Karnataka High Court

The Deputy Director vs M/S Classic Industries on 14 December, 2021

Bench: K.S.Mudagal

                                  M.F.A.NO.8295/2011

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  IN THE HIGH COURT OF KARNATAKA AT BENGALURU

    DATED THIS THE 14TH DAY OF DECEMBER 2021

                       BEFORE

       THE HON'BLE MRS JUSTICE K.S.MUDAGAL

 MISCELLANEOUS FIRST APPEAL NO.8295/2011(ESI)

BETWEEN:

THE DEPUTY DIRECTOR,
E.S.I. CORPORATION
REGIONAL OFFICE (KARNATAKA)
NO.10, BINNY FIELDS,
BINNYPET,
BANGALORE - 560 023
                                        ... APPELLANT
(BY SRI K.KRISHNAPPA, ADVOCATE)

AND:

M/S CLASSIC INDUSTRIES
KARKI, P.O. KANYANA
VIA TALLUR - 576 230
KUNDAPURA TALUK
REP. BY ITS PROPRIETOR
SRI MOHAMMED YOUSUF HAMSA
                                      ... RESPONDENT
(BY SRI A.R. HOLLA, ADVOCATE)

     THIS MFA IS FILED UNDER SECTION 82(2) OF THE
EMPLOYEES STATE INSURANCE ACT, AGAINST THE ORDER
DATED 30.06.2011 PASSED IN E.S.I. APPLICATION
NO.3/2010 ON THE FILE OF THE PRESIDING OFFICER,
LABOUR COURT-CUM-ESI COURT, MANGALORE, ALLOWING
THE APPLICATION FILED UNDER SECTION 75 OF THE E.S.I.
ACT.

     THIS MFA COMING ON FOR FINAL HEARING THIS DAY,
THE COURT THROUGH VIDEO CONFERENCE DELIVERED THE
FOLLOWING:
                                           M.F.A.NO.8295/2011

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                      JUDGMENT

Aggrieved by the order of the Presiding Officer,

Labour Court-cum-ESI Court, Mangalore allowing the

application of the respondent under Section 75 of the

Employees' State Insurance Act, 1948 ('the ESI Act' for

short), the appellant has preferred the above appeal.

2. The respondent was running the industry of

manufacturing clay decorative tiles and bricks at

Kanyana, Kundapura Taluk under the name and style of

'M/s.Classic Industries'. The said industry was

registered as small scale industry. On 03.02.2007 the

Inspector of the appellant/corporation (RW.1) inspected

the respondent's establishment and came to the

conclusion that the respondent is liable to pay the

employer and employees' contribution of Insurance.

During inspection he collected letter of applicant as per

Ex.R.4, prepared the report as per Exs.R.6 and 7.

3. Thereafter the respondent was issued with

notice dated 09.03.2007 as per Ex.R.8 reporting that

the respondent is the covered establishment and liable M.F.A.NO.8295/2011

to pay the contribution for the period from 06.06.2006

to March-2008. The respondent replied the same on

25.04.2007 claiming that the number of his employees

does not exceeds 10 and it is a seasonal industry. He

also sought the information from the appellant whether

his industry situates in the notified area. For that, the

appellant issued reply on 08.07.2008 calling upon him

to furnish the certificate of the Revenue Authority to

consider his request about applicability of the ESI Act.

4. The appellant issued another notice dated

14.10.2008 directing the respondent to pay ESI

contribution for the period September 2006 to March

2008 in a sum of Rs.1,94,257/-. The respondent issued

reply denying the claim of the appellant. Ultimately, the

appellant passed order under Section 45-A of the ESI

Act determining the contribution payable by the

respondent at Rs.1,94,257/.

5. The respondent challenged that order

before the ESI Court in ESI Application No.03/2010.

The appellant contested the said application denying the M.F.A.NO.8295/2011

contention of the respondent that it does not come

within the notified area and its employees do not exceed

10 in number etc., It also claimed that as per the

Inspection report and Ex.R.4, the application of the

respondent itself, the number of employees exceeded

20. The allegation of not giving sufficient opportunity or

violation of principles of natural justice was also

disputed.

6. The trial Court recorded the evidence of

both parties. On hearing the parties by the impugned

order the trial Court held issue No.1 viz., whether the

respondent is a seasonal industry and not covered

under the Act, against the respondent. However, the

trial Court upheld the contention of the respondent that

its employees' did not exceed 10 in number and it is not

liable to pay the contribution. The trial Court held that

the appellant has failed to establish that the number of

employees in the respondent's establishment was above

20. Therefore, the trial Court set-aside the order passed M.F.A.NO.8295/2011

by the appellant/authority under Section 45-A of the

ESI Act.

7. The respondent has not questioned the

finding that it is an establishment covered under the

Act. Therefore, that finding has attained finality. So far

as the number of employees of the respondent

exceeding 20, the appellant relied on the evidence of

RW-1 Insurance Inspector and Exs.R.4 to 7. The

respondent though admitted his signature on Ex.R.4

i.e., Form No.01 submitted to RW.1, he disputed his

knowledge about the contents of the same. RW.1

claims that during his visit he found 38 employees

mentioned in Ex.R.7 and the respondent has confirmed

the same in Ex.R.4.

8. Ex.R.4 is based on the entries in Ex.R.7.

Admittedly, the visit of RW.1 to the establishment was

on 03.02.2007. Ex.R4 is purportedly submitted to RW.1

during his visit. In Ex.R.7, the full particulars of the

employees like their names, addresses, domicile, length

of service are not forthcoming. In that context, the M.F.A.NO.8295/2011

trial Court relying on the judgment of Division Bench of

this Court in Regional Director, E.S.I. Corporation Vs

Karnataka Asbestos Cements Products and others1

held that the list of the employees prepared by the ESI

Inspector must contain the name, father's name, place

from which the employee hails, the designation, length

of service and signature or thumb impression of such

employees, otherwise it is liable to be rejected. Relying

on the said judgment the trial Court held that Ex.R.7

does not contain the place and designation of the

employees' named therein. Therefore, it is liable to be

rejected.

9. The judgment in Karnataka Asbestos

Cements Products and others' case is rendered relying

on the earlier Division Bench judgment of this Court in

ESI Corporation Vs. Subbaraya Adiga2. In para-5 of the

judgment in Subbaraya Adiga's case with regard to the

requirement of ESI Inspector report, this Court held as

follows:-

in 1991(2)KarLJ264

in AIR 1988 KAR 1806 M.F.A.NO.8295/2011

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"5.......... A list of employees prepared by the E.S.I.

Inspector in the course of his visit to an establishment, in order to find out whether the provisions of the E.S.I. Act are attracted to it, must contain the name, father's name, place from which the employee hails, the designation, the length of service, emoluments and the signature or thumb impression of the employee, as the case may be, if at that time other persons other than the employees are present, the names and addresses of atleast two of them with their signatures and also the signature of the Proprietor or Manager or the person in-charge of the establishment should be obtained at the end of the list and a copy of which be furnished to the establishment."

(Emphasis supplied)

10. Reading of the above judgment shows that

the report of the ESI inspector must contain the names,

father's name, place from which the employee hails, the

designation, the length of service, emoluments and the

signature or thumb impression of the employees. It

further shows that if at the time of inspection, there are

other persons at the spot, the names and addresses of

at least two of them and their signatures shall be taken

and the signature of proprietor/Manager of the M.F.A.NO.8295/2011

establishment should also be obtained at the end and

copy shall furnished to the establishment.