Supreme Court settles conflict between DACP Scheme and ESIC Regulations in promotions: Employees’ State Insurance Corporation vs. Union of India & Ors. (20 January 2022)

Date of the Judgment: 20 January 2022
Citation: 2022 INSC 772
Judges: Dr Dhananjaya Y Chandrachud, J and A S Bopanna, J
Can a government body’s internal regulations override a central government scheme for employee promotions? The Supreme Court of India recently addressed this question in a case involving the Employees’ State Insurance Corporation (ESIC) and its teaching staff. The core issue was whether the Dynamic Assured Career Progression (DACP) Scheme, which allows for quicker promotions, should apply to ESIC’s teaching faculty, or if the ESIC’s own recruitment regulations should take precedence. This judgment clarifies the hierarchy between central government schemes and specific regulations of statutory bodies. The judgment was authored by Dr. Dhananjaya Y Chandrachud, J, with a concurring opinion by A.S. Bopanna, J.

Case Background

The Employees’ State Insurance Corporation (ESIC), a statutory body under the Ministry of Labour and Employment, is responsible for providing medical benefits to employees. The ESIC’s teaching staff, including Assistant Professors, are governed by its recruitment regulations. Respondents 3 to 25, who were Assistant Professors at ESIC Model Hospital, Rajajinagar, Bengaluru, sought promotion to Associate Professor under the DACP Scheme. This scheme, introduced by the Central Government, allows for quicker promotions for medical officers. The ESIC, however, had its own regulations specifying a longer service period for promotions. The contesting respondents joined service between 7 February 2012 and 26 June 2014.

Timeline

Course of Proceedings

The Central Administrative Tribunal (CAT) initially ruled in favor of the contesting respondents, directing ESIC to consider their promotions under the DACP Scheme. The CAT relied on a letter from ESIC indicating the implementation of the DACP Scheme for Medical Officer Cadres. The ESIC then challenged this order in the High Court of Karnataka. The High Court dismissed ESIC’s petition, stating that the DACP Scheme had statutory effect under Section 17 of the ESI Act and that the ESIC Recruitment Regulations 2015, which stipulated a longer service period for promotions, were not applicable to the contesting respondents as they were recruited before the 2015 regulations came into effect. The High Court also noted that ESIC’s counsel had conceded that the DACP Scheme would apply.

Legal Framework

The case revolves around the interpretation of Section 17(2)(a) of the Employees’ State Insurance Act, 1948, which states:

“The method of recruitment, salary and allowances, discipline and other conditions of service of the members of the staff of the Corporation shall be such as may be specified in the regulations made by the Corporation in accordance with the rules and orders applicable to the officers and employees of the Central Government drawing corresponding scales of pay: Provided that where the Corporation is of the opinion that it is necessary to make a departure from the said rules or orders in respect of any of the matters aforesaid, it shall obtain the prior approval of the Central Government.”

Section 97 of the ESI Act empowers the ESIC to frame regulations, which have the effect of statutory provisions:

“Regulations made by the Corporation shall be published in the Gazette of India and thereupon shall have effect as if enacted in this Act.”

The ESIC Recruitment Regulations 2008 required four years of service as Assistant Professor for promotion to Associate Professor. The ESIC Recruitment Regulations 2015 increased this requirement to five years. The DACP Scheme, on the other hand, allowed for promotion after two years of service.

Arguments

Appellant (ESIC)’s Submissions:

• The ESIC is an autonomous statutory body with the power to frame its own regulations under Section 97 of the ESI Act.
• The ESIC Recruitment Regulations 2015, which require five years of service for promotion, govern the terms and conditions of service for Assistant Professors.
• The DACP Scheme, implemented by an Office Memorandum, applies to employees of Central Government Ministries and Departments, not statutory bodies like ESIC.
• Section 17(2) of the ESI Act allows ESIC to depart from Central Government rules with prior approval, and Section 97(3) empowers ESIC to make regulations with statutory effect.
• The contesting respondents were initially governed by the ESIC Recruitment Regulations 2008, which required four years of service, and then by the 2015 regulations.
• The High Court incorrectly applied the DACP Scheme, and there is no estoppel against legislative action.
• The ESIC Recruitment Regulations 2015 were made with the approval of the Central Government, as stated in the preamble.
• Advertisements mentioning the DACP Scheme are irrelevant as recruitment rules prevail.
• The DACP Scheme’s applicability to non-teaching staff is irrelevant as the ESIC Recruitment Regulations 2015 specifically govern “Medical Teaching Faculty Posts.”
• Most of the contesting respondents have been promoted after completing five years of service as per the ESIC Recruitment Regulations 2015.

Contesting Respondents’ Submissions:

• The DACP Scheme, extended to all medical doctors, is binding on ESIC under Section 17(2)(a) of the ESI Act.
• The ESIC Recruitment Regulations 2008 were issued without the Central Government’s approval.
• ESIC advertisements stated that “Promotional avenues in the Department are available under DACP guidelines of Govt. of India.”
• ESIC acknowledged that the existing recruitment regulations were under revision concerning the DACP Scheme.
• The ESIC Recruitment Regulations 2015 were issued without prior Central Government approval.
• ESIC admitted that the DACP Scheme applies to its employees and is willing to be bound by it.
• The DACP Scheme has statutory force under Section 17 of the ESI Act and was made before the ESIC Recruitment Regulations 2008.
• ESIC is estopped from denying the applicability of the DACP Scheme due to representations in recruitment advertisements.
• Even if the ESIC Recruitment Regulations 2015 are valid, the contesting respondents had completed two years of service before they came into effect.
• The cumulative teaching experience of the contesting respondents should be considered sufficient for promotion.
• Denying the DACP Scheme to the teaching cadre of ESIC violates Article 14 of the Constitution, especially when they perform clinical work.
• ESIC has previously taken the stance that the DACP scheme is applicable to its employees from 01 March 2008.

Issues Framed by the Supreme Court

The primary issue before the Supreme Court was to determine the applicable rules/regulations for the promotion of the contesting respondents from Assistant Professor to Associate Professor:

1. Whether the ESIC Recruitment Regulations 2008, the DACP Scheme, or the ESIC Recruitment Regulations 2015 should apply?

Treatment of the Issue by the Court

Authorities

The Supreme Court considered the following authorities:

Judgment

How each authority was viewed by the Court:

• Sukhdev Singh v. Bhagatram Sardar Singh Raghuvanshi [1975] 1 SCC 421*: The Court relied on this case to emphasize that regulations framed by statutory bodies have the force of law.
• Pepsu Road Transport Corporation, Patiala v. Mangal Singh and Others [2011] 11 SCC 702*: The Court cited this case to reiterate that regulations under a statute have the force of law and are binding.
• Sant Ram Sharma v. State of Rajasthan AIR 1967 SC 1910*: The Court used this case to highlight that while administrative instructions can supplement rules, they cannot override them.
• Union of India v. Ashok Kumar Aggarwal [2013] 16 SCC 147*: This case was cited to reinforce that office orders or memoranda cannot contravene statutory rules.
• P D Aggarwal v. State of U.P. [1987] 3 SCC 622*: The Court referred to this case to support the view that an office memorandum cannot override statutory rules.
• Union of India v. Majji Jangamayya [1977] 1 SCC 606*: The Court used this case to distinguish between statutory orders and administrative instructions.
• Malik Mazhar Sultan v. U.P. Public Service Commission [2006] 9 SCC 507*: The Court relied on this case to show that an erroneous advertisement does not create a right against the rules.
• Ashish Kumar v. State of Uttar Pradesh [2018] 3 SCC 55*: This case was cited to reiterate that statutory rules take precedence over advertisements.
• Rajasthan Public Service Commission v. Chanan Ram [1998] 4 SCC 202*: The Court used this case to emphasize that a subsequent amendment to service rules renders an earlier advertisement infructuous.
• Nedunuri Kameswaramma v. Sampati Subba Rao AIR 1963 SC 884*: This case was cited to establish that a concession on a point of law is not binding.
• Himalayan Coop. Group Housing Society v. Balwan Singh [2015] 7 SCC 373*: The Court relied on this case to clarify that clients are not bound by a lawyer’s admissions on matters of law.
• Director of Elementary Education, Odisha v. Pramod Kumar Sahoo [2019] 10 SCC 674*: This case was cited to support the view that a concession on a question of law concerning service rules does not bind the state.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the statutory nature of the ESIC Recruitment Regulations. The Court emphasized that regulations made under a statute have the force of law and must take precedence over executive instructions or office memoranda. The Court also highlighted the fact that the ESIC Recruitment Regulations 2015 were made with the approval of the Central Government, as stated in their preamble. The Court also noted that the contesting respondents did not challenge the ESIC Recruitment Regulations 2008 or 2015 before the CAT or the High Court.

The Court’s reasoning was based on the interpretation of Section 17 of the ESI Act, which allows the ESIC to frame its own regulations, and Section 97, which gives these regulations the force of law. The Court noted that the DACP Scheme was implemented through an Office Memorandum, which is an executive instruction, and cannot override statutory regulations.

The Court considered the argument that the ESIC was estopped from denying the applicability of the DACP Scheme due to representations in its advertisements and concessions made by its counsel. However, the Court rejected this argument, stating that there can be no estoppel against a statute or regulations having a statutory effect. The Court also noted that a concession on a point of law is not binding.

The Court’s decision was unanimous, with both judges concurring on the judgment. The Court’s reasoning was based on the established legal principle that statutory regulations prevail over executive instructions and that concessions on points of law are not binding.

The Supreme Court quoted the following from the judgment:

“Regulations made by the Corporation shall be published in the Gazette of India and thereupon shall have effect as if enacted in this Act.”

“The characteristic of law is the manner and procedure adopted in many forms of subordinate legislation.”

“The statutory bodies as well as general public are bound to comply with the terms and conditions laid down in the regulations as a legal compulsion.”

Key Takeaways

• Statutory regulations of a body like ESIC have precedence over executive instructions or office memoranda issued by the Central Government.
• Recruitment rules prevail over statements in advertisements.
• Concessions made by a counsel on a point of law are not binding on the client or the court.
• The DACP Scheme, implemented by an Office Memorandum, does not apply to the teaching cadre of ESIC.
• The ESIC Recruitment Regulations 2015, which require five years of service for promotion, are applicable to the contesting respondents.

Directions

The Supreme Court directed that the revised seniority list of the Teaching Cadre at the appellant corporation should reflect the promotions of the contesting respondents in accordance with the ESIC Recruitment Regulations 2015 and not the DACP Scheme.

Development of Law

The ratio decidendi of this case is that statutory regulations of a body like ESIC have precedence over executive instructions or office memoranda issued by the Central Government. This case reinforces the principle that regulations made under a statute have the force of law and must be followed. This judgment clarifies the hierarchy between central government schemes and specific regulations of statutory bodies, reaffirming the principle that statutory rules prevail over executive orders.

Conclusion

The Supreme Court allowed the appeal, setting aside the High Court’s judgment. The Court held that the ESIC Recruitment Regulations 2015, which require five years of service for promotion, apply to the contesting respondents, and not the DACP Scheme. This decision underscores the importance of statutory regulations over executive instructions and clarifies the legal framework for promotions within statutory bodies.

Category:

• Service Law
  • Employees’ State Insurance Act, 1948
  • Section 17, Employees’ State Insurance Act, 1948
  • Section 97, Employees’ State Insurance Act, 1948
  • Recruitment Regulations
  • Promotion
  • Statutory Regulations
  • Executive Instructions
  • Dynamic Assured Career Progression Scheme

FAQ

Q: What is the Dynamic Assured Career Progression (DACP) Scheme?
A: The DACP Scheme is a central government initiative that allows for quicker promotions for medical officers, typically after two years of service.

Q: What are the ESIC Recruitment Regulations?
A: These are regulations framed by the Employees’ State Insurance Corporation (ESIC) that govern the recruitment and promotion of its staff. The 2015 regulations require five years of service for promotion from Assistant Professor to Associate Professor.

Q: What did the Supreme Court decide in this case?
A: The Supreme Court decided that the ESIC Recruitment Regulations 2015 take precedence over the DACP Scheme for the promotion of teaching staff at ESIC.

Q: Why did the Supreme Court rule against the DACP Scheme in this case?
A: The Court ruled against the DACP Scheme because the ESIC Recruitment Regulations have statutory force and override executive instructions like the DACP Scheme.

Q: What does this mean for ESIC employees?
A: This means that ESIC employees in the teaching cadre will be promoted based on the ESIC Recruitment Regulations, which require five years of service for promotion to Associate Professor, and not the DACP Scheme’s requirement of two years.

Q: Can an advertisement override recruitment rules?
A: No, the Supreme Court has made it clear that recruitment rules prevail over statements in advertisements.

Q: What is the legal significance of this judgment?
A: This judgment clarifies that statutory regulations of a body like ESIC have precedence over executive instructions or office memoranda issued by the Central Government.