Transfer Of Hospitals Under Employees State Insurance Corporation To State Govt. Illegal: Delhi HC [Read Judgment]

The Delhi High Court has declared as "illegal" the transfer of hospitals and medical colleges under the Employees State Insurance Corporation (ESIC) to the State Government.

The Bench comprising Acting Chief Justice Gita Mittal and Justice C. Hari Shankar held that "the actions of and the further efforts by the ESI in transferring the ESI medical institutions/colleges to State Governments as well as the proposal to further transfer them by way of public private partnerships is de hors the statutory provisions and are legally impermissible."

The Court was hearing a Petition demanding compliance by the authorities with the mandate of the Employees’ State Insurance Act, 1948. It had contended that the ESIC's decision to transfer the medical colleges established by it to State Governments defeats the legislative mandate contained in the Act.

The ESIC had challenged the Petition, submitting that it had decided to withdraw from the field of medical education in order to focus on its core function of providing social security to those insured under the Employees State Insurance scheme. The transfer of the college to State Government was with the intention of ensuring better medical services, it had contended.

At the outset, the Court noted that the source of funds of the ESIC is the contributions of the employers and employees who come under the definition of "insured persons" under the Act. It further took note of the fact that the ESIC had not conducted any case by case evaluation of either the need or the efficacy of such transfer prior to the same being effected.

Moreover, the Court opined that the MoUs entered into between the ESIC and the States disclosed that ESIC was exploring the option of selling the institution in order to recover the investment made by it.

"Clearly, the interest of the insured persons who have contributed the funds for creation of these medical colleges and hospitals would be compromised if such MOUs were given a go ahead... We may also note that the respondents are unable to explain any element of public interest in the proposed transfers," the Bench then observed.

It, thereafter, held such transfer to be illegal, observing, "The scheme of the ESI Act, 1948, especially Sections 59A and 59B of the statute do not enable the ESIC to transfer any of its assets to any other person, including the State Governments. There is no provision in the statute which enables the ESIC to do so... Given the legislative mandate, we therefore, hold that the action of the respondent no.2 in transferring the medical colleges and institutions to the State governments is without jurisdiction, contrary to law and is illegal."

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