Delhi District Court
Zillion Infraprojects Pvt Ltd vs Employees State Insurance Corporation on 20 July, 2018
IN THE COURT OF SH. PRASHANT SHARMA:
SCJCUMRC: CENTRAL DISTRICT: TIS HAZARI COURTS: DELHI
ESIC - 31/16/05
Zillion Infraprojects Pvt Ltd.
5th Floor, Anushka Tower, Plot No.2,
Garg Trade Centre, Sector11
Rohini. ..... Petitioner
Vs.
Employees State Insurance Corporation,
DDA Shopping Complex
Rajendra Bhawan, Rajendra Place
New Delhi. ..... Respondent
Date of Institution : 19.12.2005
Date of reserving Judgment : 16.07.2018
Date of pronouncement : 20.07.2018
JUDGMENT
1. Present petition u/s. 75 of Employees State Insurance Act, 1948 (in short 'ESI Act') was filed by petitioner namely M/s. Durha Components Pvt Ltd (hereinafter company) against respondent namely Employees State Insurance Corporation alleging following facts:
"That company is a private limited company duly registered under the Companies Act, 1956. It is a construction company engaged in the construction activities after taking assignments on contract basis at various sites and establishments from time to time. Due to nature of activities in which company ESIC - 31/16/05 M/s. Zillion Infraprojects Pvt. Ltd. Vs ESIC Page No. 1 of 16 is involved, working force of the company is subject to sudden and frequent movements to various site. The demand of labours is based on the work assignment from time to time. As such, labour force engaged in the company is neither permanent nor the same, on all times to come. The said labour force keeps on fluctuating due to the type of job work assigned to company by its various clients from time to time.
That as per the law of ESI Act, provisions of the said Act are not applicable on the company. The nature of work of company, as such makes it an exemption to the applicability of the said Act. In this regard, notification issued by respondent dated 14.06.1999 bearing no. P12(11)11/27/99INS.IV, issued by Additional Commissioner Revenue, the workers who are engaged by construction agencies and working on the site of project should not be considered for the purpose of coverage of an establishment dealing with the construction activities. Despite said notification, respondent violated it. On 28.10.1999 some of the officers of respondent, without prior notice or intimation to the company visited the office of company and raised a balance demand to the tune of Rs.1,08,010/ only. The said demand raised by respondent vide inspection report dated 28.10.1999 was illegal, ESIC - 31/16/05 M/s. Zillion Infraprojects Pvt. Ltd. Vs ESIC Page No. 2 of 16 arbitrary and without any basis. It was contrary to the aforesaid notification and was made without an intimation. Further, company claimed that said report was illegal as it did not mention the reason of calculation for the payment of contribution amount claimed in it. Company claimed that respondent had written a letter dated 28.10.1999 duly received by the company but said letter was having no merits as the staff posted at the site was not covered under ESI Act. The said demand in letter dated 28.10.1999 was not legally tenable as employees shown in the list attached with the said letter were having wages, beyond the limit of Rs.3,000/ and Rs.6,500/ per month. Respondent did not pay any heed to the company for exempting it from payment of said contribution and demanded the said amount for the period from April 1996 to February 1998. Officers of respondent threatened the company with dire consequences in case their said demand was not meet with by the company. Under compulsion, company deposited a sum of Rs.25,000/ only vide challan and letter dated
02.12.1999, without prejudice to its right. That though the ESI Act was not applicable upon the company even then company started its establishment and got the application of ESI Act voluntarily for the safety, security and benefit of its ESIC - 31/16/05 M/s. Zillion Infraprojects Pvt. Ltd. Vs ESIC Page No. 3 of 16 permanent employees which were less than 10 in number. As such demand of the respondent for contribution amount was illegal and arbitrary. Later on, respondent issued letter dated 11.12.2002 claiming that company in question is a factory employing more than 20 employees in the post and it was covered from 01.04.1996. Company denied it is to be a factory as per definition mentioned in Sec. 2(12) of ESI Act 1948 and also the fact that it is a shop as per Sec. 5(1) of ESI Act. Company filed objections to the aforesaid letter of respondent vide letter dated 13.01.2003 which was duly received by respondent. The said letter dated 13.01.2003 was sent alongwith letter dated 17.06.2002. In those letters company explained its possession as mentioned above and prayed that it be exempted from paying the contribution amount under the ESI Act. On 31.032005, respondent further asked for some documents and some queries from the company which was duly replied by letter of company dated 21.04.2005. On 09.12.2005 two or three persons came to the premises of company and asked for Managing Director of the company Sh. C.S. Saxena. When Sh. C. S. Saxena came, the said persons abused him and told him to either pay Rs. 10,000/ as bribe else they will get him arrested. Based on said ESIC - 31/16/05 M/s. Zillion Infraprojects Pvt. Ltd. Vs ESIC Page No. 4 of 16 averments, company prayed that respondent be directed to withdraw the demand letter dated 16.09.2005 which was illegal, null and void. It further prayed that amount mentioned therein to the tune of Rs. 83130/ be also declared illegal, null and void and as such nothing is recoverable from the company. It also prayed that company be declared as not liable to pay any demand to respondent. The aforesaid averments also formed ground on which present petition was filed by the company. Same are not repeated here for the sake of brevity."
2. Respondent filed written statement, challenging the case of company. Respondent claimed that petition is baseless, without any cause of action, contrary to the provisions of law and is an endeavour to part of company to shy away from the statutory obligation to pay the contribution amount. On merits, respondent refuted the version of company and submitted that company itself had applied for ESI code number on 17.12.1997 stating that it had employed 20 employees, as on 01.11.1997. On 04.02.1998 the survey was conducted by inspector of the respondent who verified the records of the company from November 1995 onwards. He had found 20 employees employed with the company, as on 01.04.1996 and accordingly reported that ESI Act was applicable on the company w.e.f. 01.04.1996 provisionally. Further, he submitted that prior to his visit the inspector of the respondent had intimated company about his visit. The survey report ESIC - 31/16/05 M/s. Zillion Infraprojects Pvt. Ltd. Vs ESIC Page No. 5 of 16 was filed by the inspector concerned on the basis of proper verification and actual wages paid by the employer to the employees from 4/96 to 2/98. Further, company was fully informed about those demands and was asked to represent its case personally before Authorized Officer on any working day vide letter dated 04.12.2002. Despite availing that opportunity, company did not bothered to visit the office of respondent. Based on said reply, respondent claimed that demand raised by it was justified.
3. Company filed replication to the said written statement of respondent, thereby denying the version of respondent and reasserting its version as mentioned in the petition. Same are not repeated here for the sake of brevity.
4. After completion of pleadings, following issues were settled by the court.
(i) Whether recovery sought by the corporation vide its letter dated 16.09.2005 for Rs.83130/ is liable to be set aside / quashed?
(ii) Relief.
5. Onus of proving aforesaid issues, rested upon petitioner.
6. After settlement of issues, matter was fixed for petitioner's evidence.
7. Petitioner examined only one witness i.e. PW1 Sh. Ajit Kumar Srivastava who was General Manager, Legal & Administration ESIC - 31/16/05 M/s. Zillion Infraprojects Pvt. Ltd. Vs ESIC Page No. 6 of 16 of the company. He tendered in evidence by way of affidavit Ex.PW 1/A in which he reiterated the facts as mentioned in the petition. Contents of the same are not repeated here for the sake of brevity. He relied upon documents viz. Copy of resolution dated 01.03.2012 Ex.PW1/1, photocopy of Certificate of Incorporation Ex.PW1/2, inspection report dated 28.10.1999 Ex.PW1/3, copy of letter dated 02.12.1999 Ex.PW1/4, original letter dated 11.12.2002 Ex/PW1/5, copy of letter dated 17.06.2002 Ex.PW1/6, letter dated 13.01.2003 Ex.PW1/7, original letter dated 31.03.2005 Ex.PW1/8, letter dated 21.04.2005 Ex.PW1/9 and letter dated 16.09.2005 Ex.PW1/10. Petitioner also examined PW2 Aftab Alam, who placed on record notification dated 14.06.1999 Ex.PW2/1. The said notification was objected to on the mode of proof as its original was not filed. Considering the fact that it is a public document, that objection stands overruled. After examining PW1, petitioner closed its evidence and matter was fixed for respondent's evidence.
7. Respondent examined only one witness namely Sh. Bijender who was an employee of respondent. He tendered in evidence by way of affidavit Ex.RW1/A in which he reiterated the facts as mentioned in the written statement. Contents of the same are not repeated here for the sake of brevity. He relied upon documents viz. Form01 Ex.RW1/1, Survey report dated 04.02.1998 Ex.RW1/2, allotment letter dated 19.03.1998 Ex.RW1/3 and inspection report dated 28.10.1999 Ex.RW1/4. After examining said witness, respondent closed its evidence and matter was then fixed for final arguments and after hearing final arguments, matter was fixed for judgment.
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8. Before adverting to the issues in hand, I must mention here the purpose of promulgation of ESI Act. The said Act was promulgated for providing certain benefits to the employees in case of weakness, maternity and employee injury together with certain other matters. The aim of said Act is to take care of health insurance of workers employed in the factories. The concept of right to health has been enumerated in international agreement which include the universal declaration of human rights, international convent on social and cultural rights and the rights of a person with disabilities. The said right to health is not accepted as right in Indian Constitution but in the background of the directive principles of State Policy as mentioned in para4 of the Constitution viz. Article 38, 39, 41, 42, 47 & 48A, it is clear that duties casted upon the State to secure promotion of welfare to the people including their health. With the said background, provisions of ESIC Act were made.
9. As per Section 3, the mandate of ESIC Act, 1948, Central Government by notification shall establish a body known as Employees State Insurance Corporation for the administration of schemes of Employees State Insurance. As per Section 19 of the said Act, the said Corporation in addition to the scheme of benefit mentioned in the Act, shall promote measures for the improvement of health and welfare of insured persons. Section 38 of the said Act talks about the insurance of every employee in factory or establishment. Section 39 of the said Act mandates that contributions shall be made in respect of every employee by the employer to some extent as prescribed by the Central Government. Section 26 of the said Act talks about the funds which will ESIC - 31/16/05 M/s. Zillion Infraprojects Pvt. Ltd. Vs ESIC Page No. 8 of 16 be constituted due to said contributions. Section 45 of the said Act talks about appointment of certain Inspectors by the aforesaid Corporation for the purpose of inspecting the premises of employer, to check the details of employees of said employer, wages of said employees, details of employees, details of contribution made by the employer under this Act and likewise.
10. Aforesaid provisions therefore, mandate that every employer of a factory or establishment having certain employees, shall contribute certain amount as prescribed by the Central Government for the purpose of insurance of its employees. Section 2 (9) defines the word "employee" as under : "employee means any person employed for wages in or connection with the work of a factory or establishment to which this Act applies and ...........
(i) who is directly employed by the principal employer on any work of, or incidental or preliminary to or connected with the work, of the factory or establishment, whether such work is done by the employee in the factory or establishment or elsewhere ; or
(ii) who is employed by or through an immediate employer, on the premises of the factory or establishment or under the supervision of the principal employer or his agent on work which is ordinarily part of the work of the factory or establishment or which is preliminary to the work carried on in or incidental to the purpose of the factory or establishment; or
(iii) whose services are temporarily lent or let on hire to the principal employer by the person with whom the person whose services are so lent or let on hire has entered into a contract of service;
and includes any person employed for wages on any work connected with the administration of the ESIC - 31/16/05 M/s. Zillion Infraprojects Pvt. Ltd. Vs ESIC Page No. 9 of 16 factory of establishment or any part, department or branch thereof or with the purchase of raw materials for, or the distribution or sale of the products of, the factory or establishment or any person engaged as an apprentice, not being an apprentice engaged under the Apprentices Act, 1961 (52 of 1961) or under the standing orders of the establishment but does not include
(a) any member of the Indian naval, military or air forces, or.............
Section 2 (12) of the aforesaid Act defines the "factory" as under : "factory means any premises including the precincts thereof
(a) whereon ten or more persons are employed or were employed for wages on any day of the preceding twelve months, and in any part of which a manufacturing process is being carried on without the aid of power or is ordinarily so carried on, or
(b) whereon twenty or more persons are employed or were employed for wages on any day of the preceding twelve months, and in any part of which a manufacturing process is being carried on without the aid of power 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;"
11. A harmonious reading of the aforesaid provisions, therefore reflect that a person who is employee for wages in directly or in connection with the work in factory or establishment, shall be deemed to be an employee, if he is working for said factory or establishment. The factory mentioned above means any premises within whose domain, manufacturing process is being carried out with or without the aid of considering the number of persons employed therein. Those provisions were made to give clarity to the definition of ESIC - 31/16/05 M/s. Zillion Infraprojects Pvt. Ltd. Vs ESIC Page No. 10 of 16 employee and factory.
12. Section 75 of the said Act gives jurisdiction to this Court to decide the matters pertaining to dispute between the Corporation and the Employer.
13. In the case in hand, issue pertaining to definition of factory or employee or jurisdiction of this Court to try this matter, were not involved. Issues were pertaining to arbitrariness in the approach of respondent in levying fine on petitioner's establishment. In the background of aforementioned understanding, aforesaid provisions and issues involved in this case, I am proceeding further and deciding the issues in hand.
14. Reverting back to the facts of present case, I find that company has claimed that it is not covered by the provisions of ESI Act on the ground that it is involved in construction activities in which its labours have to be moved from one site to other, on the basis of nature of job work assigned by the clients of the company. Company in this regard referred to notification of respondent dated 14.06.1999 vide no. P12(11)11/27/99INS.IV vide which workers engaged by construction agencies and working on the site of the project should be exempted from coverage under the ESI Act. Those claims of company, basically rested upon the nature of work of the company. The said nature of work, was not explained by PW1 in his evidence. No documentary proof was filed by the company explaining the said nature of work. In other words, company failed to prove the fact that its labours had to be moved from one site to other on the nature of demands of the clients of ESIC - 31/16/05 M/s. Zillion Infraprojects Pvt. Ltd. Vs ESIC Page No. 11 of 16 the company. As such there was no evidence on record based on which, I could have objectively assessed and appreciated the nature of work of alleged labours of the company working at different sites. So company failed to prove and probabilise its case based on said claims.
15. The next claim of the company, was that it is neither a factory nor a shop as per Sec.2(12) and Sec. 1(5) of ESI Act respectively. It asserted that it never employed more than 20 employees in its office and that it was provisionally covered w.e.f. 01.04.1996 in the ESI Act. As per the mandate of Sec. 2(12) of ESI Act, factory means any premises where 10 or more persons are employed on any day preceding 12 months and in which manufacturing process is being carried out but it does not include Min subject to the operation of Mins Act 1952 or the Railway running shed. Admittedly, petitioner's business was not mining or railway running shed. It was a construction company. Since company did not explain the activities it was carrying out during relevant time so meaning of construction activities is to be appreciated on the basis of common understanding. The dictionary meaning of construction includes the action of building something. Its synonym includes raising, setting up, establishment and manufacture. So, by claiming that it was engaged in construction activities, it means that company was engaged in manufacturing activities. There is nothing on record, based on which contrary conclusion or some other conclusion could have been drawn regarding the activities of the company. Coupled with the same, vide application form Ex.PW1/R1, which was not disputed by PW1, company had claimed that 20 employees were employed in it as on 01.11.1997 in its Head Office. So company in this case was a factory within the meaning ESIC - 31/16/05 M/s. Zillion Infraprojects Pvt. Ltd. Vs ESIC Page No. 12 of 16 of Sec. 2(12) of ESI Act. Even otherwise, as per record company was engaged in the business of mechanical construction as per form OI Ex.PW1/R1 which did not support the case of company that it was involved in the business of constructing buildings.
16. Moving further, company had claimed that labours employed by it at various sites were not regular labours. They used to work for few days and then leave the site. Again said claim of company remained bald claim. No documentary proof was placed on record by PW1 in support of said claim.
17. Coming to the testimony of PW1 Sh. Ajeet Kumar Srivastava, this witness had basically reiterated the facts as mentioned in the petition in his examinationinchief Ex.PW1/A. His examination inchief was bereft of any explanation with respect to aforesaid aspect. As such, his examinationinchief did not help the cause of the company. In his crossexamination, he was confronted with para 3 of Ex.PW1/4, para 3 of Ex.PW1/6 and para 5 (d) of Ex.PW1/9. The said documents, were letters written by the companies. In the concerned paragraphs to which his attention was drawn, it was stated by the company that during relevant period the number of permanent employees never exceeded 20, that off and on staff of the company at Head Office remained 2025 in March 1998 and that 23 persons were shown in the muster roll register of the company at the time of inspection. In none of those documents, company referred to the document maintained by the company reflecting number of employees at the Head Office, lesser than 1020. Those claims were bald claims. They were not supported by any documents. PW1 in his evidence, ESIC - 31/16/05 M/s. Zillion Infraprojects Pvt. Ltd. Vs ESIC Page No. 13 of 16 failed to justify as to why company was not coverable u/s. 2(12) of ESI Act in the wake of said claims of the company as noted above. The exact number of workers employed at the Head Office between April 1996 till February 1998, was never clarified by the company through the evidence of PW1. He failed to explain as to why 20 employees were mentioned in the form Ex.PW1/R1 who were working on 01.11.1997 at Head Office of the company. He failed to explain as to why column 11, 12 and 13 mentioned in Ex.PW1/R1 were blank in the wake of claim of company that its workers were working at different sites. It was never the claim of the company that those columns were blank, due to oversight of the company and / or some other reason. Since Ex.PW1/R1 was filled by company itself, so it owned responsibility to the said blank space also. Company as such never explained the said shortcoming in filling the form which did not help its cause.
18. Moving further, PW1 had no knowledge about relevant facts viz. Date of inspection of the company, the contents of inspection report dated 28.10.1999, the person who had applied to respondent for coverage of company under the ESI Act and the circumstances in which inspection report Ex.PW1/R3 was prepared. He failed to point out shortcoming in the calculation of respondent. He did not quote the calculation, which should have been done by the respondent while claiming contribution from the company. As such his evidence was based on bald averments bereft of any legally admissible proof. I discarded his testimony on the ground of being untrustworthy and unreliable.
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19. So far as respondent is concerned, it examined RW1 Bijender, who deposed the facts on the basis of record available in the office of respondent. He placed on record documents Form01 Ex.RW 1/1, Survey report dated 04.02.1998 Ex.RW1/2, allotment letter dated 19.03.1998 Ex.RW1/3 and inspection report dated 28.10.1999 Ex.RW 1/4. Those documents were not objected to by the company. He was not a witness to the execution of those documents. His evidence therefore probabilise the situation that respondent being a government agency had performed its duty in ordinary course. As such documents prepared by respondent cannot be doubted, just like that, at the mere asking of the company. He was crossexamined with regard to the written statement filed by respondent, with regard to the persons who had and who had not put their signatures on the survey report carried out on 28.10.1999, with respect to the places where company was doing its business and with regard to whether he had worked with Sh. Hari Prakash who had carried out inspection in the premises of company. Those were irrelevant aspects having no bearing on the merits of the case. He stuck to the stand of respondent that company in question was coverable under ESI Act. In his crossexamination, he admitted that petitioner's firm is not the company but work contractors. The said admission was an admission which cannot be appreciated in isolation. Company failed to develop its case based on the said admission of RW1. Company did not put any document based on which RW1 had replied the fact that company in question is not a factory. It was never the case of the company that no manufacturing process were being carried out in it. Even it is believed that company was not a factory rather contractor, then also company had the onus to have explained the nature of business those contractors were carried ESIC - 31/16/05 M/s. Zillion Infraprojects Pvt. Ltd. Vs ESIC Page No. 15 of 16 out, so that this court could have concluded that company was or was not coverable under ESI Act. As such that admission did not help the cause of the company.
20. Company lastly, filed notification of the corporation Ex.PW 2/1 dated 14.06.1989 as per which the office of the respondent had exempted workers engaged on construction sites from being covered under ESI Act. That notification, is of no consqeuence for the case of the company for the reason that as per Form OI Ex.PW1/R1, company itself has claimed that it is engaged in "mechanical construction". So, it is not construction of buildings in which company is engaged and therefore it is not exempted under aforesaid notification Ex.PW2/1.
21. The net result is that company in this case failed to make out the exception to its liability for payment of contribution amount of Rs. 83130/ as per letter Ex.PW1/10. There is a legal presumption in favour of respondent regarding due execution of the documents based on which amount was claimed vide Ex.PW1/10. That presumption was not rebutted by company based on preponderance of probabilities.
22. Based on aforesaid appreciation and conclusion, I find that company failed to prove its case as per law. Both the aforesaid issues are decided against the company. Accordingly, present petition stands dismissed. File be consigned to record room after due compliance.
Digitally signed by PRASHANT PRASHANT SHARMA
SHARMA Date: 2018.07.20
17:06:06 +0530
Announced in the open court (Prashant Sharma)
th
on 20 July, 2018 SCJcumRC:Central District
Tis Hazari Courts, Delhi
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