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Sahni Silk Mills (P) Ltd. And Others v. Employees' State Insurance Corporation And Others
Factual and Procedural Background
The appeals arise from proceedings under the Employees State Insurance Act. An order under Section 85-B imposed damages of a little over Rs 15,000 on the appellants for default in timely payment of the employer’s contribution required by Section 40. On an application under Section 75-G, the amount was reduced to Rs 9,226. The appellants challenged the order before the High Court by way of a writ petition, which was dismissed in limine. They thereafter filed the present appeals before the Supreme Court.
Legal Issues Presented
- Whether the Regional Director of the Employees State Insurance Corporation (E.S.I.C.) possessed lawful authority under Section 85-B to impose damages, or whether such power vests exclusively in the Corporation itself.
- Whether the scheme of Section 94-A permits a “second-tier” or “double” delegation—namely, the Corporation delegating its powers to the Director-General who in turn authorises a Regional Director.
Arguments of the Parties
Appellants' Arguments
- The Regional Director lacked jurisdiction because the power to impose damages under Section 85-B belongs to the Corporation alone.
- Section 94-A allows the Corporation to delegate directly to its officers, but does not contemplate a further delegation by the delegatee (Director-General) to another officer (Regional Director); such double delegation is impermissible.
Respondent’s (E.S.I.C.) Arguments
- The Corporation validly delegated its powers to the Director-General “or any officer authorised by him,” thereby expressly permitting the Director-General to empower the Regional Director.
- Judicial authority recognises that a statute may sanction double delegation when its language so permits; several decisions were cited to support this proposition.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Employees’ State Insurance Corpn. v. Dhanda Engineers P. Ltd., 1981 Lab IC 658 (P&H) | Validity of delegation under the E.S.I. Act | Cited by respondent to show earlier judicial acceptance of delegated authority. |
| Regional Director, E.S.I. Corpn. v. Bhaskaran, (1987) 1 KLT 825 | Scope of Regional Director’s powers | Relied on to support the contention that Regional Directors can act under delegated powers. |
| Barium Chemicals Ltd. v. Company Law Board, 1966 Supp SCR 311 | Limits on delegation of statutory power | Cited by appellants regarding prohibition of sub-delegation absent statutory sanction. |
| Harishankar Bagla v. State of M.P., (1955) 1 SCR 380 | Principles governing delegation under Indian statutes | Used to argue that double delegation is disfavoured unless expressly permitted. |
| Bombay Municipal Corporation v. Dhondu Naraya Chowdhary, (1965) 2 SCR 929 | Double delegation permissible if statute allows | Highlighted by respondent to show statutory language can validate second-tier delegation. |
| Manindra Nath v. Anil Chandra, AIR 1953 Cal 689 | Discussion on sub-delegation in administrative law | Cited in support of general principles on delegation. |
Court's Reasoning and Analysis
The Court noted that Section 94-A authorises the Corporation to delegate “all or any” of its powers to any officer or authority subordinate to it. The Corporation passed a resolution delegating its powers to the Director-General “or any officer authorised by him,” pursuant to which the Director-General empowered the Regional Director, who then imposed damages under Section 85-B.
The core question is whether Section 94-A merely permits a single act of delegation by the Corporation, or whether it also allows the delegatee (here, the Director-General) to sub-delegate to another officer, thereby creating a valid chain of authority for the Regional Director’s order. Observing the general importance of this interpretive issue—particularly the legality of “double delegation” under the Act—the Bench concluded that the matter warrants consideration by a larger Bench.
Holding and Implications
ORDER: The matter is referred to a Bench of three Judges for authoritative determination.
Immediate consequence: No final adjudication on the merits of the appellants’ challenge; the question of double delegation under Section 94-A remains open and will be decided by the larger Bench. Until then, the legality of the Regional Director’s imposition of damages is unresolved and no new precedent is set at this stage.
Order
1. These appeals arise out of a proceeding under Employees State Insurance Act. An order under Section 85-B of the Act was passed against the appellants by the Regional Director, Chandigarh imposing damages assessed at over Rs 15,000, on the ground that the appellants had defaulted in depositing in time the employer's contribution under Section 40 of the Act. The amount was reduced to Rs 9226 on an application being moved under Section 75-G. The appellants challenged the order by filing a writ petition before the High Court, which has been dismissed in limine by the order under appeal.
2. One of the grounds urged on behalf of the appellants is that the Regional Director was not empowered to pass the impugned order under Section 85-B as the jurisdiction in this regard vests in the Employees State Insurance Corporation and not in the Regional Director.
3. Section 94-A of the Act permits the Corporation to delegate the powers exercisable by it to any of its officers. Admittedly the Corporation had delegated the powers exercisable by it to the Director-General or any officer authorised by him. Purporting to act under this resolution the Regional Director, who has been authorised by the Director-General to exercise powers under the Act, has passed the order.
4. The contention is that the Director-General could not have further delegated his powers to the Regional Director, as that would amount to double delegation, which is forbidden in law. In reply the learned counsel has relied upon the decisions in Employees' State Insurance Corpn. v. Dhanda Engineers P. Ltd. 1981 Lab IC 658, (1981) 2 LLN 106, (1981) 83 Punj LR 354 (P&H), Regional Director, E.S.I Corpn. v. Bhaskaran (1987) 1 KLT 825, Barium Chemicals Ltd. v. Company Law Board 1966 Supp SCR 311, AIR 1967 SC 295, (1966) 36 Comp Cas 639 and Harishankar Bagla v. State of M.P (1955) 1 SCR 380, AIR 1954 SC 465, 1954 Cri LJ 1322
5. In Bombay Municipal Corporation v. Dhondu Naraya Chowdhary (1965) 2 SCR 929, AIR 1965 SC 1486 it was held that double delegation was permissible if allowed by the statute. The decision in Manindra Nath v. Anil Chandra AIR 1953 Cal 689, 54 Cri LJ 1592 and the discussion in Halsbury's Laws of England, Fourth Edition, Vol. 1, para 32, were also placed before us by the learned counsel.
6. Section 94-A empowers Corporation to delegate all or any of its powers and functions on any officer or authority subordinate to it. The very power of delegation of all or any of its powers or functions under the Act by the Corporation conferred under Section 94-A thereof on any officer or authority subordinate thereto could have been delegated to such officer or authority is, therefore, the question which arises for our consideration. Having regard to the general importance of this question we are of the opinion that the same may be decided by a Bench of three Judges of this Court. Let the case be listed for hearing accordingly.
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