M/S Allahabad Canning Company vs The Regional Director E.S.I.C.& ...
2013 Latest Caselaw 5238 ALL

HIGH COURT OF JUDICATURE AT ALLAHABAD
 
 


 
						JUDGMENT RESERVED ON  16.7.2013
 
						JUDGMENT DELIVERED ON 29.8.2013
 

 

 
Special Appeal No.472 of 1998
 
M/s Allahabad Canning Company 
 
		Vs.
 
The Regional Director, ESIC & others
 
	-----------------------  
 

 

 
Hon'ble Sunil Ambwani,J.

Hon'ble Surya Prakash Kesarwani,J.

(Delivered by Hon'ble Surya Prakash Kesarwani,J.)

1. This special appeal has been filed by the appellant challenging the judgment dated 15.4.1998 passed in Civil Misc. Writ Petition No.11553 of 1987 (M/s Allahabad Canning Company v. The Regional Director, ESI & others ). In the writ petition, the petitioner has prayed for a writ, order or direction in the nature of certiorari to quash the notice dated 2.4.1987 issued by the Regional Director, Employees Insurance Corporation, respondent no.1 to the Collector, Allahabad for recovery of contribution under section 5 of the Revenue Recovery Act, as arrears of land revenue and the notice dated 18.9.1986 issued by respondent no.1.

2. After exchange of the counter and rejoinder affidavits, the writ petition was heard and dismissed by the learned Single Judge by impugned judgment dated 15.4.1998.

3. We have heard Sri Madhur Prakash, learned counsel for the appellant and Sri P.K. Srivastava, learned counsel appearing for the respondents and perused the records.

4. Learned counsel for the appellant submits that the order dated 13.11.1986 is not an order under Section 45-A of the Employees State Insurance Act, 1948. In the absence of any assessment order under section 45-A of the Act, no recovery proceedings could be initiated under Section 45-B of the Act. He submits that even assuming that there exists an assessment order, it was passed without affording any opportunity of hearing. He further submits that the finding of the learned Single Judge that successive demands were raised, is erroneous, inasmuch as the appellant has stated in the writ petition that he never received any demand letter. He submits that no claim can be made by the Corporation after lapse of five years to which the claim relates, in view of the proviso to sub-section 1(b) of Section 77 of the Employees' State Insurance Act 1948 (hereinafter referred to as the 'Act') and thus, the claim for the period prior to 1981 was barred by limitation. He submits that the finding of the learned Single Judge that ample opportunity was given to the appellant, but the same was not utilized, is erroneous.

5. Sri P.K.Srivastava supports the impugned judgment dated 15.4.1998 passed by the learned Single Judge. He submits that the learned Single Judge has correctly held that the demand was lawfully recoverable from the petitioner-appellant and it is not barred by limitation.

6. In the impugned judgment, the learned Single Judge has exhaustively considered the facts and evidences on record as well as the relevant provisions of the Employees' State Insurance Act, 1948 (hereinafter referred to as the 'Act') and recorded the following findings :

" There is no provision that no such assessment can be made after expiry of five years even though claim is raised. The second reason is that section 77 deals with the procedure of making application for raising dispute under section 75. Section 75 itself does not provide for the procedure or limitation. It is section 77 which provides the procedure and limitation. The dispute has to be raised within a period of three years from the date on which the cause of action arose. Explanation to sub-section 1-A has been inserted explaining cause of action which in sub-clause(b) points out that the cause of action in respect of any claim by the Corporation for recovering contribution shall be deemed to have arisen on the date on which such claim is made by the corporation for recovering contribution shall be deemed to have arisen on the date on which such claim is made by the corporation for the first time. In the present case the claim was made even long before the assessment order contained in annexure-4 dated 13.11.1986. Namely claims were made regularly on the basis of different inspection reports and records available with the Corporation time to time asking the petitioner to deposit the amount which he had failed to do so and had been litigating since 1974 in respect of claims till 1974, and even thereafter several successive inspections were carried out particulars whereof are disclosed in paragraph-9 of the counter affidavit. While dealing with the said paragraph, the petitioner in paragraph 11 of the rejoinder affidavit has said that the notice issued after various letters of demand and on the basis of inspection reports as mentioned were wholly erroneous. But he has not denied that no inspection was carried on or that no inspection report was furnished to him. On the other hand, it is pointed out that inspection reports were recorded in the inspection register kept with the petitioner where nothing has been indicated. Mr. Agrawal had produced the inspection register. He has led me through various pages of the said register. It appears from paragraph Nos. 9 and 11of the counter affidavit, there were inspections on 27.12.1976, 13.4.1978, 13.7.1978, 15.9.1979, 23.9.1980, 6.2.1982, 6.12.1983, 27.9.1984 and 12.7.1985. In the inspection register on 27.12.1976, it was recorded " Visited and checked records for the period February 1975 till November 1976." On 13.7.1978, it was recorded that "Inspection note dated 24.11.1997 was recorded on the stamp book." but the same is not being produced by Mr. Agrawal neither it has been explained as to how the said record speaks about the report. Where as the inspection register records on 13.7.19878 to the extent that" visited the factory on 10th & 13th July 1978 and inspected the records from 1.11.1977 till 31st May, 1978 without ledgers. Detailed inspection report will follow in due course through our Regional Office at Kanpur." Similarly, on 24.11.1977, it was recorded that "visited the factory on 23rd & 24th November 1977 and inspected the records for the period December 1976 till 30.10.1977 with ledgers upto 30.6.1977. Detailed report will follow from Regional office at Kanpur in due course." Similar note is appended on 15.6.1978 that the record were inspected without ledgers and report will follow in due course. On 25th September,1980 it was noted that ledgers were in the Head Office and therefore, could not be examined and report will follow in due course. On 4.10.1980 ledgers were inspected. Then on 6.2.1982 it was noted that report will follow in due course. Similar note is appearing on 6.12.1983. Therefore, the statement made in paragraph-9 of the counter-affidavit has not been denied in paragraph 11 of the rejoinder affidavit. Thus, it cannot be said that these claims were lodged or raised by the corporation. Nowhere it has been alleged that the corporation had never raised the claim before issuing the letter contained in annexure-1 either in the writ petition or in the rejoinder affidavit.

Now in view of section 77 (1-A) limitation was for raising the claim for the purpose of calculation of limitation of initiation of dispute under section 75 of the Act. This fiver years' bar in raising the claim does not prevent the assessment under section 54-A even after expiry of five years of the period to which the claim relates when the claim has already been raised earlier.

Thus, the said proviso to sub-section 1-A of section 7 cannot stand in the way of determining the assessment as has been sought to be done through annexure-4 dated 13.11.1978.

So far as the merits of the case are concerned, though Mr. Agrawal contends that the relevant documents have been produced to show that all dues have been paid but no particulars are being disclosed as to what were the dues. It was open to the petitioner to disclose the same as soon the notice contained in annexure-1 was issued. If the petitioner is able to produce or annex the documents in the writ petition in support of his contention or defence, in that event it would very well contained in reply to annexure-1 which from the record does not appear to have been done. Then again, it is not a case that entire dues are sought to be recovered. It is a case that some amount out of the dues were not deposited, therefore, the said amount was claimed which was ultimately assessed through annexure-4 dated 13.11.1986. Therefore, even on merits no case has been made out."

7. We find that Section 45-A is a part of Chapter-IV of the Act, while Section 77(1-A)(b) is in Chapter-VI. Chapter-IV of the Act contains the provisions with regard to contribution by the employer and recovery thereof, while Chapter-VI contains the provisions for adjudication of disputes and claims by the Employees' Insurance Court. There is no connecting link between Chapter-IV and Chapter-VI of the Act. In view of this the submission of the learned counsel for the appellant that the claim made by the respondents under section 45A will be barred by proviso to Section 77(1-A)(b) of the Act, is without substance and deserves to be rejected. The limitation provided under section 77 of the Act, cannot be applied in Section 45A, which is a part of Chapter-IV.

8. A bare reading of Chapter-IV beginning from Section 38 to Section 45-I reveals that no limitation has been prescribed. Section 45A provides for determination of contribution in the circumstances, that records are not produced by the establishment before the Corporation or when there is no cooperation, then the Corporation has got the power to make assessment and determine the amount under Section 45A and recover it as arrears of land revenue under section 45-B of the Act. After scrutiny of the facts and evidence on record, the learned Single Judge has found that successive inspections were made and demand for depositing the dues were issued. The matter was pending for a long time. By order dated 13.11.1986, the details were furnished to the petitioner pointing out to him that the assessment was made in respect thereof. The petitioner did not raise dispute under section 75 of the Act, and rather asked for time by letter dated 27.4.1987.

9. Learned Single Judge also came to the conclusion that the limitation provided under section 77 of the Act shall not be applicable with respect to proceedings under section 45-A or Section 45-B of the Act. It was observed that it is not a case where entire dues are sought to be recovered. It is a case that some amount out of the dues was not deposited by the petitioner, therefore, the said amount was claimed and was ultimately assessed vide Annexure-4 dated 13.11.1986.

10. From the Scheme of Chapter-IV of the Act, it is clear that the order under section 45A of the Act is final. It is in the nature of best judgment, but where records are produced, the assessment has to be made under Section 75(2)(a) of the Act. Section 45-A is invoked when there is failure on the part of the employer to produce the records or when there is no cooperation then, the Corporation can determine the amount and recover the same as arrears of land revenue under Section 45B of the Act. When an order u/s 45A is passed the employer may and not the corporation approach the ESI court.

11. Prior to the incorporation of Section 45-A by Act No.44 of 1966, the only resort available to the corporation was Section 75, for recovery of contribution through the Court. Since this procedure was found to be impracticable and involved delay, a special provision was contemplated whereunder adjudication is to be made by the Corporation itself. By reason of incorporation of in Section 45-A w.e.f. 17.6.1967, it became possible for the corporation to determine the contributions payable in respect of employees of the concerned factory or establishment on the basis of information available to it. The amount so determined is recoverable as arrears of land revenue u/s 45-B. Thus, we do not find any error in the impugned judgment passed by the learned Single Judge upholding the notices dated 18.9.1986 and 2.4.1987 ( Annexure 1 and 6 to the writ petition).

12. The view taken by us as above is also fortified by law laid down by the Hon'ble Supreme Court in the case of ESI Corporation Vs. CC Santhakumar (2007) 1 SCC 584 vide paragraph 12 to 30 which are reproduced below : -

12. Section 45A is a part of Chapter IV. Section 77 (1A) (b) proviso is contained in Chapter VI. The question is whether there is any connecting link between Chapter IV and Chapter VI.

13. Sections 38 to 45-I are contained in Chapter IV while Chapter VI relates to Sections 74 to 83. Sections 45A and 45B in Chapter IV were introduced by Act 44 of 1966 with effect from 17.06.1967, in order to curb the default by the employers and to provide for an efficient method of recovery. The mode of recovery is provided under Sections 45-C to 45-I. On the other hand, Section 75 in Chapter VI relates to the commencement of proceedings before the E.S.I. Court. Proviso to Clause (b) of Section 77(1A) was introduced by the Act 29 of 1989 with effect from 20.10.1989. A combined reading of the provisions indicates that no claim shall be made by the Corporation beyond five years, to which the claim relates. The relevant Section in Chapter IV, which deals with the order passed by the Corporation is Section 45A. Similarly, the relevant Section in Chapter VI, which deals with the resolving of disputes between the employer and the Corporation by the E.S.I. Court, is Section 77 (1A).

14. A reading of Chapter IV, as a whole, makes it clear that there is no limitation prescribed. Section 38 imposes the obligation on the employer to pay contribution and, upon his failure, he is liable to pay interest on a recurring basis until it is paid. Section 40 imposes an obligation to pay on the principal employer in the first instance. This means, even if the employees were those of the contractors, it is the principal employer who has to pay. Section 44 mandates the employer to furnish proper returns so that the Corporation can scrutinize, assess and pass an order for a claim. Section 44 does not provide for any limitation and, originally, it did not prescribe any mode of recovery. Therefore, Act 44 of 1966 was introduced. Under this Act, Sections 45A and 45B were brought into force. Thereafter Sections 45-C to 45-I were introduced, prescribing the mode of recovery. The apparent purpose of introduction of these Sections is to curb default by the employers and also to provide for an efficient method of recovery without any delay.

15. 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 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.

16. 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.

17. Prior to the incorporation of Section 45A under Act 44 of 1966, the only resort available to the Corporation was Section 75, for recovery of contribution through the Court. Since this procedure was found to be impracticable and delayed process involved, a special provision was contemplated whereunder adjudication is to be made by the Corporation itself. By reason of incorporation of Section 45A with effect from 17.06.1967, it became possible for the Corporation to have determination of the question, binding on the principal employer, without resorting to the E.S.I.Court. In regard to the order under Section 45A, the same is enforced, as envisaged under Section 45B, which was similarly brought into the Act, by which the contribution may be recovered as arrears of land revenue. With regard to the decision reached by the E.S.I. Court in the application under Section 75, the said decision is enforced, as envisaged in sub-section (4) of Section 75 as if it is a Civil Court. The mode of recovery under Section 45B of the Corporation and the mode of recovery as per Section 75(4) by the E.S.I. Court as the Civil Court are entirely different as both Sections 45 and 75 operate in different spheres.

18. In this context, it would be worthwhile to refer to Chapter V also. Chapter V contains Sections 46 to 73. The relevant Section is 68, which reads as follows:

"68. Corporation's rights where a principal employer fails or neglects to pay any contribution :- (1) If any principal employer fails or neglects to pay any contribution which under this Act he is liable to pay in respect of any employee and by reason thereof such person becomes disentitled to any benefit or entitled to a benefit on a lower scale, the Corporation may, on being satisfied that the contribution should have been paid by the principal employer, pay to the person the benefit at the rate to which he would have been entitled, if the failure or neglect had not occurred and the Corporation shall be entitled to recover from the principal employer either-

(i) the difference between the amount of benefit which is paid by the Corporation to the said person and the amount of the benefit which would have been payable on the basis of the contributions which were in fact paid by the employer; or

(ii) twice the amount of the contribution which the employer failed or neglected to pay, whichever is greater.

(2) the amount recoverable under this Section may be recovered as if it were an arrear of land-revenue (or under section 45-C to Section 45-I)."

19. Section 68 of the Act in Chapter V deals with the Corporation's rights, where an employer fails to pay any contribution. Sub-section (2) to Section 68 provides that the amount recoverable under this Section may be recovered as if it were an arrear of land revenue or under Sections 45-C to 45-I. The said Chapter does not impose any fetter or limitation for the Corporation to recover the amounts by coercive process. In view of the addition of the words in Section 68 "or under Section 45-C to 45-I" to sub-section (2) of Section 68 by Act 29 of 1989 with effect from 20.10.1989, the said claim could be recovered under Section 45-C to 45-I of the Act. There is no limitation prescribed in the language of Section 68. Section 60 prescribes that the benefits are not assignable to anyone else. Section 71 provides that the benefits under the Act are payable to the employee up to the date of his death. Thus, the Legislature, in its wisdom, did not want to impose by fetter or limitation on the Corporation to recover the amounts by coercive process under Chapter V.

20. Section 68 of the Act has been elaborately dealt with by this Court in Bharat Barrel and Drum Mfg. Co. Ltd. and Anr. v. E.S.I. Corporation (1971 (2) SCC 860). It was inter alia observed as follows:

"Chapter VI deals with the adjudication of disputes and claim, of which Section 74 provides for the constitution of the Insurance Court. Section 74 specifies the matters to be decided by that Court. Sections 76 and 77 deal with the institution and commencement of proceedings and Section 78 with the powers of the Insurance Court. These provisions in our view unmistakably indicate that the whole scheme is dependent upon the contributions made by the employer not only with respect to the amounts payable by him but also in respect of those payable by the employee. No limitation has been fixed for the recovery of these amounts by the Corporation from the employer; on the other hand, Section 68 empowers the Corporation to resort to coercive process. If any such steps are proposed to be taken by the Corporation and the employer is aggrieved, he has a right to file and apply to the Insurance Court and have his claim adjudicated by it in the same way as the Corporation can prefer a claim in a case where the liability to pay is disputed."

21. It is clear, therefore, that the right of the Corporation to recover these amounts by coercive process is not restricted by any limitation nor could the Government by recourse to the rule-making power prescribe a period in the teeth of Section 68.

22. In the above judgment this Court has clearly held that Section 68 of the Act empowers the Corporation to resort to coercive process, to recover the contribution from the employer as if it were an arrear of land revenue and the said right is not restricted by any limitation. This is a crucial Section.

23. Similarly, no limitation is provided in Chapter VII. It deals with the imposition of penalty or levy of damages upon failure to pay contributions. It consists of Sections from 84 to 86A.

24. When the Act itself does not provide for any limitation on the Corporation's right to claim, the employers cannot rely upon Regulations 32 to 66, dealing with the period for maintenance of registers, to imply any limitation.

25. Section 45A of the Act contemplates a summary method to determine contribution in case of deliberate default on the part of the employer. By amendment Act 29 of 1989, Sections 45-C to 45-I were inserted in the Principal Act, for the purpose of effecting recovery of arrears by attachment and sale of movable and immovable properties or establishment of the principal or immediate employer, without having recourse to law or E.S.I Court. Therefore, it cannot be said that a proceeding for recovery as arrears of land revenue by issuing a certificate could be equated to either a suit, appeal or application in the Court. Under Section 68(2) and Sections 45- C to 45-I, after determination of contribution, recovery can be made straightaway. If the employer disputes the correctness of the order under Section 45A, he could challenge the same under Section 75 of the Act before the E.S.I. Court.

26. On a plain reading of Sections 45A and 45B in Chapter IV and 75 and 77 in Chapter VI of the Act, as indicated above, there cannot be any doubt that the area and the scope and ambit of Sections 45A and 75 are quite different.

27. If the period of limitation, prescribed under proviso (b) of Section 77(1A) is read into the provisions of Section 45A, it would defeat the very purpose of enacting Sections 45A and 45B. The prescription of limitation under Section 77(IA)(b) of the Act has not been made applicable to the adjudication proceedings under Section 45A by the legislature, since such a restriction would restrict the right of the Corporation to determine the claims under Section 45A and the right of recovery under Section 45B and, further, it would give a benefit to an unscrupulous employer. The period of five years, fixed under Regulation 32(2) of the Regulations, is with regard to maintenance of registers of workmen and the same cannot take away the right of the Corporation to adjudicate, determine and fix the liability of the employer under Section 45A of the Act, in respect of the claim other than those found in the register of workmen, maintained and filed in terms of the Regulations.

28. What Section 75(2) empowers is not only the recovery of the amounts due to the Corporation from the employer by recourse to the E.S.I. Court, but also the settlement of the dispute of a claim by the corporation against the employer. While this is so, there is no impediment for the Corporation also to apply to the E.S.I. Court to determine a dispute against an employer where it is satisfied that such a dispute exists. If there is no dispute in the determination either under Section 45A(1) or under Section 68, the Corporation can straightaway go for recovery of the arrears.

29. Section 77 of the Act relates to commencement of proceedings before the E.S.I. Court. The proviso to sub-Section 77 of the Act cannot independently give any meaning without reference to the main provision, namely, Section 77 of the Act. Therefore, the proviso to Clause (b) of Section 77(1A) of the Act, fixing the period of five years for the claim made by the Corporation, will apply only in respect of claim made by the Corporation before the E.S.I. Court and to no other proceedings.

30. The Legislature has provided for a special remedy to deal with special cases. The determination of the claim is left to the Corporation, which is based on the information available to it. It shows whether information is sufficient or not or the Corporation is able to get information from the employer or not, on the available records, the Corporation could determine the arrears. So, the non-availability of the records after five years, as per the Regulation, would not debar the Corporation to determine the amount of arrears. Therefore, if the provisions of Section 45A are read with Section 45B of the Act, then, the determination made by the Corporation is concerned. It may not be final so far as the employer is concerned, if he chooses to challenge it by filing an application under Section 75 of the Act. If the employer fails to challenge the said determination under Section 75 of the Act before the Court, then the determination under Section 45A becomes final against the employer as well. As such, there is no hurdle for recovery of the amount determined under Section 45B of the Act, by invoking the mode of recovery, as contemplated in Sections 45C to 45-I.

13. The afore-noted judgment squarely answers in negative the arguments raised by the petitioner in this special appeal.

14. In view of the discussions made above, we do not find any substance in this special appeal. The special appeal fails and is hereby dismissed. However, there shall be no order as to cost.

Dt. 29th August, 2013.

Ak/