Bombay High Court
Esic,Thr.Its Dy.Director vs M/S Neelam Hotel & Food ... on 31 July, 2017
3107 FA 562/2008 1 Judgment
IN THE HIGH COURT OF JUDICATURE AT BOMBAY,
NAGPUR BENCH AT NAGPUR.
FIRST APPEAL NO. 562/2008
Employees State Insurance Corporation,
Panchdeep Bhavan, Ganeshpeth, Nagpur.
Through its Deputy Director. APPELLANT
.....VERSUS.....
M/s. Neelam Hotel and Food Products,
Badnera Road, Amravati, a Registered
Partnership Firm through its Partners;
1] Bhayyalal Puranlal Sahu,
2] Ramgopal Hiralal Gupta,
3] Jitesh Bhaiyyalal Sahu,
4] Manish Bhayyalal Sahu,
All R/o. Masangaj Amravati. RESPONDE NTS
Mrs. B.P. Maldhure , counsel for appellant.
Shri S.M. Vaishnav, counsel for respondents.
CORAM : DR. SMT. SHALINI PHANSALKAR-JOSHI, J.
DATE : JULY 31, 2017.
ORAL JUDGMENT :
This appeal preferred under Section 82 of the Employees State Insurance Act, 1948 (for short, "ESI Act") raises for consideration the following substantial question of law: ::: Uploaded on - 16/08/2017 ::: Downloaded on - 17/08/2017 00:30:43 :::
3107 FA 562/2008 2 Judgment "Whether Section 2A read with regulation 10-B of the Employees State Insurance Act, 1948 is mandatory?"
2] This issue is raised in pursuance of the order dated 04/04/2008 passed by Employees Court (Industrial Court), Amravati in E.S.I. Petition No. 1/2004.
3] The facts, which may be necessary, for deciding this question of law, can be stated in brief, as follows:
Respondent nos.1 to 4 herein claimed to be the partners of M/s. Neelam Hotel and Food Products, Badnera Road, Amravati, which is a partnership firm, running under the same name and style. Earlier, one Neelam Hotel was running in the said premises, however the said Hotel came to be closed on account of certain problems faced by the partners, who were running the said Hotel, namely, Shri Shankarsa Mamrade, Rajendrasa Mamrade and Sanjay Mamrade. After the closure of the Hotel Neelam, all the employees working in the said Hotel were terminated. Thereafter, the Hotel premises were sold by its partners, Mamrade brothers, to the firm of respondent nos.1 to 4, by registered sale deed dated 14/06/2001. After purchase of the said Hotel, respondent no.1 ::: Uploaded on - 16/08/2017 ::: Downloaded on - 17/08/2017 00:30:43 ::: 3107 FA 562/2008 3 Judgment started the business of hotel and food products in the said premises with effect from 05/11/2001.
4] As per the case of respondents, they had started the business afresh with new employees as not a single employee of the earlier Hotel Neelam was continued or re-employed. Immediately after starting their business, respondents requested Employees State Insurance Corporation, Nagpur (hereinafter will be referred to as "ESI Corporation") to provide the account number to them, so as to deposit the contribution towards Employees State Insurance. It is contended that, in spite of repeated correspondence made by the respondents, no code number was allotted to them by the appellant herein, and hence respondents could not deposit the amount by way of contribution. It is their grievance that they made efforts to get the account number, but it was all in vain. Conversely, notice came to be issued to them on 29/03/2004 demanding contribution of Rs.70,549/- for the period from November-2001 to March-2003. After receipt of this notice, respondents again made correspondence with the appellant to provide the requisite account number, so as to comply with the said notice, however, appellant failed to do so. ::: Uploaded on - 16/08/2017 ::: Downloaded on - 17/08/2017 00:30:43 :::
3107 FA 562/2008 4 Judgment 5] It is the contention of the respondents that the amount
claimed was exorbitant and excessive. As per their record, the amount of Rs.28,651/- only was found due and they were ready to deposit the same if the account number was provided to them. However, appellant insisted on respondents to deposit the contribution in the old account number of Hotel Neelam, to which respondents had no concern. According to their case, they had purchased Hotel Neelam without any liability and hence they cannot be directed to deposit the contribution in the old code number.
6] As such, respondents filed the petition before the Presiding Officer of Employees State Insurance Court, Amravati under Section 75 read with 77 of the ESI Act, for setting aside the order dated 10/08/2004 issued by Deputy Director, ESI Corporation, demanding the sum of Rs.70,549/- by way of contribution and sought further direction to fresh assessment of contribution on the basis of the record maintained by respondents and further to provide them a new account number.
7] This petition came to be resisted by the present
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3107 FA 562/2008 5 Judgment
appellant vide its written statement at Exh.12, contending inter alia that though respondents had started the Hotel business in the premises of Hotel Neelam with effect from 05/11/2001, they have not furnished the information about the same within a period of 15 days, as per the provisions of Section 2 read with Regulation 10-B of the ESI Act. It was submitted that they have given the first intimation only on 05/12/2003 and requested for allotment of new code number. Accordingly, Respondents were directed to start compliance with the old code no. 23-2031-89 and also to send the copy of the sale deed, but respondents did not comply with the said letter. It was submitted by Appellant that every factory/establishment is required to be registered as per the provisions of Regulation 10-B of the ESI Act within 15 days after the ESI Act becomes applicable to it. Such factory or establishment cannot insist for allotment of new code number, as the code number is not meant for principal employer, but for that particular factory. It was submitted that the approach of respondents, since beginning was non-cooperative and hence appellant was constrained to invoke its power under Section 45A of the Act for determination of contribution, which was defaulted since November-2001. Respondents were also given a ::: Uploaded on - 16/08/2017 ::: Downloaded on - 17/08/2017 00:30:43 ::: 3107 FA 562/2008 6 Judgment chance of personal hearing on 26/04/2004, but they did not submit any statement of contribution for the period from November-2001 to March-2003, nor attended the personal hearing on 26/04/2004. As a result, order came to be passed under Section 45A of the Act on 10/08/2004, directing the respondents to deposit the contribution of Rs.70,549/- for the period from November-2001 to March-2003. It was submitted that the said order being legal and correct, no interference was warranted therein, especially when the only contention raised by the respondents was that they should be allotted a new code number, which was not at all necessary, merely because there is a change in ownership.
8] On the basis of these respective pleadings, the E.S.I. court framed requisite issues for its consideration at Exh.17. In support of their case, respondents examined their partner Jeetesh Bhayyalal Sahu and relied upon various correspondence, whereas on behalf of appellant, it's Branch Manager, Ramrao Khandekar was examined as a witness.
9] On appreciation of their evidence and after going through the various correspondence produced on record by both the ::: Uploaded on - 16/08/2017 ::: Downloaded on - 17/08/2017 00:30:43 ::: 3107 FA 562/2008 7 Judgment parties, the learned Presiding Officer of ESI Court was pleased to hold that, as admittedly the partners and owners of earlier Hotel Neelam and the present establishment of Hotel Neelam and Food Products, were distinct and different and even the employees were also different, and hence specific request was made by the present respondents to allot them a new code number, it was not proper to serve on them the notice demanding the contribution of Rs.70,549/- towards the period from November-2001 to March-2003. 10] The contention advanced by learned counsel for appellant that the provisions of Regulation 10-B of the ESI Act, were mandatory in nature and therefore the failure of respondents to comply with the said provisions does not entitle them to any relief, was not accepted by the learned Presiding Officer. As a result, the petition was allowed and appellant was directed to make proper assessment of contribution on the basis of the record and also to provide a new account number to the respondents. Accordingly, the order dated 10/08/2004 passed by the Deputy Director was set- aside.
11] While challenging this order in the present appeal, the
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3107 FA 562/2008 8 Judgment
submission advanced by learned counsel for appellant is that, the trial court has committed an error in holding that the provisions of Regulation 10-B of the ESI Act, are not mandatory, especially having regard to the use of the word "shall" in the said provision. Hence, the substantial question of law, which is raised for consideration in the present appeal is, whether Section 2A read with Regulation 10-B of the ESI Act, 1948 is mandatory? 12] Per contra, learned counsel for respondent Shri Vaishnav has submitted that the provisions of Regulation 10-B contemplates certain compliance on the part of the appellant also. Here in the case, no such compliance was made by the appellant, and therefore Regulation 10-B, even if it is held to be mandatory, cannot make impugned order passed by the trial court, as illegal. 13] Thus, in order to decide the substantial question of law, which is raised in this appeal, as to whether Section 2A read with Regulation 10-B of ESI Act is mandatory, it is necessary first to reproduce these two provisions. Section 2A of the ESI Act reads as follows:
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3107 FA 562/2008 9 Judgment "2A. Registration of factories and establishment.
Every factory or establishment to which this Act applies shall be registered within such time and in such manner as may be specified in the regulations made in this behalf."
Whereas Reg. 10-B contained in Chapter II of the ESI Act, reads as follows :
"10-B. Registration of Factories or Establishments.
(a) The employer in respect of a factory or an establishment to which the Act applies for the first time and to which an Employer's Code Number is not yet allotted and the employer in respect of a factory or an establishment to which the Act previously applied but has ceased to apply for the first time being, shall furnish to the appropriate Regional Office not later than 15 days after the Act becomes applicable, as the case may be, to the factory or establishment, a declaration of registration in writing in Form No.01 & Form No.01A (hereinafter referred to as Employer's Registration Form).
(b) The employer shall be responsible for the correctness of all the particulars and information required for and furnished on the Employer's Registration Form.
(c) The appropriate Regional Office may direct the employer who fails to comply with the requirements of paragraph
(a) of this regulation within the time stated therein, to furnish to that office Employer's Registration Form duly completed within such further time as may be specified and such employer shall, thereupon, comply with the instructions issued by that office in this behalf.
(cc) The employer in respect of a factory or establishment to which a code number has been issued by the Corporation based on information collected or decision taken ::: Uploaded on - 16/08/2017 ::: Downloaded on - 17/08/2017 00:30:43 ::: 3107 FA 562/2008 10 Judgment regarding applicability of the Act to such factory or establishment, shall, within fifteen days of receipt of information of allotment of code number, furnish a declaration in Form-01.
(d) Upon receipt of the completed Employer's Registration Form, the appropriate Regional Office shall, if satisfied that the factory or the establishment is one to which the Act applies, allot to it an Employer's Code Number (unless the factory or the establishment had already been allotted an Employer's Code Number) and shall inform the employer of that number.
(e) The employer shall enter the Employer's Code Number on all documents prepared or completed by him in connection with the Act, the rules and these regulations and in all correspondence with the appropriate office."
14] For deciding whether both these provisions are mandatory in nature or not, it would be useful to consider the Object and Reasons of the ESI Act. The object of the ESI Act stated in its preamble is to provide certain benefits to employees in case of sickness, maternity, employment injury and for certain other matters in relation thereto. It is a beneficial legislation enacted to safeguard the interests of the employees in case of their difficult times, like sickness, injury etc. As observed by the Hon'ble Apex Court in the case of M/s. Cochin Shipping Co. -Vs- E.S.I. Corporation, 1992 II CLR 623, "The Act is an outcome of a policy to provide remedy for ::: Uploaded on - 16/08/2017 ::: Downloaded on - 17/08/2017 00:30:43 ::: 3107 FA 562/2008 11 Judgment the widespread evils arising from the consequences of national poverty. Indeed, it is a piece of social security". 15] In another case of Employees State Insurance Corporation -Vs- M/s. Harrison Malayalam Pvt. Ltd., 1994 I CLR 15, the Hon'ble Apex Court was pleased to observe that;
"..... The scheme under the Act for insuring the workmen for conferring on them benefits in case of accident, disablement, sickness, maternity etc.; is distinct from the contract of insurance in general. Under the Act, the scheme is more akin to group insurance. The contribution paid entitles the workman insured to the benefit under the Act. However, he does not get any part of the contribution back if during the benefits period, he does not qualify for any of the benefits. The contributions made by him and by his employer is credited to the insurance fund created under the Act and it becomes available for others or for himself, during other benefit period, if he continues in employement. What is more, there is no relation between contribution made and the benefit availed of. The contribution is uniform for all workmen and is a percentage of the wages earned by them. It has no relation to the risks against which the workman stands statutorily insured. It is for this reason that the Act envisages automatic obligation to pay the ::: Uploaded on - 16/08/2017 ::: Downloaded on - 17/08/2017 00:30:43 ::: 3107 FA 562/2008 12 Judgment contribution once the factory or the establishment is covered by the Act, and the obligation to pay the contribution commences from the date of the application of the Act to such factory or establishment. The obligation ceases only when the Act ceases to apply to the factory/establishment. The obligation to make contribution does not depend upon whether the particular employee or employees cease to be employee/employees after the contribution period and the benefit period expired."
16] When the Constitutional validity of the provisions of Regulation 10-B, dealing with registration of factories and establishments, was challenged before the High Court of Jammu and Kashmir in the case of Jay Kay Marbles -Vs- Union of India and others, 1996 I CLR 507, relying on the abovesaid decisions of the Hon'ble Apex Court, it was held that, "No part of the ESI Act, neither Chapter IV nor Chapter V thereof suffers from any unconstitutionality or legal vice or mischief". It was further held that, "While deciding the constitutionality of this provision and other related provisions the first and foremost thing which has to be borne in mind that the Act is a piece of welfare legislation, enacted solely with the intention of ::: Uploaded on - 16/08/2017 ::: Downloaded on - 17/08/2017 00:30:43 ::: 3107 FA 562/2008 13 Judgment providing relief as a welfare measure to the employees working in the factories and establishments covered by the Act. The intention of the Legislature in enacting a law like the Act was to ensure that in some adverse situations and circumstances whenever the employees need some relief either by way of cash assistance and medical treatment or both, they do not suffer for want of such relief and that the State creates a machinery, provides a mechanism whereby such a relief to them is ensured". 17] It was accordingly held that, "If the employees and the employers contribute some amount for providing such mechanism, a system and infrastructure whereby relief is ensured to the deserving weaker, poor and oppressed employees, the objective indeed is laudable, and therefore the Act is intra vires the Constitution of India". 18] While dealing with the plea regarding Constitutionality of Regulation 10-B of the ESI Act, it was held that, "this Regulation is in conformity with the purpose for which provision is made in the Act for registration of factories and establishments so that effective implementation of the welfare scheme, as provided for in the act is carried out. Regulation 10B merely provides for a mechanism for registration of the factories, furnishing ::: Uploaded on - 16/08/2017 ::: Downloaded on - 17/08/2017 00:30:43 ::: 3107 FA 562/2008 14 Judgment of requisite information and allotment of employers Code Number etc. It enjoins upon the employers to give correct information with regard to the employees etc. and fixes responsibility upon the employers for giving incorrect information. There is nothing obnoxious in Regulation 10B which may attract any legal vice or mischief or which may be termed as being opposed to the principles of natural justice. We hold that Regulation 10B is therefore also not ultra vires either the Constitution of India, the Act or any other law."
19] If one considers the laudable object of the Act and the entire scheme provided under the Act for the welfare of the employees in the moments of their difficulty, like sickness, medical problems etc., then it needs to be held that so far as Section 2A of the Act is concerned, which also contains the word "shall", it is required to be held as mandatory. It enjoins the duty upon the factories or establishments to which this Act applies to be registered within such time and in such manner as may be required under the regulations. In view thereof, if this provision is not considered to be mandatory, then every employer may get rid of the liability which is fastened on him under the Act to advance the laudable ::: Uploaded on - 16/08/2017 ::: Downloaded on - 17/08/2017 00:30:43 ::: 3107 FA 562/2008 15 Judgment object of the Act.
20] Now the question for consideration is whether Regulation 10-B which is a necessary follow up of the provision of Section 2A of the Act is also mandatory? As held in the abovesaid judgment in the case of Employees State Insurance Corporation vs. M/s.Harrison Malyakim Pvt. Ltd. of the Jammu and Kashmir High Court, if Regulation 10-B merely provides for mechanism of registration of the factories so as to give correct information with regard to the employees etc. and for fixing the responsibility upon employers for giving incorrect information, then the said Regulation also becomes mandatory. Hence so far as clause (a) is concerned which casts a duty on the employer in respect of the factory or establishment to which the Act applies to furnish to the appropriate Regional Office not later than 15 days after the Act becomes applicable, a declaration of registration in writing in Form No.01 is concerned, the said provision needs to be considered as mandatory. It becomes the legal duty and mandate of the every establishment and factory to which the Act is applicable, to provide the information in Form No.01 within 15 days from the day the Act has become applicable to such an establishment. There is no option but ::: Uploaded on - 16/08/2017 ::: Downloaded on - 17/08/2017 00:30:43 ::: 3107 FA 562/2008 16 Judgment to hold this provision as mandatory, as it is within the exclusive knowledge of the employer when the Act becomes applicable to his establishment. Clause (b) further holds the employer responsible for correctness of all the particulars and information required for and furnished in the employee's Registration Form. 21] Clause (C) of Regulation 10-B, on which learned counsel for respondent has placed much reliance provides that it is for the appropriate Regional Office to direct the employer who fails to comply with the requirements of the Clause (a) of the Regulation, within the time stated therein to furnish Form No.01 within the such further time as may be specified and such employer shall there upon, comply with the instructions issued by the office in that behalf. The employer has to, then 15 days after the allotment of the Code number, furnish the information and declaration in Form No.01. According to Clause (d) of the regulation 10-B, upon receipt of the employer's Registration Form, it is the duty of the Regional Office to allot to it Employer's Code Number unless the factory or establishment has already been allotted an Employer's Code Number and shall inform the employer of that number. ::: Uploaded on - 16/08/2017 ::: Downloaded on - 17/08/2017 00:30:43 ::: 3107 FA 562/2008 17 Judgment 22] Considering the entire scheme of the Act, the object and reasons for enactment for such legislation, therefore it has to be held that, initially the first duty is on the employer to furnish the information within 15 days from the date when the Act becomes applicable. The said employer has to file a declaration of registration in Form No.01, giving all the particulars. If he fails to do so, then it is for the Regional Office to direct the employer to furnish such information in Form No.01 within the stipulated time. Thereafter it is again for the employer to furnish the declaration in Form No.01 within 15 days and then again for the Regional Office to allot code number to it, if it is already not allotted. 23] In the instant case, it is not disputed that so far as the Respondent is concerned, the provisions of ESI Act are applicable to it. No factual dispute is raised on this aspect. It is also admitted that earlier Hotel Neelam was conducted in the said premises and the said establishment was, with effect from 05/11/2001, taken over by the present respondents and they started running the Hotel therein under the somewhat different name of M/s. Neelam Hotel and Food Products. The applicability of the Act to the business of hotel or the ::: Uploaded on - 16/08/2017 ::: Downloaded on - 17/08/2017 00:30:43 ::: 3107 FA 562/2008 18 Judgment establishment preparing or manufacturing food products is also not in dispute and learned counsel for appellant has also, in this respect relied upon the judgment of this court in the case of Poona Industrial Hotel Ltd. -Vs- I.C. Sarin, 1979 Law Suit (Bom) 269, wherein it was held that, "The word "establishment" needs to considered to be generic which includes factory and other establishments. If the establishment is a factory as defined under the Act, it applies to the said establishment and it does not require any action on the part of the Corporation or of the Government to apply the provisions of the Act to the factory".
24] It was held that, "the application of the provisions of the Act to the Hotel establishment of Blue Diamond, which was a factory as defined under the Act, automatically cannot be considered as violation of the rules of natural justice". It was further held that, "it is enough if 20 employees are working in premises in a part of which manufacturing process is carried on for making the provisions of the ESI Act automatic applicable to the said establishment." 25] Here in the case, learned counsel for respondents is ::: Uploaded on - 16/08/2017 ::: Downloaded on - 17/08/2017 00:30:43 ::: 3107 FA 562/2008 19 Judgment also not disputing the applicability of the ESI Act to the establishment of respondents. It is also not disputed that requisite number of 18 persons were employed in this establishment when it came into existence from 05/11/2001. It is also not disputed that earlier Hotel Neelam was covered under the ESI Act and particular code number 23-2031-89 was allotted to Hotel Neelam. 26] The grievance of learned counsel for respondents is however that, admittedly Hotel Neelam has stopped working and it is not disputed that none of the employees of Hotel Neelam was re- employed in the new establishment of the respondents. It is also admitted that establishment of the Hotel Neelam and establishment of respondents under the name of Hotel Neelam and Food Products were distinct and different. The management is also changed. Mr. Mamrade was the proprietor of Hotel Neelam, whereas the respondents are the partners of the present establishment. It is also admitted that the sale deed, under which the present respondents have taken over the said establishment, clearly shows that they have not accepted the liability of the already existing employees. Therefore, according to learned counsel for respondents, when a totally new establishment is created and it is distinct in every way ::: Uploaded on - 16/08/2017 ::: Downloaded on - 17/08/2017 00:30:43 ::: 3107 FA 562/2008 20 Judgment from the earlier establishment of Hotel Neelam, it was the responsibility of the appellant to provide a separate code number than the earlier code number. Respondents had demanded such separate code number, however appellant failed to provide such code number and directed the respondents to make contribution under the earlier code number. This submission of learned counsel for respondents is accepted by the ESI Court and accordingly the appellant was directed to re-assess the amount due and payable from the respondents.
27] If this submission of learned counsel for respondents is to be appreciated in the light of the provisions on record, then it has to be held that it was the responsibility of the respondents, immediately after the new establishment came into effect from 05/11/2001, to give information to the Regional Office in prescribed proforma of Form No.01 within 15 days after the Act became applicable. As per the provisions of the ESI Act, there is immediate application of the Act and as stated above, the moment the establishment comes into existence and achieves the particular number of employees, which is mandatory under the Act, then the application of the Act to such an establishment is ::: Uploaded on - 16/08/2017 ::: Downloaded on - 17/08/2017 00:30:43 ::: 3107 FA 562/2008 21 Judgment automatic. There is no further procedural requirement contemplated. Even the contention that it is in violation of principles of natural justice as no show cause notice or opportunity of hearing is contemplated, was also rejected as stated above. Therefore, from 05/11/2001, when respondents took over the establishment, the provisions of the ESI Act became applicable to the respondents. Hence it was necessary for the respondents to submit the information and declaration in Form No.01 within 15 days thereafter to the Regional Office. However, admittedly no such information was provided by the Respondents as contemplated under the Regulation 10(a) of the ESI Act.
28] The correspondence which is produced on record goes to show that as respondents failed to furnish such information or seek registration, they were called upon by notice dated 20/11/2002 to comply with the same. It was informed to respondents that as per the inspection carried out on 18/09/2002, they have to make necessary compliance under the code number of Hotel Neelam. This letter is received on behalf of the respondents on 16/12/2002. Thus, by this letter, a specific direction was given to the respondents to make contribution under the old code ::: Uploaded on - 16/08/2017 ::: Downloaded on - 17/08/2017 00:30:43 ::: 3107 FA 562/2008 22 Judgment number. Thereafter by another letter dated 25/03/2002, it was again pointed out that as per the letter dated 29/11/2002 Respondents were directed to make compliance under the old code number. The copy of this letter dated 25/03/2002 is also produced on record. Thereafter also as respondents failed to comply, another letter dated 14/08/2003 was issued to them, drawing their attention towards non-compliance of the provisions of ESI Act. To this letter, respondents sent reply on 26/02/2004 for allotting them new code number. It was submitted that they have requested for such new code number on 05/12/2003, however till the date they were not allotted new code number, hence they are facing the difficulty. Therefore they again requested for allotment of new code number. The Deputy Director of appellant then, by notice dated 05/07/2004, again called upon the respondents to make payment under the old code number as new code number cannot be allotted. As respondents failed to comply with the same, the ad-hoc process for the recovery of the amount due from the respondents was initiated and they were called upon to pay the said amount by the order dated 10/08/2004. This order is ultimately challenged before the trial court.
::: Uploaded on - 16/08/2017 ::: Downloaded on - 17/08/2017 00:30:43 ::: 3107 FA 562/2008 23 Judgment 29] Thus, the correspondence on record is more than sufficient to reveal that in the first place respondents did not furnish the information as per Clause (a) of the Regulation 10-B which was a mandatory mechanism, in order to comply with the provisions of the Act especially section 2A. Respondents failed to furnish such information within 15 days from the date when the Act became applicable. Therefore, they were called upon to furnish such information, by the appellant. They were also informed that they should furnish such information under the old code number. However, thereafter also, they failed to furnish information or to get their establishment registered under the Act. As a result, after issuing the requisite notice, if the ad-hoc assessment was made by the Deputy Director of the appellant and respondents were called upon to make the payment, no fault can be found therein. 30] According to learned counsel for the respondents, however, it was the responsibility of the appellant to provide them a new code number, without which it was not possible to make contribution. In this respect, reliance is placed on the judgment of Delhi High Court in the case of Employees' State Insurance ::: Uploaded on - 16/08/2017 ::: Downloaded on - 17/08/2017 00:30:43 ::: 3107 FA 562/2008 24 Judgment Corporation -Vs- B.S. Electro Chem, 2009 SCC OnLine Del, 2053, wherein after considering the provisions of Regulation 10-B it was held that, "As per these regulations it is clear, that once Employer's Registration form is received by appropriate Regional Office, they shall allot a Code Number, called as "Employer's Code Number" to the employer, whose establishment is governed under the Act. The word used in the Regulation is 'shall' which means, it is the duty of the Regional Office, to provide with Code Number without which, contribution is not possible". 31] In the facts of the said case it was held that though it was a case of the Regional Office that the code number was sent and delivered to the respondents as according to respondents they had not received the same, it was held that, without providing of such code number to the employer, it was not possible for the employer to make the payment of contribution. 32] Thus, the facts of the abovesaid authority are distinct to the effect that appellant therein, which was an establishment, has already submitted the employer's Registration Form and it was received by the Regional Office and therefore the liability was ::: Uploaded on - 16/08/2017 ::: Downloaded on - 17/08/2017 00:30:43 ::: 3107 FA 562/2008 25 Judgment shifted upon the Regional Office to allot new code number to that establishment. Though they had allotted such new code number it was not proved that appellant had received it. 33] Here in the present case, it is not at all the case of the respondents also that they had furnished the Registration Form to the appropriate Regional Office within 15 days after the Act became applicable to them. Thus, there is no compliance with the provisions of the Act, which cast the first duty on the employer to furnish Registration Form. Only if the employer fulfills the same duty, it is the duty of the Regional Office to supply the code number. Here in the case, respondents have not fulfilled the first duty cast upon them, of furnishing Registration Form within 15 days after the Act became applicable to them or even thereafter also, despite repeated reminders. In such case, this authority cannot be made applicable at all. Moreover in this authority new code number was to be allotted as the establishment has come into effect newly. As against it, in the present case, according to appellant, the old code number which was allotted to the earlier establishment, was to continue and there was no necessity of allotting the new code number, as the premises ::: Uploaded on - 16/08/2017 ::: Downloaded on - 17/08/2017 00:30:43 ::: 3107 FA 562/2008 26 Judgment in which the establishment was started by respondents was one and same. Moreover, the fact that Respondents have to fill the Registration Form under the same old code number was clearly informed to the respondents by the letter dated 28/11/2002 itself and the said letter was received on 16/12/2002 as it can be seen from the endorsement and the acknowledgement thereon. It may be true that thereafter they again raised grievance that they should be allotted new code number, but it was informed to them that there is no necessity of allotting of new code number and they will have to comply with the provisions of the Act under the old code number. Despite that, no compliance was made and therefore this fact was brought to their notice again by the letter dated 05/07/2004 and as they failed to comply with the said letter also, ad-hoc assessment was made by the order passed by the Deputy Director under section 45A of the Act. Hence no fault can be found in the order passed by the Deputy Director.
34] According to learned counsel for the respondents, however, it was obligatory on the Corporation to hear the defaulting employer who might be affected by the decision of Corporation under section 45 of the Act. By placing reliance on the judgment of ::: Uploaded on - 16/08/2017 ::: Downloaded on - 17/08/2017 00:30:43 ::: 3107 FA 562/2008 27 Judgment Paints (India), Ltd. -Vs- Employers' this court in the case of Asian State Insurance Corporation and another, it is submitted that under section 45A of the Act, the Corporation acts as a quasi- judicial authority and therefore, having regard to the object and scope of section 45A, the principles of natural justice would apply to these proceedings. The employer has to be given an opportunity of being heard before the amount is determined by the Corporation under section 45A of the Act. It was further held that, "The conditions laid down for the application of section 45A(1) and 45A(2) of the Act are two. One is non- compliance or non-observance of the provisions of section 44 which relate to employer's failure to furnish returns and maintain registers. The second condition, which is in the alternative, is the non-compliance of the provisions of sub-section (2) of section 45".
35] It was held that, "The expression "sufficient proof" used by the Legislature indicates that the Legislature did not intend to declare the amount determined by the Corporation to be a conclusive proof because it has taken care not to use the expression "conclusive proof" as understood in the Law of Evidence". Therefore, giving of an opportunity of hearing to the employer is necessary. ::: Uploaded on - 16/08/2017 ::: Downloaded on - 17/08/2017 00:30:43 ::: 3107 FA 562/2008 28 Judgment According to learned counsel for respondents there is no proof produced on record by the appellant to show that the demand notice issued was received by the respondents and thus no opportunity of hearing was given to the respondents. Therefore, on this count also impugned order of the Deputy Director, needs to be set aside.
36] According to learned counsel for respondents the witness for the appellant, Ramrao Khandekar, Branch Manager of Corporation, has admitted that he has no personal knowledge as to how many employees were working with the respondents at the relevant time. Even he does not know whether the inspection notes of the Inspector have been placed on record. This document, according to him, was not filed on record as it was not found necessary and thus, there is no sufficient proof that this amount is due from the respondents. The respondents had already deposited the amount of Rs.35,275/- in the court as per the order of the Industrial Court and the respondents are ready to deposit whatever amount was found due after they are heard in the matter, and hence, according to learned counsel for respondents, if any amount ::: Uploaded on - 16/08/2017 ::: Downloaded on - 17/08/2017 00:30:43 ::: 3107 FA 562/2008 29 Judgment is decided on ad-hoc basis, without there being sufficient material on record to prove it as due from the respondents, such amount can be finally determined after giving an opportunity to the respondents. It is submitted that the trial court has accordingly permitted such reassessment and hence no fault can be found in the impugned order of the trial court.
37] It is submitted that in the show cause notice issued on 29/03/2004, the wages of the employees were assumed as Rs.3,075/- per month and on that basis, if the amount was arrived at on ad-hoc basis and now the said amount is finalized by the impugned order, it shows that there was no sufficient proof of the said amount being due from the respondents, and hence said assessment, needs to be set aside.
38] Per contra, learned counsel for appellant submits that even after giving an opportunity to the respondents by issuing show cause notice dated 29/03/2004 which was received by the respondents on 30/03/2004, when the assessment is made by the Deputy Director under section 45A of the Act, it will prevail. To substantiate her submission, learned counsel for appellant has relied ::: Uploaded on - 16/08/2017 ::: Downloaded on - 17/08/2017 00:30:43 ::: 3107 FA 562/2008 30 Judgment upon the provisions of section 45A to submit that in the show cause notice, it was clearly stated in clause (3) as follows :
"3. Please note that under Section 45A of the Act, where in respect of a factory/establishment no returns, particulars, registers or records are submitted/furnished or maintained in accordance with the provisions of section 44, the Corporation may, on the basis of information available to it, by an order determine the amount of contribution payable in respect of employees of such factory/establishment and the same can be caused to be recovered under section 45C to 45I of the said Act".
39] It was further informed to the respondents in the said notice that if they fail to show cause within 15 days as to why assessment should not be made as proposed in the notice, then the said assessment will be finalized. It is urged that, in this case the respondents failed to reply the said show cause notice or even to appear before the Deputy Director. They have also not produced any material before the Deputy Director to explain or to give the submission regarding full particulars/ contribution actually due as per their record. Hence, in such situation, no fault can be found in the impugned order of the Deputy Director finalizing the said amount due.
::: Uploaded on - 16/08/2017 ::: Downloaded on - 17/08/2017 00:30:43 ::: 3107 FA 562/2008 31 Judgment 40] According to learned counsel for the respondents however, as held in the judgment of Asian Paints, it is the duty of the ESI Court to scrutinize the amount determined by the Corporation under section 45A(1) of the Act as it is not final. The very fact that it is necessary for the ESI Court to satisfy itself that the said demand was just and correct, it is open for the ESI Court to demand better evidence and 'sufficient proof' depending upon the facts and circumstances of the case. The declaration contained in sub-section (2) of section 45A does not and cannot impair the right of the Court to ask for such proof. In para no.23 of the judgment in the case of Asian Paints, it was held that, "It may be that the conduct of the party is condemnable because it has breached the provisions of section 44 by failing to file the returns or to maintain the records in accordance with that section or it may be that the party is guilty of causing obstruction to the offices of the Corporation when they are discharging their duties under section 45(2). But for all this, the rule of natural justice cannot be made inapplicable and then it becomes the ESI Court to verify and scrutinize whether the amount arrived at is correct or not".
41] Learned counsel for appellant has placed reliance on ::: Uploaded on - 16/08/2017 ::: Downloaded on - 17/08/2017 00:30:43 ::: 3107 FA 562/2008 32 Judgment the judgment in the case of ESI Corporation -Vs- C.C. Santhakumar, (2007) 1 Supreme Court Cases 584, specially the observations made in para no.15 of the judgment that, "Section 45A provides for determination of contribution 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 45A and recover the said amount as arrears of land revenue under section 45B 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 45A, the said order is final as far as the Corporation is concerned".
42] There cannot be any dispute about the legal proposition laid down in this authority. However the fact remains that in this authority also the employees were given an opportunity to move the ESI Court and the direction was given to the ESI Court to determine the quantum of contribution, if any payable.
43] In the instant case, admittedly the ESI Court that is trial court has not scrutinized or verified the amount of contribution ::: Uploaded on - 16/08/2017 ::: Downloaded on - 17/08/2017 00:30:43 ::: 3107 FA 562/2008 33 Judgment due from the respondents. It has directed ESI Corporation to make proper assessment on the basis of the record maintained by the respondents.
44] Thus, in the instant case, it bocomes now necessary to uphold this part of the order of the ESI Court as the competent authority is the ESI Corporation to make proper assessment of the contribution on the basis of the record, which respondents, if given an opportunity once again will produce it before the Corporation. To that extent, the impugned order of the trial court, needs to be upheld and confirmed as ESI Court itself has not done the scrutiny or verification of the amount of contribution given in the order under section 45A of the Act. However, the further direction of the trial court to the ESI Corporation to provide new account number to the respondents cannot be upheld, as already it is informed to the respondents that they will have to make registration and pay contribution in the old account number and there is nothing wrong in it.
45] Thus, so far as the substantial question of law is concerned, it is answered in affirmative holding that both, Section ::: Uploaded on - 16/08/2017 ::: Downloaded on - 17/08/2017 00:30:43 ::: 3107 FA 562/2008 34 Judgment 2A and Regulation 10B of ESI Act, are mandatory in nature. However, on the factual aspects, the impuged order of the trial court directing ESI Corporation to make proper assessment of the contribution on the basis of the record maintained by the respondents is upheld. The respondents are directed to approach the ESI Corporation with all the records in their possession within the period of one month from today i.e. on 31/08/2017. 46] The ESI Corporation shall determine the quantum of contribution, payable from the respondents and issue the requisite order under section 45A of the ESI Act.
47] Appeal is disposed of in above terms.
JUDGE
Yenurkar
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