2006 (7) TMI 718 - SC - Indian Laws

Summary

Issues Involved:
1. Legality of interim orders preventing ESIC contributions.
2. Compliance with the ESI Act and provision of medical facilities.
3. Financial implications for employers and employees due to non-deduction of ESIC contributions.
4. Jurisdiction and powers of the High Court under Article 226 of the Constitution of India.
5. Equitable considerations and hardships caused by prolonged litigation.

Detailed Analysis:

1. Legality of Interim Orders Preventing ESIC Contributions
The Supreme Court examined whether the interim orders issued by the High Court, which prevented the deduction of ESIC contributions from both employers and employees, were legally valid. The High Court had initially issued an interim order on 19.05.1986, confirmed with modifications on 17.07.1987 and 09.03.1988, directing that no deductions be made, provided the employer paid or provided medical facilities to the employees. The Supreme Court found that these orders were not challenged by the ESIC and thus were accepted, leading to the provision of medical facilities by the employer instead of contributions to the ESIC.

2. Compliance with the ESI Act and Provision of Medical Facilities
The Court noted that the ESIC did not provide medical facilities to the employees during the period covered by the interim orders. The employer complied with the High Court's direction by providing medical facilities, which the employees accepted without grievance. The Supreme Court recognized that the employer had spent substantial amounts on medical facilities and allowances, which would have otherwise been paid as contributions to the ESIC.

3. Financial Implications for Employers and Employees Due to Non-Deduction of ESIC Contributions
The Supreme Court acknowledged the financial burden on the employer if required to pay past contributions to the ESIC, given that medical facilities were provided as per the High Court's directives. It also noted the practical difficulties in recovering contributions from employees who had left or retired over the 18-year period. The Court found that enforcing such payments would be unfair and cause extreme hardship to the employer.

4. Jurisdiction and Powers of the High Court under Article 226 of the Constitution of India
The Supreme Court upheld the High Court's jurisdiction and powers under Article 226 to issue directions in the interest of justice. It observed that the High Court's final order, directing the commencement of ESIC contributions from the date of its judgment, was a balanced and equitable solution. The Court emphasized that the High Court's decision was based on the peculiar facts and circumstances of the case, including the prolonged non-availability of ESIC facilities and the employer's compliance with interim orders.

5. Equitable Considerations and Hardships Caused by Prolonged Litigation
The Supreme Court found that the High Court had taken a pragmatic and judicious approach by considering the equities involved. The prolonged litigation and the interim orders had created a unique situation where the employees did not receive ESIC benefits, and the employer provided alternative medical facilities. The Court concluded that the High Court's direction to start ESIC contributions from the date of its judgment was fair and met the ends of justice.

Conclusion:
The Supreme Court dismissed the appeals, affirming the High Court's judgments. It held that the High Court's orders were justified in the peculiar circumstances of the case and did not warrant interference. The Court left the question of law open for future consideration in an appropriate case. There was no order as to costs.