Bombay High Court
M/S. Mondelez India Foods Pvt. Ltd vs The Deputy Director, Employees State ... on 5 March, 2025
2025:BHC-AS:10305
F.A. No.1441 of 2024 (final).doc
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CIVIL APPELLATE JURISDICTION
FIRST APPEAL NO. 1441 OF 2024.
M/s. Mondelez India Foods Pvt. Ltd., ]
India Bulls Finance Tower, ]
Tower 3, Wing-C, ]
Unit 2001-20th Floor, ]
Lower Parel, Mumbai - 400 013. ] ...Appellant.
Versus
1. The Deputy Director, ]
Employees State Insurance Corporation, ]
Regional Office, Maharashtra, ]
108 Panchdeep Bhavan, ]
N. M. Joshi Marg, Lower Parel, ]
Mumbai - 400 013. ]
2. The Appellate Authority ]
Employees State Insurance Corporation, ]
Regional Office, Maharashtra, ]
108 Panchdeep Bhavan, ]
N.M. Joshi Marg, Lower Parel, ]
Mumbai - 400 013. ] ...Respondents.
------------
Mr. S. C. Naidu, Ms. Samiksha Kanani, Mr. Abhishek Ingle and Mr. Pradeep Kumar
for Appellant.
Mr. Shailesh S. Pathak for Respondent.
------------
Coram : Sharmila U. Deshmukh, J.
Reserved on : 24th February, 2025.
Pronounced on : 05th March, 2025.
Judgment :
1. The First Appeal has been preferred under Section 82 of the
Employees' State Insurance Act, 1948 [for short, "ESI Act"] impugning
the judgment dated 11th October, 2023 passed by the Employees' State
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Insurance Court, Mumbai in an Application filed under Section 75 read
with Section 77 of the ESI Act, challenging the legality and validity of
the order dated 11th September, 2019 passed under Section 45AA and
order dated 20th May, 2019 passed under Section 45A of the ESI Act, by
which the Application came to be dismissed.
2. The facts as discerned from record is that Appellant is a Private
Limited Company, which is covered under the provisions of ESI Act. On
22nd October, 2018, show cause notice in Form C-18 (Ad hoc) was
received by Appellant from the Employees' State Insurance
Corporation proposing to claim contribution amounting to Rs.
20,18,15,174/- for the financial years 2014-2016. The Appellant's
Representative attended the hearing and produced the account ledger,
bills/vouchers, invoices and bank payment acknowledgment, etc.
before Employees' State Insurance Corporation. Appellant made oral
as well as written submissions objecting the proposed claim on
expenses, which according to Appellant do not fall within the definition
of 'wages' under the ESI Act. Considering the voluminous record, which
was produced during the hearing, the Employees' State Insurance
Corporation constituted a committee of two Social Security Officers on
13th February, 2019 to verify the record. Due to some administrative
reason, the earlier committee was replaced with another committee on
19th March, 2019 comprising of three Social Security Officers who
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examined the record and submitted its report on 8th May, 2019.
Considering the report and the submissions made by the Appellant, the
Employees' State Insurance Corporation passed an order under Section
45A of the ESI Act on 20th May, 2019, assessing the contribution of
omitted wages under various heads of accounts by holding that the
same are in nature of 'wages' as defined under Section 2 (22) of ESI Act
and determined compensation of Rs. 74,93,436/- to be recovered from
Appellant.
3. The Appellant filed an Appeal against order dated 20 th May, 2019
before the Appellate Authority under Section 45AA of the ESI Act. On
11th September, 2019, the Appellate Authority addressed a
communication to Appellant contending that Appeal has been received
by their office on 24th July, 2019, i.e. after 60 days from the date of
receipt of Section 45A order passed on 20th May, 2019 and requested
the Appellant to produce the documentary evidence to show that
conditions of Appeal are satisfied. The said communication came to be
responded by Appellant vide communication dated 25th September,
2019 contending that order was received by Appellant only on 27 th
May, 2019 and copy of acknowledgment evidencing the receipt of
order was produced along with the communication. By communication
dated 26th September, 2019, the Appellate Authority informed the
Appellant that their Appeal cannot be admitted as according to their
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office record, order under Section 45A was received by Appellant on
24th May, 2019 and the Appeal has been filed beyond the period of
sixty days.
4. The Appellant approached the Employees' State Insurance Court
under Section 75 read with Section 77 of the ESI Act challenging the
order dated 20th May, 2019 passed under Section 45A of the ESI Act
and to stay the implementation of letter dated 11 th September, 2019
issued by the Employees' State Insurance-Corporation. In proceedings
before the Employees' State Insurance Court [for short, "ESI Court"],
an Application was filed below Exhibit-9 by Appellant to direct the
Appellate Authority, i.e. ESI-Corporation to produce the
proceedings/noting sheets as well as the Inspection Reports, which
came to be allowed in view of 'no objection' of Corporation to produce
the record by order dated 9th August, 2023. The Opponent instead of
producing the Social Security Officer's reports, Visit Notes, Noting
Sheets, Observation Sheet, based on which order under Section 45A
was passed, produced only the attested copy of the noting sheets of
proceedings under Section 45A and under Section 45AA.
5. By impugned judgment dated 11th October, 2023, the ESI Court
held that Appeal, which was filed on 24th July, 2019 was not within sixty
days and thus, Appeal has been rightly rejected by the learned
Appellate Authority. On the aspect of validity of order passed under
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Section 45A of the ESI Act, which was challenged inter alia on the
ground that the contribution has been assessed based on report,
without considering the documents produced by Appellant, the ESI
Court held that Appellant has neither adduced any oral or
documentary evidence to support their contention and there is no iota
of evidence to prove that order passed under Section 45A of the ESI
Act is invalid or illegal, and dismissed the Application.
6. Mr. Naidu, learned counsel appearing for Appellant would submit
that as far as order under Section 45AA is concerned, there was no
opportunity of hearing, given to the Appellant and by a cryptic
communication of 26th September, 2019, the bar of limitation was
applied and the Appeal was rejected. He submits that Appellant had
produced evidence in the form of acknowledgment to show that order
was received on 27th May, 2019 and therefore, the Appeal which was
filed on 24th July, 2019 was within time. He submits that as no
opportunity of hearing was given, the necessary facts could not be
submitted before the Appellate Authority. As regards the order passed
under Section 45A of the ESI Act is concerned, he submits that show
cause notice issued in Form C-18 (Ad hoc) proposed contribution of Rs.
20,18,15,174/-. He submits that voluminous documents were
thereafter produced and order under Section 45A was passed, which
substantially reduced the contribution assessed, however, by taking
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into account, the various heads of accounts which did not form part of
the show cause notice. He would further submit that order passed
under Section 45A was based on report of the committee dated 8 th
May, 2019, which report was not made available to Appellant. He
submits that as order under Section 45A travelled beyond the show
cause notice, it was not possible for Appellant to submit an
explanation as regards those heads of accounts, which was construed
as 'wages'. He would further submit that before the ESI Court, an
Application was moved for producing Social Security Officer's report,
visit note, observation sheet, etc. Though the Corporation had no
objection to produce the said reports, all that was produced was noting
sheets, which did not amount to compliance of directions of the
Employees' State Insurance Court. He submits that ESI Court without
noticing the fact that order under Section 45AA was passed without
complying with principles of natural justice and without furnishing the
Report dated 8th May, 2019 to the Appellants, based on which the order
under Section 45A was passed, had erroneously dismissed the
Application by holding that there is no evidence produced by
Appellant. He submits that record was more than sufficient to come to
conclusion that the basis for order under Section 45A, which was
Committee's report dated 8th May, 2019 was not furnished to
Appellant, thereby vitiating the order dated 20 th May, 2019. He would
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also submit that amount assessed under Section 45A was duly
recovered by Corporation, and therefore, Appellant is entitled for
refund of amount, which was paid at the time of filing the Appeal
under Section 45A as well as the amount, which was deposited while
filing the Appeal before the ESI Court. In support, he relies upon the
following decisions:
UMC Technologies Pvt. Ltd. vs. Food Corporation of India1
Optical Instrument Company vs. Employees State
Insurance Corporation2
Small Gauges Ltd. vs. V. P. Ramaiah3
Nasik Screw Industries vs. Regional Provident Fund
Commissioner, Maharashtra and Goa4
Johra vs. State of Haryana5
Daffodills Pharmaceuticals Ltd. vs. State of Uttar
Pradesh6
Buldana Urban Co-op. Society Ltd. vs. Dy. Director, ESI
Corporation7
Raja Harish Chandra Raj Singh vs. Dy. Land Acquisition
Officer8
M/s. Guruji Infrastructure Pvt. Ltd. vs. The Pimpri
Chinchwad Municipal Corporation, Pune9
M/s. Garage Kamat vs. Regional Director, ESIC, Bombay10
SBI General Insurance Company Limited vs. Employees'
State Insurance Corporation11
7. Per contra, Mr. Pathak, learned counsel appearing for
Respondent would submit that under Section 45AA of ESI Act, there is
1 (2021) 2 SCC 551.
2 1986 SCC OnLine Del 205.
3 2009 (1) Mh.L.J.
4 Writ Petition No. 6423 of 1998 dtd. 28.09.2010
5 (2019) 2 SCC 324.
6 (2020) 18 SCC 550.
7 Writ Petition No. 4607 of 2014 dtd. 9th March, 2015.
8 1961 SCC OnLine SC 140.
9 Writ Petition No. 7432 of 2024 dtd. 10th July, 2024.
10 1998 (2) Mh.L.J. 574.
11 Writ Petition No. 3796 of 2024 dtd. 18th September, 2024.
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no discretion, which is vested in the Corporation to condone the delay
beyond the period of sixty days. He submits that in the present case,
order dated 20th May, 2019 was received on 24th May, 2019 and as the
Appeal was filed beyond the period of sixty days, the same was barred
by limitation. He submits that before the ESI Court, there was no
evidence, which was produced on record to assail the validity of
Section 45A order, and therefore, the Application was rightly
dismissed. In support, he relies upon the decision of this Court in the
case of Garage Kamat (supra).
8. Considering the submissions of parties, the following substantial
questions of law would arise:-
(i) Whether in view of disputed questions being involved, it was
necessary for the Appellate Court to comply with principles of natural
justice and grant opportunity of hearing to the Appellants?
(ii) Whether the findings of ESI Court suffers from perversity by not
noticing that Appellate Authority had disregarded the evidence
produced by Appellant showing the service of order by ESI Corporation
on 27th May, 2019?
(iii) Whether the ESI Court committed an error while upholding the
validity of the order dated 20th May, 2019 passed under Section 45A of
the ESI Act without noticing that the order was based on Committee's
report dated 8th May, 2019, which report was not furnished to the
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Appellant vitiating the order passed under Section 45A?
As to Point Nos. (i) and (ii):
9. Section 45AA of the ESI Act provides for an Appeal against the
order passed under Section 45A within a period of sixty days from the
date of order. In the present case, order was passed on 20 th May, 2019
and Appeal has been filed on 24 th July, 2019. The Appellate Authority
had by communication dated 11th September, 2019 called upon
Appellant to produce the documentary evidence as regards limitation,
which was responded by Appellant enclosing the copy of
acknowledgment evidencing receipt of order on 27 th May, 2019.
Despite the said document being produced on record, the Appellate
Authority without considering the documentary evidence and without
granting any opportunity of being heard, by communication dated 26 th
September, 2019 informed the Appellant that their Appeal cannot be
admitted and advised to comply with the order passed under Section
45A. The remedy availed by Appellant was Appeal remedy provided
under Section 45AA of the ESI Act. The record makes it clear that there
were disputed questions as the evidence produced by Appellant
showed receipt of order on 27th May, 2019, whereas the official record
of Appellate Authority showed receipt of order on 24 th July, 2019. In
such facts, it was necessary to grant an opportunity of hearing to the
Appellants before refusing to admit the Appeal. The cursory dismissal
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of Appeal violates principles of natural justice. Though it is sought to
be contended by Mr. Pathak that in the proceedings under Section
45AA of the ESI Act, there is no provision for leading evidence, the fact
remains that Appellate Authority had called upon Appellant to produce
the documentary evidence to satisfy the conditions as regards the
period of limitation. As there was dispute as regards the date on which
the order passed under Section 45A was received by Appellant, the
Appellate Authority was bound to give an opportunity of being heard
to the Appellant before rejecting Appeal as being barred by limitation.
The provisions of the ESI Act do not expressly bar the oral hearing in
case of Appeal under Section 45AA of the ESI Act. The Trial Court had
held that the order was received by Applicant on 24 th May, 2019 and
therefore, the limitation would begin from the date of receipt of the
order, i.e. 24th May, 2019 and therefore, the Appeal was filed beyond
the period of limitation. Before the Trial Court, the decision in the case
of Buldana Urban Co-operative Society Ltd. vs. Deputy Director, Sub-
Regional Office, Employees' State Insurance Corporation (supra) was
relied upon, which provided that in the absence of actual or
constructive knowledge, it cannot be said that period of limitation
would commence from the date of order itself. In the present case,
though the provisions would not specifically provide for leading of
evidence before the Appellate Authority, principles of natural justice
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by giving an opportunity of hearing to Appellant was required to be
complied with. As no opportunity of oral hearing was given to the
Appellant, the order of Appellate Authority is liable to be set aside.
Point Nos. (i) and (ii) are accordingly answered in favor of Appellant.
As to Point No. (iii) :
10. The order passed under Section 45A of the ESI Act determines
the contribution at Rs. 74,93,436/- by considering the report dated 8 th
May, 2019 submitted by the Committee, constituted by the Employees'
State Insurance Corporation. Firstly, the copy of report dated 8 th May,
2019 was not furnished to Appellant and therefore, Appellant was not
provided an opportunity to submit its explanation to the said report. In
the case of Small Gauges Ltd. vs. V. P. Ramaiah (supra) and Nasik
Screw Industries vs. Regional Provident Fund Commissioner,
Maharashtra & Goa (supra), Co-ordinate Bench of this Court held, in
context of non-furnishing of report by Enforcement Officer under
Employees Provident Funds and Miscellaneous Provisions Act, 1952,
that the basic tenets of principle of audi-alteram partem requires that a
person should not be condemned unheard and that all the documents
relied upon by Department must be furnished to him before any
conclusion is arrived at on the basis of those documents. The
proposition of law laid down in the said decision and which is well-
settled proposition of law is squarely applicable to the facts of the
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present case. Before the order under Section 45A could have been
passed, based on Committee's Report dated 8 th May, 2019, the
Appellant was required to be furnished with a copy of the said report
and an opportunity was required to be given to Appellant to respond
to the said report before the same could form the basis of the order
passed under Section 45A. The non-furnishing of Report dated 8 th May,
2019 has vitiated the order passed under Section 45A of ESI Act.
11. Further, the order passed under Section 45A assessed the
contribution under various heads, which travelled beyond the show-
cause notice, issued to the Appellant and therefore, no opportunity
was given to Appellant to explain the payments under the heads of
accounts, which were not part of show cause notice. The whole
purpose of issuing show cause notice is to make the Appellant aware of
the case of Corporation as regards the omission of contribution of
wages, so construed by the Corporation. Unless and until, Appellant is
informed about various heads of accounts, which according to
Corporation amounts to 'wages' within the meaning of Section 2(22) of
the ESI Act, Appellant would not be in a position to furnish proper
explanation. It is not disputed by Mr. Pathak that expenses under
certain heads of account were considered as wages, which were not
part of show cause notice. For the reason that the order under Section
45A travels beyond show cause notice, the order stands vitiated.
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12. In the case of SBI General Insurance Company Limited (supra),
learned single Judge of this Court held that reports which were
submitted during the hearing were not furnished to Appellant and
therefore, had resulted in violation of principles of natural justice.
13. Before the ESI Court, an Application was moved by Applicant-
Appellant seeking production of committee's report, noting sheets,
etc. which were allowed by ESI Court and despite thereof, Opponent-
Corporation produced only evidence and report, which even at that
stage was not furnished to Appellant. The Employees' State Insurance
Court while adjudicating the validity of notice issued under Section 45A
had failed to consider that record itself would indicate that order
stands vitiated by non-furnishing of report based on which, order
under Section 45A was passed. It was thus, not necessary for Appellant
to produce any evidence on record as regards the validity of order
passed under Section 45A.
14. Considering that no opportunity of hearing was given to
Appellant at the time of filing of Appeal under Section 45AA resulting
in violation of principles of natural justice, this is a fit case for remand
to the Appellate Authority to be decided afresh after giving an
opportunity of being heard to Appellant. Resultantly, the following
order is passed :-
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:ORDER:
[i] The First Appeal is allowed.
[ii] The impugned judgment dated 11th October, 2023 is
hereby quashed and set aside.
[iii] The Appeal filed under Section 45AA of the ESI Act is
restored to file of the Appellate Authority, to be considered
afresh on aspect of limitation uninfluenced by order dated
26th September, 2019 refusing to admit the Appeal.
[iv] The Appellate Authority after granting an
opportunity of being heard to Appellant to consider the issue
of limitation and if so answered in favor of Appellant, to
consider the appeal on merits.
[v] All rights and contentions of all the parties are
expressly kept open in that regard.
15. As regards the claim for refund of amount, which was deposited
before the Appellate Authority as well as the ESI Court, in view of the
fact that entire amount under Section 45A has been recovered, Mr.
Pathak would submit that if the same is correct position then amount
deposited at the time of filing of Appeal under Section 45AA and
amount deposited at the time of filing of Appeal before the ESI Court
would be permitted to be refunded to Appellant. In view thereof, there
is no specific direction in this regard.
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16. In view of dismissal of First Appeal, nothing survives for
consideration in the pending Civil/Interim Applications, if any, and the
same stand disposed of.
[Sharmila U. Deshmukh, J.]
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