Karnataka High Court
The Regional Director vs M/S Methods Automotive on 10 August, 2023
Bench: H.P.Sandesh
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NC: 2023:KHC:28703
MFA No. 2386 of 2016
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 10TH DAY OF AUGUST, 2023
BEFORE
THE HON'BLE MR JUSTICE H.P.SANDESH
MISCELLANEOUS FIRST APPEAL NO. 2386 OF 2016 (ESI)
BETWEEN:
1. THE REGIONAL DIRECTOR
ESI CORPORATION ,
NO.83, PRIDE PLAZA,
DEVANATHACHAR STREET, 5TH MAIN ROAD,
CHAMARAJPET,BANGALORE
2. THE RECOVERY OFFICER
ESI CORPORATION ,
NO.83, PRIDE PLAZA,
DEVANATHACHAR STREET, 5TH MAIN ROAD,
CHAMARAJPET,BANGALORE
...APPELLANTS
(BY SMT.GEETHADEVI.M.PAPANNA.,ADVOCATE)
Digitally signed AND:
by SHARANYA T M/S METHODS AUTOMOTIVE
Location: HIGH PVT. LTD. (FORMERLY METHORDS A PARTNERSHIP
COURT OF
KARNATAKA FIRM, 30/1, REAR BLOCK,
7TH CROSS, LAVELLE ROAD,
BANGALORE-01
REP BY ITS DIRECTOR
SRI.M.N. SHAM SUNDER
...RESPONDENT
(BY SRI. K R ANAND., ADVOCATE)
THIS M.F.A. IS FILED U/S.82(2) OF THE EMPLOYEES
STATE INSURANCE ACT, AGAINST THE ORDER DATED
30.01.2016 PASSED ON ESI NO.28/12 ON THE FILE OF THE
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MFA No. 2386 of 2016
EMPLOYEES STATE INSURANCE COURT, BENGALURU, PARTLY
ALLOWING THE APPLICATION FILED U/S.75 & 76 OF THE ESI
ACT.
THIS APPEAL, COMING ON FOR FURTHER HEARING, THIS
DAY, THE COURT DELIVERED THE FOLLOWING:
JUDGMENT
Heard the learned counsel for appellants and also learned
counsel appearing for the respondent.
2. The appellants have challenged the order passed by
the employees' Court Insurance Court at Bengaluru in ESI
application No.28/2012 wherein the application was allowed in
part filed by the respondent herein and directed that applicant
is liable to pay the contribution of fixing charges of Rs.75,000/-
and pay contribution amount into Rs.19,520/- towards
incentive charges and order passed under section 45-A of
Employees' Insurance Act dated 23.05.2011 is modified,
wherein a direction was given to pay the amount of
Rs.2,03,886/-. Being aggrieved by the order of the ESI Court at
Bengaluru, the present appeal is filed.
3. The main contention of appellants herein that the
Trial Court committed an error in modifying the order since the
components of claim is in respect of fixing charges,
commission, incentives, as well as security charges amount
paid to M/s.Method Automative Pvt. Ltd. The main contention in
this appeal is that orders of the ESI Court restricting the
contribution amount of Rs.19,520/- only, an amount of
Rs.75,000/- of fixing charges is only arbitrary, whimsical and
without any material to support the said restriction.
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MFA No. 2386 of 2016
4. It is also contended that respondent has failed to
furnish the exact labour components under the accounting head
fixing charges and determining the same taking fixing charges
only Rs.75,000/- and determination of contribution of
Rs.19,520/- as against the actual fixing charges of
Rs.13,15,345/- found recorded in the inspection report which is
marked as Ex.A6. Therefore, the ESI Court ought to have taken
the entire fixing charges for the purpose of determining the
contribution.
5. The other ground urged in the appeal that as
regards to the incentives paid the same constitute 'wage' in
terms of section 2(22) of ESI Act,1948 and contend that the
respondent are liable to pay contribution of entire sum of
Rs.8,33,550/-. The ESI Court has committed an error and there
was absolutely no reason for the ESI Court to totally ignore the
claim of contribution on incentive payment in the operative part
of the order dated 30.01.2016. The respondent is liable to pay
the entire incentive amount.
6. It is also contended that in respect of the security,
employees' employed in the premises of the respondent's
establishment by the security agency that the operation of law,
the respondent becomes the 'Principle Employer'-prove the
payment of contribution in respect of all those poor employed
in the premises, i.e., immediate employer. Accordingly, the
absence of proof regarding the payment of contribution in
respect of security employees' having produce to the
respondent. For the satisfaction of the Court, the respondent is
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MFA No. 2386 of 2016
also liable to pay contribution of security charges as claimed by
the appellants.
7. It is also contended that the appellants while
passing an order under section 45-A of ESI Act, taken note of
all these facts into consideration and rightly to passed the order
and ought not to have modified the same by the ESI Court.
Hence, it requires interference. The counsel appearing for
appellants has also in the argument contend that this Court has
to frame substantive question of law that order passed by the
ESI Court is arbitrary and not justified in reducing the amount
to Rs.19,520/- only against the claim made under section 45A
of ESI Act order an amount into Rs.2,03,886/- for the period
from 2006-07 and also contend that the order passed by Trial
Court is contrary to section 45A(2) of ESI Act and hence, it
requires interference.
8. Per Contra, the counsel appearing for the
respondent filed a memo stating that during the course of the
hearing the matter by this Court and also submission made by
the respondent, directed the respondent to file the statement of
calculation in support of his argument in which the respondent
is comply through this memo by enclosing the said statement
of calculation with the prayer to consider the same and based
on that statement of calculation, filed by M/s Methods
Automative Pvt ltd., comes up with the memo contending that
with regard to the fixing charges is concerned, 25% on basis
for calculation of Rs.13,15,345/-comes to Rs.3,28,836/- and
contribution at 6.5% on 25% comes to Rs.21,374/-. Likewise,
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MFA No. 2386 of 2016
head of commission is concerned, 25% on basis for calculation
of Rs. 8,33,550/- comes to Rs. 2,08,388/- and contribution at
6.5% on 25% comes to Rs.13,545/-; head of incentives to
employees' is concerned, 25% on basis for calculation of
Rs.19,520/- comes to Rs.4,880/- and contribution at 6.5% on
25% comes to Rs.317/-; head of incentives to dealers is
concerned, 25% on basis for calculation of Rs.8,58,338/-
comes to Rs.2,14,585/- and contribution at 6.5% on 25%
comes to Rs.13,948/- and total liability is Rs.49,185/-.The
counsel also vehemently contend that in respect of security
charges is concerned, not liable to pay on the amount of
Rs.1,09,945 on basis for calculation.
9. Having heard the learned counsel appearing for the
appellants and respondent and the very contention of the
appellants counsel in the appeal memo is with regard to the
security amount is concerned, it amounts to wages, since in
respect of the security employees' employed in the premises of
the respondent establishment by the security agency that by
operation of law, the respondent becomes the " Principle
employer " and to prove the payment of contribution in respect
of all those poor employees' in his premises by the security
agency i.e., immediate employee and same is not proved. In
the absence of proof regarding the payment of contribution in
respect of security employees' having produced by the
respondent for the satisfaction of the Court, respondent is liable
to pay the contribution and security charges as claimed by the
appellants' authority.
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MFA No. 2386 of 2016
10. Learned counsel for respondent would vehemently
contend that the Trial Court has rightly comes to the conclusion
that for having payment is concerned, for having remitted the
amount during the year 2006-07 and same is also not disputed
by the appellants and hence rightly comes to the conclusion
that the claim for contribution made on payment to the security
agency which is a covered establishment is illegal and contrary
to the law also requires to be set aside. In keeping the
contention, the finding regarding security given by the Trial
Court with regard to the claim made by the appellants, I do not
find any error committed by the Trial Court in not considering
with regard to the security claim and the claim made under the
head of incentive charges and other heads, already memo is
filed by the respondent regarding liability and the memo is
accepted. Hence, I do not find any error in making such an
observation by the Trial Court except admitted claims. Hence,
in view of the memo filed by the respondent, the respondent is
liable to pay an amount of Rs.49,185/-as admitted.
11. The contentions of the appellants' counsel is
regarding security claim not accepted and appeal is disposed
of in terms of the memo filed by the respondent's counsel.
12. In view of the discussions made above, I pass the
following:
ORDER
The appeal is allowed.
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MFA No. 2386 of 2016
In view of observation made by this Court consequent
upon the memo, the respondent is directed to pay an amount
of Rs.49,185/- in favour of the appellants' corporation.
The counsel for the respondent submit that he has
already deposited the amount before the ESI Court at the initial
stage, if any such amount is deposited, the same has to be
adjusted, if any excess amount is paid, the same shall be
refunded in favour of the respondent. If any shortfall, directed
to deposit the same within four weeks.
Sd/-
JUDGE
RHS
