Karnataka High Court
The Deputy Director vs The Presidency School on 26 May, 2023
Bench: H.P.Sandeshpresided Byhpsj
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MFA No. 3637 of 2019
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 26TH DAY OF MAY, 2023
BEFORE
THE HON'BLE MR JUSTICE H.P.SANDESH
MISCELLANEOUS FIRST APPEAL NO.3637 OF 2019 (ESI)
BETWEEN:
THE DEPUTY DIRECTOR,
EMPLOYEES STATE INSURANCE CORPORATION,
DOOR NO.5/7/708/11, 1ST FLOOR,
CITY POINT, NAVABHARATH CIRCLE,
KODIALBAIL MANGALORE - 575003.
...APPELLANT
(BY SRI C. SHASHIKANTHA, ADVOCATE)
AND:
THE PRESIDENCY SCHOOL,
KELARAI POST,
BONDANTHAILA, KUNTADAKA,
MANGALORE - 575029.
Digitally signed
by SHARANYA T REP BY ITS CHAIRMAN & MANAGING TRUSTEE
Location: HIGH OF A.H. MEMORIAL EDUCATIONAL TRUST
COURT OF MR. NISSAR AHMED.
KARNATAKA
...RESPONDENT
(RESPONDENT- SERVED)
THIS MFA IS FILED UNDER SECTION 82(2) OF THE ESI
ACT, 1948 AGAINST THE ORDER DATED 24.11.2018 PASSED IN
ESI.NO.1/2016 ON THE FILE OF THE PRESIDING OFFICER,
LABOUR COURT, D.K, MANGALURU, ALLOWING THE
APPLICATION FILED UNDER SECTION 75 OF THE ESI ACT.
THIS APPEAL COMING ON FOR ADMISSON THIS DAY, THE
COURT DELIVERED THE FOLLOWING:
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MFA No. 3637 of 2019
JUDGMENT
This matter is listed for admission today. Heard the
learned counsel for the appellant.
2. This appeal is filed under Section 82(2) of the
Employees' State Insurance Act, 1948 ('the Act' for short)
praying this Court to set aside the order dated 24.11.2018
passed in ESI No.1/2016, on the file of the Presiding
Officer, Labour Court, Dakshina Kannada, Mangaluru,
raising the substantial questions of law whether the Court
below was justified in entertaining the application under
Section 75 of the Act when there was no order passed
determining the contribution under Section 45A of the Act.
Whether the Court below was justified in entertaining the
premature application under Section 75 of the Act.
Whether the Court below was justified in arriving at the
conclusion that Ex.A9 dated 21.04.2015 was an order and
it was illegal though the said communication provided show
cause and hence the impugned order is perverse to the
material available on record, more particularly Ex.A9.
MFA No. 3637 of 2019
3. The learned counsel for the appellant would
vehemently contend that the Court below failed to
appreciate that application under Section 75 of the Act was
not maintainable inasmuch as Ex.A9 dated 21.04.2015 was
not an order determining the contribution under Section
45A of the Act. The application of the respondent was
premature as the impugned communication was not an
order but called upon the respondent to show cause which
is evident from the bare perusal of the said communication.
Hence, the conclusion arrived by the Court below that it
was an order, is perverse and contrary to the very
communication. The learned counsel would contend that
when the department comes to know about when an
establishment is made and contribution is not made,
exercising the powers under Section 45A of the Act, show
cause notice is issued and determination is only an adhoc
determination of contribution and further proviso says 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
MFA No. 3637 of 2019
reasonable opportunity of being heard. In view of the said
further proviso, a show cause notice was issued and the
same is not an order and also not a final determination.
The Trial Court failed to consider the very proviso of
Section 45A of Act. Section 45A of the Act is clear that if
such contribution is not made and furnished and
maintained in accordance with the provisions of Section 44
of the Act, on the basis of information available to it, by
order, determining the amount of contributions payable in
respect of the employees of that factory or establishment.
The show cause notice is consequent upon Section 45A
further provision that no such order shall be passed by the
Corporation in respect of the period beyond five years and
it is only for period from 2011 to 2013 and hence there is
no any violation of the provision under Section 45A of the
Act and also further proviso. The Trial Court fails to take
note of the show cause notice and the same is not an order
and before passing the final order, an opportunity has to be
given and hence the show cause notice was issued to the
MFA No. 3637 of 2019
respondent herein. Hence, it requires interference of this
Court.
4. Though this Court issued notice against the
respondent, the respondent in unrepresented.
5. Having heard the learned counsel for the
appellant and also on perusal of the material available on
record, particularly document Ex.A9, which was marked
before the Trial Court, it is clear that under Section 39 of
the Act, the Principal employer of the factory covered under
the Act is prepared to pay, in respect of every employee
both the employers and employees contribution at the
rates specified in Rule 51 of the ESI (Central) Rule, 1950
(as amended). The contribution are required to be paid in
terms of Regulations 29, 31 and 33 of the ESI (General)
Regulations, 1950 in to a bank duly authorized by the
Corporation except where otherwise provided, as within the
periods laid down in the purpose. In case of failure to pay
contributions in accordance with Regulation 29 read with
Regulation 31 of ESI (General) Regulation, 1950, interest
at 12% from 01.10.2005 onwards under Regulation 31A of
MFA No. 3637 of 2019
the ESI (General) Regulation, 1950 is also able to be paid
by the principal employer on the arrears of contributions
for each day of default or delay in payment of
contributions.
6. Having taken note of the Regulations and also
Section 39 of the Act, in the letter it is made clear that
information has been laid before the Deputy Director of the
ESI Corporation and on consideration there was a reason to
believe that they have not paid the contributions as per the
provisions of law and also not submitted monthly details of
contributions from 16.03.2011 to 30.09.2013. It is stated
that they have to furnish any particulars of the contribution
actually due in respect of their employees for the above
said periods. The show cause notice is very clear with
regard to exercising the powers under Section 45A of Act is
with regard to non-compliance of Section 44 of the Act and
on basis of the information, a adhoc determination of
contribution was also made. The show cause notice is very
clear that 15 days time was given to show cause as to why
the same cannot be confirmed, if they fail to appear and
MFA No. 3637 of 2019
produce the document within the time stipulated. Having
read the document of Ex.A9, it is clear that under Section
39 of the Act and also considering the Regulations 29, 31
and 33 and also on information received and laid before the
Deputy Director of the ESI Corporation, a show cause
notice was issued exercising the powers under Section 45A
of the Act.
7. The learned counsel also brought to the notice of
this Court, the very proviso of Section 45A of the Act,
which reads as follows:
"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
Social Security Officer 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.
MFA No. 3637 of 2019
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.
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."
8. Having considered Section 45A of the Act, it is
clear with regard to the determination of contributions in
certain cases wherein it is clear that when the provisions of
Section 44 of the Act has not been complied, under Section
45A, the Corporation may, on the basis of information
available to it, pass an order determining the amount of
contributions payable in respect of the employees of that
factory or establishment. The proviso is clear 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. Accordingly, adhoc
determination of contribution was done and show cause
MFA No. 3637 of 2019
notice was issued in terms of Ex.A9 and the Trial Court
while passing the impugned order comes to the conclusion
that the very order passed by the appellant herein amounts
to violation of principles of natural justice and also not
called for any records from the respondent. The very
approach of the Trial Court is erroneous and Section 45A of
the Act clearly says that on information available to it, the
order can be passed and also before confirming the order,
a show cause notice has to be given and it is only a adhoc
determination and the same has not been taken note of.
The Trial Court failed to take note of Section 45A of the
Act, wherein a provision is made to determine the
contribution on the information and the document Ex.A9 is
also very clear that on the information laid before the
Deputy Director of ESI Corporation, comes to the
conclusion that they have not paid the contribution as per
the provisions of law and also not submitted the monthly
details of contribution from 16.03.2011 to 30.09.2013 for a
period of 2½ years. When the Corporation exercised the
powers under Section 45A of the Act when the details of
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MFA No. 3637 of 2019
contribution collected has not been submitted and no
particulars are given, the Trial Court failed to consider the
very provision under Section 45A of the Act and passed the
impugned order. The very reasoning given by the Trial
Court that the order is against the principles of natural
justice cannot be accepted since the proviso of Section 45A
of the Act is clear that no such order has to be passed
without giving any show cause notice and accordingly show
cause notice is given under the further proviso of Section
45A of the Act. Hence, the order impugned is required to
be set aside and the matter has to be remanded to the
Trial Court to continue with the further proceedings
considering the objections, if any, filed before the Trial
Court in pursuance of Ex.A9.
9. In view of the discussions made above, I pass
the following:
ORDER
(i) The appeal is allowed.
(ii) The impugned order dated 24.11.2018,
passed in ESI No.1/2016, on the file of the
Presiding Officer, Labour Court, Dakshina
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MFA No. 3637 of 2019
Kannada, Mangaluru, is set aside and the
matter is remanded back to the Trial Court
to consider the matter afresh by giving an
opportunity to both the parties.
Sd/-
JUDGE
MD
