Karnataka High Court
Employees State Insurance Corporation vs Sree Valliappa Textiles Ltd on 16 December, 2013
Author: Aravind Kumar
Bench: Aravind Kumar
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IN THE HIGH COURT OF KARNATAKA AT BANGALORE
DATED THIS THE 16TH DAY OF DECEMBER, 2013
BEFORE
THE HON'BLE MR.JUSTICE ARAVIND KUMAR
MISCELLANEOUS FIRST APPEAL NO.6752/2008 (ESI)
BETWEEN:
EMPLOYEES STATE INSURANCE
CORPORATION
NO.10, BINNY FIELDS,
BINNYPET, BANGALORE - 560 023
REPRESENTED BY ITS
DEPUTY DIRECTOR . ...APPELLANT
(BY SRI M.P.GEETHA DEVI, ADVOCATE)
AND:
SREE VALLIAPPA TEXTILES LTD.,
HEJJALA P.O.,
BIDADI - 562 109
BANGALORE DISTRICT,
REPRESENTED BY ITS
MANAGING DIRECTOR ...RESPONDENT
(BY SRI K. RAMACHANDRAN, ADVOCATE FOR
M/S MRC RAVI, ASSOCIATES, ADVOCATES)
This Appeal is filed Under Section 173(1) of MV
Act against the judgment & award dated 20.03.2008
passed in Exi. Appl. No.6/03 on the file of the Presiding
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Officer, Industrial Tribunal, Bangalore, partly allowing
the application filed under Section 75 of the ESI Act.
This Appeal coming on for Admission this day, the
Court delivered the following:
JUDGMENT
The ESI - Corporation is in appeal challenging the order passed by Industrial Tribunal, Bangalore dated 20.03.2008 in ESI No.6/2003.
2. Learned Advocates appearing for the parties would fairly submit that substantial questions of law which was required to be formulated under Section 82 of the Employees State Insurance Act, 1948 (hereinafter referred to as the 'Act' for the sake of brevity) has not been formulated and as such, they request this court to formulate the substantial questions of law.
3. Having heard the learned Advocates appearing for parties, I am of the considered view that 3 following two substantial questions of law would arise for my consideration:
i. Whether ESI Court was correct in arriving at a conclusion that manufacturing activity of respondent - establishment having been stopped with effect from 14.06.1999 and thereby it need not pay Employers/employees contributions to appellant corporation?
ii. Whether Industrial Tribunal was correct in arriving at a conclusion that respondent had proved that stipend was paid to its trainees/apprentices and as such it does not form part of wages.
4. It is the contention of Smt.Geetha Devi, learned counsel appearing for ESI - Corporation that Tribunal committed a serious error in not construing the inspection report in proper perspective, which came 4 to be marked as Ex.R-1, which would clearly indicate that on 17/18.05.2001 respondent - establishment was inspected and observation has been made about non production of certain records and the very records produced by respondent - establishment would itself indicate that there was no stoppage of activity in respondent - establishment and as such, it continued to be a covered establishment as per Section 1(6) of the Act. She would elaborate her submission by contending that on facts respondent - establishment had failed to demonstrate that it had paid stipend to its trainees /apprentices and no evidence was tendered in this regard. Hence, contrary conclusion arrived at by the Industrial Tribunal is erroneous and is liable to be set aside. She would contend that under the definition of an employee as defined under sub-section (9) of Section 2 of the ESI Act, not only establishment has to prove that it had employed trainees as per the approved industrial standing orders, but it has to further establish and prove that such payment of stipend was 5 actually made, as otherwise it has to be construed as wages as defined under Section 2(22) and thereby the demand raised by ESI - Corporation would be justified.
5. She would also draw the attention of the Court to Ex.A-9 i.e., namely profit and loss account of respondent-establishment drawn as on 30.06.2002 to contend that it does not show about any stipend having been paid, but on the other hand it has been shown as salaries, wages and bonus. She would also contend that there was no material available before ESI Court to arrive at a conclusion that stipend was factually paid to trainees and no vouchers were forthcoming and despite non production of evidence for having made payment in this regard, respondent - establishment cannot contend that it is not liable to pay ESI contribution. Hence, she requests this Court to answer the substantial questions of law in favour of ESI - Corporation by allowing the appeal.
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6. Per contra, Sri.Ramachandran, learned counsel appearing for respondent - establishment would support the order passed by Industrial Tribunal and he would contend that undisputedly establishment was closed on 31.03.1999 under Section 250 of the Industrial Disputes Act, 1947 and on account of trade union challenging the said order by filing a review petition, it attained finality on 14.06.1999 and as such, it can be construed that there was a closure of respondent-establishment legally with effect from 14.06.1999 and immediately on such closure, three communications were sent to ESI - Corporation on 14.08.1999 and other statutory authorities like Provident Fund and despite such intimation he contends appellant officials did not visit the establishment and after a period of two years the Inspector of ESI - Corporation visited the respondent- establishment and a demand has been raised, which is contrary to statutory provision namely Sub-Section (6) of Section 1 and Sub-Clause (b) of Clause (iii) of Sub- 7 Section (9) of Section 2 of the Act. He would submit that when establishment has ceased to have any manufacturing process, provisions of the Act would not apply or get attracted and the establishment not being covered under the Karnataka Shops and Commercial Establishments Act, 1961, it cannot also be contended that there was any commercial activity and particularly when there was no admitted commercial activities of trading like buying and selling and or any other incidental activities it also cannot be held or construed that establishment was running its business. Hence, he contends that it cannot be construed that establishment continued to remain as a covered establishment. Supporting the impugned order he submits that respondent is admittedly having a certified standing orders and payment of stipend to its trainees would not par-take the character of wages and as such no fault can be found in the impugned order passed by ESI Court. He would submit that after closure of establishment, it is not liable to pay contributions and 8 as such, he seeks for answering the substantial questions of law in favour of respondent - establishment.
7. In support of his submissions he has relied upon the following judgments:
1) 1993 (1) LLJ SC 939:
ESIC VS. HOTEL KALPAKA INTERNATIONAL
2) 1976 (1) LLJ SC 81:
EMPLOYEES STATE INSURANCE CORPORATION AND ANOTHER VS. TATA ENGINEERING AND LOCOMOTIVE CO. LIMITED AND ANOTHER
3) 2006 SCC (L&S) 323:
REGIONAL PROVIDENT FUND COMMISSIONER, MANGALORE VS. CENTRAL ARECANUT & COCA MARKETING AND PROCESSING COOP. LTD., MANGALORE
4) 1999 (1) LLJ 222:
ROHTAS INDUSTRIES LTD., (IN LIQUIDATION)
5) 1999 III LLJ (Supp) 243:
REGIONAL PROVIDENT FUND COMMISSIONER VS. MANAGEMENT OF HOTEL HIGHWAY LIMITED, MYSORE 9 FACTUAL BACKGROUND:
8. Applicant is an establishment carrying on manufacturing of garments. It was covered under ESI Act with effect from 1998. Said establishment was closed as per permission accorded to it by appropriate Government to close down the establishment as per Section 250 of the Industrial Disputes Act, 1947, by order dated 26.02.1999. Said order came to be challenged by the trade union by filing a review petition before the appropriate Government, which ended in dismissal and as such it is deemed that respondent is closed with effect from 14.06.1999 according to respondent-establishment. These aspects are not in dispute. Respondent - establishment submitted a representation to ESI-Corporation on 14.08.1999 intimating about the closure. Said communication has been produced and marked as Ex. A-17. However, the Inspector of ESI-Corporation visited the establishment on 17/18.05.2001 for the purposes of verification and after examining the registers namely Attendance 10 Registers, Wages Registers and other Registers, made available, he prepared an inspection report as per Exhibit-R-10. Thereafter a demand came to be raised on establishment by issuance of notice dated 17.07.2001 Ex.A-3.
9. Prior to it, an order came to be passed under Section 45-A of the ESI Act by determining the total demand at Rs.2,95,274/- contending that it covers contribution for the period October 1997 to March 2000 vide order dated 26.11.2001. Aggrieved by the said order an application was filed under Section 75 of the ESI Act before ESI Court, which came to be numbered as ESI No.6/2003. Said application came to be allowed in part by order dated 29.10.2005 holding that Corporation is entitled to claim contribution for the period 02.10.1997 to 16.06.1999 only and claim regarding stipend paid to the apprentice held was not justified.
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10. Being aggrieved by this order Corporation filed an appeal before this Court in MFA No.1040/2006. After considering the contentions of respective parties, this Court allowed the appeal and set aside the order of remand and remitted the matter back to the Industrial Tribunal for adjudication afresh. In the light of observations made by Co-ordinate Bench of this Court while remanding the matter, it requires to be extracted. Hence, same is extracted herein below:
"5. With regard to the next contention urged by the learned counsel for the appellant regarding closure of the factory, it is seen that the court below has proceeded on the basis of the admission made by the very Inspector who claims to have inspected the premises. He has admitted in his evidence that the manufacturing activities were closed on 16.06.1969. Based on this admission, the court below has proceeded to hold that the manufacturing activities were closed from 16.06.1999 and therefore, the question of demanding contribution to the 12 remaining period did not arise. However, the counsel for the appellant referring to the inspection report of the Inspector contends that for the period subsequent to 16.6.1999 contribution is stated to have been deducted.
6. The counsel for the appellant rightly contends that if the court below had properly considered the inspection report marked as Ex.R-1 along with the oral evidence led by the Inspector, it would have come to a just and reasonable conclusion and failure to do so has vitiated the order. There is considerable force in this submission as the court below has not referred to the Report of the Inspector. Therefore, as the court below has not examined the inspection report wherein it is shown that certain amount was deducted towards contribution even after the date of alleged closure on 16.6.1999, without expressing any opinion at this stage on the matter, I consider it appropriate to remand the matter back for fresh consideration in accordance with law. This process is all the more necessary because the court below has placed reliance on the two decisions which 13 are not applicable to the facts of the case and are subsequently distinguished by the division bench in MFA No.2910/01. Hence, I pass the following order:
ORDER The appeal is allowed. The order under challenge is set aside. The matter is remanded back for fresh consideration in accordance with law and in the light of the observation made above. No costs.
Sd/-
Judge"
11. On such order of remand being made, establishment tendered further evidence by examining one of its employee namely Labour Officer - Sri N.S.Raju on 14.03.2007. There was no cross-examination of this witness by corporation. Subsequently, Corporation filed a memo on 13.05.2007 adopting the evidence recorded in application 5/2003 as its evidence in the instant case. Thereafter Industrial Tribunal re-examined the 14 matter and allowed the application by holding that Corporation is entitled to claim ESI contribution for the period October 1997 to 16.06.1999 only and claim regarding stipend paid by applicant to apprentice was held to be not justified. In this background and in the light of contentions raised by learned advocates as recorded hereinabove and case laws relied upon by them, substantial questions of law formulated hereinabove is being adjudicated and answered.
12. In order to answer these two substantial questions of law, it would be necessary to note the relevant provisions which would have bearing namely Sections 1(6), 2(9) and 2(22) of the ESI Act. They are extracted hereinbelow:
"1. Short title, extent, commencement and application.--(1) This Act may be called the Employees' State Insurance Act, 1948. (2) xxxxxxxxxxxxx (3) xxxxxxxxxxxxx (4) xxxxxxxxxxxxx (5) xxxxxxxxxxxxx [(6) A factory or an establishment to which this Act applies shall continue to be 15 governed by this Act notwithstanding that the number of persons employed therein at any time falls below the limit specified by or under this Act or the manufacturing process therein ceases to be carried on with the aid of power.]
2. Definitions.--In this Act, unless there is anything repugnant in the subject or context,--
(1) xxxxxxxxxxxxxx (2) xxxxxxxxxxxxxx (3) xxxxxxxxxxxxxx (4) xxxxxxxxxxxxxx (5) xxxxxxxxxxxxxx (6) xxxxxxxxxxxxxx (7) xxxxxxxxxxxxxx (8) xxxxxxxxxxxxxx (9) "employee" means any person employed for wages in or in connection with the work of a factory or establishment to which this Act applies and -
(i) xxxxxxxxxxxxxx
(ii) xxxxxxxxxxxxx
(iii) xxxxxxxxxxxx [and includes any person employed for wages on any work connected with the administration of the factory or establishment or any part, department or branch thereof or with the purchase of raw materials for, or the distribution 16 or sale of the products of, the factory or establishment] [or any person engaged as apprentice, not being an apprentice engaged under the Apprentices Act, 1961 (52 of 1961), [or under the standing orders of the establishment], but does not include]--
(10) xxxxxxxxxxxxxx (11) xxxxxxxxxxxxxx (12) xxxxxxxxxxxxxx (13) xxxxxxxxxxxxxx (14) xxxxxxxxxxxxxx (15) xxxxxxxxxxxxxx (16) xxxxxxxxxxxxxx (17) xxxxxxxxxxxxxx (18) xxxxxxxxxxxxxx (19) xxxxxxxxxxxxxx (20) xxxxxxxxxxxxxx (21) xxxxxxxxxxxxxx (22) "wages" means all remuneration paid or payable in cash to an employee, if the terms of the contract of employment, express or implied, were fulfilled and includes [any payment to an employee in respect of any period of authorized leave, lock-out, strike which is not illegal or lay-off and] other additional remuneration, if any, [paid at 17 intervals not exceeding two months], but does not include--
(a) any contribution paid by the employer to any pension fund or provident fund, or under this Act;
(b) any travelling allowance or the value of any travelling concession;
(c) any sum paid to the person employed to defray special expenses entailed on him by the nature of his employment; or
(d) any gratuity payable on discharge;"
RE. SUBSTANTIAL QUESTION OF LAW NO.1:
13. A reading of Sub-Section (6) of Section 1 would clearly indicate that when an establishment is covered under the Act it shall continue to be covered under the Act notwithstanding with the number of employees employed in an establishment at any time falls below the limit specified by or under the Act or the manufacturing process therein ceased to be carried on with the aid of power. Whether mere closure of an establishment would amount to establishment falling outside the purview of the Act or on account of manufacturing process or ceasing of manufacturing 18 process with the aid of power would amount to closure or the very order of closure issued by `appropriate Government' itself would suffice to arrive at a conclusion that establishment would be outside the purview of the Act, requires to be examined and answered in this appeal.
14. In the instant case there is no dispute that under Section 25-O of the Industrial Disputes Act `appropriate Government' passed an order of closure of respondent-establishment. Same did not reach finality inasmuch as workers trade union challenged the said order by filing a review petition before the appropriate Government and said review petition came to be dismissed on 14.06.1999, which also came to be affirmed by this court.
15. Contention of ESI - Corporation is that on account of Inspector having inspected the respondent factory on 17/18.05.2001 and having scrutinised the Registers made available for inspection and having 19 noticed that even subsequent to the period of closure there was activity carried on by the covered establishment and expenses expended by the establishment have been booked in the accounts maintained by the establishment, was itself sufficient to establish or indicate that it continued to be a covered establishment or manufacturing process having ceased would not take away the establishment from the purview of the Act.
16. At this juncture, it would be relevant to note the admissions of witness examined on behalf of Corporation as well as establishment namely Sri.Basaravaraj and Sri.N.S.Raju, respectively. Their admissions reads as under:
Sri Basaravaraju examination-in-chief dated 13.07.2005:
"In may 2001, I was working xxxxxxx with me. I checked attendance registers, wages registers, Form-7 registers, Form-6 returns, and also challans, payment of ESI contributions. I also verified the ledgers, vouchers. As on the date of my inspection, 20 the manufacturing activities had been closed."
Sri N.S.Raju cross-examination dated 15.06.2005:
"4. It is not true to suggest xxxxxxxxx 18th May 2001. It is true that the Government sanctioned permission to close the establishment by order dated 26.02.1999. It is true to say that the factory was functioning upto February 1999."
17. These admissions would clearly indicate that respondent-establishment in question had ceased functioning from the date as indicated in the closure order dated 31.03.1999 or in the alternate from the date review petition is filed by the trade union came to be dismissed on 14.06.1999. There cannot be any iota of doubt on this point.
18. The next point that would arise would be as to whether this would suffice or respondent- establishment continued to be a covered establishment by virtue of deeming provision under Section 6(1) of the Act. To buttress her arguments Smt Geetha Devi, 21 learned counsel appearing for ESI-Corporation has contended that Ex.R-1, inspection report dated 17/18.05.2001 would indicate various expenses having been booked in the account books of establishment indicating that activities have further continued and merely because of manufacturing activity with the aid of power having been stopped by itself would not absolve the establishment of being construed as falling outside the purview of Act. When said contention is examined with reference to records it would clearly indicate that an inspection was conducted by the Inspector of ESI- Corporation and it was noticed by him that following amounts were spent and booked in the registers and account books for the period October 1997 to March 2000 by the respondent - establishment. Same is extracted herein below in the tabular column for the purpose of convenience:
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Sl. Nature of omitted Period Amount Contribution No. wages 1 Loading and 10/97-9/98 19,173-75 unloading charges 10/98-3/00 8,202-75 booked in cotton expenses 2 Cleaning charges 10/97-9/98 150-00 10/97-9/98 63,336-00 3 Production/ 10/98-3/00 3,07,079-00 Attendance bonus 10/97-9/98 12,40,242-00 4 Stipend 10/98-3/00 8,41,340-97 10/97-9/98 22,358-00 5 Loading and 10/98-3/00 23,244-00 Unloading charges booked in Freight Charges 6 Building repair 10/97-9/98 2,06,823-00 10/98-3/00 1,08,738-00 7 Machinery Repair 10/97-9/98 3,67,154-40 10/98-3/00 87,718-18 8 Electrical Repair 10/97-9/98 50,414-18 10/98-3/00 21,375-00 9 Generator Expenses 10/97-9/98 37,558-00 10/98-3/00 38,903-00 10 Garden Expenses 10/97-9/98 54,820-00 10/98-3/00 1,87,173-00 11 Welfare Expenses -do- 8,809-00 12 Repair to others -do- 1,269-00 13 Waste Cotton Sales -do- 8,290-00 Expenses 14 Waste Scrap Sales -do- 1,292-00 Expenses Total 37,05,466-49 Contribution Rs.2,40,856/-
19. There is no dispute that these amounts having been reflected in the book of accounts of respondent-establishment. It is pertinent to note at this juncture that respondent - establishment has also 23 produced the balance sheet before the industrial Tribunal as well as profit and loss account for the year ending 30.06.2002 and it came to be marked as Ex.A-9. Thus, inspection report Ex.R-1 will have to be read along with the accounts of respondent - establishment which has been relied upon by the respondent- establishment itself. In the registers produced before the authorities namely the Inspector at the time of inspection it has been indicated that a sum of Rs.8,41,340-97 and Rs.12,40,242-00 having been paid for the year October 1998 to March 2000 and October 1997 to September 1998 towards stipend. The balance sheet namely profit and loss account Ex.P-9 would indicate that as on year ending 30.06.2002 (18 months) under the column schedule 'M' to words "employees remuneration and their benefits", it has been indicated that a sum of Rs.1,20,28,098-00 has been booked as expenses towards "salaries, wages and bonus". 24
20. The demand raised by the Corporation would indicate that expenses booked for the above period related to loading and unloading charges, cleaning charges, building repair, machinery repair, electrical generator repair, etc., has been taken into consideration for purposes of raising the demand. Though it is the contention of Sri Ramachandran, learned counsel appearing for respondent-establishment that to keep the establishment in a saleable condition minimum skeletal staffs had to be employed and as such expenses had to be incurred and that by itself cannot be construed as establishment having carried on any activity either manufacturing or commercial or trading activity. Said contention requires to be considered with utmost circumspection for reasons more than one. Firstly profit and loss account dated 30.06.2002 for the year ending 31.03.2001 would indicate that respondent- establishment itself has booked expenses for having paid the salaries, wages and bonus upto 2001 and in the registers maintained by establishment in natural 25 course, which was produced for inspection before the authorities would themselves indicate that establishment has classified the payment under different heads and depicting same as expenses for having incurred it has been depicted as such and as such it cannot contend those expenses have not been incurred or there was no activity in the establishment after closure. Secondly, the list appended to Ex.P-3 would indicate that for the period October to December 1999 number of employees employed in respondent- establishment were 17, 34, 14 persons. Again in the months of July to December 2000 number of employees employed by it were 90, 74, 95, 99, 91 and 73. As such, it cannot be construed that there was only minimum skeletal staff and this material evidence available on record has not been construed in proper perspective by the Industrial Tribunal and as such version put forward by establishment cannot be accepted. Thirdly, in view of deeming provision under sub-section (6) of Section 1 the mere cessation or stoppage of the manufacturing 26 process either with the aid of power or without the aid of power would not by itself sufficient to conclude that such establishment would be outside the purview of the Act and it would not come to the rescue of the establishment to contend that it has ceased to operate or continue with its activity. As such provisions of the Act is inapplicable. ESI Act being a social piece of legislation, the avowed object with which it has come into force will have to be looked into or taken into consideration. In the light of object of the Act it has to be necessarily held that in the facts and circumstances of the case it cannot be construed or held that the activity of respondent-establishment had been stopped or by virtue of closure order issued by `appropriate Government' to respondent - establishment it had ceased to operate or stopped its activity so as to claim immunity from the Act. Hence, substantial question of law No.1 is answered in the negative and against the respondent - establishment.
27RE: POINT NO.2:
21. Section 2(9) of the Act would clearly indicate as to who are the persons who are construed to be a employee of an establishment. Said definition is exhaustive and an apprentice engaged by an establishment not being an apprentice engaged under the Apprentices Act, 1961 or an apprentice appointed under the standing orders of an establishment would not be an `Employee' as defined under the ESI Act. In other words apprentice who have been employed as per registered industrial standards of establishment would not an employee coming within the purview of sub- section (9) of Section 2 of ESI Act and as such stipend paid to them would not form part of wages. There cannot be any dispute with regard to this position. The authorities of corporation have conducted an inspection of the establishment on 17/18.05.2001 and a report came to be submitted which was marked as Exhibit R- 1 before ESI Court. To determine the ESI contribution 28 at the rate of 6.5% certain amounts or expenses incurred and booked under the respective heads in the books of account of respondent-establishment have been taken into consideration by ESI authorities for raising demand. Tabular column already extracted herein above would indicate the amount booked in the various ledgers maintained by establishment. One such amount which was construed as wages and a demand for ESI contribution raised thereon by corporation relates to stipendiary amount reflected in the books of accounts of the establishment for the period October 1998 to March 2000 and October 1997 to September 1998 which was in a sum of `8,41,340.97ps and `12,40,242.80ps.
22. It has been the specific contention of establishment that these amounts are paid as stipend to apprentice or trainees and hence they do not come under the purview of being construed as wages having been paid to the employees nor these apprentices or 29 trainees would fall within the definition of `employee' as defined under section 2(9) of ESI Act. This plea which was raised by covered establishment before the ESI Court found in its favour. ESI Court has noticed at paragraph 11 of its order that respondent-establishment in question had invited applications from the intending applicants for taking them for training and as such it had appointed trainees. It is the contention of Sri.Ramachandran that ESI Authorities are not disputing that there is a Certified Industrial Standing Orders of the covered establishment and when this fact is not disputed by the authorities and the same having been accepted by them for earlier period they cannot now turn around and contend that such amounts paid by establishment towards stipendiary to apprentices or trainees is to be construed as wages and as such demand for ESI contribution cannot be raised by corporation. ESI Court at paragraph 12 has taken note of the evidence tendered on behalf of establishment and arrived at a conclusion that certified standing orders of 30 establishment provides for appointment of trainees and said evidence has not been challenged by way of cross examination. As already noticed herein above certified standing orders of the covered establishment would definitely take away the right of authorities to bring apprentices or trainees within the definition of `employee' as defined under section 2(29) of the Act. There cannot be any dispute with regard to said proposition. On the other hand it is the specific case of the authorities that it was incumbent upon the covered establishment to demonstrate that date on which these trainees came to be appointed, manner in which stipend was paid to them by producing evidence in this regard and additional information furnished by the inspector who has visited the covered establishment on 17/18.05.2001 which was available on record would clearly indicate that respondent-establishment did not produce any records in respect of trainees/ apprentice and the amount paid to them towards stipend and this material evidence had been overlooked. It is not the 31 case of establishment that such records were produced before the authorities to establish for the said period i.e., October 1998 to March 2000 and October 1997 to September 1998 that stipend to trainees were produced. It is also not the case of respondent-establishment that records were produced to establish or demonstrate that apprentices or trainees were paid stipend in accordance with the certified standing orders of establishment and this was taken note of by the authorities. On the other hand it is specific case of the authorities that establishment did not produce any records in this regard. As already noticed herein above mere assertion by the establishment that it had paid its apprentices or trainees stipend would not by itself absolve of its liabilities. It is because of this precise reason authorities would be required to pierce the corporate veil to ascertain the factual matrix. Thus, burden has been cast on the establishment to demonstrate before the authorities by producing cogent material about having appointed trainees, period for which they worked 32 as trainees and stipend having been paid to such trainees by producing bank statements or vouchers or any other material supporting such contention. In the absence of such material it cannot be construed that mere assertion by the establishment that the trainees were paid stipend is to be accepted by the corporation. Respondent-establishment having paid stipend to its trainees so as to exclude the said amount from the purview of wages and consequential ESI contribution payable by such establishment.
23. It is also intriguing to note at this juncture itself that according to respondent-establishment itself it had closed its manufacturing activity or trading activity or commercial activity with effect from 26.02.1999 (Exhibit A-1) or 14.06.1999 (Exhibit A-2). If it is so, as to how the apprentices or trainees were retained and for what purpose and how they were paid stipend thereafterwards upto March 2000 is a moot question which has remained unanswered. Though 33 Sri.Ramachandran made a valiant attempt to contend that it is the composite accounts relating to two(2) companies which was looked into by the inspector who visited the factory, it cannot be accepted since there is no material available on record to arrive at such conclusion. On the other hand profit and loss account of the covered establishment for the period ending 30.06.2002 would clearly indicate under the heading "Employees Remuneration and other Benefits", Schedule H that salaries, wages and bonus have been paid to the employees upto the said period. Thus, it was for the covered establishment to demonstrate that factually it was stipend which was paid for a anterior period and not for period after the order of closure. In that view of the matter it cannot be construed that amounts reflected in the books of accounts as stipend should not be construed as wages. Nothing prevented the establishment to produce material to show and establish about the date on which the trainees were appointed, date till which they worked as trainees, proof 34 of payment of stipend if any, like vouchers, bank statement accounts etc., and the resolution of the establishment -company if any passed to show as to approval of the board of Directors approving the appointment of trainees that came to be passed by for the period in question. No evidence whatsoever was produced that expenses booked under the head "stipend" was actually stipend and it related to payment of amount prior to closure and paid after the closure. In the absence of any such material being tendered I am of the considered view that authorities were justified in coming to a conclusion that these amounts are to be construed as wages for the purposes of reckoning or calculating ESI contribution payable by the covered establishment. Mere assertion in its oral evidence by the witnesses of establishment about having paid the stipend to its trainees or apprentices without producing any documentary evidence in this regard would not suffice and ESI court was not justified in arriving at a conclusion that stipend paid to trainees or apprentices 35 by establishment by itself would be sufficient to conclude that it does not form part of wages. In the absence of factual evidence being tendered in this regard order passed by ESI authorities under section 45A dated 26.11.2001 cannot be construed as one suffering from any error or infirmity which called for interference at the hands of ESI court. In that view of the matter Point No.2 deserves to be answered in the negative i.e., against the covered establishment and in favour of appellant -ESI Corporation.
For the reasons aforestated following order is passed:
ORDER
1. Appeal is hereby allowed.
2. Order passed by ESI Court in ESI application No.6/2003 dated 20.03.2008 is hereby set aside and order passed by the authorities under section 45A of ESI Act dated 26.11.2001 is hereby affirmed.36
3. No order as to costs.
Sd/-
JUDGE DR/SBN