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Citation Codes
Equivalent Citations
citation codes
Case Number
Attorney(S)
  • For the Appellant: K.S. Rajamony M. Lalitha Nair
Judges
  • Sivaraman Nair
  • Pareed Pillay, JJ.
Acts
  • Rule 16(2) of the Employees State Insurance Roles, 19-50
  • EMPLOYEES STATE INSURANCE ACT
  • S. 85B(1) of the Employees State Insurance Act, 1948
  • S. 82 of the Employee's State Insurance Act.
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Cites
Cited by
Citation Codes
Equivalent Citations
citation codes
Case Number
Attorney(S)
  • For the Appellant: K.S. Rajamony M. Lalitha Nair
Judges
  • Sivaraman Nair
  • Pareed Pillay, JJ.
Acts
  • Rule 16(2) of the Employees State Insurance Roles, 19-50
  • EMPLOYEES STATE INSURANCE ACT
  • S. 85B(1) of the Employees State Insurance Act, 1948
  • S. 82 of the Employee's State Insurance Act.
See more information ...
Smart Summary

Structured Summary of the Opinion (Sivaraman Nair, J.)

Factual and Procedural Background

The Regional Director of the Employees State Insurance Corporation (the appellant) filed appeals under S. 82 of the Employees' State Insurance Act against a common judgment of the Employees Insurance Court in multiple Insurance Cases. The appeals arise from proceedings under S. 85B of the Act in which the Corporation sought recovery of damages from employers for failure to pay contributions or other amounts payable under the Act. The employers challenged the competence of the Regional Director to impose such damages on the ground that his power derived from a sub-delegation by the Director General and that such sub-delegation contravened S. 94A of the Act. The Insurance Court accepted that objection, held that the authorisation in favour of the Regional Director was an unlawful sub-delegation in breach of S. 94A, and set aside the Regional Director's orders. The Regional Director appealed against that common judgment.

The appeals were taken from the Insurance Court's common judgment in I.C. Nos. 26, 31, 33, 37, 40, 43, 49, 52, 53, 55 and 57 of 1982 (as listed at the outset of the opinion). The Court later ordered that the matters be remitted to the Insurance Court, Quilon; the judgment records the remittal in the operative paragraph as "Insurance Case Nos. 26, 31, 33, 37, 40, 43, 49, 52, 53, 53 and 57 of 1982."

Legal Issues Presented

  1. Whether the authorisation by the Director General and the subsequent office orders (appointing Regional Directors and other officers to levy damages under S. 85B) amounted to an unlawful sub-delegation contrary to S. 94-A of the Employees' State Insurance Act.
  2. Whether the Regional Director (and other designated officers) were competent to impose and recover damages under S. 85B of the Act by virtue of the Corporation's resolution dated 28-2-1976 and the Director General's office orders.

Arguments of the Parties

Employers' Arguments

  • The authorisation given to the Regional Director originated as a sub-delegation by the Director General (a delegate) and therefore contravened the principle delegatus non potest delegare.
  • They relied on several Supreme Court decisions (cited in the opinion) supporting restrictions on sub-delegation of delegated powers.

Appellant's (Regional Director's) Arguments

  • The Corporation's resolution dated 28-2-1976 validly delegated the power under S. 85B to the Director General or "any other officer authorised by him," and that specification of officers by subsequent proceedings of the Director General did not amount to an unlawful sub-delegation.
  • Section 94-A of the Act authorises the Corporation (and, subject to regulations, the Standing Committee) to direct that powers exercisable by the Corporation may also be exercisable by officers or authorities subordinate to the Corporation; thus the Corporation itself had power to delegate to subordinate officers.
  • If the Insurance Court's view were upheld, recoveries already made by Regional Directors and other designated officers would be rendered invalid and unworkable.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Barium Chemicals Ltd. v. Company Law Board (AIR 1967 SC 295) Invoked by employers to support the principle that a delegate cannot sub-delegate (delegatus non potest delegare). The opinion records that employers relied on this Supreme Court decision. The Court considered the reliance but analysed statutory delegation provisions and the Corporation's resolution and did not accept the Insurance Court's conclusion that the office orders amounted to unlawful sub-delegation.
Mangulal Chunilal v. Manilal Magan Lal (AIR 1968 SC 822) Invoked by employers as authority bearing on limits of sub-delegation and delegation principles. The opinion notes reliance on this decision by the employers; the Court nonetheless interpreted S. 94-A and the 1976 resolution so as to find that designation by the Director General did not constitute unlawful sub-delegation.
Bombay Municipal Corporation v. Dhondu Narayan Chowdhary (AIR 1965 SC 1486) Cited by employers in support of limitations on sub-delegation. The Court recorded that this Supreme Court authority was relied upon by the employers but proceeded to analyse the statutory scheme and the Corporation's resolution and concluded differently from the Insurance Court.
E.S.I. Corpn. v. Shoba Engineers ((1981) 59 FJR 343) — Karnataka High Court Interpreted the Corporation's resolution of 28-2-1976 as a delegation in favour of the Director General and as authorising the Director General to sub-delegate such powers. The Court observed that the Insurance Court had accepted an alternative construction that found favour with the Karnataka High Court in this case. The present Court found that interpretation persuasive and consistent with a workable administrative scheme.
E.S.I. Corpn. v. Dhanda Engineers (P) Ltd. ((1981) 48 FJR 402) — Punjab & Haryana High Court The Division Bench viewed the resolution as a two-fold delegation: in favour of the Director General and in favour of the officer authorised or named by the Director General (a construction the opinion cites). The Court noted this decision as taking a different view from the Karnataka High Court. In the present opinion the Court preferred an interpretation that did not treat the Director General's designation process as an unlawful sub-delegation.

Court's Reasoning and Analysis

The Court's analysis proceeded in a series of identified steps, limited to the material and reasoning contained in the opinion:

  1. Statutory framework: The Court set out S. 85B in full, noting that the power to levy damages for non-payment is quasi-criminal/quasi-judicial in character, penal and deterrent rather than compensatory, and requires a reasonable opportunity to be heard before damages are recovered. It then set out S. 94-A (delegation of powers by the Corporation) and Rule 16(2) of the Employees State Insurance Rules, 1950 (which permits the Director-General, with Standing Committee approval, to delegate powers to subordinates subject to restrictions).
  2. Administrative acts: The Corporation adopted a resolution on 28-2-1976 providing that "the Director General or any other officer authorised by him may levy and recover damages" under S. 85B. The Director General issued office orders authorising Regional Directors and other officers to exercise powers of levy of damages in their regions.
  3. Preliminary objection and Insurance Court's conclusion: Employers objected that the Director General's authorisation was a sub-delegation by a delegate and therefore invalid under delegatus non potest delegare; they relied on Supreme Court precedents. The Insurance Court accepted that argument and held that the authorisation was a sub-delegation in contravention of S. 94-A, setting aside the Regional Director's orders.
  4. Appellate scrutiny of the resolution's language: The appellate Court assumed S. 94-A validly authorised delegation. It examined the resolution's wording "Director General or any other officer authorised by him" and identified two plausible readings. One reading would treat the resolution as delegating exclusively to the Director General with a power to sub-delegate (which might contravene S. 94-A as construed by the Insurance Court). An alternative reading, which the Court regarded as possible and realistic, treats the resolution as a direct delegation by the Corporation to a class of officers ("any officer" subordinate to the Corporation), with the Director General's subsequent actions serving only to identify or designate which among those already-delegated officers would exercise the power in particular regions. Under that interpretation, the Director General's acts were not sub-delegation but administrative designation.
  5. Comparative authority and practical considerations: The Court observed conflicting High Court treatments of the same resolution — Karnataka High Court (Shoba Engineers) adopting a construction authorising DG's sub-delegation and Punjab & Haryana High Court (Dhanda Engineers) adopting a different view — and stated that the interpretation which avoided a functional stalemate and made the statute workable was preferable. The Court emphasised that judicial or quasi-judicial powers are not ordinarily delegable except where specifically authorised, but found no challenge to S. 94-A itself and concluded that the Corporation's resolution and the Director General's designation did not amount to unlawful sub-delegation.
  6. Conclusion of analysis: The Court concluded that the Insurance Court erred in holding that the appellant had no power to impose damages and erred in setting aside the Regional Director's orders on that preliminary point. Because the Insurance Court had not considered the substantive merits of any individual case (it had decided on the preliminary question), the appellate Court remitted the matters to the Insurance Court for fresh consideration on merits in accordance with law.

Holding and Implications

Core Ruling: The appeals by the Regional Director were ALLOWED. The Court held that the Insurance Court was incorrect to find that the authorisation of the Regional Director (and other designated officers) constituted an unlawful sub-delegation contrary to S. 94-A.

Direct Consequences and Disposition

  • The judgment of the Insurance Court setting aside the Regional Director's orders on the ground of unlawful sub-delegation was set aside.
  • The matters were remitted to the Insurance Court, Quilon for fresh consideration and disposal on merits in accordance with law. The opinion records the remittal in its operative paragraph as "Insurance Case Nos. 26, 31, 33, 37, 40, 43, 49, 52, 53, 53 and 57 of 1982 are remitted to the Insurance Court, Quilon for fresh consideration and disposal on merits in accordance with law."
  • There was no order as to costs.

Broader Implications

The opinion states that the chosen interpretation makes the statute and administrative scheme workable and avoids a stalemate in administering a beneficial legislation. The Court did not purport to invalidate S. 94-A and did not state that it was laying down a novel legal principle as a binding precedent beyond the present case; instead, it resolved an interpretive question about the scope of a particular delegation and remitted the individual matters for merits adjudication. The Court expressly noted that it was not called upon to, and did not, strike down the statutory provision enabling delegation.

This summary is based exclusively on the content of the provided opinion. No facts, arguments, or holdings beyond those contained in the opinion have been added.

Show full summary ...

    Regional Director, E.S.I Corpn. v. Bhaskaran

    Sivaraman Nair, J.:— The Regional Director of the Employees State Insurance Corporation is the appellant in these appeals filed under S. 82 of the Employee's State Insurance Act. The appeal is against the common judgment of the Employees Insurance Court in I.C Nos. 26, 31, 33, 37, 40, 43, 49, 52, 53, 55 and 57 of 1982. In all these cases, the employer, against whom, proceedings under S. 85B of the Employees State Insurance Act (hereinafter to be refrred to as the Act) for recovery of damages for failure to pay the contribution or any other amount payable under the Act, had challenged the competence of the Regional Director of the Employees State Insurance Corporation. The argument is that the Regional Director got power only by virtue of a sub-delegation made by the Director General of the Corporation and that sob-delegation was contrary to S. 94A of the Act. The Tribunal held in favour of the employer. The Regional Director challenges that order of the Insurance Court in these appeals.

    2. It is necessary to advert to the relevant statutory provisions to undestand the controversy involved in full. S. 85B of the Act deals with the power to recover damages and provides:—

    “1. Where an employer fails to pay the amount due in respect of any contribution or any other amount payable under this Act, the Corporation may recover from the employer such damages, not exceeding the amount of arrears as it may think fit to impose:

    Provided that before recovering such damages, the employer shall be given a reasonable opportunity of being heard.

    2. Any damages under sub-section (1) may be recovered as an arrear of land revenue”.

    3. It is clear from the above provisions that the power to recover damages is quasi criminal in character. It has been held that the damages recoverable under S. 85B of the Act is not compensatory, but penal and deterrent in character,-and that is the reason why it is specifically provided that such damages may be recovered only after the employer is given a reasonable opportunity of being heard. Therefore, the proceedings are quasi judicial in character. The authority to recover damages is vested in the Corporation. S. 94-A deals with delegation of powers and provides:

    “The Corporation, and subject to any regulations made by the Corporation in this behalf, the Standing Committee, may direct that all or any of the powers and functions which may be exercised or performed by the Corporation or the Standing Committee, as the case may be, may, in relation to such matters and subject to such conditions, if any. as may be specified, be also exercisable by any officer or authority subordinate to the Corporation”.

    4. It is evident from the above provisions that ordinarily the power of the Corporation to recover damages may be capable of delegation. In other words, it may be necessary to designate specified officer or officers of the Corporation to exercise the power under S. 85B of the Act. The Director General of the Corporation is a statutory functionary appoioted under the Act. He has to exercise many statutory powers. Rule 16(2) of the Employees State Insurance Roles, 19-50 enables delegation of his powers subject to certain conditions to any person subordinate to him and provides:

    “The Director-General may, with the approval of the Standing Committee, by general or special order, delegate any of his powers or duties under the rales or the regulations or under any resolution of the Corporation or the Standing Committee as the case may be, to any person subordinate to him. The exercise or discharge of any of the powers or duties so delegated shall be subjected to such restrictions, limitations and conditions, if any, as the Director General may. with the approval of the Standing Committee, impose”.

    5. The Corporation, in its meeting held on 28-2-1976, adopted the following resolution:—

    “Resolved that for the purpose of levy of damages under S. 85B(1) of the Employees’ State Insurance Act, 1948 as amended upto date, the Director General or any other officer authorised by him may levy and recover damages from the employers not exceeding the rates as per table annexed”.

    6. The Director General issued three office orders on 3-5-1976, 8-7-1977 and 15-12-1977, authorising all the. Regional Directors, Joint Regional Directors, etc., to exercise the powers of levy of damages on employers within their respective regions under S. 85B (1) of the Act. It was in exercise of that power that the Regional Director sought to recover damages from the employers under S. 85B (1) of the Act.

    7. The employers, in their applications under S. 75 of the Act before the Insurance Court, in resisting the recovery of damages, raised a prelimi nary objection that the Regional Director was not competent to recover damages because, the authorisation in his favour was a sub-delegation by a delegate, viz. the Director General of the Corporation, They relied on the maxim ‘delegatus non potest delegare’. Reference was made to the observations of the Supreme Court in the decisions reported in Barium Chemicals Ltd. v. Company Law Board (AIR. 1967 SC. 295), Mangulal Chunilal v. Manilal Magan Lal (AIR. 1968 SC. 822) and Bombay Municipal Corporation v. Dhondu Narayan Chowdhary (AIR. 1965 SC 1486). The Insurance Court held that the authorisation in favour of the Regional Director was a sub-delegation in contravention of S. 94-A of the Act, and therefore held that he had no power to imoose damages. In this view, all the orders of the Regional Director were set aside.

    8. Counsel for the appellant submits that the resolution of the Corporation dated 28-2-1976 had validly delegated the power under S. 85-B to the Director General or any other officer authorised by him and the specification of the officers by subsequent proceedings of the Director General did not amount to sub-delegation. According to him, S. 94-A has conferred authority on the Corporation unconditionally, and on the Standing’ Committee subject to the regulations in that behalf, to direct that the powers and functions which may be exercised by the Corporation or the Standing Committee may be exercisable by any officer or authority subordinate to the Corporation. We have to proceed on the basis that S. 94-A of the Act enabling delegation of powers to any Officer or authority subordinate to the Corporation is valid.

    9. A delegation need not be in favour of one Officer alone. It may as well be in favour of all Officers. ‘Any Officer’ of the Corporation may as well mean every Officer of the Corporation. We have to examine the resolution dated 28-2-1976 adopted by the Corporation in the light of this legal position.

    10. If that resolution delegated the power of the Corporation in the matter of levy of damages under S. 85-B(1) of the Act only on the Director General, and enabled him to sub-delegate that power to any subordinate of his, that resolution may be contrary to the provisions of S. 94-A of the Act. Let us now see that resolution. The conferment of power by delegation is on the Director General or “any other Officer authorised by him”. The delegation is, therefore, in favour of two classes of persons; one consisting of the Director General alone, and the other consisting of any other officer who may be designated by the Director General. The second part of the resolution may not be an authorisation for a sub-delegation. It may only be a power in the Director General to designate the Officers who already had the delegated powers. The meaning of the 2nd clause may as well be that the oower is delegated to every officer subordinate to the Corporation. But such officers had to be identified by the Director General. Viewed in this manner, there may not be any sub-delegation of the power which was given to the Director General by the Corporation, to his subordinates. It may only be a process of identification and designation of some among the officers subordinate to the Corporaton, to all of whom, the power to recover damages under S. 85B of the Act was validly delegated under the resolution dated 28-2-1976.

    11. We feel that this is a possible interpretation. We also feel that this interpretation may be more realistic. We are also of the opinion that this interpretation will make the provisions of S. 85B of the Act more workable. The Insurance Court has accepted an alternative construction which found favour with the Karnataka High Court in E.S.I Corpn v. Shoba Engineers, (1981) 59 FJR 343). The Karnataka High Court understood the resolution of the Corporation dated 28th February, 1976 as a delegation of its powers in favour of the Director General and an authorisation to sub-delegate such powers by the Director General. In adopting that view, a Divisioo Bench of the Karnataka High Court differed from the view expressed by the Punjab and Haryana High Court in E.S.I Corpn. v. Dhanda Engineers (P) Ltd. ((1981) 48 FJR 402) where Sandhawalia, C.J speaking for the Bench observed with reference to the resolution dated 28-2-1976 that:—

    “……It is plain, that the delegation by the Corporation was not made merely in favour of the Director General. Plainly enough it was a two-fold delegation. Firstly, in favour of the Director General and secondly, in favour of the officer authorised or named by the Director-General;”

    12. Counsel for the appellant argued that it may not be possible for the Director General to exercise the power of recovery of damages under S. 85-B of the Act in all cases, and as such, he has necessarily to have other officers competent to exercise the same powers in different parts of the country. It appears to us that we have to understand S. 94-A of the Act and the resolution dated 28-2-1976 adopted by the Corporation admittedly under the provisions therein, reasonably. If so done, the more acceptable view is that the delegation of powers was not in favour of the Director General alone, but in favour of other Officers subordinate to the Corporation as well. It was left to the administrative determination of the Director General of the Corporation as to who shall be specifically identified and designated to exercise that power. The process of such identification and designation of some among the many officers, in whose favour the delegation was validly made, may not amount to sub-delegation.

    13. Counsel for the appellant stated before us that if the view of the Insurance Court is to be upheld, recoveries so far made by the Regional Directors and other designated officers would be rendered invalid and unworkable. We see considerable force in this submission. We feel that it shall not be our anxiety to adopt interpretations which will result in a stalemate in the working of the Corporation which has constituted to administer a beneficial legislation. We have no doubt about the proposition that there shall be no delegation of judicial or quasi judicial powers except in cases where there is specific authorisation. We are also clear in our mind that such powers shall not be capable of sub-delegation even if the statute authorises that. But in the latter case, the governing statute itself may have to be specifically challenged. The Insurance Court, which is the creature of that very statute, may not be able to hold that the provisions enabling such delegation is invalid. Happily, there is no challenge to S. 94-A of the Act which authorises delegation of the power of the Corporation under S. 85-B(1) of the Act in favour of Officers or authorities subordinate to the Corporation. The only question is whether the resolution dated 28-2-1976 and the subsequent office orders passed by the Director General authorising the Regional Directors and other designated officers to exercise powers under S. 85-B(1) of the Act amounted to sub-delegation contrary to the provisions contained in S. 94-A of the Act. We are of the opinion that there was no such sub-delegation. The resolution dated 28-2-1976 was a valid delegation in favour of Officers subordinate to the Corporation and included the Director General, who was separately designated. Delegation in favour of unspecified or unidentifiable officers of the Corporation as would invalidate the delegation, is not a point raised before us. Nor was that point urged before the Insurance Court. We are also of the opinion that if it was necessary for us to decide the question, we would have held that the expression “any officers subordinate to the Corporation” is sufficiently identifiable and adequately determinable, Neither the provisions of S. 94A of the Act, nor the resolution dated 28-2-1976 can. therefore, be effectively challenged as conferring a statutory power on an unidentifiable indeterminate mass of people.

    14. In this view, we have to hold that the Insurance Court was not right in holding that the appellant had no power to impose damages on the respondents/employers and in setting aside the orders issued by the appelant.

    15. The Insurance Court did not consider any of the individual cases involved; on merits, since it held in favour of the employers on the preliminary point. It is now necessary to remit the matter for reconsideration since we are inclined to set aside the judgment of the Insurance Court.

    16. The appeals have, therefore, to be, and are hereby allowed. Insurance Case Nos. 26, 31, 33, 37, 40, 43, 49, 52, 53, 53 and 57 of 1982 are remitted to the Insurance Court, Quilon for fresh consideration and disposal on merits in accordance with law. There will be no order as to costs.

    17. Dismissed.

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    Comments

    Regional Director, E.S.I Corpn. v. Bhaskaran
    (Mar 26, 1987)