Insured Employees Cannot Be Denied Certificate By ESI Corporation Due To Employers’ Default In Making Contributions And Filing Returns : Kerala HC [Read Judgment]

Certificate stating “Ward of Insured Employee” is necessary for availing quota in medical colleges run by ESI Corpn.

The High Court of Kerala has held that the employers’ failure to make contributions and file returns in time cannot be a ground for denial of certificate of “ward of insured employee” to the insured employees by the Employees State Insurance Corporation. The said certificate is necessary to admission of wards of insured employees in the quota in medical colleges run by ESI Corporation.

There was a batch of writ petitions filed in the High Court by several employees, who were denied the certificate. The certificates were denied by the Corporation stating that their respective employers had committed default in making contributions and filing returns within the time frame stipulated by the ESI Act and Regulations. The petitioners contended that they were on the rolls of ESI, and that the contributions were deducted from their salary by their employers. Therefore, they contended that the employees cannot be visited with adverse consequences for the breach committed by the employees. The ESI Corporation justified the denial stating that the quota for insured employees in the medical colleges run by it was a “privilege”, which can be granted only as per the admission scheme. The admission scheme had specifically set out the time frame and eligibility criteria, which are to be strictly followed. It also pointed out that in a similar instance where the employee was not registered with the Corporation within the time frame, the High Court had upheld the denial of certificate, as per the decision in Geetha N. V Employees State Insurance Corporation 2016(5) KHC 148.

The batch of writ petitions was considered by Justice Dama Seshadri Naidu.  Examining the provisions of the Act, Justice Naidu noted that an employee will be covered by the Act if contributions are “payable” by him, and actual payment of contributions was not necessary, as clear from the definition of ‘employee’ under Section 2(9) of the Act.

“Semantically, the expression “paid” refers to a past, completed event; “payable,” on the other hand, refers to a future event. But “were payable,” employed both in the Act and the Admission Policy, could only

refer to an unfulfilled past event. So once an amount became due, it might remain unpaid; unpaid it earns interest, not disqualification. The Corporation’s insistence that the amount must have been paid, I am afraid, negates its own definition and its own policy. The Corporation is estopped”, held the Court

Further, it was noted that the Act and the Regulations had several provisions conferring powers on the Insurance Inspectors under the Corporation to take coercive steps against defaulting employers. Section 68 of the Act was specifically referred to, which specifically stated that an employee will not be disentitled to benefits under the Act due to employer’s default, and that in such situation the Corporation should extend the benefit to the employee first, and later recover the amounts from the employer.

In the light of the social welfare intention of the parent Act, which has specific provisions to protect the interests of the employee even in cases of default by employer, the Court rejected that argument of ESI Corporation that admission in quota was a “privilege” extended by it, which cannot be claimed as a right .

In a democratic polity, governed by the rule of law, “privilege” is an anachronism. The ruled give the power to the ruler—if these expressions do not sound incongruous and pejorative. The ruler is in trust of the people’s power. The power belongs to the people, so does a privilege. The Corporation can be no different; it holds powers in trust and exercises them in pursuit of the welfare of those who entrusted the powers to it, observed the Court. It was further held that adminisitrative policy can be interfered by the Court under judicial review if the policy is against the parent statute.

Further, the Court held that making contribution or filing of returns was not within the control of employee. Therefore, the employee cannot be compelled to suffer consequences for failing to perform the impossible. In this context, reference was made to the legal maxim relying on the legal maxim lex non cogit ad impossibilia—the law compels no man to do that which he cannot possibly perform. Explaining the maxim, the Court held : where the law creates a duty or change, and the party is disabled to perform it, with no default in her, and has no remedy over, the law will in general excuse her.

The precedent Geetha N. V Employees State Insurance Corporation was distinguished holding that it was a case pertaining to delayed registration of the employee, whereas the present cases concerned with delayed contributions and returns by employers.

Therefore, the Court held that “the Corporation cannot deny the otherwise eligible Insured Person the Certificate on the premise the employer contributed or filed the returns late”