Delhi District Court
Through Its Prop vs Employees State Insurance Corporation on 1 September, 2018
IN THE COURT OF SH. AMITABH RAWAT,
SCJCUMRC (NORTHEAST), KARKARDOOMA COURTS, DELHI
ESIC No. 01/16
M/s Imam Garment
At H. No. 15B, Hansh Raj Dairy,
Ground Floor, Gali No. 01,
Jai Prakash Nagar, Delhi110053.
Through its Prop.
Imam Hasan
S/o Mohd. Badrul Hasan
R/o B412, Gali No. 2B,
Block Subhash Mohalla
North Gondha,
Delhi110053. ...... Petitioner
Versus
1. Employees State Insurance Corporation
Panchdeep Bhawan, Kotla Marg,
New Delhi110002
(through it's Director General)
2. Regional Director
Employees State Insurance Corporation
Rajendra Bhawan, Rajendra Place
New Delhi110008.
3. Deputy Regional Director
Employees State Insurance Corporation
Parsvnath Metro Tower
Metro Station, Shahdara,
Delhi110032.
4. Recovery Officer
[Sh. Mohd. Rubani]
ESI Corporation, Rajendra Bhawan,
Rajendra Place, New Delhi110008.
.......Respondents
CS No. 01/16. M/s. Imam Garments Vs. ESIC & Ors. Page no. 13 of 13 Petition under Section 75 of ESIC Act, for quashing/setting aside the illegal demand of Rs.1,60,871/ & further interest/penalty.
1. Date of institution of petition : 23.12.2015
2. Judgment reserved on : 25.08.2018
3. Date of Judgment : 01.09.2018
4. Decision : Petition Dismissed J U D G E M E N T PETITION
1. (a) Sh. Imam Hasan is the sole proprietor of M/s Imam Garments and he started the business of cutting and stitching of readymade garments at H. No. 15B, Hans Raj Dairy, Ground Floor, Gali No. 01, Jai Prakash Nagar, Delhi 110053 on 01.04.2009.
(b) The respondent no. 1 is the statutory body providing the insurance and other allied facilities to the employees covered under the scheme while respondent no. 2, 3 & 4 are its officials.
(c) The petitioner, who is illiterate, started his small workshop and himself opted for the ESIC scheme and his establishment was allotted employers code No.10001085320000109. Later on, the work of the petitioner was closed as he was unable to survive in the competitive market and resultantly suffered loss and this fact was duly communicated to the respondent no. 2 and was duly acknowledged by respondent no. 2 on 17.06.2010. The petitioner firm had been closed since 31.03.2010.
(d) Initially, 4 persons were in the employment of the petitioner, which eventually increased to 10 in the month of September, 2009 and therefore as a law abiding citizen the petitioner applied for ESIC registration with the respondent no. 1 and petitioner firm was covered under respondent no. 1 on CS No. 01/16. M/s. Imam Garments Vs. ESIC & Ors. Page no. 13 of 13 01.09.2009.
(e) The petitioner paid initial contribution for the month of September, 2009 to the respondent no. 1 of Rs.2,796/ for 30 days. Thereafter, due to shortage of work and lack of finance with the petitioner, the labour employed with the petitioner was reduced to 4 workers in the month of October, 2009, 2 workers in the month of November, 2009, 2 workers in the month of February, 2010, hence there was no worker in the month of March, 2010.
(f) Ultimately due to lack of finance and work, he completely and finally closed the cutting and stitching unit of garments in the name of M/s Imam Garments which was running from 15B, Hansh Raj Dairy, Ground Floor, Gali No. 1, Jai Prakash Nagar, Delhi110053 on 31.03.2010.
(g) The petitioner was maintaining wages register and attendance register towards the services of their employee. The petitioner had also paid full and final payment to their workers and there was no worker employed after 31.03.2010 with the petitioner and the factory/unit in the name of the petitioner was completely closed since 31.03.2010, even the petitioner had sold the stitching machines on 01.06.2010.
(h)The premises where the said factory unit was run by the petitioner was taken on rent which was also vacated by the petitioner in the month of April, 2010.
(i) The intimation of the closing of the work of the petitioner was duly communicated to the respondent on 17.06.2010 and necessary action on the part of the respondent was also requested.
(j)After getting loss in the previous work, the petitioner started doing private job at Gandhi Nagar, Delhi at Readymade Garment Shop for earning his livelihood. It is further averred that the petitioner had deposited a sum of CS No. 01/16. M/s. Imam Garments Vs. ESIC & Ors. Page no. 13 of 13 Rs.2,796/ with the respondent.
(k) Petitioner had received a letter dated 01.05.2014 from the office of respondent no. 3 and the petitioner was directed to deposit a sum of Rs.1,51,938/ being arrears of contribution of ESI. After receiving the said letter, several times the petitioner visited the office of respondent no. 1 to 3 and requested to withdraw the said letter. Thereafter, the petitioner was directed by the respondent no. 1 to 3 to deposit a sum of Rs.73,000/ as 50% of principal amount and after that the dispute regarding arrears of contribution of ESI will be heard. As per directions of the respondent no. 1 to 3, the petitioner had deposited a sum of Rs.73,000/ with the respondent no. 1 on 10.08.2015.
(l) Petitioner was surprised to receive a letter dated nil from the recovery officer, the respondent no. 4, wherein the petitioner was directed to deposit a sum of Rs.1,60,871/ plus interest Rs. 49.95/ on per day basis. Through this letter, the petitioner was also directed to attend the office on 26.11.2015 and also a show cause notice was issued wherein he was asked why he should not be committed to civil prison.
(m) Petitioner immediately approached the respondent no. 3 and also moved a written reply dated 30.11.2015 to the letter of the respondent. Through this reply, the petitioner had submitted that the petitioner firm had been closed since 31.03.2010 and he had already deposited a sum of Rs.73,000/ with the respondent no. 1 and the petitioner is not liable to pay the alleged amount but the petitioner was directed to contact the respondent no. 4, recovery officer and when the office of the recovery officer was contacted it was informed that recovery officer has to nothing with the case of the petitioner, that officer is concerned with the recovery of the due amount of the instructions of the concerned branch and has no role in the case of petitioner.
CS No. 01/16. M/s. Imam Garments Vs. ESIC & Ors. Page no. 13 of 13
(n) The demand raised by the respondents is unjustified and unreasonable and nothing is due and payable by the petitioner to the respondents on any account whatsoever.
(o) It was thus prayed that illegal demand of Rs.1,60,871/ and interest thereupon be quashed and respondents be directed to close the account of the petitioner and cancel the code allotted to him. It was also prayed that amount of Rs.73,000/ be returned.
WRITTEN STATEMENT
2. (a) The respondents admitted that M/s Imam Garments has been doing the business of cutting and stitching of readymade garments w.e.f. 01.04.2009 as per 01 Form dated 29.09.2009 furnished by the petitioner, which was covered under the provisions of ESI Act, 1948 w.e.f. 01.09.2009.
(b) The petitioner submitted the application dated 30.09.2009 for coverage of his firm declaring 10 employees as on 01.09.2009 and was allotted a code number vide C11 letter dated 04.12.2009.
(c) The credit for contribution paid for September, 2009 was not received in respondent's account and contribution for the period 01.10.2009 to 31.03.2012 was not paid by the petitioner at all till the issuance of the order under Section 45(A) dated 12.06.2014 and C19 letter dated 09.02.2015. Even the copy of already paid challan for Rs.2796/ for the month of September, 2009 was submitted by the petitioner only on 11.08.2015 through his letter.
(d) The petitioner failed to inform the respondent/ESI Corporation about the alleged payment in response to our show cause notice dated 01.05.2014 affording him opportunity of personal hearing on 29.05.2014. The self serving averment put forth by the petitioner about reduction in employment is unsubstantiated and unauthenticated for the reason that the petitioner failed to CS No. 01/16. M/s. Imam Garments Vs. ESIC & Ors. Page no. 13 of 13 submit return in form no. 5 as required under Regulation 10C,11,12, 16 and 32 of ESI (General) Regulations, 1950. Further, the petitioner despite service of C18 notice dated 01.05.2014 opted not to appear on 29.05.2014 or even submitted no written representation thereto, the respondent/ESI Corporation therefore, was left with no other alternative except to pass the Assessment order dated 12.06.2014. The respondent denied that petitioner had intimated about the closure of the petitioner's unit w.e.f. 31.03.2010 allegedly acknowledged by respondent no. 2 on 17.06.2010. It is further added that petitioner did not submit any closure documents suggestive of permanent closure of the firm.
(e) The petitioner was afforded an opportunity on 29.05.2014 to put across his point of view and adduce relevant documents in response to C18 notice dated 01.05.2014 which was duly acknowledged by the petitioner, before the authorized officer in determining the correct contribution The petitioner neither represented his case, through oral or written submission, nor produced any record, such as Attendance register/wages register, full and final payment to his employees, accounts books or documents to establish that his factory was permanently closed on 31.03.2010, before the Assessing Officer on 29.05.2014. The petitioner in afterthought subsequent to the assessment order/C19 (recovery certificate) intimated about closure of the unit and full and final payment to his employees through his letter dated 11.08.2015 which was duly replied by respondent corporation vide letter dated 23.10.2015, rejecting the same.
(f) The petitioner has not furnished any rent deed or terminated thereof handing over vacant possession of demised premises to the land lord. The challenged assessment is therefore not invalidated by arbitrariness or CS No. 01/16. M/s. Imam Garments Vs. ESIC & Ors. Page no. 13 of 13 unreasonableness.
(g) As a matter of fact, this intimation was received alongwith letter dated 11.08.2015. This false averments is made to avoid statutory ESI liability, therefore impugned assessment determined under Section 45A of the said Act is legitimate and sustainable in the eye of law.
(h) The intimation about deposit of contribution of Rs.2796/ for the month of September, 2009 has been received only on 11.08.2015 and was not brought to the notice of respondent/ESI Corporation in response to C18 notice dated 01.05.2014.
(i) The petitioner made a representation, which was received by the respondent ESI Corporation on 11.08.2015 (i.e. after issue of C19 dated 09.02.2015) but finding no substance and merit in the case, the same was rejected by the competent Authority and the petitioner was informed accordingly vide letter dated 26.10.2015. The deposit of Rs.73000/ made by the petitioner vide letter dated 30.11.2015 is factually a part payment against the C19 dated 09.02.2015.
(j) The letter from recovery officer asking the petitioner to deposit Rs.1,60,871/ is admitted. This coercive measure under Section 45C to 45 I was resorted when normal method of realization of dues do not yield any response from the defaulting units. As the petitioner was defaulter, C18 notice dated 01.05.2014 in consequence thereof was sent to the petitioner to represent his case in person or through an authorized representative on 29.05.2014. The petitioner neither attended the personal hearing nor sent any written contribution. The respondents were left with no other alternative but to assess the contribution as per information/records available with them on its record. Accordingly, quasi judicial Assessment Order dated 12.06.2014 assessing the CS No. 01/16. M/s. Imam Garments Vs. ESIC & Ors. Page no. 13 of 13 contribution on merits after applying judicious mind thereupon was passed. The petitioner preferred not to file the appeal with the appellate authority in prescribed time in accordance with the provisions of Section 45AA of the said Act. The respondent/ESI Corporation under legal duty was therefore obligated to issue a C19 certificate dated 09.02.2015 to the Recovery Officer to effect recovery of the validly determined ESI dues.
REPLICATION
3. Replication was filed wherein petitioner reiterated the averments made in the plaint and denied the allegations made in the written statement. ISSUES
4. Following issues were framed on 22.12.2016.
(A) Whether the petitioner has closed his business on 31.03.2010 and had intimated the same to the respondent corporation? OPP (B) Whether the petitioner is entitled to refund of amount from the respondent corporation? If any, at what rate? OPP (C) Whether the demand raised by the respondent corporation for an amount of Rs.1,60,871/ is illegal and liable to be quashed? OPP. (D) Relief.
PETITIONER'S EVIDENCE
5. (a) Petitioner Sh. Imam Hasan appeared himself in the witness box as PW1 and tendered his affidavit by way of evidence as Ex. PW1/A and he deposed on the similar lines as the petition. He also relied upon following documents :
i) The ESIC Challan form as Ex. PW1/1.
ii) The salary/wages entry for the month of February, 2010 as Ex.PW1/2.
iii) Receipt dated 01.06.2010 as Ex. PW1/3.
iv) Letter dated 17.06.2010 regarding closing of Imam Gargment as Ex.
CS No. 01/16. M/s. Imam Garments Vs. ESIC & Ors. Page no. 13 of 13 PW1/4.
iv) Transaction details dated 10.08.2015 as Ex. PW1/5.
v) Letter of Recovery Officer as Ex. PW1/6.
vi) Reply/Letter to Deputy Director, Employee's State Insurance Corpo ration dated 30.11.2015 as Ex.PW1/7.
He was crossexamined by Ld. Counsel for respondent/defendant at length and during his crossexamination, counsel for defendants has shown photocopy of two documents dated 29.09.2009 to PW1. First document is list of employees and second document is list of machinery. After seeing the said documents, PW1 had admitted that they were handed over by him to the defendants. The said documents are exhibited as Ex.PW1/D1 i.e. the list of employees with designation, D.O.A and Wages and Ex.PW1/D2 is the list of machinery.
DEFENDANT'S EVIDENCE
6. (a) Defendant in support of his case examined Sh. Jagpal Singh, UDC, Office of ESIC, SubRegional Office, Shahdara, Delhi as DW1. He has proved the dispatch register, C18 (show cause notice) which is already MarkA and the same is now Ex.DW1/1. The same was sent through entry no. 636 marked as point A & pointB. He also proved the another document i.e. order under Section 45A of the ESI Act which is Ex.PW1/3 and the same was sent with entry no. 1508 & 1509 which is marked A & B alongwith Indian Postal Receipt is exhibited as Ex.DW1/4, AD Card regarding sending of order under Section 45A is exhibited as Ex.DW1/5.
Thereafter, the said witness was cross examined at length and DE was closed.
7. Final arguments were heard on behalf of both sides. Record perused.
8. ISSUE WISE FINDINGS OF THE COURT CS No. 01/16. M/s. Imam Garments Vs. ESIC & Ors. Page no. 13 of 13 Issue No. (A) Whether the petitioner has closed his business on 31.03.2010 and had intimated the same to the respondent corporation? OPP
(a) The onus to prove this issue is upon the petitioner.
(b) The petitioner/PW1 Imam Hasan, proprietor of M/s Imam Garments, started the work of cutting and stitching of readymade garments on 01.04.2009 from the workshop at H. No. 15B, Hans Raj Dairy, Ground floor, Gali No. 1, Jai Prakash Nagar, Delhi and opted for ESIC scheme and was allotted Employer's Code No. 10001085320000109. The petitioner applied for the ESIC registration with respondent No.1 i.e. Employees State Insurance Corporation as the number of his employees increased to 10 in September, 2009. Consequently, the petitioner proprietorship firm was covered under the Employee State Insurance Act on 01.09.2009. PW1 admitted in the cross examination the letter Ex. PW1/D1 issued by it to the respondent giving the details of 10 employees hired by it making it mandatory for the petitioner firm to be registered under the beneficial registration of ESIC Act. The list of machinery Ex. PW1/D2 given to the respondent was also admitted by PW1. PW1 also admitted his filled up form for application for registration with the respondent Corporation and exhibited as Ex. PW1/D1 (colly).
(c) The petitioner/PW1 thereafter pleaded and deposed that due to lack of finance and work, the petitioner closed his unit of garments on 31.03.2010 and communicated about the same to respondent on 17.06.2010. PW1 proved the wages record showing two employees for February, 2010 as Ex.PW1/2 and receipt showing sale of garments machines by petitioner dated 01.06.2010 as Ex.PW1/3. The challan of Rs.2,796/ for deposition of funds under ESIC as against an employee for January, 2010 was Ex.PW1/1. The letter dated CS No. 01/16. M/s. Imam Garments Vs. ESIC & Ors. Page no. 13 of 13 17.06.2010 was proved as Ex.PW1/4. The respondent had denied this. The respondent stated that the alleged letter dated 17.06.2010 intimating the respondent about closure of business was not sent to them. Even, the copy of the challan Ex.PW1/1 for the month of September, 2009 was submitted by the petitioner on 11.08.2015. A perusal of the Ex.PW1/4 clearly shows that firstly it is not dated. Secondly, it does not provide any details of the name of the proprietor in the entire letter. Moreover, the said letter does not make any reference to the ESIC Code allotted to it by the respondent so that anyone receiving it can proceed on the said letter. Most importantly, it does not bear the seal of the respondent corporation but has only a stamp which is denied by the respondent. PW1 in the crossexamination deposed that he handed over the letter personally at the office of ESIC but cannot tell the name/designation of the person to whom he had handed over Ex. PW1/4. He had also not informed any other department regarding the closure of the firm.
PW1 has deposed that he sold the machines to Farukh Usman on 01.06.2010 vide receipt Ex. PW1/3. The said exhibit is a self serving document as firstly, it is prepared by the petitioner himself and secondly, it does not give details of the machinery sold. Critically, PW1 in cross examination has deposed that he does not know any person by the name of Salim Usmani. He also deposed that he has not filed any document on judicial record that his workforce is getting reduced slowly/gradually. He further deposed that he has not filed any documentary proof to show that he had vacated the tenanted premises from which he was running his factory. He admitted that the attendance register and wage register have not been filed by him along with evidence by affidavit. In any case, it is irrelevant as what had to be proved is that the petitioner had intimated the respondent about the CS No. 01/16. M/s. Imam Garments Vs. ESIC & Ors. Page no. 13 of 13 closure of his business on 31.03.2010 which has not been done. It is important because the statutory liability under the ESIC Act will continue to be on the petitioner till the aspect of closure of the firm is duly intimated to the respondent. This issue is decided accordingly against the petitioner and in favor of the respondent.
Issue No. (B) Whether the petitioner is entitled to refund of amount from the respondent corporation? If any, at what rate? OPP & Issue No. (C) Whether the demand raised by the respondent corporation for an amount of Rs.1,60,871/ is illegal and liable to be quashed? OPP.
(a) The onus to prove the said issues was upon the petitioner.
(b) Since both the issues are interlinked, hence, a common discussion is made herein under :
(i) As per petitioner/PW1, the letter Ex. PW1/6 demanding from the petitioner statutory ESIC dues amounting to Rs. 1,60,871/ with interest be setaside. Perusal of the same shows that it is issued by the recovery officer in pursuance of the order under Section 45 of the ESIC Act Ex. DW1/3 passed by the respondent corporation. Through the said order, it is ordered that Rs. 1,51,938/ is statutorily due as arrears of contribution and payable by the employer in respect of the claim of the showcause notice dated 08.05.2014. It is specifically provided that against the said order, an appeal can be preferred before Joint Director which has evidently not been done by the petitioner. Moreover, PW1 deposed that he received a letter dated 01.05.2014 for a direction to deposit Rs. 1,52,938/ which petitioner protested. The petitioner, thereafter, deposited 50% of the principal amount i.e. Rs. 73,000/ with the CS No. 01/16. M/s. Imam Garments Vs. ESIC & Ors. Page no. 13 of 13 respondent on 10.08.2015 and the said receipt is Ex. PW1/5. Thus, the petitioner himself deposited the part amount of the statutory dues and cannot withdraw from the liability to pay the statutory dues. Thus, the petitioner wold be liable to pay the statutory dues for the entire period till it came out of the ambit of the ESIC Act and duly intimated the respondent regarding the same. Hence, the petitioner has not been able to prove that the demand raised by the respondent corporation for an amount of Rs. 1,60,871/ is illegal and he is entitled to refund of amount of Rs. 73,000/ already deposited with the respondent.
Thus, both the issues are decided against the petitioner and in favor of respondent.
RELIEF In view of the findings on the aforementioned issues, the petition under Section 75 of Employees State Insurance Act, filed by petitioner is dismissed.
Digitally signed by AMITABH AMITABH RAWAT
Announced and dictated directly to the PA RAWAT Date: 2018.09.01
18:16:48 +0530
in the Open Court on 01.09.2018 (AMITABH RAWAT)
SCJcumRC(NorthEast)
Karkardooma Courts, Delhi
CS No. 01/16. M/s. Imam Garments Vs. ESIC & Ors. Page no. 13 of 13