Delhi High Court

Employees State Insurance ... vs Niranjan Industries on 24 September, 2010

Author: Siddharth Mridul

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*     IN THE HIGH COURT OF DELHI AT NEW DELHI

+     FAO 529/1999
                                Date of decision: 24th September, 2010

      EMPLOYEES STATE INSURANCE CORPORATION
                                 ..... Appellant
                   Through: Mr. K.P. Mavi, Adv.
              versus

      NIRANJAN INDUSTRIES                  ..... Respondent
                   Through:            None.

      CORAM:
      HON'BLE MR. JUSTICE SIDDHARTH MRIDUL

      1.       Whether reporters of local papers may be allowed to see
               the judgment?                                 YES.

      2.       To be referred to the Reporter or not?         YES.

      3.       Whether the judgment should be reported        YES.
               in the Digest?


                            JUDGMENT

SIDDHARTH MRIDUL, J. (ORAL).

1. The question, which arises for consideration in this appeal is

whether the period of limitation provided in proviso to explanation

(b) of Section 77(1)(a) of the Employees State Insurance Act, 1948

(hereinafter referred to as „the Act‟) is applicable to Section 45A of

the Act.

2. Before alluding to the relevant facts, it is proper to reproduce

Section 77 of the Act. The relevant provision provides as follows:-

"77. Commencement of Proceedings. - (1) The proceedings before an Employees‟ Insurance Court shall be commenced by application.

(1A) Every such application shall be made within a period of three years from the date on which the cause of action arose.

Explanation. - For the purpose of this sub-section, -

(a) the cause of action in respect of a claim for benefit shall not be deemed to arise unless the insured person or in the case of dependants‟ benefit, the dependants of the insured person claims or claim that benefit in accordance with the regulations made in that behalf within a period twelve months after the claim became due or within such further period as the Employees‟ Insurance Court may allow on grounds which appear to it to be reasonable;

(b) the cause of action in respect of a claim by the Corporation for recovering contributions (including interest, and damages) from the principal employer shall be deemed to have arisen on the date on which such claim is made by the Corporation for the first time:

Provided that no claim shall be made by the Corporation after five years of the period to which the claim relates;

(c) the cause of action in respect of a claim by the principal employer for recovering contributions from an immediate employer shall not be deemed to arise till the date by which the evidence of contributions having been paid is due to be received by the Corporation under the regulations.

(2) Every such application shall be in such form and shall contain such particulars and shall be accompanied by such fee, if any, as may be prescribed by rules made by the State Government in consultation with the Corporation."

3. The relevant facts as are necessary for the adjudication of the

present appeal is that the Employees State Insurance Corporation

(hereinafter referred to as „the Corporation‟) has vide

communication dated 25th March, 1993 informed the respondent

that it determined to recover a sum of ` 3,617.25 paise, as

contribution payable in respect of the employees of its

factory/establishment under Section 45A of the Act w.e.f. 5th May,

1981 to 5th May, 1982.

4. Feeling aggrieved by the order dated 25th March, 1993, the

respondent moved an application before the ESIC Court under

Section 75 of the Act. The application was heard by the ESIC Court,

who relying upon the proviso to Explanation (b) of Section 77 (1A)

held that the claim of the corporation was barred by time.

5. It may be noticed that the limitation period of five years, as

laid down in the proviso to Explanation (b) of Section 77(1A) was

three years from the date of the cause of action and the Corporation

could raise the dispute within five years thereafter.

6. It is submitted by learned counsel for the appellant that the

point in issue, as noticed at the outset, is no longer res-integra and it

is squarely covered by a judgment of the Supreme Court in the case

of ESI Corporation vs. C.C. Santhakumar reported in (2007) 1

Supreme Court Cases (L&S) 413.

7. Before referring to the decision of the Supreme Court, it will

also be appropriate to reproduce Sections 45A and 45B of the Act.

The same run as under:-

"45A. Determination of contributions in certain cases. - (1) Where in respect of a factory of establishment no returns, particulars, registers or records are submitted, furnished or maintained in accordance with the provisions of Section 44 or any Inspector or other official of the Corporation referred to in sub-section (2) of Section 45 is prevented in any manner by the principal or immediate employer or any other person, in exercising his functions or discharging his duties under Section 45, the Corporation may, on the basis of information

available to it, by order, determine the amount of contributions payable in respect of the employees of that factory or establishment:

Provided that no such order shall be passed by the Corporation unless the principal or immediate employer or the person in charge of the factory or establishment has been given a reasonable opportunity of being heard.

(2) An order made by the Corporation under sub- section (1) shall be sufficient proof of the claim of the Corporation under Section 75 or for recovery of the amount determined by such order as an arrear of land revenue under Section 45B or the recovery under Sections 45C to 45I.

45B. Recovery of contributions. - Any contribution payable under this Act may be recovered as an arrear of land revenue."

8. Now referring to, what the Supreme Court said on Sections

45A and 45B and the proviso to Section 77(1A)(b) of the Act in the

case of ESI Corporation vs. C.C. Santhakumar (supra) as

under:-

"25. Section 45-A 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 the ESI 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 45-A, he could challenge the same under Section 75 of the Act before the ESI Court.

26. On a plain reading of Sections 45-A and 45-B in Chapter IV and Sections 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 45-A and 75 are quite different.

27. If the period of limitation, prescribed under proviso (b) of Section 77(1-A) is read into the provisions of Section 45-A, it would defeat the very purpose of enacting Sections 45-A and 45-B. The prescription of limitation under Section 77 (1-A)(b) of the Act has not been made applicable to the adjudication proceedings under Section 45-A by the legislature, since such a restriction would restrict the right of the Corporation to determine the claims under Section 45-A and the right of recovery under Section 45-B and, further, it would give 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 45-A 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 ESI 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 ESI 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 45-A(I) 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 ESI Court. The proviso to sub-section (1-A)(b) of 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(1-A) 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 ESI Court and to no other proceedings."

9. In the light of the above quoted paragraphs, it is clear that no

period of limitation can be read into an order passed under Section

45A of the Act and, that any determination made under the said

Section by the Corporation shall not attract the limitation prescribed

under proviso to Section 77(1A) of the Act. After having held so, the

Supreme court also dealt with the question, whether a concept of

reasonable time can be read into the provision even though not

specifically provided for? On this aspect, it has been said in the

judgment that a „reasonable period‟ would depend upon the factual

circumstances of the case concerned and that there cannot be any

empirical formula to determine that question. It has been further

held that the Court/authority considering the question, whether the