[Case Brief] Zuari Cement Ltd. v. Regional Director, E.S.I Corporation, Hyderabad – Supreme Court of India

Case NameZuari Cement Ltd. v. Regional Director,E.S.I Corporation, Hyderabad
Case NumberCIVIL APPEAL NO. 5138-40/2007
CourtSupreme Court of India
BenchJustice TS Thakur and Justice R. Banumathi
Author of the judgmentJustice R Banumathi
Decided OnJuly 02, 2015
Relevant Act/SectionsEmployees State Insurance Act, 1948- Sec. 74, 75, 87
Author of the case briefNishita Kapoor

The brief facts and procedural history of the case are-

  • Zuari Cement Ltd. (‘Appellant’) was running a cement factory in an area, which was brought under the purview of Employees State Insurance (‘ESI’) Scheme from 1.03.1986. He was granted exemption from the operation of the Employee State Insurance Act, 1948, by the State Government from 01.03.1986 to 31.03.1993. His application for further exemption till 1999 was rejected and demand notices for making contributions were served on him.
  • He challenged the rejection order and demand notices sent to him before the High Court through a writ petition. The concerned High Court disposed it off with direction to approach ESI Court (constituted under Section 74 of the Employees State Insurance Act,1948).
  • When approached to the ESI Court, the ESI Court granted future exemption from coverage of the ESI scheme and also set aside the demand notices.
  • Against this order of the ESI Court, ESI Corporation filed an appeal before the High Court contending that ESI has no power to grant an exemption under Section 75 of the ESI Act. High Court allowed the appeal and held that ESI Court does not have the power to grant an exemption and hence it set aside the orders of exemption. Being aggrieved, the appellant thereafter filed a civil appeal before the Supreme Court.

The Issue to be decided by the Court was-

  • Whether ESI Court can grant an exemption under the ESI Act or not?

The judges were of the opinion that-

  • In terms of Section 87 of the ESI Act, only ‘Appropriate Government’ has the power to grant a factory or an establishment an exemption from the operation of the ESI Act. High Court cannot confer jurisdiction upon ESI Court to grant an exemption. Under Section 75 of the ESI Act, ESI court has full jurisdiction to decide all matters between the Employer and the Corporation. But for refusal or grant of exemption, a specific provision has been provided under the Act i.e., Section 87 of the Act which gives such power to the appropriate government.
  • An appropriate government, for the purpose of this act, would mean in respect of establishments under the control of the Central Government or  [a railway admin­istration] or a major port or a mine or oilfield, the Central Government, and in all other cases, the State Government.

Hence it was held that-

  • The ESI Court had no jurisdiction to consider the question of grant of exemption. The High Court was justified in setting aside the order of ESI court and accordingly the judgment was dismissed. 
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