**IN THE HIGH COURT OF KERALA AT ERNAKULAM**
**PRESENT:**
**THE HONOURABLE MR. JUSTICE DAMA SESHADRI NAIDU**
**THURSDAY, THE 12TH DAY OF JULY 2018 / 21ST ASHADHA, 1940**
**WP(C).No. 19990 of 2018**
**-----------------------**
## **PETITIONER(S)**
**-------------**
**1 GEETHA P, AGED 40 YEARS,W/O.KRISHNAKUMAR, PLAVU NILKUM KANDIYIL, CHOOLOOR P.O.,KOZHIKODE.**
**2 AMRITHA P.K., AGED 20 YEARS, D/O.KRISHNAKUMAR,PLAVU NILKUM KANDIYIL, CHOOLOOR P.O.,KOZHIKODE.**
**BY ADVS.SRI.R.SANJITH**
**SMT.C.S.SINDHU KRISHNAH**
**RESPONDENT(S):**
- **--------------**
**1. EMPLOYEES INSURANCE CORPORATION, REGIONAL OFFICE, NORTH SWARAJ ROUND, THRISSUR-680020, REPRESENTED BY ITS DIRECTOR.**
**2. SUB REGIONAL OFFICE,**
- **E.S.I. CORPORATION, HOUSEFED COMPLEX, SASTHRI NAGAR ROAD, ERANHIPALAM, KOZHIKODE-673006, REPRESENTED BY ITS JOINT DIRECTOR.**
**3. DIRECTOR GENERAL OF HEALTH SERVICES, DIRECTORATE GENERAL OF HEALTH SERVICES, NIRMAN BHAVAN, MAULANA AZAD ROAD, NEW DELHI-110108.**
**R1 & R2 BY ADV. SRI.K.SANDESH RAJA**
- **R3 BY ADV.SRI.JAISHANKAR V.NAIR, CGC**
**THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 12-07-2018, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:**
**K.V.**
**WP(C).No. 19990 of 2018 (W) ---------------------------**
## **APPENDIX**
## **PETITIONER(S)' EXHIBITS**
## **-----------------------**
**EXHIBIT P1 TRUE COPY OF THE ADMISSION NOTICE BEARING NO.L-11/12/3/UG ADMISSION/2018-19/MEC DATED 09.05.2018. EXHIBIT P2 TRUE COPY OF THE IDENTITY CARD ISSUED BY THE ESI CORPORATION TO THE 1ST PETITIONER. EXHIBIT P3 TRUE COPY OF THE NATIONAL ELIGIBILITY CUM ENTRANCE TEST(UG)-2018 RESULT OF THE 2ND PETITIONER. EXHIBIT P4 TRUE COPY OF THE APPLICATION BEARING NO.ESIC003233. EXHIBIT P5 TRUE COPY OF THE JUDGMENT IN W.A.NO.1520/2017 AND CONNECTED CASES AS AVAILABLE FROM THE ENQUIRY OF THIS HONOURABLE COURT. EXHIBIT P6 TRUE COPY OF THE ORDER DATED 6.6.2018 BEARING NO.72A.21.12.2018 ADM.SRO.KZ EXHIBIT P7: TRUE COPY OF THE EMPLOYEE DETAILS AS AVAILABLE FROM THE 1ST AND 2ND RESPONDENT. RESPONDENTS EXHIBITS: NIL --------------------**
**/TRUE COPY/**
**K.V. P.S.TO JUDGE 12.07.2018**
DAMA SESHADRI NAIDU, J. ========================= W.P.(C) No.19990 of 2018 ========================= Dated this the 12[th] day of July 2018
## JUDGMENT
The petitioners are the mother and daughter; the mother is an employee within the protective cover of the ESI Corporation (“the Corporation). Under the Employees’ State Insurance Act, 1948, the employee is an insured person. She continues to be so as long as her salary remains within the statutory ceiling.
2. The employee’s daughter secured a rank in the NEET entrance. To get her daughter admitted to a medical college for the undergraduate course (MBBS/BDS) under the ESI quota, the employee claimed “Ward of Insured Person Certificate” but could not get it. The Corporation rejected it, through the Ext.P6. Questioning the Ext.P6 order of rejection, dated 06.06.2018, both the mother and the daughter filed this writ petition.
3. The Corporation, as seen from the Ext.P6, rejected the employee’s claim on the premise that she did not fulfill the eligibility criterion under Clause 8(a) of the admission policy.
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That is, the employee has not been in continuous insurable employment for five/four/three years.
Submissions:
## The Petitioners’:
4. Sri Sanjith, the learned counsel for the petitioners, has submitted that the Corporation, with no rhyme or reason, introduced an artificial gradation of Group I, Group-II, GroupIII, based on the length of service. To begin with, he has contended that the Corporation has intended to extend a benefit to the employees coming under its protective cover. That accepted, the Corporation ought to have, continues the learned counsel, kept only the merit as the criteria, instead of the length of service.
5. To elaborate, Sri Sanjith has submitted that the employee’s daughter is a meritorious student, who secured a good rank. Just because her mother has not been working for more years, her chances for better, higher educational prospects, especially in medicine, cannot be stymied. Extraneous and unsustainable is the reason, he continues, that the student’s
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mother has not completed the required minimum service.
6. After elaborating on constitutional principles involving irrationality and arbitrariness, Sri Sanjith has relied on these judgments: (1) State of U.P. v. Committee of Management,[1] (2) State of Maharashtra v. Ravdeep Singh Sohal,[2] (3) D.S.Nakara v. Union of India,[3] and (4) Chairman, All India Railway Recruitment Board v. K.Shyam Kumar.[4]
Respondents’:
7. On the contrary, Sri Sandesh Raja, the learned Standing Counsel for the Corporation, has submitted that the Corporation has only a few seats available under the reserved category for the employees coming under this category. Unless some eligibility criteria are fixed, the Corporation cannot effectively administer the beneficial policy—the policy of securing medical education to the employees’ children. He has also submitted that if merit alone is the criterion, the very policy of reserving any seats even for the children of the insured persons falls foul of the doctrine of merit.
> 1 AIR 2010 SC 402 2 2000(9) SCC 184 3 _(1983) 1 SCC 305_ 4 (2010) 6 SCC 614
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8. The condition that an employee ought to have been, asserts Sri Raja, in continuous insurable employment for five/four/three years is inviolable. In this regard, he has drawn my attention to Employee's State Insurance Corporation v Jemin Elizabeth Mathew[5] , a Division Bench judgment. He asserts that this Court has unambiguously held that the continuous insurable employment is indispensable. So he urges this Court to dismiss the Writ Petition.
Discussion:
## How Does This Admission Policy Operate?
9. The Corporation issued the Admission Notice on 9th May 2018, stipulating the criteria for “Admission of ‘Wards of Insured Persons’ (IPs) in UG Course (MBBS/BDS) . . . UnderInsured Persons (IPs) Quota’ for Academic Session 2018-19.” The Guiding Principle (GP) 5.2.1 divides the candidates into three groups: Group I, Group II, and Group III. The division is on “merit cum preference” basis. And every applicant seeking admission must have a valid Ward of Insured Person Certificate issued by a competent authority—that is, the Corporation. 52015 (1) KLT 328
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According to GP 6.2 of the Scheme, the last date for submitting applications to the authority concerned to get the Certificate is 30th May 2018. No request will be entertained later.
10. GP 7.9 of the Scheme determines an essential eligibility criterion: The critical date for determining the eligibility under the ‘Insured Persons Quota’ is 1st January 2018. The Scheme also incorporates the “Admission Policy” and “Admission Procedure”. Clause 3 of the Policy clarifies that, to admit the candidates on “merit cum preference”, the Corporation will follow the due process as specified in the Admission Policy or as it will specify “from time to time.”
11. GP 4.5 describes how the division of IPs into three groups takes place.
|Gro<br>up|Insurable<br>Employme<br>nt Period|Contributi<br>on Paid or<br>Payable in<br>a Year|Total<br>Contributi<br>on before<br>1stJan 2018|Exigencies|
|---|---|---|---|---|
|Gr. I|Five Years|For not<br>less than<br>78 days|Nine|Out of 9<br>Periods, two<br>shortfalls of<br>minimum 78<br>days could be<br>condoned, by<br>adding<br>the|
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|||||immediate<br>preceding two:<br>9+2|
|---|---|---|---|---|
|Gr.<br>II|Four Years|- Do -|Seven|7+2<br>Contributions|
|Gr.II<br>I|Three Years|- Do -|Five|5+2<br>Contributions|
## 12. GP 4.5 has these features:
- The employee must be in “continuous insurable employment” for “a minimum period of” five/four/three years by 1st January 2018, the year admission. Thus, there are three Groups.
- Obvious is the rank of preference. First the IPs in Group I will get preference for admission, followed by Group II and Group III.
- The unfilled seats, if any, will be surrendered to the “respective State Governments.”
- The five-/four-/three-year continuous-insurable-employment will be reckoned based on the contribution period.
- Each block of 12 months (Financial Year) has two contribution periods—April to September and October to March.
- The five-year block must have nine contribution periods; four-year block, seven contribution periods; and three-year block, five contribution periods.
- Each contribution must have received the period
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contribution for minimum 78 days. That is, in every six months, the contribution must be at least for 78 days.
- In each block, the contribution may fall below the “78-days minimum”—twice.
- Then, under the condition of “exigency”, two contribution periods beyond five/four/three years could be counted in. Cut to chase, the contribution periods for five, four, and three years are 11, 9, 7 respectively.
13. So five-/four-/three-year periods need not mean calendar or financial years; instead, they are reckoned based on the contribution periods. That accepted, we face a contradiction: The “Note” attached to GP 4.5 adds another element to the “minimum continuous period”: The period must start from 01.01.2012 for five-year slab; from 01.01.2013 for four-year slab; and from 01.01.2014 for three-year slab.
Clarification:
14. First, the Court pointed out what it felt to be an anomaly between the body of GP 4.5 and the Note. The Corporation, then, explained that if an insured person could not fulfill the length of continuous service based on contribution periods, the Corporation, in the alternative, could reckon the
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service from the commencing date, rather than the culminating date.
## How are the half-yearly periods reckoned?
|S. No.|Contribution Periods for<br>Academic Session 2018-19|Minimum Days<br>of Contribution|
|---|---|---|
|(i)|1stApril 2012 - 30thSeptember<br>2012|78|
|(ii)|1stOctober 2012 - 31stMarch<br>2013|78|
|1|1stApril 2013 - 30thSeptember<br>2013|78|
|2|1stOctober 2013 - 31stMarch<br>2014|78|
|3|1stApril 2014 - 30thSeptember<br>2014|78|
|4|1stOctober 2014 - 31stMarch<br>2015|78|
|5|1stApril 2015 - 30thSeptember<br>2015|78|
|6|1stOctober 2015 - 31stMarch<br>2016|78|
|7|1stApril 2016 - 30thSeptember<br>2016|78|
|8|1stOctober 2016 - 31stMarch<br>2017|78|
|9|1stApril 2017 - 30thSeptember<br>2017|78|
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Note: (i) and (ii) are the “exigencies.” That is, if there are any two breaks in the nine periods, (i) and (ii) could be counted in.
The Elaboration of the Scheme:
15. To understand the Scheme and the Policy, we must, among other things, consider these expressions: Employee, Insurable Employment, Contribution, Contribution Period, the Return of Contribution Period, Exigency & Enlarged Time, “78 days of paid or payable contribution”, the date of entry and the date of Registration, the Corporation’s disclaimer, and “words not defined.”
Employees' State Insurance Act, 1948:
16. Section 2(9) defines an "employee." Then, Section 2(13A) defines "insurable employment" to mean employment in a factory or establishment to which the ESI Act applies. Section 2 (14) of the Act defines "insured person" to mean a person who is or was an employee “regarding whom contributions are or were payable under this Act and who is by reason thereof, entitled to any of the benefits provided by this Act.” So, I may note, to have the
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benefits provided by the Act, the employee must have contributions paid or payable. No other constraint found mentioned.
17. Section 39 defines "contribution." The contribution payable to the Corporation comprises the employer's contribution and the employee's. We may consider sub-section (5) (a) of Section 39. It says if any contribution payable under this Act remains unpaid when it has become due, the employer “must pay simple interest" at 12% per annum or at such higher rate as specified, until its actual payment. Remedially, the Corporation can recover the dues from the defaulting employer by invoking the Revenue Recovery Act.
18. Regulation 2A of the Employees’ State Insurance (Central) Rules, 1950 (the Regulations), defines “contribution period.”. It is the period not exceeding six consecutive months, as specified in the Regulations. The Scheme refers to exigency. If there is a break in the contribution periods—that is, if the contribution for any half-yearly block is for less than 48 days—the next period can be counted in. This counting-in beyond the
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permissible 9/7/5 blocks can happen twice. Not more.
19. The statute scanned further, Section 40 (1) lays down the employer’s obligation: the principal employer must pay for every employee, whether directly employed by him or through an immediate employer, both the employer's and the employee's contribution. Under sub-section (2), “in the case of an employee directly employed by him,” the principal employer may deduct from the employee's wages her contribution, but not otherwise.
20. Section 42 of the Act deals with the general provisions for paying the contributions. Sub-section (2) mandates that the employer must pay both its contribution and the employee's, too. Section 44, read with Regulations 26, compels the employers to furnish returns and maintain registers ‘in certain cases.’ Section 45, further, gives extensive powers to the Inspectors of the Corporation. These Inspectors can inspect any establishment falling within the sweep of the Act and ensure that the employer complies with the statutory mandates. And Section 45A-D provides for the steps the Corporation could take to collect the arrears of contribution from the employer. The Corporation can
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invoke the recovery mechanism under the Revenue Recovery Act.
## The Date of Entry and the Date of Registration:
21. Under Section 2A of the Act, read with Regs. 10B and 32 of the Regulations, every factory or establishment to which this Act applies must be registered within such time and in such manner as specified in the regulations. Regulations 11 to 14 mandate the method of registering the employees’ names with the Corporation. The employer must do it.
22. Regulation 31 prescribes the time for payment of contribution: “15 days of the last day of the calendar month in which the contribution falls due.” Regulation 31A enables the Corporation to collect interest on the delayed payments, while Regulation 26 compels the employer to file the return “within 42 days of the termination of contribution period to which it relates.”
## Pivotal Provision:
23. Here comes the pivotal provision around which the whole dispute revolves: Para 8 of the Admission Policy. It needs elaboration, so it bears reproduction:
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8. Insured person for the purpose of availing benefit of Insured Persons (IPS) Quota for his/ her wards shall be, as under
a) ''The 'Insured Person' shall be an 'employee' as defined in the ESI Act; and he/she should have been in continuous insurable employment for a minimum period of five/ four / three years as on, and immediately preceding the 1st January of the year of admission; and contribution in respect of him/her were paid/ payable for not less than 78 days in all the 9/7/5 contribution periods immediately preceding 1st January of the year of admission with the proviso that the return of contribution as provided under Section 44 of the ESI Act read with Regulation 26(a) of the ESI (General) Regulation be filed with 42 days of termination of contribution period to which it relates, during this five/ four/ three year period. However, if the IP does not fulfill the requirement of minimum 78 days of paid or payable contribution as above in the specified CPs on account of exigency beyond contribution as above in the specified CPs on account of exigency beyond control of IP, 78 days of paid/ payable contribution shall be allowed to reckon from among the 02* contribution periods shown in the tables in Para (4.5) during the five/ four/ three-year period for determining eligibility. The five/ four / threeyear period along with extended period of one year for the purpose eligibility for eligibility, i.e. 1st January of the year of admission.
b) The insured person for the said purpose having five/ four / three years of continuous insurable employment shall be grouped as Group- I/ II / III respectively.
c) The date of entry into the scheme for calculating the minimum continuous period would be the date of registration available in the IP database of the ESIC as uploaded by the employer in the Web Portal of ESIC.
d) In case there is default or delay on the part of the employer in getting itself or the concerned employee covered under the Scheme, the ESIC will not be responsible for the said default or delay.
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e) Any period prior to the date of entry described above would not be counted towards the five / four / three-year period of eligibility for the purpose of availing benefit of Insured Persons (IPs) Quota.
f) The combined earnings of the IP and spouse (parents of the applicant) should not exceed Rs. 06 (six) lakh per annum.
g) All other words and expressions used not defined/ explained in this Admission Policy shall have the meanings respectively assigned to them in the ESI Act 1948, ESI (Central) Rules, 1950 and the ESI (General) Regulations, 1950.
(italics supplied)
Does the Policy suffer from the vice of arbitrariness or unreasonableness?
24. To find out the supposed shortcomings, let us examine
the Corporation’s admission policy. Para 8 of the Policy, as I mentioned earlier, is pivotal. It bears scrutiny. It contains these conditions:
- The insured person must have been in continuous insurable employment for five/ four / three years.
- The period must have been completed by the 1st January of the year of admission (2018).
- The contribution must have been paid/ payable for at least 78 days in all the 9/7/5 contribution periods immediately preceding 1st January of the year of admission.
- The return of contribution must have been filed in 42 days after the termination of contribution period to which it
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relates.
- If the IP does not fulfill the requirement of minimum 78 days of paid or payable contribution because of exigency, the IP must be allowed to reckon from among the two contribution periods shown in the tables.
- The five/ four/three-year period [must be reckoned] along with the extended period of one year.
- The date of entry into the scheme for calculating the minimum continuous period would be the date of registration available in the IP database of the ESIC as uploaded by the employer.
- The employer’s delay cannot bind the Corporation.
- Any period of employment before registration with ESIC would not be counted.
- The combined earnings of the applicant’s parents should not exceed six lakh rupees.
- Words and expressions not defined in the Policy will have the meanings ascribed to them in the ESI Act 1948, the Rules, and the Regulations.
## Continuous Insurable Employment and Minimum Contribution Days:
25. The employee, here, contends that continuous insurable employment for a fixed minimum number of years is arbitrary; talent alone ought to have been reckoned as the basic criterion.
Is the Condition of Continuous Insurable Employment
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## Arbitrary?
26. According to the Admission Policy, the employee should be an insured person, as defined under the ESI Act. She should have been in continuous insurable employment for five/four/three years, as on 1.1.2018. Besides, she should have contributed for 78 days in each contribution period, as shown in the table. So the employee’s entitlement to the certificate—the Ward of Insured Person—depends, here, on two conditions: (1) continuous insurable employment, and (2) regular contribution.
How Did the Employee Fare?
27. The employee’s continuous insurable employment and contributions run thus:
|Sl No.|Contribution Period|No. of days<br>contribution<br>paid|
|---|---|---|
|1|1stApril 2013-30thSeptember<br>2013|0|
|2|1stOctober 2013-31stMarch<br>2014|0|
|3|1stApril 2014-30thSeptember<br>2014|0|
|4|1stOctober 2014-31stMarch<br>2015|0|
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|5|1stApril 2015-30thSeptember<br>2015|30|
|---|---|---|
|6|1stOctober 2015-31stMarch<br>2016|182|
|7|1stApril 2016-30thSeptember<br>2016|183|
|8|1stOctober 2016-31stMarch<br>2017|169|
|9|1stApril 2017-30thSeptember<br>2017|178|
28. The policy adopted must have a rational nexus with the object sought to be achieved. This proposition brooks no dilution. Agreed. In Committee of Management, a high school was upgraded as an intermediate college. Upgraded, the college was denied grant-in-aid. The Supreme Court has held that the Government’s policy of exclusion has no intelligible nexus with object it wishes to achieve. The upgraded college included the high school, too.
29. The Maharashtra State admission policy, then,
stipulated that the defence personnel, seeking admission for their children into medical courses, ought to have been “transferred to Maharashtra, in public interest, on or after 1-7-1994.” The
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Bombay High Court kept in view “the peculiar situation in which defence personnel are placed and the exigencies of their transfer, in public interest, during an academic year.”
30. So, instead of striking down the Rule, read it down “to harmonise it with other Rules.” Then, it has held that the defence employee’s son having secured the rank should not be denied admission only because his father had been transferred to the State of Maharashtra before July 1994. The Supreme Court in Ravdeep Singh Sohal agreed with the High Court’s decision. It has observed that if the cut-off date defeats the object of reserving for the defence personnel’s children “who come to the State of Maharashtra from outside on account of transfers of their parents in public interest.” The Court also observed that the defence personnel have no fixed time of transfer.
31. I reckon the length of service stands on a different footing from the date of transfer. Length of service and period of contribution go together; the more the service, the more the contribution, and the more the employee’s claim to any benefit. For the benefit comes out of contribution. On the other hand,
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transfer is a fortuitous event.
32. D. S. Nakara reiterates what has been held in Ram Krishna Dalmia v. Justice S.R. Tendolkar [AIR 1958 SC 538]: Though Article 14 forbids class legislation, it does not forbid reasonable classification. To pass the test of permissible classification, the legislative or administrative act must fulfil two conditions: (i) that the classification must be founded on an intelligible differentia which distinguishes persons or things grouped together from those that are left out of the group; and (ii) that that differentia must have a rational relation to the objects sought to be achieved by the statute in question.
33. The classification may be founded, D. S. Nakara also explains, on differential basis according to objects sought to be achieved but what is implicit in it is that there ought to be a nexus—that is, causal connection—between the basis of classification and the object of the statute.
34. Here, the Corporation grouped employees according to the length of their service and linked a benefit to that length of service. This classification, I reckon, cannot be termed
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unreasonable or arbitrary. I may note that in D. S. Nakara the pensionary benefits were given based on the date of retirement, rather than the length of service. Here, it is on the converse.
35. In K. Shyam Kumar, the Government cancelled a recruitment test. It has found that the question paper was leaked, candidates impersonated and indulged in mass-copying. The employer had three alternatives before it: (i) to cancel the entire written test and to conduct a fresh written test; (ii) to offer retest to the successful 2690 candidates out of 3,22,223 participants; (iii) and to go ahead with the first written test, confining the investigation to 62 candidates against whom there were serious allegations of impersonation. It favoured the second alternative. When that choice was questioned, the High Court chose the third one.
36. Finally, the Supreme Court applied the principle of Wednesbury unreasonableness and the proportionality test. It has held that, by accepting the third alternative, the High Court was perpetuating the illegality. For there were serious allegations of the question paper leakage, large scale impersonation by
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candidates, and mass copying in the first written test. So it backed the employer’s decision—to choose the second option.
37. I am afraid none of the decisions the petitioners relied on help their cause. I find the Corporation’s condition on the length of service neither arbitrary nor unreasonable.
Judicial Imprimatur:
38. A learned Division Bench of this Court, in Jemin Elizabeth Mathew, examined two key words in clause 8: "continuous insurable employment" and " for a period of five years as on the 1st January of the year of admission". After examining the lexical nuances and the semantic significance of these expressions, the Division Bench has held follows:
“12. The words "five continuous insurable years employment" is prefixed by "a period of five years as on 1st January of the year. The plain and simple meaning of the words shall be completion of five years continuous period as on 1st January of the year.
Admittedly, the institution from where the certificate was applied came under the scheme only on 1.6.2009. The period of five years could be completed only on 31.5.2014 and 1st January being the cut-off date for scrutinising the application, no error was committed by the Corporation in not issuing the certificate to petitioner's parents. The learned Single Judge as well as the writ petitioner has placed reliance on the definition of "year" in section 2(w) of the Employees State Insurance Regulation, 1950. The said definition of
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"year" is "year means a calendar year". The said definition in no manner militates clause 8 of the notice or on the interpretation which has been put up by the Corporation, of the period. Where a period of continuous five year has been contemplated in the notice, that obviously means five completed calendar years. The said definition also in no manner help the writ petitioner.
We are of the view that the learned Single Judge committed error in interpreting clause 8 in the manner as to hold the writ petitioner eligible. The Corporation has formally followed its criteria treating five years continuous period as on 1st January with which no fault can be found. In view of the aforesaid discussion, the judgment of learned Single Judge is set aside. The writ petition is dismissed.”
39. I may note here that continuous insurable employment should have not only on-time registration but also contributions for at least 78 days in each period. That is, the employee must have worked for those minimum days in each period, subject to the two exigency periods. True, this Court, on earlier occasions, relaxed the rigour of contributions.[6] In other words, the Court has distinguished between late payment and non-payment: one is curable and the other is not.
40. Here, the employee fulfilled neither condition. She has no continuous insurable employment; her employer, too, has
> 6 See Bindu Radhakrishnan v. ESI, 2017(4) KHC 876 (holding that delayed contribution cannot deprive the employee of a benefit, for it is the employer that contributes.)
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failed to contribute for the minimum periods.
So I hold that the employee has failed to fulfill the basic eligibility criteria. And the Corporation has, rightly, rejected her claim. As a result, the writ petition stands dismissed.
Sd/- DAMA SESHADRI NAIDU JUDGE
sd