GASKET RADIATORS PVT. LTD versus EMPLOYEES STATE INSURANCE CORPN. & ANR.

Citation: [1985] 2 S.C.R. 1085 · Decided: 28-02-1985 · Supreme Court of India · Bench: O. CHINNAPPA REDDY · Disposal: Dismissed

Judgment (excerpt)

) 
J 
1085 
A 
GASKET RADIATORS PVT. LTD. 
v. 
EMPLOYEES STATE INSURANCE CORPN. & ANR. 
B 
February 28, 1985 
0. CHINNAPPA 
REEDY, 
E. S. VENKATAiAMIAH 
& R. B. 
MISRA, JJ). 
Constit:ition of India, 
Articles 41, 
42 and 43 and Entries 23 and 
C 
24, List III, Schedule VJI-Campetency of legblature to make laws. 
Employees' State Insurance Act, 1948-Chapter V-A (Prior to its 
deletion w. e. /. Juley 1, 1973 by notification issued uuder s. 73-1)-Whether 
contemplates rendering of any serv:ce or conferment of benefit-Employer's 
special contributfon-Whethernecessory to label constitution as a tax or fee-
Whethl'r quid pro quo exists between cantribution and benefit-Whether quid 
D 
pro quo need be simultaneous or deferred. 
Interpretation : Whether observation in Judgments to be construed as 
provision of statute. 
The Employee' State Insurance Act 1948, a social welfure legislation 
E 
in tune with the Directive Principles of State Policy contained in Articles 
41, 42 and 43 of the Constitution, was enacted to provide for certain 
benefits to employees in the case of sickness, maternity and employment 
injury and to make provisions for certain other matters in relation thereto. 
The Act directly falls under Entries 23 and 24 of List III of the Vllth 
Schedule of the Constitution, which are, "social security and social insur-
ance; employment and unemployment", and ''welfare of labour including 
F 
conditions of work, pro\,'.ident funds, employers liability, w0rkmeo's compen-
sation, invalidity and old age pensions and maternity benefits'', 
The Act applies to all factories including factories belonging to the 
Government other than seasonal factories. 
Chapter II provides for the 
establishment of the Employees' State Insurance Corportttion, to be a body 
corporate, for administering the scheme of Employe\::s' State Insurance. 
Section 26 provides for the establishment of a Fund called the Employees' 
State Insurance Fund. 
Section 28 lists tho purposes for which the Fund 
may be expended. 
Chapter IV provides for the manner of insurance of 
all the employees in factories or ostablishmenta to which tho Act applies 
G 
H 
A 
8 
c 
D 
E 
1086 
SUPREME COURT REPORTS 
(198512 s.c.R. 
and the payment of c oatributioo for that purpose. 
The contribution pay-
able io respect of an employee shall comprise contribution payable 
by the empt oyer called employer's contribution and contribution payble 
by the employee 
called employee's 
contribution. 
The 
contribution 
has to be paid at tbe rates specified in the first Ecbedule. 
Section 46 
specifies the benefits to wbi.::h the insured persons, their dependants and olhers 
shall be entitled. The scheme under the Acl could only be implemented by 
stages, and, therefore, "transitory provisions" were made by introduction 
of Chapter V-A by s. 20 of Act No. 53 of 1951, which provided for the 
payment by the principal employer of a special contribution which shall be 
in lieu of the employer's contribution payable under Chapter IV in the 
case of factories or establishments situate in areas in which the provisions 
of both Chapters IV and V are in force. 
The provisions or Chapter V -A. 
however. ceased to have effect on and from July 1, 197 J. 
The appellant company was foemed in 1964 and started production 
the same year. 
The appellant company was exempted from the provisiona 
of Chapter V·A until the provisions of Chapter V of the Act were enforced 
in the area where the appellant's factory was situated. 
This exemption was 
withdrawn with effect from May 31, 1969, 
The appellant company ques· 
tioned its liability to pay special contribution under Chapter V-A of the 
Act under Article 2 26 of the Constitution. 
The High Court dismissed the 
petition. 
In the appeal to this Court it was contended that the contribution 
payable under Chapter V -A is a fee and its levy is illegal as the Act does 
not contemplate the rendering of any service or the conferment of any 
benefit to the appellant company or its employees as quid pro quo for the pay· 
meat, and the provisions of Chapter V-A are, therefore, ultra vires. 
Dismissing the appeal. 
HELD : 1. The payment of contribution by an employer towards the 
premium of an employee's compulsory insurance under the Employee' State 
Insurance Act falls directly within Entries 23 and 24 of List III of the 
F 
VII th Schedule and it is wholly unnecessary to seek justification fot it by 
recourse to Entry 97 of List I or Entry 4 7 of List III 

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