Chandrasekhara Menon, J.:— The appellant herein is a Joint Stock Company with registered office in Nagda in the State of Madhya Pradesh and is one incorporated under the Gwalior Companies Act. It has its pulp division office at Mavoor in Kozhikode District.

2. The appellant filed an application before the Employees' Insurance Court, Calicut (hereinafter referred to as the Court) under Sections 75 to 77 of the Employees' State Insurance Act, 1948—Act 34 of 1948—(shortly stated the Act) claiming refund of the special contribution which the appellant had to pay under Section 73-A of the Act on account of 65 employees who were serving the appellant-company in forests areas in Kerala, Mysore and Madras States. These employees are by reason of the work in these areas which are non-implemented areas as far as the Act is concerned, denied the benefit under Chapter V of the Act. However, the appellant is obliged to pay at the rate of 3% of their total wage bill, subsequently enhanced to 4% towards the contribution impugned. The appellant had further claimed in the petition for cancellation of the direction given by the Employees' State Insurance Corporation-respondent as per his reference No. 51—6798—13 dated April 10, 1969, by which the appellant has to make periodical payments of the employees' special contribution under Section 73-A in respect of the 65 employees referred to above.

3. The Court by its judgment dated May 5, 1972 held that the appellant has to make the payments under Section 73-A of the Act of the special contribution at the rate notified by the respondent and the appellant's petition was dismissed. The appellant has, therefore, come up in appeal under Section 82(2) of the Act. Under Section 82(2) of the Act an appeal shall lie to the High Court from an order of a court, if it involves a substantial question of law. A case in which the court has misdirected itself on a question of law would come within the phrase ‘substantial question of law’. It is not disputed that under the Act the 65 employees concerned would come within the definition of the term ‘employee’ given in the Act considered apart from the notification under Section 88. Under Section 2(9) of the Act an ‘employee’ means:

“Any person employed for wages in or in connection with the work of a factory or establishment to which this Act applies and—

(i) who is directly employed by the principal employer on any work of, or incidental or preliminary to or connected with the work of, the factory or establishment whether such work is done by the employee in the factory or establishment or elsewhere; or

(ii) who is employed by or through an immediate employer on the premises of the factory or establishment or under the supervision of the principal employer or his agent on work which is ordinarily part of the work of the factory or establishment or which is preliminary to the work carried on in or incidental to the purpose of the factory or establishment; or

(iii) whose services are temporarily lent or let on hire to the principal employer by the person with whom the person whose services are so lent or let or hire has entered into a contract of service; and includes any person employed for wages on any work connected with the administration of the factory or establishment or any part, department or branch thereof or with the purchase of raw materials for, or the distribution or sale of the products, of the factory or establishment; but does not include

(a) any member of the Indian Naval, military or air forces; or

(b) any person so employed whose wages (excluding remuneration for overtime work) exceed five hundred rupees a month:

Provided that an employee whose wages (excluding remuneration for overtime work) exceed five hundred rupees a month at any time after (and not before) the beginning of the contribution period, shall continue to be an employee until the end of that period.”

4. But these 65 persons are exempted from the operation of the Act under Section 88 of the Act. Section 88 is in these terms:

“Exemption of persons or class of persons—The appropriate government may, by notification in the official gazette and subject to such conditions as it may deem fit to impose, exempt any person or class of persons employed in any factory or establishment or class of factories or establishments to which this Act applies, from the operation of the Act.”

5. The contention that was urged by the learned counsel for the appellant Sri K.P Kesava Menon is that the listed 65 employees stand exempted from the operation of any of the provisions of the Act as per State Government notification under Section 88 of the Act; their employments have ceased to be ‘insurable’ employments with the direct consequence of their ceasing to be ‘insured’ persons within the meaning of Sections 2(13-A) and 2(14) of the Act. Therefore, according to him the appellant for purpose of payment of special contribution prescribed under Section 73-A of the Act has no obligation or liability to include the proportionate wage bill of the listed employees for purposes of payment of higher rate prescribed for the implemented area, to which alone provisions of Chapters IV and V are made applicable under the Act. He further contended that the fact that the employers' special contribution stipulated under Section 73-A of the Act was not covered by the exemption order of the State Government would not warrant an inference that the appellant was statutorily obliged to pay the special contribution prescribed under Section 73-A. The gazette notification made by the State Government took that form because the exemption from payment of employers' special contribution was beyond the competence of the State Government. Such an exemption of the employers' special contribution was within the exclusive jurisdiction of the Central Government under Section 73-F of the Act. He further took up the position that contributions are always linked up with the corresponding service to be rendered by the recipient of the contribution. The Act as well as the statutory Rules have not made any provision for conferment of any sort of benefit under the statutory scheme for the employees in the non-implemented area, such as the listed employees in the petition. That was why the State Government notified exemptions of these employees under Section 88 of the Act. Therefore, Mr. Kesava Menon argued that the necessary corollary of this exemption is a similar exemption for the employer as well as from payment of special contribution at a higher rate. Though the factory of the appellant is situated in an implemented area which is at Mavoor, the listed employees are working in non-implemented area. Therefore, to them the statutory benefits are either denied or not available. There is absence of quid pro quo flowing from the respondent in regard to the listed employees and, therefore the appellant had no obligation to pay special contribution at the higher rate as laid down in the second proviso to Section 73-A of the Act.

6. Mr. Kesava Menon, in this connection, invited our attention to Sections 39 and 40 of the Act. Under Section 39 ‘the contribution payable under the Act in respect of an employee shall comprise contribution payable by the employer and contribution payable by the employee and shall be paid to the Corporation’. Under Section 40 ‘the principal employer has to pay in respect of every employee, whether directly employed by him or by or through an immediate employer, both the employer's contribution and the employee's contribution. The principal employer shall in the case of an employee directly employed by him not being an exempted employee be entitled to recover from the employee the employee's contribution by deduction from his wages. Any sum deducted by the principal employer from wages under the Act shall be deemed to have been entrusted to him by the employee for the purpose of payment the contribution in respect of which it was deducted.’

7. Section 73-A is in the following terms:—

“Employer's special contributions—(1) For so long as the pro visions of this Chapter are in force, every principal employer shall, notwithstanding anything contained in this Act, pay to the corporation, a special contribution (hereinafter referred to as the employer's special contribution) at the rate specified under sub section (3).

(2) The employer's special contribution shall, in the case of a factory or establishment situate in any area in which the provisions of both Chapters IV and V are in force, be in lieu of the employer's contribution payable under Chapter IV.

(3) The employer's special contribution shall consist of such percentage, not exceeding five percent of the total wage bill of the employer, as the Central Government may, by notification in the official gazette, specify from time to time:

Provided that before fixing or varying any such percentage the Central Government shall give by like notification not less than two months' notice of its intention so to do and shall in such notification specify the percentage which it proposes to fix or, as the case may be, the extent to which the percentage already fixed is to be varied:

Provided further that the employer's special contribution in the case of factories or establishments suitable in any area in which the provisions of both Chapters IV and V are in force shall be fixed at a rate higher than that in the case of factories or establishments situate in any area in which the provisions of the said Chapters are not in force.

(4) The employer's special contribution shall fall due as soon as the liability of the employer to pay wages accrues, but may be paid to the Corporation at such intervals, within such time and in such manner as the Central Government may, by notification in the official gazette, specify, and any such notification may provide for the grant of a rebate for prompt payment of such contribution.

Explanation—‘Total bill’ in this section means the total wages which have accrued due to employees in a factory or establishment in respect of such wage periods as may be specified for the purposes of this section by the Central Government by notification in the official gazette.”

8. Mr. Menon emphasised the fact that it is specifically stated in the section that the employer's special contribution is in lieu of the employer's contribution payable under Chapter IV. On this basis he argues that if there is no question of an employee's contribution on account of exemption under notification issued under Section 88, then the employer also is not liable to contribution under Section 73-A, because his special contribution under that section is in lieu of the employer's contribution payable under Chapter IV; the payment of such contribution made under Chapter IV is a combined contribution under Regulation 29 of the Employees' State Insurance (General) Regulations, 1950, ‘every contribution payble under the Act, shall, except as otherwise provided herein be paid by affixing contribution stamps on the Contribution Card of the employee in the space indicated for that purpose upon the Card. The contribution stamps shall be of such shape and design as the Corporation may, from time to time determine, and shall be sold in such manner and at such agencies as the Corporation may notify from time to time’.

9. For a proper appreciation of the controversy involved in the case it would be useful if one takes note of the purpose of the Act and the Scheme of the relevant provisions therein. As is clear from the preamble this Act is to provide for certain benefits to employees in case of sickness, maternity and employment injury and to make provision for certain other matters in relation thereto. It is a piece of social security legislation. Under the Act a body corporate known as the Employees' State Insurance Corporation is established for the administration of the Employees' State Insurance in accordance with the provisions of the Act. A standing Committee and a medical council are also established, the first to administer the affairs of the corporation subject to its general supervision and the latter to advise the corporation on matters relating to the administration of medical benefits. A fund by name. The Employees' State Insurance Fund is also created. The Corporation will administer the Fund for the purposes of the Act. Contribution and other monies received on behalf of the Corporation are paid into this Fund. Chapter IV of the Act deals with contributions. Section 39 provides for two kinds of contributions, the employers' contribution and the employees' contribution. It also provides for payment of the same to the corporation according to certain rates and certain units of time prescribed therein. Though under Section 39 the liabilities for the two kinds of contribution are on the two respective parties, namely, the employers and the employees, Section 40 states that both the above types of contribution are to be paid by the employer who is entitled to recover the employees' contribution from the wages of the particular employee or employees for the particular period. Chapter V details the benefits to which the insured persons and their dependants are entitled. Insured persons means a person who is or who was an employee in respect of whom contributions are or were payable under the Act and who is, by reason thereof, entitled to any of the benefits provided by the Act.

10. In 1951, Act 53 of that year amended the Act introducing a new Chapter, Chapter V-A. This is in the nature of transitional provisions which provides that as long as these provisions remain in force every employer shall, notwithstanding anything contained in the Act, pay to the Corporation a special contribution at such rate the Central Government may fix not exceeding five percent of his total wages bill. The special contribution in the case of factories or establishments situated in an area in which the provisions of Chapters IV and V are in force shall be fixed at a rate higher than that in the case of factories or establishments situated in an area in which the provisions of these Chapters are not in force. The special contribution is made recoverable as if it were in arrear of land revenue (Section 73-D of the Act).

11. In meeting the arguments of the appellant's counsel, Mr. K. Prabhakaran referred us to the statement of objects and reasons of the Amending Act LIII of 1951 wherein it is stated:

“The Employees' State Insurance Act, 1948, was passed by the Dominion Legislature in April, 1948. It provides for certain benefits to industrial employees in case of sickness, maternity and employment injury. The Act permits the implementation of the scheme by stages.

It was intended that the scheme should be implemented in the first instance in Delhi and Kanpur, but regional implementation of such scheme is always attended with certain practical difficulties. The principal difficulties are the rise in the cost of production and the diminution of the competitive capacity of industries located in those regions. The main objections of the employers centred round the former difficulty and those of the Uttar Pradesh Government emphasised the latter. The Central Government have considered those objections and are anxious to avoid any competitive handicap to any region. This may be best achieved by an equitable distribution of the employer's contribution, even where implementation is effected only in certain areas, among the employers in the whole country—employers in regions where the scheme is implemented paying slightly higher contributions. This will minimise the contribution leviable from the employers and spread the incidence of the cost of the scheme equitably. This Bill is primarily intended to achieve this object.

Advantage has been taken of this opportunity to effect some other amendments to the Act which have been found necessary for rectifying certain defects and removing certain lacunae in the Act—(S.O.R Gaz. of India, 1951, Pt. II-S. 2, page 141).”

12. The levy of special contribution was resorted for the purpose of spreading the incidence of the cost of the Scheme equitably. This is sought to be achieved by an equitable distribution of the employer's contribution, even when implementation is effected only in certain areas, among the employers in the whole country.

13. As Mr. Prabhakaran pointed out, which according to us is correct on a proper construction of Section 73-A and also on the Scheme of Chapter VA as such though the contribution in Sec. 73-A is in lieu of the employer's contribution payable under Chapter IV, the nature of the contribution is not exactly similar. No doubt ‘in lieu of’ means in the place of or instead of However, that does not mean the nature of the contributions in the two instance is identical. We might here quote with advantage the following observations made by P.N Mookerjee, J. (as he then was) speaking for a Bench of the Calcutta High Court in Calcutta Electric Supply Corporation v. Employees State Insurance Corporation (1) in dealing with a similar objection:

The objection appears to proceed upon a misconception and misreading of the statute. The special contribution has been imposed under Ch. V-A. This is plainly within and under the power, given under Section 73-A, sub-section (1) and that sub-section clearly contemplates and authorises such imposition notwithstanding anything in the statute, as expressly mentioned therein (vide the words ‘notwithstanding anything contained in the Act’ in the section itself). Under sub-section (2) of the aforesaid Section (Section 73-A) this special contribution will be in lieu of the ordinary (employer's) contribution payable under Chapter IV (vide Section 39) where that Chapter (Ch. IV) and Ch. V are in force. It is clear also that, under Section 73-F it is the central government and the central government alone, which has the power to grant exemptions from the special contribution. The state government's power under Sections 87 and 88 of the Act (vide also Section 91) in the matter of exemption of ‘factories or establishments or class of factories or establish-merits or of persons or class of persons from the operation of the statute or parts thereof, does not extend to the case of special contribution which is exclusively a matter for the central government alone. This is categorically stated in Section 73-F, which is the governing—and, indeed, the only—section, authorising and permitting exemption from special contribution. The state government's notification, therefore, must be read subject to the said limitation and it has no effect whatsoever on the special contribution, imposed under Section 73-A of the Act, or the liability thereof. It is true that, where the particular employer is otherwise liable for the ordinary (employer's) contribution under Ch. IV inview of sub-section (2) of Section 73-A, the special contribution will be, and must be deemed to be, in lieu of the same but that is only to give relief to the employer against double imposition and it does not mean that exemption from ordinary (employer's) contribution would necessarily have the effect of exempting the particular employer from the special contribution too. Indeed, that will be against both the letter and spirit of the statute and its scheme and purpose and the express provisions, contained in Ch. V-A—in particular, Sections 73-A and 73-F—and it would be directly contrary to the language and intention of the two sub-sections (1) and (2) of the said Sec. 73-A and of Section 73-F as well, which as already stated, expressly reserves the power of granting exemption from special contribution to the central government alone and denies such power to the state government. It is clear beyond dispute that the matter of special contribution, both as regards its imposition (vide Section 73-A) and exemption (vide Section 73-F) of cancellation (vide Section 73-1) is left by the statute solely to the discretion of the central government and the state government has nothing to do with it and it has no power in regard to the same. Read in the above light, the exemption granted under the state government's aforesaid notification, would not affect the imposition of the existing special contribution and, only when the employer is or becomes liable to pay the ordinary (employer's) contribution, under Ch. IV of the Act, it would be and would be deemed to be in lieu of the said ordinary (employer's) contribution, or in other words, where the employer is liable for the special contribution, he will not at the same time be liable for the ordinary (employer's) contribution under Ch. IV. Clearly, then, the exemption granted by the state government would be unavailing and unavailable for the purpose of a claim of exemption from the special contribution, which exemption can only be granted by the central government under Section 73-F of the Act, and no such exemption has admittedly, been granted in the present case.”

14. We may state here, with respect, that we are in complete agreement with the above statement of law.

15. No question of any quid pro quo arises in the case of special contribution under Section 73-A. Therefore, there is nothing illegal or wrong in that the employers are liable to contribute under the same without corresponding liability on the part of the employees also to pay their part of the contribution. The special contribution which the employers have to pay under Section 73-A of the Act, is an impost in the nature of a tax.—See 1972 K.L.J 243 and A.I.R 1957 All. 136. It is impossible to interpret Section 73-A in the manner in which Sri Kesavan Menon want it to be done. That will be doing violence to its language. As per that section the employer's special contribution is absolute and will not depend upon the question whether an employee is contributing. Such a contribution is a percentage of the total wage bill of the employer. The total wage bill in the section, as indicated in the explanation to the section itself, means:

“the total wages which have accrued due to employees in a factory or establishment in respect of such wage periods as may be specified for the purposes of this section by the central government by notification in the official gazette.”

16. There it might be noted the reference is to employees as such and not to employees who are insured persons as defined in the Act. Therefore, the special contribution which an employer makes under Section 73-A cannot have any nexus as such with that if the contribution which the employee may or may not make. In construing Section 73-A of the Act, one might take note of as to what Gagendragadkar, J., (as he then was) said in Buckingham and Carnatic Co. v. Venkatiah (2):

“Mr. Dolia contends that since this Act has been passed for conferring certain benefits on employees in case of sickness, maternity and employment injury, it is necessary that the operative provisions of the Act should receive a liberal and beneficient construction from the courts. It is a piece of social legislation intended to confer specified benefits on workmen to whom it applies, and so, it would be inappropriate to attempt to construe the relevant provisions in a technical or a narrow sense. This position cannot be disputed. But in dealing with the plea raised by Mr. Dolia that the section should be liberally construed, we cannot overlook the fact that the liberal construction must ultimately flow from the words used in the section. If the words used in the section are capable of two constructions one of which is shown patently to assist the achievement of the object of the Act, courts would be justified in preferring that construction to the other which may not be able to further the object of the Act. But, on the other hand, if the words used in the section are reasonably capable of only one construction and are clearly contractable in regard to the construction for which Mr. Dolia contends, the doctrine of liberal construction can be of no assistance.”

17. Therefore, we are of opinion that the view taken by the Court is correct and its decision calls for no interference. The appeal is, therefore, dismissed with costs.