Tripura High Court
Shri Sukehndu Deb vs Employees State Insurance Corporation on 8 January, 2018
Author: S. Talapatra
Bench: S. Talapatra
THE HIGH COURT OF TRIPURA
AGARTALA
WP(C) 223 of 2017
Shri Sukehndu Deb,
Son of Late Nishi Kanta Deb,
Proprietor of M/s Maa Mallika Engineering
Udyog, resident of Village : Madhya
Kashipur, P.O. Resham Bagan, P.S. East
Agartala, District-West Tripura, Tripura.
............ Petitioner
- Vs -
1. Employees State Insurance Corporation,
represented by its Director General,
Panchdeep Bhawan,
Comrade Inderjeet Gupta (CIG) Marg,
New Delhi-110002.
2. The Assistant Director,
Employees State Insurance Corporation,
Regional Office, NE Region,
Panchdeep Bhawan, P.O. Bamuni Maidan,
Guwahati-21.
3. The Branch Manager,
Employees State Insurance Corporation,
Agatala Branch Office, Shyamali Bazar,
P.O. Kunjaban, P.S. New Capital Complex,
Sub-Division-Agartala, District-West Tripura,
PIN-799006.
4. The Recovery Officer,
Employees State Insurance Corporation,
Regional Office (Guwahati), NE Region,
Panchdeep Bhawan, P.O. Bamuni Maidan,
Guwahati-21.
...........Respondents
BEFORE THE HON'BLE MR. JUSTICE S. TALAPATRA For the petitioner : Mr. S Lodh, Advocate For the respondents : Mr. KK Pal, Advocate Date of hearing : 10.11.2017 Date of delivery of judgment & order : 08.01.2018 Whether fit for reporting : Yes WP(C)223 of 2017 Page 1 of 11 JUDGMENT AND ORDER Heard Mr. S Lodh, learned counsel appearing for the petitioner as well as Mr. KK Pal, learned counsel appearing for the respondents.
2. By means of this writ petition, the petitioner has challenged the notices and orders as under:
1. Show Cause Notice No. 46000010670000704/2102014302 & 46000010670000704/2102014254 both dated 10.02.2014 (Annexure P1 & 2 to the writ petition)
2. Show Cause Notice No. 46000010670000704 dated 09.05.2014 (Annexure-P10 to the writ petition)
3. Order No. 46000010670000704 dated 09.05.2014 (Annexure-
P11 to the writ petition)
4. Order No. 46000010670000704/59201411233 dated 09.05.2014 (Annexure-P12 to the writ petition)
5. Letter under reference No. 4600010670000704 dated 11.08.2016 (Annexure-P13 to the writ petition)
6. Notice of Demand under reference No.46000010670000704/ CP/1156726398/PRC dated 24.08.2016 (Annexure-P 14 to the writ petition)
7. Order dated 17.08.2016 (Annexure-P15 to the writ petition)
8. Letter dated 21.11.2016 (Annexure-P17 to the writ petition)
9. Letter dated 21.11.2016 (Annexure-P18 to the writ petition)
10. Notice of Demand to defaulter dated 30.11.2016 (Annexure-
P19 to the writ petition)
3. The petitioner has further urged for directing the respondents to refund the amount to the extent of Rs.1,57,985/- with interest @ 20% from the date of recovery with damage to the extent of Rs.2,00,000/-. Further, it has been urged that in furtherance of the impugned notices and the orders, the respondents be prohibited from acting on or in furtherance of the notices and the orders as challenged in this writ petition to recover any WP(C)223 of 2017 Page 2 of 11 further amount or penalty or interest from the petitioner or his sole proprietorship firm, namely M/S Maa Mallika Engineering Udyog.
4. The petitioner is the sole proprietor of M/S Maa Mallika Engineering Udyog, A.A. Road, Agartala, hereinafter referred to as the firm.
The said firm was engaged in vehicle repairing. The firm had closed the workshop in the year January, 2014 and the closure of the vehicle repairing firm was duly informed to the Factories and Boilers Organization. On 10.02.2014 by a show cause notice, the petitioner was communicated that he had violated the provisions of Employees State Insurance Act, ESI Act for short, and asked to explain within a period of 10 days why the appropriate action in terms of the ESI Act should not be taken against him. However, by the said notice the respondent No.3 had informed the petitioner that he would inspect the said firm for purpose of inquiry. By the notice dated 11.02.2014 (Anenxure-P3 to the writ petition), the date of inspection was communicated.
5. On 18.02.2014, the scheduled date, the inspection was carried out but it could not be completed and thus the date of next visit was fixed on 26.02.2014. Thereafter, the respondent No.3 continued to visit till 07.03.2014. In the meanwhile, the petitioner had produced the records and categorically contended that the petitioner's firm so far the vehicle repairing is concerned, there were only seven employees and hence the petitioner's firm could not be brought under the provisions of ESI Act.
6. On 07.03.2014, the respondent No.3 filed the inspection observation in handwriting after verification of salary register, attendance register and balance sheet for the period 2010-2011, 2011-2012 and 2012- 2013 and the salary register of January, 2014. The said inspection WP(C)223 of 2017 Page 3 of 11 observation note dated 07.03.2014 (Anenxure-8 to the writ petition) however did not support the contention of the petitioner. As a result, on 11.03.2014, he approached the respondent No.2 for exempting him or his firm from the proceeding under the provisions of ESI Act. Without granting any exemption on 08.05.2014 the respondent No.2 by issuing a show cause notice had observed that the petitioner had violated the provisions of ESI Act in the manner as recorded hereinafter:
(i) The petitioner did not submit the declaration form under Regulations 11, 12 and 14 of the ESI (General) Regulation, 1950.
(ii) Payment of contribution for the period from April,2010 to January, 2014.
(iii) The petitioner did not produce the Balance Sheet, Book of Accounts, Ledger, etc. from April 2010 to January 2014 during inspections on 26.02.2014, 18.02.2014 & 07.03.2014
7. By the show cause notice dated 09.05.2014 the respondent No.2 had clearly asked the petitioner why action shall not be initiated against him under Section 85 of the ESI Act. Section 85 of the ESI Act provides the arrangement in the event of failure to pay contribution etc. For purpose of reference, the entire Section 85 of the ESI Act is reproduced hereunder:
"85. Punishment for failure to pay contributions, etc. -- If any person --
(a) fails to pay any contribution which under this Act he is liable to pay, or
(b) deducts or attempts to deduct from the wages of an employee the whole or any part of the employer's contribution, or
(c) in contravention of section 72 reduces the wages or any privileges or benefits admissible to an employee, or WP(C)223 of 2017 Page 4 of 11
(d) in contravention of section 73 or any regulation dismisses, discharges, reduces or otherwise punishes an employee, or
(e) fails or refuses to submit any return required by the regulations or makes a false return, or
(f) obstructs any Inspector or other official of the corporation in the discharge of his duties, or
(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, [he shall be punishable --
[(i) where he commits an offence under clause (a), with imprisonment for a term which may extend to three years but --
(a) which shall not be less than one year, in case of failure to pay the employee's contribution which has been deducted by him from the employee's wages and shall also be liable to fine of ten thousand rupees ;
(b) which shall not be less than six months, in any other case and shall also be liable to fine of five thousand rupees :
Provided that the Court may, for any adequate and special reasons to be recorded in the judgment, impose a sentence of imprisonment for a lesser term;
(ii) where he commits an offence under any of the clauses (b) to (g) (both inclusive), with imprisonment for a term which may extend to one year or with fine which may extend to four thousand rupees, or with both.]]"
8. As the petitioner did not pay the contribution as per law amounting to Rs.85,209/- for the period from April, 2010 to January, 2014, by the order dated 09.05.2014 (Anenxure-11 to the writ petition) the respondent No.2 asked the petitioner to deposit the said amount within a period of fortnight else the said amount shall be recovered from him. On the very same day, i.e. 09.05.2014 another order to pay damage under Section 85(B) of the ESI Act, amounting to Rs.12,874/- within a period of 15 days was passed. For purpose of reference, Section 85-B of the ESI Act is as well reproduced hereunder:
"85-B. Power to recover damages. -- (1) Where an employer fails to pay the amount due in respect of any contribution or any other amount payable under this Act, the Corporation may recover [from the employer by way of penalty such damages, not exceeding the amount of arrears as may be specified in the regulations]:
Provided that before recovering such damages, the employer shall be given a reasonable opportunity of being heard:
[Provided further that the Corporation may reduce or waive the damages recoverable under this section in relation to an establishment which is a sick industrial company in respect of which a scheme for rehabilitation has been sanctioned by the Board for Industrial and Financial Reconstruction established under section 4 of the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986), subject to such terms and conditions as may be specified in regulations.] WP(C)223 of 2017 Page 5 of 11 (2) Any damages recoverable under sub-section (1) may be recovered as an arrear of land revenue [or under section 45-C to section 45-I]."
9. The petitioner has not rebutted the allegations made in the show cause notice that the petitioner did not file any return nor did he maintain any records in accordance with the provisions of Section 44 of the said Act. The petitioner, being the Principal Employer had failed to discharge the duties under Section 45 of the ESI Act which requires a Principal Employer to furnish the return in terms of Section 44 of the ESI Act to the Social Security Officer. It has been admitted by the petitioner further that he was given notice before the order for recovery was issued. The petitioner has consistently contended that at no point of time he has more than seven employees and as such he cannot be brought within the purview of the ESI Act. The petitioner has stoutly contended that the contribution of Rs.85,209/- and the penal interest thereon to the extent of Rs.44,639/-, Rs.1,29,911/- in total, has been drawn up without any jurisdiction. Despite that, the respondent No.4 by his letter dated 21.11.2016 (Anenxure-17 to the writ petition) had advised the petitioner to deposit the said due to the extent to Rs.1,32,152/- within a period of 15 days, else the stringent action will be taken. The further amount thereafter added to the said amount. Finally, the ESI had recovered Rs.1,43,751/- from the account of the petitioner as maintained in the IDBI Bank, Agartala Branch without his knowledge.
10. In terms of the Employees State Insurance (Amendment) Act, 2010 which came into effect from 01.06.2010, the factory for the purpose of jurisdiction would mean any premise including the precincts thereof wherein 10 or more persons are employed or were employed on any day in WP(C)223 of 2017 Page 6 of 11 the preceding 12 months or in any part of which, a manufacturing process is being carried on or is ordinarily so carried on but does not include a mine subject to the operation of the Mines Act, 1952 (35 of 1952) or a railway running shed whereas an employee means any person employed for wages in or in connection with the work of a factory or establishment to which the Act applies.
11. Only in the case of a factory where 10 or more persons are employed, the ESI Act can have its application, otherwise not. According to the petitioner, it has been revealed even from the letter dated 11.08.2016 (Anenxure-P13 to the writ petition) that the petitioner's factory was having only seven employees. The recovery of Rs.1,57,985/- (Rs.1,43,751+Rs.14,234 (as the contribution for the month of 2017)) has crippled the working capital of the petitioner and the petitioner has suffered loss which is tentatively assessed at Rs.2,00,000/-. The respondents were also liable to return the sum of Rs.1,57,985/- with interest @ 20% per annum forthwith.
12. The respondents, represented by Mr. KK Pal, learned counsel in order to refute the said contention as raised by the petitioner has submitted that since the petitioner violated the provisions of ESI Act as stated above, the recovery as made through the IDBI Bank cannot be held to be illegal. The respondents have clearly stated that when seven employees were working there the petitioner's firm did not come under the purview of the ESI Act. Therefore, failure to furnish any return is immaterial as claimed by the petitioner and has been seriously contested by the respondents by stating in para 19 of their reply as under:
"19. That, the statement made in para-2.14, the establishment/factory was covered under the ESI Act. As per preliminary WP(C)223 of 2017 Page 7 of 11 survey report dated 18.02.2009 the petitioner himself submitted a list of 10 (ten) employees on the basis of record, the unit was covered w.e.f.
11.02.2009."
13. The respondents have insisted that the petitioner has admitted by his statement dated 11.02.2009 that the petitioner had 10 employees and thus it has liability to deposit the contribution in time which the petitioner's firm did not. As a result the penal measure has been taken when the ordinary course of recovery failed.
14. By filing an Interlocutory Application being IA 02/2017 arising from WP(C)223/2017 the respondents have filed certain documents including the preliminary survey report (Annexure-F), where it has been observed that as per the attendance register there was eight employees and there are two other employees on hire as gathered by way of interrogation. The said report dated 11.02.2009 has been referred by the petitioner. One observation slip (Annexure-G to the said IA) has also been filed and the said slip is duly signed by the petitioner's Manager, namely Bipul Debnath which stands to show that on 11.02.2009 the petitioner's firm had ten employees.
15. The petitioner has filed a rejoinder and reiterated his position that unless there are ten employees, it would not come under the ESI Act and as such any of the provisions of the ESI Act will have no application on the petitioner's firm.
16. Mr. Lodh, learned counsel has submitted that by the notice dated 18.10.2014 the provisional determination was made and the petitioner was given an opportunity to reply to such provisional determination. The relevant part of the determination as available in para 4 is reproduced hereunder:
WP(C)223 of 2017 Page 8 of 11
"4. And whereas, it is proposed to determine and recover the amount of contribution payable in respect of the employees of your factory/establishment under Section 45 A of the Act as under:-
Sl. Nature of Period* No. of Average Basis for calculation Amount of No. Dues* employees Wages (6.5%* NO. of Employees * contribution.
Average Wages * No. of Months)
1 Defaulter 1 10 5500 6.5%*10*5500*1 3575
2 Defaulter 44 10 8250 6.5%*10*8250*44 235950
Total 239525/-
And whereas, it is proposed to afford M/s MAA MALLIKA ENGG.
UDYOG an opportunity to show cause against the said determination and recovery."
17. Mr. Lodh, learned counsel has further submitted that unless there is proof that the petitioner's firm had engaged 10 or more employees it would not come under the purview of ESI Act. Hence, the impugned notices and orders are wholly illegal are liable to be interfered with.
18. Mr. Pal, learned counsel has referred to the provisions of Section 1(6) of the ESI Act which clearly provides that a factory or establishment to which the ESI Act applies shall continue to be governed by this Act notwithstanding that the number of persons employed therein at any time falls below the limit specified by or under this Act or the manufacturing process therein ceases to be carried on with the aid of power.
19. It has been though stated that even if at the relevant point of time when the inspection was carried on in terms of the notice dated 10.02.2014 it was found that according to the statement of the petitioner the total number of employees as per the attendance register was seven or whose names have been registered in the pay register, that will not absolve the petitioner from payment of the contribution under the ESI Act inasmuch as at one point of time total number of employees was more WP(C)223 of 2017 Page 9 of 11 than ten. Therefore, the recovery order as communicated by the notice dated 09.05.2014 cannot be faulted with.
20. Mr. Pal, learned counsel has submitted that the writ petition is not maintainable as those orders are adjudicable by the Employees Insurance Court constituted under Section 74 of the ESI Act, as the dispute is well covered by Section 75 of the ESI Act. Despite such effective remedy, the petitioner has approached this Court. This Court should not interfere with the orders passed in the proceeding under ESI Act for recovery of the contribution of the employer.
21. Tripura Employees Insurance Court has been constituted in exercise of power conferred under sub-section (1) of Section 74 of the ESI Act for purpose of adjudication in the matters as laid down in Section 75 of the ESI Act by the notification dated 06.10.2009 (Annexure-A to the reply filed by the respondents). Thus, the petitioner's factory being under the notified area vide notification dated 17.12.2008 (Annexure-B to the reply filed by the respondents) the petitioner ought to have approached the statutory court without filing the writ petition inasmuch as, the inquiry into disputed facts is involved, as from the statement endorsed by the Manager of the petitioner (Anenxure-4 to the Interlocutory Application No. 02/2017) it has been recorded that the petitioner's factory had once ten employees. Subsequent reduction in strength will not absolve the petitioner, if the said statement is acted on.
22. As such, this Court is of the view that there exists no grave jurisdictional error. The petitioner ought to have approached the Tripura Employees Insurance Court for adjudication of the dispute, if he was really aggrieved by the said dispute. Apparently since, there is no infirmity so far WP(C)223 of 2017 Page 10 of 11 the fact relating to the number of workers working in the factory at the relevant point of time or for determining the effect of such strength, this writ petition is dismissed however reserving the right to the petitioner to approach the Tripura Employees Insurance Court, if he is so inclined.
23. The further recovery shall not be made within a period of six weeks from today. In the meanwhile, the petitioner may approach the Tripura Employees Insurance Court else there will be no restraint for the respondents in recovering the legal due from the petitioner.
24. With these observations and directions, this writ petition is disposed of. There shall be no order as to costs.
25. A copy of this order be furnished to the learned counsel for the parties.
JUDGE lodh l odh WP(C)223 of 2017 Page 11 of 11