Delhi District Court
M/S. Nxp India Pvt. Ltd vs Employees' State Insurance ... on 27 August, 2022
IN THE COURT OF MS. NEHA GUPTA SINGH
SENIOR CIVIL JUDGE-CUM-RENT CONTROLLER,
NEW DELHI DISTRICT, PATIALA HOUSE COURTS, NEW DELHI
ESIC-2/2017
M/s. NXP India Pvt. Ltd.,
Formerly M/s. Freescale Semiconductor
India Pvt. Ltd. Having Registered Office
at: 13, Abul Fazal Road,
Bengali Market, New Delhi-110001.
Now at:
Ground Floor, Manyata Tech Park,
Greenheart Phase-III,
Nagawara, Bengaluru,
Bangalore-560045 .... Petitioner.
Versus
Employees' State Insurance Corporation,
Through its Director General/Insurance
Commissioner, Panchdeep Bhawan,
Kotla Road, CIG Marg, New Delhi.
AND
Employees' State Insurance Corporation,
Sub Regional Office-Noida,
Through its Additional Commissioner/Regional
Director, B-64, Sector-57,
Noida. ..... Respondents
Date of institution : 24.11.2017
Date of final arguments : 16.07.2022
Date of judgment : 27.08.2022
JUDGMENT
1. The present petition has been filed by M/s. NXP India Pvt. Ltd.
(formerly known as Freescale Semiconductor India Pvt. Ltd.) against the Regional Director, Employee State Insurance Corporation (herein-after referred to as "ESIC") through its AR Sh. Ashish Chattoraj, who was authorized to file the present petition by way of Board resolution at the meeting held on 31.05.2016.
ESIC No.2/17 M/s. NXP India Pvt. Ltd. Vs ESIC & ANR. Page 1 of 112. Brief facts as stated by the petitioner are that the assessment order dt. 31.03.2016 under section 45A ESIC Act was passed without following the principles of natural justice and without giving any notice to the petitioner for an opportunity to appear before the respondent to produce relevant documents. Petitioner is engaged in the business of semiconductor hardware and software designs for the embedded market in various application segments. That the petitioner has received an ex-parte order dated 31.03.2016 passed by the respondent under section 45 A of ESI Act on 22.04.2016 against which an appeal was preferred by the petitioner under Section 45 AA of ESI Act. The said assessment order related to the period 2011-2012. Niether any inspection of the petitioners unit was carried out by any of the officers/inspectors of the respondent nor any notice calling for records of the petitioner was served upon the petitioner.
3. C-18 Adhoc notice dated 25.11.2013 was never sent to the petitioner, nor published in any newspaper. Order do not mention the period for which demand is raised neither record the date of notice. Protest against the order was made by the petitioner vide letter dated 29.04.2016 as petitioner does not have any coverable employees and has furnished a nil return in past years as all employees are earning more than Rs. 10000 per month.
4. Petitioner made payment of 25% amount under protest and preferred an appeal under Section 45 AA of the Act. It was contended that there are no 43 employees qua whom contribution is made by the petitioner. Petitioner do not maintain any account in Canara Bank and never deposited any contribution for 43 employees. Authority reassessed the demand while passing order under section 45AA and did not consider the fact that order under 45A was passed without giving any notice to petitioner. order dated 15.09.2017 by appellate authority is illegal. Respondent issued ESIC No.2/17 M/s. NXP India Pvt. Ltd. Vs ESIC & ANR. Page 2 of 11 recovery notice dated 13.11.2017, CP2 thereby claiming Rs. 73,70,318. Thus, a prayer is made that the impugned order dated 31.03.2016, 15.09.2017 and C2 dated 13.11.2017,passed by ESIC be set aside.
5. Notice of petition was served on the respondent and they put an appearance.
6. Reply filed by the respondent denying the contentions made by the petitioner. It is stated on behalf of respondent that petition is not maintainable for non joinder of necessary parties, Petitioner was covered by the ESIC from 2.12.2008 and after verification date of coverage is 4.05.2004. C-18 adhoc notice dated 27.07.2018 was issued online affording employer an opportunity of being heard on 30.08.2012. Petitioner did not appear nor submitted written representation and therefore an order dated 31.03.2016 was passed under section 45 A ex parte for sum of Rs. 3,22,833 for period 5/11 to 6/12. when petitioner preferred appeal under section 45AA authority heard the matter on several dares and re assessed th demand after taking into account balance sheet . The total contribution was found payable under various heads as 43,28,744 and C19 recovery certificate was issued for Rs. 73,70,318 for period 5/11 to 6/12 on 10.11.2017.
7. Replication was not filed by the petitioner.
8. From the pleadings of the parties, following issues were framed vide order dated 8.01.2019 :-
1. Whether the petitioner is entitled to setting aside and quashing the order dated 15.10.2017 and order dated 31.03.2016 passed by the Appellant authority and Assessing Officer? OPP.
2. Whether the above stated orders were passed without complying with the principles of natural justice and in violation of the provisio of the Section 45A of the ESI Act? OPP.ESIC No.2/17 M/s. NXP India Pvt. Ltd. Vs ESIC & ANR. Page 3 of 11
3. Whether the petitioner is entitled to setting aside of recovery notice dated 13.11.2017 in the form CP2? OPP
4. Whether the petitioner is not liable to pay any contribution or interest as demanded by the respondent? OPP.
5. Whether the petitioner is liable to refund of amount already deposited upon the upon the order of the court? OPP
6. Whether the petitioner has failed to comply with the mandatory provision of Section 75(2) of ESI Act? OPD
7. Whether the petition is bad for non-joinder of necessary parties? OPD
8. Whether the present petition has not been filed by duly authorised and competent person on behalf of the petitioner? OPD
9. Relief.
9. During evidence, Sh. Ashwani Kumar entered into the witness box on behalf of the petitioner and deposed on the lines of petition. He further relied upon the following documents :-
1 Certificate of incorporation is Ex. PW 1/3. 2 Copy of letters dt. 29.04.2016 and 03.06.2016 are Ex. PW1/5.
and Ex. PW 1/6 respectively.
3 Copy of letter dt. 14.06.2016 is Ex. PW 1/7 4 Copy of application dt. 03.07.2017 under RTI Act is Ex. PW 1/8.
5 Copy of representations dt. 10.07.2017, 25.07.2017 and 28.07.2017 are Ex. PW 1/9, Ex. PW 1/10 and ex. PW 1/11 respectively.
6 Copy of reply to RTI application is Ex. PW 1/12. 7 Copy of revenue manual is Ex. PW 1/13.
8 Copy of order dt. 15.09.2017 is Ex. PW 1/14. 9 Copy of representation dt. 11.10.2017 is Ex. PW 1/15. 10 Copy of CP-2 dt. 13.11.2017 is Ex. PW 1/16. 11 Copy of letter dt. 27.11.2017 is Ex. PW 1/17. 12 copy of email dt. 05.12.2017 is Ex. PW 1/18. 13 Copy of order dt. 06.12.2017 is Ex. PW 1/19. 14 Copy of letter dt. 07.12.2017 is Ex. PW 1/20.ESIC No.2/17 M/s. NXP India Pvt. Ltd. Vs ESIC & ANR. Page 4 of 11
10. Sh. Rajender Prasad Singh, entered into the witness box as RW1 on lines of reply filed by the respondent.
11. I have heard the contentions of both the parties and have gone through the record.
ISSUE No. 1,2 & 3:
1. Whether the petitioner is entitled to setting aside and quashing the order dated 15.10.2017 and order dated 31.03.2016 passed by the Appellant authority and Assessing Officer? OPP.
2. Whether the above stated orders were passed without complying with the principles of natural justice and in violation of the provisio of the Section 45A of the ESI Act? OPP.
3. Whether the petitioner is entitled to setting aside of recovery notice dated 13.11.2017 in the form CP2?
OPP
12. The onus to prove this issue was upon the petitioner. It is averred by the petitioner that the petitioner company never received any notice for hearing in present matter as per mandate of section 45 A of ESIC Act. Per contra it is stated by the respondent that a C-18 notice dated 27.07.2012 was given to the petitioner through mail. It is argued by the ld. counsel for the petitioner that order under sec- tion 45A is arbitrary as due process was not followed and Appellate Authority under section 45AA went beyond its power in re assessing the same. It is submitted that respondent has not provided any de- tails of the 43 employees against whom contributions are sought to be received. Per contra its argued for respondent that sufficient op- portunity was granted to petitioner during appeal and Appellate au- thority was well within its power to reassess the demand on basis of the documents provided by the petitioner.
13. AR of the petitioner during cross examination has stated that email id was updated in 2016 and it was provided as [email protected]. He has denied paying contribution on behalf of 43 employees. It is fur-
ESIC No.2/17 M/s. NXP India Pvt. Ltd. Vs ESIC & ANR. Page 5 of 11ther proved by way of information received through RTI to respon- dent, that no notice was dispatched to the petitioner. During cross examination RW1 accepted the seal of respondent on Ex. RW1/P1 whereby email address was provided by the respondent company in form 01 in 2016. Respondent has not braught on record any email confirmation or any other postal receipt to show that notice was ever issued to the petitioner.
14. Section 45A ESIC Act read as follows:
45A Determination of contributions in certain cases.
(1) Where in respect of a factory or establishment no returns, par-
ticulars, registers or records are submitted, furnished or maintained in accordance with the provisions of section 44 or any Social Security Officer or other official of the Corporation referred to in sub-section (2) of section 45 is prevented in any manner by the principal or immediate employer or any other person, in exercising his functions or discharging his duties under section 45, the Corporation may, on the basis of information available to it, by order, determine the amount of contributions payable in respect of the employees of that factory or establishment:
Provided that no such order shall be passed by the Corporation unless the principal or immediate employer or the person in charge of the factory or establishment has been given a reasonable opportunity of being heard.
Provided further that no such order shall be passed by the Corporation in respect of the period beyond five years from the date on which the contribution shall become payable. (2) An order made by the Corporation under sub-section (1) shall be sufficient proof of the claim of the Corporation under section 75 or for recovery of the amount determined by such order as an arrear of land revenue under section 45B or the recovery under sections 45C to 45-I.
15. As per the act corporation can act under section 45A only in situa-
tion where Social Security Officer or other official of the Corporation referred to in sub-section (2) of section 45 is prevented in any man- ner by the principal or immediate employer or any other person, in exercising his functions or discharging his duties under section 45, that too after giving reasonable opportunity of hearing.
16. It was laid down in Optical Instrument Company vs Employees State Insurance Corporation 30 (1986) DLT 389:
ESIC No.2/17 M/s. NXP India Pvt. Ltd. Vs ESIC & ANR. Page 6 of 11"(7) Before any action is taken under Section 45(A), or 73(A), it is necessary to ascertain with the help of proper evidence the exact number of workers working in the establishment at the relevant time. In the plaint, the appellant has alleged that no notice under Section 44 was served on them. This was also a specific ground taken by them in reply to the show cause no-
tice. The fact that no show cause notice was issued under Sec- tion 44 has not been denied by the respondent Corporation in their written statement. However, it is simply asserted that since the requirement of Section 44 was not complied with by the appellant, action under Section 45A was taken. In other words, the respondent Corporation subscribed to the position that action under section 45(A) can be followed only after com- pliance of Section 44, Section 44 of the Act states, "Where in respect of any factory or establishment the Corporation has reason to believe that a return should have been submitted un- der sub-section (1) but has not been so submitted, the Corpo- ration may require any person in charge of the factory or es- tablishment to furnish such particulars as it may consider nec- essary for the purpose of enabling the Corporation to decide whether the factory or establishment is a factory or establish- ment to which this Act applies." Section 45(A) enables the cor- poration to proceed on the basis of the "information available to it", when the information as required by section 44 is not furnished. If an establishment is not called upon to produce the records and particulars as envisaged by Section 44(2) by a no- tice, no action can be taken under section 45(A) of the Act. This is so on a plain reading of Section 45(8) where Section 44 is specifically mentioned. Sections 44 and 45(a) together in- corporate the sound principle of natural justice that no adverse or pre-judicial action should be taken unless the person has been given an opportunity and is beard. Breach of these provi- sions is another reason why the impugned orders are invalid in law."
17. In present case, claim is made on notional basis, but it is nowhere stated or proved by the respondent that officials were prevented on any date by the petitioner from making enquiries and inspection un- der section 44 or any notice was given to petitioner for furnishing the information necessary for assessment. C-18 Adhoc notice was sent on email, which respondent cannot prove to be of petitioner, further, it is averred by the respondent that they provided the copy of notice during hearing of appeal of other recovery notice. There also respondent failed to provide explanation as to why present re- covery was again sought without enquiry. Further there is no docu-
ESIC No.2/17 M/s. NXP India Pvt. Ltd. Vs ESIC & ANR. Page 7 of 11ment to show that notice was ever served on the petitioner.
18. Respondent has failed to prove on record documents to show that procedure provided in Act was duly complied by the respondent. Ac- cordingly, order dated 31.03.2016 passed by Assessing Officer is liable to be set aside and quashed.
19. As for order of appellate authority under section 45AA of the Act dated 15.09.2017, section 45AA provides If an employer is not sat- isfied with the order referred to in section 45A, he may prefer an appeal to an appellate authority as may be provided by regulation, within sixty days of the date of such order after depositing twenty- five per cent. of the contribution so ordered or the contribution as per his own calculation, whichever is higher, with the corporation:
Provided that if the employer finally succeeds in the appeal, the Corporation shall refund such deposit to the employer together with such interest as may be specified in the regulation.
20. In present case appellate authority did not provide petitioner the in-
spection report or any other document on which order under 45A was based, further authority never provided the details of 43 em- ployees against whom contribution was recived, it cannot be said that effective hearing was given by the appellate authority to the petitioner, where it did not consider the fact that notice was never served on the petitioner. Further recovery amount was enhanced on the basis of the payments made to different vendors without seek- ing any bifurcation as to labor component. It is settled law that con- tribution is to be made on wages only, however, contribution is cal- culated on on all miscellaneous expenses of petitioner, without any reasonable bifurcation of labor component. Accordingly, order dated 15.09.2017 passed by Appellate authority and recov- ery notice dated 13.11.2017 liable to be set aside and quashed.
ESIC No.2/17 M/s. NXP India Pvt. Ltd. Vs ESIC & ANR. Page 8 of 11Issue no. 4:
Whether the petitioner is not liable to pay any contribution or interest as demanded by the respondent? OPP.
21. Petitioner has pressed the issues that assessment by respondent was arbitrary as principles of natural justice were not followed and opportunity was not granted to petitioner for hearing. In these cir- cumstances, and in light of findings on issue no. 1, 2 and 3, peti- tioner is not liable to pay any contribution as per recovery notice dated 13.11.2017, however, respondent is at liberty to reassess the contribution of petitioner for the time period 05/11 to 06/2012 after granting petitioner fair opportunity of representation as per law. Issue no. 5:
Whether the petitioner is liable to refund of amount already deposited upon the upon the order of the court? OPP
22. In light of finding in issue no. 1, 2 and 3 since recovery notice is set aside, respondent is liable to refund amount deposited in interim as per section 75(2) and 45 AA ESIC Act to petitioner. Issue no. 6:
Whether the petitioner has failed to comply with the mandatory provision of Section 75(2) of ESI Act? OPD
23. In light of interim order where 50 % amount was deposited by the petitioner, this issues requires no specific finding of court. Issue no. 7:
Whether the petition is bad for non-joinder of necessary parties? OPD
24. The onus to prove this issue was on the respondent. The respondent has relied upon the decision Fertilisers and Chemical Travancore Ltd Vs Regional Director, ESIC and Ors, Civil Appeal no. 917- 918 of 2004. The relevant paragraphs of the said judgment are re- produced hereinunder for the sake of clarity:-
"6. Labour Statutes are meant for the benefit of the workmen. Hence, ordinarily in all cases under labour statutes the ESIC No.2/17 M/s. NXP India Pvt. Ltd. Vs ESIC & ANR. Page 9 of 11 workmen, or at lease some of them in a representative capacity, or the trade-union representing the concerned workmen must be made a party. Hence, in our opinion the appellant (petitioner before the Employees Insurance Court) should have impleaded atleast some of the persons concerned, as respondents.
.........................
11. In our opinion, wherever any petition is filed by an employer under Section 75 of the Act, the employer has not only to implead the ESIC but has also to implead at least some of the workers concerned (in a representative capacity if there are a large number of workers) or the trade-union representing the said workers. If that is not done, and a decision is given in favour of the employer, the same will be in violation of the rules of natural justice. After all, the real concerned parties in labour matters are the employer and the workers. The ESI Corporation will not be in any way affected if the demand notice sent by it under Section 45A/45B is quashed.
..................
13. In the present case the workmen concerned were not made parties before the Employees Insurance Court, nor was noticed issue to them by the said Court.
14. Also, the order of the Employees Insurance Court dated 04.02.1993, relevant portion of which we have quoted, is not a very happy one as no proper determination has been made therein as to whether the workmen concerned are the employees of the appellant and whether they are entitled to the benefit of the Act. No doubt some observations have been made that some labourers come on one day but they may not come on the next day. Having said so, a direction has been given that the ESI Corporation will after making inquiries about the identities of the said workers will register them and then extended the benefit of the Act.
15. In our opinion, the Employees Insurance Court should have itself made a proper investigation of the facts after getting evidence from the parties, including the workmen concerned, and after impleading them as party in the petition, it should have determined the question as to whether the persons concerned were the employees of the appellant or not."
25. In present case, demand notice is disputed by the petitioner on ground that contribution for 43 employees was never made, he has disputed the notice on ground of natural justice as same was issued on notional basis and demand is to be re-assessed by the respon- dent. Respondent has not provided the details of these employees neither it is stated that they were ever enrolled with ESIC. Present petition therefore cannot be said to be bad for misjoinder of parties.
ESIC No.2/17 M/s. NXP India Pvt. Ltd. Vs ESIC & ANR. Page 10 of 11Issue no. 8:
Whether the present petition has not been filed by duly authorised and competent person on behalf of the petitioner? OPD
26. Onus to prove this issue was on defendant, they have not brought on record any evidence to this effect. Accordingly, issue is decided in favour of petitioner and against the defendant. RELIEF.
27. In view of the above discussion, the petitioner is entitled to the re-
lief as claimed by it. The impugned order dated 31.03.2016 passed by Assessing Officer and order dated 15.09.2017 passed by Appellate authority and recovery notice dated 13.11.2017 are set aside and quashed. Respondent is at lib- erty to re assess the contribution of petitioner after afford- ing them an opportunity of hearing as per the Act. Respon- dent is directed to refund the amount deposited by the peti- tioner against the impugned notice within a month to the pe- titioner. No order as to cost.
Announced in the open (NEHA GUPTA SINGH)
court on 27.08.2022 SCJ-CUM-RC:PHC:NEW DELHI
ESIC No.2/17 M/s. NXP India Pvt. Ltd. Vs ESIC & ANR. Page 11 of 11