ESIC Medical Colleges, Hospitals to remain independent, transfer to Govt Illegal: HC

The writ petition made a grievance that in addition to gross mismanagement of the funds of the ESIC, as noted in the report of the statutory audit conducted by the Comptroller and Auditor General (CAG) under Section 34 of the enactment, the ESIC is not complying with the statutory mandate of Section 59B of the act. The petition challenged the decision of the ESIC meeting which stated that

“a. ESIC should exit the field of medical education entirely as it is not the core function of the ESIC and the objective of section 59B of the Act is unlikely to be met.

b. Hand over on-going medical colleges and other Medical Education Institutions having separate infrastructure to State governments willing for such transfer."

The petitioner stated that the decision of the Corporation to exit from the field of Medical education would seriously prejudice the interest of the beneficiaries of the ESI Scheme that is the insured persons.The petition cited the examples of ESIC medical colleges in Mandi, Himachal Pradesh, Coimbatore as well as Alwar etc which were in discussion to be transferred to the state governments

The respondents, on their behalf submitted that the decision to stop imparting the medical education by the ESIC and for transfer of some of the existing medical colleges and hospital to a State Government or to State Government undertaking was taken by the respondent no.2 in the interest of proper functioning and management of the medical and dental colleges run by it. ESIC justified that running of medical colleges was not its core function, which was to provide social security to those insured under the Employees State Insurance scheme...

The court after going through the arguments observed

So far as the establishment of medical colleges, nursing colleges and treating institutions are concerned, Section 59B enables the ESIC to establish such colleges and institutions “for its para-medical staff and other employees” with a view to “improve the quality of service provided under the ESIC Scheme”. The statutory mandate thus is quite clear and it unequivocally declares that the establishment of all facilities including medical colleges, nursing colleges and treating institutions under the ESI Act is strictly for the benefit of insured persons, and if extended, for their families.

The court narrated some MOUs signed between ESIC and certain state governments observing that interest of the insured persons would be compromised and that the ESIC is losing all control over the facilities.

We may also note that the respondents are unable to explain any element of public interest in the proposed transfers. Nothing has been placed before us which would enable this court to take a view that the transfers were in any way for the benefit of the insured persons for whose sole benefit the legislature has enacted the ESI Act which includes the provision of Section 59B of the
statute.

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. In the 164th Meeting, the members of the Standing Committee had pointed out that an amendment to the statutory scheme would benecessary if the ESIC was to effectuate the policy of transferring the medical colleges and institutions to the State governments. 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 is illegal

......the actions of and the further efforts by the ESI in transferring the ESI medical institutions/colleges to State Governments as well as the proposal to further transfer them by way of public private partnerships is de hors the statutory provisions and are legally impermissible......

In view of the above, the court directed that ESIC is bound to and shall strictly comply with the mandate of Section 59B and other provisions of the Employees’ State Insurance Act, 1948.