Telangana High Court
Kalwakurthy Municipality vs The Secretary To Government on 5 June, 2024
THE HON'BLE SRI JUSTICE C. V. BHASKAR REDDY
WRIT PETITION No.13178 of 2023
ORDER:
This Writ Petition is filed praying this Court to set
aside the Demand Notice in Ref No.52000460730000908/
CP/540172, dated 13-03-2023 issued by the 4th
respondent for recovery of an amount of Rs.55,74,539/-
(Rupees fifty five lakhs Seventy four thousand Five hundred
and thirty nine only) i.e., a sum of Rs.40,66,871/- towards
contribution plus Rs.15,07,668/- towards interest @ 12
Percent per annum and @ Rs.1337-05 per day from
06-06-2023 to the date of recovery being it illegal arbitrary
and without verification of records and consequently direct
the respondents 2 to 4 not to demand further payments
from the petitioner herein towards ESI contributions for the
outsourcing employees engaged by the petitioner through
the 5th respondent Agency M/s.Aditya Enterprises Plot
No.103 Sivaganga Colony LB Nagar Rangareddy District.
2. The case of the petitioner Municipality is that it has
engaged 110 persons in all categories on outsourcing basis
and used to remit ESI contribution amount directly to
respondent No.2 authority till 2016. Thereafter from 2017
onwards respondent No.5 used to receive the amount from
the petitioner along with consolidated salaries and remit
the amounts to respondent No.2 authority. The petitioner
municipality has also increased the number of persons and
hired more persons on outsourcing through respondent
No.5 agency. It is the further case of petitioner that now
145 persons are working in the petitioner Municipality on
outsourcing through respondent No.5 agency and is paying
the consolidated salary. Respondent No.5 agency is paying
respondent No.2 authority every month towards ESI
contribution for the persons hired by the petitioner
Municipality.
3. While the things stood thus, respondent No.4 has
issued Demand Notice in Ref No.52000460730000908/
CP/540172, dated 13-03-2023 for recovery of an amount of
Rs.55,74, 539/- stating that petitioner Municipality is liable
to pay the said amount towards contribution of ESI by
exercising the power under Section 45(C) and 45(I) of the
ESI Act (for short, 'the Act').
4. The grievance of the petitioner is that prior to
issuance of said demand notice dated 13-03-2023 the
petitioner Municipality has not received any notice and the
petitioner Municipality was only made as a party to the
proceedings dated 08-03-2023 issued by respondent No.3
and as such straight away issuance of impugned demand
notice is illegal and arbitrary.
5. Sri G. Venkateshwarlu, learned Standing counsel for
ESIC vehemently contended that the respondents have
issued notice while conducting enquiry under
Section 45-A of the Act. Even after receipt of said notice
also petitioner Municipality has not participated in the
enquiry or produced any records. Therefore, there is no
illegality in issuing the demand notice for realization of
amounts towards ESI contribution. He further contended
that against the demand notice dated 13-03-2023 the
petitioner is having alternative remedy of filing statutory
appeal under Section 45AA of the Act, therefore, the
present Writ Petition filed by the petitioner herein is not
maintainable and is liable to be dismissed in limini.
6. Learned counsel appearing for the petitioner has
vehemently contended that only after issuance of demand
notice dated 13-03-2023 the petitioner Municipality came
to know about the same and if sufficient time is provided
they will avail alternate remedy of appeal under
Section 45AA of the Act. He also placed reliance on a
decision reported in Ashok Layland Limited v. Deputy
Tahsildar 1, wherein by placing reliance on the judgment of
Hon'ble Apex Court in Employees' State Insurance
Corporation v. F. Fibre Bangalore (Private) Limited 2 it is
held in paragraph No.5 as under :
"The Full Bench of the High Court has held that in a
case where the order under Section 45-A becomes
final, there is no need for the Corporation to seek
adjudication before the Insurance Court. In all other
cases, the Corporation is required to go to the
Insurance Court, have it adjudicated and then make
2001 (4) ALD 96 (DB)
2 1997 SCC (L&S) 190
a demand. We are of the view that the Full Bench of
the High Court is clearly in error to reach that
conclusion.
Though Section 75 of the Act does not
envisage as to who has to approach the Insurance
Court, by necessary implication when the employer
denies the liability or applicability of the provisions
of the Act or the quantum of the contribution to be
deposited by the employer, it is for him to approach
the Insurance Court and seek adjudication. It is not
for the Corporation in each case whenever there is a
dispute, to go to the Insurance Court and have the
dispute adjudicated. Otherwise, the Act would
become unworkable and defeat the object and
purpose of the Act."
7. In view of the aforesaid submissions, this Writ Petition
is disposed of relegating the petitioner Municipality to avail
alternative remedy of appeal available under the ESI Act
within 45 days from the date of receipt of a copy of this
order. Till such time, the respondents are directed not to
take any coercive action pursuant to the impugned demand
notice, dated 13-03-2023. There shall be no order as to
costs.
8. As a sequel thereto, miscellaneous petitions, if any,
pending shall stand closed.
___________________________
C.V. BHASKAR REDDY, J
June 05, 2024
PN
