Madras High Court
M/S.Sowbhagya Illam Children'S ... vs The Deputy Director on 22 April, 2021
W.P.(MD)No.17346 of 2015
BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT
RESERVED ON: 27.04.2022
DELIEVERD ON: 14.06.2022
CORAM
THE HONOURABLE MRS.JUSTICE S.SRIMATHY
W.P.(MD)No.17346 of 2015
and
M.P.(MD).Nos.1 & 2 of 2015
M/s.Sowbhagya Illam Children's Home,
Gandhigram Tust,
Gandhigram,
Dindigul District - 624 302,
Represented by its Correspondent
Ms.K.S.Neela ... Petitioner
Vs
1.The Deputy Director,
Employees State Insurance Corporation,
Sub Regional Office (Madurai),
2nd West Street,
K.K.Nagar, Madurai-20.
2.The State of Tamil Nadu,
Represented by its Secretary to Government,
Labour and Employment (L1 Department),
Secretariat, Chennai-9. ... Respondents
(R2 is suo motu impleaded vide Court order, dated 22.04.2021 in W.P(MD)No.
17346 of 2015)
PRAYER: Writ Petition filed under Article 226 of the Constitution of India for
issuance of Writ of Certiorari, calling for the records of the respondent in its
No.57-00-074277-000-0999/INS.I/SRO/MDU/15668/14, dated 25.02.2015 and
quash the same.
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1/13
W.P.(MD)No.17346 of 2015
For Petitioner : Mr.V.Vijay Shankar
For R-1 : Mr.P.Ganapathisamy
For R-2 : Mr.S.Kameswaran
Government Advocate (Civil Side)
*****
ORDER
This writ petition is filed to quash the impugned order, dated 25.02.2015.
2. The brief facts of the case are that the petitioner namely, M/s.Sowbhagya
Illam Children's Home, Gandhigram Trust was started in the year 1948 with the
vision of providing care, protection and empowerment of vulnerable children. It is a
Non-Governmental Organization which aims to provide parental affection and to
ensure that they are restored to normal life by creating a family atmosphere in the
Home.
3. The petitioner purely depends on Government grants and donations from
well-wishers. The destitute home which is under the petitioner institution caters to
destitute children and creche center takes care of children of poor working women in
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W.P.(MD)No.17346 of 2015
rural areas. The Income Tax Department has granted exemption under Section 80G
of the Income Tax Act to the donors, in respect of the contributions made by them.
The founders of Gandhigram Trust with the cardinal principles and objective of
providing help / assistance to the poor and needy children without charging any fees
from the children is running solely through Government aid and donations from the
willing donors. Even the staff engaged by the establishment are service motivated
volunteers and no commercial activities of any sort take place in the establishment.
In such circumstances, suddenly without any advance notice or intimation, the
respondents by proceedings, dated 25.02.2015, brought the petitioner establishment
under the purview of Employees State Insurance Act (herein after referred as 'ESI
Act'). As per Section 1(G) of the ESI Act, initially applies to all factories under
Section 1(5) of the ESI Act, empowers State Governments to notify any
establishment under its area for coverage under the Act provided that adequate
notice is given and approval obtained from the Central Government. Pursuant to the
same, the State Government has invoked the provisions of Section 1(5) of the ESI
Act and extended to the following categories of establishment namely,
a) Shop
b) Establishment
c) Hotel and Restaurants
d) Cinema including pre-view theatres
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W.P.(MD)No.17346 of 2015
e) Road Motor Transport Establishments
f) Newspaper Establishments.
4. The petitioner's home does not fall under any of the above categories. The
ESI Act does not define the term "Establishment". But several orders passed by the
Hon'ble Supreme Court and High Courts have been consistently taking the view that
it is only those "Establishments", where systematic commercial activities take place
irrespective of the fact that whether they earn profit or not which will fall within the
purview of ESI Act for its coverage. The petitioner submitted a representation
dealing the above aspect to the respondents along with the recommendations sent by
the District Children's Welfare Officer, Dindigul, dated 11.02.2015 but the
respondents have not considered. On the other hand, the respondent Corporation had
issued demand notice with penal consequences, left with no other option, the present
Writ Petition is filed.
5. The respondents have filed a counter affidavit, the preliminary objections
stating that efficacious alternative remedy is available to the petitioner in the ESI
Court, Madurai. As per the guidelines issued laid down by the Madras High Court
and recently reiterated the judgment in Boopathy Associates Private Limited Vs.
ESIC and others reported in 2013-III-LLJ-518(Mad), the writ petition can be
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W.P.(MD)No.17346 of 2015
entertained when the impugned order-
(i) is without jurisdiction; or
(ii) the order passed in violation of the principles of natural justice; or
(iii) was passed against Part III of the Constitution of India.
In the present case no such plea was raised by the petitioner. Moreover, when
efficacious alternative remedy is available, the writ petition is not maintainable.
6. The respondents further contended that the ESI is a “Labour Statute” are
meant for the benefit of the workmen. The impugned order is only a show cause
notice proposing to charge contribution of Rs.16,99,734/- for the period from
01.10.2006 to 31.01.2015. There are several judgments, where it has been stated
show cause notice issued under Section 75(2B) of the ESI Act cannot be challenged.
If, any notice ought to be challenged, the petitioner is liable to deposit 50% of the
amount demanded and the present writ petition has been filed to evade the deposit of
50% amount.
7. The Gandhigram Revenue Village in Dindigul District has been brought
under ESI coverage on 01.10.2006. The petitioner unit submitted an application,
dated nil in Form No.01 for coverage under the ESI Act and the same was received
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W.P.(MD)No.17346 of 2015
in the ESI Corporation on 05.11.2014. As the employer has not indicated the date
from which the unit was coverable, the said Form No.01 was sent to the Social
Security Officer on 07.11.2014 for survey and submit a report. Accordingly, the unit
was surveyed by the said Social Security Officer (SSO) on 15.12.2014 and it was
recorded that the unit is engaged in doing service to the needy children. As per the
attendance, salary and other records, the unit attracts coverage under Section 1(5) of
the ESI Act with effect from 01.10.2006 and the contribution is liable to be paid as
soon as the code number intimation was received. The statement of the Secretary of
the petitioner unit namely, K.Shivakumar has also recorded in the said visit and the
Secretary had agreed that "On receipt of code number, contribution will be paid from
January, 2015".
8. The respondents further submitted that another application, dated
15.12.2014 (in Form 01) was submitted by the employer for coverage under the ESI
Act. On the basis of the said findings and the applications submitted by the
employer, the petitioner unit was covered with effect from 01.10.2006. The coverage
intimation, signed on 14.01.2015, was sent to the petitioner unit and the same was
received by the employer on 24.01.2015. There was no compliance from the
petitioner unit even from 01.01.2015. Therefore, a notice, dated 25.02.2015 was
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W.P.(MD)No.17346 of 2015
issued proposing to charge contribution of Rs.16,99,734/- for the period from
01.10.2006 to 31.01.2015. But in response, the petitioner submitted a representation,
dated 28.02.2015 to the ESI Corporation disputing the coverage. In the meantime,
the petitioner unit has also submitted an application, dated 06.04.2015 to the
Government of Tamil Nadu for exempting the unit from coverage, under Section 87
of the ESI Act and no final orders were passed to the notice, dated 25.02.2015. The
said proceedings were initiated based on the application submitted by the petitioner
unit. There was no objection raised for coverage even when the survey was carried
out on 15.12.2014. The term "Establishment" has not been defined under the ESI
Act. However, the same is not akin to 'factory' or 'industry'.
9. In Maharaja School of Arts and Science and others Vs. The State of Tamil
Nadu and others reported in 2011 (3) LLN 694 (Mad) has elaborately examined the
definition clause of ESI Act, wherein it has been stated Section 1(5) of ESI Act is
couched in a language which can include establishments which necessarily need not
have the characteristics as industrial, commercial or agricultural establishments.
They can even include the other types of establishments. Therefore, the petitioner's
establishment includes in the said definition and the respondents have rightly
brought the petitioner's establishment under the purview of the Act and prayed to
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W.P.(MD)No.17346 of 2015
dismiss the writ petition.
10. Heard Mr.V.Vijay Shankar, learned Counsel for the petitioner and
Mr.P.Ganapathisamy learned Counsel for R1 and Mr.S.Kameswaran, learned
Government Advocate (Civil Side) for R2 and perused the records.
11. It is an admitted fact that both the petitioner and the respondents, that the
petitioner's Sowbhagya Illam Children's Home, Gandhigram Trust was a unit
engaged in doing service to the needy children. The petitioner unit is registered
under Section 12 AA maintained in the Income Tax Department. The registration
certificate under Income Tax was also produced wherein under Section 12 AA. The
petitioner unit is serving the needy children.
12. In order to establish philanthropic activities of the petitioner, the petitioner
had produced the recommendation letter, dated 11.02.2015 of the District Children
Welfare Officer wherein it has been stated that has held as follows:
",t;tpU ,f;Foe;ijfs; ,y;yq;fSk;> ,isQh; ePjp (ghJfhg;G
kw;Wk; guhkhpg;Gr;) rl;lk; 2000 kw;Wk; jpUj;jg;gl;l rl;lk; 2006> gphpT
34(3)-d; gb gjpT ngw;W nray;gl;L tUfpd;wd. Foe;ijfs;
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W.P.(MD)No.17346 of 2015
eyf;FOtpd; Mizapd;gb> Mjutw;w Foe;ijfs;> jha; my;yJ
je;ijia ,oe;j Foe;ijfs;> iftplg;gl;l Foe;ijfs;
kw;Wk; ,juh; ,tw;wpy; ghJfhg;G kw;Wk; guhkhpg;G Njitf;fhfj; jq;fp
fy;tp gapd;W tUfpd;wdh; vd;gjidg; gzpe;J njhptpf;fpd;Nwd;";.
13. This recommendation letter clearly indicates the philanthropic activities of
the petitioner unit. It is submitted by the petitioner that 60% grant is from the Central
Government, 30% grant from the Tamil Nadu Government and 10% from the
donations received from the general public. Based on these, the petitioner is taking
care of the needy children.
14. It is seen when the ESI Act was brought into effect within the Dindigul
District, the respondents have directed the petitioner to submit an application
indicating the coverage of ESI Act. Since it is a new Act, the petitioner has submitted
an application in Form No.01. Thereafter only, the petitioner has realized, Form No.
01 is an application showing willingness to invoke all ESI Act to any establishments
after receiving the impugned notice. The petitioner has realized that the unit ought to
be exempted from the coverage of ESI Act. Thereafter, the petitioner has submitted
the elaborate details of the unit, the philanthropic activities of the petitioner and the
donations which grant received by the Governments and the general public.
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W.P.(MD)No.17346 of 2015
15. Therefore this Court is of the considered opinion that the petitioner unit is
Non-Governmental Organization carrying on philanthropic activities and can never
be brought under the purview of the ESI Act. If this Act is invoked, there will be an
additional burden to the unit and the unit will be forced to take extra donation in
order to meet out the ESI contribution. Then the basis of philanthropic activities will
be demolished with severe repercussion. Even according to the petitioner and the
respondent, the word 'establishment' is not stated in the Act. The petitioner has relied
on the definition in Section 2(12) of the ESI Act under the definition of factory. On
perusal of the Government Notification by the State Government issued under
Section 1(5) of the ESI Act, indicates that the following places are covered:
a) Shop
b) Establishment
c) Hotel and Restaurants
d) Cinema including pre-view theatres
e) Road Motor Transport Establishments
f) Newspaper Establishments.
The petitioner’s unit will not come under any of the place stated in the list and hence
this Court is of the considered opinion that petitioner’s unit is not covered under ESI
Act.
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W.P.(MD)No.17346 of 2015
16. The respondents submitted that the petitioner unit is coverable under ESI
Act as a “shop”. As seen from various rulings of the Supreme Court, the word
“shop” may also cover a “place of employment or activity or industry and it will
also cover where there is systematic service or economic activity is carried on”.
The respondent relies on the phrase of “systematic service place”. This Court is not
agreeing with the plea of the respondent since the respondent is reading it in
truncated way. On comprehensive reading the place should indicate that the
systematic service place with economic activity and admittedly the petitioner is
carrying on philanthropic activities. Therefore this Court is of the considered opinion
that from any angle, the petitioner cannot be brought under the ESI purview. Hence,
the impugned show cause notice is quashed and the writ petition is allowed.
17. As far as the appeal filed before the Tamil Nadu Government for granting
exemption under the Act is concerned, since such an application is submitted, the
same would amount to subject the petitioner under the Act. Since this Court has held
that ESI Act is not applicable to the petitioner, the said application cannot be
entertained under the Act. Therefore, the petitioner is at liberty to withdraw the
application pending before the State Government.
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W.P.(MD)No.17346 of 2015
18. The writ petition stands allowed. No costs. Consequently, connected
Miscellaneous Petitions are closed.
14.06.2022
Index : Yes / No
Internet : Yes
btr
Note:
In view of the present lock down owing to COVID-19 pandemic, a web copy of
the order may be utilized for official purposes, but, ensuring that the copy of the
order that is presented is the correct copy, shall be the responsibility of the
Advocate/litigant concerned.
To
1.The Deputy Director,
Employees State Insurance Corporation,
Sub Regional Office (Madurai),
2nd West Street,
K.K.Nagar, Madurai-20.
2.The Secretary to Government,
The State of Tamil Nadu,
Labour and Employment (L1 Department),
Secretariat, Chennai-9.
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W.P.(MD)No.17346 of 2015
S.SRIMATHY, J
btr
Order made in
W.P.(MD)No.17346 of 2015
14.06.2022
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