Delhi District Court
Trehan Consultants Pvt Ltd vs Esic on 16 July, 2024
IN THE COURT OF SENIOR CIVIL JUDGE CUM RENT
CONTROLLER (WEST), TIS HAZARI COURTS, DELHI
Presided by : Sh. Himanshu Raman Singh
ESIC No. 01/2019
CNR No. DLWT03--000674-2019
M/s. Trehan Consultants Pvt. Ltd.
110, Shivam House Commercial Complex,
Karampura, Opp. Milan Cinema,
Delhi - 110015.
Through Sh. Naveen Trehan, HR Manager .....Petitioner
Versus
M/s. Employees State Insurance Corporation
Regional Office, Rajendra Bhawan,
Rajendra Place, Delhi - 110008.
Through its Dy. Director ....Respondent
PETITION UNDER SECTION 75 FOR QUASHING / SETTING ASIDE
OF ORDER/ CERTIFICATE NO.11001222530000999/10152018225/4779
DATED 20.11.2018/11.12.2018 MENTIONING Rs. 2,24,385/- AS
CONTRIBUTION RECOVERABLE FROM THE PETITIONER FOR
THE WAGE MONTHS OF 4/2011 TO 03/2016 AND INTEREST
AMOUNTING TO RS. 1,33,080/- THEREON
Date of Filing : 02.03.2019
Date of Judgment : 16.07.2024
Decision : Allowed
ESIC No. 01/2019 M/s. Trehan Consultants Pvt. Ltd. Vs. M/s. Employees State Insurance Corporation Page 1 of 45
JUDGMENT
1. This petitioner is an appeal under section 75 of Employees State Insurance Act, 1948 (hereinafter referred to as the ESI Act) for quashing / setting aside of order / certificate no. 11001222530000999 / 10152018225/4779 dated 20.11.2018 / 11.12.2018 mentioning Rs.2,24,385/- as contribution recoverable from the petitioner for the wage months of 4/2011 to 03/2016 and interest amounting to Rs.1,33,080/- thereon.
CASE OF THE PETITIONER
2. The petitioner is incorporated under the Companies Act, 1956 and Sh. Naveen Trehan its HR Manager has been authorized by the Board of Directors vide its resolution dated 21.02.2019 to institute the present petition as against order dated 20.11.2018/11.12.2018 passed by the Dy. Director, ESIC. It has been contended that the petitioner received the order dated 20.11.2018/11.12.2018 of Dy. Director of respondent mentioning therein the same to be an application for recovery of contribution under Section 45C to 45 I Employees State Insurance Act as claim of Rs. 2,24,385/- for the wage months of April, 2011 to March, 2016 plus interest amounting to Rs. 1,33,080/- thereon from 21.05.2011 to 15.10.2018 from the petitioner. It has been contended that the Dy. Director issued the impugned order dated 20.11.2018/11.12.2018 as Authorized Officer.
ESIC No. 01/2019 M/s. Trehan Consultants Pvt. Ltd. Vs. M/s. Employees State Insurance Corporation Page 2 of 453. It has been stated that subsequent to issuance of the aforesaid order dated 20.11.2018/11.12.2018, Sh. P.K Bhatnagar as Recovery Officer, Regional Office, ESI Corporation, Rajendra Place, New Delhi-110 008 issued order dated 15.02.2019 to the Manager, State Bank Of Patiala, Shiv Nagar, New Delhi-110 058 mentioning therein that as per certificate по. 11001222530000999 dated 20.11.2018 forwarded by Authorized Officer an amount of Rs.3,66,663 is outstanding as arrears due from the petitioner and vide this order dated 15.02.2019 the aforesaid official prohibited and restrained the said branch of State Bank Of Patiala from making payment to extent of amount of above stated arrears to any person other than Recovery Officer. It has been contended that the State Bank of Patiala had been merged with State Bank of India and the Branch Manager of State Bank of India vide email dated 18.02.2019 informed the petitioner about the above said attachment order. It has been contended that the impugned order/ certificate in its para no.6 mentions that the petitioner establishment is provisionally covered with effect from 01.04.2011 and if it is found to be covered subsequently from any prior date, the corporation reserves right to demand recovery of the amount from the prior date found as date of coverage of the petitioner under ESI Act.
4. It has been stated that at Para No. 4 of the impugned order/ certificate mentions that amount of Rs. 2,24,385/- has been determined as contribution payable after notice and reasonable enquiry and on the basis of record available with the corporation. It ESIC No. 01/2019 M/s. Trehan Consultants Pvt. Ltd. Vs. M/s. Employees State Insurance Corporation Page 3 of 45 has been averred that the petitioner has neither received the alleged notice mentioned in above para no. 4 of the impugned order/certificate nor the petitioner was aware of the alleged reasonable enquiry stated in above para no.4 of the impugned order/certificate. It has been stated that the petitioner has not received any intimation of holding of enquiry with respect to proposed determination or determination of contribution for the period April, 2011 to March, 2016. It has been stated that the vague statement, which is contained in para no.4 of the impugned order/certificate as about service of notice and reasonable enquiry, is in absence of any lawful material facts and basic particulars including the date of notice and mode of sending and service of notice and the date/s of holding of the alleged reasonable enquiry and the official who allegedly held the enquiry, is a statement in air having no legal existence, more particularly in view of statutory provisions of ESI Act that determination of contribution can be done only under either section 45-A of ESI Act or under Section 75 of ESI Act. It is averred that the second Proviso to section 45-A prohibits the respondent from determining contribution in respect of period beyond 5 years from the date on which the contribution shall become payable. Hence, even if the alleged enquiry is made under Section 45-A same is without jurisdiction and impermissible under ESI Act and arbitrary, malafide, illegal and ultra virus of the provisions of ESI Act, against the principles of natural justice and null and void. It is also averred that besides the statutory prohibition contained in second proviso to section 45-A, the petitioner has ESIC No. 01/2019 M/s. Trehan Consultants Pvt. Ltd. Vs. M/s. Employees State Insurance Corporation Page 4 of 45 neither received any notice under Section 45-A of ESI Act nor had been given any opportunity of hearing under Section 45-A of ESI Act and the impugned recovery order/ certificate, which is not based upon any lawful determination of dues, is also without jurisdiction, arbitrary, malafide, illegal and ultra virus of the provisions of ESI Act, against the principle of natural justice and null and void. It has been contended that section 7 of the ESI Act contains statutory pre- condition which is to be satisfied in order to confer status of lawful to any order or decision of ESI Corporation under the provisions of EST Act including the order u/s 45-A of EST Act, but in present case, there is neither any lawful order determining Rs. 2,24,385/- as contribution payable by petitioner for April, 2011 to March, 2016 nor there is any mandatory authentication under Section 7 of ESI Act of any such order in relation to the aforesaid claimed contribution vide impugned recovery certificate/ order.
5. It has been averred that a vague and an incorrect statement of fact is made in the para no.4 of the impugned order certificate that alleged determination is based upon record available with the corporation and it is further submitted that no such determination exists in fact or in law. It has been contended that there can be no determination of contribution under ESI Act simply to fill coffers of ESI Corporation. The pre-condition for making any determination under permissible provision of ESI Act is identification of employees in relation to whom the contribution is sought to be determined. It has been averred that there exist no such identification of employees in ESIC No. 01/2019 M/s. Trehan Consultants Pvt. Ltd. Vs. M/s. Employees State Insurance Corporation Page 5 of 45 relation to whom the contribution is allegedly made by the respondent in respect of determination alleged in para 4 of the impugned recovery certificate/ order.
6. It has been further stated that by virtue of section 45-H of ESI Act the provisions of second schedule of the Income Tax Act applies with respect to recovery certificate/s issued by the Authorized Officer and attachment order issued by the Recovery Officer. The mandatory provisions of the rule 21 warrants that Recovery Officer in the first instance would serve the copy of warrant of attachment upon defaulter and if after service of said warrant, the amount is not paid forthwith, only then under rule, 22 the Officer can proceed to attach the movable property. The impugned order. Dated 15.02.2019 is in violation of the aforesaid rule 21 and 22 of the second schedule of the Income Tax Act. It has been contended that the respondent for the first time through its two SSO namely Sh. Narender Kumar and Sh. Gauran Kansac vide their notice dated 03.03.2016 sought records from the petitioner for inspection and as per their notice they visited the premises of the petitioner on 09.03.2016 and got filled form-01 on the basis of the alleged employment of 17 employees with the petitioner in petitioner activity of supplying of manpower to overseas clients. Thereafter coverage letter dated 17.03.2016 was issued by the respondent to the petitioner. In this coverage letter the respondent deliberately concealed the facts that their above mentioned coverage letter about the inspection conducted by the abovesaid two SSOs and their act of getting 01 form filled from the ESIC No. 01/2019 M/s. Trehan Consultants Pvt. Ltd. Vs. M/s. Employees State Insurance Corporation Page 6 of 45 petitioner and obtaining that filled form from the petitioner. Neither the two SSOs nor the respondent intimated the petitioner as to how and upon what basis the petitioner was required to be covered and covered u/s 1(5) of ESI Act. Even password and user Id was not allotted to the petitioner and petitioner has to send letter dated 02.05.2016 to the respondent. The petitioner, as pointed out above, were kept in dark by the SSOs and the respondent, as to under what type of establishment specified in notification dated 23.03.2011 the petitioner falls so as to attract the provision of section 1(5) of ESI Act though the petitioner deposited Rs. 75,000/- with the respondent vide cheque no. 529947 dated 05.05.2016 drawn upon State Bank of Patiala with request to apprise the petitioner with the benefits the respondent would be giving for the past period including left employees and with its methodology. Thereafter the petitioner submitted on 09.05.2016 to the Regional Office, Rajindra Place, New Delhi to intimate the type of stablishment in which the petitioner falls under notification dated 28.03.2011. Thereafter the petitioner submitted another letter dated 08.08.2018 to the respondent that if the petitioner did not receive any reply from the respondent to their aforesaid query the petitioner would presume that they are not covered under ESI Act and amount already deposited would be sought to be refunded. Till sending of the impugned recovery certificate/ onder the respondent has not specified as to whether the petitioner has been considered as shop or hotel or restaurant or road moke transport establishment or cinema or newspaper establishment or education institution or medical ESIC No. 01/2019 M/s. Trehan Consultants Pvt. Ltd. Vs. M/s. Employees State Insurance Corporation Page 7 of 45 institution under the notification of 23.03.2011. Without specification of the above fact the respondent has no legal right to consider the petitioner as a covered establishment. It is to be added that the petitioner is having only an office at the premises of Shivam House, Commercial Complex, Karampura Opposite Milan Cinema, New Delhi 110015 Le. Which are covered by the respondent under ESI Act. The petitioner's exclusive activity vide the setup of and in the above premises supply of manpower to overseas clients.
7. It has been further stated that as every employee employed by the petitioner is not employee under ESI Act in view of section 2 (9) of the ESI Act read with other provisions of the Act and Rules and regulations framed thereunder including Rule 50. The petitioner has been employing substantial number of employees whose monthly salary exceeded the limit of amount stated in rule 50 out of the total number of employees engaged during the period of April, 2011 to March, 2016. It is also to be added that the total number of employees during the above period always remained much less than 20 and generally it remained below the April, 2011 figure.
8. It has been further stated that the respondent vide its instructions number 1/2000 dated 01.05.2000 acknowledged the legal necessity of collecting details relating to coverable employees by the SSOs during their inspection for the circumstances which can give rise to making claims pertaining to contribution and the instructions stated that the such required details warrant mentioning of name, father's ESIC No. 01/2019 M/s. Trehan Consultants Pvt. Ltd. Vs. M/s. Employees State Insurance Corporation Page 8 of 45 name and date of appointment of such coverable employees and signature or thumb impression of such coverable employees are also to be required to be obtained and further passed the order/gave instructions that contribution from back period should not be claimed in absence of relevant evidence as mentioned above or without inspection of the record of the relevant back periods. In the present case aforesaid instructions have been totally disregarded and violated. Further the instructions dated 14.03.2012 impose duty on SSOs not only to personally get all coverable employees registered with ESIC by giving assistance to beneficiaries and employer and do all other necessary acts for the purpose of issuance of pehchan cards.
9. It has been further stated that it is undisputable fact that the respondent has not extended any benefit under ESI Act to any of the employees of the petitioner for the period in question. Nor, in the facts and circumstances, the respondent could have given statutory benefit to each and every beneficiary/employee for the period in question. The impugned demand of the respondent is nothing but unjust enrichment.
10. It has been further stated that the petitioner has been irredeemably prejudiced by highly belated claims of the respondent contained in the impugned order and the records are not kept for a such long past period and the said claims of the respondent are also liable to be quashed on this ground also.
ESIC No. 01/2019 M/s. Trehan Consultants Pvt. Ltd. Vs. M/s. Employees State Insurance Corporation Page 9 of 45WRITTEN STATEMENT BY THE RESPONDENT
11. It has been averred that the the petitioner has not approached the Court with the clean hands and suppressed the material facts. It has been averred that the present petition is liable to be dismissed due to the no cause of action arises and this Court has no jurisdiction to try and entertain the present petition.
12. It has been averred that as per record, the petitioner was found to be defaulter and accordingly the Respondent issued notice through the Recovery Officer to the employer for recovery of Rs. 357465/- Contribution amount Rs. 224385/- and interest amount Rs. 133080/-. It has been averred that Respondent surveyed the unit of the petitioner on 09.03.2016 through Sh. Gaurav Kansal and Sh. Narender Kumar SSOs and at the time of survey Mr. Naresh Kumar Trehan was present who signed and acknowledged the survey report and also put his signature and affix the stamp of the unit. The said Mr. Naresh kumar Trehan further submitted the documents viz. Copy of cancelled Check, Copy of PAN card, Copy of ID of Director, Memorandum of Association (MOM) and Salary and remuneration sheet for period of 2011-2012 in support of survey report/Form-01. It has been averred that accordingly the SSOs recommended for coverage of the said unit and thus the respondent issued the Code vide C-11 dated 17.03.2016 w.e.f. 01.04.2011 and the contents of C-11 and survey report shall have to be read.
ESIC No. 01/2019 M/s. Trehan Consultants Pvt. Ltd. Vs. M/s. Employees State Insurance Corporation Page 10 of 4513. It has been averred that the petitioner was duly informed by the respondent to comply / to make payment of contribution vide C-18 (Adhoc), which was duly received and acknowledged by one Mr. Mandeep through AD Card. It has been averred that the petitioner thereafter moved an application for issuance of User Id and password to make the compliance of contribution vide letter dated 02.0.2016 and accordingly the said user id and password was issued by the respondent which was duly received and acknowledged by the petitioner.
14. It has been averred that the petitioner had moved a representation before the respondent that his unity was not coverable under the act vide letter dated 06.06.2016 and accordingly the respondent replied to his query vide reply dated 15.06.2016. It has been averred that the respondent clearly informed the petitioner that his unity is covered under the act and under the definition of 'SHOP' and 'ESTABLISHMENT" vide information letter dated 11.06.2016. It has been averred that thereafter, a C-18 (actual) dated 22.03.2018 was issued to the petitioner but the petitioner did not comply the C- 18 and then, a C-19 dated 11.12.2018 was issued. It has been averred that on finding the establishment coverable under the ESI Act, 1948, the SSOs of the respondent recommended coverage of the establishment under section 1(5) of the ESI Act with effect from 01/04/2011. Thereafter, the respondent issued coverage letter (c-11) together with Form-01 duly signed, to the petitioner dated ESIC No. 01/2019 M/s. Trehan Consultants Pvt. Ltd. Vs. M/s. Employees State Insurance Corporation Page 11 of 45 17.03.2016. It has been further stated that the petitioner has duty acknowledged C-18 (Adhoc) dated 25.04.2016 amounting to Rs.4,11,304/- vide which the Petitioner has been afforded an opportunity of personal hearing (PH) on 05.05.2016 along with necessary documents to represent the case, however the petitioner did not appear for PH on 05/05/2016 but requested to issue User Name and Password to work online vide letter dated 02.05.2016.
15. It has been averred that the Petitioner instead of making payment of the remaining contribution due as per their list record seek clarification about coverage of their Establishment under ESI Act vide letter dated 05.05.2016. The respondent sent copy of Gazette Notification vide letter dated 15.06.2016 but the petitioner disagreed the coverage u/s 1(5) of the ESI Act stating that their organization establishment do not come under the ambit of any professions as 'Shop' and requested to refund Rs. 75000/- vide letter dated 17/06/2016. It has been further stated that the respondent again clarified the matter to the employer and requested to comply with the provisions of ESI Act vide letter dated 11.07.2016. It has been averred that as per online C-6 register the employer has neither deposited contribution for the period 04/11 to 03/16 nor has appeared for representation.
16. It has been submitted that on finding the establishment coverable under the ESI Act, 1948, the SSO of the respondent recommended coverage of the establishment under section 1(5) of the ESI Act with ESIC No. 01/2019 M/s. Trehan Consultants Pvt. Ltd. Vs. M/s. Employees State Insurance Corporation Page 12 of 45 effect from 01/04/2011. It is further submitted that the respondent issued coverage letter (C-11) together with Form-01 duly signed, to the employer dated 17/03/2016. It has been submitted that the petitioner employer is aware of the coverage of the establishment under ESI Act, 1948. It has been further submitted that the employer has duly acknowledged C- 18 (Adhoc) dated 25/04/2016 amounting to Rs. 4,11,304/- vide which the employer has also been afforded an opportunity of personal hearing (PH) on 05/05/2016 along with necessary documents to represent the case.
17. It has been submitted that the employer has received notice C- 18 (Adhoc) dated 25/04/2016 affording an opportunity of personal hearing (PH) on 05/05/2016 along with necessary documents, against which AD has been received. It is further submitted that the respondent issued C-18 (Adhoc) dated 25/04/2016 to the employer for the period from 04/2011 to 02/2016. It is further submitted that the employer, however, not appeared for PF on 05/05/2016 but requested to issue User Name and Password to work online vide letter dated 02/05/2016. It is further submitted that the employer submitted calculation of amount of contribution due for period from 04/2011 to 03/2016 with the request to provide facility to make payment in three installments and enclosed cheque for Rs. 75000/- vide letter dated 05/05/2016. It is further submitted that the employer, instead of making payment of the remaining contribution due as per their list/record seek clarification about coverage of their Establishment under ESI act vide letter dated 05/05/2016. It is ESIC No. 01/2019 M/s. Trehan Consultants Pvt. Ltd. Vs. M/s. Employees State Insurance Corporation Page 13 of 45 further submitted that the respondent sent copy of Gazette Notification vide letter dated 15.06.2016 but the employer disagreed the coverage u/s 1(5) of the ESI Act stating that their organization/establishment do not come under the ambit of any professions as 'shop' and requested to refund Rs.75000/- vide letter dated 17/06/2016. It is further submitted that the respondent again clarified the matter to the employer and requested to comply with the provisions of ESI Act vide letter dated 11/07/2016. It is further submitted that as per online C-6 register the employer has neither deposited contribution for the period 04/11 to 03/16 nor has he appeared for representation.
18. It has been averred that the contribution demanded/claimed is based on the statement of the employer submitted vide their letter dated 05/05/2016. It has been averred that the contribution is payable under section 40 read with Section 39 of the Employees state Insurance Corporation Act, 1948 (herein after referred to as the Act) the principal employer of a factory/establishment covered under the Act is required to pay in respect of every employee both the Employers contribution and the Employees contribution at the rates specified in rule 51 of the ESI (General) Rules, 1950 (as amended). It is further submitted that the contribution are required to be paid in terms of Regulations, 29, 31 and 33 of the ESI (General Regulations 1950) into-a-ban duly authorized by the Corporation, expect where otherwise provide, and within the periods laid down for the purpose. It has been averred that the employer has informed the coverage of ESIC No. 01/2019 M/s. Trehan Consultants Pvt. Ltd. Vs. M/s. Employees State Insurance Corporation Page 14 of 45 establishment u/s 1(5) of the ESI Act. It is further submitted that this office has duly informed the employer vide letter dated 15/06/2016 along with copy of the Gazette of India dated 23/05/2011. It has been averred that the establishment is employing more than 10 employees and is doing business of deployment of manpower as per Form-01 submitted by the employer and Survey Report of SSOs. It is further submitted that the instructions are relevant for physical verification of employees available at the time of survey. It has been further submitted that the records submitted by the employer such as Salary and Remuneration ledger duly signed by the Managing Director Sh. Naresh Kumar Trehan. It is further submitted that in the FORM-01 (Under Regulation 1013) the same declaration had-also- been-made. It was further submitted that there was no dispute at the time of survey and above all the coverage was done on the basis of available and produced records by the employer has not raised any doubt against the produced records. It is further submitted that the letter of TCPL/ESIC/0505 dated 05/05/2016 by the employer is self- explanatory as the number of employees with their names and salary have once again been provided by the employer confirming to the finding of SSO and coverage of the employer vide C-11 form.
19. It has been averred that due to non registration of coverable employees and by making no compliance the employer denied the statutory benefits to the coverable employees. It has been submitted that the recovery certificate has been issued on the basis of record/ statements submitted by the employer vide letter dated ESIC No. 01/2019 M/s. Trehan Consultants Pvt. Ltd. Vs. M/s. Employees State Insurance Corporation Page 15 of 45 20.11.2018/11.12.2018.
20. From the pleadings, following issues were framed :-
1. Whether the impugned order no. 11001222530000999 / 10152018225/4779 dated 20.11.2018 (and 11.12.2018 ) is barred by limitation in terms of Section 45A of the ESIC Act? OPP
2. Whether the impugned order no. 11001222530000999 / 10152018225/4779 dated 20.11.2018 (and 11.12.2018) is liable to be set aside? OPP
3. Relief.
21. In order to prove his case, the petitioner examined Sh. Naresh Kumar Trhan, Manager Director as PW-1, who filed his evidence by way of affidavit Ex.PW-1/A. He has relied upon the following documents:-
Ex.PW1/1 Copy of certificate of incorporation (OSR) Ex.PW1/2 Copy of impugned order dated 22.11.18 /11.12.18 (OSR) Ex.PW1/3 Visit note dated 09.03.2016 given by the SSO (OSR) Ex.PW1/4 Letter of coverage of the petitioner dated 17.03.2016 (OSR) issued by the respondent Ex.PW1/5 Letter dated 02.05.2016 of the petitioner seeking user (OSR) ID and Password Ex.PW1/6 Letter dated 05.05.2016 of the petitioner submitted to (OSR) the respondent and at point A is the seal of the respondent as token of receiving ESIC No. 01/2019 M/s. Trehan Consultants Pvt. Ltd. Vs. M/s. Employees State Insurance Corporation Page 16 of 45 Ex.PW1/7 Letter dated 06.06.2016 of the petitioner submitted to OSR the respondent and at point A is the seal of the respondent as token of receiving Ex.PW1/8 Letter dated 15.06.2016 of the respondent sent to the (OSR) petitioner with annexures Ex.PW1/9 Letter dated 30.03.2011 of the respondent sent to the (OSR) petitioner annexed with Ex.PW1/8 Ex.PW1/10 Gazette dated 23.03.2011 annexed with Ex.PW1/8 (OSR) Ex.PW1/11 Pate No. 42 and 43 of the revenue manual of the (OSR) respondent annexed with Ex.PW1/8 Ex.PW1/12 Photocopy of envelope containing the letter dated (OSR) 15.06.2016 along with above mentioned annexures Ex.PW1/13 Copy of Letter dated 17.06.2016 of the petitioner (OSR) submitted to the respondent and at point A is the seal of the respondent as token of receiving Ex.PW1/14 Order of recovery Officer dated 15.02.2019 (OSR) Ex.PW1/15 Balance sheet for financial year 2015-2016 (OSR) PW1 was cross-examined at length by the Counsel for the defendant.
22. Thereafter, the plaintiff evidence was closed vide order dated 16.09.2019.
23. In support of its defence, the respondent has examined Sh. Narinder Kumar as RW1, who filed his affidavit Ex.RW1/A and relied upon the following documents :-
ESIC No. 01/2019 M/s. Trehan Consultants Pvt. Ltd. Vs. M/s. Employees State Insurance Corporation Page 17 of 45 EX.RW1/1 Survey Report dated 09.03.2016
EX.RW1/2 Form 01
EX.RW1/3 Visit note dated 09.03.2016
EX.RW1/4 List of employees as on 09.03.2016
Mark A Copy of the canceled cheque
Mark B Copy of the PAN Card of the petitioner unit.
Mark C Copy of the ID of the director of the company
Mark D Copy of MOA
Mark E Copy of salary and remuneration letter for 2011-12.
RW1 was cross-examined at length by the Counsel for the plaintiff.
24. The respondent has also examined Sh. Sushil Sachdeva as RW2, who filed his affidavit Ex.RW2/A and relied upon the following documents :-
Ex.RW2/1 C-18 (Actual) notice for the period 04.11 to 03.16 dated 22.03.2018 Ex.RW2/2 C-18 (Actual) notice for the period 04.16 to 01.18 dated 22.03.2018 Ex.RW2/3 C-19 order for the period 04.11 to 03.16 dated 20.11.2018 / 11.12.2018 Ex.RW2/4 Letter dated 05.05.2016 and list of amount of (colly) contribution due for the period from 01.04.2011 to 31.03.2016 along with list of employees Ex.RW2/5 Acknowledgment slip of C-18 (Actual) notice dated 22.03.2018 for the period 04.11 to 03.16 Ex.RW2/6 Acknowledgment slip of C-19 notice to petitioner's unit Ex.RW2/7 Acknowledgment slip of C-19 notice to the employer of the petitioner's unit ESIC No. 01/2019 M/s. Trehan Consultants Pvt. Ltd. Vs. M/s. Employees State Insurance Corporation Page 18 of 45 Ex.RW2/8 Copy of the letter dated 15.06.2016 Ex.RW2/9 Letter dated 02.05.2016 (Already Ex.PW1/R1) Mark A Copy of cheque no. 529947 of Rs. 75,000/-
RW2 was cross-examined at length by the Counsel for the plaintiff.
25. Thereafter, the defence evidence was closed on 04.04.2022.
26. I have heard the final arguments at length and gone through the record carefully.
ARGUMENTS ADVANCED BY THE PETITIONER
27. It has been argued by Learned Counsel for the petitioner that the present petition under section 75 of the ESI Act has been preferred by the petitioner challenging the recovery certificate/order dated 20.11.2018/11.12.2018(Ex. PW1/2) issued U/s 45-C to 45-1 of the ESI Act wherein it has been alleged by the respondent that the petitioner is liable to pay Rs. 2,24,385/- as ESI Contribution for the wage months from April, 2011 to March, 2016 and interest thereon amounting to Rs. 1,33,080/-. It has been further argued by Learned Counsel for the petitioner that the abovesaid recovery certificate is not based upon/preceded with a lawful determination U/s 45A of the ESI Act. As per the provisions of the ESI Act any demand under the Act can only be raised by the ESI corporation only after a lawful determination U/s 45A of the Act. Absence of lawful determination U/s 45A of the Act in the present case makes the impugned demand ESIC No. 01/2019 M/s. Trehan Consultants Pvt. Ltd. Vs. M/s. Employees State Insurance Corporation Page 19 of 45 nullity/void-ab-initio. Further section 45A categorically provides for grant of opportunity of hearing to the employer and due adherence to principles of natural justice by the respondent authority (who is to act as an independent quasi-judicial authority) before saddling any liability under the Act upon an establishment/employer. As there was no invocation of section 45A neither there existed any occasion for grant of opportunity of hearing to the petitioner nor the petitioner was afforded any opportunity of hearing prior to the impugned demand. The impugned demand patently suffers from violation of principles of natural justice and as such, untenable.
28. It has been further argued by Learned Counsel for the petitioner that it was imperative for the respondent to invoke section 45A of the Act, more particularly after the letter dated 05.05.2016 whereby petitioner disputed/questioned its coverage under the Act. Section 45A further provides that no order shall be passed under the said section by the respondent in respect of the period beyond 05 years from the date on which contribution shall become payable. Patently the recovery certificate dated 11.12.2018, demanding contribution for the period April, 2011 to March, 2016, is time barred/beyond the said statutory limitation. Admittedly the petitioner establishment is a manpower supplier to overseas clients and as per the provisions of the Act, the ESI Act is applicable only to the employees employed within India. In the present case the respondent, to the query of the petitioner regarding as to how the petitioner is covered under ESI Act, vide its letter dated 30.03.2011 alleged that the petitioner falls within the Gazette Notification dated 23.03.2011. The said ESIC No. 01/2019 M/s. Trehan Consultants Pvt. Ltd. Vs. M/s. Employees State Insurance Corporation Page 20 of 45 notification is applicable to the areas in National Capital Territory of Delhi. As such, the said notification further narrows down the applicability of the provisions of the Act only to be employees employed/deployed in NCT of Delhi. Neither the petitioner had requisite number of employees in Delhi nor the Act is attracted in the case of the petitioner.
29. It has been further argued by Learned Counsel for the petitioner that in order to attract the provisions of the Act to an establishment, it is mandatory that there must be employment of 10 persons who are employees as envisaged u/s 2(9) of the Act, meaning thereby the monthly wages of the said 10 persons should be within the statutory wage ceiling as prescribed under Rule 50 of the ESI (Central) Rules. During the period in question i.e from 04/2011 to 03/2016 the said wage ceiling was Rs. 10,000/- per month. Admittedly the petitioner did not have 10 or more persons employed with it in India and/or in Delhi at the relevant time whose monthly wages were Rs. 10,000/- or more. It has been further argued by Learned Counsel for the petitioner that as per respondent's own instructions dated 01.05.2000 and as per judge made law, the list of employees prepared by an ESI Inspector during the course of his visit shall contain the name, father's name, place from which the employee hails, his designation, his length of service and his signatures. Moreover the signatures of two independent witnesses are also warranted to be obtained by the inspector. All the said mandatory requirements are non-existing in the present case, rather there exists no list from or by the Inspectors in the present case. As per the provisions of the Act, any ESIC No. 01/2019 M/s. Trehan Consultants Pvt. Ltd. Vs. M/s. Employees State Insurance Corporation Page 21 of 45 contribution/demand under the Act can be made / raised against duly and specifically identified employees U/s 2(9) of the Act and no demand can be made to fill coffers of ESI Corporation. Moreover, the determination/assessment under the Act is not an assessment of tax and/or not meant for any revenue generation for the Govt. The Assessment under the Act in for the benefit of duly identified individuals/employees, admittedly there exists no such identification.
30. It has been further argued by Learned Counsel for the petitioner that the present case is a glaring example of gross abuse and misuse of power by the respondent officials wherein the officials/Inspectors, in furtherance of their illegitimate designs of meeting their per- conceived target of coverage drive, wrongfully got Form-I filled from the petitioner and wrongfully obtained signatures of the petitioner. The petitioner has been wrongfully covered in the present case, said wrongful conduct of the officials of the respondent is patent from the record including from the evidence of respondent witnesses. It has been further argued by Learned Counsel for the petitioner that the entire stress of the arguments of respondent side is on the aspect that the petitioner itself asked for user ID and password and also deposited some amount under the Act. Whereas the said communications were pursuant to aforesaid wrongful conduct of the officials of respondent and the resultant mistaken belief/impression. Moreover, as per the settled principles of law there can be no estoppel against statute. As patent from the record, the Act is not applicable to the petitioner. If the ESI Act is not applicable to the ESIC No. 01/2019 M/s. Trehan Consultants Pvt. Ltd. Vs. M/s. Employees State Insurance Corporation Page 22 of 45 petitioner, any action or inaction on the part of the petitioner is immaterial nor any action of the petitioner can bring the petitioner within the ambit of the Act.
31. It has been further argued by the Learned Counsel for the petitioner that initial Onus/burden is upon the respondent to prove that the petitioner had the requisite number of employees (as envisaged U/s 2(9) of the Act and the Act was applicable to the petitioner during the subject period. The respondent has miserably failed to discharged the onus / burden, neither there exists any material on record wherefrom it can be proved/demonstrated that the petitioner had the requisite number of employees as envisaged U/s 2(9) of the Act) and the Act was applicable to the petitioner nor the respondent led any evidence to substantiate the same. Rather, the evidence on record including the cross examination of respondent witnesses clearly establishes that the petitioner did not have the requisite number of employees as envisaged U/s 2(9) of the Act) nor the Act was applicable to the petitioner
32. It has been further argued by Learned Counsel for the petitioner that as per the law enshrined by various High Courts as well as the Supreme Court, no contribution can be demanded by the respondent corporation if no benefit under the Act was extended by the respondent corporation to the employees of the establishment. In the present case also no benefit has been extended by the respondent corporation to any of the employee of the petitioner.
ESIC No. 01/2019 M/s. Trehan Consultants Pvt. Ltd. Vs. M/s. Employees State Insurance Corporation Page 23 of 45ARGUMENTS ADVANCED BY THE RESPONDENT
33. Per contra, it has been argued by Learned Counsel for the respondent that the C-19 Recovery Order No. Dated 20/11/2018- 11/12/2018 raising the demand is reasoned one on merits relying upon ratio decidendi of judgment of Hon'ble Apex Court applicable to case of petitioner titled as P.K. Mohammad Pvt. Ltd., Cochin vs Esi Corpn., cited as 1993(1)LLJ 482 decided on on 19 August, 1992 and Madhavrao Jiwajirao Scindia Vs. Sambhajirao Chandrojirao Agngre, cited as AIR 1988 SC 79. It is argued that the Hon'ble Apex Court in case reported at Cochin Shipping Co. Etc. vs E.S.I. Corporation cited as 1992 (3) SCR 909 decided on on 19 August, 1992, has held that "the appellant is carrying on stevedoring, clearing and forwarding operations. Clearing the documents, even it be in custom house, is the carrier's job. It can not be gainsaid the appellant is rendering services to cater the need of importers and exporters and others who want to carry the goods further. Therefore, it is a shop carrying on systematic economic or commercial activity. This would be enough to bring the appellant without specifically enumerating the activity carried by the appellant. Merely because shop has been enumerated along with other similar establishment we do not think any further specific enumeration is necessary to cover the appellant." It is argued that the petitioner is misdirected by not taking note of expanded definition of 'shop' such as evolved in various judgments of the Apex Court.
ESIC No. 01/2019 M/s. Trehan Consultants Pvt. Ltd. Vs. M/s. Employees State Insurance Corporation Page 24 of 4534. It has been argued by the Learned Counsel for the respondent that in case of Bangalore water and sewage Board Vs R Rajappa 1978 (2) SCC 213, Industry', as defined in Section 2 (j) of the Industrial Disputes Act (1947) has a wide import. (a) Where (i) systematic activity (ii) organized by co-operation between employer and employee (the direct and substantial element is chimerical) (iii) for the production and/or distribution of goods and services calculated to satisfy human wants and wishes (not spiritual or religious but inclusive of material things or services geared to celestial bliss) however making on a large scale Prasad or food, prima facie, industry' an there is in that Enterprise. (b) of profit motive Absence or gainful objective is irrelevant, be the venture in the public, joint, private or other sector. (c) The true focus is functional and the decisive test is the nature of the activity with special emphasis on the employer-employee relations.
35. It has been argued by Learned Counsel for the respondent that with respect to the upholding of the notification dated 23.03.2011 Ex.PW1/10, the ratio of relevant Apex Court judgments holding establishments as shop where employee - employer relationship present and charging price for services are Hindu Jea Band, Jaipur Vs. Regional Director, ESIC, AIR 1987 SC 1166; Delhi Gymkhana Club Ltd. Vs. Employees State Insurance Corporation, 2014 (12) JT 236; International Ore and Fertilizers (India) Pvt. Ltd. Vs. Employees State Insurance Corporation, 1988 AIR (SC) 1154; M/s. Cochin Shipping Co. Vs. Employees State Insurance Corporation, ESIC No. 01/2019 M/s. Trehan Consultants Pvt. Ltd. Vs. M/s. Employees State Insurance Corporation Page 25 of 45 1993 AIR (SC) 252; Bangalore Turf Club Ltd. Vs. Employees State Insurance Corporation, 2015 AIR (SC) 221 and Christian Medial College Vs. Employees State Insurance Corporation, 2001 AIR (SC)
373.
36. It has been argued by Learned Counsel for the respondent that adverse presumption be taken under Section 114(g) of the Evidence Act. for not furnishing all relevant documents such as C- 18 (Notices) of which Postal acknowledgment are on record and secondly overseas employees records deliberately evaded.
37. Learned Counsel for the respondent has also relied upon judgment passed in Girdhari Lal Vs. ESIC [DHC] 208 (2014) DLT 718. the relevant portion is reproduced below:-
"In my opinion the entire arguments urged on behalf of the respondent herein, petitioner in the court below, are misconceived because Section 106 of the Evidence Act 1872, States that onus of proof with respect to facts which are in the knowledge of a person is on the said person. In the present case, the knowledge of number of employees in the special knowledge of the respondent, and this onus has to be discharged by filing the record of employees of the respondent of the number of the employees which the respondent has in its establishment. Admittedly no record was filed by the respondent in the court below to substantiate its contention that number of employees were less than 10 in number. Accordingly the respondent has failed to discharge the onus upon it that its employees were less than ten in number and therefore, it could not be covered under the ESI Act."
38. It has been argued by Learned Counsel for the respondent that the respondent's witnesses that is RW1 and RW2 have stood by the ESIC No. 01/2019 M/s. Trehan Consultants Pvt. Ltd. Vs. M/s. Employees State Insurance Corporation Page 26 of 45 defense of respondent ESI Corporation without any falsity, inconsistency and contradiction. It is contended that the question put to RW1 and RW2 are evasive, irrelevant and actually brings out no contradiction / inconsistency or veracity in their testimony. It has been argued by Learned Counsel for the respondent that it is a clear cut case of admission involving substantial question of law. The material facts about coverage/dues have been admitted as discarded deposition carries no probative value warranting to be discarded outrightly. On close appreciation of deposition / oral or documentary evidence on applying benchmark of preponderance of probability standard deposition is untenable/disproved. It has been argued by Learned Counsel for the respondent that the petitioner company admitted the liability twice Ex RW1/1 and Ex. RW2/4 (colly)/Ex.PW1/6 and can not escape statutory ESI dues by dubious argument of non applicability of the Act.
39. Learned Counsel for the respondent has relied upon Union of India v. Moksh Builders and Financiers Ltd (AIR 1977 SC 409), wherein it was held as under :-
21. The ancillary question is as to who was the real owner of the house for whom defendant No. 2 was the "benamidar"? We have not taken the admissions of defendant No. 3 into consideration so far, but they have a direct bearing on the question now before us. We recorded a statement Ex. P. 1 dated August 12, 1950 before Puran Chand P. W. 1, Income-tax Officer, which has been proved by the witness. It has been stated there as follows,-
"I purchased 15 Keeling Road on 12-12-46 for Rs. 60,000/- in the name of my son (Major Krishan Lal) This money was paid out of my bank accounts and I have shown the details and payments from my bank ESIC No. 01/2019 M/s. Trehan Consultants Pvt. Ltd. Vs. M/s. Employees State Insurance Corporation Page 27 of 45 passbooks."
Then there is document Ex. P. 6 which is a copy of the personal account of defendant No. 3. It was filed in connection with the return of his income-tax for 1947-
48. An attempt was made to argue that the document had not been proved or marked as an exhibit. We have seen the original document and we have no doubt that the whole of it was tendered in evidence and was marked as Ex. P. 6. The identity of the document has been established by the statement of Puran Chand P. W. 1 that the scribing on it was made by him. The document has therefore, been proved beyond doubt. It shows that it was defendant No. 3 who spent Rs. 60,000/- on "property" in that assessment year. Both Exhibits P. 1 and P. 6 go to prove that the house was purchased by defendant No. 3 out of his own funds in the name of his son defendant No. 2 who, it will be recalled, was admittedly only 18 years old at that time, and did not have any money of his own. Moreover defendant No. 3 showed the income accruing from the house as his own income in his return for the years 1947-48 and 1948-49. Counsel for the respondents have urged for the exclusion of these admissions. The main attack was that they were admissions of a co-defendant and were not admissible against defendant No. 2. As has been stated, we have not taken them into consideration as evidence against that defendant. There is however no force in the other argument that they are not admissible in evidence against defendant No. 3 as he was not confronted with them in the trial court and they were not adverse to the interest of their maker at the time when they were made. It has been held by this Court in Bharat Singh, Bhagirathi, (1966)1 SCR 606 that an admission is substantive evidence of the face admitted and that admissions duly proved are admissible evidence irrespective fact admitted, ad party making them appeared in the witness box or not and whether that party when appearing as witness was confronted with those statements in cate it made a statement contrary to those admissions." In taking this view this Court has noticed the decision in Ajodhya Prasad Bhargava v. Bhawani Shankar, All 1957 Allah also."
ESIC No. 01/2019 M/s. Trehan Consultants Pvt. Ltd. Vs. M/s. Employees State Insurance Corporation Page 28 of 4540. It has been argued by Learned Counsel for the respondent that order u/s 45A is directory in certain cases and not mandatory. (i) In case of actual and admitted dues. Ex.PW1/6 in response to C-18 (adhoc) dated 25/04/2016 for Rs. 411304/-[admitted in cross) (page 72- 73/WS) forcing ESI to issue C-18 (actual) dated 22/03/2018 for Rs. 299385/- required no mandatory assessment under the above provisions of the Act. (ii) In cases only such of C-18 (adhoc) /determination is called for when any preconditions specified therein assessment of three are satisfied namely (a) when no returns, particulars, registers or (b) records are or submitted, furnished. Maintained sso/other official is prevented in any manner by principle or immediate employer in exercising the duties under section 45 (2) of the ESI Act. (iii) The section 45 A uses/ employs the word may and not shall, as such director in nature. (iv) The Heading of the section further confirms in no uncertain terms that section 45A is be invoked in certain cases only, and this case because of Ex. PW1/3 and Ex. PW1/5 when records are produced is certainly not covered under the sweep and purview of section 45A.
41. It has been averred argued by Learned Counsel for the respondent that no documents on records for catering to overseas clients out of India have been placed on record. No permission of Bureau of Immigration office, No Overseas clients Bills/ agreements Salary records of such overseas employees have been neither shown to ESIC Assessing officer or even before the Court. It is contended that the initial onus is discharged by the respondent ESIC by exhibiting RW1/1.
ESIC No. 01/2019 M/s. Trehan Consultants Pvt. Ltd. Vs. M/s. Employees State Insurance Corporation Page 29 of 4542. It has been averred argued by Learned Counsel for the respondent that overseas employee should have been made party in view of judgment in case of (ESIC vs BBMB (2009)10SCC67 and Fertilizer & chemical vs ESIC (2009) 10 SCC 485.
ANALYSIS, ISSUE-WISE FINDINGS AND CONCLUSION
43. The following issues were framed :-
Issues No. 1 & 21. Whether the impugned order no. 11001222530000999 / 10152018225/4779 dated 20.11.2018 (and 11.12.2018 ) is barred by limitation in terms of Section 45A of the ESIC Act? OPP
2. Whether the impugned order no. 11001222530000999 / 10152018225/4779 dated 20.11.2018 (and 11.12.2018) is liable to be set aside? OPP
44. Briefly stated the petitioner has challenged the impugned Orders on the following grounds :-
a. No lawful determination has been done under Section 45-A of the ESI Act.
b. No opportunity of hearing was granted before passing of the order.
c. The demand is time barred as it pertains to the period April 2011 to March 2016.
d. The petitioner does not have the requisite number of employees for application of the Act as the petitioner does not have requisite number of employees under Section 2 (9) of the ESI Act.ESIC No. 01/2019 M/s. Trehan Consultants Pvt. Ltd. Vs. M/s. Employees State Insurance Corporation Page 30 of 45
45. Per contra, the respondent has contended that the order in question has been passed after giving reasonable opportunity of hearing and is a well reasoned order. Further, order under Section 45 A is directory and not mandatory in certain cases. It has been contended that in case of admitted dues, there is no requirement of invoking Section 45 A. It has been contended that the burden of proof is not discharged by the petitioner company. Further, section 45 A Limitation Part has no applicability, since the said Section has not been invoked.
46. Let us first decide as to whether Section 45A is mandatory or directory. Before proceeding further, it would be appropriate to reproduce the said provision. The section 45A reads as under:
"45A. Determination of contributions in certain cases.
-- (1) Where in respect of a factory or establishment no returns, particulars, 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 ESIC No. 01/2019 M/s. Trehan Consultants Pvt. Ltd. Vs. M/s. Employees State Insurance Corporation Page 31 of 45 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 section 45C to section 45-I."
47. It is clear from the bare reading of the provision that it empowers the Corporation to determine the contributions which are payable in respect of the employees of a factory or establishment. The proviso to the said section mandates that no such order determining the contribution payable shall be passed by the Corporation unless the principles of natural justice are complied with. While interpreting the scope of section 45A of ESI Act, the Hon'ble Supreme Court of India in the case of ESIC vs. C.C. Santhakumar (MANU/SC/8689/2006) held the following: -
"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. Under Section 45A(1), the Corporation, by an order, can determine the amount of contributions payable in respect of the employees where the employer prevents the Corporation from exercising its functions or discharging its duties under Section 45, on the basis of the material available to it, after giving reasonable opportunity..."
48. Therefore, the contribution payable has to be determined by the Corporation by way of passing an order under section 45A of the ESIC No. 01/2019 M/s. Trehan Consultants Pvt. Ltd. Vs. M/s. Employees State Insurance Corporation Page 32 of 45 ESI Act. Further, such an order of assessment is made appealable under section 45AA before the Appellate Authority, which is a statutory right provided to the employer in case he is not satisfied with the assessment order passed under section 45A. Also, an order determining contributions under section 45A shall be sufficient proof of the claim of the Corporation under section 75 or the same may be recovered by initiating recovery proceedings as an arrear of land revenue under section 45-B or through recovery modes as provided under section 45-C to section 45-I.
49. In the context of recovery proceedings initiated by the ESIC against the employer without passing an assessment order determining the contributions payable under section 45A, in a recent judgment of the Nandakumar vs. The Deputy Director, ESI Corporation (WP(C) NO. 4510 OF 2018, decided on June 05, 2024), the Hon'ble Kerala High Court has held as under: -
"7. In the present case, it appears that the Corporation has not passed an order under Section 45A, as required by the Statute itself. Further, the order passed under Section 45A is appealable under Section 45AA, which is a statutory right conferred on the employer or employees to challenge before the appellate authority if one of them is not satisfied with the order passed under Section 45A.
7.1 On proper construction of Section 45A and 45AA, it may be said that the payable contribution has to be determined only by an order passed under Section 45A and the Corporation cannot say that on the basis of the documents submitted by the employer of a factory or establishment, the amount has been arrived at for payable contribution.
7.2 Payable contribution would include short ESIC No. 01/2019 M/s. Trehan Consultants Pvt. Ltd. Vs. M/s. Employees State Insurance Corporation Page 33 of 45 payment of the contribution besides the non- payment of the contribution. If there is short payment or non-payment of the contribution, that amount has to be determined under Section 45A by an order passed by the Corporation/competent authority. In the present case, as there has been no order passed under Section 45A, the recovery action under Section 45B/45C is unsustainable."
(Emphasis Supplied)
50. In another case of M/s Electronic Net vs. Union of India & Ors.
(Civil Writ Jurisdiction Case No.6882 of 2014, decided on October 12, 2017), the Hon'ble Patna High Court held as under: -
"In view of the discussions made above, as also in view of the statutory provisions prescribed under Section 45-A(2) of the ESI Act, which clearly provides that recovery under Section 45- B, 45-C to 45-I of the ESI Act can only be made if it is preceded by an order of assessment under sub-section (1) of Section 45-A of the ESI Act, the impugned demand made by the Authorized Officer vide letter dated 11.12.2013 regarding payment of alleged ESI contribution to the tune of Rs.97,13,612/- for the period 01.12.2010 to 31.03.2012, the impugned letter dated 13.01.2014 issued by the Authorized Officer in favour of the Recovery Officer directing him to recover the impugned amount plus interest from the petitioner and the notice of demand dated 27.01.2014 by which the Recovery Officer instituted Certificate Case No.6329 and directed the petitioner to pay the impugned amount and the prohibitory order dated 13.02.2014 issued by the Recovery Officer to the Senior Branch Manager, Indian Overseas Bank, Shastrinagar, Patna by which the account of the petitioner has been attached and the Bank has been directed to remit the amount cannot be sustained. They are accordingly set aside...."ESIC No. 01/2019 M/s. Trehan Consultants Pvt. Ltd. Vs. M/s. Employees State Insurance Corporation Page 34 of 45
51. From the aforesaid judicial precedents and statutory scheme of the ESI Act, it is clear that the recovery proceedings under section 45-B, 45-C to 45-I has to be preceded by an order determining the contribution under section 45A. In the absence of such an assessment order, the recovery proceedings are vitiated as being in violation of the statutory mandate.
52. The thrust of respondent's arguments is that there was admission on part of petitioner and therefore, Section 45(A) has no applicability. On the other hand, it has been contended by the petitioner that the petitioner was forced to sign the various documents under duress of the respondent's inspector. The respondent has produced various signed documents of the petitioner and has further contended that the petitioner obtained the username and password for deposit of the dues and now the petitioner is estopped from going back. On the other hand, the petitioner has contended that it immediately sent a letter to the respondent stating that it is not liable for the charges and dues raised by the respondent ESI Corporation.
53. To prove its case, the respondent examined Mr. Narender Kumar, SSO as RW1. During the cross-examination, various discrepancies were pointed out in the procedure adopted by ESIC. During the cross-examination, the witness admitted that no observation slip was prepared during the survey. It has been contended that the same were required to be prepared as per Section 45 and instruction dated 14.03.2012. The witness admitted that he has not complied with the ESIC No. 01/2019 M/s. Trehan Consultants Pvt. Ltd. Vs. M/s. Employees State Insurance Corporation Page 35 of 45 duties as mentioned in the instruction on his visit on 09.03.2016. The witness could not show any proof of his posting as SSO in the area in which the petitioner establishment was situated as on 9.03.2016. The witness admitted that he did not prepare any list of employees showing total 17 employees as on 01.04.2011 with the respondent and did not identify the coverable employees. He further admitted that Form No. 1 that is Ex.RW1/2 does not bear his signatures. He admitted that on his visit on 09.03.2016, he neither examined any employee nor examined the employer. RW1 admitted that in the affidavit, he did not specify as to out of the two SSOs, who prepared the visit note. He admitted that he has not communicated with the petitioner establishment any communication after his visit on 09.03.2016 relating to any of the compliances to be made by the petitioner establishment.
54. The respondent examined Sh. Sushil Sachdeva, Deputy Director, ESIC, as RW2. He proved the C-18 Actual for the period 04.11 to 03.16 dated 22.03.2018 (Ex.RW2/1) and C-18 adhoc for the period 04.16 to 01.18 dated 22.03.2018 (Ex.RW2/2). He also proved the C- 19 Order for the period 04.11 to 03.16. He was cross-examined at length. In his cross-examination, he admitted that he has not placed on record either the original or copy of the alleged letter dated 06.11.2019 mentioned in the affidavit. He further admitted that neither he nor the respondent corporation has placed on record any document with respect to his posting at the place concerned. He further deposed that he is only privy to the statements made in Para No. 5 and 6 of his affidavit.
ESIC No. 01/2019 M/s. Trehan Consultants Pvt. Ltd. Vs. M/s. Employees State Insurance Corporation Page 36 of 4555. During the cross-examination, he deposed that he cannot tell whether the provisions of Section 44 were complied with in the present case. He stated that as per Judgment of the Hon'ble High Court of Delhi in the case titled Mesco Private Limited Vs. ESIC, if normal mode of assessment is mentioned in Section 44 of the ESI Act, then only Section 45(A) is to be invoked. He admitted that he did not mention any such thing in the notices Ex.RW2/2 and Ex.RW2/3.
56. RW2 further admitted in his cross-examination that as per portion Mark as A1 to A2 in C-18 adhoc dated 22.03.2018, invocation of Section 45 A and determination was warranted in the present case. He further admitted that he did not place on record either the High Court Judgment or any ESIC manual to support his claim. Further, the witness admitted that he did not conduct any inquiry to ascertain the nature of business of petitioner establishment, the number of employees, their rate of wages, their natures of employment and as to whether the said employees were employed in India or outside. The witness after going through the documents and the court file stated that he cannot tell as to how many employees of the petitioner establishment were employed or deployed in India or outside India.
57. The witness was again cross-examined on 04.04.2022. The witness deposed that he did not examine the SSO prior to issuance of C-19. He stated that the report was already available, however the witness was unable to tell the date, month or year of the said report. The ESIC No. 01/2019 M/s. Trehan Consultants Pvt. Ltd. Vs. M/s. Employees State Insurance Corporation Page 37 of 45 witness did not inquire from the SSO as to whether the copy of the report was given to the petitioner. The witness could not tell as to whether any survey was going on in the year 2016 and whether any instructions were given to the SSO to visit the petitioner establishment. He admitted that the SSO are not required to visit any establishment without instructions or approval of the competent authority. He admitted that the petitioner wrote multiple letters to the ESIC pointing out that the SSO under misguidance and quartion got the paper signed from the petitioner. He also admitted that ESIC has not granted any benefit to any person till date against the contribution demanded in the present case. He also admitted that neither he nor any of the SSO took any statement of any of the employees of the petitioner establishment with respect to the subject matter.
58. The witness further admitted that Sh. S. P. Pandey neither invoked any inquiry under Section 45 A ESI Act nor issued any C-19.
59. In view of the settled law, this court is of the view that the submission of the petitioner that it is not covered within the definition of shop cannot be accepted. Further, as discussed above, the notice under Section 45 A is mandatory and not directory. The present case does not fall under any of the categories in which the Section becomes directory. Further, in the C-18 adhoc, the respondent corporation has itself mentioned as under :-
"Please take notice that unless your explanation and / or a statement as mentioned in para 4 above given the actual dues for the periods in question is submitted to this office with in the time specified ESIC No. 01/2019 M/s. Trehan Consultants Pvt. Ltd. Vs. M/s. Employees State Insurance Corporation Page 38 of 45 as above, this office shall proceed with the case merits and an order shall be passed under Section 45(A) of the Act determining the amount of contributions due from you under the provisions of the ESI Act and further cause the same to be recovered under Section - 45 (C) to 45 (I) of the Act along with interest @ 15 % per annum under Section 39 (5) of the ESI Act, payable on arrears of contributions for each day of default or delay in payment of dues.
Yours Faithfully (S.P. Pandey) Dy. Director"
60. The petitioner has been able to point out various discrepancies in the orders passed by the respondent. The respondent has failed to show that the orders were passed in accordance with the law. In the circumstances, the orders passed by the respondent are not sustainable in the eyes of law.
61. The next question which has been agitated is as to whether the judgment of the Hon'ble Supreme Court passed in the case titled as Employees State Insurance Corporation Vs. M. M. Suri (hereinafter referred to as the M. M. Suri Judgment) is a good law or not after amendment in Section 2 (9) of the ESI Act. Although, the orders passed by the respondent have not passed even the threshold test under Section 45 A of the ESI Act. However, this Court proceeds to decide the applicability of the M. M. Suri Judgment as the same has been agitated. The controversy has been settled by the Hon'ble Bombay High Court in the case titled Employees State Insurance Corporation vs M/s Eastern Engineering Co decided on 19 March, 2018. The relevant portions are reproduced as under :-
ESIC No. 01/2019 M/s. Trehan Consultants Pvt. Ltd. Vs. M/s. Employees State Insurance Corporation Page 39 of 45"14. Thus, the distinction between Sections 2(9) and 2(10) is mainly wage based and the ceiling is placed on the basis of amount of wages earned by the employee. If that yardstick is applied, then we may get two types of employees in one establishment or factory. There may be different pay scales or increase in wages due to increment because of experience, skill etc. There can be skilled or unskilled workers. There may be freshers or experienced workers. On that basis, the wages may differ. However, some of these employees may be getting wages below the ceiling and some above the ceiling. However, they all are getting wages and not salary. Therefore, they all are to be considered as employees.
15. This is supported by further sub section, i.e., Section 2(10) of the Act wherein the term "exempted employee" is defined "an employee who is not liable under this Act to pay the employees contribution". That means, though he is an employee under the Act, he is that class of employee may be drawing salary or wages but above the ceiling hence is not liable to pay the employee's contribution and, therefore, will not get the medical benefits under the Scheme as they are getting better payment. The legislature has thoughtfully considered the possibility of difference in the wages of the employees working under the same factory or establishment and FA92_1994.doc the employees, who are getting salary less than prescribed wages, are categorized and defined under Section 2(9) of the Act. For those employees, it is obligation on the part of the employer to pay the contribution on their behalf. Section 2(9) does not only define the employees on the basis of wages but it also further defines and covers the class of employees on the basis of relationship with the employer, i.e., contractual workers who are having a temporary service and so also the employees working in other department and branches.ESIC No. 01/2019 M/s. Trehan Consultants Pvt. Ltd. Vs. M/s. Employees State Insurance Corporation Page 40 of 45
16. In Clause (3) of the Schedule of the Notification, the word "employees" is used and therefore, it can be restricted to only the employees under section 2(9) and excludes employees defined under section 2(10). However, the scheme will be applicable to the establishment due to the twenty number of the employees who are drawing wages.
17. Learned Counsel for the ESIC argued by giving example that the employer has to pay the contribution of the workers who are earning less than Rs.1,000/- but for the application of the Act, the minimum number of employees should be 20. Thus, out of 20, there may be two employees who are drawing less than Rs.1,000/-
or FA92_1994.doc there may be 18 employees who are drawing less than Rs.1000/-, for those employees only the employer is required to pay the contribution. For applicability of the Act, if such criterion of 20 employees earning less than Rs.1000/- is applied, then it is very easy for the employer to give go-bye to the scheme, just by paying wages of Rs.1,001/- to one or more employees. Such situation is not contemplated under the Act, as it will defeat the object of the Act.
18. In the case of Employees State Insurance Corporation vs. M/s. M.M. Suri & Associates (supra), the Hon'ble Supreme Court held that 20 or more persons should be those who fall under the definition of "employee" as given in Section 2(9) of the Act. The Supreme Court observed that though 6 to 7 persons drawing wages less than prescribed ceiling of the wages and other employees drawing above that ceiling and though the number is 20 or more, the scheme cannot be applied, as the definition of number of 20 employees under section 2(9) of the Act is not complete. The Supreme Court has considered the earlier rulings in the case of Regional Director, Employees State Insurance Corporation, Trichur vs, Ramanuja Match Industries, AIR 1985 SC 278.ESIC No. 01/2019 M/s. Trehan Consultants Pvt. Ltd. Vs. M/s. Employees State Insurance Corporation Page 41 of 45
In that case, the question before the Court was whether a partner of the firm FA92_1994.doc is an employee and it was answered "No" because he was not drawing wages. Thus, the Court in the case of M.M. Suri has mainly applied the yardstick of wages which is defined under section 2(22) of the Act. In the said case, the Hon'ble Supreme Court has also relied on the case of Employees' State Insurance Corporation vs. Apex Engineering Pvt. Ltd., (1998) 1 SCC 86 wherein the judgment of the Bombay High Court holding that the Managing Director of the respondent-company was not an employee within the meaning of Section 2(9) of the Act was reversed. The directions given in the case of ESIC vs. Apex Engineering Pvt. Ltd. were reproduced by the Hon'ble Supreme Court in the case of M.M. Suri. Considering those directions, what is important is that the persons should be employed on wages on any work connected with the work of the factory or establishment. In the case of M.M. Suri (supra), the Hon'ble Supreme also specifically reproduced the finding given by the Hon'ble Supreme Court in the case of Regional Director, Employees State Insurance Corporation, Trichur vs. Ramanuja Match Industries (supra) wherein it is observed thus:
"We do not doubt that beneficial legislations should have liberal construction with a view to implementing the legislative intent but where such beneficial legislation has a scheme of its own FA92_1994.doc there is no warrant for the Court to travel beyond the scheme and extend the scope of the statute on the pretext of extending the statutory benefit to those who are not covered by the scheme."
This proposition of law cannot be disputed, as it is a settled principal of law."
62. From a bare reading of the relevant portion cited above, it is clear ESIC No. 01/2019 M/s. Trehan Consultants Pvt. Ltd. Vs. M/s. Employees State Insurance Corporation Page 42 of 45 that the judgment in M. M. Suri is still a good law and the employees which are to be counted for the purposes of giving benefit have to satisfy the criteria of wages also. The contention of the counsel for the respondent that M. M. Suri judgment is not applicable, cannot be accepted in light of the judgment of the Bombay High Court.
63. The observation of the Hon'ble High Court in the case titled as E.S.I.C Vs. Santhakumar is relevant. The relevant portion is reproduced as under :-
64. Section 45A provides for determination of contributions 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. Under Section 45A(1), the Corporation, by an order, can determine the amount of contributions payable in respect of the employees where the employer prevents the Corporation from exercising its functions or discharging its duties under Section 45, on the basis of the material available to it, after giving reasonable opportunity. But, where the records are produced, the assessment has to be made under Section 75(2)(a) of the Act. Section 45A (2) provides that the order under Section 45A(1) shall be used as sufficient proof of the claim of the Corporation under Section 75 or for recovery of the amount determined by such ESIC No. 01/2019 M/s. Trehan Consultants Pvt. Ltd. Vs. M/s. Employees State Insurance Corporation Page 43 of 45 order as arrears of land revenue under Section 45B. In other words, when there is a failure in production of records and when there is no cooperation, the Corporation can determine the amount and recover the same as arrears of land revenue under Section 45B. But, on the other hand, if the records are produced and if there is cooperation, the assessment has to be made and it can be used as a sufficient proof of the claim of the Corporation under Section 75 before the E.S.I. Court. So, the limitation of three years for filing an application before the Court, introduced by Act 44 of 1966, can only relate to the application under Section 75 read with 77(1A). The order under Section 45A need not be executed by the Corporation before the E.S.I. Court under Section 77. As such, the amendment to Section 77(1A)(b) proviso by Act 29 of 1989 providing five year limitation has no relevance so far as orders passed by the Corporation under Section 45A are concerned.
Where an order is passed under Section 45A, it is the duty of the employer and not the Corporation to approach the E.S.I. Court. Since no application need be filed by the Corporation after an order is passed under Section 45A, the limitation prescribed under Section 77 does not get attracted. The non-payment of contribution is a continuing cause, which is clear from the fact that the employer is enjoined to pay the interest under Section 39(5)(A), which was introduced by Act 29 of 1989, until the date of its actual payment.
64. In view of the judgment titled as ESIC Vs. Santhakumar, as discussed above, the question of limitation in the present case becomes irrelevant as there is no order passed under Section 45 A of the Employees State Insurance Act, 1948.
ESIC No. 01/2019 M/s. Trehan Consultants Pvt. Ltd. Vs. M/s. Employees State Insurance Corporation Page 44 of 45Relief :
65. In the totality of the facts and circumstances, the petition is allowed and the impugned order no. 11001222530000999 / 10152018225/4779 dated 20.11.2018 (and 11.12.2018 ) and the impugned order no. 11001222530000999 / 10152018225/4779 dated 20.11.2018 (and 11.12.2018) are set aside.
66. File be consigned to Record Room after necessary compliance.
Digitally signed HIMANSHU by HIMANSHU RAMAN RAMAN SINGH SINGH Date: 2024.07.16 14:31:16 +0530 Announced in open Court (HIMANSHU RAMAN SINGH) on 16.07.2024. SCJ-CUM-RC (WEST) TIS HAZAR COURT / DELHI ESIC No. 01/2019 M/s. Trehan Consultants Pvt. Ltd. Vs. M/s. Employees State Insurance Corporation Page 45 of 45