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All Unaided Private Educational Institutions "Establishment" For The Purpose Of ESI Act: Madras HC [Read Judgment]

Mehal Jain
1 Aug 2020 12:04 PM GMT
All Unaided Private Educational Institutions "Establishment" For The Purpose Of ESI Act: Madras HC [Read Judgment]

All private educational institutions will come under the purview of the ESI Act and will be treated as an 'establishment' for all purposes under it, the Madras High Court has ruled.

The order was passed by an all-women bench of Justice Pushpa Sathyanarayana, Justice Anita Sumanth and Justice P T Asha, dismissing petitions moved by educational institutions, seeking to strike down a November 26, 2010 order of the Tamil Nadu government extending the provisions of ESI Act to the private educational institutions.

"Whether unaided private educational institutions can be treated to be an establishment within the meaning of Section 1(5) of the Employees State Insurance Act, 1948 and be capable of being governed by notifications issued under the 1948 Act as being an establishment being covered within the word 'otherwise'?", the full bench sought to answer.

The High Court quoted Philosopher Aristotle as saying, "the one exclusive sign of thorough knowledge is the power of teaching. Teaching profession contributes to the elimination of poverty, significantly, through the provision of education. The teachers and their supporting staff in any educational institution should be given the utmost privileges in particular, any statutory benefit".

There is no definition for the word "Establishment" in the ESI Act, noted the bench, observing that the ESI Act being a socio-economic welfare oriented legislation, it has brought with it the avowed objective of securing social and economic justice and upholding human dignity and that it is not a law regulating education.

The bench proceeded to read section 1(5) of the Act, which stipulates that the appropriate Government may extend the provisions of this Act or any of them, to any other establishment, or class of establishments, industrial, commercial, agricultural or otherwise.

Asserting that it is always the endeavour of the Courts that the social perspective must play upon the interpretative process, the bench opined that the ESI Act can treat the private educational institutions as 'establishments' coming within the meaning of the Act and the term 'otherwise' has clearly been placed to specify that genus of establishments is not restricted to those organisations, which are industrial, commercial or agricultural only, but also includes organisations like educational institutions.

No overlap between the ESI and two State enactments occupying the field

"Whether the State Government can extend the applicability of the ESI Act, a Central Act, to educational institutions, when the conditions of service in the field of education find place in two State enactments namely, the Tamil Nadu Recognised Private Schools Act, and the Tamil Nadu Private Colleges Regulation Act, 1976?", wondered the Court.

Section 1(5) of the ESI Act enables the State Government to extend the scheme to any establishments or class of establishments unaided educational institutions being no exception, remarked the bench.

As to whether the ESI Act, the 1973 Act and the 1976 Act are operating in the same field, the bench appreciated that the ESI Act is a pre-constitutional law enacted in exercise of powers vested on the Federal Legislature in terms of Entry 27 of List III (Part II) of Schedule VII prescribed under Section 100 of the Government of India Act, 1935. Schedule VII of the Constitution distributes powers between the State legislature and the Parliament. Under Section 100 of the 1935 Act, the power to legislate on the subject of insurance was vested with the Federal legislature in terms of Entry 37 of List I of Schedule VII.

However, post framing of the Constitution, the power to legislate qua insurance is solely vested with the Parliament in terms of Entry 47 of List I of Schedule VII under Article 246. Whereas, Entry 25 of the Concurrent List deals with Education, while Entry 23 and 24 deal with "Social security and social insurance; employment and unemployment" and "Welfare of labour including conditions of work, provident funds, employers' liability, Workmen's Compensation, invalidity and old age pensions and maternity benefits" respectively.

"Thus, it is clear that the ESI Act can be said to be a Central Act falling under Entries 23 and 24 of the Schedule VII", concluded the bench.

It further observed that the 1973 Act is not intended to legislate the subjects covered under Entries 23 and 24, but only with respect to Entry 25, i.e., "education". In order to regulate the functioning of the private schools and the service conditions of teachers and other employees, it was enacted. It cannot be stated that it automatically excludes any other law covering the insurance under Entry 47 of List I or Entires 23 and 24 of List III, merely because Section 19 of the said Act refers to insurance.

"The natural corollary of the above discussion would be that there is no repugnancy between the provisions of the ESI Act and the 1973 Act, as they entire operate in different fields", the court concluded.

It is also stated that the State Government is yet to frame any insurance cover to the teachers of private unaided schools and even to the teachers working in self-finance stream in aided institutions. "...it is disheartening to state that they have been prolonging the implementation of social welfare legislation for nearly a decade, by stalling the impugned notification, which would otherwise have benefited", said the bench.

The bench was of the view that the power under Section 1(5) of the ESI Act has been used by the State to implement what it had envisaged under Section 19 of the 1973 Act, and therefore, there is no illegality in the manner in which, the State has exercised its power, since the overriding provision itself allows for such an order to be made.

Noting that perhaps instead of enacting a separate rule in terms of insurance, which would further delay the process, the State Government had thought it fit to extend the already overdue benefit to the employees of educational institutions by issuing the Government Order, the bench continued to observe that even assuming that the State Government had introduced a statute qua insurance under the 1973 Act, it would not lead to repugnancy between the said rule and the ESI Act in view of the proviso to Section 17 of the 1976 Act. "A Government Order or enactment, whichever provides better scheme would survive, while the lesser one would automatically become inapplicable as per the proviso which entitles the employee of better benefits", said the court.

Therefore, it held that apparently there is no repugnancy between the 1973 Act and 1976 Act and the G.O.Ms.No.237 issued under Section1(5) of the ESI Act and hence, no amendment is required to be made either under the ESI Act or under the State Acts to implement/enforce the G.O.Ms.No.237, dated 26.11.2010

"When the ESI Act (in its section 61) has already excluded the operation of any other enactment in the field that is governed by the ESI Act, a State cannot enact any Act or rule providing benefits that are similar to the benefits provided under the ESI Act. Even otherwise, Section 87 of the ESI Act provides for exemption for those employer providing better benefits to the employees of educational institutions", pointed out the bench.

No Discrimination between private unaided educational institutions on the one hand and the public and government aided private educational institutions

"Whether the State discriminated between private unaided educational institutions on the one hand and the public and government aided private educational institutions on the other by issuing a notification applying the same only to the former, which may amount to an act of invidious discrimination under Article 14 of the Constitution of India so as to enable the petitioners to resist the impugned notification dated 26.11.2010 ?, considered the bench

The bench appreciated that after the advent of the Right of Children to Free and Compulsory Education Act, 2005, the question of aided or unaided goes, as all the schools are mandated to surrender 25% of their seats and get aid from the government for the Students admitted under the RTE Act.

"The proviso to Section 1(4) of the ESI Act came to be inserted with effect from 20.10.1989 and after the said amendment, the applicability of the provisions of the ESI Act to the Government owned or controlled establishments is not automatic, when the Government is of the opinion that the benefits given to the employees under those establishments are substantially similar or superior to the benefits provided under the said Act", the bench observed.

Finally, the bench recorded that a January, 2013 notification issued by the State, has extended the provision of the ESI Act to public, private and aided educational institutions as well, and therefore, there cannot be any discrimination, as alleged.

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