Telangana High Court
Kalwakurthy Municipality vs The Secretary To Government on 5 June, 2024
THE HON'BLE SRI JUSTICE C. V. BHASKAR REDDY
WRIT PETITION No.13178 of 2023
ORDER:
This Writ Petition is filed praying this Court to set aside the Demand Notice in Ref No.52000460730000908/ CP/540172, dated 13-03-2023 issued by the 4th respondent for recovery of an amount of Rs.55,74,539/- (Rupees fifty five lakhs Seventy four thousand Five hundred and thirty nine only) i.e., a sum of Rs.40,66,871/- towards contribution plus Rs.15,07,668/- towards interest @ 12 Percent per annum and @ Rs.1337-05 per day from 06-06-2023 to the date of recovery being it illegal arbitrary and without verification of records and consequently direct the respondents 2 to 4 not to demand further payments from the petitioner herein towards ESI contributions for the outsourcing employees engaged by the petitioner through the 5th respondent Agency M/s.Aditya Enterprises Plot No.103 Sivaganga Colony LB Nagar Rangareddy District.
2. The case of the petitioner Municipality is that it has engaged 110 persons in all categories on outsourcing basis 2 and used to remit ESI contribution amount directly to respondent No.2 authority till 2016. Thereafter from 2017 onwards respondent No.5 used to receive the amount from the petitioner along with consolidated salaries and remit the amounts to respondent No.2 authority. The petitioner municipality has also increased the number of persons and hired more persons on outsourcing through respondent No.5 agency. It is the further case of petitioner that now 145 persons are working in the petitioner Municipality on outsourcing through respondent No.5 agency and is paying the consolidated salary. Respondent No.5 agency is paying respondent No.2 authority every month towards ESI contribution for the persons hired by the petitioner Municipality.
3. While the things stood thus, respondent No.4 has issued Demand Notice in Ref No.52000460730000908/ CP/540172, dated 13-03-2023 for recovery of an amount of Rs.55,74, 539/- stating that petitioner Municipality is liable to pay the said amount towards contribution of ESI by 3 exercising the power under Section 45(C) and 45(I) of the ESI Act (for short, 'the Act').
4. The grievance of the petitioner is that prior to issuance of said demand notice dated 13-03-2023 the petitioner Municipality has not received any notice and the petitioner Municipality was only made as a party to the proceedings dated 08-03-2023 issued by respondent No.3 and as such straight away issuance of impugned demand notice is illegal and arbitrary.
5. Sri G. Venkateshwarlu, learned Standing counsel for ESIC vehemently contended that the respondents have issued notice while conducting enquiry under Section 45-A of the Act. Even after receipt of said notice also petitioner Municipality has not participated in the enquiry or produced any records. Therefore, there is no illegality in issuing the demand notice for realization of amounts towards ESI contribution. He further contended that against the demand notice dated 13-03-2023 the petitioner is having alternative remedy of filing statutory 4 appeal under Section 45AA of the Act, therefore, the present Writ Petition filed by the petitioner herein is not maintainable and is liable to be dismissed in limini.
6. Learned counsel appearing for the petitioner has vehemently contended that only after issuance of demand notice dated 13-03-2023 the petitioner Municipality came to know about the same and if sufficient time is provided they will avail alternate remedy of appeal under Section 45AA of the Act. He also placed reliance on a decision reported in Ashok Layland Limited v. Deputy Tahsildar 1, wherein by placing reliance on the judgment of Hon'ble Apex Court in Employees' State Insurance Corporation v. F. Fibre Bangalore (Private) Limited 2 it is held in paragraph No.5 as under :
"The Full Bench of the High Court has held that in a case where the order under Section 45-A becomes 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 1 2001 (4) ALD 96 (DB) 2 1997 SCC (L&S) 190 5 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. Otherwise, the Act would become unworkable and defeat the object and purpose of the Act."
7. In view of the aforesaid submissions, this Writ Petition is disposed of relegating the petitioner Municipality to avail alternative remedy of appeal available under the ESI Act within 45 days from the date of receipt of a copy of this order. Till such time, the respondents are directed not to take any coercive action pursuant to the impugned demand 6 notice, dated 13-03-2023. There shall be no order as to costs.
8. As a sequel thereto, miscellaneous petitions, if any, pending shall stand closed.
___________________________ C.V. BHASKAR REDDY, J June 05, 2024 PN