- Bookmark
- Share
- CaseIQ
E.S.I Corporation v. State Of Kerala & Ors.
Structured Summary of the Opinion
Factual and Procedural Background
The Employees State Insurance Corporation (the petitioner), established under the Employees State Insurance Act, 1948, filed two original petitions under Article 226 of the Constitution challenging judgment Ext. P1 of the Subordinate Judge, Kottarakkara in L.A.R. Nos. 408/96, 13/1989 and 14/1989. Those judgments were passed in references made under Section 18 of the Land Acquisition Act, 1894, arising from proceedings instituted by the second respondent at the instance of respondent Nos. 3 and 4. The petitioner contends that the reference court passed the impugned judgments enhancing compensation payable to respondents 3 and 4 without giving notice to the petitioner as a "person interested" under Section 20 of the Land Acquisition Act, thereby causing liability to be fastened on the petitioner’s funds. The acquisition relates to matters beginning from 1982 onwards, and the impugned judgments were passed as early as February 1995 and August 1996.
Legal Issues Presented
- Whether the petitioner, a statutory corporation established under a Central Act, is a "person interested" entitled to notice under Section 20 of the Land Acquisition Act, 1894, before the reference court passes awards that may impose liability on its funds.
- Whether the petitioner may challenge the impugned judgments by invoking the High Court's writ jurisdiction under Article 226 of the Constitution, despite pendency of appeals under Section 54 of the Act and despite having executed an agreement (Form No. 7 / Rule 9(3) of Kerala Land Acquisition Rules) to pay awards.
- Whether the failure to give notice to the petitioner to participate in reference proceedings vitiates the impugned judgments and requires quashing and remand for fresh awards after affording notice and opportunity to the petitioner and other parties.
Arguments of the Parties
Petitioner's Arguments
- The petitioner (E.S.I. Corporation) was not given notice of the reference proceedings or of the impugned judgments, even though it is a "party interested" as defined under Section 3(b) and entitled to notice under Section 20 of the Land Acquisition Act, 1894.
- Because the compensation enhanced by the impugned judgments would be payable from the petitioner’s funds, it has a direct financial interest and thus a right to notice and an opportunity to be heard before any liability is fixed.
- The petitioner relied on the Supreme Court decision in U.P. Awas Evam Vikas Parishad v. Gyan Devi ((1995) 2 SCC 326 : AIR 1995 SC 724) and a Division Bench decision of the Kerala High Court in Steel Authority of India Ltd. v. State of Kerala (1995 (2) KLT 683) to support entitlement to invoke writ jurisdiction under Article 226 when deprived of notice.
- The petitioner states it became aware of the impugned judgments only upon receiving notice from the District Collector and promptly approached the High Court; it denies any laches since it awaited the statutory notice that was not given.
Respondents 3 and 4's Arguments
- The respondents pointed out that they have appealed the impugned judgments before the High Court and that the petitioner is a party in those appeals; they argued that the petitioner should pursue relief by way of appeal under Section 54 of the Land Acquisition Act rather than by writ petitions under Article 226.
- They relied on the agreement executed by the petitioner in Form No. 7 (Rule 9(3) of the Kerala Land Acquisition Rules), contending that the petitioner agreed to pay the amounts awarded and must honour that bond and deposit the awarded amount before challenging the judgment.
- They contended that acquisition proceedings started long ago, property had been handed over to the petitioner, and buildings had been constructed, so the petitioner is guilty of laches in approaching the Court at this stage.
- They further contended that the petitioner, as a statutory corporation, was not entitled to be heard before the reference court under Section 50(2) of the Act and was not an “interested person” under Section 3(b).
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| U.P. Awas Evam Vikas Parishad v. Gyan Devi ((1995) 2 SCC 326 : AIR 1995 SC 724) | The availability of writ jurisdiction under Article 226 to local authorities (and similarly situated bodies) to seek judicial review of compensation determinations under the Land Acquisition Act, even where other remedies under the Act exist; and that the proviso to Section 5(2) does not deprive an aggrieved local authority of remedies under Article 226. | The court relied on this authority to hold that the remedy under Article 226 is available to challenge awards passed without notice and that, in cases where notice was not given at all, those affected are certainly entitled to challenge the impugned judgments under Article 226. |
| Steel Authority of India Ltd. v. State of Kerala (1995 (2) KLT 683) | The Division Bench interpreted the U.P. Awas decision and examined the definition of "person interested" under Section 3(b) and the notice requirement of Section 20; it concluded that aggrieved persons (including government companies) may invoke High Court jurisdiction under Article 226. | The court treated this decision as supporting the proposition that entities such as government-owned companies (and, by extension, statutory corporations) are "persons interested" under Section 20 and may invoke Article 226 where they were not given notice; the opinion draws on the Division Bench's reasoning to include the petitioner within persons entitled to notice and to judicial review. |
Court's Reasoning and Analysis
The court proceeded through a focused legal analysis applying the authorities and statutory provisions cited in the record. The key steps in the court's reasoning were:
- Application of Precedent: The court treated the Supreme Court decision in U.P. Awas Evam Vikas Parishad v. Gyan Devi as settling that extraordinary jurisdiction under Article 226 remains available to review compensation determinations under the Land Acquisition Act when grounds for judicial review exist — particularly where notices required by statute were not given. The court held that the doctrine applies where notices were not given at all, entitling the affected body to challenge the impugned judgments under Article 226.
- Confirmation from State Division Bench: The Division Bench decision in Steel Authority corroborated the reasoning that, post-U.P. Awas, aggrieved persons may invoke Article 226; that decision also examined "person interested" under Section 3(b) and the duty under Section 20 to give notice to such persons.
- Maintainability of Writ Petitions: On that legal foundation, the court rejected respondents' contention that the writ petitions were not maintainable because appeals under Section 54 were pending. The court held pendency of appeals does not bar invoking writ jurisdiction when the impugned judgments were passed without notice and in violation of statutory provisions.
- Effect of Bond / Form No. 7: The court considered and rejected the argument that the petitioner’s execution of a bond (Form No. 7, Rule 9(3) of Kerala Land Acquisition Rules) precluded judicial review. The court reasoned that such an agreement contemplates prompt payment but does not abrogate constitutional remedies available under Article 226.
- No Condition Precedent to Invoke Article 226: The court found no requirement that the petitioner deposit the amounts decreed before being heard in the constitutional forum; accordingly, the respondents’ contention that the petitioner cannot be heard unless it first pays was not accepted.
- Laches: The court addressed the laches argument and accepted the petitioner's explanation that it was unaware of the proceedings and had relied on the statutory mechanism to provide notice; hence it could not be held guilty of laches when notice was not given as required by Section 20.
- Who Is a "Person Interested": The court analyzed the definitions and prior decisions and concluded there was no reason to exclude a statutory corporation established by a Central Act (and owned/controlled by the Centre or State) from the category of "person interested" under Section 20, especially where its funds (sourced from workers and employers for welfare) would be used to meet enhanced compensation.
- Remedial Outcome: Because the petitioner was not given the statutory notice required by Section 20, the court concluded the impugned judgments were vitiated by the denial of opportunity to a party that would bear financial liability, and thus the judgments could not be sustained.
Holding and Implications
Core Ruling: The original petitions under Article 226 are allowed; the impugned judgments of the reference court are quashed and set aside.
Direct consequences and directives given by the court:
- The court quashed the impugned judgments (Ext. P1) and directed the reference court to pass fresh awards after affording a reasonable opportunity to all parties, explicitly including the petitioner, the second respondent, and respondents 3 and 4, to participate in the proceedings.
- The reference court was directed to expeditiously dispose of the matter, with a specific timeline: in any event before 31-12-1998, taking into account that the acquisition proceedings date from 1982 onwards.
Broader implications: The opinion applies established precedents (U.P. Awas Evam Vikas Parishad and the Steel Authority Division Bench decision) to confirm that statutory bodies and corporations that will ultimately bear acquisition costs can be treated as "persons interested" under Section 20 and may invoke Article 226 where they were not afforded statutory notice. The opinion does not purport to lay down a novel precedent beyond applying these binding decisions; its practical effect is to require fresh adjudication with notice to all interested parties and to protect parties financially affected by awards from having liability imposed without an opportunity to be heard.
1. The E.S.I Corporation established in terms of the Employees State Insurance Act, 1948 has come up with these two original petitions challenging Ext. P1 judgment of the Subordinate Judge, Kottarakkara in L.A.R Nos. 408/96, 13/1989 and 14/1989. Those judgments were passed in the references made by the second respondent at the instance of respondent Nos. 3 and 4, under Sec. 18 of the Land Acquisition Act, 1894.
2. It is contended by the petitioner that those judgments were passed without notice to it and that being party interested as defined in Sec. 3(b) of the said Act, it Was entitled to notice as provided in Sec. 20 of the Act. The petitioner was not aware of the proceedings which led to the impugned judgments enhancing compensation payable to the respondents 3 and 4 in this case. It is their contention that the compensation payable to respondents 3 and 4 on the basis of enhancement ordered in the impugned judgments has to be met from the funds of the petitioner Corporation. The petitioner is liable to pay the enhanced compensation as decreed in terms of the impugned judgments without notice to them, the petitioner submits, inspite of the statutory provision under Sec. 20 of the Act that they are entitled to such notice. In support of their contention, the decision of the Supreme Court reported in U.P Awas Evam Vikas Parishad v. Gyan Devi (Dead) by L.Rs, etc. etc., respondents ((1995) 2 SCC 326 : AIR 1995 SC 724) and a Division Bench decision of this court reported in Steel Authority of India Ltd. v. State of Kerala (1995 (2) KLT 683) are pointed out.
3. Countering these contentions, counsel for the respondents 3 and 4 submitted that the impugned judgments are now appealed against by them before this court. It is also submitted that these writ petitions will not lie challenging the impugned judgments as the petitioner, if found aggrieved should have filed an appeal in terms of Sec. 54 of the Act. It is also contended that the petitioner has been made party in the appeals filed by them and it is only after getting notice in such appeals that the petitioner has preferred this appeal. It is also contended that the petitioner has executed a bond in terms of Rule 9(3) of the Kerala Land Acquisition Rules agreeing to pay the compensation as awarded by the Land Acquisition Officer or the court without any dispute. They have to honour the bond and deposit the amount as awarded in the impugned judgment. Without that, the petitioner cannot be heard, to contend against the judgment, respondents 3 and 4 submit.
4. The answer to these contentions raised by respondents 3 and 4 are contained in the two decisions cited by the counsel for the petitioner. It is now settled law in the light of the decision reported in U.P Awas Evam Vikas Parishad, Appellant v. Gyan Devi, (Dead by L.Rs, respondents ((1995) 2 SCC 326 : AIR 1995 SC 724) that “even when notice has been served on the local authority, the remedy under Art. 226 of the Constitution would be available to the local authority on ground on which judicial review is permissible under Art. 226”. This is a case where notices were not given at all to the petitioners. Therefore, certainly, they are entitled to challenge the impugned judgments under Art. 226. It had also been held by the Supreme Court that “the proviso to Sec. 5(2) only precludes a local authority from seeking a reference but it does not deprive the local authority which feels aggrieved by the determination of the amount of compensation by the Collector or by the reference court to invoke the remedy under Art. 226 of the Constitution as well as the remedies available under the L.A Act.”
5. It was held by a Division Bench of this court in Steel Authority of India Ltd. v. State of Kerala, (1995 (2) KLT 683) that “with the pronouncement of the decision of the Constitution Bench in U.P Awas Evam Vikas Parishad v. Gyan Devi ((1995) 2 SCC 326 : AIR 1995 SC 724) the matter is no longer res integra and it is open to the aggrieved persons to invoke the extra ordinary jurisdiction of the High Court under Art. 226 of the Constitution.”
6. In the light of these binding pronouncements, respondents 3 and 4 cannot contend before me that these original petitions under Art. 226 are not maintainable.
7. There are appeals pending, filed by respondents 3 and 4, the claimants and also by the State. Pendency of appeals will not preclude the petitioner, even if they are parties to the appeal, to invoke the remedy of judicial review that is available to them, when the impugned judgments, which are also the subject matter of the said appeals, are passed without notice to them and in violation of the statutory provisions. Therefore the pendency of the appeal also will not preclude the petitioner from prosecuting these writ petitions.
8. The contention with regard to the agreement in Form No. 7, executed by the petitioner, as provided in Sec. 9(3) of the Kerala Land Acquisition Rules also will not disable the petitioner from approaching this court assiling the impugned judgment. The said provision only provides that when the acquisition is for a public purpose, other than for the purpose of the State Government or Central Government, no declaration shall be published, unless the acquisition authority executes in favour of the District Collector, an agreement in Form No. 7. Such an agreement contemplates prompt payment of the amount payable in terms of the awards or enhancement decreed, as the case may be - The said provision or agreement does not take away the remedy available to the petitioner under the Constitution of India.
9. The submission of the respondents 3 and 4 that the petitioner cannot be heard to contend anything against the award unless they pay the amount decreed in terms of the said impugned judgment also, does not hold good. In order to invoke a constitutional remedy available to the petitioner, there is no such condition precedent.
10. It is further submitted by respondents 3 and 4 that acquisition proceedings started long ago and the property had been handed over to the petitioner and they had constructed the building Judgments had been passed as early as in February, 1995 and August, 1996. The petitioner is, therefore, guilty of latches, in approaching this court. Petitioner answered this point stating that they were not aware of any proceedings before the court. They need not enquire, because the statute makes the court liable to issue notice to the parties interested including the petitioner, before passing an award. Therefore, they were awaiting the notice as statutorily provided and that they became aware of the impugned judgments only on receiving the notice from the District Collector. Immediately, they have approached this court with these petitions. In such circumstances, the petitioner cannot be said to be guilty of latches.
11. It is also contended that the petitioner being a statutory corporation was not entitled to be heard before the reference court in terms of Sec. 50(2) of the Act and it was not an interested person in terms of Sec. 3(b).
12. It is true that the decision of the Supreme Court referred to above is concerning the local authority and a company. Local authority is defined in Sec. 3(aa) of the Act and it is an inclusive definition to include town planning authority as well. Therefore, the local authority means a local body or a town planning authority. Of course, the petitioner will not come within the terms ‘local authority’. Sec. 50(2) also mentions about the “local authority or company concerned”. The petitioner is neither of these. Therefore, the Supreme Court decision cannot have any direct application to the case of the petitioner. Relying on the Supreme Court decision, a Division Bench of this court in Steel Authority's case, examining the definition of person interested as contained in Sec. 3(b) and the notice to “all persons interested” contemplated under Sec. 20, made it clear that the Steel Authority of India Ltd., being a Government company owned by the Central Government is a person interested as envisaged in Sec. 20 of the Act. Therefore, the net position is that a local authority is a party interested, a company is a party interested and a company owned by Central Government is also a party interested. In such circumstances, there is no reason to exclude “Corporation owned or controlled by the State”. Therefore, there is no reason to exclude a statutory corporation like the petitioner established by a Central Act from the person interested.
13. It is to be borne in mind that the funds in the hands of the petitioner Corporation is obtained from the workers and the contribution paid by the employers for the welfare of the workers. It is from out of that fund, that the petitioner has to defray expenses for acquisition. Therefore, such fund is public fund and before any liability is fastened on that public fund collected from the pockets of or for the workmen covered by the scheme of the petitioner, towards the enhanced compensation in terms of the judgments like Ext. P1 marked in this case, necessarily, the petitioner is entitled to be heard. There is no dispute that in terms of the bond executed by the petitioner in Form No. 7 as provided in Rule 9(3) of the Kerala Land Acquisition Rules, the petitioner is liable for the enhanced compensation as decreed in Ext. P1 judgment marked in these cases. But, before fastening such liability, it was incumbent upon the court to issue notice to the petitioner. It is also insisted as provided in Sec. 20 of the Act. As there is no such notice to the petitioner naturally, the impugned judgments are bad. As per Sec. 20, as held by a Division Bench of this court mentioned above “the reference court has to give notice to all persons interested”. Such a notice was not given to the petitioner. As held by the Division Bench, “if without affording an opportunity to the person who has to bear the acquisition costs, land value happened to be increased by leaps and bounds it would be a negation of principles of natural justice. The contexts in which “person interested” in the Act would fall should therefore, override the definition of the word ‘Company’ in Sec. 3(c). Every person, whether it is a Government owned company or a private company, must also be regarded as a “person for the purpose of participating in the proceedings if he or it is really interested in the outcome.”
14. In such circumstances, there is no reason to exclude a statutory corporation owned and controlled by the Central Government or the State Government, as the case may be.
15. Accordingly, it is held that these writ petitions are maintianable based on the said two decisions and that the petitioner is a person interested as envisaged in Sec. 20 of the Act. As the petitioner was not given notice by the reference court, the impugned judgments passed by the reference court cannot be sustained. Accordingly, I quash the impugned judgments and direct the reference court to pass fresh awards after affording reasonable opportunity to all the parties, including the petitioner, the second respondent and respondents 3 and 4 for participating in the proceedings. The original petitions are allowed. Taking into account that this is a matter relating to acquisition of the year 1982 onwards, the reference court shall expeditiously dispose of the matter, at any rate, before, 31-12-1998.
Alert