Delhi High Court
Employee State Insurance ... vs M/S Hindustan Unilever Ltd. on 23 July, 2014
$~8
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ FAO 372/2013
Decided on 23rd July, 2014
EMPLOYEE STATE INSURANCE CORPORATION..... Appellant
Through : Mr. K.P. Mavi and Mr. B.P. Mishra,
Advs.
Versus
M/S HINDUSTAN UNILEVER LTD. ..... Respondent
Through : Mr. R.K. Mittal, Adv.
CORAM:
HON'BLE MR. JUSTICE A.K. PATHAK
A.K.PATHAK, J.(ORAL)
1. Respondent filed a petition under Section 75 of the Employees'
State Insurance Act, 1948 ("the Act", for short) before the ESIC Court
thereby assailed the order dated 1st December, 2008 passed by the appellant
under Section 45-A of the Act. Respondent alleged that it had acquired M/s.
Modern Food Industries (India) Limited in two spells i.e. in 2000 and 2003,
under the disinvestment policy of Government of India and thereafter the
said company became the subsidiary of respondent. As a result of
amalgamation with effect from 30th March, 2007 M/s. Modern Food
Industries (India) Limited lost its legal existence and stood merged with the
FAO 372/2013 Page 1 of 7
respondent. The demand raised by the appellant pertains to an undertaking
of M/s. Modern Food Industries (India) Limited, known as Fruit Juice
Bottling Plant (FJBP). The said concern was supplying fruit juices to the
Government of Uttar Pradesh for social welfare programs. With effect from
1st April, 2003 Government of Uttar Pradesh stopped taking supplies from
the said undertaking, as a result thereof said undertaking suffered huge
losses towards payment of idle wages and was subsequently closed. Vide
letter dated 2nd December, 2008 the above facts were notified to the
appellant pursuant to the show cause notice dated 14 th August, 2008 issued
by the appellant. It is alleged that order under Section 45-A of the Act was
passed whereby ad hoc payment of `35,269/- was calculated for the period
April, 1996 to April 1998 inspite of the fact that said unit stands closed. It
was further contended that the order was passed with regard to the
contribution pertaining to 12 years ago and was barred by time. As per the
scheme of the Act, appellant could have claimed dues for the preceding five
years only, inasmuch as respondent is required to maintain records for five
years only.
2. Case of the appellant before the trial court was that impugned order
was validly passed after proper inspection and confirmation by the
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concerned officials. Reasonable opportunities were granted to the
respondent to put forth its case. Appellant specifically stated that no
intimation was ever given to appellant about the closure of FJBP before 23rd
July, 2008. Even otherwise the same would have no effect as regards to the
demand of contribution which pertained to the period when the said
undertaking was functional. Appellant categorically stated that a
discrepancy letter was issued to the respondent on 13th/15th September, 1999
after the inspections which were carried out on 17th August, 1999, 27th
August, 1999 and 31st August, 1999. Records of the respondent were
inspected by the Inspector and thereafter observation slip dated 30 th August,
1999 was issued, showing details of amounts on which contribution was
payable. Personal hearing was afforded before passing of the order dated 1 st
December, 2008.
3. ESIC Court framed following preliminary issue:-
"Whether the impugned demand raised by the
respondent under Section 45-A of ESI Act is beyond
limitation and the said amount cannot be recovered, if
so its effects?"
4. Learned ESIC Court has held that no determination of contribution
could have been done under Section 45-A of the Act in respect of the period
FAO 372/2013 Page 3 of 7
beyond five years. Accordingly, preliminary issue has been answered in
favour of the respondent and against the appellant. For arriving at this view,
ESIC Court has placed reliance on Sections 45-A and 77 of the Act.
5. Section 45-A before amendment reads as under:-
"45A. Determination of contributions in certain
cases :- (1) Where in respect of a factory or
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 if the claim of the Corporation
FAO 372/2013 Page 4 of 7
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 or 45I."
6. Section 45-A of the Act was amended with effect from 1st June, 2002
and a proviso with regard to limitation was included. The proviso reads,
thus, "provided further that no such order shall be passed by the Corporation
in respect of the period beyond five years from the date on which the
contribution shall become payable". In the old Act, no period of limitation
has been prescribed for determining the contribution under Section 45-A of
the Act. It is trite law that a statute, which is legislated by the Parliament
any amendment made therein, would have prospective effect unless it has
been specifically made effective with retrospective effect.
7. The order involved in this case pertains to period prior to the
amendment. Thus, old provision would be applicable, wherein no period of
limitation has been prescribed.
8. Learned counsel for the respondent has vehemently contended that
Section 77 of the Act prescribes the period of limitation of five years even in
the old Act. Thus, no demand under Section 45-A of the Act could have
been assessed for a period prior to five years, even in respect of the period
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which is covered under the old Act. I do not find any force in this
contention. In ESI Corpn. Vs. C.C. Santhakumar (2007) 1 Supreme Court
Cases 584, Apex Court held that period of limitation as prescribed under
Section 77(1-A) of the Act cannot be read into the provision of Section 45-A
of the Act. It has been held that 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 of the Act by the legislature, since such a
restriction would restrict the right of the Corporation to determine the claims
under Section 45-A of the Act and the right of recovery under Section 45-B
of the Act and, further, it would give benefit to an unscrupulous employer.
9. Accordingly, I am of the view that ESIC Court has committed an
patent error in holding that the order dated 1st December, 2008 is patently
time barred as per Section 45-A of the Act in respect of the determination of
the dues pertaining to the period 1996-97.
10. As regards closure of the unit is concerned, the same will have no
effect since the period for which the amount has been determined, pertains
to the period prior to closure, inasmuch as in the year 1996-97 unit was
functional. Section 93-A of the Act provides that if an employer, in relation
to a factory or establishment, transfers that factory or establishment in whole
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or in part, by sale, gift, lease or licence or in any other manner whatsoever,
the employer and the person to whom the factory or establishment is so
transferred shall jointly and severally be liable to pay the amount due in
respect of any contribution or any other amount payable under this Act in
respect of the periods up to the date of such transfer. Accordingly, plea of
merger of the said unit with the respondent in the year 2000 and 2003 will
also not absolve the respondent from the liability of FJBP since under
Section 93-A of the Act transferee company is liable to make the payment of
ESIC contribution in respect of the transferor company.
11. Appeal is, accordingly, disposed of in the above terms.
A.K. PATHAK, J.
JULY 23, 2014
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