Case Note & Summary
The petitioner, Surat Manav Seva Sangh, a registered charitable trust under the Bombay Public Trust Act, filed a petition under Articles 226 and 227 of the Constitution of India read with the Employees' State Insurance Act, 1948 (ESI Act). The trust runs a pathology laboratory, MRI, and dialysis center within the New Civil Hospital, Surat, under a Memorandum of Understanding dated 21.01.2011. The trust provides services at 50% less than market rates, offers free tests to five patients daily as recommended by the hospital, and provides free tests to BPL cardholders without any cap. The trust does not admit patients independently and only conducts tests upon reference from the Medical Superintendent. The respondent, Employees' State Insurance Corporation (ESIC), passed an order under Section 45A of the ESI Act on 22.12.2017 determining contributions, followed by an order under Section 45AA on 07.03.2018 for damages and interest, and issued show-cause notices on 21.01.2020 for recovery. The petitioner challenged these orders and notices on the ground that the trust is not a 'factory' or 'establishment' under Section 2(12) of the ESI Act and is not engaged in any profit-making activity. The court analyzed the definition of 'factory' under Section 2(12) and 'establishment' under the Act, and noted that the trust's activities are purely charitable and not commercial. The court held that the ESIC had no jurisdiction to pass the orders under Sections 45A and 45AA as the trust was not covered under the ESI Act. The court quashed the orders dated 22.12.2017 and 07.03.2018, and the show-cause notices dated 21.01.2020, and allowed the petition. The court directed that no recovery be made pursuant to the impugned orders and notices.
Headnote
A) ESI Act - Coverage - Charitable Trust - Section 2(12) - The petitioner, a charitable trust running a pathology laboratory within a government hospital, is not a 'factory' or 'establishment' under the ESI Act as it does not engage in any profit-making activity and is solely attached to the hospital. The court held that the ESI Corporation's orders under Sections 45A and 45AA were without jurisdiction and quashed them. (Paras 1-17) B) ESI Act - Damages and Interest - Section 45A and 45AA - The orders dated 22.12.2017 under Section 45A and 07.03.2018 under Section 45AA, and the show-cause notices dated 21.01.2020 for recovery of damages and interest, were quashed as the petitioner was not covered under the Act. The court held that the respondent had no authority to determine contributions or levy damages. (Paras 1-17) C) Constitutional Law - Writ Jurisdiction - Articles 226 and 227 - The High Court exercised its writ jurisdiction to quash the orders and notices as they were passed without jurisdiction and in violation of principles of natural justice. The court held that the petitioner's charitable activities were not subject to the ESI Act. (Paras 1-17)
Issue of Consideration
Whether the petitioner, a charitable trust running a pathology laboratory within a government hospital, is covered under the Employees' State Insurance Act, 1948, and whether the orders under Sections 45A and 45AA of the Act and the consequential recovery notices are valid.
Final Decision
The court allowed the petition and quashed the order dated 22.12.2017 under Section 45A, the order dated 07.03.2018 under Section 45AA, and the show-cause notices dated 21.01.2020. No recovery shall be made pursuant to these orders and notices.
Law Points
- Charitable trust running pathology lab in government hospital not a factory or establishment under ESI Act
- ESI Act not applicable to charitable activities without profit motive
- Section 45A order without jurisdiction if establishment not covered
- Show-cause notice for recovery quashed if based on invalid determination
