Telangana High Court
M/S. Proven Chemical Ltd., Hyd. vs The Esi Corp. Hyd. And Another on 28 June, 2024
THE HONOURABLE SMT. JUSTICE M.G.PRIYADARSINI
CIVIL MISCELLANEOUS APPEAL No.628 of 2012
J U D G M E N T:
This Civil Miscellaneous Appeal is filed by petitioner-
appellant under Section 82 of the Employees State
Insurance Act, 1948 (for short referred as 'the Act, 1948')
aggrieved by the Order dated 17.09.2010 passed in
E.I.C.No.48 of 2003 (impugned Order) by the learned
Judge, Employees Insurance Court, Hyderabad (hereinafter
will be referred as 'learned trial Court).
02. For the sake of convenience, hereinafter, the
parties will be referred as per their array before the learned
trial Court.
03. The brief facts of the case are that petitioner
i.e., M/s.Proven Chemical Limited, was a small
establishment manufacturing bulk drugs. Petitioner
covered under the provisions of the Act, 1948. Since
petitioner had sustained losses, it stopped its production of
drugs from the year 1997. The Andhra Pradesh Pollution
Control Board also issued the proceedings directing
petitioner to stop production and accordingly, petitioner
stopped activity from 07.01.1998. On account of its
closure, employees also left the organization. Petitioner
informed about its closure to respondents. Therefore,
petitioner is not liable to pay any contribution because no
worker was working from January 1998. Petitioner
received an order of attachment of immovable property
dated 22.09.2003 attaching the Flat No.404 and Maruthi
Zen Car No.AP AR 2119. A representation was made by
petitioner stating that no worker was working with
petitioner but respondents did not consider the same. In
the letter addressed to petitioner there was mention about
many letters with dates having been addressed to
petitioner establishment. Since no such letters were
received by petitioner, petitioner made a representation
dated 26.09.2003 to the Employees State Insurance
Corporation for supply of copies of proceedings mentioned
in the attachment proceedings. Respondents supplied only
some of the photo copies of those proceedings along with
the covering letter dated 29.09.2003 except the copies of
documents shown at Serial No.1 and 3 of the annexure
enclosed to the attachment proceedings dated 22.09.2003.
Respondents issued a letter dated 06.08.1998 asking
petitioner to pay a sum of Rs.85,945/- towards the ESI
contribution for the period from 01.01.1996 to 31.08.1997.
On the ground that no compliance was made to the letter
dated 06.08.1998 respondents had filed P.S.C.No.58 of
2001. Thereupon, petitioner had paid the amount of
Rs.85,945/- demanded under letter dated 06.08.1998.
Further, respondents issued two proceedings one dated
09.08.2000 seeking payment of Rs.1,15,166/- towards ESI
contribution for the period from October, 1998 to March,
1999 and another proceeding seeking payment of
Rs.52,901/- towards ESI contribution for the period
October, 1997 to September, 1999. Further, respondents
sought payment of Rs.56,328/- for the period from
October, 1997 to September, 1998 through its letter dated
31.08.2000 towards ESI contribution. Claim made by
respondents was not based on any valid grounds but based
on assumptions. Since no employee was working from
January, 1998 onwards payment of contribution did not
arise. Petitioner had paid the contribution for the period
mentioned at Serial No.1 and 3 of the annexure enclosed to
the attachment order dated 22.09.2003. Hence, petitioner
is not liable to pay any amount and sought for setting aside
the order of attachment of immovable properties dated
22.09.2003.
04. Respondents filed written statement stating
that on the basis of Inspection Report dated 23.01.1992 of
the Inspector of the Insurance Corporation who visited and
inspected petitioner-company on 23.01.1992 and
Respondent No.1-Corporation issued an intimation
proceedings No. AP/PICI/52-9445-34 dated 30.01.1992
covering petitioner under the provisions of the Act, 1948.
The administrative office of petitioner situated at
Yusufguda was also allotted a sub code No.52-9445-34/A
and petitioner was advised to make compliance in respect
of its administrative office. Inspector of respondent No.1-
Corporation who visited and inspected petitioner company
on 29.09.1997 reported that petitioner had not paid ESI
contribution. Thereupon, respondent No.1-Corporation
issued a notice in Form C-18 (Actuals) dated 21.11.1997,
asking petitioner to pay the ESI contribution within 15
days from the date of receipt of the said notice. Since
petitioner had failed to pay ESI contribution amount
demanded under Form C-18 Notice dated 21.11.997
respondent No.1-Corporation issued proceedings on
06.08.1998 authorizing the Recovery Officer to recover the
amounts 1) Rs.21,948/- (Rs.17,958+3,990 Interest)
towards ESI contribution in respect of the office staff for
the period from 1/96 to 8/97, 2) Rs.85,945/- (Rs.70,332 +
15,623 Interest) towards ESI contribution in respect of
factory staff for the period from 1/96 to 8/97, 3)
Rs.4,674/- (Rs.4,251 + 423 Interest) towards ESI
contribution on the omitted wages for the period from 4/95
to 3/96. Petitioner had paid Rs.85,945/- towards ESI
contribution subsequently. Since petitioner subsequently
failed to comply with the provisions by not submitting as
required under Section 44 of the Act, 1948 Respondent
No.1-Corporation issued the notice in Form C-18 directing
petitioner to show-cause as to why an amount of
Rs.27,188/- should not be determined as payable on adhoc
basis. So issuing such proceedings, petitioner was given
an opportunity of explaining its case on personal hearing
dated 15.03.1999. Since petitioner has not responded to
the opportunity given Respondent No.1-Corporation issued
proceedings under Section 45-A of the Act, 1948 on
30.04.1999 directing petitioner to pay ESI contribution in
respect of the office staff, the said amount was also
remained as not paid. Thereafter, respondent No.1-
Corporation issued notices in Form C-18 (Adhoc) 1) dated
15.12.1999 assessing ESI contribution as Rs.44,616/-
payable in respect of the office staff under the code No.52-
9445-34/A for the period from 10/97 to 9/99, 2) dated
12.11.1999 assessing ESI contribution as Rs.12,548/-
payable in respect of the factory staff for the period from
10/97 to 3/99 and 3) dated 17.04.2000 assessing ESI
contribution as Rs.1,07,358/- payable in respect of the
remaining 77 factory employees for the period from 10/97
to 3/99. Even though, petitioner was given an opportunity
of personal hearing, it had not availed nor made
compliance under the provisions of the Act, 1948.
Therefore, respondent No.1-Corporation issued orders
under Section 45-A of the Act, 1948 on 27.03.2000,
05.05.2000 and 23.06.2000 respectively. Thereafter, the
Recovery Officer of respondent No.1-Corporation issued the
recovery notices in Form ESI CP-2 calling upon petitioner
to pay the amount within 15 days along with interest.
Since petitioner failed to make payment of ESI
contribution, when Recovery Officer started initiating the
coercive steps for recovery of ESI contribution, petitioner
filed a petition before the learned trial Court. Petitioner
made contradictory statements as regards the closure of
factory, at one breath, it was stated that petitioner-
company ceased to function from January, 1997, at
another breath, it was stated that petitioner-company
ceased to function from 17.01.1998 onwards. Petitioner
had paid Rs.85,945/- towards ESI contribution along with
interest for the period from 1/96 to 8/97 in respect of
factory staff but contribution for the office staff for the
same period is still due from petitioner. There was no
overlapping in proceedings dated 05.07.1998 and
06.08.1998. While C-19 dated 05.07.1998 was issued for
the period from 1/96 to 9/98, C-19 dated 06.08.1998 was
issued for the period from 1/96 to 8/97 only. By oversight
respondents have claimed contribution for the period from
10/97 to 3/99 twice for an amount of Rs.52,901/- and
Rs.56,238/- in Form C-19 dated 09.08.2000 and
31.08.2000 respectively. Subsequently, C-19 dated
31.08.2000 for Rs.56,238 is withdrawn. However, there
are two different C-19 notices for the same period from
10/98 and 3/99 for different number of factory employees
and they are in order. Still there are 19 notices pending for
payment by petitioner. There are no valid and justified
grounds either for granting any relief to petitioner and
sought for dismissal of the petition.
05. Before the learned trial Court, on behalf of
appellant, the Managing Director of Appellant-company
was examined as PW1 and got marked Exs.P1 to P7. On
behalf of respondents, their officers are examined as RW1
and RW2 and got marked Exs.R1 to R17.
06. The learned trial Court after considering the
submissions of both sides and evidence available on record
both oral and documentary, has partly allowed the petition
by setting aside the Order of Attachment dated 22.09.2003
in respect of claim for Rs.85,945/- under Form No.C-19
dated 06.08.1998 and Rs.56,238/- under Form No.C-19
dated 31.08.2000. Petition is dismissed in respect of claim
for Rs.4,674/- under Form No.C-19 dated 06.08.1998,
Rs.21,948/- under Form No.C-19 dated 06.08.1998,
Rs.1,15,166/- under Form No.C-19 dated 09.08.1998,
Rs.14,717/- under Form No.C-19 dated 31.08.2000,
Rs.52,901/- under Form No.C-19 dated 09.08.2000 and
Rs.31,056/- under Form No.C-19 dated 05.07.1998 under
Order of Attachment dated 22.09.2003.
07. Aggrieved by the same, petitioner preferred this
Civil Miscellaneous Appeal seeking to set aside the
dismissal Order.
08. Heard Sri G.Pedda Babu, learned counsel for
appellant and Sri P.Rajashekar, learned counsel for
respondents and perused the record available before the
Court.
09. The contention of learned counsel for appellant
is that the learned trial Court ought to have considered the
fact that petitioner-company has closed its activity from
07.01.1998 onwards pursuant to notice of the Andhra
Pradesh Pollution Control Board and that thereafter
employees left the organization; and that neither RW1 nor
RW2 stated that appellant continued its
manufacturing/working operations after September, 1997
nor did they inspect and produce any evidence to that
effect and prayed to set aside the impugned Order.
10. On the other hand, learned counsel for
respondents has contended that the learned trial Court
after considering the oral and documentary evidence
available on record has passed impugned Order with
reasons.
11. Now the point for consideration is that:
Whether the impugned Order dated 17.09.2010
passed in E.I.C.No.48 of 2003 by the learned trial
Court, is liable to be set aside?
P O I N T:
12. This Court has perused the entire evidence and
documents available on record.
13. The Managing Director of Petitioner-company
was examined as PW1 and reiterated the contents of
petition and got marked Exs.P1 to P7. A perusal of Ex.P1-
Order of Attachment of Immovable property dated
22.09.2003 discloses that the property of petitioner-
company i.e., Flat No.404 and Maruthi Zen Car No.AP AR
2119 are attached by respondents for non-payment of ESI
contribution amount. Ex.P2-Representation dated
26.09.2003 submitted by petitioner to respondents with
reference to Ex.P1, requesting respondents to supply
relevant documents for taking necessary action. Ex.P3-
Letter dated 29.09.2003 issued by respondents showing
the details of documents supplied to petitioner with
reference to Ex.P2-Representation. Ex.P4-Proceedings of
the Andhra Pradesh Pollution Control Board, Hyderabad
dated 07.01.1998 discloses that petitioner-company has
not complied with the directives of the Andhra Pradesh
Pollution Control Board, Hyderabad, for which the Andhra
Pradesh Pollution Control Board has directed petitioner-
company to stop its activity with immediate effect. Ex.P5-
Representation dated 04.01.2000 made by petitioner
informing respondents about closure of petitioner-company
from January, 1998 as per Orders of the Andhra Pradesh
Pollution Control Board vide Ex.P4. Ex.P6-Letter dated
18.05.2000 issued by petitioner informing respondents
that petitioner-company was closed and assured
respondents that petitioner-company will pay ESI
contributions after restart of the unit. Ex.P7-Certified
Copy of Judgment dated 13.09.2002 passed in Prosecution
Case No.58 of 2001 in C.C.No.277 of 1999 by the learned
Judicial Magistrate of First Class for the Offences under
the Act, 1948 and Industrial Tribunal-I, Andhra Pradesh,
Hyderabad wherein respondents herein was shown as
complainant and petitioner was shown as accused,
discloses that petitioner was found guilty for the offence
under Section 85(a) of the Act, 1948 for not informing
respondents-Corporation about closure of petitioner-
company.
14. RW1-Manager of Respondents-Corporation by
way of his chief affidavit stated that he inspected the
premises of petitioner-company on 29.09.1997 and found
that petitioner failed to pay ESI contributions amounting to
Rs.70,322/- and omitted wages contributions of
Rs.4,251/- and Rs.17,958/- in respect of Registered Office
and prepared Inspection Report.
15. RW2-Inpsector of Respondents-ESI
Corporation, Legal Branch, deposed that he gave evidence
based on the records available in their office and stated
about inspection in the similar lines of RW1 and also
stated about issuance of notices for payment of ESI
contributions under Exs.R9, R10, R14 and R15.
16. Now coming to the documentary evidence,
Ex.R1-Copy of C-18 notice dated 21.11.1997 issued by
respondents demanding petitioner-company to pay ESI
contributions from 1/96 to 8/97 for Rs.17,958, Ex.R2-
Copy of C-18 notice dated 15.12.1999 issued by
respondents demanding petitioner-company to pay ESI
contributions from 01.10.1997 to 30.09.1999 for
Rs.44,616, Ex.R3-Copy of Order dated 05.05.2000 under
Section 45-A of the Act, 1948 issued by respondents
directing petitioner to pay default contribution amount
along with interest, Ex.R4-Copy of HRO-325 showing the
details of petitioner-company, Ex.R5-Copy of Visit Note
dated 29.09.1997 issued by RW1 shows that petitioner
committed default of Rs.70,322/- for the period from 1/96
to 8/97 and it is also mentioned that petitioner-company
has deducted ESI contributions from the employees
including contract workers and accordingly issued Ex.R6
and R7-Inpsection Reports. Ex.R8-Copy of Visit Note
issued by RW1 also shows that petitioner committed
default of ESI contributions. Ex.R9-Copy of C-18 Notice
(actual basis) dated 21.11.1997 asking petitioner-company
the pay ESI contributions along with interest or otherwise
cautioned of recovery under Section 45-C and 45-I of the
Act, 1948, Ex.R10-Copy of C-18 notice dated 08.01.1999
asking petitioner-company to pay Rs.27,188/- towards ESI
contributions along with interest, Ex.R11-Letter of
petitioner dated 04.10.1997 addressed to respondents
seeking time to produce ledgers for the year 1996-97 as
audition for filing Income Tax Returns was going on.
Ex.R12-Copy of Order dated 30.04.1999 under Section 45-
A of the Act, 1948 issued by respondents directing
petitioner to pay default contribution amount along with
interest, Ex.R13-Copy of Order dated 27.03.2000 under
Section 45-A of the Act, 1948 issued by respondents
directing petitioner to pay default contribution amount
along with interest, Ex.R14-Copy of C-18 notice dated
12.01.1999 asking petitioner-company to pay Rs.12,548/-
towards ESI contributions along with interest, Ex.R15-
Copy of Recovery Notice dated 23.06.2000 under Section
45-A of the Act, 1948 for the period from 01.10.1998 to
31.03.1999, Ex.R16 and R17-Copies of showcause notices
dated 21.11.1997 issued by respondents to petitioner for
non-payment of ESI contributions.
17. It is an admitted fact that RW1 visited and
inspected petitioner-company on 29.09.1997 in the
presence of PW1 and found that there were 87 employees
working as on that date and it was further noticed that no
ESI contribution amount was paid for the period from
January, 1996 and August, 1997 even after ESI
contributions were deducted from the employees. Further,
even as per Ex.R11-Letter dated 04.10.1997 by petitioner
addressed to respondents, petitioner sought time to
produce ledgers for the year 1996-97 as audition for filing
Income Tax Returns was going on, but later on petitioner
failed to file those ledgers. Even during cross-examination,
PW1 admitted that he did not file ledgers for the period
1996-1997 and 1997-1998.
18. After careful scrutiny of entire record, it is
crystal clear that petitioner had committed default in
payment of ESI contribution amount even after deducting
concerned amount from the salaries of workers-employees.
After issuance of notices, petitioner paid an amount of
Rs.85,945/- as demanded under Letter dated 06.08.1998.
Admittedly, petitioner has not filed any document to show
that M/s.Proven Chemical Limited was closed on
07.01.1998. It is pertinent to note that no document was
filed showing the closure of petitioner-company even by
way of additional evidence before this Court.
19. It is relevant to mention here that petitioner
filed petition under Section 75(1)(g) of the Act, 1948 before
the learned trial Court in the year 2003, which reads as
under:
"any other matter which is in dispute between a
principal employer and the Corporation, or
between a principal employer and an immediate
employer or between a person and the
Corporation or between an employee and a
principal or immediate employer, in respect of any
contribution or benefit or other dues payable or
recoverable under this Act, or any other matter
required to be or which may be decided by the
Employees' Insurance Court under this Act, such
question or dispute subject to the provisions of
sub-section (2A) shall be decided by the
Employees' Insurance Court in accordance with
the provisions of this Act."
Section 77(1)(A) of the Act, 1948 reads as under:
Every such application shall be made
within a period of three years from the date on
which the cause of action arose.
Explanation: For the purpose of this sub-
section,--(a) the cause of action in respect of a
claim for benefit shall not be deemed to arise
unless the insured person or in the case of
dependants' benefit, the dependants of the
insured person claims or claim that benefit in
accordance with the regulations made in that
behalf within a period twelve months after the
claim became due or within such further period
as the Employees' Insurance Court may allow on
grounds which appear to it to be reasonable;
(b) the cause of action in respect of a claim by the
Corporation for recovering contributions (including
interest and damages) from the principal
employer shall be deemed to have arisen on the
date on which such claim is made by the
Corporation for the first time:
Provided that no claim shall be made by the
Corporation after five years of the period to which
the claim relates;
(c) the cause of action in respect of a claim by the
principal employer for recovering contributions
from an immediate employer shall not be deemed
to arise till the date by which the evidence of
contributions having been paid is due to be
received by the Corporation under the
regulations.
20. In the above statute, it is clear that every
application shall be made before the learned trial Court
within a period of three years from the date on which the
cause of action arose. In the present case on hand, as
seen from the record, respondents issued Form C-19
notices which are of the years 1998 and 1999 issued by
respondents. Without filing any application rendering
explanation, a petition under Section 75(1)(g) of the Act,
1948 was filed before the learned trial Court, therefore, the
same is barred by limitation. Therefore, there are no
grounds to interfere with the findings of the learned trial
Court.
21. Now coming to the substantial question of law,
in Shri Debananda Dam vs The Employees' State
Insurance Corporation 1 it was held that the sub-section
(1) of Section 82 of the Act, 1948 contemplates that no
appeal shall lie from an order of an Employees' Insurance
Court, save and expressly provided in this section making
MFA 02 OF 2019 dated 13.01.2022 by the High Court of Tripura at Agartala
it implicit that the filing of appeal against the judgment
passed by the Insurance court is not automatic rather
conditional. The condition is encrypted in sub-section (2) of
Section 82, which mandates that there must be substantial
question of law to file an appeal to the High Court from an
order of the Insurance Court. So, existence of substantial
question of law is a condition precedent to prefer appeal
before the High Court against the judgment and decree
passed by the Insurance court. It can easily be said that to
file an appeal, the appellant has to comply the
essentialities of Section 100 of the Code of Civil Procedure,
1908. So, for hearing an appeal against the Judgment and
decree passed by the Insurance Court existence of
substantial question of law is a sine qua non for exercise of
jurisdiction under Section 82(2) and the procedure is
mandatory as provided under Section 100 CPC. It is settled
proposition of law that second appeal does not lie on the
erroneous findings of facts based on appreciation of
relevant evidences. Further, the scope of exercise of
jurisdiction by the High Court in second appeal under
Section 100 CPC is limited to the substantial question of
law. To be a substantial question of law, it must be
debatable, not previously settled by law of the land or a
binding precedent and answer to the same will have a
material bearing as to the rights of parties before the
Court. In the present case on hand, there is no substantial
question of law.
22. In view of the above discussion, this Court is of
the considered view that the learned trial Court after
considering all the aspects has rightly passed the
impugned Order by partly allowing the petition to the
extent which petitioner has paid ESI contribution amount
and rightly dismissed the petition to the extent of
remaining claim, upholding the impugned proceedings
issued by respondents. Thus, there is no infirmity, or
irregularity, or illegality in the impugned Order passed by
the learned trial Court, for which this Court do not find
any reason to interfere with the same. Hence, the Civil
Miscellaneous Appeal is devoid of merits and it is liable to
be dismissed.
23. Accordingly, the Civil Miscellaneous Appeal is
dismissed. There shall be no order as to costs.
As a sequel, miscellaneous applications if any
pending shall stand closed.
________________________________
JUSTICE M.G.PRIYADARSINI
Date: 28-JUN-2024
KHRM
