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2012 DIGILAW 1299 (MAD)

S. Prabakar v. IT Expressway Ltd

2012-03-12

V.DHANAPALAN

body2012
Judgment 1. Heard Mr.G.Arul Murugan, learned counsel for the petitioner and Mr.V.Ramajagadeesan, learned counsel for the respondent. 2. The petitioner has sought for a direction to the respondent to refund a sum of Rs.2,45,796/- to the petitioner which was deducted towards non-submission of ESIC and PF codes, in respect of the contract agreement dated 9.4.2009 for construction of culvert extension. 3. According to the petitioner, he is a contractor engaged in doing civil contract work. The respondent called for a tender for construction of Culvert Extension including duct banks, data cable chamber, E.B. cable chamber on Rajiv Gandhi Salai in Chennai. The petitioner participated in the tender and as per the petitioner's offer, the respondent issued the work order on 9.4.2009 for executing the above work for an amount of Rs.1,64,24,470/-. The petitioner is a contractor coming under the category of Construction Agency, which does not have a regular work or permanent set of employees. In respect of the above contract work, as the activities involved in the above work are at different stretches and different types, the workers are engaged on different categories as per the requirements. The petitioner employs persons as per the requirements and at no point of time, more than 20 employees work at a site. All the workmen engaged by the petitioner in the above contract belong to different categories and they are migratory in nature. There is no permanent work and the work is executed in various stretches in parts. As such, the petitioner is not having any permanent or continuous employees and engage only temporary labourers. Therefore, the petitioner does not come within the purview of the Employees' State Insurance Corporation Act (for short, 'the ESIC Act'). 4. It is the further case of the petitioner that the ESIC issued instructions in No.4 of 1999, dated 14.6.1999 that as the petitioner falls under the construction industry, they do not come within the purview of the ESIC Act. As such, the petitioner does not possess any code from the ESIC or the Provident Fund (for short, 'the PF'). Therefore, the respondent has to make the payment in full according to the work executed by the petitioner without insisting on any submission of code towards the ESIC or PF. As such, the petitioner does not possess any code from the ESIC or the Provident Fund (for short, 'the PF'). Therefore, the respondent has to make the payment in full according to the work executed by the petitioner without insisting on any submission of code towards the ESIC or PF. The petitioner made a representation to the respondent on 13.8.2010 giving the above details and requested to exempt the petitioner from ESIC and PF compliance, as the petitioner does not come within the purview of the ESIC Act and release the payment. The respondent has arbitrarily deducted a sum of Rs.2,45,796/-from the petitioner's bills towards non-submission of ESIC and PF codes and has not released the payment till date. Hence, for refund of the same, the present Writ Petition has been filed. 5. The respondent has filed counter affidavit inter-alia stating that as per the work order issued to the petitioner, one of the conditions, namely No.(e), the contractor, namely the petitioner should submit a workmen compensation policy, but the petitioner has not submitted such workmen compensation policy to the respondent-Company and the petitioner has not taken insurance policy in respect of his liability towards the workmen compensation for the workers engaged by him for carrying out the work on behalf of the principal employer, the respondent herein. In 2010, when the audit party inspected the books of accounts of the respondent-Company, it was pointed out that it should be ensured that the contractors engaged by the respondent-Company take insurance policy in respect of the workers engaged by them, both under the ESIC Act and the Employees' Provident Funds and Miscellaneous Provisions Act (for short, 'the EPF Act'). The petitioner did not submit any records to the respondent-Company to establish that the petitioner is not covered under the provisions of the ESIC Act or EPF Act, and the petitioner has also not given any reference in respect of the registration under the ESIC Act or the EPF Act, inspite of the repeated requests made by the respondent-Company during the meetings held at the site office and also at the time of passing the bills by the Accounts Department of the respondent-Company. Because of the failure on the part of the petitioner in submitting the required proof to establish that he is not covered under the ESIC Act or the EPF Act and has also not produced any exemption certificate from the respective competent authorities under the said Acts and has also not given any reference for registration under those Acts, the respondent-Company has to retain the amount towards the petitioner's liability under the ESCI Act and EPF Act and the amount so retained by the respondent-Company works out to only Rs.2,21,360/- and not Rs.2,45,796/- referred to by the petitioner in his affidavit. 6. It is further stated by the respondent in the counter affidavit that the petitioner submitted his final bill on 28.9.2010 and issued a No Claim Certificate to the respondent-Company and thereby, he has acknowledged the power of the respondent-Company to retain the necessary statutory liabilities to the credit of the petitioner. The petitioner's liability under the aforesaid two enactments or the exemption of the petitioner under the aforesaid two enactments, cannot be adjudicated upon by the respondent-Company who is the principal employer and not the competent authority under the ESIC Act or EPF Act. It is the obligation on the part of the petitioner to approach the competent authorities under the said enactments and get necessary exemption certificate or the reference regarding registration under those Acts and then only, the petitioner can maintain the present Writ Petition and without impleading the competent authorities under the ESIC Act and the EPF Act, the petitioner cannot unilaterally declare that he is not liable under those Acts or that he is entitled for exemption under those Acts and such exemption cannot be presumed unilaterally either by the petitioner or by the respondent in the absence of any positive proof such as the orders of exemption or the reference regarding the registration under those enactments and the insurance policy taken under the ESIC Act or EPF Act. 7. 7. It is also stated in the counter affidavit that when the petitioner has come forward with a request to refund the amount retained by the respondent-Company towards the statutory liability, it is the primary responsibility of the respondent-Company to comply with the statutory requirements and remit the amount to the statutory authorities to the credit of the petitioner-contract and because the petitioner has not furnished the necessary details of registration or insurance policy, the amount is now lying with the respondent-Company even today. It is not the intention of the respondent-Company to cause any loss to the petitioner and with a view to safeguard the interest of the respondent-Company, the amount has been retained because of the failure of the petitioner to furnish the necessary particulars. 8. It is the further case of the respondent in their counter affidavit that the ESIC letter No.P-12(11)-11/27/99-Ins.IV, dated 14.6.1999 relied on by the petitioner, is addressed to the Regional Directors and it contains certain clarifications and general instructions regarding coverage of construction agencies under the ESIC Act and the applicability of the said general instructions to the case of the petitioner has to be examined and certified by the competent authorities only. Based on the said letter alone, the petitioner cannot unilaterally claim that he is entitled to exemption from the provisions of the ESIC Act. Without impleading the competent and statutory authorities under the ESIC Act and EPF Act, the question as to whether the petitioner is entitled to exemption under those Acts, cannot be adjudicated upon in exercise of powers by this Court under Article 226 of the Constitution of India. 9. Without impleading the competent and statutory authorities under the ESIC Act and EPF Act, the question as to whether the petitioner is entitled to exemption under those Acts, cannot be adjudicated upon in exercise of powers by this Court under Article 226 of the Constitution of India. 9. In paragraph 7 of the counter affidavit, it is specifically pleaded that in any case, if this Court is inclined to issue any directions in favour of the petitioner, this Court may necessarily protect the interest of the respondent-Company from the statutory liability in view of the fact that while scrutinising the books of accounts of the respondent-Company, the auditors have directed the respondent-Company to take necessary reference to registration number under the ESIC Act and EPF Act and in the absence of any reference being furnished by the petitioner and in the absence of any statutory orders exempting the petitioner from such liability, it is not open to the petitioner to maintain the present Writ Petition, that too, without impleading the concerned statutory authorities in the Writ Petition and prayed for dismissing the Writ Petition. 10. The only contention raised by the learned counsel for the petitioner is that he is the construction agency involved in construction work in the industry and not covered either under the ESIC Act or under the EPF Act. 11. Per contra, learned counsel for the respondent-Company contended that when an industry engages more than 20 employees, they are under the obligation to get necessary code or certificate from the competent authority and produce the same before the respondent-Company as per the condition No.(e) of the work order issued to the petitioner and the contract agreement dated 9.4.2009. 12. Heard the learned counsel appearing for both parties and perused the records. 13. It is not in dispute that the petitioner is a contractor under the respondent-Company as per the agreement dated 9.4.2009 for construction of culvert extension work, which is a civil contract work. As per the tender for construction of the culvert extension work, including the duck banks, date cable chamber, E.B. cable chamber on Rajiv Gandhi Salai, in Chennai, the respondent issued the work order on 9.4.2009 for executing the above work for an amount of Rs.1,64,24,470/-. The petitioner also submitted necessary bills, but the only amount due to the petitioner as claimed by him is a sum of Rs.2,45,796/-. 14. The petitioner also submitted necessary bills, but the only amount due to the petitioner as claimed by him is a sum of Rs.2,45,796/-. 14. As per the law in existence, a Company which engages more than 20 employees, either under the ESIC Act or under the EPF Act, is under the obligation to pay necessary contribution of the employees towards the ESIC or the EPF to the concerned authorities under the said Acts and they should get necessary code or certificate for that purpose and unless the petitioner is exempted with a specific order from the competent authority, the petitioner cannot claim any exemption on a mere statement of facts to the authorities concerned. When a contractor like the petitioner is agreed by certain conditions before accepting the work, it is obligatory on the part of the contractor to furnish such certificate or the code to the respondent-Company and in the absence of such a Code or certificate, the respondent-Company is to retain the amount, and accordingly, the amount has been retained by the respondent-Company. 15. It is not the case of the petitioner that he has not engaged the employees. When the petitioner claims that he has got exemption from payment of contribution amount as a construction company under the provisions of the ESIC Act or the EPF Act, it is for the petitioner to go before the competent authority under the said Acts to get necessary Certificate or Code for claiming such exemption, for carrying out the work. In this case, the petitioner has not produced any certificate or code from the competent authority for that purpose. Therefore, the deduction made by the respondent-Company cannot be found fault with or stated to be contrary to the provisions of the said Acts. 16. However, the petitioner has expressed certain difficulties and inconveniences for not paying the amount of contribution of the employees towards the ESIC and EPF. Even assuming that the petitioner is not liable to pay the contribution amount towards the ESIC or the EPF, the same has to be discharged in the manner known to law. It is for the petitioner to work out his remedy in accordance with law by approaching the authorities concerned to claim exemption. 17. Even assuming that the petitioner is not liable to pay the contribution amount towards the ESIC or the EPF, the same has to be discharged in the manner known to law. It is for the petitioner to work out his remedy in accordance with law by approaching the authorities concerned to claim exemption. 17. Learned counsel for the petitioner submitted that the petitioner gives an undertaking to furnish security in the form of indemnity bond, which is resisted by the learned counsel for the respondent-Company, as the indemnity bond will not be a proper security and the amount can be indemnified only by furnishing the bank guarantee, which would protect the interest of the respondent-Company. 18. In paragraph 7 of the counter affidavit, the respondent-Company has stated as follows: "7.) ... ... In any case, if this Hon'ble Court is inclined to issue any directions in favour of the petitioner, this Hon'ble Court may necessarily be pleased to protect the interest of the Respondent-Company from the statutory liability in view of the fact that while scrutinising the books of accounts of the Respondent-Company, the Auditors have directed the Respondent-Company to take necessary reference to registration number under the Employees State Insurance Act as well as Employees Provident Fund Act and in the absence of any reference being furnished by the petitioner and in the absence of any statutory orders exempting the petitioner from such liability, it is not open to the petitioner to maintain the present Writ Petition and that too, without impleading the concerned statutory authorities in the above Writ Petition before this Hon'ble Court." 19. In the light of the above stated position, while holding that the deduction made by the respondent-Company is in accordance with law, and as the petitioner has now come forward to receive the amount with some security in the form of indemnity bond, this Court is of the opinion that the said amount of Rs.2,21,360/-is to be indemnified by proper security, namely in the form of bank guarantee and the respondent-Company has made it clear in the counter affidavit that the amount deducted is only Rs.2,21,360/-and not Rs.2,45,796/- as claimed by the petitioner in his affidavit, and hence, the petitioner is directed to furnish the bank guarantee to the respondent-Company for a sum of Rs.2,21,360/- and on furnishing such bank guarantee for a period of one year, the respondent-Company is directed to refund the amount within a period of four weeks from the date of furnishing such bank guarantee and in case, the petitioner is able to produce any code or certificate of exemption from the competent authorities under the ESIC Act and the EPF Act, the said bank guarantee shall be discharged in accordance with law. 20. With the above observations, the Writ Petition is disposed of. No costs.