By observing that the word “including” stated in the notification in the instant case is used as a word of enlargement, so as to make the territorial application of the ESI Act extensive. The notification is certainly not confined to “only the area under the Silchar Municipal Board '', but includes various areas mentioned therein, in addition to the areas under the Silchar Municipal Board, the Court set aside the impugned judgmnets and allowed the appeal.

A Division Bench of Justice K.M. Joseph and Justice Hrishikesh Roy by observing that non- joinder of the necessary parties makes the proceeding as non- maintainable, allowed the present appeal instituted against the judgment of the Gauhati High Court whereby the High Court allowed the appeal of the respondent and set aside the order passed by the Employees Insurance Court in favor of the appellants. 

The present appeal was preferred against the judgment and order dated December 1, 2016 whereby the Gauhati High Court allowed the appeal of the respondent and set aside the order dated April 28, 2006 passed in the favor of the appellants by the Employees Insurance Court. In the impugned judgment it was held that the village Tarapur, where the factory of the respondent was located, falls outside the municipal limits of Silchar and therefore was not covered under the notification dated July 21, 1999 issued by the appellants under sub-Section (3) of Section 1 of the Employees’ State Insurance Act, 1948. 

The subject matter to be decided before the present Court was whether the High Court was correct in construing the notification dated July 21, 1999 by holding that the notification only covers within the Silchar Municipal Board, however the notification additionally did mention names of other areas/ villages including the Village of Tarapur, where the respondent’s factory is located. 

Facts in brief were that on July 21, 1999, notification was issued under subsection (3) of Section 1 of the ESI Act, notifying August 1, 1999 as the date on which certain provisions of the ESI Act shall come into operation in certain areas in the State of Assam.

The respondent was apprised of the same and of the fact that the provisions of EST would now be applicable to all the factories situated within the notified areas including the factory area of the respondent. However, the respondent failed to take necessary steps for registration under the ESI Act and to pay the requisite contribution for the employees in their establishment, a show cause notice was issued to the respondent to remit contribution for the months of April to September, 2000, on ad hoc basis. 

In pursuance of the same, the respondent approached the Employees Insurance Court to assail the show cause notice. However, the ESI ruled that the factory of the respondent, located in Tarapur was under the coverage of the ESI Act. In view of the same an appeal was preferred against the order under Section 82 of the ESI Act before the High Court. 

The High Court through its impugned judgement observed that the establishment of the was not covered under the notification dated July 21, 1999 and the RFA was accordingly allowed by setting aside the judgment dated April 28, 2006 of the E.I. Court.  Hence, the present appeal. 

This Court re-identified the location of the respondent’s factory to resolve the subject matter in hand. It then took into account the notification dated July 21, 1999 issued by the Central Government wherein the names of the additional/ villages were explicitly stated, including the village of Tarapur. In view of the same, the Court noted that it was not difficult to comprehend the territorial implication of notification in question. 

It was further observed that the notification issued under Section 1 (3) of the ESI Act was a statutory notification and the same shall be treated as a part of the statute, both for the purpose of construction and also for the obligations arising there from, as if, they are contained in the Act. In addition to this, the Court observed that principles of interpretation of subordinate legislation are applicable for interpretation of such statutory notification. If the words used are unambiguous, the cardinal principle of interpretation in that effect has to be given to every word in the subject notification.

The Court further referred to the case of Ramanlal Bhailal Patel and Ors. vs. State of Gujarat wherein the interpretation of word “includes'' was made as the same was also present in the present notification.  The observation made in the aforesaid was that where the definition is an inclusive definition, the use of the word “includes” indicates an intention to enlarge the meaning of the word used in the statute. Consequently, the word must be construed as comprehending not only such things which they signify according to their natural import, but also those things which the interpretation clause declares that they shall include. 

Reverting back to the impugned judgment of the High Court, the Court observed that the High Court restrained the application of the statutory notification to the limits of the Silchar Municipal Corporation, which would imply that all the other areas mentioned beyond “including” would be taken out of the purview of the ESI Act.  This could not be the intention of the Union Government, the Court noted. 

It placed reliance on the case of Delhi Gymkhana Club Limited vs. Employees’ State Insurance Corporation wherein it was observed that the object of the ESI Act is to provide benefits to the employees and also to make provisions for certain other matters in relation thereto. As the ESI Act is a beneficial piece of social welfare legislation aimed at securing the well-being of the employees, a restrictive interpretation which will have the effect of defeating the objects of the beneficial legislation, should be eschewed by the Court.

The Court further noted that the respondent in the instant case, while assailing the show cause notice in the EI Court failed to impleade the factory’s employee either individually or in  representative capacity. In addition to this the Court noted that even the Union of India was not impleaded as the party. 

Thus, in pursuance of the same, the Court observed that non- joinder of the necessary parties makes the proceeding at the instance of the respondent as non- maintainable.  With respect to the same, reliance was placed to the case of Khetrabasi Biswal vs. Ajaya Kumar Baral and Ors wherein it was observed that the procedural law as well as the substantive law both mandates that in the absence of a necessary party, the order passed is a nullity and does not have a binding effect.

Further on the contention of the respondent that since penal consequences are provided under the ESI Act, strict interpretation of the notification on the applicability of the Act to the respondent’s establishment, must be made, the Court with regard to the same observed that name of the village Tarapur was mentioned twice in the notification and thus strained interpretation was not at all necessary to bring the establishment of the respondent. 

At last, the Court observed that the word “including” in the notification, is used as a word of enlargement, so as to make the territorial application of the ESI Act extensive. The notification is certainly not confined to “only the area under the Silchar Municipal Board”, but includes various areas mentioned therein, in addition to the areas under the Silchar Municipal Board.

Hence, the impugned judgments were set aside and the appeal was allowed. 

Case name: THE EMPLOYEES STATE INSURANCE CORPORATION & ORS. Vs. M/S KEY DEE COLD STORAGE PVT. LTD.

Picture Source :