September 15, 2013 · 8:45 am

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.

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August 24, 2013 · 6:03 pm

Appointment of Chief Engineer in the ESI Corporation!

(This article constitutes Episode IV of the series ‘A Review in Heavens’)

Mr. Adharkar and his friends meet at their usual place of retreat.

Mr. Adharkar says, “It is a long time since we met last. I am sad to say that things in the ESIC have taken a turn for the worse, since the arrival of Mr. Sis Ram Ola on the scene as the Minister for Labour. As politicians, these Ministers know the art of wielding authority without responsibility. Mr. Ola wants to acquire authority over the transfers and postings of officers who head the Regions and Sub-Regions. He is also showing interest in construction matters and medical college buildings. It is plain unlawful on his part to demand a role in the transfer of officers in the ESI Corporation. But, he never cares for law. Besides, there are so many things murky in the area of construction and medical college matters. Crores roll there. Instead of setting right things one should not add to the already existing problems. Hope the CAG takes note of the facts”.

There was sullen silence. It was Prof. Adharkar who broke the ice again. He said, “In regard to construction matters the less said the better. It becomes difficult for the Director General to protect the organisation from the people who have vested interests, because there are so many persons with such interests. Now that the post of Chief Engineer has become vacant, with the exit of Mr. Om Kumar, who was on deputation, proper course of action is only to fill up the post of Chief Engineer through the UPSC. But, no proposal is stated to have been sent to the UPSC, although it should have been sent last year itself, after giving proper advertisement calling for applications for appointment on deputation, if the people in the feeder cadre did not meet the requirement to be considered for promotion. But, the latter one is the better option. It is better to promote cadre officers, even by relaxing the condition of the period of residency. Action for that also should have been taken last year. But, it was not done. Anyway, the ESIC should avoid recruiting anyone as Chief Engineer directly in violation of the rules and regulations on the subject.”

“How can there be appointment to a post, and that too, to the post of Chief Engineer, in violation of rules?”, asked Mr. Beveridge.

“Oh, dear!” said Mr. Adharkar, “You people in England follow conventions. You hold them dear, there. But, in India, conventions were given a go-by, immediately when the British rulers declared in 1945 that they were prepared to leave India to Indians. Nothing is sacrosanct now in India and one would do anything if one could get power or money through something”.

“How to save India, then, from such people of India?”, said Mr. Murray.

“It is possible. The silver lining is already there. The Central Information Commission has already declared that the political parties must make their source of income public. This is the precise remedy for the Indian malady. Once this is implemented, the politicians in power as well as in opposition cannot make money for themselves, in the name of collecting funds for the party. Collecting funds for the party is the euphemism for accepting corrupt money that is shared between the individual politicians and their political parties. When one cannot collect money secretly in the name of his political party, he cannot put up a brave face and demand corrupt money for himself saying that it was for his party. Everyone would know that that unaccounted for money is only for him. Corrupt politicians and Ministers cannot wear a mask of honesty anymore. They would stand exposed in public, if their political parties are compelled by law to make the source of income public. That is the mortal fear of the present day politicians. All of them became so scared that they pass a resolution in the Parliament to nullify the orders of the Central Information Commission. The resolution, even if made an Act, is unlawful and can and will be struck down in the Court of Law.

Because, these politicians who made the law do not have the locus standi to pass such a law, when they are a party to the issue. If at all, the orders of the Central Information Commission is to be annulled, it must be done only by the people through a referendum and not by the so-called people’s representatives who are afraid of the people and want to keep the people in dark. But, that is a different story. The issue now is that unless the political parties are made to make their source of finance public, corruption in the nation cannot be controlled.

The enthusiastic consequence of implementing the order of the Central Information Commission is that, once the CIC’s orders are implemented, the present set of politicians would, as a breed, run away and vanish from the political scene and only those who are interested in public welfare would dominate the political field. No politician would have the urge to make his son or daughter or daughter-in-law, as his successor. Politics would not prove to be a field for making money. Indian people must learn from Scandinavian countries in this regard”, said Mr. Adharkar.

“That, definitely, is a very encouraging solution. Every Indian must thank the Central Information Commission for it. I find that once the source of funds to the political parties becomes transparent, the tendency of criminals entering political fields, the tendency of the political parties to appoint and patronize local criminals to be their party workers, etc., would cease”, said Mr. Dengill.

“I think we were discussing about appointment to the post of Chief Engineer in the ESI Corporation”, said Mr. Beveridge bringing the course of the conversation to the back to the original issue.

“Yes, yes. There had been violations in the past in the appointment of Chief Engineer in the ESIC. Convenient persons had been appointed and were attempted to be appointed. That was the reason the UPSC asserted itself when the Recruitment Regulations were framed. The Recruitment Regulations for the post of Chief Engineer was, thereafter, notified in the Gazette with the condition that the consultation with the UPSC “is” necessary on “all” occasions.

There was, then, a Minister who wanted one Mr. R.N. Singh to be appointed as Chief Engineer for one year temporarily, in the year 2004. He cited the provisions in Sec. 17 (3) of the ESI Act, to achieve his purpose. But, Sec. 17 (3) of the ESI Act, 1948 has to be read with the very restrictive provisions of the Recruitment Regulations for the post of Chief Engineer in the ESI Corporation which necessitate consultation with the ESIC ‘on all occasions’ and the instructions of the DOPT on temporary and officiating posts as found in the Swamy’s Manual of Establishment and Administration. When this fact was taken to the notice of that Minister, he was convinced of the stand and left the issue at that.

But, thereafter, one Mr. P.R. Roy was appointed as Chief Engineer in an unlawful manner on the basis of a single application, in the year 2007. He was also given an unlawful extension in the year 2008. The consequences are not described here. But, the UPSC is understood to have taken serious note of it, when it came to know of the facts in the year 2010. Because, no one could answer how Mr. Roy came to know that there was vacancy in the post of Chief Engineer in the ESI Corporation. A single para in the office note decided the appointment and projects worth more than Rs. 10,000 crores cleared through him”, concluded Mr. Adharkar. Others were just watching him wondering how things could go astray in the ESI Corporation. They went through the following Office Note also, which had been obtained through the Right to Information Act, 2005:

Filenoting that led to the appointment of a Chief Engineer

Filenoting that led to the appointment of a Chief Engineer

=============================================================

Dr.K. M.Soni, Superintending Engineer, was recommended by the UPSC to be appointed as Chief Engineer in the ESI Corporation on deputation. When he did not join, a note had been put up on 28.11.2007 as under:

“Thus the appointment of Dr. Soni through UPSC could not be effected. As a matter of recourse, DG may like to consider the name of Shri Prithwi Raj Roy EE in Rural Engg. Services, Govt. of UP, for being hired on deputation basis for one year, w.r.t. the application of Shri Roy, flagged “A”. A formal proposal in this regard is put up pl.”

The Administration Division entertained the application only from one person, Shri P.R. Roy and appointed him as Chief Engineer on deputation. Shri P.R. Roy was only an Executive Engineer in his parent department and he was posted here on deputation by naming him as Chief Engineer. He was, thereby, vested with administrative and disciplinary powers over the other regular UPSC-recruited Executive Engineers already working in the ESI Corporation. The riddles were:

  1. How did Shri. P.R. Roy come to know of the existence of vacancy in the ESI Corporation?
  2. How did he alone come to know?

There was no answer to these riddles. The proper course for the Administration Division was to inform the UPSC about the non-acceptance of the offer by Dr. K.M.Soni and ask for substitute or further course of action, if there was no one in the Reserve List. It should also have followed proper procedure in appointing the Chief Engineer. It should have intimated the UPSC about the appointment of Shri Prithwi Raj Roy, immediately and asked, at least, for the ratification of such action. It was not done. The UPSC had not received any intimation for more than one year and eight months. The UPSC  received the intimation only on 14.9.2009 (UPSC letter dated F.No. 2/39 (1)/2010-ADT-1 dated 11.2.2010).

The file-notings dated 6.1.2009 in Page 7 of the Note file show that ‘the Secretary, UPSC had already been intimated about the appointment of Shri P.R. Roy as Chief Engineer in ESIC’. But, the UPSC which went through the copy of this note-file page concerned said that it had been informed of the said appointment only on 14.9.2009, more than eight months after the date of the file-noting itself. This was how a false declaration had been given in the issue of appointment of Chief Engineer.

The file noting dated 7.1.2009 contained the remarks that ‘it (the UPSC) was informed to continue the services of Shri Roy as CE till regular selectee joins in ESIC’. That was another false declaration.

The same Chief Engineer had been given an unlawful extension also in the year 2008 in total violation of all the rules on the subject. The file-notings dated 6.1.2009 and 7.1.2009 in Page 7 of the Note file did not refer to the specific proviso to the contrary under Sec. 17(3) of the ESI Act, 1948.

Moreover, the UPSC came to know of the extension given to Shri P.R.Roy only on 11.1.2010, just five days before the expiry of the extended term. Nobody cared for Sec. 17 (3). There was no discussion either about Sec. 17 (3) or about the concerned Recruitment Regulations in the notes submitted on 11.12.2008, 6.1.2009 or on 7.1.2009.

=============================================================

Mr. Adharkar and others went through the above note. Mr. Adharkar then said, “Now that the post of Chief Engineer is vacant, it would be proper if the Administration is permitted to follow the lawful methods of filling it up, through UPSC”.

Mr. Beveridge said, “Besides, there must be some Public Interest Litigation about the matter of Medical Colleges to render justice to the contributing insured populace. The legislation in this regard in 2010 was made by hoodwinking the Parliamentary Committee of Labour”

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Filed under Amendments 2010, For Trainees, Transfers

July 30, 2013 · 9:38 am

ESIC Officers transfer: Amend the Act first before allowing a role for Minister!

A Study on Authority to Transfer the Officers of the ESIC was done in the year 2004 when Hon’ble Mr.Sahib Singh Verma, the then Minister for Labour wanted to acquire the power to transfer the Group ‘A’ and Group ‘B’ officers of the ESI Corporation. And, the paper was circulated among various units of the ESIC Officers’ Association. Now, in the context of similar intense desire shown by the present Minister for Labour, Hon’ble Mr. Sis Ram Ola to have a role in the matter of transfer of officers of the ESI Corporation, the Study Paper circulated then is published, now, for the benefit of the public. The following is the text of that Paper:

============================================

The issue whether the transfers and postings of the officers of the ESI Corporation can be done by the Hon’ble Minister for Labour, Government of India in the capacity of his being the Chairman of the ESI Corporation had been examined on various occasions in the past in various fora. But, it was found that such power could not be vested in the Hon’ble Minister. Unless the Sec. 94 (A) of the ESI Act, 1948 and the Reg. 4 of the ESIC (Staff & Conditions of Service) Regulations, 1959 are amended to provide for such vestiture, the power for ordering such transfers cannot be exercised by the Hon’ble Minister.

The fact that the Hon’ble Minister exercises such powers in the Employees’ Provident Fund Organisation made it necessary for us to make a comparative study of the provisions of the both the Organisations. And it became clearer that no executive power for running the Administration is vested in the Chairman of the ESI Corporation in contrast to the executive powers vested in the Chairman of the Central Board of Trustees of the Employees’ Provident Fund Organisation.

In the EPFO, The Board is the Appointing Authority as per Sec. 5 D of the EPF&MP Act, 1952 and Para 22-A of the EPF Scheme, 1952. As per Sec. 5 E of the EPF&MP Act, 1952 the Central Board can delegate the Executive Committee or to the Chairman of the Board or to any of its officers any of its powers for the efficient administration of the Scheme. Accordingly, as empowered under Para 24-A (2) of the EPF Scheme, 1952, the Central Board, by a resolution, enabled its the Chairman to act as the Appointing Authority in respect of the Officers and Staff other than the CPFC and the FA&CAO. This para 24-A(2) prescribes a specific method and the Board has adopted that method to make its Chairman the Appointing Authority. It is by virtue of having thus become the Appointing Authority, the Chairman of the EPFO is able to exercise the power of transfers and postings of these officers. The provisions in the EPF&MP Act, 1952 and the EPF Scheme, 1952 are very explicit to enable the Chairman to act as the Appointing Authority and thereby exercise the powers of transfer of officers.

Transfer is one of the essential conditions of service for government servants. The authority which functions as the Appointing Authority has the inherent power to enforce transfers and postings also. In other words, the authority to transfer goes together with the authority to appoint. As per the Appendix – 3 to the F.R Part I read with F.R 6 and F.R 15, full power to transfer employees has been delegated to the Heads of Departments.

It is only such an inherent power which enables the Chairman of the EPFO to exercise the powers for the transfers and postings of the Officers in the EPFO. If the Chairman of the EPFO had not been empowered, by a specific resolution of the Board passed under Para 24-A (2) of the EPF&MP Act, 1952, to act as the Appointing Authority he cannot exercise the powers of transfer of the officers in the EPFO.

It is only because the Chairman of the EPFO is not the Appointing Authority in respect of the CPFC and the FA&CAO in the EPFO that he is not, at present, exercising the powers of transfer and posting of these two officers.

There is no provision in the ESI Act to enable the Corporation to pass a resolution to empower the Chairman to act as the Appointing Authority. The Parliament has specifically mentioned in the original ESI Act in the year 1948 itself that the Director General shall be the Chief Executive Officer of the Corporation. That would imply that the executive powers of the Corporation would be carried out through the Director General. Although the CPFC has also been shown in Sec. 5D (1) of the EPF&MP Act, 1952 as the Chief Executive Officer of the Central Board, the Board has resolved, as per Sec. 5 E and Para 24-D to vest the powers of the Appointing Authority in the Chairman and not on the CEO.

This is in striking contrast to the decision of the ESI Corporation which, in the year 1959, resolved to vest the powers of the Appointing Authority in the CEO and not the Chairman.

So, the Director General of the ESI Corporation has alone been empowered by the Corporation to exercise the powers of transfer and postings of the officers in the Corporation (except the Financial Commissioner), by virtue of his being the Appointing Authority as per Reg. 4 of the ESIC (S&CS) Regs. 1959. Thus, as long as the Reg. 4 remains in the present form, it is only the Director General who can do the transfers and postings of the officers and staff of the Corporation.

If the Reg. 4 is sought to be amended, such amendment must be in consonance with Sec. 94 (A) of the ESI Act, 1948 which gives the option to the Corporation to direct any officer or authority to perform the functions of the Corporation. But, such officer or authority must be the one who is subordinate to the Corporation. The Chairman of the Corporation cannot be called as a subordinate to the Corporation whereas the Director General is a subordinate, as could be seen from the duties cast upon him, especially through Rule 16 (1) (vi) of the ESI (Central) Rules, 1950.

A cursory reading of Sec. 5 E of the EPF&MA Act, 1952 in the context would make it very clear that the Sec. 94 (A) of the ESI Act, 1948 is in sharp contrast to the provisions of the former which enables the Central Board ‘to delegate’ any or all its powers to the Chairman of the Board while the latter enables the Corporation ‘to direct’ only its subordinate officers or authority to carry out such functions.

So, as long as the Sec. 94 (A) remains in its present form, the Corporation cannot vest the power of the Appointing Authority on anyone who is not its subordinate and the Chairman of the Corporation can never be classified as its subordinate.

The apparent differences between the earlier ESI Act of the year 1948 and the later EPF&MP Act of the year 1952 would clearly prove that the Parliament of India wanted to make the ESI Corporation an autonomous one while it did not want to confer such status on the EPFO.

The ESI Corporation has not been given authority by the ESI Act, 1948 to delegate its powers and more particularly the executive powers to the Chairman of the ESI Corporation. So, the resolution, if any, passed by the ESI Corporation on 13.2.2004 empowering its Chairman to transfer the officers of the Corporation would only be ultra vires.

Moreover, the Director General of the ESI Corporation is the Head of Department as per Reg. 8 (5) (vi) of the ESIC (Staff & Conditions of Service) Regulations, 1959. So, as per the Appendix – 3 to the F.R Part I read with F.R 6 and F.R 15, he, and he alone, does have the power, the full power, to transfer all the employees, i.e., officers and staff members of the ESI Corporation.

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Filed under Amendments 2010, Transfers

July 26, 2013 · 9:22 am

ESIC: A review in Heavens – Episode III

Mr. Adharkar, Mr. Beveridge, Mr. Dengill, Mr. Murray and Mr. Wagner are sitting under a tree. An innocent person who was a factory employee and  a beneficiary under the ESI Scheme arrives at the spot and talks to Mr. Adharkar. “Sir, I was an insured person in India when I was living on earth. I want my posterity to get similar or even better benefits from the ESIC. But, I find that you were all somewhat apprehensive about various things. May I just be present here?”

“Dear brother, you are most welcome. We would, of course, be delighted to hear your inputs too. Please be seated”. Adharkar then continues to explain to him. “I can summarise the problem this way. Suppose, there is a small village in which there are around 100 families. That village does not have proper approach road to the Main road, which is four kilometers away and in which buses ply. A proposal to lay the approach road of four kilometers is cleared by the government and the outlay is Rs. 2 crores. Now, a team of officials arrives at the village to lay the road. The team is headed by an Executive Engineer. When the road is being laid, it is being supervised by an honest Junior Engineer who is brimming with enthusiasm and devotion. He joined the team of this Executive Engineer just six months back, on his request for the present station, and was working earlier in a far away station for more than ten years.

He notices, at the initial stage itself, that the contractor was laying the road with a thickness of only 4.5 inches instead of 9 inches as per the approved plan. He objects to this kind of work. But, the contractor simply ignores him. The plan of the contractor was to eat away a neat 50% of the allocated amount. When the bill for the first stretch of the road is presented, the Junior Engineer refuses to clear the Bill of the contractor, as the work had not been performed as per rules. The contractor has some understanding with the Executive Engineer and complains to him against the Junior Engineer. The Executive Engineer summoned the Junior Engineer and advised him to clear the bills of the contractor. But, the Junior Engineer said that the contractor had not done his work as per rules. His explanation enrages the Executive Engineer. He, immediately, transfers the Junior Engineer to a far away station, relieves him all of a sudden and does not give any time to him even to represent against the transfer. He did not even inform the Chief Engineer about his orders. It is the Chief Engineer who is the competent authority to transfer the Junior Engineer and not the Executive Engineer.”

“Oh, My God! What happened to the road, then?”

“The road was laid fully, as desired by the contractor. He got the entire amount cleared. But, please tell me, who was affected in the entire process?”

“The honest Junior Engineer and the people of the village. The Junior Engineer who had already been working in a far away station and came to the present station on his request is punished again because of the malafide motive of the Executive Engineer. But, the villagers are the most affected as they have been provided with a link road of 50% deficiency and would suffer when the road vanishes after a rain or two.”

“Okay, you have understood the problem in correct perspective. What should the villagers do now?”

“They must organize a protest against the substandard road.”

“Of course, they should! But, what caused the substandard road to come into existence, in the first place?”

The insured person thinks for a while. He says, “Yeah! The road would not have come into existence this way, if the objection raised by the Junior Engineer at the initial stage itself had been taken cognizance of. But, the Executive Engineer had, instead of hearing the Junior Engineer, transferred him to a far away station, even when he had no power to transfer him beyond the area of his jurisdiction. This transfer had been effected, in spite of the fact that the Junior Engineer has completed only six months of service in the present station.”

“Okay, you have analysed the issue well. Now, where does the problem originate?”, said Mr. Adharkar.

“The problem arises because of the absence of proper Transfer Policy of officials in the department. If there had been some assurance to the officials about their tenure in a transferred station, they can settle their personal problems accordingly. They can also plan their future. When there is uncertainty on transfers, the officials think that their life depends upon the whims and fancies of the higher officials. They, therefore, would try to please the higher officials instead of doing the work assigned to them as per rules. Their loyalty will not be towards their duty but to their higher officials.” said the Insured Person.

“Yes. In the present case also, if the said Junior Engineer had acted as per the desires of the Executive Engineer, he would not have faced the transfer to a far-away station again. But, he was honest by his choice. The system as evolved by the corrupt officers of this department, did not permit honest people to survive. Now, what would you suggest?”, asked Prof. Adharkar.

“If I were aware of these intricacies and if I were one of those villagers, I would organize an effective protest against the absence of proper Transfer Policy in the department”, said the Insured Person.

“Hurrah! Well done!”, said Mr. Wagner, patting on the back of the Insured Person. “You have correctly understood the problem. The Administrative Procedure of every government organization affects the public directly. Because, the defects in the Administrative Procedure affect the delivery mechanism. It is, therefore, essential for the people of the nation to feel really concerned about the internal administrative procedure of every department. They must agitate, if there is no proper policy or defective policy. In this case, the Executive Engineer who had no authority had exceeded his authority to transfer the honest Junior Engineer. There was no system, in place, even to represent against such transfers. These defects work against public interest”.

“Yes, that precisely is the problem now with the ESI Corporation in India”, said Mr. Adharkar. “Mr. Sahib Singh Verma, who was the Minister for Labour in the early 2000s was trying very hard to take over the power of transfer of officers in the ESIC and the EPFO. The ESIC resisted a lot. Mr. Sis Ram Ola who succeeded him wanted to follow only him in the matter of transfer of officers in the ESIC. The Labour Ministers, who are politicians, should not be given the powers of transfers of the officers of the ESIC. They do not want to follow any system in the matter of transfers. They want to wield arbitrary powers in the matter of transfers. These Ministers demonstrate irrepressible desire to acquire the power of transfer of officers. They issue unlawful directions to the ESI authorities in the matter of transfers. They believe that the people would not bother themselves about such unscrupulous activities indulged in by them.”

“Mr. Sis Ram Ola is interfering in and preventing proper administration of the ESI Corporation. It is time someone filed a Public Interest Litigation to prevent the role of the politicians in the matter of transfer of officers of the ESIC. When Mr. Sahib Singh Verma was recklessly interfering in the appointment of officers in the EPFO, the Officers Association passed resolution against him. Such things did not happen in the ESIC as the office-bearers of the ESIC Officers Federation were also not interested in evolving proper system. They were concerned only about themselves and not about the system. Fortunately, after Mr. Rao came into power, proper transfer policy was evolved. But, things were back to the same chaotic era, after 2007. Now, when the Administration took steps to bring the system back on rails, Mr. Sis Ram Ola is playing the villainy. He wants to wield powers, which are not vested in him. He does not bother about the areas in which he should, rightly, concentrate and for which powers are vested in him. For example, he can examine how the Parliamentary Committee of Labour was hoodwinked when it asked right questions about the need for undergraduate medical colleges. But, he does not do that. The ESIC has to be salvaged now, by overcoming the urge of Mr. Sis Ram Ola also to interfere in the matter of transfer of officers. Very sorry state of affairs that the nation has to face this kind of politicians. The only way out is to make them answerable to the public”, said Mr. Adharkar.

“Haiti was once a famous island nation, famous for its prosperity. It prospered, because the institutions of that nation were doing the work assigned. But, there came some politicians to wreck the institutions. Now the country is in ruins.”, said Mr. Murray.

“I do not understand”, said the Insured Person.

“You see, when a person who was robbed goes to the police station, he believes that the police would hear him and help him. If it happens that way, the institution commands respect of the public and helps the nation to progress. If the policemen there support the robber instead, the public loses confidence in the police station and try to take law into its own hands or suffer in silence. There will, then, be more robbery and conflicts. The nation cannot progress. It is the case with every organization. When unscrupulous officials or politicians try to unsettle the system and acquire arbitrary power to favour or harm the subordinate officials, the entire institution collapses. The institution will not serve the public then but only the person who has acquired such arbitrary power. The ESIC is now facing problems from the Minister. As the activities of this over-ambitious Minister conflict with public interest, the public must take action to resist his attempts, effectively.

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July 13, 2013 · 7:36 am

ESIC: A review in Heavens ! – Episode II

It so happened that we had a chance, recently, to visit the Heavens, and come back too. What we saw and heard there were found to be worth sharing. Hence this attempt. 

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What Mr. Wagner asked raised the curiosity of everyone. They requested him to explain the facts without putting questions.

Mr. Wagner continued, “There was one Mr. Charles Ponzi. He collected money from a lot of people promising that he would pay them very high returns. Attracted by his promises, people poured in money. ‘He promised investors outrageous returns of 50 percent in 45 days, or 100 percent in 90 days. Ponzi paid these investors using money from other investors, rather than with actual profit….He bought a mansion in Lexington, Massachusetts, with air conditioning and a heated swimming pool. He reportedly made $250,000 a day.”

“How could he pay so much?” asked Mr. Beveridge.

“Yes. He paid money to the investors from the deposits made by the subsequent investors. He could not invest the deposits properly in any venture to make profits. He did not pay the investors from dividends that he got any source.”

“How long could he go on like that?”

“His reasoning was that as long as the inflow is more than the outflow, there was no problem for him. That was the reason he could continue with the scheme for so long. He could run the scheme only for two years. When The Boston Post started investigating and bringing out the facts, the scared depositors stopped paying further. Naturally, it caused the bubble to burst.”

“A lone man had brought sufferings to millions.” concluded Mr. Dingell. There was sullen silence there for some time.

Mr. Murray broke the ice. “But, the United States Social Security Administration has not learnt any lesson. These administrators also want to run the Social Security Scheme just like that of Ponzi scheme although they labour so much to portray that they are not managing it like the Ponzi scheme”.

“Yes. They say, ‘As long as the amount of money coming in the front end of the pipe maintains a rough balance with the money paid out, the system can continue forever. There is no unsustainable progression during the mechanism of pay-as-you-go pension system and so it is not a pyramid or Ponzi scheme’. But, this very concept is Ponzi Scheme only.”

Mr. Adharkar intervened. “But, we did not conceive of the ESI Scheme in India that way. We wanted the scheme to be the backbone of the nation’s economy. Our concept was making the scheme largely self-sustaining and stronger in the long run.”

(Economic Times: 05.02.2003: Please click on it for bigger image)

(Economic Times: 05.02.2003: Please click on it for bigger image)

Mr. Beveridge nodded in assent. He said, “Yes. Indians managed the ESIC funds very well. If they had continued with that trend, the scheme would have become self-sustaining in the long run. For example, their surplus of about Rs. 16000 crores would have earned them, on proper investment @ 10% interest per annum, a sum of Rs. 1600 crores. That was equivalent to the revenue generated in Maharashtra and Tamilnadu combined together. Or it was equivalent to the revenues generated in many other states. Once you have the economic strength to run the scheme with your own funds, you are stronger economically and provide better security net for the posterity forever.”

“But, what is the problem now? They can continue that way.” said Mr. Dingell.

“No. Things are different now. The surplus funds have been frittered away in the name of establishing medical colleges and constructing buildings for them.”

“How is the scheme being run, then?”

“By increasing the wage limit of the employees coverable under the Scheme. That appears to be the only way, once all the Medical Colleges start functioning. You know, these medical colleges do not collect donations like the private medical colleges. There is no income through them, but only expenditure. And, the expenditure is very huge. If you compare the revenue generated in a region with the expenditure required for the medical colleges in those regions only, you will be alarmed to think of the consequences.”, said Mr. Adharkar.

“But, can the Indians increase the wage limit everytime they find the money available is inadequate?”, said Mr.Wagner.

“Yeah. That’s what makes Mr. Adharkar sad”, said Mr. Beveridge.

There was a wry smile in the face of Mr. Adarkar. “That is not the only thing that makes me sad” , he said.

“What else?”, demanded Mr. Beveridge.

“The brazen interference of politicians in the transfers and postings of the officers in Group A and Group B level in the ESI Corporation. That is wrecking the system. The Labour Ministers do not want to stabilise the system so that it works for public welfare. They want to play godfathers to one or the 0ther officer and force the Director General to yield. In the process, the officers who are the beneficiaries of such favours from the Ministers demonstrate their loyalty to the Minister and not to the organisation. The pr0blem was there earlier in respect of one or two stray cases, earlier. But, it was Mr. Sahib Singh Verma who wanted to institutionalise his interference in the matters of transfers and postings of senior officers. It was resisted fiercefully. Yet, he could have his way in some cases. Fortunately, because his political party lost the elections he could not meddle with the ESIC and EPFO anymore. But, his successor Mr. Sis Ram Ola also followed the footsteps of only Mr. Sahib SinghVerma. It was only Mr. K. C. Rao who put an end to it in the year 2005. He put the organization, again, on the right path. But, many Indian politicians could not resist the temptation of demonstrating that they are mightier. They believe in the present and, therefore, care for their show of strength only. They do not care for establishing corruption-free system in the institutions.  India, therefore, goes the Haiti way. That makes me sad”, said Mr. Adharkar.

“Oh, My!, I am tired of hearing all these things. I need a break, yaar!”, said Mr. Murray.

“Okay, let us make a move, then! We assemble here next week and discuss about the Haitian examples and warnings, the importance of transfer policy of officers, the consequences of the interferences by the Labour Ministers in the transfers and postings of officers in the ESIC and the EPFO and the necessity for the public to know the facts as all these administrative matters affect only the public and the nation, at last.”

“I agree. The Social Security System of every nation is too big to be left only to the Labour Ministers to be run by them as they please. The public must know why these Ministers have such irresistible temptation to play with the transfers and postings of the senior officers in the ESIC and the EPFO. A trip down the history is essential. Mr. Adharkar has, rightly, drawn the Haitian example. Let us discuss it next week”, concurred Mr. Beveridge.

(Continued in Episode-III)

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Readers who would like to know more of the Ponzi Scheme and the Social Security Scheme in the USA may please click on the following links please for some facts. The opinions expressed therein are subjects of discussion, if not subjects of controversy:
http://mises.org/daily/5658
http://www.youtube.com/watch?v=oh-NqdmEDq4

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July 5, 2013 · 2:31 am

ESIC: A review in Heavens! – Episode 1

It so happened that we had a chance, recently, to visit the Heavens,  and come back too. What we saw and heard there were found to be worth-sharing. Hence this attempt. 

When we were wandering ‘lonely as a cloud’ in the Heaven, we came across a person sitting under a tree in a pensive mood for a long time. How could there be a man so sad when he was in Heaven? We went nearer to see who he was. What a pleasant surprise! The unpleasant person was Prof. B.P. Adharkar, the Father of Social Security in India. We were just watching him, without his being aware of our presence. All of a sudden, there was a flash in his eyes when he looked in a particular direction. We could then see  the reason for his lit up eyes. He got up and cheerfully welcomed the person who came near him and shook hands. He was Sir William Beveridge.

“Good Morning, Mr. Beveridge! How are you? Happy to see you here.”

“Good Morning, Mr. Adharkar! I wanted to meet you for a long time. I could make it only today. I saw you sitting as if you were lost in thoughts. What is on in your mind?  May I know that?”

“Oh, sure! I was just thinking about the way the Social Security system is functioning at present in India. How marvellous the scheme was, when you prepared the blue print for it!”

“It is okay! All of us had done our bit for the society. But what made you to be lost so much  in your thoughts today?”

“A lot, A LOT!. I do not know how to describe or where to start from. But, the only positive thing is that the present CEO of the ESI Corporation really wants to bring the organisation back on rails. But, there are many vested interests working against that objective. I do not know what the future holds for the ESIC. It is the backbone of the nation’s economy. But, people do not seem to realise its importance.Things had gone awry for quite some time. The after-effects are felt, still. The organisation must recover from those effects.”

“Oh, no! What do you say? It was you who were instrumental in preparing the ESI Act. It was prepared on the basis of the report given by you on 15.08.1944. Was there anything wrong in your report?”

“I do not know! I just prepared the report as per the standards of the 1940s. I did not know that things would move this way.”

“Can you please elaborate?”

“That is what I said. I do not know where to start. There are so many things that we have to discuss. I am just flabbergasted at the way things had gone astray for some time that it has become a Herculean task for the present day Administrators to clean the Augean Stable.”

“Mr. Adharkar, you are just increasing my anxiety and worry with all these statements. You please start from somewhere, anywhere. We are not writing a book here to narrate things in an orderly fashion. Do share what comes to your mind, and whatever you feel like saying. We can revisit the same issue again and again during our discussion, and there is no statutory bar of any kind to it.”

“Yeah, that’s true! Mr. Beveridge. Let me tell you about the Standing Committee and the ESI Corporation. I conceived of them as autonomous bodies consisting of people who would exhibit real and sincere interest in the welfare of the working population. I thought these bodies would function like brain-storming centres and decisions would be taken after no-holds-barred discussion. But, contrary became the reality. Discussions were managed. You can see the article “Executive Powers of the Chairman, Standing Committee” published in the website ‘flourishingesic.info’ in this regard.  Except a very few, the other members are not evincing keen interest and involvement in the state of affairs. Take for example, the officers who are on these Bodies as members representing their respective State Governments. Do they take part in any discussion on important matters? Do they, at least, want to get things clarified, when information that affects the System, is made available to them? No!”

“But, why? After all, they are there in these Elected Bodies as representatives of their State Governments. If there is nothing to represent for their States, why should they speak?”

“No, the meetings of these Bodies are not like the meetings of Chief Ministers for allocation of funds, where they need not bother themselves about anyone except their own States and where they do not really know much about the area of the others. These members in the Standing Committee and the ESI Corporation have voting rights. The resolutions passed by these Bodies are shown to have been passed with their approval too. Their silence gives room to declare that every resolution was passed with majority support. Nobody has barred them from voicing their opinion as members of the Standing Committee or ESIC  on any issue placed before them on the Agenda. Yet, they maintain silence, presuming that it was courtesy. But, it is really indifference. Likewise, many representatives of  employers and employees too do not bestow adequate attention to details. The Bureaucrats Vs. Political leaders episodes of the serial ‘Yes, Minister’ are re-enacted on many occasions.”

“I am simply surprised. How does it happen?”

“I am also puzzled. But, they do happen. Please take the issue of I.T. Roll-out. Every department that wants to computerise its activities starts it only as a pilot project in a small area. That way the trials and errors would not affect the routine of the organisation even for  a single day. Take for example, the Railways.  Did they stop any train even for a single day, to computerise their activities? But, in the ESIC the inspection work and the work in many other areas came to a standstill for long, even for the preparation and supply of Identity Card. Did anyone assess the cost-benefit ratio of this kind of approach, as this work was done simultaneously throughout the nation. So many wrong orders were issued affecting not only the office work but also the insured persons and their family members for the photo sessions. Yet,these ID cards have not become fully functional. These cards must prevent duplication, in the ideal situation. But, that ideal situation has not yet come, in spite of the passage of more than four years. The finger prints and the other bio-metric data are not used for de-duplication process. Employers and Employees have found various methods to circumvent the System. The mounds and mounds of ID cards returned undelivered speak volumes of the flaw in the planning. If only there had been pilot project, the damage would have been limited only to a small area. You know, I have, so far, told you only about the ID card matter. I have not told you anything about the defect in the System in preparing Payment Dockets in the Branch Offices or processing the Inspection Report in the Insurance Branches, or others.”

“Mr. Adharkar, you, surely, have reason to feel worried. But, it does not matter much, I think. After all, you can dump the I.T. Roll-Out and go back to the time-tested manner in which your Scheme was functioning earlier with pen and paper. Take heart! Not much has been lost.”

“I agree with you Mr. Beveridge. The Airforce of the USA provides a precedent in this regard. I saw one article titled ‘BOOTS or COTS’ in this regard in the website ‘flourishingesic.info’.’ But, the white elephants, the ESIC Medical Colleges worry me so much. The way the construction work was started even before the Parliament amended the Act, the way Deans were appointed, the way money was spent, the way some projects were abandoned midway, the way the authorities have been left to wonder now, how to make use of the buildings constructed for the abandoned Medical Colleges are really making me apprehensive.”

Mr. Adharkar continued. “While formulating the ESI Scheme, I had, very consciously, specified eleven Fundamental Principles. They are, in fact, sound directive principles to be kept in view by the Government not only for any social security measure to be introduced through the ESI Scheme but also on any labour-welfare related matter. One of the Fundamental Principles is that the proposed scheme “must not be too ambitious in the beginning”. But, this fundamental thing has not been examined on record before starting I.T.Roll-Out all over the nation or before starting construction work for so many medical colleges.”

“I do understand. …(Looking off into the distance)  Oh, you see there comes the trio, Mr. Wagner, Mr.Murray and Mr.Dingell, the architects of the Social Security Scheme in the USA. Let us hear them too.”

These three gentlemen arrive on the scene. They join the discussion after exchange of courtesies.

“It is not just these things”, continues Mr. Adharkar, “The way the Ministers wanted to interfere in the day-to-day administration of the autonomous body by influencing the transfers of officers is more worrisome. The evil effects of such interferences had been felt in the past and had been narrated in detail in the agenda for the Standing Committee in the year 2004. It was only Mr. Chandrasekar Rao who allowed the Rule of Law to prevail in the matter of transfer of officers. His period as Chairman of the ESI Corporation was short. But, it had a telling effect in establishing Rule of Law in the matters of transfer of officers. He said in the open meeting of the ESI Corporation that there would be no interference from the Minister or Ministry in the matter of transfer of officers and the Director General would, as the Team Leader, be free to decide the issues. The Transfer Policy assuring equality for all, was enforced thenceforth. But, as I said, his tenure was short. Again interference in the matter of transfers started. There became so many power-centres de facto. Such interference by the Ministers and other power-centres would sink the organisation and we can discuss about it in detail later”.

“Yes, yes. What you told, so far, appears to be only an introduction of various things that had taken place. The burden on the shoulders of the well-meaning administrators of the present  to put things again in proper shape and perspective is just enormous.    But, I feel not only worried but also tired just by hearing these things. Anyway, what about the financial aspects, especially with so many medical colleges? There would be heavy running costs without any income from these medical colleges. Was that issue analysed on file before the proposals were submitted? What would be the long term effect?”, said Mr. Beveridge.

At this moment, Mr. Wagner chipped in. “Friends, have you heard of a scheme in the USA started by one Mr. P….?”

(Continued in Episode 2.)

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June 7, 2013 · 9:41 am

Germany – From ‘Sick man’ to ‘Strongman’ through Social Security

DSC00125For more:

http://timesofindia.indiatimes.com/home/opinion/interviews/Ursula-von-der-Leyen-Social-security-and-skilled-workers-helped-German-economy/articleshow/20464910.cms?

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May 23, 2013 · 11:32 pm

Apprentices and the ESIC Revenue Manual.

The concept of Apprenticeship and the need for the Government to give encouragement to that concept can be seen from the Statement of Objects and Reasons of the Apprentices Act, 1961.

Coverage of Apprentices is not permitted under the ESI Act, 1948. For this purpose, the coverage of persons called as Apprentices required deeper examination. Industrial Employment (Standing Orders) Act, 1946 and the Industrial Disputes Act, 1947 refer to Apprentices. After the enactment of the Apprentices Act, 1961, also the ESI Act did not specifically refer to Apprentices. .But, that situation led to ambiguous interpretations and large-scale misuse. The Inspectors were to examine whether there was real training system in the factory, class room, etc., The employers argued that the learners, trainees were also excluded as they were apprentices too. The judgment of the Hon’ble Supreme Court in ESIC vs. Tata Engineering Co and others on October 8, 1975 would throw light on various issues pertaining to the Apprenticeship and the coverage of apprentices under the ESI Act.

“The Apprentices Act, 1850, defines an apprentice as a person who is undergoing apprenticeship training in a designated trade in pursuance of a contract of apprenticeship. Whenever the legislature intends to include an apprentice in the definition of a worker it has expressly done so, for instance, while defining a worker under s. 2 of the Industrial Disputes Act, 1947. The very next year while passing the Employees State Insurance Act, 1948, the Legislature did not choose to include apprentice while defining the word employee. Such a deliberate omission on the part of the Legislature can be only attributed to the well known concept of apprenticeship which the Legislature assumed and took note of for the purpose of the Act.”, said the Hon’ble Supreme Court of India. (http://www.indiankanoon.org/doc/1405877/)

The problems were being encountered in numerous cases at the time of inspections and hearing under Sec. 45. So, the ESI Amendment Act, 1989 addressed the issue and made it specific to exclude only the Apprentices who were covered by the Apprentices Act, 1961 and the Apprentices as per the Standing Orders of the factory (Industrial Establishment).

The ESIC authorities had, however, to examine deeply various aspects pertaining to the Standing Orders and the way in which the Certifying Authority exercised his power to approve those Standing Orders. The Amendment Act, 2010 has put an end to all these problems. Now, only the persons who are Apprentices as per the Apprentices Act, 1961 are excluded from coverage.

But, the ESIC Revenue Manual says something different. The details in this regard are given below for the benefit of readers. They are welcome to offer their views.

Apprentices Act, 1961:

Sec.18: “Apprentices are trainees and not workers –
Save as otherwise provided in the Act, –
(a) every apprentice undergoing apprenticeship training in a designated trade in an establishment shall be a trainee and not a worker; and
(b) the provisions of any law with respect to labour shall not apply to or in relation to such employee.”

Position in the ESIC from 1989:

Sec. 2 (9) of the ESI Act, 1948 says that “employee means …… any person engaged as an apprentice, not being an apprentice engaged under the Apprentices Act, 1961 (52 of 1961), or under the standing orders of the establishment”.

Accordingly, all those appointed as Apprentices under the Standing Orders approved by the competent Certifying Authority as per Sec. 4 of the Industrial Establishment (Standing Orders) Act, 1946 were excluded. But, it was not that simple. The ESIC would see whether the Certifying Authority had really ensured that the Standing Orders were in accordance with the Model Standing Orders. There were cases where the period of training as per the approved Standing Orders was much more than what was permitted as per the Model Standing Orders, both for skilled and unskilled persons. In that event, the ESIC would seek confirmation from the Certifying Authority how he certified and whether he had, indeed, certified those Standing Orders which were produced before the ESIC authorities. In many cases, the Certifying Authorities chose to keep mum, as they had certified those standing orders in violation of the provisions of the Act concerned. In such cases, the ESIC would not accept those employees as Apprentices. The Certifying Authority cannot approve any Standing Order for any factory or establishment, if those Standing Orders are in deviation of the Model Standing Orders.

There were also cases where large number of employees were shown as Apprentices as per the Standing Orders and payment of ESI Contribution avoided. But, in regard to Tamilnadu Region, disproportionate number of employees in any cadre were not permitted to be shown as Apprentices. Contribution was claimed in respect of all persons exceeding 5% in every cadre as ruled by the Hon’ble High Court of Chennai in the Pallavan Transport Corporation Vs. Appellate Authority in the year 1979 . This case was with reference to the provisions of the Industrial Establishment (Standing Orders) Act, 1946. The decision is available in the Book of K.D. Srivastava on the said Act published by the Eastern Book Company.

(1979) 2 LLJ 262

(1979) 2 LLJ 262
Click on the image to have a larger view

Position in the ESIC from 01.06.2010:

Sec. 2 (9) of the ESI Act, 1948 says that “employee means ….any person engaged as an apprentice, not being an apprentice engaged under the Apprentices Act, 1961 (52 of 1961), and includes such person engaged as apprentice whose training period is extended to any length of time.”

The amendment of 2010 did away with the need to examine the contents of the Standing Orders. All those who are called as Apprentices by the employer are now coverable under the ESI Act, 1948 except only those who fall within the purview of the Apprentices Act, 1961.

What does the ESIC Revenue Manual say?

But, Para L.2.12 in Page 23 of the Revenue Manual published by the ESI Corporation in the year 2011 says as under:

“Exceptions: The following categories need not be counted for the purpose of coverage of the factory or for their own coverage.
…. c) An apprentice engaged under the Apprentice Act, 1961 excluding the Apprentice whose training period is extended to any length of time.”

This is again reiterated against Item 1 under the category “Exclusions” in Page 78 under the Para L.6.4 which reads as follows:

“Exclusions are:
(1) An Apprentice engaged under the Apprentice Act 1961. Consequent to the Amendment to the Act in 2010, only the Apprentices covered under Apprentice Act 1961 are not coverable as employees under the Act. Apprentices engaged under Apprentice Act whose training period is extended to any length of time and all other trainees working under the Standing Orders of the companies are coverable as employees.”

  1. Does it imply that the ESIC says that the Apprentices engaged under the Apprentices Act, 1961 are coverable, if their training period extends to any length of time?
  2. Does this not run contrary to what is, correctly, mentioned against Item 6 in Para L.2. 11 in Page 22?
  3. Is not Item (c)  under Para L.2.12 , then, in violation of Sec 18 (a) and (b) of the Apprentices Act, 1961?
  4. Can the ESI Act, 1948 supersede the Apprentice Act, 1961 on the core issue of the status of an Apprentice, when there is no specific provision in the ESI Act for such supersession?
  5. Is it not reasonable on the part of the employers to expect clarification from the ESIC authorities with reference to the aforesaid interpretations and discrepancies in the Revenue Manual?

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May 16, 2013 · 12:39 pm

Respect people below you on the ladder!

The management principle recommended by Mr. Gordon M.Bethune, former Chief Executive of the Continental Airlines is to hear the subordinates. For, they know more about the work, they know more about the weak-spots.

He says, “I was a mechanic in the Navy. And mechanics in the Navy are like mechanics in airlines. You may have more stripes than I do, but you don’t know how to fix the airplane. You want me to fix it? You know how much faster I could fix the airplane when I wanted to, than when I didn’t want to? So I’ve always felt that if you treat me with respect, I’ll do more for you.”…”And we never lied. You don’t lie to your own doctor. You don’t lie to your own attorney, and you don’t lie to your employees.”

It is because the authorities did not hear the subordinates for long in the I.T. Roll Out work, the mechanisation process is full of complications. When the subordinates asked genuine questions, they were insulted or ignored or frightened.

The same is the reason for so many flaws in the Revenue Manual and the Recovery Manual.

The text of the interview by Mr. Godon M. Bethune is posted here for the benefit of the readers.

Respoect people below you

Please click on the image to have a larger view

For more, they may visit:

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May 9, 2013 · 11:48 am

Sec. 45 AA and the Questions of Mr.Hiren Chheda!

Mr. Hiren Chhedha has raised the following questions with reference to Sec. 45 AA of the ESI Act, 1948. He is awaiting reply to these questions under the Right to Information Act, 2005. As many of the issues raised by him are relevant to all the employers, his write-up is hosted here as a separate Post for the benefit of all. (Upadate on 12 05.2013: Mr. Hiren Chheda has forwarded the reply received by him from the Regional Office, Mumbai. That is also uploaded here in this thread for the benefit of the readers).

Now, the text of what Mr. Hiren Chheda has written:

1. If an appeal u/s 45-AA is submitted after 60 days from the issuance of the Order u/s 45-A whether the Appellate Authority is empowered to entertain the same? a. If the answer to the above query is affirmative please provide me the copy of the instructions issued. b. If yes is the reply to the above query, is it mandatory to file an application for condoning the delay? ====================================================

2. In case, if the deposit of 25% of the assessed amount u/s 45-A of the ESI Act is deposited along with appeal u/s 45-AA after 60 days from the issuance of the Order u/s 45-A than the Appellate Authority has power for forfeiture of the amount deposited while issuing the order u/s 45-AA where in impugned order was set aside? If the reply is yes, kindly provide me the copy of the provisions or instructions in this regard. a. Whether RO Mumbai has intimated to HQ of any such forfeiture of the amount deposited by the employer u/s 45-AA. I enclosed (Annexure A 1 ) herewith the copy of the Order u/s 45-AA dated 13.02.2012 where in the impugned order u/s 45-A was set aside but the deposit was forfeited by the Appellate Authority of RO Mumbai. b. I would like to know where the forfeited amount does is booked by the RO Mumbai and under which account head it is reflected in the annual financial statement of the ESIC. Please provide me the duly certified copy of the same. c. Please provide me the copy of the certified provisions of the ESI Act where in such power is delegated to the Appellate Authority for forfeiture of amount deposited by employer under the trust incorporated under the section 45-AA of the Act. d. If no power is delegated under the ESI Act to the Appellate Authority for forfeiture of amount deposited by employer, does the issuance of order referred at supra dated 13.02.2012 amounts to mental harassment to the employer and does it amounts misconduct under service rules or not? What steps have been taken by the corporation to alleviate these fears of the Employers? e. Please provide me the certified copy from Office the Financial Commissioner stating under which rules & provisions the noble ESIC department can hold the said amount. If the said deposit with interest is returnable to the Employer than who will bear the cost of the interest for the default on the part of the Officer? Please inform me the correct rules in this regard. f. If above act on the part of the Senior Officer of the noble ESI Corporation is against the norms & provisions under the ESI Act, whether remedies are available for the employer to register his grievances against such high handiness of the said officer. Please provide me the procedure as well as the name and address of the authority with whom the grievance should be registered for redressal. Is the officer guilty of violating rules and hence guilty of misconduct under conduct rules? Please give a copy of their conduct rule, which they have violated by violating the above mentioned rule. g. The said authority of RO Mumbai has caused serious mental agony/injury by making the employer to run helter-skelter around all the way. Is said officer is guilty of causing mental harassment to the Employer/public or not? h. What actions can be taken initiated against the officer for violating the rules and for causing mental agony to the Employer/public? Is any time-frame fixed by the Department for initiating action against such Officer? Please state in crystal clear terms. =================================================

3. I enclose (Annexure A 2 ) herewith the order passed u/s 45-A & 45-AA by the officer of the RO Mumbai in respect of the Establishment whose code number is 31001010500001001/Pin-07 along with a letter addressed to the IC dated 24.04.2012 and request you to provide me the following information. i. Whether the Appellate Authority u/s 45-AA has the power to enhance the period sue-motto for which the order u/s 45-A was issued? ii. Whether the Appellate Authority u/s 45-AA can revert back to the date of coverage of the establishment when said issue was not covered under the Order u/s 45-A of the Act or rose by the Appellant in his appeal? iii. Are there any instructions issued by the Head Office to claim the ESI contributions on labour charges RECEIVED by the employer? If so please provide me the copy of such instructions. iv. What is the present status of the employer letter dated 24.04.12 (copy enclosed) at the Office of the IC and RO Mumbai, please inform. v. Can the Appellate Authority u/s 45-AA enhance the amount of contributions determined under the Order u/s 45-A without issuing fresh notice or revising the Notice to the Employer to submit his pleadings on the issues rose? vi. Whether the actions of the RO Mumbai are justified in recovering the amount by following coercive and harsh measures from Woman employer without replying to the humble submissions made by her? vii. Is it not mandatory on the part of the Officer concerned to reply to the grievance of the employer at least on recovery of money, to pay attention and redress the grievance by way of reply quoting the rule book? =================================================

4.        As per the instruction of the ESIC Head Office on the issue of the outside labour charges specific directions are issued to the inspecting authorities to bring out in their reports details of their observations which could establish supervision on those jobs or otherwise and then only to claim contributions. However, some of the inspecting authorities do not adhere to the said directions. Are these officials guilty of violating these rules and hence guilty of misconduct under their conduct rules. Please provide me a copy of their conduct rule, which they have violated by violating the above mentioned rule. What actions can be taken against concerned officers for not adhering the instructions of the Head Office? ================================================

5. Is there any circular issued by the ESIC Head Office to claim the contributions on outside labour charges even though the inspecting authority failed to discharge its duty in accordance with the instructions of the ESI HQ. If yes, than please provide me the copy of the same. ================================================

6. Do the authorised officer u/s 45-A has the power to cancel his own order passed u/s 45-A without prior approval of the higher officers? If so under what circumstances? Please state and explain the circumstances. If such provision exists kindly provide me the copy of the instruction. In case no such provision exists cancelling the order issued u/s 45-A without jurisdiction will amount to misconduct in accordance to service rules or not? ===============================================

7. As per the instruction of the Head Office the burden to prove the supervision in case of outside labour charges is on the inspecting officer. Can this burden be shifted to employer under proceeding u/s 45-A of the Act? If yes, please provide the circular instructions on the issue making responsible the employer to prove that no supervision by him in case of outside labour charges. ===============================================

8. Is it correct on the part of the Authorised Officer to determine the contributions on the total amount paid to other establishment which is duly covered under the ESI Act for getting job work done from its premises? If the answer is no, than is it not misconduct on the part of the authorized officer. [In case you require more details in this regard you may please refer to file of RO Mumbai bearing code number 31000090450000108 Pin-25] ===============================================

9. What is the reasonable time limit to issue order under Section 45-A of the ESI Act 1948 from the date of conclusion of the final hearing u/s 45-A? Please specify the time limit prescribed by the department. In case no order is passed within the stipulated time schedule what actions are initiated by the department who violated the time schedule? In case no such instructions are existing prescribing time limit for issuance of order on completion of hearing/inquiry, can the authorized officer pass the order after lapse of 6 months from the date of last hearing? ==============================================

10. Under which circumstances or parameters a Corrigendum to an order passed under section 45-A can be issued? ===============================================

11. Does is it require to call for hearing before issuance of the Corrigendum to the order issued? Whether officer who has not issued the order can issue the Corrigendum? Is it necessary to record the reasons for issuance of the Corrigendum in the corrigendum order? ===============================================

12. Under which provision of the ESI Act, Corrigendum to order u/s 85-B can be issued? Kindly provide the extract of same and also ESIC HQ directions on the issue. ===============================================

13. Are there any instructions issued by HQ office OR any provisions under the ESI Act to issue the Order u/s 45-A of the Act on mere presumptions of the authorized officer? If yes, please provide me the copy of such instructions. If the answer is ‘no’, whether the actions of the Authorized Officer shall be treated as misconduct for harassing the employer? ================================================

14. Does the Recovery Officer has the power to issue the Order u/s 45-A while discharging duty as Recovery Officer but not holding any charge of the insurance branch? If the answer is yes, than please provide me the copy of the Notification or delegation of powers. ===============================================

15. Is it a right or not that an employer to get a copy of the inspection report based on which the show cause notice u/s 45-A was issued? Whether the Authorized Officer can reject the request made by the employer to provide the copy of the inspection report during the proceedings under section 45-A? Please state the rule position. ==============================================

16. What are the remedies available with the employer, if the Authorized Officer does not provide the copy of the report of SSO relied in issuance of the Notice (C-18)? Please furnish the details thereof. ===============================================

17. After issuance of the Order u/s 45-A of the Act, can another Order u/s 45-A for the same period is permitted? If reply is no to the above query, whether any instructions were issued on the issue, and if so please provide me the copy of the same. ===============================================

18. Please provide me the certified copy of full set of the Special Leave to Appeal (Civil) No(s).4746/2006 filed in the Hon Supreme Court of India in case of ESIC V/s WESTERN INDIA PLYWOOD LTD along with final order dated 24.03.2006. ===============================================

19. Does ESIC have filed any Appeal to the Apex Court after losing at the Hon High Court of Bombay in case of ESIC v/s Hotel Suresh (FA 2284 of 2005) and H. Fillunger and Co. Pvt. Ltd vs. ESIC? If not filed than is it correct that it amount to acceptances of the question of law declared by the Hon High Court by the ESIC? ================================================

20. Can the authorized officer pass an order under section under 45-A for an amount higher than the amount proposed in the notice (C-18) without revising the show cause Notice or calling for objections from the employer?=========

Mr. Hiren Chheda has received the reply from the Regional Office, Mumbai with reference to his application under the RTI Act, 2005. The reply in Pdf. format is posted here. Readers may please click on the following link to download the pdf. file and read the contents. RTI reply to Mr. Hiren Chheda from the Regional Office, Mumbai The same file in pdf format has been converted into png. format and displayed here.

While many issues raised by Mr. Chheda pertain to the errors and omissions on the part of individual officers, the questions of law raised by him have been replied to in various other posts. Wherever there is deficiency in the Amendment of 2010, the same had been taken to the knowledge of the authorities also, as could be seen from the relevant posts, although the authorities at New Delhi have not exhibited any involvement, to set matters right.

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