Employees State Insurance Corpn. ... vs M/S. Jayaswals Neco Ltd., Thru. ...
2016 Latest Caselaw 1375 Bom

                  fa195.07.odt                                                                                  1/14

                               IN THE HIGH COURT OF JUDICATURE AT BOMBAY
                                         NAGPUR BENCH : NAGPUR.




                                                                                                             
                                                      FIRST APPEAL NO.195 OF 2007




                                                                                     
                   APPELLANTS:                                 1.          Employees  State  Insurance Corporation
                                                                           Panchadeep   Bhavan,   Ganeshpeth,
                   Ori. Resp.
                                                                           Nagpur   Through   the   Joint-Regional
                   (On R.A.)                                               Director.




                                                                                    
                                                               2.
                                                          Employees  State  Insurance Corporation
                                                          Panchdeep Bhavan, Ganeshpeth, Nagpur
                                                          Through it's Recovery Officer.




                                                                      
                                                                                                                   
                                     ig                        -VERSUS-

                   RESPONDENT:                                             M/s Jayaswal Neco Limited, F-8, MIDC,
                                                                           Hingna   Road,   Nagpur   through   its
                   Ori. Appellant
                                   
                                                                           Manager.
                   (On R.A.) 
                   
                                                                                                                           
      


                  Smt. B. P. Maldhure, Advocate for the appellant.
                  Shri V.P. Marpakwar, Advocate for the respondent.
   



                                                      CORAM: A.S. CHANDURKAR, J.

DATED: 11 th APRIL, 2016.

ORAL JUDGMENT :

1. This appeal filed under Section 82(2) of the

Employees State Insurance Act, 1948 (for short, the

said Act) takes exception to the order dated

18-12-2006 passed by the learned Judge, Employees

State Insurance Court, Nagpur on an application filed

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under Section 75 of the said Act. By the said order,

the appellants have been directed to recalculate the

contribution to be made by the respondent by applying

Circular dated 9-8-2002.

2. The facts that are found to be relevant for

considering the challenges in the appeal are that the

respondent is an establishment that is covered by the

provisions of the said Act. For the period from 1987-88

to 1990-91, a team of Inspectors re-verified the ledgers

of the respondent Company in the matter of payment

of contribution. For the aforesaid period, demand of

contribution amounting to Rs.8,29,112/- was made on

18-12-2001. In response to aforesaid notice the

respondent by letter dated 20-12-2001 called upon the

appellants to supply details of the contribution

claimed. Reminders were also issued on 29-12-2001

and 7-1-2002. Thereafter on 24-1-2002 the respondent

issued another letter pointing out that the difference of

wages shown in the verification chart was below 20%

of the bill amount paid to various contractors. It was

further stated that in the year 1990, the records

pertaining to the contractor M/s Shrikant and

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Company were stolen and a first information report

was also lodged. A prayer was made for grant of

instalments in view of the financial condition of the

respondent Company. In response thereto, the

appellants by communication dated 8-2-2002

informed the respondent that the amount of

contribution had been reduced from Rs.8,74,068/- to

Rs.8,23,721/-. The respondent was asked to make

payment in instalments as requested by it.

Accordingly, by issuing various post dated cheques an

amount of Rs.8,29,112/- was paid by the respondent.

3. On 29-4-2003, the appellant issued another

notice claiming interest on account of delayed

payment to the tune of Rs.6,69,160/-. The respondent

submitted its reply on 5-5-2003 and stated therein

that initially an amount of Rs.53,29,325.74 had been

claimed. The same was thereafter reduced after re-

verification to an amount of Rs.8,31,516/-. It was,

therefore, stated that as the dues were settled in

January 2002, there was no question of any liability to

pay interest for delayed payment. On 20-5-2003,

another notice claiming damages of Rs.8,23,721/-

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came to be issued. This notice was replied on

29-5-2003 reiterating the earlier stand. Thereafter on

17-7-2003 an order under Section 85-B of the said Act

came to be passed by which damages for an amount of

Rs.8,23,721/- came to be levied for the period from

1987 to 1991. Thereafter on 25-7-2003 a show cause

notice came to be issued demanding interest @15%

per annum on the arrears of contribution.

ig The respondent being aggrieved filed an

application under Section 75 of the said Act. Therein

the notice dated 29-4-2003, order dated 17-7-2003

passed under Section 85B of the said Act and the

subsequent order dated 25-7-2003 calling upon the

respondent to pay interest were challenged. The

appellants filed reply opposing the application. The

learned Judge of the Employees State Insurance Court

after hearing both the sides held that there was

exchange of communications between the parties for a

long period of time. It was held that as the necessary

bifurcation with regard to the amount of wages paid to

the employees of the Contractor not being made, the

Circular dated 9-8-2002 could be applied in the facts

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of the case. On that basis, the impugned notices/order

dated 29-4-2003, 17-7-2003 and 25-7-2003 were set

aside. The appellants were directed to recalculate the

contribution by applying Circular dated 9-8-2002 and

thereafter recalculated interest and damages for the

period in dispute. Being aggrieved, the appellants

have filed the present appeal.

5. The appeal was admitted on 26-8-2009 and

the following substantial question of law was framed?

Whether lower Court erred in observing that

there was bifurcation done by the respondent before

charging damages and interest on the claim amount?

6. Smt. B. P. Maldhure, learned Counsel for the

appellant submitted that the learned Judge of the

Employees State Insurance Court was not justified in

setting aside the impugned notices/orders passed

under the said Act. It was submitted that the

respondent had not challenged the basis on which the

contribution for the period from 1987-88 till 1990-91

and had in fact paid the same in eleven instalments. It

was not the case in the application filed under Section

75 of the said Act that the calculation of contribution

fa195.07.odt 6/14

had been wrongly made by the respondent. In the

notice dated 18-12-2001 the contribution was

calculated on the basis of actual payments made to the

contractors. The calculation was not challenged.

Therefore, the Employees Insurance Court was not

justified in applying the Circular dated 9-8-2002

especially when the same was not relied by either

party nor was its copy placed on record. It was

submitted that the direction to recalculate the

contribution was, therefore, not justified. Even

otherwise it was submitted that despite sufficient

opportunity being granted to the respondent the

records were not produced and, therefore, the

respondent could not have been granted benefit of the

Circular dated 9-8-2002. In fact, the Court had

observed that the respondent had in fact, avoided to

give a clear picture in the matter of payment of

contribution.

It was then submitted that the damages and

interest were sought to be levied as per the relevant

statutory provisions of the said Act. Reference was

made to the provisions of the Employees State

fa195.07.odt 7/14

Insurance (General) Regulations and especially

Regulation Nos. 31, 31A and 31C. In support of her

submissions, the learned Counsel relied upon the

judgment of learned Single Judge in Associated Cement

Companies Ltd. Vs. The Regional Director ESIC 1981

LAB. I.C. 1409 and the judgment in Regional Director

of Employees State Insurance Corporation Vs.

Amalagamation Repco Ltd. 1982 LAB. I.C. 1691. It was,

therefore, submitted that the impugned order was

liable to be set aside.

7. On the other hand Shri V. P. Marpakwar,

learned Counsel for the respondent supported the

impugned order. He submitted that the re-verification

of the records was carried out at the behest of the

Corporation itself and submitted that the letter dated

4-11-1993 came to be issued by the appellant in that

regard. After receiving notice dated 18-12-2001, the

respondent had been demanding the details on the

basis of which the amount of contribution was being

claimed. However, these details were never supplied.

According to him, the Corporation itself was not sure

about the actual amount of contribution that was due

fa195.07.odt 8/14

and payable by the respondent. He submitted that

initially an amount of Rs.8,74,068/- was demanded

and the same was reduced to Rs.8,23,721/- by the

Corporation without assigning any reason. He

submitted that in fact, it was the appellants who were

at fault and not the respondent. According to him, the

Court had rightly directed recalculation of the amount

of contribution on the basis of the Circular dated

9-8-2002 as it was the case of the respondent that the

relevant records for said period were not available. He

also submitted that inaction on the part of the

Corporation for a considerable period of time could

not result in causing prejudice to the respondent

inasmuch as the amount of contribution of

Rs.8,29,112/- had already been paid by the

respondent. In support of his submissions, the learned

Counsel placed reliance on the judgment of the

Hon'ble Supreme Court in Himachal Pradesh State

Forest Corporation Vs. Regional Provident Fund

Commissioner (2008) 5 SCC 756. It was, therefore,

submitted that the appeal does not give rise to any

substantial question of law and the same was liable to

fa195.07.odt 9/14

be dismissed.

8. I have heard the respective Counsel for the

parties at length and after perusing the records, I have

given due consideration to their respective

submissions. The material placed on record indicates

that for the period from July 1987 till March 1991 and

from April, 1991 to April 1993 the Insurance Inspector

of the Insurance Corporation had sought to verify the

ledgers of the respondent Company. A report came to

be submitted by the Inspector on 5-11-2000 after re-

verification of the records. On 18-12-2001 (Exhibit-37)

a notice demanding contribution came to be issued by

the Corporation. In said notice, reference was made to

the payments made to two contractors for the period

from 1987-88 till 1990-91. The contribution

demanded was Rs.8,29,112/-. The stand of the

respondent was that with regard to payments made to

other contractors the concession of 20% of the bill

amount was considered but the same was not done in

respect of two contractors who were referred to in the

notice dated 18-12-2001. Thereafter, on 8-2-2002, the

appellant reduced the amount of contribution from

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Rs.8,74,068/- to Rs.8,23,721/-. The appellants

permitted the respondent to pay arrears of

contribution of Rs.8,29,112/- in eleven instalments

and the same was duly done. After these payments

were made, a demand of interest on delayed payments

to the tune of Rs.6,69,160/- came to be made by

communication dated 29-4-2003 at Exhibits 49 & 50.

On 20-5-2003, damages as per Regulation No.31C

were demanded @25% per annum from 10-2-1997 till

the actual date of payment which was 5-3-2002. It is

on that basis that order under Section 85-B of the said

Act came to be passed imposing damages of

Rs.8,23,721/-.

9. The respondent examined its Dy. General

Manager below Exhibit-85 in support of the

application under Section 75 of the said Act.

According to said witness, there was delay on the part

of the appellants in the matter of re-verification for

which the respondent was not responsible. This

witness admitted that though various notices were

issued by the appellants, the record was not shown to

it. He has further stated that after receiving the

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demand notice on 20-1-1997, till 18-12-2001 no

dispute was presented in the Court.

No evidence was led on behalf of the

appellant.

10. The Insurance Court framed issues at

Exhibit-26 and the same related to the correctness of

the orders challenged in said proceedings. It is to be

noted that what was challenged in proceedings under

Section 75 of the said Act was the order dated

17-7-2003 passed under Section 85-B of the said Act

imposing damages, the demand of interest for an

amount of Rs.6,69,160/- on 29-4-2003 and the

demand for outstanding interest as per notice dated

25-7-2003. There was no challenge whatsoever to the

demand of contribution made under Section 45-A of

the said Act as per Exhibit-37 dated 18-12-2001. In

fact, the respondent paid the amount of Rs.8,29,112/-

through eleven instalments without any protest. It is,

therefore, clear that the demand of contribution that

was made by the appellants was not the subject matter

of the proceedings under Section 75 of the said Act.

11. Perusal of the impugned order dated 18-12-

fa195.07.odt 12/14

2006 passed in proceedings under Section 75 of the

said Act indicates that in para 11 thereof it has been

observed by the learned Judge that the appellants

ought to have applied mind while claiming

contribution in the light of Circular dated 9-8-2002.

Thereafter in para 12 of the impugned order, it has

been further observed that it was the first case of not

making bifurcation while demanding contribution. On

that basis, the Insurance Court proceeded to hold the

respondent entitled for the benefit of the Circular

dated 9-8-2002 and after setting aside the orders

impugned in the application, directed re-calculation of

the amount of contribution.

12. This exercise by the Insurance Court of

examining the basis for demanding contribution is

beyond the scope of the proceedings under Section 75

of the said Act. In absence of any challenge

whatsoever to the demand of contribution of

Rs.8,29,112/-, it was not permissible for the Insurance

Court to have gone into the question as to whether

bifurcation was made by the appellants before

demanding the contribution. The Insurance Court lost

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sight of the fact that the respondent had not made any

grievance whatsoever with regard to the amount of

contribution demanded by the appellants. The

challenge was to the order passed under Section 85B

of the said Act which pertains to recovery of damages

and to the demand of interest. It is, therefore, clear

that the Insurance Court committed a serious error in

reopening the question of contribution and the aspect

of failure to make bifurcation. It was not justified in

directing recalculation of the contribution by applying

Circular dated 9-8-2002. The ratio of the decision of

the Hon'ble Supreme Court in Himachal Pradesh State

Forest Corporation (supra) cannot be made applicable

to the case in hand. The impugned order, thus, is

liable to be set aside on the ground that the Court has

travelled beyond the challenge raised in the

proceedings filed by the respondent under Section 75

of the said Act. The substantial question of law as

framed is answered by holding that the Insurance

Court erred in going into the question of bifurcation

instead of deciding the challenge to the demand of

damages and interest.

fa195.07.odt 14/14

13. As the Insurance Court has not considered

the validity of the order/notices impugned before it, it

would be necessary to direct the Insurance Court to

reconsider the application filed under Section 75 of

the said Act.

14. In view of aforesaid discussion, the following

order is passed:

(a) The order dated 18-12-2006 passed by the

Employees Insurance Court, Nagpur in Application

No.23/2003 is quashed and set aside.

(b) The proceedings are remitted to the

Employees Insurance Court to reconsider the

application filed by the respondent on its own merits

and in accordance with law. The proceedings shall be

decided expeditiously.

(c) The records be sent to the Insurance Court

forthwith.

(d) The first appeal is allowed in aforesaid terms

with no order as to costs.

JUDGE

//MULEY//