1990 Supreme(Raj) 585
RAJASTHAN HIGH COURT
Milap Chandra Jain, J.
Anil Textile Industry - Appellant
Versus
Employees’ State Insurance Corporation - Respondent
S.B.C.W.P. No. 441 of 1987.
Decided On : 8-08-1990
The contribution under the Employees' State Insurance Act, 1948 is in the nature of a tax and not a fee. If such contribution is paid for a period when the Act was not applicable, the employer is entitled to a refund of the amounts paid.
Headnote:
EMPLOYEES' STATE INSURANCE ACT - COVERAGE - INDUSTRIAL AREA INCLUDED IN MUNICIPAL LIMITS - CONTRIBUTION - NATURE - REFUND - LIMITATION - ALTERNATIVE REMEDY - EMPLOYEES' STATE INSURANCE ACT, 1948 - SECTIONS 1(3), 2(4), 40(1), 72 - INDIAN CONTRACT ACT, 1872 - SECTION 72 - CONSTITUTION OF INDIA - ARTICLES 265, 366.
Fact of the Case:
Petitioners' factories were situated in the industrial area of Pali. They applied for registration under the Employees' State Insurance Act, 1948 (ESI Act) and paid contributions from 1979 to 1983. In 1986, they realized their mistake and sought a refund of the amounts paid. The ESI Corporation denied the refund, claiming that the Act was applicable to the petitioners' factories and that the employees had received benefits under the Act.
Finding of the Court:
The court held that the ESI Act came into force in the industrial area of Pali only from January 1, 1984, as per the notification issued by the Central Government. The contribution under the Act was in the nature of a tax and not a fee. The petitioners were entitled to a refund of the amounts paid as contribution for the period 1979 to 1983, as the Act was not applicable during that period. The court rejected the arguments of the ESI Corporation that the petitioners had alternative remedies or that their claims were barred by limitation.
Issues: 1. From what date did the ESI Act come into force in the industrial area of Pali? 2. Whether the contribution under the ESI Act is a tax or a fee? 3. Whether the petitioners are entitled to a refund of the amounts paid as contribution for the period 1979 to 1983? 4. Whether the writ petitions should be rejected on the ground of alternative remedy and limitation?
Ratio Decidendi: 1. The court interpreted Section 1(3) of the ESI Act and the relevant notifications issued by the Central Government and the State Government to determine the date from which the Act came into force in the industrial area of Pali. 2. The court analyzed the provisions of the ESI Act, particularly Section 40(1), and the nature of the contribution to conclude that it was a tax and not a fee. 3. The court applied the principles of unjust enrichment and restitution under Section 72 of the Indian Contract Act to hold that the petitioners were entitled to a refund of the amounts paid as contribution for the period when the Act was not applicable. 4. The court held that the questions of alternative remedy and limitation did not arise in cases where public bodies recovered money without authority of law.
Final Decision: The court allowed the writ petitions and directed the ESI Corporation to refund two-thirds of the amounts deposited by the petitioners as ESI contribution for the period ending December 31, 1983, with interest. The court also directed that if an employee of a petitioner requested a refund of the amount deducted from his wages and deposited as his contribution, the same would be refunded with interest.
JUDGMENT
1. - The facts of all these cases and the questions involved in them are similar. On the request of the learned counsel for the parties arguments were simultaneously heard at length at the admission stage for the final disposal of all these cases. As such they are being disposed of by this common order.
2. The petitioners have filed these writ petitions with these allegations. Their factories and establishments are situated in the industrial area, Pali. On the advise of the authorities of the State Insurance Department, Pali and labouring under the mistake of law, they applied for the registration under the Employees' State Insurance Act, 1984 (hereinafter to be called 'the Act') and their factories and establishments were covered by the provisions of the Act with effect from the year 1977. Since then they started paying contribution in respect of their various employees and workmen to the respondent. The details of contribution paid from 1979 to 1983 are given in the charts. By notification No. F.1 (3) LSG /74/ 35476-54 dated June 18, 1975 of the Government of Rajasthan in the department of Local Self Government, the industrial area was included in the limits of Pali Municipality, Pali. By Notification No. SO/118 dated December 24, 1983 of the Government of India, published in Gazette of India part II dated January 14, 1984, Chapters IV, V and VI of the Act were brought into force with effect from January 1, 1984 in the extended municipal limits of Pali wherein the factories and establishments of the petitioners are situated. The mistake was realised in the month of December, 1986 and after consultation with the lawyers, notice requesting for the refund of the amounts paid till December, 1983 were served. The said levy and collection of Employees' State Insurance Contribution as shown in the charts were wholly without jurisdiction, illegal and void. The petitioners are entitled to get back the said amounts with interest.
3. In reply, it is admitted by the Employees' State Insurance Corporation that the factories and establishments of the petitioners were duly registered with effect from the year 1979, they started paying contribution since then and the said notification dated December 24, 1983 was duly issued. The remaining allegations of the petitioners were denied. It has further been averred that the petitioners' factories and establishments are duly covered by the earlier notification of the Central Government No. SRO/2857 dated November 23, 1956, the various employees of the petitioners had already obtained benefits under the Act, the petitioners should have applied to the Corporation for the refund of the amounts before the beginning of the first benefit period, they could have also applied to E.S.I. Court for the redressal of their grievance and could also file suit under Section 72, Indian Contract Act in the Civil Court and the writ petitions deserve to be dismissed on the ground of having alternative remedies.
4. It has been contended by the learned counsel for the petitioners that it is clear from the Notification No. F.1 (3) LSG/74/3546-54 dated June 18, 1975 of the Government of Rajasthan that the Industrial Area, Pali was included within the municipal limits of Pali with effect from June 18, 1975 and by Notification No. SO/118 dated December 24, 1983 of the Government of India, the Act was brought into force in the extended municipal limits of Pali with effect from January 1, 1984 and as such the petitioners were not liable to pay contribution under the Act prior to January 1, 1984. He further contended that the contribution as defined in Section 2 of the Act is in the nature of a tax and not fee and the petitioners are entitled under Section 72, Indian Contract Act, to get back the amounts paid by them as E.S.I. contributions. He relied upon AIR 1980 SC 1037, AIR 1983 SC 603, AIR 1986 SC 1556, 1963 STC 63, 1969 STC 216 and 1988 (2) STL 97 (SC).
5. In reply, it has been contended by the learned counsel for
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