions of service of the employees of the Corporation.

But, applying these Rules in day-to-day work posed some practical and technical problems. These Central Government rules refer to various authorities who would exercise various powers at various levels. One could see the Appendices to F.R & S.R. Part I of Swamy’s Compilation for the list of such officers who are entrusted with the powers of the President in respect of various departments of the Central Government. The ESI Corporation had not identified and specified the authorities who would exercise such powers. In the absence of such specification, the ESI Corporation had been referring various matters to the Ministry of Labour & Employment even for minor issues. It was causing avoidable delay.

Moreover, it was found that such references practically did away with the basic structure of the Corporation, i.e., its autonomous nature. Such references were also found to be inconsistent with the provisions of Sec. 18 of the ESI Act, 1948 which provided that the Standing Committee of the Corporation shall administer the affairs of the Corporation, subject to the general supervision and control of the Corporation. It was not the Central Government that had to ‘administer’ the Corporation but the ‘Standing Committee’. The report of Prof. Adharkar says that a statutory corporation to be called “Central Board of Health Insurance” shall be set up comprising representatives of various interests including medical profession at the apex committees to administer the scheme. The ESI Corporation was not meant to be yet another department of the Central Government.

The issues came up immediately after the enforcement of the ESIC (S&CS) Regulations, 1959. So, the Corporation had passed resolution somewhere in the early Sixties that the ESI Corporation was not one of the offices of the Central Government.

The following provision was inserted as Reg. 24 – A, as per Gazette notification in 1965:

“For the purpose of application of Central Government rules to the employees of the Corporation under these regulations, the Standing Committee shall be competent authority to exercise all the powers and functions which are vested in the President/Local Government/Ministries or Departments of the Government of India, under the various Central Government Rules.”

To sum up, the ESIC is a Central Autonomous Body controlled by the Central Government. There is power for the Centre to give directions to the Autonomous Body but its Minister cannot directly administer this Autonomous Body. Any such interest by the politicians in power to acquire power in the matter of transfers and postings of the officers is to be resisted in public interest.

N.B: The next post will be on the purpose of some other provisions of the ESI Act, 1948 and how it cannot be misused to subvert the Basic Structure of the ESI Corporation.