Transfer of hospitals under ESIC to any state govt is ‘illegal’: Delhi HC

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Holding that the rules laid in the Employees State Insurance (ESI) Act do not allow the transfer of any of its assets to any person, including the state government, the Delhi High Court has stopped the transfer of hospitals and medical colleges under the Employees State Insurance Corporation (ESIC) by terming it “legally impermissible” and “contrary to the law.

A bench of Acting Chief Justice Gita Mittal and Justice C Harishankar pointed out that there was no provision in the ESI Act which enables the ESIC to do so. The directions come on a plea which had challenged the transfer of the hospital and medical colleges under it to any state government.

“The scheme of the ESI Act, 1948, especially Sections 59A and 59B of the statute do not enable the ESIC to transfer any of its assets to any other person, including the State Governments. There is no provision in the statute which enables the ESIC to do so,” the court said.

The bench, while delivering the judgment also added, “Given the legislative mandate, we, therefore hold that the action of the respondent no. 2 in transferring the medical colleges and institutions to the state governments is without jurisdiction, contrary to law and illegal”.

In order to effectuate the administration of the purposes of the ESI Act, the Centre had established the ESIC which would provide benefits to the employees in case of sickness, maternity and employment injury.

The court held that there was substance in the petitioner’s contention that instead of addressing the several concerns pointed out by the members in the 164th Meeting, ad hoc decision to transfer even proposed medical colleges were being taken.

“There is strength in the petitioner’s contention that there was nothing on record to show that any case by case evaluation of either the need or the efficacy of such transfer was conducted prior to the same being affected,” adding that the interest of the insured persons would be compromised and that the ESIC is losing all control over the facilities.

The court also said that “ESI Act contains nothing to indicate that funding by the State Government would entail, as necessary and inexorable sequitur, throwing open the hospitals to the general public”.

“…..If, by virtue of their being contributing employees of the ESI, and, per definition therefore, “insured persons”, the petitioner and others like him have a statutorily fossilized right to exclusive enjoyment of the facilities at the ESI hospitals, the court has a duty to zealously protect and preserve that right,” the bench said in a 38 page judgment.

The court’s direction came on pleas filed by Balaraj Jadhav and others who contended that the ESIC was flouting Section 59B of the ESI Act. According to this section, the ESIC took steps for establishment of medical, dental and nursing colleges all over India.

It also said that the source of funds given for this purpose was that of the ESIC and therefore comprised of contributions by the insured persons under the ESI Act. The plea also highlighted the gross mismanagement by quoting a CAG report.

The ESIC, on the other hand, had said that it should exit the field of medical education as it is not the core function and the objective of section 59B of the Act is unlikely to be met. It said that the state governments would contribute to the better functioning of the hospitals and colleges.