Lark Laboratories(India) Ltd. vs Govt. Of Nct Of Delhi Through Its ...
2006 Latest Caselaw 1201 Del

JUDGMENT

Shiv Narayan Dhingra, J.

1. The petitioner has filed this writ petition challenging the order passed by Government of NCT, Delhi dated 6th September, 2004 whereby the request of the petitioner for granting exemption under Section 88 of the ESI Act in respect of 'traveling medical sales representatives' employed in the petitioner company was declined.

2. The facts necessary to dispose of this writ petition follow. The petitioner is a company engaged in manufacturing, sale and marketing of pharmaceutical formulations. The petitioner applied for grant of exemption under Section 88 of ESI Act in respect of medical representatives/employees who used to remain away from head office for a period of seven months in a year. The application for grant of exemption for such employees was being made regularly by the petitioner from 1981 onwards. The applications made with effect from 1.4.81 to 31.3.88 were allowed and the respondent No. 1 vide notification No. 281/87/IMP/LC dated 2.6.88 granted exemption to such employees for which exemption was sought. By another notification of 31.1.1996, exemption was granted from the period 1.4.88 to 31.3.95. The petitioner in the same fashion applied for further exemption from 1.4.95 onwards and by impugned order dated 6.7.04, the request for exemption from 1.4.95 onwards was declined. The letter declining the exemption reads as under:

  No. F. 25(05)/JLC(ESI)/Lab./03/2092                                        Dt.6.7.04
 

To
 

The Director, 

Lark Laboratories(India) Ltd., 

Lark House, A-105/2,  

Okhla Industrial Area,  

Phase-II,  

New Delhi
 

Sub: Grant of exemption Under Section 88 of the ESI Act,1948 for  Touring Sales Representatives.
 

Sir,
 

I am desired to inform you that while considering your application dated 17.7.2003, addressed to the Labour Commissioner, seeking exemption Under Section 88 of the ESI Act, 1948, in respect of Traveling Medical Sales Representatives of your company from April, 1995 to March, 2003, was forwarded to the Regional Director, Employees State Insurance Corporation, Rajendra Bhawan, Rajendra Place, New Delhi for is comments and recommendations in the matter.

The office of the Regional Director, Employees State Insurance Corporation, (Delhi Region) Rajendra Place, New Delhi, has conveyed that the conditions for allowing exemption Under Section 88 of the ESI act are not fulfillled by the employer/employees for whom the exemption has been sought for and therefore, the case does not deserve for consideration for granting exemption under the Act. Vide its letter dated 24.2.2004. A photocopy of the letter is enclosed, which is self-explanatory.

In view of the above, it is not possible to grant exemption Under Section 88 of the ESI Act, in respect of the Traveling Medical Representatives of the company as requested in your application. You are, therefore, requested to comply with the provisions of ESI Act and obtain Insurance Numbers of the employees from the Employees State Insurance Corporation so as to make them eligible for the benefits of the ESI Scheme.

                                                                   Yours faithfully,
Encl: As above                                                      (J.C. Negi)
                                                           Joint Labour Commissioner
 

3. The ground for seeking exemption by the petitioner in respect of traveling employees was based on a notification No. P.13.11.1.82 INS. I dated 31.3.83. In this notification, the Government laid down the guidelines for grant of exemption. The notification reads as under:
  

EMPLOYEES'STATE INSURANCE CORPORATION 'ESIC' BUILDING: KOTLA ROAD:NEW DLEHI
 P.13/11/1/82 Ins.I                                               Dated:31st March,83
 

Subject: Principles to be followed in recommending exemptions from the scope of the ESI Act, 1948 under Section 87 and 88
 

1. The Principles governing the grant of exemptions under Section 87 and 88 of the Employees State Insurance Act, 1948 have been under consideration in consultation with the Ministry of Labour and Rehabilitation. It has now been decided that all requests for exemptions and for renewal already granted, in future may be processed keeping in view the following guidelines:

2. The factories/establishments and class of employees, as the case may be, may be considered eligible for grant and renewal of exemption under Section 87 and 88 if the following conditions are satisfied:

(1) The employer has his own arrangement at least for outdoor medical care.

(2) In case the employer is not having his own arrangement for specialist and indoor treatment, he should have arrangements with any Govt./Semi Govt./private/or other hospital or Nursing Home where the employees and their family members got specialist consultation/hospitalization without having to pay for the same.

(3) The exemption or renewal of exemption may not be recommended where there is no medical arrangement or the employer, and the employees are entitled only to the reimbursement of medical expenses.

(4) Medical treatment under the Scheme of employer should be available to the workers as well as their family members irrespective of the fact whether the employees are permanent, temporary or casual worker.

(5) The employer should have the provision for supply of artificial limbs, aids, and appliances including dialysis, kidney transplant etc.

(6) The cash benefits/leave salary provided by the employer to the employees in case of sickness, maternity and employment injury should be substantially similar or superior to those applicable under the ESI Act.

However, for the purpose of comparison of sickness benefit, we may not insist on the provision of sick leave etc. 91 days duration. We may consider provision for grant of leave considering earned leave comparable to 56 days sickness benefit as Half-Day as was the position prior to 1.3.77 for the purpose of comparison of this benefit of earned leave available to the employees may also be taken into account.

3. The exemption under Section 88 may be recommended to the employees or a class of employees who are in receipt of benefits substantially similar or superior to those available under the ESI Act, as detailed in para 2 above at items No. 1 to 6. The category of employees referred to here is in/addition to the categories of employees which are already eligible for exemption under Section 88, such as the employers who remain away from their head office for more than 7 months during the year or who are posted in non implemented area etc.

4. As regards exemption under Section 90 of the Act to the factories/establishments belonging to the Government or a local authority, the same shall continue to be dealt with under the provision of this section which lays down that exemption under this Section can be considered if the employers of such factory or establishment are in receipt of benefits substantially similar or superior to the benefits provided under the ESI Act.

Receipt of this may please be acknowledged.

(Hindi version will follow)

SD/-

(L.R. WADHWANI)

DY.INSURANCE COMMISSIONER

FOR INSURANCE COMMISSIONER

Regional Director,

Delhi

4. The petitioner has been seeking exemption every year by forwarding an application and in the application petitioner used to enclose list of medical representatives and used to state that these medical representatives are those who used to remain away from head office for more than 7 months in a year and, therefore, petitioner should be granted exemption in respect of these employees from making ESI contribution. The petitioner in this writ petition has taken the stand that the petitioner had been applying for exemption from April, 1995 onwards regularly and has been waiting for the decision of the Government on the application and therefore it had not deposited ESI contributions in relation to these employees for whom exemption was sought, otherwise the petitioner was covered under ESI Act and had been complying with the provisions of ESI Act and had been depositing contribution for rest of the employees. The petitioner had been writing reminders to the respondent No. 1 for grant of exemption. However, the petitioner was served with an order Under Section 45 of the Act on 29.8.2003 whereby a liability of Rs. 32,42,218/- had been determined against the petitioner pertaining to the period from April, 1995 to March, 2003 towards ESI Contribution of the employees. The decision on the applications of the petitioner for grant of exemption had not been taken by that time, therefore, petitioner requested for taking decision on the applications. The petitioner was declined exemption vide letter dated 6.7.2004 on the ground stated in the letter reproduced after. After receipt of this letter petitioner approached respondent No. 1 requesting for reconsideration of the decision. This request was declined. The petitioner filed a suit before ESI Court Under Section 75 of ESI Act challenging the legality of letter dated 6.7.2004 by which exemption was declined. The prayer for challenging the letter was withdrawn considering that ESI court was not competent to decide the same. The petitioner sought stay of the demand raised by the ESI, the court of ESI Judge directed the petitioner to deposit 50% of the demand vide order dated 13.7.2003. Against this order, petitioner approached this Court by way of an appeal. The appeal was dismissed. The suit filed by the petitioner before the designated court of Employees Insurance Court of Daya Prakash was dismissed on 4th September, 2004 holding that the prayer made by the petitioner of challenging the legality of order and consequential relief was beyond the scope of ESI court. Petitioner thereafter filed this writ petition.

5. The contention of the petitioner is that the petitioner had been granted exemption from 1981-1995 from the application of the Act in respect of the medical representatives who used to remain away from head office for the period of more than seven months in a year. There was no reason for the respondent to refuse such exemption for subsequent period from 1995 onwards. The applications for exemption were being made year after year but the respondent took a long period of 7 years to decide the application of exemption for the period from April, 1995 onwards. The various employees working during the period had already left the company and there was no occasion for deposit of their contribution. It is stated that the declining of request of exemption was contrary to the guidelines laid down by ESI in its memorandum dated 31.3.83. The case of the petitioner was covered by guidelines and the petitioner was entitled for the benefit of exemption. The rejection of the exemption was ultravires to the provisions of Sales Promotion Employees and Conditions of Services Act, 1976. It is stated that the provision of ESI Act was not applicable to the class of sales promotion employees as there was no mention of the said Act in 1986 of the Sales Promotion Employees Act. It is stated that Section 53 of Workmen's Compensation Act provides that a workman who claims compensation under this Act was barred from claiming compensation under ESI Act. It is submitted that since the Workmen's Compensation act was applicable to the employees who were in sales promotion, ESI Act was not applicable. It is further submitted that the reasons given in the letter that the traveling sales representatives were working in the implemented areas was absolutely baseless as the staff members working in implemented areas were already covered under ESI Act. The counsel for the petitioner prayed that the petition should be allowed and the petitioner should be granted exemption Under Section 88 of the Act and the order refusing exemption should be quashed by the court.

6. In the counter affidavit, it is submitted that the application of the petitioner for granting exemption was rejected because the petitioner did not comply with the mandatory provisions of the Act. After March, 1995 when there was no exemption, the establishment of the petitioner was inspected on 21.7.1995. The petitioner failed to deposit ESI Contribution despite those being no exemption under Section 40 of the ESI Act. Respondent made ad hoc assessment were made and an opportunity was given to the petitioner to appear before the respondent No. 2 on 3.7.2003 vide an order dated 9.6.03. None appeared for the petitioner and an order was passed under Section 45A of ESI Act on 29.8.2003. The petitioner did not pay ESI contribution even when demand was made to the petitioner on the ground that the applications of the petitioner were pending before the appropriate authority for exemption under Section 88 of the Act. The recovery certificate dated 28.6.2004 for ESI contribution amount along with interest was issued by the respondent on 28.6.04.

7. On merits it is further submitted that sales representatives of the petitioner company frequently visited the head office in Delhi. The sales representatives being mobile were at a higher risk as compared to those employees who work in the office and necessity of insurance coverage was more for these employees as they remain most of the time mobile and on road. It is submitted that exemption was not a matter of right of the petitioner. The petitioner could be granted exemption only if the petitioner fulfillled the necessary conditions. Merely because earlier the petitioner was granted exemption, the exemption for the subsequent period did not become a matter of right. No assurance or impression was given to the petitioner at any point of time that he would be exempted with retrospective effect. The ESI Medical Manual specifically provides for the medical representatives who are posted inside the implemented areas and it is provided that they can avail benefit of ESI Scheme by availing facilities through their regional transfer of employees. It is submitted that the petitioner had not stated that it was providing any medical facilities or any other medical benefits as available to the employees under ESI Act to its medical representatives. In absence of providing any medical facilities and any other facilities as available under ESI, no exemption could be granted. Section 11A of the Sales Promotion Employees Conditions of Services Act (the Act) specifically provides that where an employee is entitled to benefit in respect of any matter which are more favorable to him than to which he would be entitled under the Act, the Sales Promotion Employees shall continue to be entitled to those more favorable benefits in respect of that matter notwithstanding that he is entitled to receive benefits in respect of other matters under this Act. By virtue of Section 11A of the Act Sales Promotion Employees were covered by ESI Act.

8. It is further submitted that ESI Act provides certain benefits to employees in case of sickness, maternity, employment injuries etc and make provisions of certain other matters in relation thereto. This is a social security Act and no employee can be deprived of the benefits of this Act. Exemption from ESI Act is available only if the benefits of the Scheme at the establishments of the employee is more advantageous to the employees.

9. During the arguments, the entire emphasis of the counsel for the petitioner was that the petitioner had been availing exemption from 1981 to 1995 in respect of those employees who remain away from the head office for more than 7 months in a year and on the same terms, this exemption should have been granted for subsequent years. He placed reliance on the guideline No. 3 which has been reproduced above.

10. A perusal of this guideline would show that exemption under Section 88 can be recommended to that class of employees who are in receipt of benefits substantially similar or superior to those available under ESI Act. This exemption is in addition to the categories of the employees to which exemption was already available under Section 88 of the Act, such as employees who remained away from head office for more than seven months in a year. The guidelines do not say that even if no benefit, much less substantially similar or superior benefits, were being given by the establishment, still establishment can seek exemption only because employees remain away for seven months in a year from head office. I consider that this submission of the petitioner has no force. The entire scheme of the ESI Act would show that exemption can be granted only where the equivalent or better benefits are being given by employer to his employees. Section (1) (4) of the Act provides:

(4) It shall apply, in the first instance, to all factories(including factories belonging to the Government) other than seasonal factories:

[Provided that nothing contained in this sub section shall apply to a factory or establishment belonging to or under the control of the Government whose employees are otherwise in receipt of benefits substantially similar or superior to the benefits provided under this Act.]

11. It is evident from this section that even in case of Government Establishment, exemption has been allowed only where the employees are in receipt of benefits substantially similar or superior to the benefits provided under the Act. There is no provision for exemption from the Act in case of any establishment where no benefits are being given to the employees.

12. The contention of the counsel for the petitioner that in view of the guidelines issued by ESI regarding exemption, ESI should have granted exemption in respect of employees who remained away from head office for more than 7 months in a year of posted in unimplemented areas must fail since this argument is not based on correct appreciation of guide lines.

13. A perusal of guide lines would show that for seeking exemption all conditions laid therein are necessary. It does say that employees -

(i) who remained away from head office for more than 7 months in a year.

(ii) who were posted in non implemented areas.

could be considered for exemption, but this exemption can only be granted if other conditions are fulfillled. It is not provided that these two categories were not entitled to receive benefits from the establishments which are similar to or equivalent or better than the benefits being provided by the ESI. No guideline for exemption can be issued by ESI which is contrary to the provisions of the Act.

14. The scheme of the Act for granting exemption is provided in Sections 88, 89 and 90. While Section 88 is in respect of grant of exemption of any person or class of persons employed in factories, Section 90 is in respect of exemption of establishments/factories belonging to the government or any local authority. ESI Act is a social security legislation and it has to be applied to all without any discrimination, meaning thereby that exemption can be granted only in those cases where the employees of the establishment are already getting equal or better benefits. The availability of benefits for the employees is sine quo nan for grant of exemption. Even in case of Medical Representatives who remain on tour duty exemption can be granted only when benefits being enjoyed by them in establishments concerned are at least similar to those provided under ESI Act and the employees concerned themselve clearly desire that establishment should be exempted from application of the ESI scheme. While considering the exemption under Section 88 which is available in case of a person or class of persons, exemption cannot be granted by the Government without taking into account view/consent of the employees, merely because the establishment has sought exemption in respect of employees. Medical representatives who are normally on touring duty in connection with the working of the establishment are more prone to illness due to changing food facilities, changing weather, changing living conditions. They are prone to accident because they are always on the move and they may be under a risk of business rivalry from other medical representatives as all medical representatives are supposed to meet a monthly target. There is no reason that the medical representatives who remain on touring duty should be denied the benefits of this social legislation merely because they are away on duty for more than seven months in a year.

15. A perusal of the notifications dated 2.6.88 & 31.1.96 by which the petitioner was granted exemption for the periods 1985-88 and 1988-95 would show that this exemption was granted with the presumption that the petitioner was providing benefits to the employees in cash or kind and these benefits would continue to be provided. Paragraph 5(3) of the Notification reads as under:

(iii) Ascertaining whether the employees continue to be entitled to benefits provided by the employer in cash and kind being benefits in consideration of which exemption is being granted under the notification; or

16. It is clear that the earlier exemptions were granted to the petitioner on the presumption that the petitioner shall continue to provide cash and kind benefits to the employees in consideration for which exemption was being granted. However, it seems that the application for exemption of the petitioner were allowed without any inquiry into the fact whether any benefits were being given to employees or not and without an opportunity being given to ESI, in a very mechanical manner. In the application made by the petitioner either before or after 1995, it is nowhere stated by the petitioner that the petitioner was providing medical facilities and other benefits to the employees for whom exemption was sought, or they were getting equal or more benefits in comparison to benefits under ESI Act.

17. I find that unless the petitioner had made such representation, the exemption could not have been granted.

18. One of the most forceful arguments of the petitioner's counsel is that the petitioner had been granted exemption from 1985 to 1995 by the government and the petitioner presumed that the exemption for subsequent period would also continue since the application of the petitioner was for the subsequent period also contained the same ground as given in earlier applications.

19. It is clear that earlier exemptions were granted to petitioner without ensuring that the employee were getting medical benefits & other facilities as envisaged under ESI Act. Court cannot give direction to ESI to commit a wrong because it earlier committed a wrong. There is no such law or rule that if an authority has committed a wrong once, it should be made to commit wrong again. Two wrongs do not make one right. It is clear from the earlier notification that earlier exemption was granted to the petitioner without keeping in mind the provisions of ESI Act, without taking into account the consent of employees and their welfare in a very mechanical and casual manner. It was not necessary for the authority to repeat the mistake again even it has been repeated twice earlier. No court can give directions to an authority to commit wrong again if it has earlier committed wrong.

19. In view of above discussion, I find no force in the writ petition. The writ petition is hereby dismissed. No orders as to cost.