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IN THE HIGH COURT OF ALLAHABAD
Om Prakash and R. N. Ray, JJ.
SWADESHI COTTON MILLS - Appellant
Versus
REGIONAL DIRECTOR, ESIC - Respondents
C. M. W. P. 9925 Of 1982
Decided On : 07/21/1994
EMPLOYEES STATE INSURANCE ACT, 1948 - SECTION 93-A - TRANSFER OF UNDERTAKING - ACQUISITION OF UNDERTAKING BY CENTRAL GOVERNMENT - WHETHER AMOUNTS TO TRANSFER - LIABILITY FOR CONTRIBUTION - SECTION 5 OF THE SWADESHI COTTON MILLS COMPANY LIMITED (ACQUISITION AND TRANSFER OF UNDERTAKINGS) ACT, 1986 - WHETHER PREVAILS OVER SECTION 93-A OF THE EMPLOYEES STATE INSURANCE ACT, 1948.
Fact of the Case:
The Swadeshi Cotton Mills Company Limited and its six textile undertakings were acquired by the Central Government under the Industries (Development and Regulation) Act, 1951. The Swadeshi Cotton Mills Company Limited (Acquisition and Transfer of Undertakings) Act, 1986 was passed, transferring the undertakings to the National Textile Corporation. The Employees State Insurance Corporation (ESIC) issued a demand notice to the National Textile Corporation for contribution on incentive payments made to employees, claiming that such payments were part of wages. The National Textile Corporation challenged the demand notice, arguing that the liability for contributions prior to the appointed day (April 1, 1985) was not enforceable against it under Section 5 of the 1986 Act.
Finding of the Court:
The court held that the acquisition of the undertakings by the Central Government did not amount to a transfer under Section 93-A of the Employees State Insurance Act, 1948, as acquisition is not a voluntary transfer. The court further held that Section 5 of the 1986 Act, which provides that liabilities prior to the appointed day are not enforceable against the Central Government or the National Textile Corporation, prevails over Section 93-A of the 1948 Act to the extent of inconsistency, due to Section 24 of the 1986 Act.
Issues: 1. Whether the acquisition of the undertakings by the Central Government amounted to a transfer under Section 93-A of the Employees State Insurance Act, 1948. 2. Whether Section 5 of the Swadeshi Cotton Mills Company Limited (Acquisition and Transfer of Undertakings) Act, 1986 prevails over Section 93-A of the Employees State Insurance Act, 1948.
Ratio Decidendi: 1. The court interpreted Section 93-A of the Employees State Insurance Act, 1948, holding that the expression "in any other manner" in the provision should be construed in light of the preceding words "sale, gift, lease or licence", and thus does not include acquisition by the Central Government. 2. The court applied the principle of ejusdem genesis to interpret the phrase "in any other manner" in Section 93-A, concluding that it should take its meaning from the preceding words, which all refer to voluntary transfers. 3. The court found that acquisition is a compulsory transfer done in public interest by the Government, and thus cannot be considered a transfer under Section 93-A. 4. The court relied on Section 24 of the Swadeshi Cotton Mills Company Limited (Acquisition and Transfer of Undertakings) Act, 1986, which provides that the provisions of the Act prevail over any inconsistent provisions in other laws, to conclude that Section 5 of the 1986 Act, which exempts the Central Government and the National Textile Corporation from liability for contributions prior to the appointed day, prevails over Section 93-A of the 1948 Act.
Final Decision: The court allowed the petition and quashed the demand notice issued by the ESIC, holding that the National Textile Corporation was not liable to pay the contribution on incentive payments made to employees prior to the appointed day.
( 1 ) SWADESHI Cotton Mills Company Limited and its six textile undertakings, are engaged in the manufacture and production of different varieties of cloth and yarn. The management of the said textile undertakings was taken over by the Central Government under the Notification dated april 13, 1978 under Section 18-AA of the industries (Development and Regulation) Act, 1951. The Swadeshi Cotton Mills Company Limited (Acquisition and Transfer of Undertakings) Act, 1986 came to be passed in 1986 (for short, the Act of 1986 ). Subsection (1) of Section 3 of the act 1986, states that on the appointed day every textile undertaking and the right, title and interest of the Company in relation to every such textile undertaking shall, by virtue of this Act, stand transferred to and shall vest in the Central Government. Subsection (2) of Section 3 declares that every such textile undertaking which stands vested in the Central Government by virtue of Sub-section (1) shall, immediately after it has so vested, stand transferred to, and vested in the National Textile Corporation. By Notification dated April 13/14, 1978 the National Textile corporation Limited, New Delhi-a Government of India undertaking-was appointed authorised person to manage the undertakings for and on behalf of the Central Government.
( 2 ) BY virtue of Sections 38 and 39 of the Employees State Insurance Act, 1948 (briefly, the Act of 1948), which is, admittedly, applicable to the employees of the undertakings, all the employees in the aforesaid undertakings are to be insured and both employer and the employees have to pay contribution to the Employees State Insurance Corporation (for brevity sake "e. S. I. corporation" ). It is averred in paragraph 8 of the writ petition that "the management has framed a scheme that if employees exceed the normal production, they would be paid additional remuneration. However, this amount of extra remuneration is not a regular payment nor is payable to a workman regularly on account of employment but depends on certain conditions to be fulfilled by employees and is called incentive. In paragraphs 10 and 15 of the writ petition, it is averred that incentive does not form part of the wages and, as such no contribution need be paid by the employer on such incentive. It is contended that without giving any opportunity of hearing, the respondent issued impugned demand notice dated June 7, 1982 (Annexure 2 to the writ petition) calling upon the petitioner to pay a sum of Rs. 28941. 90 within fifteen days. The petitioner, namely, the Management of National Textile Corporation Limited, which was appointed as authorised person, then addressed a letter dated July 29, 1982 to the respondent denying the liability to pay contribution on incentive. It is averred that without deciding such objections of the petitioner, the respondent threatened to take coercive measure against the petitioner to recover the amount of impugned demand notice. This is how by this petition the petitioner prayed for quashing the impugned demand notice dated June 7, 1982 (Annexure 2 to the writ petition ).
( 3 ) IN paragraph 8 of the counter-affidavit filed by the respondent it is sated that "extra remuneration given to the employees were also part of the wages, according to the Employees state Insurance Act, and the employer is also liable to pay contribution on that extra remuneration. "
( 4 ) FROM the pleadings of the parties, it appears that they are at variance on the question; whether remuneration paid for extra production is part of wages and whether employer is liable to make contribution on such amount.
( 5 ) HOWEVER, learned counsel for the petitioner urged before us that even if the contention of the respondent that contribution is payable on incentive as well, is assumed to be correct for argument sake, the amount sought to be recovered by the impugned notice (Annexure 2 to the writ petition) is not recoverable from the petitioner as that liability r
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