Madras High Court
M/S. Ninety Nine Beedi Factory vs The Government Of Tamil Nadu on 9 April, 2025
W.P.No.8528 of 2020
IN THE HIGH COURT OF JUDICATURE AT MADRAS
(Special Original Jurisdiction)
RESERVED ON : 27.03.2025
PRONOUNCED ON : 09.04.2025
PRESENT:
THE HON’BLE DR. JUSTICE A.D. MARIA CLETE
W.P.No.8528 of 2020
and
WMP No. 10301 of 2020
M/s. Ninety Nine Beedi Factory
Rep by its Proprietor Mr.K.Azhar,
8, Commissary Bazar,
Vellore – 632 004. ….Petitioner
Vs.
1.The Government of Tamil Nadu
Rep. by its Principal Secretary,
Labour and Employment (L1) Department
Fort St.George,
Chennai – 600 009.
2.Employees State Insurance Corporation
Rep. by its Assistant Director,
Regional Office (Tamil Nadu)
143, Sterling Road,
Chennai – 600 034. …Respondents
Prayer in WP:
To issue a Writ of Certiorarified Mandamus or any other Order, Direction in the
1/13
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W.P.No.8528 of 2020
nature of a Writ to call for the records of the 1st Respondent culminating in
G.O.(D) No.284 Labour and Employment [1] Department dated 03.06.2020 and
quash the same and consequently direct the 1st Respondent herein to accord the
Petitioner, renewal of the exemption from the provisions of the ESI Act, 1948
for the period between 10.01.2019 and 09.01.2020 and pass such further or
other order or orders as may be deemed fit and proper in the circumstances of
the case.
Prayer in WMP
To stay the operation of the G.O.(D) No.284 Labour and Employment [L1]
Department dated 03.06.2020 pending disposal of this Writ Petition and for
such further or other order or orders as may be deemed fit and proper in the
circumstances of the case.
Appearance of Parties:
For Petitioner: Mr.K.M.Aasim Shehzad, Advocate
For BFS Legal
For Respondent 1: Mr.P.Muthukumar, AAG XI
assisted by Mr.R.Kumaravel, AGP
For Respondent 2: Mr.K.Prabakar, Advocate
JUDGEMENT
Heard.
2. The writ petition has been filed by a Beedi manufacturing unit
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challenging the order of the State Government issued in G.O.(D) No. 284,
Labour and Employment Department, dated 03.06.2020, whereby the
Government rejected the petitioner’s request for exemption from the provisions
of the Employees’ State Insurance Act, 1948, under Sections 87, 88, and 91-A
for the periods from 10.01.2019 to 09.01.2020 and from 10.01.2020 to
09.01.2021. It may be noted that the impugned order erroneously refers to the
first period as ending on 09.01.2012, which is a typographical error.
3. When the writ petition was listed on 25.06.2020, the learned Additional
Government Pleader took notice on behalf of the State Government, and notice
was ordered to the Employees’ State Insurance Corporation. Thereafter, the first
respondent filed a counter affidavit, dated Nil of 2021. The Employees’ State
Insurance Corporation is represented by its panel counsel.
4. The principal contention of the petitioner is that the first respondent has,
as a matter of consistent administrative practice, been granting periodical
exemptions to Beedi manufacturers from the operation of the ESI Act, and that
such exemptions were routinely extended from time to time. In support of this
claim, the petitioner refers to a series of Government Orders granting
exemptions covering the period from 01.01.2000 to 09.01.2019. It is submitted
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that the impugned G.O. represents a mechanical and non-application of mind in
rejecting the petitioner’s request.
5. The petitioner further relies on the orders passed by this Court dated
07.01.2020 in W.P. Nos. 18314 and 18316 of 2019, wherein, in view of the
exemption having been granted during the pendency of those writ petitions, the
same were dismissed as infructuous. The petitioner also refers to an earlier
instance when it was compelled to approach this Court in W.P. No. 5123 of
2017. That writ petition was disposed of by order dated 27.04.2017, directing
the Government to consider the petitioner’s representation. Pursuant to that
direction, the Government granted exemption by issuing G.O.(D) No.365,
Labour and Employment Department, dated 01.06.2018.
6. It was further contended that the workers engaged in the beedi industry,
along with their trade unions, have accepted the welfare schemes and measures
specifically tailored for the industry, which is governed by the provisions of the
Beedi and Cigar Workers (Conditions of Employment) Act, 1966.
7. In this regard, specific reference is made to Ground No. (ix) of the writ
petition, which reads as follows:
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“The Beedi and Cigar Workers (Conditions of Employment) Act,
1966, The Beedi Workers Welfare Fund Act, 1976 and The Beedi
Workers Welfare Cess Act, 1976 address the specific
requirements of the beedi workers / rollers as the said legislations
have been enacted keeping in mind their requirements and how the
beedi industry functions whereas the ESI Act is a general welfare
mechanism and is not suitable to address the requirements and
protect the interest and welfare of the beedi workers / rollers. It is
also relevant to state here that the present welfare and benefit
schemes have been drawn up only after long discussions and
deliberations with the labour unions and the workers are also
agreeable to the welfare schemes that have been put in place by
the establishment at present. The 1st Respondent ought to have
seen the fact that the ‘Beedi Employees’ will be governed under
the Beedi and Cigar Workers (Conditions of Employment) Act
and their best interests will be protected therein for which ‘cess’ is
levied for the ‘Beedi Employees’ under the said Act. While so,
warranting the ‘Beedi Employer’ to pay ESI contribution is
nothing but Double Taxation and for the said reason this
Impugned Order is liable to be set aside.”
8. In response to the petitioner’s claims and opposing the relief sought, the
first respondent, in paragraphs 9 and 10 of the counter affidavit, has made the
following averments:
“9....The Employees State Insurance Scheme covers both
economic and physical distresses under all foreseeable
contingencies, through full medical care not only to the insured
person but also to their eligible family members and adequate cash
compensations with the aid of its own massive infrastructure
established across the country. The first respondent has exercised
the authority vested as per section 91-A of the Employees State
Insurance Act, 1948.
10.It is submitted that the Government have examined the benefits
provided to the employees as claimed in the applications with that
of the benefits given by the Employees’ State Insurance
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Corporation. From the comparative study, it is found that most of
the benefits provided by the Employees State Insurance
Corporation are superior to the benefits provided by the
Management viz., the Sickness benefit, Extended Sickness benefit,
Disablement benefit, Dependant benefit, Maternity benefit,
Funeral expenses and Vocational / Rehabilitation Allowance. The
benefits provided by Employees’ State Insurance Corporation viz
Unemployment allowance, Medical bonus and coverage of
disabled person drawing wages up to Rs.25,000/- are not given by
the management. As per section 87 of the ESI Act, 1948
exemption may be granted only if the employees in factories of
establishments are otherwise in receipt of benefits substantially
similar or superior to the benefits provided under the ESI Act,
1948. On inspection of the factory by the Labour department
officials, it has been observed that no medical facilities are being
provided by the management to the workers and the
Commissioner of Labour has recommended for the rejection of the
applications seeking exemptions from the ESI Act, 1948. It has
therefore been concluded that the workers will get more benefit if
enrolled under ESI Corporation and the request made by M/s.
Ninety Nine Beedi Factory for exemption has been rejected as per
the provisions under sections 87, 88 read with 91-A of the ESI
Act, 1948.”
9. In support of the averments made in the counter affidavit, the learned
Additional Advocate General appearing for the State produced the original file
pertaining to the impugned Government Order. Considering the frequent risk of
original files being misplaced during circulation, a photocopy of the relevant
file was also furnished to the Court.
10. A perusal of the file clearly substantiates the stand taken by the State in
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the counter affidavit. It reveals that due consideration was given to the
petitioner’s request, and the decision was taken after due application of mind.
The file also discloses that the matter was placed before and approved by the
Hon’ble Minister for Labour. In such circumstances, the allegation that the
impugned order is mechanical or suffers from non-application of mind is
without merit and unsustainable.
11. The learned counsel for the petitioner placed reliance on the decision of
the Division Bench of this Court in Tamil Nadu State Marketing
Corporation Ltd. v. Employees State Insurance Corporation (W.A. No.
1906 of 2010, dated 18.10.2014), wherein the Court held that the Government
had failed to consider relevant materials while rejecting the request for
exemption. However, it is submitted that the said decision is distinguishable on
facts, as in the present case, the Government has duly considered all relevant
materials before passing the impugned order.
12. On the other hand, the learned counsel appearing for the second
respondent placed reliance on the following three decisions:
a. Seyadu Beedi Company, Tirunelveli Dist. Vs. Regional
Director, ESIC, Madras reported in 1995 (1) CTC 261
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b. Muruga Home Industries Vs. Employees State Insurance
Corporation reported in 2002 (2) LLJ 590
c. M/s. A.Habeebur Rahman Sons ‘S’Beedi Manufacturers
Vs. M/s.V.Abdul Jabber & Sons and ors. in W.A.No.279 of
2023 dt. 18.6.2024 (Division bench)
13. In the first two decisions relied upon, the Courts held that the welfare
benefits extended through the cess collected from beedi manufacturers cannot
be equated with the comprehensive medical benefits available under the ESI
Act.
14. In the third decision rendered by a Division Bench, it was observed that
the learned Single Judge had erred in comparing the benefits offered by the
management with those under the ESI Act, and that such benefits were in no
way superior to or on par with the statutory entitlements provided under the Act.
15. It is noticed that there is yet another lacunae in the writ petition filed by
the management. In seeking exemption under a welfare legislation, it was
incumbent upon the petitioner to implead the workmen or their trade union as
parties to the proceedings. In the absence of such necessary parties, effective
adjudication of the issue is not permissible in law.
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16. In this regard, reference may be made to the judgment of the Hon’ble
Supreme Court in State of Tamil Nadu v. K. Sabanayagam, reported in (1998)
1 SCC 318, wherein it was held that, before granting any exemption under
welfare legislation, the Government is duty-bound to hear the affected workmen
who have a vital interest in the continued application of such statutory benefits.
Although the said decision arose under the Payment of Bonus Act, the principle
laid down therein applies with equal force to the present case.
17. The Hon’ble Supreme Court, in Employees’ State Insurance
Corporation v. Bhakra Beas Management Board & Another, reported in
(2009) 10 SCC 671, has categorically held that even in proceedings before the
ESI Court under Section 75 of the ESI Act, where the question of coverage is in
issue, the workmen must be impleaded either in their individual capacity or in a
representative capacity.
18. In this context, it is apposite to extract the relevant portion of the said
judgment, which read as follows:
"This Court has recently held in Fertilizer & Chemicals
Travancore Ltd. v. ESIC & Ors. 2009 (11) SCALE 766 as under:
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“5. It may be noted that in its petition before the
EmployeesInsurance Court, the appellant herein only impleaded
the Employees State Insurance Corporation and the District
Collectors of Alleppey, Palaghat and Cannanore as the
respondents but did not implead even a single workman as a
respondent.
6.Labour statutes are meant for the benefit of the workmen.
Hence, ordinarily in all cases under labour statutes the workmen,
or at least some of them in a representative capacity, or the trade
union representing the workmen concerned must be made a party.
Hence, in our opinion the appellant (petitioner before the
EmployeesInsurance Court) should have impleaded at least some
of the persons concerned, as respondents.”
19. The above-mentioned decisions were followed by a learned Single Judge
of this Court, who dismissed a writ petition filed by the management seeking
exemption from the applicability of the ESI Act, on the ground that the
workmen had not been impleaded as parties to the proceedings. This view was
taken in Employees’ State Insurance Corporation v. M/s. Pondicherry Agro
Service and Industries Corporation Ltd., in W.P. No. 19054 of 2008, dated
23.12.2010, wherein the Court observed in Paragraphs 9 & 10 as follows:
“9.It must be remembered that the Act has been enacted for the
benefit of the workers to give them medical benefits, which have
been mentioned in Section 46 of the Act. Hence, the principal
beneficiary of the Act is the workmen and not ESI Corporation.
ESI Corporation is only the agency to implement and carry out the
object of the Act and it has nothing to lose if the decision of the
Employees Insurance Court is given in favour of the employer. It
is only the workmen who have to lose if a decision is given in
favour of the employer. Hence, the workmen (or at least some of
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them in a representative capacity, or their trade union) have to be
necessarily made a party/parties because the Act is a labour
legislation made for the benefit of the workmen.
10.In the present case the workmen concerned were not made
parties before the Employees’ Insurance Court, nor was notice
issued to them by the said court.”
20. The matter was carried in appeal before a Division Bench, and the
judgment of the learned Single Judge was affirmed in Writ Appeal No. 1271 of
2011, dated 17.12.2014. The relevant portion of the judgment reads as follows:
“In the present case, we are of the considered view that the
appellant Corporation has not been in a position to show that the
benefits provided by the first respondent to its employees are
inferior in nature, as compared to those which are contemplated
under the provisions of the Act. Even otherwise, it is not for this
Court to conduct a roving enquiry into such contradictory claims,
under Article 226 of the Constitution of India, especially, when
the employees concerned, who are said to be the beneficiaries, are
not before this Court. In such circumstances, we find it appropriate
to dismiss the writ appeal, as it is devoid of merits. Accordingly,
the writ appeal stands dismissed.”
21. In light of the foregoing discussion, this Court finds that the writ petition
is devoid of merit and is liable to be dismissed. Accordingly, W.P. No. 8528 of
2020 stands dismissed. Consequently, W.M.P. No. 10301 of 2020 is also
dismissed. There shall be no order as to costs.
09.04.2025
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ay
NCC : Yes / No
Index : Yes / No
Internet : Yes / No
To
1.The Principal Secretary to Government of Tamil Nadu,
Labour and Employment (L1) Department ,
Fort St. George, Chennai – 600 009.
DR. A.D. MARIA CLETE, J
ay
2.The Assistant Director,
Employees State Insurance Corporation,
Regional Office (Tamil Nadu),
143, Sterling Road,
Chennai – 600 034.
and
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09.04.2025
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