Basant Kumar Sarkar And Others vs Eagle Rolling Mills Ltd. And Others

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: Supreme Court of India

Case Number: Civil Appeals Nos. 721-723 of 1962

Decision Date: 26 February 1964

Coram: P.B. Gajendragadkar, K.N. Wanchoo, J.C. Shah, N. Rajagopala Ayyangar, S.M. Sikri

In this case, the Supreme Court recorded that the petitioners, Basant Kumar Sarkar and several others, were employed as workmen by the first respondent, Eagle Rolling Mills Ltd., and that they received free medical facilities of a high standard in a well equipped hospital maintained by that respondent. The Union of India, acting as the third respondent, issued a notification under section 1(3) of the Employees State Insurance Act of 1948 designating 28 August 1960 as the date on which certain provisions of the Act would become effective in specified areas of the State of Bihar. The area where the petitioners performed their duties fell within the ambit of that notification. Pursuant to the notification, the Chief Executive Officer of the first respondent served notices to the petitioners informing them that, from the appointed date, the medical assistance previously provided under the hospital scheme would cease for persons covered by the insurance scheme, and that thereafter such medical benefits would be governed by the relevant provisions of the Employees State Insurance Act. The petitioners consequently filed a writ petition before the High Court challenging both the constitutionality of section 1(3) of the Act and the legality of the notifications issued under that provision, alleging that the section violated article 14 of the Constitution and suffered from the vice of excessive delegation of legislative authority. The High Court rejected the petitioners’ contentions and dismissed the writ petitions. The petitioners then appealed to the Supreme Court by way of special leave, reiterating their argument that section 1(3) of the Act effected an undue delegation of power and therefore ought to be declared invalid. The Court held that section 1(3) did not constitute delegated legislation but rather amounted to conditional legislation, authorising the Central Government, by means of a notification, to establish a corporation for administering the Employees State Insurance scheme. The Court observed that the discretion as to the timing of the notification and the factories to which it would apply was left to the Central Government, a feature typical of conditional legislation, and cited the decision in Queen v. Burah as authority. Assuming, for argument’s sake, that some delegation existed, the Court further found that the plea of excessive delegation could not succeed because the Act itself provided sufficient guidance and the scheme of the legislation clearly indicated the parameters within which the Central Government could act, thereby negating any claim of unbridled discretion.

In the Court’s observation, it would have been impossible for the legislature to determine precisely the geographical areas and the specific factories in which the Employees’ State Insurance Corporation should be set up, because such detailed discretion could not be exercised by the statute‑making body. The Court explained that although the scheme contemplated by the Act was highly beneficial, it could not be introduced across the entire nation simultaneously. The Court noted that beneficial measures of this nature often require careful experimentation and therefore are sometimes adopted in stages and in different phases. Consequently, the decision of how far to extend the statutory benefits provided by the Act must logically be left to the discretion of the appropriate Government, and that delegation of discretion does not constitute an improper or excessive delegation of legislative power. The Court referred to the decisions in Edward Mills Co. Ltd. Beawar v. The State of Ajmer, [1955] 1 S.C.R. 735; M/s Bhikusa Yamasa Kshatriya v. Sangamner Akola Taluka Bidi Kamgar Union, [1963] Supp. 1 S.C.R. 524; and Bhikusa Yamasa Kahtriva v. Union of India, [1964] 1 S.C.R. 860 as authorities that supported this reasoning. The judgment was recorded in the Civil Appellate Jurisdiction as Civil Appeals Nos. 721‑723 of 1962, arising by special leave from the Patna High Court’s order dated 1 March 1961 in Miscellaneous Judicial Cases Nos. 1167, 1122 and 1235 of 1960. Counsel for the appellants comprised N. C. Chatterjee, Rai Behari Singh and Udai Pratap Singh, while counsel for respondent No. 1 included B. P. Singh, N. P. Singh and I. N. Shroff. For respondents Nos. 2 and 3, the Attorney‑General C. K. Daphtary, along with N. S. Bindra, V. D. Mahajan and B. R. G. K. Achar, appeared. The judgment was delivered on 26 February 1964 by Chief Justice Gajendra Gadkhar. The central issue before the Court was whether section 1(3) of the Employees’ State Insurance Act, 1948 (No. 34 of 1948) – hereinafter referred to as the Act – was invalid. The appellants, who were workmen employed by the three respondent firms – Eagle Rolling Mills Ltd., Kumardhubi Engineering Works Ltd. and Kumardhubi Fire Clay and Silica Works Ltd. – had filed writ petitions in the Patna High Court alleging that the impugned provision violated Article 14 of the Constitution and suffered from excessive delegation, rendering it void. Those employers were impleaded as respondent No. 1 in each writ petition. The High Court had dismissed the writ petitions, and the appellants consequently appealed to this Court, joining the three employers as respondents. All three appeals were heard together because they shared the same factual backdrop and raised an identical question of law. The Court observed that respondents No. 1 in each appeal were managed by M/s Bird & Co. Ltd. through a General Manager, and that the appellants, as their workmen, had previously enjoyed very satisfactory medical benefits free of charge, including access to a well‑furnished hospital with sixty permanent beds for the workmen, their families and dependents.

In this case the appellants complained that, because of section 1(3) of the Employees’ State Insurance Act, they were now required to accept medical benefits of a lower quality than had previously been provided. Consequently they challenged both the validity of the impugned section and the propriety and legality of the notification issued under that provision. The Employees’ State Insurance Corporation and the Union of India were joined as respondents 2 and 3 respectively to the writ petitions and to the appeals. On 22 August 1960 respondent 3, the Union of India, issued a notification under section 1, sub‑section (3), fixing 28 August 1960 as the date on which certain provisions of the Act would become operative in specified areas of the State of Bihar. By virtue of that notification the locality in which the appellants were employed was brought within the ambit of the Act. Pursuant to the notification, the Chief Executive Officer of respondent 1 informed the appellants on 25 August 1960 that, from the appointed day, medical benefits—including both indoor and outdoor treatment to the extent authorized by the Act—would cease to be provided to insurable persons. The officer issued and published a notice to that effect, and similar notices were subsequently served on the appellants, indicating that thereafter medical benefits would be governed by the relevant provisions of the Act rather than by the arrangements previously made by respondent 1. This sequence of events formed the factual basis of the present writ petitions and defined the nature of the dispute between the parties. The first issue raised by counsel for the appellants, identified as Mr Chatterjee, was that section 1(3) of the Act suffered from excessive delegation of authority and was therefore invalid. To assess that contention, the Court examined the text of section 1, sub‑section (3), which states: “The Act shall come into force on such date or dates as the Central Government may, by notification in the Official Gazette, appoint, and different dates may be appointed for different provisions of this Act and for different States or for different parts thereof.” The appellants argued that the power conferred on the Central Government to determine the commencement dates by notification granted the Government absolute discretion unbounded by any legislative criteria, and that such un‑canalised power rendered the provision invalid. They further contended that the Act did not prescribe any considerations that should guide the Central Government in exercising this power, and that this lack of guidance meant the power must be struck down. The Court, however, was not persuaded by that argument. It observed that section 1(3) was not an example of delegated legislation but rather constituted conditional legislation. The Act, the Court noted, contained a comprehensive code dealing with the insurance of employees covered by it and encompassed numerous remedial measures that the Legislature deemed necessary to enforce.

In this matter, the Court observed that the Act contains specific provisions that deal with the categories of workmen who are intended to benefit, and that the legislation makes appropriate arrangements to implement the policy of the Act as set out in its various sections. Section 3(1) of the Act, for instance, purports to empower the Central Government to create a corporation responsible for administering the Employees’ State Insurance scheme through a notification. In effect, the timing of that notification and the particular factories to which it should apply are left to the discretion of the Central Government. The Court noted that this discretionary element is precisely the sort of mechanism that is commonly employed by conditional legislation, whereby the legislature fixes the framework and leaves certain details to be determined by the appropriate authority.

The Court then turned to the authorities cited by the petitioner, particularly the observation of Lord Selborne in Queen v. Burah (1) concerning the powers given to the Lieutenant‑Governor under the provisions of Act XXII of 1869. The Court held that the same reasoning applies with equal force to the powers conferred on the Central Government by section 1(3) of the present Act. Lord Selborne had remarked that it is a mistake to describe the powers granted to the Lieutenant‑Governor as merely delegated powers, because the effectiveness of any act performed under those powers derives directly from the authority of the Governor‑General in Council, and the entire operation proceeds “directly and immediately under and by virtue of this Act (XXII of 1869) itself.” He further explained that the legislature had exercised its judgment in deciding the persons, laws and powers involved, and that once the prescribed conditions were satisfied, the legislation became absolute. The Court treated this passage as the primary response to the plea advanced by Mr Chatterjee.

Assuming, for argument’s sake, that an element of delegation existed, the Court found the contention still untenable. It observed that the Act provides ample guidance through its substantive provisions and through the overall scheme of the legislation. The preamble to the Act, the Court noted, makes it clear that the legislature enacted the law because it deemed it necessary to furnish certain benefits to employees in cases of sickness, maternity, and injury arising out of employment, and also to address related matters. Consequently, the policy of the Act is unambiguous and straightforward. Moreover, the definitions contained in section 2—such as “benefit period,” “employee,” “factory,” “injured person,” “sickness,” and “wages”—offer a clear indication of the types of establishments to which the Act applies, the class of persons for whose benefit the Act was enacted, and the nature of the benefits intended to be conferred.

The Court further outlined the structure of the Act. Chapter II deals with the corporation, the standing committee and the Medical Benefit Council, and sets out their constitution. Chapter III addresses finance and audit matters. Chapter IV provides for contributions to be made by both employees and employers. Chapter V prescribes the benefits that must be granted to the workmen and contains general provisions concerning those benefits. Chapter V‑A contains transitory provisions, and Chapter VI follows thereafter. The Court emphasized that this detailed legislative framework demonstrates that the Central Government’s discretion is bounded by clear legislative guidelines, and therefore the plea of excessive delegation could not succeed.

Chapter VI deals with the adjudication of disputes and claims, while Chapter VII prescribes penalties. Chapter VIII, being the final chapter, addresses miscellaneous matters. By the very nature of legislative drafting, it would have been impossible for the legislature to specify precisely the areas and the categories of factories in which the Employees’ State Insurance Corporation should be established. It was evident that a scheme of such magnitude, although highly beneficial, could not be introduced throughout the entire country in a single step. Beneficial measures that require careful experimentation must sometimes be adopted in stages and in different phases; consequently, the decision of how far to extend the statutory benefits contemplated by the Act had to be left to the discretion of the appropriate Government. Under section 2(1), “appropriate Government” means the Central Government with respect to establishments under the control of the Central Government, a railway administration, a major port, a mine, or an oilfield, and the State Government in all other cases. Accordingly, when the Act is extended to various establishments, the relevant Government is empowered to constitute a Corporation for administering the Employees’ State Insurance scheme. Modern legislatures have uniformly followed this pattern in dealing with welfare schemes: they devise a socio‑economic welfare plan, make detailed provisions for it, and then leave it to the concerned Government to determine when, how, and in what manner the scheme should be introduced. This approach, in the Court’s view, does not constitute excessive delegation. The issue of excessive delegation has been examined repeatedly by this Court, and the method for addressing it is now settled. In Edward Mills Co. Ltd., Beawar and Others v. The State of Ajmer and Another, the Court rejected a challenge to section 27 of the Minimum Wages Act, 1948, which authorized the appropriate Government to add any employment to either part of the schedule by notification and to deem the scheme amended accordingly. The Court observed that while section 27 implied a delegation—allowing a body specified by the legislature to act in a manner the legislature itself could—it was not unwarranted or unconstitutional and did not exceed permissible limits. Similar reasoning has been affirmed in recent decisions such as M/s Bhikusa Yamasa Kshatriya and Another v. Sangamner Akola Taluka Bidi Kamgar Union and Others and Bhikusa Yamasa Kshatriya (P) Ltd. v. Union of India and Another. Accordingly, the Court concludes that the delegation of authority under the Employees’ State Insurance Act is within constitutional bounds.

The Court held that the challenged provision, namely section 1(3) of the Act, could not be shown to be unconstitutional. Before disposing of the appeals, the Court felt it necessary to address one further matter. It was earlier observed that respondent No. 3 had issued a notification under section 1(3) designating 28 August 1960 as the date on which certain provisions of the Act would become operative in specified areas of the State of Bihar. Following that notification, the Chief Executive Officer of respondent No. 1 issued a series of notices that gave effect to the State Government’s notification. Those notices informed the appellants that, because of the notification, the medical benefits which had previously been provided to them would from that date onward be payable under the relevant provisions of the Act. The appellants contended before the High Court that the notices were void and should be set aside. Their submission was that respondent No. 1, in the three appeals cited as (1) [1955] 1 S.C.R. 735, (2) [1963] Supp. 1 S.C.R. 524 and (3) [1964] 1 S.C.R. 860, had no authority to diminish the benefits that had earlier been granted to the appellants, and that the benefits contemplated by the Act were neither qualitatively nor quantitatively comparable with those earlier benefits. The High Court ruled that the validity of the notices and circulars issued by respondent No. 1 could not be examined under Article 226 of the Constitution; rather, the appropriate forum for raising the dispute was under section 10 of the Industrial Disputes Act. While acknowledging that the jurisdiction conferred on High Courts by Article 226 is indeed wide, the Court noted that Mr Chatterjee had not suggested that such jurisdiction could extend to industrial disputes of the nature raised by the appellants. Consequently, without expressing any view on the substantive merits of the appellants’ contention, the Court affirmed the High Court’s finding that the correct remedy for the appellants to air their grievances concerning the notices and circulars was to file a dispute under section 10 of the Industrial Disputes Act, or, where feasible, to seek relief under sections 74 and 75 of the Act. In view of these observations, the Court concluded that the appeals could not be sustained and ordered them dismissed. No order as to costs was made, and the appeals were formally dismissed.