Holding

In proceedings under Section 75 of the Employees' State Insurance Act, workers (or their representatives) must be impleaded; failure to do so violates natural justice, rendering the earlier orders void.

Summary

The Employees' State Insurance Corporation (ESIC) issued a notice under Section 45‑A of the Employees' State Insurance Act, 1948, requiring the Bhakra Beas Management Board to make employer contributions for its workers. The Board challenged the notice before the ESIC Court, but neither the workers nor any representative were made parties to the petition under Section 75. The ESIC Court ordered the Board to pay, and the High Court later set aside that order, holding that the Board’s sub‑stations were not factories and thus not liable. On appeal, the Supreme Court held that labour statutes are for the benefit of workers and that, under the principles of natural justice, the workers (or their union) must be impleaded in any proceeding under Section 75. The Court set aside both the ESIC Court and High Court orders and remanded the matter to the ESIC Court to be decided after impleading the workers or their representative, directing an expeditious decision. The appeal was allowed.

Issues considered

Whether workers or their representatives must be impleaded as parties in proceedings under Section 75 of the Employees' State Insurance Act.
Whether the failure to give workers a hearing violates the principles of natural justice.
Whether the High Court erred in holding that the Board was not liable to make ESIC contributions.

Legislation cited

Employees' State Insurance Act, 1948s. 45-A, s. 46, s. 75, s. 82

Subjects

Employees' State InsuranceNatural JusticeEmployer ContributionSection 75Labour LawProcedural FairnessImplementation of ESIC Act

Judgment

[2009] 14 (ADDL.) S.C.R. 656

A
..
EMPLOYEES STATE INSURANCE CORPORATION
v.
BHAKRA BEAS MANAGEMENT BOARD & ANR.
(Civil Appeal No. 8335 of 2004)
B
SEPTEMBER 17, 2009

[MARKANDEY KATJU AND ASOK KUMAR
GANGULY, JJ.]
-+-
c Employees' State Insurance Act, 1948

ss. 45-A and 75 - Employers contribution towards
• Employees' State insurance - Notice to employer -
Challenged before Employees' State Insurance Court -
D Employees or their representative not made party - Held:
Principles of natural justice have been violated - Judgment +
and order of High Court as well as that of the Employees'
•, I
State Insurance Court are set aside and matter remitted to
Employees' State Insurance Court for deciding the same after
E impleading the workers of the Board or their Union in a
representative capacity - Since, the case pertains to the year·
1987, the Employees' State Insurance Courl would decide the;
+
same expeditiously - Patty - Natural justice.
..1~0~t
>
Fertilizer & Chemicals Travancore Ltd. vs. Regional
F Director, ESIC & Ors. 2009 (11) SCALE 766, relied on
I ~ J l_ •

Case Law Reference: •· r- '

1 2009(11) SCALE 766 relied on Para 6 ·. -''i r. . .
G CIVIL AP PELLATE JURISDICTION : Civil Appeal No. )lqic• ·
8335 of 2004.
~·
From the Judgment & Order dated 14.11.2002 of the High
Court of Delhi at New Delhi in F.A.O. No. 291 of 1987.
•
4 H 656
~MPLOYEES
. STATE INSURANCE
. CORPORATION v. 657
BHAKRA SEAS MANAGEMENT BOARD & ANR.

-;
~ WITH A

Civil Appeal No.8336 of 2004.

V.J. Francis and Anupam Mishra for the Appellant.

Om Prakash Mishra and Ghan Shyam Vasisht for the B
Respondents.

The following Order of the Court was delivered

ORDER
c
CIVIL APPEAL NO. 8335 OF 2004

Heard learned counsel for the parties.

This appe~I has been filed against the judgm~nt and order
+ dated 14.11.2002 of the High Court of Delhi at New Delhi D
whereby the appeal filed by the respondent No. 1 herein has
.,,. been allowed anc~ it has been declared that the respondent No.
1 Board is not liable to make any contribution towards the
Employees State Insurance in respect of the impugned
demand. E

-44 The facts in detail have been given in the impugned
-.1 judgment and hence we need not repeat the same herein.

It appears that the appellant had issued a notice under
Section 45-A of the Employees State Insurance Act, 1948
F
(hereinafter for short 'the Act') for making employer's
contribution towards the employees state insurance. The
respondent No.1 Board challenged that notice before the
Employees State Insurance Court, Delhi. It appears that neither
.,. the workers concerned of the respondent No. 1 Board nor any G
-~ one of them in representative capacity were made parties in
the petition under Section 75 of the Act before the Employees
State lnsurance Court or before the High Court.
The Employees State Insurance Court decided in favour H
658 SUPREME COURT REPORTS (2009] 14 (ADDL.) S.C.R.

A of the appellant and against the respondent No. 1 Board and
directed the respondent No. 1 to pay its contribution towards ""'
the employees insurance. Against the said order of the
Employees State Insurance Court, the respondent No. 1-Board
filed an appeal under Section 82 of the Act before the High
B Court and the High Court has allowed the said appeal holding
that the sub-stations of the respondent No. 1 Board are not
factories within the meaning of the Act. Hence this appeal by
special leave.

This Court has recently held in the case of Fertilizer &
...
c Chemicals Tranvancore Ltd. vs. Regional Director, ESIC &
· Ors. 2009 (11 )SCALE 766 as under :
"5. It may be noted that in its petition before the Employees
Insurance Court, the appellant herein only impleaded the
·' 0 Employees State Insurance Corporation and the District
Collectors of Alleppey, Palaghat and Cannanore as the +
respondents but did not implead even a single workman
as a respondent.
....
6. Labour statutes are meant for the benefit of the
E
workmen. Hence, ordinarily in all cases under labour
statutes the workmen, or at least some of them in a
representative capacity, or the trade-union representing the ...
concerned workmen must be made a party. Hence, in our y.
opinion the appellant {petitioner before the Employees
F . Insurance Court) should have impleaded atleast some of
the persons concerned, as respondents.
7. The case of the appellant was that, in fact, none of the
concerned persons was its employee and it was difficult
G to identify them.

8. In this connection we may refer to Section 75(1)(a) of ~- •
the Act which states that if any question or dispute arises
as to whether any person is an employee of the employer
concerned, or whether the employer is liable to p~y·the
H
EMPLOYEES STATE INSURANCE CORPORATION v. 659
BHAKRA BEAS MANAGEMENT BOARD & ANR.

employer's contribution towards the said persons' A
insurance, that is a matter that has to be decided by the
Employees Insurance Court. Hence, in our opinion, the
concerned person has to be heard before a determination
is made against him that he is not an employee of the
employer concerned. B

9. The rules of natural justice require that if any adverse
order is made against any party, he/she must be heard.
+ Thus if a determination is given by the Employe~s
Insurance Court that the concerned persons are not the C
employees of the petitioner, and that determination is
given even without hearing the concerned persons, it will
be clearly against the rules of natural justice.

10. It may be seen that Section 75 of the Act does not
mention who will be the parties before the Insurance Court. D
Since the determination by the Insurance Court is a quasi-
judicial determination, natural justice requires that any party
which may be adversely affected or may suffer civil
consequences by such determination, must be heard
before passing any order by the authority/court. E

11. In our opinion, wherever any petition is filed by an
employer under Section 75 of the Act, the employer has
not only to implead the ESIC but has also to implead
atleast some of the workers concerned (in a
representative capacity if there are a large number of F
workers) or the trade-union representing the said workers.
If that is not done, and a decision is given in favour of the
employer, the same will be in violation of the rules of natural
justice. After all, the real concerned parties in labour
matters are the employer and the workers. The ESI G
Corporation will not be in any way affected if the demand
notice sent by it under Section 45A/45B is quashed.

12. It must be remembered that the Act has been enacted
for the benefit of the workers to gi\':.. 'hem medical benefits, H
660 SUPREME COURT REPORTS [2009] 14 (ADDL.) S.C.R.

A which have been mentioned in Section 46 of the Act.
HE:mce the principal beneficiary of the Act is the workmen
and not the ESI Corporation. The ESI Corporation i~ pnly
·the agency to implement and carry out the object of the Act
and it has nothing to lose if the decision of the Employee!li
B Insurance Court is given in favour of the employer. It is only
the workmen who have to lose if a decision is given in
favour of the employer. Hence, the workmen (or at least
some of them in a representative capacity, or their trade
union) have to be necessarily made a party/parties
c because the Act is a labour l~gislation made for the benefit
of the workmen.

13. In the present case the workmen concerned were not
made parties before the Employees Insurance Court, nor
was notice issued to them by the said Court."
D
Neither the workers of the respondent No. 1 nor any one
of them in representative capacity were impleaded either
before the Employees St~te Insurance Court or before the High
Court. In our opinion, this is .in violation of the principles of
E natural justice. Hence, we allow this appeal, set aside the
, impugned judgment and order of the High Court as well as that
· of the Employees State Insurance Court and remand the matter
to the Employees State Insurance Court for deciding the same
after impleading the workers of the respondent No. 1 Board or
F their union in a representative capacity. Since, the case
pertains to the year 1987,,we request the Employees State
. Insurance. Court to decide the same expeditiously.
Appeal allowed. No order as to the costs.

G Civil Appeal No. 8336/2004

For the reasons stated in order passed in Civil Appeal No.
8335/2004, this appeal is also allowed and the impugned
judgment of the High Court as also of the Employees Insurance
H Court are set aside and the matter remanded to the Employees
EMPLOYEES STATE INSURANCE CORPORATION v. 661
BHAKRA BEAS MANAGEMENT BOARD & ANR.

State Insurance Court for deciding a fresh after impleading the .A
workers of the Respondent No. 1 or their union in a
representative capacity. Since, the case pertains to the year
1987, we request the Employees State Insurance Court to
decide the same expeditiously.
8
Appeal allowed. No order as to the costs. ,

R.P. Appeal allowed.