Bombay High Court
Employees State Insurance Corporation vs M/S. P.Y.C. Hindu Gymkhana on 12 August, 2024
Author: Sharmila U. Deshmukh
Bench: Sharmila U. Deshmukh
67 fa 2372-2011.doc
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CIVIL APPELLATE JURISDICTION
FIRST APPEAL NO. 2372 OF 2011
Employees State Insurance
Corporation and Another. ...Appellants.
Versus
M/s. P.Y.C. Hindu Gymkhana. ...Respondent.
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Mr. Sujeet Kurup for the Appellant.
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Coram : Sharmila U. Deshmukh, J.
Date : August 12, 2024. P. C. : 1. Heard.
2. At the outset, learned Advocate Mr. Kurup tenders his vakalatnama. The same is taken on record.
3. By this appeal, challenge is to the order dated 30 th January 2009 passed by the Employees State Insurance Court [for short "the ESI Court"] under Section 75 of the Employees State Insurance Act, 1948 [for short "the ESI Act"].
4. Facts of the case are that the Respondent herein had challenged the recovery notice dated 28th March, 2005 demanding an amount of Rs.3,53,908/- before the Employees State Insurance Corporation. It was contended that in the absence of bifurcation statement, it was Patil-SR 1 of 6 67 fa 2372-2011.doc difficult to ascertain the actual wages of the employees and questioned Form C-18. It was contended that the figures taken in the inspection report by the inspector of the Corporation was taken from the ledger folios in respect of different heads and the amount paid to the contractor was inclusive of material cost and wages cost and therefore it was necessary to pass an order under Section 45A of the ESI Act and without such order being passed, Form C-18 as well as the notice for recovery has been issued. The ESI Court held that though it is stated in observation sheet that amounts under various heads of account were paid to contractors, there is no explanation as to how the payments were to employees of contractor only. It held that as amount paid to contractor included material cost, profits and labour charges and without any evidence showing the wages paid to employees of contractor it cannot be said that amount was actually paid towards labour charges. The ESI Court held that as there was requirement of bifurcation statement, show-cause notice in Form C-18 was required to be issued on ad-hoc basis and determination of amount under Section 45-A of ESI Act which was not done. The ESI Court on appreciation of evidence held that the notice dated 27 th February 2005 and recovery notice dated 29 th March 2005 are illegal and contrary to the provisions of law. The ESI Court held that as there Patil-SR 2 of 6 67 fa 2372-2011.doc is no dispute about the amount spent on various heads including the wage component, it is obligatory on the part of Petitioner to pay compensation to ESI Corporation at least on the wage component and thereafter proceeded to determine the actual amount of contribution. The ESI Court considered that as per the circular issued by the ESI Corporation when bifurcation statement is not available, 25% of the amount actually spent under various heads can be considered as amounts spent on labour components and thus calculated the amount of contribution at 9564.49 along with interest @ 13% per annum.
5. Mr. Kurup, learned counsel appearing for the Appellant would submit that the substantial question of law in the present case is that the ESI Court could not have determined the contribution and has committed a jurisdictional error by doing so.
6. Considered the submission and perused the record.
7. Under Section 82 of the ESI Act, an appeal would lie against the judgment of ESI Court only in event the same raises substantial question of law. In the present case, admittedly there is no contribution determined by passing an order under Section 45A of ESI Act. Section 45A of ESI Act empowers the Corporation where no returns, particulars, registers or records are submitted, furnished or maintained, in that event, on the basis of information available to it to Patil-SR 3 of 6 67 fa 2372-2011.doc determine the amount of contribution payable in respect of the employees of factory or establishment provided that before passing an order under Section 45A of ESI Act, a reasonable opportunity of being heard is given to the principal or the immediate employer or the person in charge of the factory or establishment. The recovery certificate can be issued under Section 45C of ESI Act only where there is an assessment of contribution payable. Admittedly, in the present case the recovery certificate has been issued without determining the amount of compensation under Section 45A of ESI Act. The trial Court has therefore rightly held that in the absence of any order under Section 45A of ESI Act, the recovery proceedings cannot be initiated.
8. Section 75 of ESI Act governs the jurisdiction of ESI Court and provides that if any question or dispute arises as to the rate of contribution payable by the principal employer in respect of any employee or any matter which is in dispute between the principal employer and the corporation, such question or dispute shall be decided by the ESI Court in accordance with the provisions of ESI Act. Sub Section (2) of Section 75 of ESI Act provides that the ESI Court shall decide the claim for recovery of contribution from the principal employer. It is therefore clear from the said provision that the ESI Court has the jurisdiction to decide the dispute, if any, in respect of the Patil-SR 4 of 6 67 fa 2372-2011.doc rate of contribution payable by the principal employer. The ESI Court has relied upon the circular issued by the ESI Corporation which provides that when the bifurcation statement is not available then 25% of the amount actually spent under various heads can be considered as amount spent on labour components and on that amount the contribution has to be calculated. The submission of learned counsel appearing for the Appellant that thereby the amount of contribution has been reduced would amount to a disputed question of fact.
9. Admittedly, there is no order passed under Section 45A of ESI Act and therefore no recovery could have been issued. It is also pertinent to note that Section 45A of ESI Act provides for a reasonable opportunity of being heard before an order under Section 45A of ESI Act is passed. The recovery certificate was therefore illegal and was rightly quashed by the ESI Court. Having done so, in exercise of powers under Section 75 of ESI Act, the ESI Court has in accordance with the circular issued by the ESI Corporation calculated the amount @ 25% of the actual amount. It is not every error of fact which is required to be corrected while exercising powers under Section 82 of the ESI Act and it is only in event the substantial question of law that the appeal can be admitted.
10. For admission of an appeal under ESI Act, there has to be a Patil-SR 5 of 6 67 fa 2372-2011.doc substantial question of law in the appeal.
11. Having regard to the above, no substantial questions of law arises in this appeal. The appeal stands dismissed.
12. In view of the disposal of Appeal, nothing survives for consideration in the pending civil/interim applications and the same stand disposed of.
[Sharmila U. Deshmukh, J.]
Patil-SR 6 of 6
Signed by: Sachin R. Patil
Designation: PS To Honourable Judge
Date: 14/08/2024 20:51:26