The Employees State Insurance Corporation
Chapter Eight
Syllabus topic 1.4, "Employees State Insurance Corporation"
Pages 52 to 57 of 597
In one line
Chapter IV runs a contributory health and injury insurance scheme, and sections 24 to 27 set up the people who run it and the fund they run it out of.
In exam wording: sections 24 to 27 of the Code on Social Security 2020 provide for the Principal Officers and other staff of the Employees' State Insurance Corporation, the constitution of the Employees' State Insurance Fund, the purposes for which that Fund may be expended, and the Corporation's power to hold property.
Why the law has this at all
Provident fund is saving; insurance is pooling. The difference matters and it explains everything about Chapter IV.
Under Chapter III a worker gets back, with interest, what he and his employer put in. Under Chapter IV a worker gets medical treatment, sickness pay, maternity pay, disablement pay or a dependants' pension when the event happens, whether he has contributed for thirty years or for thirty weeks. Most contributors will draw less than they pay; a few will draw far more. That is what insurance is, and it only works if the money is pooled in one fund and administered by a body that is not the employer.
Hence the design of these four sections. Section 25 puts every rupee into a single Employees' State Insurance Fund. Section 26 then does something unusual and important: it states an exhaustive list of the purposes that fund may be spent on. A pooled fund with an open ended spending power is a fund that leaks.
Some words this chapter uses
Insured Person is defined in section 28(2) and is the person entitled to benefits under this Chapter. User charges are amounts collected from persons treated at the Corporation's hospitals who are not contributors. Contribution is defined in section 2(21). Superannuation is defined in section 2(82). Gazetted post means a post whose holder's appointment is published in the Gazette, used here as a rank marker in Central Government service. Regulations are made by the Corporation itself under section 157, as distinct from rules made by a Government.
Section 24: the Principal Officers and the staff
Section 24(1) and (2). The Central Government may appoint a Director General of the Corporation and a Financial Commissioner, who are the Principal Officers of the Corporation. They hold office for such period, not exceeding five years, as the order of appointment specifies, and the proviso makes an outgoing officer eligible for re-appointment if otherwise qualified.
Section 24(3) and (4). Their salary and allowances are prescribed by the Central Government. They exercise such powers and discharge such duties as the Central Government prescribes, and perform such other functions as the regulations specify.
Section 24(5), disqualification. A person is disqualified from being appointed as, or being, Director General or Financial Commissioner if he is subject to any of the disqualifications specified in section 8. So the same list that keeps an insolvent or a defaulting employer off the Board keeps him out of the executive chair.
The Employees State Insurance Corporation
Section 24(6), removal. The Central Government may at any time remove either officer, and shall do so if removal is recommended by a resolution of the Corporation passed at a special meeting called for the purpose and supported by the votes of not less than two thirds of the total strength of the Corporation.
That sub-section contains both a discretion and a duty, and the difference is the answer to a good short question. Government may remove of its own motion. Government must remove where the Corporation itself has resolved, at a special meeting, by a two thirds majority of total strength, not merely of those present.
Section 24(7), other staff. The Corporation may employ such other officers and employees as are necessary. The proviso requires the sanction of the Central Government for creating any post whose maximum monthly salary exceeds the prescribed figure.
Section 24(8), conditions of service. Specified in the regulations, in accordance with the rules applicable to Central Government officers on corresponding scales. Three provisos: medical specialists and super specialists notified by the Central Government are to have terms similar to their equivalents in the All India Institute of Medical Sciences, the Post Graduate Institutes of Medical Sciences and Research or similar Central institutions; prior Central Government approval is needed for any departure from those rules; and the sub-section does not apply to consultants and specialists appointed on contract.
The medical parity proviso is easy to pass over and it is worth a sentence in an essay. The Corporation runs hospitals, and it cannot recruit specialists at clerical scales.
Section 24(9) and (10), the Union Public Service Commission. Every appointment to posts corresponding to Group A and Group B Gazetted posts under the Central Government must be made in consultation with the Union Public Service Commission, except medical, nursing and para-medical posts. The provisos exempt an officiating or temporary appointment not exceeding one year, and provide that such an appointment confers no claim to regular appointment and does not count towards seniority or minimum qualifying service. If a question arises whether a post corresponds to Group A or B, it goes to the Central Government, whose decision is final.
Section 25: the Employees' State Insurance Fund
Section 25(1). All contributions and user charges paid under Chapter IV, and all other moneys received on behalf of the Corporation, are paid into a fund called the Employees' State Insurance Fund, held and administered by the Corporation for the purposes of the Code. The proviso deems user charges collected from the other beneficiaries referred to in section 44 to be contributions forming part of the Fund.
The Employees State Insurance Corporation
Section 25(2). The Corporation may accept grants, donations, Corporate Social Responsibility Fund and gifts from the Central Government, any State Government, a local authority, or any individual or body, incorporated or not, for any purpose of the Chapter.
Section 25(3). All moneys accruing or payable to the Fund are deposited in such bank or banks as the Central Government approves, to the credit of an account styled the account of the Employees' State Insurance Fund.
Section 25(4). The Fund, or any other money held by the Corporation, is deposited or invested in the manner prescribed by the Central Government, and the account is operated by such officers as the Standing Committee authorises with the approval of the Corporation.
Section 26: what the Fund may be spent on
Subject to the Chapter and the rules and regulations, the Fund shall be expended only for the following purposes. The word "only" is the point of the section.
There are twelve heads, clauses (a) to (l):
| Clause | Purpose |
|---|---|
| (a) | payment of benefits and provision of medical treatment and attendance to Insured Persons under section 28, and to their families where medical benefit is extended to them, with the charges and costs connected with it |
| (b) | fees and allowances to members of the Corporation, the Standing Committee, the Medical Benefit Committee and other Committees |
| (c) | salaries, leave and joining time allowances, travelling and compensatory allowances, gratuities, compassionate allowances, pensions and provident or other benefit fund contributions for the Corporation's officers and staff, and the expenditure of the offices and services set up under the Chapter |
| (d) | establishment and maintenance of hospitals, dispensaries and other institutions, and provision of medical and other ancillary services |
| (e) | contributions to a State Government, local authority, private body or individual towards the cost of medical treatment and attendance, including the cost of buildings and equipment, under an agreement entered into by the Corporation |
| (f) | the cost of auditing the Corporation's accounts and of valuing its assets and liabilities |
| (g) | the cost of the Employees' Insurance Courts |
| (h) | sums payable under any contract entered into for the purposes of the Code by the Corporation, the Standing Committee or a duly authorised officer |
| (i) | sums under any decree, order or award of a court or Tribunal against the Corporation or its officers for acts done in execution of duty, or under a compromise or settlement |
| (j) | the cost of instituting or defending civil or criminal proceedings arising out of action taken under the Chapter |
| (k) | expenditure, within limits prescribed by the Central Government after consultation with the Corporation, on improvement of health and welfare and on rehabilitation and re-employment of disabled or injured Insured Persons |
| (l) | such other purposes as the Corporation authorises with the previous approval of the Central Government |
The Employees State Insurance Corporation
If the list will not fit in an answer, group it: benefits and medical care (a, d, e); the machinery and people who deliver them (b, c, g); the Corporation's legal and financial obligations (f, h, i, j); welfare and rehabilitation (k); and the residual head (l), which alone needs the previous approval of the Central Government.
Section 27: holding of property
Four sub-sections, and the last two are the ones students forget.
Section 27(1). Subject to conditions prescribed by the Central Government, the Corporation may acquire and hold property, movable and immovable, sell or otherwise transfer any such property vested in or acquired by it, and do all things necessary for the purposes for which it is established.
Section 27(2). Subject to prescribed conditions, it may from time to time invest any moneys not immediately required for expenses properly defrayable under the Code, and re-invest or realise those investments.
Section 27(3). With the previous sanction of the Central Government and on prescribed terms, it may raise loans and take measures for discharging them.
Section 27(4). It may constitute, for the benefit of its own officers and staff or any class of them, such provident or other benefit fund as it thinks fit.
Sub-section (1) is what makes the Corporation able to own the hospitals through which it delivers the medical benefit rather than buying the service from somebody else. Sub-section (4) is a small irony worth noticing: the body that administers other people's provident fund neighbour Chapter may set up one for its own staff.
A worked example
The Corporation wants to build a new hospital in Nashik, appoint a cardiologist to run its cardiac unit, and remove a Director General it has lost confidence in.
Can it own the hospital? Yes. Section 27 permits the Corporation to acquire and hold immovable property, subject to prescribed conditions.
Where does the money come from? The Employees' State Insurance Fund. Section 26 permits expenditure on the establishment and maintenance of hospitals and other medical and surgical services, so the purpose is within the exhaustive list.
Must the cardiologist's appointment go to the Union Public Service Commission? No. Section 24(9) excepts medical, nursing and para-medical posts from the consultation requirement.
Can he be paid more than a Central Government officer on the corresponding scale? Yes, if he is a specialist or super specialist notified by the Central Government: the first proviso to section 24(8)(a) requires his terms to be similar to those of the equivalent post at the All India Institute of Medical Sciences or a comparable Central institution.
The Employees State Insurance Corporation
How does the Corporation remove the Director General? It cannot remove him itself. Under section 24(6) removal is by the Central Government. The Corporation's route is a resolution at a special meeting called for the purpose, supported by not less than two thirds of its total strength, on which the Central Government is then bound to remove him.
Suppose a philanthropic trust offers a donation for a dialysis unit. Section 25(2) permits the Corporation to accept grants, donations, Corporate Social Responsibility Fund and gifts from any individual or body, incorporated or not, for the purposes of the Chapter.
What this does NOT mean
The Fund is not the Corporation's to spend as it thinks best. Section 26 says it shall be expended only for the listed purposes, and the residual head requires the previous approval of the Central Government.
The Corporation cannot remove its own Principal Officers. It can resolve, by a two thirds majority of total strength at a special meeting, and that resolution obliges the Central Government to act. The act of removal is the Central Government's.
Two thirds of total strength is not two thirds of those present. Section 24(6) says total strength, so absentees count against the majority.
Consultation with the Union Public Service Commission is not universal. Medical, nursing and para-medical posts are outside it altogether, and short officiating or temporary appointments up to a year are exempt.
Limits and criticism
The rates and much of the substance sit outside the Code. Section 24 leaves salaries, powers and duties to rules and regulations; section 25(4) leaves investment to rules; section 26's residual head leaves the outer edge of expenditure to the Corporation with Central approval.
The five year cap is on the term, not on the tenure. The proviso to section 24(2) allows re-appointment without limit, so the cap is softer than it looks.
User charges are deemed to be contributions. The proviso to section 25(1) treats money paid by non-contributing beneficiaries under section 44 as contributions, which quietly widens what the insurance fund is.
Quick revision
- Section 24: Director General and Financial Commissioner are the Principal Officers, appointed by the Central Government for not more than five years, re-appointable; disqualified by anything in section 8; the Central Government may remove at any time and must remove on a resolution of the Corporation at a special meeting carried by two thirds of total strength; Central sanction for high salaried posts; medical specialist parity; UPSC consultation for Group A and B, except medical, nursing and para-medical, and except officiating or temporary appointments up to one year.
- Section 25: all contributions and user charges go into the Employees' State Insurance Fund, held and administered by the Corporation; user charges under section 44 are deemed contributions; grants, donations, Corporate Social Responsibility Fund and gifts may be accepted; deposited in Central Government approved banks; invested as prescribed; account operated by officers authorised by the Standing Committee with the Corporation's approval.
- Section 26: the Fund is expended only for the twelve purposes in clauses (a) to (l): benefits and medical care; committee fees; staff pay and offices; hospitals and dispensaries; contributions to a State Government, local authority, private body or individual for treatment; audit and valuation; the Employees' Insurance Courts; contractual sums; decrees, orders and awards; the cost of litigation; welfare and rehabilitation within prescribed limits; and other purposes authorised by the Corporation with the previous approval of the Central Government.
- Section 27: the Corporation may (1) acquire, hold, sell or transfer property; (2) invest and re-invest money not immediately required; (3) raise loans with the previous sanction of the Central Government; and (4) constitute a provident or other benefit fund for its own staff.
The Employees State Insurance Corporation
Test yourself
1. Who are the Principal Officers of the Corporation and for how long do they hold office? The Director General and the Financial Commissioner, appointed by the Central Government for such period not exceeding five years as the order of appointment specifies, and eligible for re-appointment if otherwise qualified: section 24(1) and (2).
2. The Corporation resolves by a bare majority at an ordinary meeting that the Director General should go. Must the Central Government remove him? No. Section 24(6) obliges the Central Government to remove only where the resolution is passed at a special meeting called for the purpose and supported by not less than two thirds of the total strength of the Corporation. Neither condition is met.
3. May the Employees' State Insurance Fund be spent on anything the Corporation considers beneficial to workers? No. Section 26 provides that the Fund shall be expended only for the purposes it lists, and the residual purpose requires the previous approval of the Central Government.
4. Must the appointment of a staff nurse be made in consultation with the Union Public Service Commission? No. Section 24(9) excepts medical, nursing and para-medical posts from that requirement.
5. Where do user charges collected from beneficiaries under section 44 go? Into the Employees' State Insurance Fund, and by the proviso to section 25(1) they are deemed to be contributions and form part of it.
6. Who authorises the officers who operate the Fund's bank account? The Standing Committee constituted under section 5(3), with the approval of the Corporation: section 25(4).
The rest of this subject
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