Travancore Medical College & Hospital (Unit of Quilon Medical Trust) v. Employees' State Insurance Corporation

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT:** ## **THE HONOURABLE MR. JUSTICE A.K.JAYASANKARAN NAMBIAR** # **TUESDAY, THE 1ST DAY OF AUGUST 2017/10TH SRAVANA, 1939** ## **WP(C).No. 29782 of 2013 (W)** **-------------------------------------------** **PETITIONER(S) :** **--------------------------** **TRAVANCORE MEDICAL COLLEGE & HOSPITAL, HOSPITAL PROJECT OF QUILON MEDICAL TRUST, UMAYANALLOOR P.O., KOLLAM-691 589, REPRESENTED BY ITS MANAGER-LEGAL MR. NIZAMUDDIN.A.** **BY ADVS. SRI.T.M.RAMAN KARTHA SRI.JOSEPH RONY JOSE SMT.O.A.NURIYA** **RESPONDENT(S) :** **----------------------------** **1. EMPLOYEES' STATE INSURANCE CORPORATION, PANCHDEEP BHAVAN, COMRADE INDERJEET GUPTA (CIG) MARG, NEW DELHI-110 002, REPRESENTED BY ITS DIRECTOR GENERAL.** **2. DEPUTY DIRECTOR, EMPLOYEES STATE INSURANCE CORPORATION, SUB REGIONAL OFFICE, KOLLAM, ST. THOMAS SHOPPING COMPLEX, CROSS JUNCTION, KOLLAM-691 001.** **BY ADV. SRI. SANDESH RAJA, S.C BY ADV. SRI.P.SANKARANKUTTY NAIR, S.C** **THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 01-08-2017, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** Msd. ## **WP(C).No. 29782 of 2013 (W)** ## **-------------------------------------------** ## **APPENDIX** ## **PETITIONER'S EXHIBITS:** - **P1 A TRUE COPY OF THE LETTER DATED 18-05-2012 OF THE 2ND RESPONDENT.** - **P2 A TRUE COPY OF THE AGREEMENT DATED 09-05-2007.** - **P3 A TRUE COPY OF THE PART BILL CONTAINING THE TERMS OF CONTRACT DATED 11-10-2008.** - **P4 A TRUE COPY OF THE LETTER ENCLOSING THE DETAILED SPECIFICATION SCHEDULE AND PRICE SCHEDULE DATED 15-10-2008.** - **P5 A TRUE COPY OF THE LETTER ENCLOSING THE SPECIFICATIONS FOR DUCTABLE SPLIT AIR CONDITIONING SYSTEM DATED 30-10-2009.** - **P6 A TRUE COPY OF THE AGREEMENT DATED 16-09-2008.** - **P7 A TRUE COPY OF THE AGREEMENT DATED 14-05-2008.** - **P8 A TRUE COPY OF THE NOTICE DATED 21-05-2012.** - **P9 A TRUE COPY OF THE STATEMENT FILED BY THE HOSPITAL MANAGEMENT BEFORE THE 2ND RESPONDENT ON 25-06-2012.** - **P10 A TRUE COPY OF THE STATEMENT FILED BY THE HOSPITAL MANAGEMENT BEFORE THE 2ND RESPONDENT ON 27-07-2012.** - **P11 A TRUE COPY OF THE STATEMENT FILED BY THE HOSPITAL MANAGEMENT BEFORE THE 2ND RESPONDENT ON 23-08-2012.** - **P12 A TRUE COPY OF THE COVERING LETTER DATED 15-10-2012.** - **P13 A TRUE COPY OF THE ORDER DATED 02-09-2012 WITH POSTAL ENDORSEMENT DATED 08-10-2013 AND 09-10-2013.** ## **RESPONDENT(S)' EXHIBITS :** **NIL** **//TRUE COPY//** **P.S.TO JUDGE.** Msd. ## **A.K.JAYASANKARAN NAMBIAR, J.** **............................................................. W.P.(C).No.29782 Of 2013 -(W) ............................................................. Dated this the 1[st] day of August, 2017** ## **J U D G M E N T** The petitioner, which is a Medical College is stated to be a unit of the Quilon Medical Trust. In the writ petition, the petitioner is aggrieved by Ext.P13 order passed by the 2[nd] respondent under Section 45A of the Employees' State Insurance Act (hereinafter referred to as 'the ESI Act'), 1948. The facts in the writ petition would indicate that the petitioner hospital had undertaken construction works at the hospital, in connection with which, it had entrusted works to various contractors. As per the contracts entered into between the petitioner and the various contractors, produced in the writ petition as Exts.P2 to P7, the contractors were obliged to comply with the statutory formalities regarding payment of dues to workers employed by them, under the various labour enactments including the ESI Act. When, pursuant to the completion of the construction work, the petitioner was found not to have made the requisite contribution during the -2- ## **W.P.(C).No.29782 Of 2013 -(W)** relevant contribution periods under the ESI Act, Ext.P8 demand notice was served on the petitioner, calling upon it to effect the payment of the required contribution in respect of wages paid to workers for the construction work that was undertaken on behalf of the petitioner. The contribution was demanded for the period from 01.04.2008 to 31.03.2011 and was quantified at Rs.1,32,86,513/-. On receipt of Ext.P8 demand notice, the petitioner preferred Exts.P9 to P12 replies, along with connected documents, pointing out that it did not have the requisite details with regard to the workers employed by the contractor, and the payment of wages effected by the contractors to the said workers, and requesting the 2[nd] respondent to confirm the demand against the petitioner only in respect of the wages paid by the petitioner and by excluding the contribution in respect of the wages paid by the contractors. The request of the petitioner was not considered favourably by the 2[nd] respondent, who proceeded to pass Ext.P13 order confirming the demand to an extent of Rs.24,16,669/- on the petitioner. In the writ petition, Ext.P13 order of the 2[nd] respondent is impugned primarily on the contention that, inasmuch as a substantial portion of the construction work was done through -3- ## **W.P.(C).No.29782 Of 2013 -(W)** contractors, the 2[nd] respondent ought to have bifurcated the dues fastened on the petitioner, between dues that were attributable to the petitioner in respect of workers directly employed by the petitioner, and dues attributable to the contractors for workers employed by the contractors. Reliance is placed by counsel for the petitioner on the decision of the Supreme Court in **Bharat Heavy Electricals Ltd. v. Employees State Insurance Corporation [2008 (2) KLT Suppl. 1226 (SC)]** in support of the said contention. 2. A counter affidavit has been filed by the respondents, wherein Ext.P13 order is sought to be justified for the reasons stated therein. In particular, it is pointed out that, on a consideration of the reply, as also the documents produced by the petitioner in response to Ext.P8 notice, the 2[nd] respondent deducted the amounts attributable towards material expenses, and adopted only 25% of the balance amount towards the omitted wages portion, and thereafter, determined the contribution that was required of the petitioner, on the said wages portion. It is stated that, in the absence of any other documents produced by -4- ## **W.P.(C).No.29782 Of 2013 -(W)** the petitioner to substantiate its contention that the payment towards wages was in an amount, less than what was adopted based on the petitioner's accounts, the assessment done by the 2[nd] respondent has to be taken as legal and proper. It is further pointed out that, as per the provisions of Section 39, 40 and 41 of the ESI Act, the petitioner had to pay the contribution to the respondent Corporation at first instance, and thereafter, could recover any contribution paid by him on behalf of the immediate employers/contractors, from the said persons. 3. I have heard the learned counsel appearing for the petitioner and also the learned Standing counsel appearing for the respondent Corporation. 4. On a consideration of the facts and circumstances of the case as also the submissions made across the Bar, I find that, as per the Scheme of the ESI Act, the liability to pay contribution in respect of employees, who have been employed by the employer for specified works, is primarily on the principal employer, who is obliged to pay the contributions at first instance, and thereafter, -5- ## **W.P.(C).No.29782 Of 2013 -(W)** seek a recovery of any proportionate contribution from the immediate employer engaged by him, under whom workers were employed for the purposes of the work undertaken on behalf of the principal employer. The decision relied upon by the petitioner is one which mandates that, in an adjudication proceedings under Section 45 A, in the event of there being a dispute with regard to the applicability of the Act to the establishment of an immediate employer/contractor, then it would be incumbent upon the adjudicating authority under Section 45A to issue a notice to the said immediate employer/contractor and determine the applicability of the Act to the said employer/contractor before proceeding to determine the liability of the principal employer under the Act. In the instant case, I note from the pleadings before me that, it was never the case of the petitioner that, the establishment where the work was carried on through the contractor, would not come under the coverage of the Act, either on account of the number of persons engaged by the contractors or otherwise, and hence there was no necessity for the adjudicating authority to determine, separately, the liability of the petitioner in his capacity as the principal employer, and the -6- ## **W.P.(C).No.29782 Of 2013 -(W)** liability of the contractors in their capacity as immediate employers. Inasmuch as there was no dispute with regard to coverage under the Act, both in respect of the petitioner as also the contractors, the 2[nd] respondent cannot be faulted for having relied upon the figurers furnished by the petitioner, showing the payments made to the contractor, for the purposes of deriving therefrom the component of wages paid by the contractors to their employees, and determining the contribution that was due from the petitioner and the contractor under the ESI Act. Ext.P13 order of the 2[nd] respondent does not, in my view, suffer from any jurisdictional error, nor is it vitiated by a non-compliance with the rules of natural justice, so as to warrant an interference with the same in these proceedings under Article 226 of the Constitution of India. The writ petition in its challenge against the said order, therefore, fails and is accordingly dismissed. Taking note of the apprehension of the learned counsel for the petitioner that Ext.P13 order would prevent the petitioner from claiming proportional reimbursement of the amounts paid by him to the respondent Corporation, pursuant to Ext.P13 order, from -7- ## **W.P.(C).No.29782 Of 2013 -(W)** the contractors in question, I make it clear that in the light of the statutory scheme envisaged in Sections 39, 40 and 41 of the ESI Act, 1948, read with the specific clauses in the contracts entered into between the petitioner and the various contractors, it would be open to the petitioner to seek a recovery in respect of such amounts, paid by the petitioner pursuant to Ext.P13 order, as are attributable to dues owing from the contractors, through appropriate proceedings in accordance with law. The writ petition is disposed as above. Sd/- **A.K.JAYASANKARAN NAMBIAR JUDGE** mns/01.08.17