E.S.I. Corporation v. M/s Lakshmi Implements

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** **PRESENT :** **THE HONOURABLE MR. JUSTICE M.N.KRISHNAN** **TUESDAY, THE 7TH SEPTEMBER 2010 / 16TH BHADRA 1932** **Ins.APP.No. 41 of 2009(B)** **------------------------** **IC.2/2007 of ESI COURT, PALAKKAD** **....................** **APPELLANT/OPPOSITE PARTY** **--------------------------------------------** **E.S.I. CORPORATION, (REP. BY ITS REGIONAL DIRECTOR) NORTH SWARAJ ROUND, THRISSUR - 20.** **BY ADV. SRI.T.V.AJAYAKUMAR** **RESPONDENT(S): APPLICANT** **----------------------------------** **M/S.LAKSHMI IMPLEMENTS (REPRESENTED BY ITS MANAGING PARTNER SHRI.T.P.RAJAN), INDUSTRIAL ESTATE, SHORNUR - 679 122.** **ADV. SRI.P.RAMAKRISHNAN FOR R1 SMT.PREETHI RAMAKRISHNAN FOR R1** **THIS INSURANCE APPEALS HAVING BEEN FINALLY HEARD ON 07/09/2010, THE COURT ON THE SAME DAY PASSED THE FOLLOWING:** ## **M.N. KRISHNAN, J.** **= = = = = = = = = = = = = = INS.APPEAL NO. 41 OF 2009** **= = = = = = = = = = = = = = = Dated this the 7[th] day of September, 2010.** **==> picture [128 x 15] intentionally omitted <==** This appeal is preferred against the order of the Employees Insurance Court, Palakkad in I.C.2/07. The Corporation passed an order alleged to be made under S.45A of the E.S.I.Act whereby an amount of Rs.35,662/- has been determined as contribution of finishing charges paid for the period from 4/1999 to 3/2001. The contention of the applicant before the insurance Court was two fold namely that the action of the E.S.I.Corporation is squarely barred by limitation and that the demand of finishing charges is illegal and not proper for the reason that they contend for the position that they are not liable to pay finishing charges with respect to the work done by the black smith/karuvans. ## **INS.APPEAL NO. 41 OF 2009** -:2:- The E.I.Court after elaborate consideration found that S.45A is not attracted and since S.45A is not attracted provisions of S.77(1A)(b) will come into play and therefore as the demand is for the period prior to 5 years the claim is barred by limitation and therefore dismissed the application. It is against that decision the Insurance Corporation has come up in appeal. 2. The points of law that arise for determination are; (1) Whether the order is passed one under S.45A? (2) If it is so, whether the claim made by the Corporation is barred by limitation? (3) If the order is not passed u/s 45A but under other methodology, whether there will be any limitation? and ## **INS.APPEAL NO. 41 OF 2009** ## -:3:- (4) Regarding the contention of finishing charges. ## **Points 1 and 2:** 3. I am answering these together for the reason that if it is found that the order is passed under S.45A then by virtue of the authoritative pronouncement of the Hon'ble Supreme Court in **E.S.I. Corporation v. Santhakumar (2007 (1) KLT 133 (SC)** there will not be any limitation. Learned counsel for the Corporation had invited my attention to the order passed and specifically to the last sentence in the penultimate paragraph of the order passed by the E.S.I.Corporation wherein it is stated, “Whereas the Principal Employer has failed to pay the contributions and to submit the Return as required under law, I am ## **INS.APPEAL NO. 41 OF 2009** ## -:4:- left with no alternative but to determine the contributions in respect of the factory referred under the provisions of Section 45-A of the Act.” It was also stated in the order, “As the amount was finishing charges and no bifurcation of wage element was done by the employer, .........” 4. Now a reference to S.45A of the Employees' State Insurance Act is necessary. S.45A envisages two important ingredients namely, 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 Inspector or other official of the Corporation referred to in sub-section (2) of section 45 is prevented in any manner by the ## **INS.APPEAL NO. 41 OF 2009** -:5:- principal or immediate employer, the cause of action to proceed against u/s 45A will lie. 5. The Hon'be High Court of Karnataka in the decision reported in **Siddeshwar & Co. v. Employees' State Insurance Corporation (1997 (3) LLJ (Suppl) page 1127)** has made it clear that S.45A applies only in cases where either no returns or registers are maintained or furnished or inspector is prevented by employer from exercising his functions.” So there is a factual dispute with respect to these materials. Learned counsel for the appellant as well as the respondent had taken me through the documents produced in the case. It may require explanation and it is on evidence the matter has to be adjudicated. Therefore without the materials being explained or analyzed it is not proper for a Court to jump to a conclusion that ## **INS.APPEAL NO. 41 OF 2009** -:6:- S.45A is applicable or not applicable. Therefore I set aside the finding and direct the E.I.Court to permit the parties to produce materials and evidence to satisfy whether the action is initiated under S.45A of the E.S.I.Act. As stated by me earlier if it is initiated u/s 45A of the Act then there is an end for the reason by virtue of the decision referred to above there cannot be any limitation for the Employees Insurance Corporation to initiate action. But at the same time the Hon'ble Supreme Court in the said decision has also cautioned regarding the concept of reasonable time. The Hon'ble Supreme Court held that a reasonable period would depend upon the factual circumstances of the case concerned and it also held that, “There cannot be any empirical formula to determine that question. **INS.APPEAL NO. 41 OF 2009** -:7:- The Court/authority considering the question whether the period is reasonable or not has to take into account the surrounding circumstances and relevant factors to decide that question.” 6. So parties have to be permitted to let in evidence then decide regarding the question in the light of the pronouncement made by the Hon'ble Supreme Court in Santhakumar's case. 7. The next question is regarding the fact that if the order is not passed under S.45A but under some other provision, what will be the impact on the E.S.I.Corporation and what will be the impact of S.77 and whether there will be any limitation. Now when confronted with the situation the learned counsel for the E.S.I.Corporation had drawn my attention to a decision of the Hon'ble Supreme Court of India in **E.S.I.Corporation v. M/s Fibre Banglore Pvt.** ## **INS.APPEAL NO. 41 OF 2009** -:8:- **Ltd. (AIR 1997 S.C. 2441)** . This decision has also been referred to in Santhakumar's case. In the said decision the Hon'ble Supreme Court has considered an answer given by a Full Bench of the Karnataka High Court in a reference. The answer to the reference by the Karnataka High Court was, “Where, in cases to which provisions of Section 45A of the 'Act' are attracted, the Corporation by an order made in accordance with that section determines the amount of contributions payable and that claim is disputed by the employer, it would not be necessary for the Corporation to seek a resolution of that dispute before the Insurance Court. such a claim is recoverable as arrears of land revenue. If the employer disputes the claim it is for him to move ## **INS.APPEAL NO. 41 OF 2009** -:9:- the Insurance Court for relief. In other cases - other than cases where determination of the amount of contributions under Section 45A is made the Corporation, if its claim is disputed by the employer, should seek an adjudication of the dispute before the insurance Court, before enforcing recovery.” Or in other words in a case falling outside the purview of S.45A of the E.S.I.Act the Full Bench of the Karnataka High Court held that it was for the E.I.Court to get an adjudication when there is a dispute. 8. After elaborately considering the matter the Hon'ble Supreme Court set aside that order and in paragraph 5 of the said judgment held that, “The Full Bench of the high Court has held that in a case where the order under Section 45A becomes ## **INS.APPEAL NO. 41 OF 2009** -:10:- final, there is no need for the Corporation to seek adjudication before the Insurance Court. In all other cases, the Corporation is required to go to the Insurance Court, have it adjudicated and then make a demand. We are of the view that the Full Bench of the High Court is clearly in error to reach that conclusion. Though Section 75 of the Act does not envisage as to who has to approach the Insurance Court, by necessary implication when the employer denies the liability or applicability of the provisions of the Act or the quantum of the contribution to be deposited by the employer, it is for him to approach the Insurance Court and seek adjudication. It is not for the Corporation in each case whenever there is a dispute, to go to the Insurance Court and have the dispute adjudicated. ## **INS.APPEAL NO. 41 OF 2009** ## -:11:- Otherwise, the Act would become unworkable and defeat the object and purpose of the Act.” 9. In the light of these authoritative pronouncements by the Hon'ble Supreme Court of India coupled with the pronouncement of the Hon'ble Supreme Court in Santhakumar's case it is very clear that the question of limitation for the E.S.I.Corporation is not there unless it chooses to move the Court and in such cases the period is five years. When the E.S.I.Corporation is not under a statutory obligation to approach the Court and really the approach has to be made by the employer who is affected by the order by the E.I.Court, it is for him to approach the Court and then the question of limitation does not arise at all. Therefore I find if the order is not passed under S.45A also the question of limitation will not arise and the matter is to ## **INS.APPEAL NO. 41 OF 2009** **==> picture [28 x 9] intentionally omitted <==** be adjudicated. Underlying principle of this is that u/Ss. 39 and 40 of the E.S.I.Act it is a duty imperatively cast on the employer to pay contribution and a notice or an action is only a reminder and does not ipsofacto affect or by any other provisions of the law absolve liability of the owner from paying contribution which it is statutorily bound to pay on account of the fact being a social welfare legislation. Therefore there cannot be any limitation as well. 10. Lastly on merits. Unfortunately the merits has not been considered by the Court below and the question whether there will be an estoppel or otherwise in the light of the earlier non answering of the finishing charges etc. are all matters which can be considered by the E.I.Court. I leave open the entire contention on merits and permit the parties to ## **INS.APPEAL NO. 41 OF 2009** -:13:- adduce evidence in support of the same. 11. Therefore the appeal is allowed and the order passed by the E.I.Court is set aside and the E.I.Court is directed to consider the question in the light of the observations made in the previous paragraphs of the judgment and permit the parties to adduce both documentary as well as oral evidence in support of their respective contentions and then dispose of the matter in accordance with law. The E.I.Court is directed to fix a date of appearance and inform the parties regarding the same for their further participation in the matter. The Ins.Appeal is disposed of accordingly. ## **M.N. KRISHNAN, JUDGE.** ul/-