Research › Search › Judgment

Telangana High Court · body

2022 DIGILAW 395 (TS)

EID Parry India Limited v. Deputy Director

2022-06-17

M.LAXMAN

body2022
JUDGMENT : M. LAXMAN, J. 1. The present appeal assails the order dated 15.12.2004 in E.I. Case No. 52 of 2001 on the file of the Court of the Employees Insurance Court and Chairman, Industrial Tribunal-I, Hyderabad (for short, the Tribunal), whereunder and whereby the order dated 23.05.2001 passed by the first respondent under Section 45-A of the Employees’ State Insurance Act, 1948 (for short, the Act), was confirmed whereunder the liability of the appellant was fixed for Rs. 16,112/-. 2. The case of the respondents-Corporation is that Inspectors of ESI Corporation conducted inspections on the premises of the appellant on 17.07.1987, 28.03.1989, 28.08.1990 and 25.04.1991 and verified the records of the appellant and found that contributions in respect of labours/employees engaged for execution of the works for the expenditure incurred under the heads of mixing the processing charges and repairs and maintenance were not contributed. The appellant was directed to comply the defects through the letters dated 27.07.1989, 04.10.1990, 28.12.1990, 03.07.1991 and 09.12.1991. It is the further case of the respondents-Corporation that the appellant, having receiving such notices, neither complied with the directions nor raised any grievance before the Tribunal under Section 75 of the Act, as such, the claim disputing to the demands is barred under Section 77(1-A) of the Act. When there was no response from the appellant to the correspondence made by the Corporation, a final notice dated 08.04.2001 was issued calling explanation from the appellant for proposed action under Section 45-A of the Act. The appellant submitted an explanation claiming that the records pertaining to the period mentioned in the notice dated 08.04.2001 were not available with it since the period for preservation of the records was completed. Having dissatisfied with the explanation, the Corporation passed the order dated 23.05.2001 determining the liability of the appellant at Rs. 16,112/-. Aggrieved by the same, the appellant herein invoked the jurisdiction of the Tribunal by filing E.I. Case No. 52 of 2001. 3. The Tribunal has upheld the order dated 23.05.2001 of the Corporation vide order dated 15.12.2004. Challenging the same, the appellant filed the present appeal. 4. Heard both sides. 5. 16,112/-. Aggrieved by the same, the appellant herein invoked the jurisdiction of the Tribunal by filing E.I. Case No. 52 of 2001. 3. The Tribunal has upheld the order dated 23.05.2001 of the Corporation vide order dated 15.12.2004. Challenging the same, the appellant filed the present appeal. 4. Heard both sides. 5. On hearing the arguments of both the counsel, and the grounds raised in the present appeal, the following substantial questions of law fall for consideration: “(i) Whether the respondents are justified in invoking the powers under Section 45-A of the Act in the facts and circumstances of the case, and whether the findings of the Tribunal confirming the order of the respondents under Section 45-A of the Act suffers from any perversity? (ii) Whether the limitation contemplated under Section 77(1-A) of the Act applies to a claim under Section 45-A of the Act and this finding of the Tribunal suffers from any perversity? Findings of substantial question of Law No. (ii): 6. Before dealing with the law on the applicability of limitation of Section 77(1-A) of the Act to the proceedings passed under Section 45-A of the Act, it is apt to refer to the provisions of Sections 45-A and 77(1-A) and they read as under: “45-A. Determination of contributions in certain cases: (1) Where in respect of a factory or establishment no returns, particulars, registers or records are submitted, furnished or maintained in accordance with the provisions of Section 44 or any Social Security Officer or other official of the Corporation referred to in sub-section (2) of Section 45 is prevented in any manner by the principal or immediate employer or any other person, in exercising his functions or discharging his duties under Section 45, the Corporation may, on the basis of information available to it, by order, determine the amount of contributions payable in respect of the employees of that factory or establishment. Provided that no such order shall be passed by the Corporation unless the principal or immediate employer or the person in charge of the factory or establishment has been given a reasonable opportunity of being heard. Provided further that no such order shall be passed by the Corporation in respect of the period beyond five years from the date on which the contribution shall become payable. Provided further that no such order shall be passed by the Corporation in respect of the period beyond five years from the date on which the contribution shall become payable. (2) An order made by the Corporation under sub-section (1) shall be sufficient proof of the claim of the Corporation under Section 75 or for recovery of the amount determined by such order as an arrear of land revenue under Section 45-B 2 or the recovery under Section 45-C to Section 45-I.” 77. Commencement of proceedings: (1) The proceedings before an Employees’ Insurance Court shall be commenced by application. (1-A) Every such application shall be made within a period of three years from the date on which the cause of action arose. Explanation:- For the purpose of this sub-section: (a) the cause of action in respect of a claim for benefit shall not be deemed to arise unless the insured person or in the case of dependants’ benefit, the dependants of the insured person claims or claim that benefit in accordance with the regulations made in that behalf within a period of twelve months after the claim became due or within such further period as the Employees’ Insurance Court may allow on grounds which appear to it to be reasonable. (b) the cause of action in respect of a claim by the Corporation for recovering contributions (including interest and damages) from the principal employer shall be deemed to have arisen on the date on which such claim is made by the Corporation for the first time: Provided that no claim shall be made by the Corporation after five years of the period to which the claim relates. (c) the cause of action in respect of a claim by the principal employer for recovering contributions from an immediate employer shall not be deemed to 33 arise till the date by which the evidence of contributions having been paid is due to be received by the Corporation under the regulations.” 7. A reading of Section 77(1-A) of the Act would make it clear that the limitation prescribed thereunder is in respect of an application made to the Insurance Court and the limitation prescribed is three years from the date of cause of action and the proviso to sub-clause (b) of Explanation to Section 77(1-A) contemplates that no claim shall be entertained after five years of the period to which the claim relates. The powers under Section 45-A of the Act are independent to that of Section 75 of the Act. 8. The similar issue fell for consideration before the Apex Court in ESI Corporation vs. C.C. Santhakumar, (2007) 1 SCC 584 wherein it has been held as follows: “15. Section 45-A provides for determination of contributions in certain cases. When the records are not produced by the establishment before the Corporation and when there is no cooperation, the Corporation has got the power to make assessment and determine the amount under Section 45-A and recover the said amount as arrears of land revenue under Section 45-B of the Act. This is in the nature of a best judgment assessment as is known in taxing statutes. When the Corporation passes an order under Section 45-A, the said order is final as far as the Corporation is concerned. Under Section 45-A(1), the Corporation, by an order, can determine the amount of contributions payable in respect of the employees where the employer prevents the Corporation from exercising its functions or discharging its duties under Section 45, on the basis of the material available to it, after giving reasonable opportunity. But, where the records are produced, the assessment has to be made under Section 75(2)(a) of the Act. Section 45-A(2) provides that the order under Section 45-A(1) shall be used as sufficient proof of the claim of the Corporation under Section 75 or for recovery of the amount determined by such order as arrears of land revenue under Section 45-B. In other words, when there is a failure in production of records and when there is no cooperation, the Corporation can determine the amount and recover the same as arrears of land revenue under Section 45-B. But, on the other hand, if the records are produced and if there is cooperation, the assessment has to be made and it can be used as a sufficient proof of the claim of the Corporation under Section 75 before the E.S.I. Court. So, the limitation of three years for filing an application before the Court, introduced by Act 44 of 1966, can only relate to the application under Section 75 read with 77(1-A). The order under Section 45-A need not be executed by the Corporation before the E.S.I. Court under Section 77. So, the limitation of three years for filing an application before the Court, introduced by Act 44 of 1966, can only relate to the application under Section 75 read with 77(1-A). The order under Section 45-A need not be executed by the Corporation before the E.S.I. Court under Section 77. As such, the amendment to Section 77(1-A)(b) proviso by Act 29 of 1989 providing five year limitation has no relevance so far as orders passed by the Corporation under Section 45-A are concerned.” 9. A reading of the above judgment would clearly show that the limitation provided under Section 77(1-A) of the Act is not applicable to the proceedings under Section 45-A of the Act. 10. Learned counsel for the appellant has relied upon the judgment of this Court in EID Parry (India) Ltd. vs. ESI Corporation, 2002 Supp. (1) ALD 362, wherein this Court took the view that the limitation prescribed under Section 77(1-A) of the Act is applicable to the proceedings under Section 45-A of the Act. This view was taken prior to the decision of the Apex Court in C.C. Santhakumar’s case (supra). Therefore, the law laid down by this Court in the said judgment is no longer good law and hence, the same cannot be taken into consideration. In view of the same, I hold that the limitation under Section 77(1-A) of the Act is not applicable to the proceedings under Section 45-A of the Act. Accordingly, this substantial question of law is answered. Findings of substantial question of Law No. (i): 11. The foundation for the present proceedings are the inspections done in the years 1987, 1989, 1990 and 1991. These inspections were conducted by the Inspectors of the Corporation. In the inspections, they verified the records of the appellant’s factory and found that the factory has incurred certain expenditure under the heads of mixing the processing charges and repairs and maintenance, but no contribution was made for the workmen engaged for execution of such work to the Corporation. Having found so, a further notice was issued in the same year calling upon the appellant to comply with its directions. 12. It appears that there was a request from the appellant for grant of time for production of the records, and certain records were also produced to show that credits were made to the Corporation. Having found so, a further notice was issued in the same year calling upon the appellant to comply with its directions. 12. It appears that there was a request from the appellant for grant of time for production of the records, and certain records were also produced to show that credits were made to the Corporation. After proceedings initiated in the year 1990, the Corporation slept over till 2001, and issued notice dated 08.04.2001 to the appellant calling for explanation for the proposed proceedings under Section 45-A of the Act. The appellant submitted its explanation claiming that records are not available with it to show that it has made the contributions. Therefore, the Corporation passed the order determining the amount under Section 45-A of the Act. 13. The contention of the learned counsel for the appellant is that the assessment procedure under Section 45-A and Section 75 stands on different footing. Section 45-A can only be invoked when no returns have been filed and no cooperation from the employer to the inspecting officers of the Corporation. However, in case where cooperation is made and certain records were produced, and on verification certain defects are found, the assessment procedure has to be taken in a regular mode, but not under Section 45-A of the Act. According to him, the exercise of power under Section 45-A of the Act, in the facts and circumstances of the case, is without jurisdiction. He has also contended that since the claims relating to the demand are barred under Section 77(1-A) of the Act, the Corporation has invoked Section 45-A of the Act, which is not sustainable. 14. Learned counsel representing the respondents – Corporation has submitted that the Corporation is having power to proceed under Section 45-A of the Act. Section 75 of the Act is not the procedure for making the assessment and such a procedure is followed when a party raising dispute resorted to Tribunal. According to him, in the facts and circumstances of the present case, the invocation of the power under Section 45-A of the Act is within the jurisdiction and it is not outside the jurisdiction. It is also his contention that though sufficient time was granted to the appellant for production of the records, it failed to produce any record in spite of several reminders, except by seeking time. It is also his contention that though sufficient time was granted to the appellant for production of the records, it failed to produce any record in spite of several reminders, except by seeking time. In the said circumstances, the power under Section 45-A of the Act was invoked and hence, it does not suffer with any illegality. 15. To answer the said contentions, it is relevant to incorporate Sections 44, 45 and 75 of the Act and they read as under: “44. Employers to furnish returns and maintain registers, in certain cases: (1) Every principal and immediate employer shall submit to the Corporation or to such officer of the Corporation as it may direct such returns in such form and containing such particulars relating to persons employed by him or to any factory or establishment in respect of which he is the principal or immediate employer as may be specified in regulations made in this behalf. (2) Where in respect of any factory or establishment the Corporation has reason to believe that a return should have been submitted under sub-section (1) but has not been so submitted, the Corporation may require any person in charge of the factory or establishment to furnish such particulars as it may consider necessary for the purpose of enabling the Corporation to decide whether the factory or establishment is a factory or establishment to which this Act applies. (3) Every principal and immediate employer shall maintain such registers or records in respect of his factory or establishment as may be required by regulations made in this behalf. 45. Social Security Officers, their functions and duties: (1) The Corporation may appoint such persons as 3 Social Security Officers, as it thinks fit, for the purposes of this Act, within such local limits as it may assign to them. (2) Any Social Security Officer appointed by the Corporation under sub-section (1) (hereinafter referred to as Social Security Officer), or other official of the Corporation authorised in this behalf by it may, for the purposes of enquiring into the correctness of any of the particulars stated in any return referred to in Section 44 or for the purpose of ascertaining whether any of the provisions of this Act has been complied with: (a) require any principal or immediate employer to furnish to him such information as he may consider necessary for the purposes of this Act. (b) at any reasonable time enter any office, establishment, factory or other premises occupied by such principal or immediate employer and require any person found in charge thereof to produce to such Social Security Officer or other official and allow him to examine such accounts, books and other documents relating to the employment of persons and payment of wages or to furnish to him such information as he may consider necessary. (c) examine, with respect to any matter relevant to the purposes aforesaid, the principal or immediate employer, his agent or servant, or any person found in such factory, establishment, office or other premises, or any person whom the said Social Security Officer or other official has reasonable cause to believe to be or to have been an employee. (d) make copies of, or take extracts from, any register, account book or other document maintained in such factory, establishment, office or other premises. (e) exercise such other powers as may be prescribed. (3) A Social Security Officer shall exercise such functions and perform such duties as may be authorised by the Corporation or as may be specified in the regulations. (4) Any officer of the Corporation authorised in this behalf by it may, carry out re-inspection or test inspection of the records and returns submitted under Section 44 for the purpose of verifying the correctness and quality of the inspection carried out by a Social Security Officer. 75. Matters to be decided by the Employees’ Insurance Court: (1) If any question or dispute arises as to: (a) whether any person is an employee within the meaning of this Act or whether he is liable to pay the employee’s contribution. (b) the rate of wages or average daily wages of an employee for the purposes of this Act. (c) the rate of contribution payable by a principal employer in respect of any employee. (d) the person who is or was the principal employer in respect of any employee. (e) the right of any person to any benefit and as to the amount and duration thereof. (ee) any direction issued by the Corporation under Section 55-A on a review of any payment of dependants’ benefits. (d) the person who is or was the principal employer in respect of any employee. (e) the right of any person to any benefit and as to the amount and duration thereof. (ee) any direction issued by the Corporation under Section 55-A on a review of any payment of dependants’ benefits. (f) *** *** *** (g) any other matter which is in dispute between a principal employer and the Corporation, or between a principal employer and an immediate employer, or between a person and the Corporation or between an employee and a principal or immediate employer, in respect of any contribution or benefit or other dues payable or recoverable under this Act, or any other matter required to be or which may be decided by the Employees’ Insurance Court under this Act, such question or dispute subject to the provisions of sub-section (2A) shall be decided by the Employees’ Insurance Court in accordance with the provisions of this Act. (2) Subject to the provisions of sub-section (2A), the following claims shall be decided by the Employees’ Insurance Court, namely: (a) claim for the recovery of contribution from the principal employer. (b) claim by a principal employer to recover contributions from any immediate employer. (c) *** *** *** (d) claim against a principal employer under Section 68. (e) claim under Section 70 for the recovery of the value or amount of the benefits received by a person when he is not lawfully entitled thereto. (f) If any claim for the recovery of any benefit admissible under this Act. (2-A) If in any proceedings before the Employees’ Insurance Court a disablement question arises and the decision of a medical board or a medical appeal tribunal has not been obtained on the same and the decision of such question is necessary for the determination of the claim or question before the Employees’ Insurance Court, that Court shall direct the Corporation to have the question decided by this Act and shall thereafter proceed with the determination of the claim or question before it in accordance with the decision of the medical board or the medical 32 appeal tribunal, as the case may be, except where an appeal has been filed before the Employees’ Insurance Court under sub-section (2) of section 54-A in which case the Employees’ Insurance Court may itself determine all the issues arising before it. (2-B) No matter which is in dispute between a principal employer and the Corporation in respect of any contribution or any other dues shall be raised by the principal employer in the Employees’ Insurance Court unless he has deposited with the Court fifty per cent. of the amount due from him as claimed by the Corporation: Provided that the Court may, for reasons to be recorded in writing, waive or reduce the amount to be deposited under this sub-section. (3) No civil Court shall have jurisdiction to decide or deal with any question or dispute as aforesaid or to adjudicate on any liability which by or under this Act is to be decided by a medical board, or by a medical appeal tribunal or by the Employees’ Insurance Court.” 16. A reading of Section 44 of the Act would show that every principal or employer is required to submit returns in the form containing the particulars relating to persons employed by him in the establishment. Section 45 deals with the power of the officers of the Corporation to make an inspection of the factory or premises. The requirement contemplated under Section 45-A for invoking the powers is where the establishment failed to file returns and failed to furnish or maintain particulars, registers or records, as is required to maintain under Section 44, or prevented the officials while exercising their power under Section 45, the power can be invoked under the said section. 17. In the present case, the very counter pleadings of the Corporation show that on the inspection days i.e. 17.07.1987, 28.03.1989, 28.08.1990 and 25.04.1991, the Inspectors of the Corporation verified the records of the appellant and found that certain expenses were shown in the registers under the heads mixing the processing charges and repairs and maintenance. The Inspectors felt that such expenditure is incurred and the appellant must have been utilized the services of labour. Further, when such services of the labour were utilized for execution of those works, the appellant has not made any contributions in respect of the said expenditure. Therefore, the Corporation directed the appellant to rectify the non-compliance. It appears, there was no response. Even in the final notice issued for proposing to invoke the proceedings under Section 45-A, it is clearly mentioned that the demand is in respect of omitted wages. 18. Therefore, the Corporation directed the appellant to rectify the non-compliance. It appears, there was no response. Even in the final notice issued for proposing to invoke the proceedings under Section 45-A, it is clearly mentioned that the demand is in respect of omitted wages. 18. As per the respondents-Corporation, it is not the case of non-filing of returns and it is the case of suppression of certain facts in the returns filed by the appellant. The suppression is relating to non-contribution of amounts relating to works executed under the heads mixing the processing charges and repairs and maintenance. Even the notice shows that it is omitted wages and it is not the case of non-filing of the returns or non-furnishing of particulars or records required to maintain under Section 44 of the Act. 19. The Apex Court in C.C. Santhakumar’s case (supra), made a distinction demarcating the jurisdiction to be invoked under Sections 45-A and 75. The Apex Court held that to invoke Section 45-A, the condition required is that there is non-production of records or non-filing of returns and non-cooperation and that when there is filing of returns and maintenance of records or cooperation, the authorities cannot invoke the power under Section 45-A and they have to resort to the procedure under Section 75(2-A) of the Act. 19. In the present case, the very inspections made by the Inspectors of the Corporation show that they have verified the records which were available and found omissions in respect of contribution relating to certain works executed by the appellant. When the records are made available, omissions were found out, and therefore, it is not a case of non-production of records or non-filing of returns. Further, when there is also cooperation from the appellant for verification of the records available with it, the authorities required to take the proceedings under Section 75 of the Act, which they have not done. There appears to be some reason for not invoking the procedure under Section 75(2-A) that the cause of action arose for the demands in the years 1987, 1989, 1990 and 1991 and the proceedings were again initiated in the year 2001. The limitation for invoking the power under Section 75(2-A) is only three years from the date of cause of action and the maximum is five years for the related claims which is hopelessly barred. The limitation for invoking the power under Section 75(2-A) is only three years from the date of cause of action and the maximum is five years for the related claims which is hopelessly barred. Having allowed the certain things to attain finality in respect of other provisions of the Act, the respondents – Corporation has invoked Section 45-A of the Act to make the dead claim alive. Therefore, invocation of such power is nothing but misuse of the provisions of Section 45-A of the Act. 20. The Tribunal, while deciding the issue raised before it, has not taken supra stated facts into account and hence, the findings of the Tribunal suffer from perversity. Therefore, the order of the Tribunal requires to be set aside. 21. In the result, the Civil Miscellaneous Appeal is allowed and the order dated 15.12.2004 in E.I. Case No. 52 of 2001 on the file of the Court of the Employees Insurance Court and Chairman, Industrial Tribunal-I, Hyderabad, is set aside. Consequently, the order dated 23.05.2001 passed by the first respondent under Section 45-A of the Employees’ State Insurance Act, 1948 is quashed. There shall be no order as to costs. Miscellaneous petitions, if any, pending, shall stand closed.