Gujarat High Court
Deputy Regional Director vs M/S. Shreedhar Metal on 31 July, 2025
NEUTRAL CITATION
C/FA/2999/2023 ORDER DATED: 31/07/2025
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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/FIRST APPEAL NO. 2999 of 2023
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DEPUTY REGIONAL DIRECTOR
Versus
M/S. SHREEDHAR METAL
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Appearance:
MR AV NAIR(5602) for the Appellant(s) No. 1
MR DG SHUKLA(1998) for the Defendant(s) No. 1
MR HARSHEEL D SHUKLA(6158) for the Defendant(s) No. 1
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CORAM:HONOURABLE MR. JUSTICE DEVAN M. DESAI
Date : 31/07/2025
ORAL ORDER
1. The present First Appeal is filed by appellant-original opponent under Section 82 of the Employees' State Insurance Act, 1948 (hereinafter referred to as 'the Act') challenging the judgment and award dated 06.08.2022 passed by learned Employee State Insurance Court, Ahmedabad in Employees' State Insurance Application No.73 of 2015.
2. Heard learned advocate Mr. A.V. Nair for the appellant and learned advocate Mr. D.G. Shukla for the respondent.
3. Upon the request and consent of learned advocate for the parties, the present First Appeal is taken up for final hearing.
Page 1 of 16 Uploaded by RINKU MALI(HC01574) on Thu Aug 14 2025 Downloaded on : Fri Aug 15 22:55:11 IST 2025 NEUTRAL CITATION C/FA/2999/2023 ORDER DATED: 31/07/2025 undefined 4. The brief facts of the case are as under:-
4.1. The respondent-original applicant filed an application under Section 75 of the Act praying for cancellation letter dated 26.05.2013, demanding Rs.7,17,808/- with 8% interest. The respondent-establishment was covered the Employees' State Insurance Act, 1948. After the visit of the employees of the Corporation, respondent was allotted ESI Code No.37-26884-51 on 13.06.2008. Respondent-Corporation was remitting contribution regularly. The employee of the respondent- establishment, Sureshsingh Nakhusingh was employed on 06.05.2008 with respondent-establishment. The requisite declaration form and details were submitted to the Corporation. Thereafter, the said employee left the services of the respondent- establishment and again rejoined on 01.04.2012. After rejoining, said employee, respondent-establishment did not submit the details and the forms which are mandated as per the Act and the regulations framed thereunder. On 10.05.2012, the said Page 2 of 16 Uploaded by RINKU MALI(HC01574) on Thu Aug 14 2025 Downloaded on : Fri Aug 15 22:55:11 IST 2025 NEUTRAL CITATION C/FA/2999/2023 ORDER DATED: 31/07/2025 undefined employee while performing his duties, met with an accident and died. The Corporation was intimated by respondent regarding the death of the employee on 10.05.2012 and paid contribution under the old Code. The corporation thereafter paid the death benefits to the heirs of the deceased employee. The corporation issued show cause notice dated 14.05.2013 for violation of Regulation Nos.12 and 14 of the Employees' State Insurance (General) Regulations, 1950 (hereinafter referred to as 'the Regulations') and a show cause notice dated 14.05.2013 under Section 68 of the Act. Vide communication dated 26.05.2013, respondents were directed to pay an amount of Rs.8,92,600/- (Rs.7,17,808/- as capitalized value plus Rs.1,74,792/-) with 8% interest upto 26.05.2015.
4.2. Being aggrieved and dissatisfied with impugned decision, respondent filed an application under Section 75 of the Act before learned ESI Court, Ahmedabad. Appellant-Corporation appeared and filed Written Statement at Exhibit-6 and contested Page 3 of 16 Uploaded by RINKU MALI(HC01574) on Thu Aug 14 2025 Downloaded on : Fri Aug 15 22:55:11 IST 2025 NEUTRAL CITATION C/FA/2999/2023 ORDER DATED: 31/07/2025 undefined the application. Issues were framed at Exhibit-50. The application of the respondent came to be allowed. Against the said judgment and order, appellant-original opponent is before this Court.
5. Learned advocate for the appellant has proposed following substantial questions of law for consideration.
"(i) Whether the Hon'ble Employees State Insurance Court has jurisdiction under Section 75 of the Employees State Insurance Act, 1948, to interfere with the Show Cause notice dated 26/05/2015, issued under the ESI Act, at the stage of inquiry?
(ii) Whether the Hon'ble Employees State Insurance Court has exceeded its jurisdiction vested under the Section 75 of the ESI Act, in the facts of the present case, at a stage of Show Cause notice, when the impugned Show Cause notice was issued by the Competent Authority having jurisdiction?
(iii) Whether the Hon'ble Employees State Insurance Court was justified in law in holding that the ESIC was not entitled to recover the quantified amount of benefit paid to the dependents of the deceased employee from the Employer, when the employer had surreptitiously paid the contribution, only after the death of the employee concerned?
(iv) Whether the impugned Judgment and award passed by the Hon'ble Employees' State Insurance Court is erroneous and perverse, as being contrary to the established facts on record?"
5.1. Learned advocate for the appellant has contended that Page 4 of 16 Uploaded by RINKU MALI(HC01574) on Thu Aug 14 2025 Downloaded on : Fri Aug 15 22:55:11 IST 2025 NEUTRAL CITATION C/FA/2999/2023 ORDER DATED: 31/07/2025 undefined deceased-employee was in the employment of respondent since 01.01.2008 and deceased-employee was re-employed by respondent on 01.04.2012. The re-employment being a fresh employment, respondent was required to follow the provisions of Regulation Nos.12, 14 and 110 of the Regulations. It is contended that when the employee was initially employed with respondent-establishment in the year 2008, the employee was allotted ESI Code No.37-26884-51 on 13.06.2008. On 10.05.2012, the employee-Sureshsingh Nakhusingh met with an accident during the course of employment and expired. Respondent submitted online accident report on 10.05.2012 i.e. after the happening of the accident. On 18.05.2012, upon visit to the factory of the respondent, it was noticed that the registration of the employee was done after the accident and the establishment has committed breach of Regulation Nos.12 and 14 of the said Regulations. The death benefits were paid to the heirs of deceased employee by the Corporation. On 14.05.2013 two show cause notices came to be issued to the respondent-
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corporation, one for the violation of Regulation Nos.12 and 14 of the said Regulations and second was issued under Section 68 of the Act. Both the show cause notices were served but respondent-establishment did not reply to the show cause notices and therefore, on 20.06.2015 an order to recover Rs.8,92,600/- being capitalized value of dependent benefits payment came to be passed. The contention raised by learned advocate for the appellant is that under Regulation No.12, the employer in respect of a factory or establishment shall before taking any person into employment to furnish the details of the employee and also to furnish a declaration form including temporary identification certificate. As per Regulation No.14, the employer shall send such declaration forms within 10 days of the date of appointment. Since the establishment has breached the aforesaid regulations, the show cause notices were issued and thereafter, the order for recovery came to be passed against respondent. It is further contended by learned advocate for the appellant that before the adjudication of the show cause notices, Page 6 of 16 Uploaded by RINKU MALI(HC01574) on Thu Aug 14 2025 Downloaded on : Fri Aug 15 22:55:11 IST 2025 NEUTRAL CITATION C/FA/2999/2023 ORDER DATED: 31/07/2025 undefined respondent-establishment challenged the order dated 26.05.2015 and hence, the challenge to the show cause notice and the communication dated 26.05.2015 are premature. However, learned ESI Court has erred in quashing and setting aside the communication dated 26.05.2015 and the proceedings under Section 68 of the Act. It is further contended that learned ESI Court has no jurisdiction to decide the application at the stage of pending decision of two show cause notices. Except above, no other submissions are canvassed by learned advocate for the appellant.
6. Per contra, learned advocate for the respondent- establishment has supported the judgment and order and contended that deceased was initially in the employment of the respondent in the year 2008 and thereafter, deceased left the employment. Deceased rejoined the respondent-establishment on 01.04.2012. Unfortunately, on 10.05.2012, employee met with an accident during the course of employment and expired.
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Respondent-establishment was under the impression that since deceased was allotted Code ESI Code No.37-26884-51 at the initial time of the appointment, respondent-establishment is not required to apply for a fresh Code and therefore, did not furnish fresh declaration and details of the said employee after 01.04.2012. However, on 10.05.2012, the corporation was intimated by respondent-corporation through online accident report dated 10.05.2012 and also paid contribution. The officers of the corporation visited the establishment on 18.05.2012 and 08.06.2012 and thereafter, submitted the employment injury report wherein the corporation found that the accident is an accident which has resulted into during the course of employment. After completion of formalities, death benefits were paid to the dependents of deceased. Two show cause notices were issued on 14.05.2013. In the showcause notices as well as before learned ESI Court, it is not the case of the appellant-corporation that the employer has not paid the contribution as it is mandated under the Act. What has been Page 8 of 16 Uploaded by RINKU MALI(HC01574) on Thu Aug 14 2025 Downloaded on : Fri Aug 15 22:55:11 IST 2025 NEUTRAL CITATION C/FA/2999/2023 ORDER DATED: 31/07/2025 undefined alleged in the show cause notices is the violation of Regulation Nos.12 and 14 of the said Regulations. The communication dated 26.05.2012 is a decision taken by the appellant- corporation without any opportunity of being heard given. The appellant did not decide the aforesaid two show cause notices and straightaway passed an order of payment of Rs.8,92,600/- as capitalized value of dependent benefit payment. It is further contended that the substantial questions of law which are proposed by the appellant, are not substantial questions of law, and therefore, the appeal is not maintainable under Section 82 of the Act. Except above, no other submissions are canvassed by learned advocate for the appellant.
7. I have considered the submissions canvassed by learned advocates for the parities and perused Paper-book. The record reveals that an employee-Sureshsingh Nakhusingh was appointed as an employee with respondent-establishment in the year 2008. Thereafter, the said employee left the job and again Page 9 of 16 Uploaded by RINKU MALI(HC01574) on Thu Aug 14 2025 Downloaded on : Fri Aug 15 22:55:11 IST 2025 NEUTRAL CITATION C/FA/2999/2023 ORDER DATED: 31/07/2025 undefined rejoined respondent-establishment on 01.04.2012. There is no quarrel on a factual aspect that when deceased was employed in the year 2008, respondent-establishment complied with provisions of Regulation Nos.12 and 14 of the said Regulations and submitted the details of the employee and also furnished the required declaration forms. It is also not under dispute that respondent-establishment was paying contribution on regular basis. As per the contention of the appellant, after the employee rejoined with respondent-establishment, the respondent did not comply with requirements of Regulation Nos.12 and 14 of the said Regulations. After the death of the employee, the Corporation was intimated by respondent by submitting an online accident report and also deposited contribution under old Code. Respondent remained under impression that since deceased was allotted ESI Code No.37-26884-51 in the year 2008, they were not required to apply for fresh Code, this is the starting point of controversy. The contention of appellant is that 01.04.2012 though deceased rejoined the establishment, it would Page 10 of 16 Uploaded by RINKU MALI(HC01574) on Thu Aug 14 2025 Downloaded on : Fri Aug 15 22:55:11 IST 2025 NEUTRAL CITATION C/FA/2999/2023 ORDER DATED: 31/07/2025 undefined amount to a fresh employment and the establishment was required to comply with the provisions contained under Regulation Nos.12 and 14 of the said Regulations. There is nothing on record to substantiate that deceased was re-employed with respondent-establishment on fresh terms and conditions and record also indicates that it is not the case of appellant- corporation that respondent has flouted the provisions of the Act by not remitting contribution. Learned ESI court has also observed that after death of employee, new Code No.10358772 was obtained by establishment.
8. Regulation Nos.12 and 14 of the said Regulation and Section 68 of the Act are required to be reproduced and the same are reproduced:-
"12. Declaration by persons engaged after the appointed day.-
(1) The employer in respect of a factory or an establishment shall, before taking any person into employment in such factory or establishment after the appointed day, require such person (unless he can produce an Identity Card or other document in lieu thereof issued to him under these regulations) to furnish and such person shall on demand furnish to him correct particulars required for the Declaration Form including the Temporary Identification Certificate. Such employer shall enter the particulars in the Declaration Form including the Temporary Identification Certificate Page 11 of 16 Uploaded by RINKU MALI(HC01574) on Thu Aug 14 2025 Downloaded on : Fri Aug 15 22:55:11 IST 2025 NEUTRAL CITATION C/FA/2999/2023 ORDER DATED: 31/07/2025 undefined and obtain the signature or the thumb-impression of such person and also complete the form as indicated thereon. (2) Where an Identity Card is produced under such sub-regulation (1), the employer shall make relevant entries thereon.
14. Declaration form to be sent to appropriate office.- The employer shall send to the appropriate office by registered post or messenger, all declaration forms without detaching the temporary identification certificate prepared under these regulations together with a return in duplicate in Form 3 within 10 days of the date on which the particulars for the declaration forms were furnished."
"68. Corporation's rights where a principal employer fails or neglects to pay any contribution.
(1) If any principal employer fails or neglects to pay any contribution which under this Act heis liable to pay in respect of any employee and by reason thereof such person becomes disentitled to any benefit or entitled to a benefit on a lower scale, the Corporation may, on being satisfied that the contribution should have been paid by the principal employer, pay to the person the benefit at the rate to which he would have been entitled if the failure or neglect had not occurred and the Corporation shall be entitled to recover from the principal employer either --
(i) the difference between the amount of benefit which is paid by the Corporation to the said person and the amount of the benefit which would have been payable on the basis of the contributions which were in fact paid by the employer; or]
(ii) twice the amount of the contribution which the employer failed or neglected to pay; whichever is greater.
(2) The amount recoverable under this section may be recovered as if it were an arrear of land-revenue [or under section 45-C to section 45-I]."
9. Section 68 of the Act deals with the rights of corporation where principal employer fails or neglects to pay any Page 12 of 16 Uploaded by RINKU MALI(HC01574) on Thu Aug 14 2025 Downloaded on : Fri Aug 15 22:55:11 IST 2025 NEUTRAL CITATION C/FA/2999/2023 ORDER DATED: 31/07/2025 undefined contribution. On failing to pay the contribution by any employer, such employer is liable to pay in respect of any employee, the benefit at the rate to which to liable to pay in respect of any employee or by reason thereof such person becomes entitled to a benefit on a lower scale. The corporation may pay to the person the benefit at the rate to which he would have been entitled if the failure or neglect had not occurred and the corporation shall be entitled to recover from the principal employer either the difference between the amount of benefit and the amount of benefit which could have been payable on the basis of contributions which were in fact paid by the employer or twice the amount of contribution which the employer failed or neglected to pay. In the background of the aforesaid provisions, so far as the show cause notice issued under Section 68 is concerned, the Corporation gets a right to recover the amount from the principal employer who has failed or neglected to pay any contribution under the Act. The admitted position on record indicates that there is no dispute on the non-payment of Page 13 of 16 Uploaded by RINKU MALI(HC01574) on Thu Aug 14 2025 Downloaded on : Fri Aug 15 22:55:11 IST 2025 NEUTRAL CITATION C/FA/2999/2023 ORDER DATED: 31/07/2025 undefined contribution by the employer. Another show cause notice which is issued for the violation of Regulation Nos.12 and 14 of the said Regulations. The establishment was called upon to showcause within 10 days from the receipt of the show cause notice as to why one of the principal employers should not be prosecuted for the offence under Section 85(g) of the Act.
10. Section 85(g) of the Act is reproduced as under:-
"85. Punishment for failure to pay contributions, etc.- If any person-
(g) is guilty of any contravention of or non-compliance with any of the requirements of this Act or the rules or the regulations in respect of which no special penalty is provided."
Section 85 contemplates punishment for failure to pay contribution. If the employer is found guilty on any contravention of or non-compliance of any of the requirements of the Act or Rules or Regulations, the person is punishable with an imprisonment for a term which may extend to one year or with fine which may extend to Rs.4,000/- or with both. For non- compliance of regulations, the remedy is available to the Page 14 of 16 Uploaded by RINKU MALI(HC01574) on Thu Aug 14 2025 Downloaded on : Fri Aug 15 22:55:11 IST 2025 NEUTRAL CITATION C/FA/2999/2023 ORDER DATED: 31/07/2025 undefined Corporation to initiate criminal proceedings by resorting to Clause (g) of the Section 85 of the Act. Failure of non- compliance of Regulation Nos.12 and 14, do not empower the Corporation to demand any amount from the establishment. As observed by learned ESI Court and as fairly conceded by learned advocate for the appellant that the case of the Corporation is not that the contribution is not paid by establishment.
11. Again the show cause notice dated 14.05.2013 for the initiation of proceedings under Section 68 is perused, the Corporation has alleged that particulars and signature of the employee were not obtained in the declaration form before taking him in the employment on 01.04.2012 as required under Regulation No.12 of the said Regulation. Non-compliance on the part of the appellant was made liable to bear the capitalized value of the dependent benefits payable to the deceased. The issuance of show cause notice under Section 68 of the Act is misconception on the part of the appellant.
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12. Coming back to the proposed substantial questions of law, which have been proposed in the memo of appeal do not raise any question of law, much less, substantial questions of law. The scope of under Section 82 of the Act is limited. Unless substantial questions of law are involved, this Court may not entertain any appeal. The judgment and order passed by learned ESI Court is on the basis of the factual aspect that there was no question of non-payment of contribution by the establishment and therefore, learned ESI Court rightly allowed the application of respondent-establishment. As I do not find any reason to interfere in the findings arrived at by learned ESI Court. Accordingly, First Appeal fails and deserves to be dismissed and the same is dismissed.
13. Record and proceedings be sent back to the concerned Court forthwith.
(D. M. DESAI,J) RINKU MALI Page 16 of 16 Uploaded by RINKU MALI(HC01574) on Thu Aug 14 2025 Downloaded on : Fri Aug 15 22:55:11 IST 2025