Regional Director E.S.I.Cor.And Others v. Deepak Industries And Others

-1AFR HIGH COURT OF CHHATTISGARH AT BILASPUR MISC. APPEAL NO. 605 OF 2004 1.

Regional Director, ESI Corporation, Panchdeep Bhawan, Nanda Nagar, Indore.

2.

Recovery Officer, Panchdeep Bhawan, Nanda Nagar, Indore. ... Appellants versus 1.

Deepak Industries, 33-Lite Industrial Area, Industrial State, Bhilai (C.G.) 2.

Employees Insurance Court, Labour Court, Durg (C.G.) ... Respondents For Appellants :

Mr. Vinod Deshmukh, Advocate.

For Respondent No.1 :

Mr. Tanuj Patwardhan, Advocate.

Hon'ble Shri Justice P. Sam Koshy Order on Board 06/12/2017 1.

The present is an appeal of the ESI Corporation challenging the order dated 8.3.2004 passed by the Employees' State Insurance Court, i.e., the Labour Court, Durg, in Case No. 133/E.S.I./2002. 2.

Vide the impugned order, the learned ESI Court has rejected the three notices issued by the ESI Corporation, which were demand notices for recovery of the ESI contributions, dated 9.3.2002, 25.9.2002 and 29.10.2002.

3.

Contention of Shri Vinod Deshmukh, learned Counsel appearing for the appellant-ESI Corporation, is that the ESI Corporation on an earlier occasion had issued a notice, dated 16.8.1991, for the assessment period September, 1989 to the month ending March, 1991. The said notice of demand by the ESI Corporation was put to challenge by the respondent company before the ESI Court, i.e., the Labour Court, Durg, vide Case No. 13/1991/E.S.I. The said case of the respondent company subsequently got dismissed for want of prosecution. Subsequently, the corporation again

-2issued recovery orders against the respondent company vide three notices referred to in the preceding paragraphs, i.e., dated 9.3.2002, 25.9.2002 and 29.10.2002. These three notices were put to challenge before the ESI Court and vide the impugned order the learned ESI Court has allowed the application on the ground of limitation, holding the notices to be barred by limitation as per the provisions of Section 77(1)(1A)(b) of the Employees' State Insurance Act, which provides for a limitation of 5 years for initiating a proceeding before the ESI Court.

4.

Shri Deshmukh, learned counsel for the ESI Corporation, submits that the said finding of the learned ESI Court is erroneous and is per se illegal, for the reason that the provisions of Section 77(1)(1A)(b) would not be applicable in the instant case as that is a period of limitation prescribed for challenging the demand notice by the assessee before the ESI Court. That the period of limitation prescribed under Section 77(1)(1A)(b) is not for the Corporation authorities from initiating assessment or initiating recovery proceeding against the assessee. According to Shri Deshmukh at the relevant point of time there was no period of limitation prescribed under the Act for initiating recovery proceeding or for initiating assessment proceeding under the Act and therefore the finding is erroneous. 5.

Shri Tanuj Patwardhan, learned counsel appearing for respondent company, however, opposing the appeal, submits that as regards the notices which have been issued by the appellant-corporation, they have been issued much after the prescribed period of 5 years limitation as is prescribed under the proviso to Section 77(1)(1A)(b) of the E.S.I. Act. He further submits that though the original notice which was issued was of 16.8.1991, but thereafter the appellant-corporation did not initiate any fresh notices against the respondent-company. He further submits that the Labour Court while considering this aspect has reached to the conclusion

-3that since the notices issued were beyond the period of 5 years, the notices were hit by the law of limitation and therefore had allowed the claim application. Hence the appeal of the appellant being devoid of merits deserves to be rejected. It was further contended by the learned counsel for the respondent-company that during the relevant period, there was also an interim protection by the Hon'ble Supreme Court in respect of applicability of the provision of the E.S.I. Act itself in the area where the respondent company situated and for this reason also the notices issued were not sustainable and the appeal deserved to be rejected. 6.

Having considered the contentions put forth on either side, what is relevant to be taken note of is that Chapter VI of the E.S.I. Act deals with 'Adjudication of Dispute and Claims' before an ESI Court. It also deals with constitution, procedures and proceedings before an ESI Court. Section 77 refers to the commencement of proceedings before an ESI Court. For ready reference provisions of Section 77(1) are reproduced herein under:- "77.

Commencement of proceedings.-(1) The proceedings before an Employees' Insurance Court shall be commenced by application.

(1A). 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:

-4Provided 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 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."

7.

A plain perusal of the aforesaid provision would clearly reflect that the said provision is exclusively for challenging an action mentioned in Section 75 of the Act before an ESI Court. The period of limitation prescribed under Section 77 is also for the assessee to challenge the action of the ESI Corporation before an ESI Court. The said Section does not deal with assessment or recovery proceedings initiated by the Corporation.

8.

So far as the recovery and determination of contributions under the E.S.I. Act is concerned, the same is envisaged under Chapter IV of the Act which deals with contributions. Section 45A is a provision which was inserted in 1967 which deals with determination of contributions in certain cases. A plain perusal of this provision would show that the period of limitation prescribed under the proviso clause of the said Section was itself inserted for the first time with effect from 1.6.2010 and that means that prior to 1.6.2010 or prior to insertion of the proviso clause there was no period of limitation as such prescribed for determination of the contributions.

9.

Further, the proceedings drawn under Section 45A was also made appealable under Section 45AA before the appellate authority as may be provided by the regulation. In the instant case, there does not appear to be any such appeal to have been preferred by the respondent company and that it is only after the demand notices which were issued by the ESI

-5Corporation that the respondent company has preferred a case before the ESI Court challenging the notice.

10.

In the case of ESI Corporation v. C.C. Santhakumar, 2007 (1) SCC 584, the Hon'ble Supreme Court in paragraphs 26 to 29 has held as follows:

"26.

On a plain reading of Sections 45-A and 45-B in Chapter IV and 75 and 77 in Chapter VI of the Act, as indicated above, there cannot be any doubt that the area and the scope and ambit of Sections 45-A and 75 are quite different. 27.

If the period of limitation, prescribed under proviso (b) of Section 77(1-A) is read into the provisions of Section 45-A, it would defeat the very purpose of enacting Sections 45-A and 45-B. The prescription of limitation under Section 77(I-A)(b) of the Act has not been made applicable to the adjudication proceedings under Section 45-A by the legislature, since such a restriction would restrict the right of the Corporation to determine the claims under Section 45-A and the right of recovery under Section 45-B and, further, it would give a benefit to an unscrupulous employer. The period of five years, fixed under Regulation 32(2) of the Regulations, is with regard to maintenance of registers of workmen and the same cannot take away the right of the Corporation to adjudicate, determine and fix the liability of the employer under Section 45-A of the Act, in respect of the claim other than those found in the register of workmen, maintained and filed in terms of the Regulations. 28.

What Section 75(2) empowers is not only the recovery of the amounts due to the Corporation from the employer by recourse to the ESI Court, but also the settlement of the dispute of a claim by the corporation against the employer. While this is so, there is no impediment for the Corporation also to apply to the ESI Court to determine a dispute against an employer where it is satisfied that such a dispute exists. If there is no dispute in the determination either under Section 45-A(1) or under Section 68, the Corporation can straightaway go for recovery of the arrears.

29.

Section 77 of the Act relates to commencement of proceedings before the ESI Court. The proviso to sub-Section (1-A)(b)77 of the Act cannot independently give any meaning without reference to the main provision, namely, Section 77 of the Act. Therefore, the proviso to Clause (b) of Section 77(1-A) of the Act, fixing the period of five years for the claim made by the Corporation, will apply only in respect of claim made by the Corporation before the ESI Court and to no other proceedings." 11.

In the given factual matrix of the case, this Court has no hesitation in reaching to the conclusion that the finding arrived at by the learned ESI Court of the demand notices instituted by the appellant-corporation to be

-6time barred is not sustainable, for the reason that the provisions of Section 77(1) would not be applicable in the instant case for determining the period of limitation in initiating the notices.

12.

The impugned order thus being bad in law deserves to be and is accordingly set aside. The matter is remitted back to the concerned ESI Court for deciding the case on its merit afresh. The parties would also be at liberty to adduce evidence in respect of their respective stand which they intend to take for establishing the case including that of limitation, if any. 13.

The appeal thus stands allowed and disposed of accordingly. Sd/- (P. Sam Koshy) /sharad/ Judge