Validation Clause: An IP’s letter to the ESIC Members !

Excerpts from the letter sent by an Insured Person to the Members, who are Employers’ and Employees’ representatives in the ESI Corporation: 



1. Mr. Sudershan Sareen,

2. Mr. G.P. Srivastava,

3. Mr. B.C. Prabhakar,

4. Mr. Michael Dias,

5. Dr. U.D. Choubey

6. Mr. Rajinder Singh Maker

7. Mr. Vijay Kalantri

8. Mr. Rama Kant Bharadwaj

9. Mr. Badish Jindal

10. Mr. Bharat Mehta

11. Mr. Ram Kishore Tripathi

12 Mr. Prashanta Nandi Chowdhury

13. Mr. Gokulananda Jena,

14. Mr. V. Radhakrishnan,

15. Mr. Ajit Sripad Kulkarni,

16. Mr. Dilip Bhattacharya

17. Dr. G. Sanjeeva Reddy

18. Mr. Chandra Prakash Singh

19. Mr. K. Suresh Babu

20. Mrs. Amarjeet Kaur

Sub: Construction of buildings for Medical Institutions in the ESIC – Expenditure during the pre-amendment period – remaining as an unauthorized expenditure till date – false statement by the authorities of ESIC before Court.

Ref: 1. Para 8 of the Affidavit of the Petitioners in the W.P. 12953 of 2015 before the Hon’ble High Court.
2. Para 11 of the Counter-Affidavit filed by the ESI Corporation, the Respondents 2 & 3, therein, in the same W.P. 12953 of 2015.
3. Para 76 & 77 of the Report dated 04.12.2009 of the Parliamentary Standing Committee on Labour & Employment.


Sir/ Madam,

I invite your kind attention to the references cited and request you, one of the trustees of the ESI Corporation and the custodian of the ESI Fund, to kindly bestow your personal attention to the issues raised in this letter. This letter arises out of the pleadings of the parties in the W.P. 12953 of 2015 in the Hon’ble High Court of Chennai and explains the manner in which the officials of the Hqrs. Office had deliberately misled the Hon’ble High Court by submitting false statements, even when they were on oath, in the matter of construction of buildings for medical institutions and setting up medical colleges, nursing colleges and training institutes for para medical staff that involves massive expenditure of thousands of crores of rupees.

2. I request you to kindly recall the fact that the ESI Act was amended by the Parliament only on 03.05.2010 to insert Sec. 59-B therein, to empower the ESI authorities to set up medical institutions. The Bill for such amendment, tabled in the Parliament of India on 30.07.2009, contained the following as Clause 15:


Clause 15

The said clause was approved and passed by the Parliament of India as Sec. 59-B on 03.05.2010, the assent of the President obtained on 24.05.2010 and the amended provision became effective from 01.06.2010. as per the decision of the Ministry of Labour and Employment. Sec. 59-B which is in force as on date reads as under, in Clause 17 of the ESI (Amendment) Act, 2010:

Clause 17

It would thus become clear that the authorities of the ESIC did not have the authority to incur any expenditure to construct buildings for medical colleges or to incur expenditure to appoint Deans and Professors, or to spend money to engage even Consultants for setting up of medical colleges, at any time, before 01.06.2010, the pre-amendment period.

3. But what had actually happened was that the authorities of the ESIC had, during the pre-amendment period from 2008 to May, 2010, incurred thousands of crores of rupees and that exprenditure remains an irregular and unauthorized expenditure till date. They had spent such a huge sum of public money even before the Bill was tabled in the Parliament in July 2009.

4. This, in spite of the fact that Sec. 28 of the ESI Act, does not permit expenditure of ESI Fund for purposes which are not within the purview of the Act. The opening sentence of the said Sec. 28 makes it very clear that the ESI Fund can be expended “subject to the provisions of this Act”. The rules can be made by the Central Government to spend ESI Fund, only with reference to the purposes mentioned in the Act. Significantly, no provisions in the Act permitted setting up of medical institutions before 01.06.2010. Besides, no “Rules” have so far been framed by the Central Government to spend ESI Fund for the purpose of construction of buildings for medical colleges. Thus, even Sec. 28 (xii) of the Act cannot be used to justify the expenditure incurred during the aforesaid pre-amendment period. There was no authority for anyone in the ESIC to permit expenditure from the ESI Fund for any purposes relating to the setting up of medical institutions, before 01.06.2010. The expenditure incurred actually by the authorities of the ESIC, thus, during the abovementioned pre-amendment period, was, therefore, an unauthorized one.

5. This fact had been referred to in the pleadings before the Hon’ble High Court of Madras at Chennai in W.P. 12953 of 2015 which had been filed with reference to the issue of new-admission of students into the ESIC-run medical colleges for year 2015-16. Paragraphs 8  of the affidavit of the Insured Persons who filed in the said case read as under:

“8. But, overlooking the importance of the Scheme in the making of the nation, all of a sudden an administrative decision was taken in the year 2008 to set up more than 28 medical colleges throughout the nation. A Chief Engineer was also appointed in violation of the recruitment rules on the subject, in a hurry and hundreds of crores of rupees were sanctioned under his signature for constructing buildings for medical colleges. But, there was no provision at all, at that time, in the ESI Act authorizing the ESI Corporation to establish and run medical colleges. A Bill for amending the ESI Act to empower the ESI Corporation was introduced only later, in the year 2009, in Lok Sabha, as Bill No. 66-C of 2009. That Bill was got passed by the Lok Sabha only on 03.05.2010. The provisions of the Amended Act came into force only on 01.06.2010. These events would prove that the expenditure incurred for constructing buildings for so many medical colleges by the Respondent-2 before 01.06.2010 was, clearly, an unlawful and unauthorized expenditure. It is learnt that such expenditure sanctioned and incurred upto 31.05.2010 itself was around Rs. 10000 crores. The expenditure incurred from and after 01.06.2010 till date is not taken into account here and is said to be more than Rs. 15000 crores.

6. But, the ESIC had filed counter-affidavit stating that the expenditure thus during the pre-amendment period was regularized through the Validation Clause in the Amendment Act, 2010. Their reply in Para 11 of the Counter-Affidavit said, “The Validation Clause in the ESI (Amendment) Act of 2010 (18 of 2010) provides for all expenses incurred.” This statement regarding the Validation Clause, is a deliberate and conscious lie on the part of the officials of the Hqrs. Office of the ESI Corporation besides being blatant perjury in the sworn statement. The authorities had fearlessly made such stunningly false statements before the Hon’ble High Court itself. The said Para 11 is reproduced below:

“11. I submit that the contention of the Petitioners made in Para No. 8 of the Affidavit is misleading in that the decision to set up medical colleges across the country was taken with a view to improve medical care facility to IPs (Insured Persons) and their dependants. The Validation Clause in th ESI (Amendment) Act of 2010 (18 f 2010) provides for all expenses incurred. The expenditure incurred on 12 ongoing medical college projects including the medical education complex at Gulbarga till 30.09.2014 is around 5350 crores only.”

7. The fact is that the Validation Clause had not, at all, been inserted in the Bill 66 of 2009 to ratify the actions and inactions of the Respondents with reference to the expenditure incurred for setting up medical educations or for constructing buildings for medical colleges. In fact, the Parliament was not even made aware of the fact that the Respondents had already taken action (a) for construction of medical colleges, (b) for the payment of salary of Deans and Professors (without students) and (c) for payment of fee to the consultants. To be more precise, the Parliament was not aware that the ESIC authorities had spent thousands of crores of rupees even before the Bill for amendment was placed on the table of Lok Sabha on 30.07.2009.

Ordnance First Page

Ordnance First Page

8. The Validation Clause had, actually, been inserted only to ratify the action or inaction on the part of the Respondents with reference to the ESI (Amendment) Ordinance, 2008 which was promulgated on 3.7.2008 (Ord. 7 of 2008) for opening of facilities in ESI Hospitals to other beneficiaries on payment of user charges. The ESI (Amendment) Bill, 2008 (Bill No. 56 of 2008) which had been tabled in the Parliament on 29.09.2008 could not become Act and the Ordinance got lapsed in due course. It was in that context, the Validation Clause was inserted in the ESI (Amendment) Act, 2010 to regularize the action or inaction with reference to the aforesaid Ordinance, when it was in force. Para 76 & 77 of the Report of the Parliamentary Standing Committee on Labour, which examined the Bill No. 66 of 2009 as per the directions of the Hon’ble Speaker of Lok Sabha, would testify to this fact.

9. The observations of the Parliamentary Standing Committee on Labour regarding the need for Validation Clause are reproduced below:
“76. It is proposed to validate actions or measures taken during the period beginning on or after 3rd July, 2008 till the commencement of ESI (Amendment) Act, 2009.
77. The Ministry in their explanatory note stated as under:- “The ESI (Amendment) Ordinance, 2008 was promulgated on 3.7.2008 for opening of facilities in ESI Hospitals to other beneficiaries on payment of user charges. However, as the Bill to amend the Act to replace the Ordinance could not be taken up in the Parliament due to dissolution of 14th Lok Sabha, the Ordinance lapsed. Hence, it is proposed to validate any action taken based on the Ordinance. Grant of exemptions by the State Governments result in denial of social security benefits to workers as well as under-utilisation of infrastructure created for the insured persons of that area. It is therefore proposed that such exemptions may be granted judiciously only where benefits substantially similar or superior to the benefits provided under this Act are provided by the employers.”

Amendment Bill of 2008 that could not be passed because of the dissolution of the Lok Sabha.

Amendment Bill of 2008 that could not be passed because of the dissolution of the Lok Sabha. If this Bill had been passed in 2008, there would have been no Validation Clause in the ESIC (Amendment) Act of 2010. 

10. These observations of the Parliamentary Standing Committee would very clearly prove that the Validation Clause had no connection at all and had nothing to do with the colossal expenditure incurred by the ESIC authorities during the pre-amendment period upto and including May, 2010 for construction of buildings for medical institutions of the ESIC and other expenditure for this purpose.

11. The ESIC authorities are, therefore, …………………. in their pleadings, that irrelevant Validation Clause to justify the unlawful expenditure incurred by them to set up medical institutions, during the said pre-amendment period. Moreover, it is a fact that the ESI Funds had been siphoned away in the name of construction of medical institutions, from December 2007 onwards, immediately after a Chief Engineer was appointed unlawfully on 28.11.2007, while the Validation Clause talks of the events that had taken place, seven months later, only from 03.07.2008 (with reference to the lapsed ESI (Amendment) Ordinance, 2008).

12. The very fact that the ESIC authorities could not produce any evidence in …………..which was about Rs. 10000 crores, remains an unauthorized one till date.

13. I, therefore, request you to kindly ascertain all the facts pertaining to the incorporation of such a deliberate …………….

14. In the context, it would be helpful to you to understand the attitude of the authorities, if you know the fact that they are maintaining total and unlawful silence to the application of Mr. K. K….. under the RTI Act on 10.07.2015 (Copy enclosed). He had asked for the simple information regarding details of the so-claimed actions and inactions in the field of construction of buildings for and setting up of medical colleges which were proposed to be regularised by inserting that Validation Clause. But, no reply has been given under the RTI Act by the officials of the till date.

15. It would be appropriate, if you could use your good offices to place the issues raised in this representation as an Agenda point before the next meeting of the Standing Committee / ESI Corporation and request the authorities to explain their case to all the Members present in the meeting and get the details recorded in the Minutes thereof. It would be better if you could use your influence as a Member of the ESI Corporation and try to obtain the information even earlier to avoid wastage of time, in seeking legal remedy through Court of Law. It is proposed to seek the kind intersession of the Hon’ble High Court on this issue by filing a Writ in February, 2016.

16. A line in reply about the initiative taken by you, with reference to this representation would, therefore, help me to place the facts before the Judiciary besides convincing my co-beneficiaries of the ESI Scheme to repose faith in you and trust that you are acting in the interests of the ESI Corporation, safeguarding the ESI Fund and, thereby, protecting the interests of the insured persons, when the authorities of the ESI Corporation are indulging in the organised crime of mismanagement of public funds that runs into crores and crores of rupees.

Thanking you on behalf of millions of insured persons like me,
I remain,
Yours faithfully,

Statement of Objects and Reasons that accompanied the Amendment Bill of 2008

Statement of Objects and Reasons that accompanied the Amendment Bill of 2008


1 Comment

Filed under Amendments 2010

One response to “Validation Clause: An IP’s letter to the ESIC Members !

  1. deshmukhsingh

    Hey, very nice site. I came across this on Google, and I am stoked that I did. I will definitely be coming back here more often. Wish I could add to the conversation and bring a bit more to the table, but am just taking in as much info as I can at the moment. Thanks for sharing.
    ESIC Consultants

    Keep Posting:)

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