Employee State Insurance Corporation Vs M/s. Navdurga Fuel Private Ltd.

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2024:CGHC:48141

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AFR

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HIGH COURT OF CHHATTISGARH AT BILASPUR

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MA No. 78 of 2017

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1 - Employee State Insurance Corporation Through Branch Manager, Local Office Employees State Insurance Corporation, Behind P.H.E. Office, First Floor, Chakradhar Nagar, Raigarh, Chhattisgarh., District : Raigarh, Chhattisgarh

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2 - Employee State Insurance Corporation Through Recovery Officer, Employees State Insurance Corporation, Raipur, Chhattisgarh.

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3 - Employee State Insurance Corporation Through Deputy Director, Employees State Insurance Corporation, Raipur, Office Of No. 2 And 3 Office Of Recovry 107, Ramnagar Road, Kota, Raipur, Chhattisgarh.

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4 - State Bank Of India Through Branch Manager, State Bank Of India, Main Branch, Raigarh, District- Raigarh, Chhattisgarh.

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... Appellants

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versus

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1 - M/s. Navdurga Fuel Private Ltd Through Nimish Gadodiya S/o Sabermal Gadodiya, Village Saraipali, Tehsil Tamnar, District Raigarh, Chhattisgarh.

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... Respondent

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For Appellants : Mr. Pranav Saxena, Advocate. For Respondent : Mr. Vivek Tripathi, Advocate.

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SB: Hon'ble Shri Parth Prateem Sahu, Judge

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ORDER ON BOARD

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05/12/2024

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Digitally NISHA signed by DUBEY NISHA DUBEY

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This appeal is filed under Section 82 of the Employees State Insurance Act, 1948 (for short ‘the Act of 1948’) challenging the legality and sustainability of the judgment dated 4.5.2017 passed by the Employee Insurance Court-CumLabour Court, Raigarh, Chhattisgarh in case No.18/ESI Act/2015 Civil

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whereby the application filed by respondent under Section 77 of the Act of 1948 was allowed, appellant was directed to redeposit the amount of Rs.17,25,469/-, which was withdrawn by it, in the account of respondent and further held that amount shall carry interest at the rate of 9% p.a.

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Learned counsel for the appellants submits that one Mallikarjun was employed by the respondent on 16.12.2014, however, immediately after employment, the said employee was not registered with the appellants. It was the duty of respondent No.1 employer to give necessary information to the appellants and get all the employees engaged by him registered under the Act of 1948 as provided under Regulation 11 of the Employees State Insurance(General) Regulations, 1950 (in short, ‘the Regulations, 1950’) as amended on 2018. He contended that the said employee Mallikarjun met with an accident and suffered injury on 22.12.2014 and the accident was informed by respondent to the appellants on 8.1.2015. Based on the information, the Branch Manager of appellant No.1 visited the respondents unit on 8.1.2015 and conducted investigation. He found that seven employees, engaged were not get covered by the employer and they were not registered with the appellants. It is contention of counsel for appellants that said employee’s name was registered under the Regulation 11 of the Regulations, 1950 on 23.12.2014 i.e. after the employee met with accident. As on the date of accident employee was not covered, the appellants were not having liability under the Act of 1948, however, considering that the Act of 1948 to be a beneficial piece of legislation, they have provided the benefits to the dependents of the employee. It is contended that as the employment of Mallikarjun was not in dispute, the benefit was given in view of death of the employee to his dependents. The said benefit/amount is recoverable from the employer/respondent under the provisions of Section 68 of the Act of 1948. Accordingly, show-cause notice was issued on 31.3.2015 and thereafter recovery order of Rs.17,25,469/- was passed on 27.8.2015 and recovery

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notice was issued for recovery of the amount. The order dated 27.8.2015 was put to challenge by filing application filed under Section 77 of the Act, 1948 before the ESI Court/ Labour Court inter alia on the ground that order of recovery of the amount is without there being an order of determination of amount under Section 45(A) of the Act of 1948; no amount has been mentioned in the order of recovery and further the amount already disbursed to the family members of the deceased employee, is not recoverable.

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Appellants herein submitted reply and specifically pleaded that the recovery is permissible under Section 68 of the Act, 1948; the registration of the employee was post accident and prayed for dismissal of the said application. It is further contended by learned counsel for appellant that the ESI Court has allowed the application contrary to the provisions under the Act of 1948 observing that upon receipt of information have issued the certificate ExP/3; gave the confirmation for the treatment of the employee and further that vide Annexure-P/2 dated 31.3.2015 declared family members of the deceased employee entitled of the benefits under the Act of 1948. He contended that mere issuance of ExP/2 & ExP/3 will not absolve the respondents from his liability to comply with the provisions under the Act of 1948. Registration of the employee engaged by the employer is mandatory under Regulation 11 of the ESI Regulation, 1950. He contended that the appellants have acted in accordance with provisions under Section 68 of the Act, 1948 and provided benefit under the Act, 1948 to the family members of the deceased employee wherein the employment of the said employee is not disputed by the respondents. Findings recorded by the ESI Court is contrary to the evidence available on record infact the ESI Court misread the evidence and came to erroneous conclusion.

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Learned counsel for the respondent opposes the submission made by counsel for appellant and would submit that the order impugned is well

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founded and based on appreciation of the evidence available on record and strictly in accordance with the provisions of the Act of 1948, hence, it does not call for any interference.

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This appeal was admitted on following substantial questions of law:-

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“(I) Whether the E.I. Court was justified in holding that if the employer has submitted the registration from within 10 days as per Regulation 14 it has already fulfilled with the Regulation 11 which mandates for registration of employees before taking into employment ? (ii) Whether the E.I. Court was justified in holding that the corporation has no right to recover any amount u/s 68 ? (iii) Whether the E.I. Court was justified in holding that the recovery action can be undertaken only in compliance of an order u/s 45A and not in case of assessment u/s 68 ?”

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Heard learned counsel for the parties and perused the record of the ESI Court.

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Perusal of the application filed under Section 77 of the Act of 1948 by the respondent would show that in the application respondent has only challenged recovery proceedings on the ground that appellants herein, in connivance with non-applicant No.4 therein (Bank) have illegally and arbitrary based on garnishee order recovered the amount of Rs.17,25,469/- . Deceased employee was insured within time, therefore, the payment etc. are being made by the non-applicant. Declaration form was cancelled without conducting any inquiry and therefore, recovery notice being contrary to the provisions of the Act, 1948 is liable to be cancelled. In the entire application submitted under Section 77 of the Act, 1948, there is no specific pleading with respect to the date of appointment/engagement of deceased employee.

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In the reply submitted to said application, there is specific pleading, which is also not in dispute, that registration of two employees was after the date of

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accident; registration was after six months and four employees were registered after 5, 6 & 7 days of accident respectively. During course of inspection, seven employees were found without registration and out of which, five were not registered till 13.10.2015. One Rakesh Pandey was examined on behalf of respondent employee and he has also stated in his evidence that registration was not done prior the date of accident of deceased employee. In his cross-examination, he admitted that on the date of accident, Ajay Kumar Tiwari, Mr. Bhagwat Prasad, Mr. Palash Haldar, Suryakant Garai, Mr. Wasim Ahmad and Mr. Mallikarjun Adepu, met with an accident and suffered injuries, out of which Mallikarjun died. He has shown his unawareness about the fact that on 8.1.2015 inspection was done by the official of the ESI; the insurance of above named persons were done after the acciedent. The Personnel Manager (Witness No.2) of respondent-Company had admitted that he has not submitted the documents with respect to appointment in record. He further accepted that the notice dated 27.8.2015 was received; employees of ESI Department came on 8.1.2015 and 28.5.2015 for the enquiry and that on 8.1.2015 during enquiry seven employees were found not registered with ESI.

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From the pleadings and evidence available on record, it is not in dispute that deceased employee was registered and insured by the respondent-employer after the date of accident. Regulation 10B of the Regulations, 1950 deals with registration of factories or establishments. Regulation 11 talks of declaration by persons in employment on appointed day, Regulation 12 talks of declaration by persons engaged after the appointed day. Under Regulation 12(1) of the Regulations, 1950, it is provided that the employer shall require such person to furnish documents and correct particulars for declaration before taking any person into employment in such factories or establishments and thereafter the employer shall enter the particulars in the Declaration Form including the temporary Identification Certificate and obtain the

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signature or the thumb impression of such person and also complete the form as indicated thereon. After obtaining particulars of the employee under Regulation 14 of the Declaration Form, it has to be sent to appropriate office by registered post or messenger without detaching the temporary identification certificate prepared under these regulations together with a return in duplicate in Form-3. Regulation 15 provides for allotment of Insurance Number, it envisages that on receipt of the return required under regulation 14, the appropriate Office shall promptly allot an Insurance Number to each person in respect of whom the Declaration Form has been received unless it finds that the person had already been allotted an Insurance Number.

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10.Above referred provisions makes it explicit upon the employer to obtain particulars from a person before taking him into employment to fill the particulars in the prescribed Form and to forward the same to the appropriate office for allotment of Insurance Number. In the case at hand, the employer has not pleaded and proved the date of employment of deceased employee. Indisputably, registration of employee was after he met with an accident. On the date of suffering accidental injury, deceased employee was not registered and no contribution was paid by employer towards his insurance under the Act of 1948.

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Employment of the deceased employee with the respondent is also not in dispute in the facts of the case and evidence available on record. Section 2(4) of the Act of 1948 defines “contribution” which means the sum of money payable to the Corporation by the principal employer in respect of an employee and includes any amount payable by or on behalf of the employee in accordance with the provisions of this Act; Section 2(7) defines “duly appointed” means appointed in accordance with the provisions of this Act or with the rules or regulations made thereunder. In case at hand, admittedly

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the provisions under Regulation 12 & 14 of Regulations, 1950 have not been complied with.

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12.“Employment injury” is defined under Section 2 (8) of the Act of 1948, which means personal injury to an employee caused by accident or an occupational disease arising out of and in the course of his employment being an insurable whether the accident occurs or the occupational disease is contracted within or outside the territorial limits of India; the word “employee” is defined under Section 2 (9) of the Act of 1948, which is extracted below for ready

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reference:-

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“ (9) "employee" means any person employed for wages in or in connection with the work of a factory or establishment to which this Act applies and-

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(i) who is directly employed by the principal employer on any work of, or incidental or preliminary to or connected with the work of, the factory or establishment whether such work is done by the employee in the factory or establishment or elsewhere; or

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(ii) who is employed by or through an immediate employer on the premises of the factory or establishment or under the supervision of the principal employer or his agent on work which is ordinarily part of the work of the factory or establishment or which is preliminary to the work carried on in or incidental to the purpose of the factory or establishment.”

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Section 2 (13A) of the Act of 1948 defines “insurable employment” which

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means an employment in a factory or establishment to which this Act applies; “insured person” defines under Section 2 (14) of the Act of 1948 defines a person who is or was an employee is respect of whom contribution are or were payable under this Act and who is by reason thereof, entitled to any of the benefits provided by this Act.

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13.From the definition as referred above under Section 2 of the Act of 1948, the deceased was an employee of principal employer, he was under insurable employment and was an insured person as provided under Section 2(14) of

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the Act of 1948 because he was an employee in respect of whom contribution was payable.

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14.In the aforementioned facts of the case, when after receipt of information, inspection/ enquiry was conducted and upon finding that the injured suffered the employment injury during his employment with respondent is not disputed, treated him to be insured person. The appellants have made payment to the family members of deceased employee as per entitlement under the provisions of the Act of 1948 and the Regulation framed thereunder. The quantum of amount is also not disputed.

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15.After making payment of the amount under the Act of 1948 by appellants herein, they issued a notice for recovery of the amount paid by it from the principal employer under Section 68. Learned ESI Court allowed the application filed under Section 77 of the Act of 1948 on two grounds firstly that Declaration Form of Mallikarjun is sent within 10 days from the accident therefore certificate in the Form of ExP/3 has been issued of confirmation for treatment and vide notice ExP/2 dated 31.2.2015, family members of Late Mallikarjun were declared entitled for the benefit under the Act of 1948. It is also observed that if declaration and contribution were not submitted by the principal employer, in accordance with provisions under the Act and Regulations framed thereunder, the Branch Manager of ESI would have mentioned adverse note, instead he issued the document Ex.P/2 & Ex.P/3. Second ground which was considered is that there is no determination therefore without there being any determination, no proceedings under Section 45A(1) of the Act of 1948 for recovery can be initiated.

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16.So far as the reason assigned by the ESI Court referring to Regulation 14 is concerned, Regulation 14 has to be read along with Regulation 12 of Regulations, 1950. Regulation 12 of Regulations, 1950 clearly envisages that the employer has to obtain correct particulars from the person before

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taking him into employment in such factories or establishments. In the case at hand, there is no pleading and evidence brought in record by the respondent as to what is the date of engagement/employment of the deceased employee, who suffered accidental injury, therefore, without there being any material and evidence in this regard, ESI Court fell into error in applying the provision under Regulation 14 of the Regulations, 1950 and coming to the conclusion that the information is supplied within 7 days whereas the Regulation provides ‘within10 days period’. The period of 10 days is provided for sending the information in prescribed Declaration Form to the appropriate office immediately after receipt of the information and entering into the Declaration Form.

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17.As discussed above, the information is to be collected prior to the employment of such person/employee, therefore, the finding to this extent recorded by the ESI Court is erroneous and not sustainable in the eyes of law.

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So far as the reason assigned with respect to the fact that contribution and the declaration was submitted by the principal employer with the appellants in accordance with law only is based on the proceedings initiated by the appellants after satisfying that employment of the deceased employee was not in dispute provided treatment. Further giving notice to the family members of the deceased employee for receiving benefits under the Act is concerned, the Act of 1948 is a social security legislation, that provides for certain benefits to the employees in case os sickness, maternity and employment injury. As the deceased employee in the facts of the case came within the definition of insured person, it was for the appellants initially, to extend the benefit of the employee or the family members of the deceased employee under the Act of 1948 and Regulations framed thereunder.

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Hon’ble Supreme Court in case of Transport Corporation of India vs Employees' State Insurance, reported in AIR 2000 SC 238 , observed that The Employees’ State Insurance Act is aimed at conferring benefits on employees in case of sickness, maternity and employment injury. Section 38 of the Act of 1948 mandates that all the employee in the factories or establishments shall be insured. The initial and vital endeavour should be to identify the beneficiaries or the employees for insurance.

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As discussed above, the deceased employee would fall into the definition of ensured employee and subsequent to the accident suffered by deceased employee, the contribution and declaration was submitted.

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21.In the aforementioned facts of the case, the findings arrived by the learned ESI Court that only because the Declaration Form and the contribution was submitted, the appellants have not mentioned any adverse note on the claim and have proceeded for giving benefit under the Act of 1948, therefore, the recovery notice issued, does not appear to be correct finding in the facts of the case, where admittedly contribution of deceased employee was deposited after accident meaning thereby on the date of accident, he was not insured, but was an employee of respondent, hence, it is not sustainable in the eyes of law.

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22.With respect to the reason assigned for allowing the application under Section 77 of the Act of 1948 that the determination has not been done under Section 45A(1) is concerned, perusal of the aforementioned provision would show that it deals with entirely different subject. Section 45(A) is extracted below for ready reference:-

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“ 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

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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: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.

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(2)An order made by the Corporation under sub-section (1) shall be sufficient proof of the claim of the Corporation under section 75 or for recovery of the amount determined by such order as an arrear of land revenue under section 45B or the recovery under sections 45C to 45-I.”

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Provision of Section 45A would operate where in respect of factories or establishments no returns, particulars, registered or records are submitted, furnished or maintained in accordance with provision of Section 44 of the Act of 1948 or an {Social Security Officer}, or other official of the Corporation referred in sub-Section 2 of Section 45 of the Act of 1948 is prevented in any manner by the principal or immediate employer or any other person. The application of Section 45 A of the Act of 1948 operates in different field. In the case at hand it is not the case that no record, returns or particulars was submitted, but it is a case where contribution of some employee was not deposited and therefore in the opinion of this Court, the learned ESI Court has erred in recording a finding that as there is no determination under Section 45A of the Act of 1948, the notice of recovery dated 27.8.2015 is not justifiable.

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24.Hon’ble Supreme Court in case of Bharagath Engineering vs R. Ranganayaki and another, reported in (2003) 2 SCC 138 has held as under :-

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“Learned counsel appearing for the Corporation submitted that Section 2(14) of the Act was wide enough to cover an employee who dies even before the registration with the Corporation. According to him, the benefit under the Act is more beneficial to the employee than the compensation that

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could be awarded under the Compensation Act.

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Learned counsel appearing for the claimant, on the other hand, submitted that only when the person is registered for the purpose of insurance with the Corporation, the Act has application and it is not that all the employees are automatically insured. What is contemplated under Section 38 of the Act, which is a statutory requirement, is to insure all the employees.

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Section 2(14) of the Act, which is the povotal provision, reads as follows:

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"'Insured person' means a person who is or was an employee in respect of whom contributions are or were payable under this Act and who is, by reason thereof, entitled to any of the benefits provided by this Act."

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It is to be noted that the crucial expression in Section 2(14) of the Act is 'are or were payable'. It is the obligation of the employer to pay the contribution from the date the Act applies to the factory or the establishment. In .5.7. v. Harrisson Malayalam Pvt. Ltd., [1993] 4 S.C.C. 361, the stand of the employer that employees are not traceable or that there is dispute about their whereabouts does not do away with the employer's obligation to pay the contribution. In .5.7. Corporation v. Hotel Kalpaka International, [1993] 2 SCC 9, it was held that the employer cannot be heard to contend that since he had not deducted the employee's contribution on the wages of the employees or that the business had been closed, he could not be made liable. Said view was reiterated in Employees' State Insurance Corporation v. Harrisons Malayalam Limited, [1998] 9 SCC 74. That being the position, the date of payment of contribution is really not very material. In fact, Section 38 of the Act casts a statutory obligation on the employer to insure its employees. That being a statutory obligation, the date of commencement has to be from the date of employment of the concerned employee.

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The scheme of the Act, the Rules and the Regulations clearly spell out that the insurance covered under the Act is distinct and different from the contract of insurance in general. Under the Act, the contributions go into a Fund under Section 26 for disbursal of benefits in case of accident, disablement, sickness, maternity, etc. The contribution required to be made is not paid back even if an employee does not avail any benefit. It is to be noted that under Regulation 17-A, if medical care is needed before the issuance of temporary identification certificate, the employer is required to issue a certificate of employment so that the

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employee can avail the facilities available. 'Wage period', 'benefit period' and 'contribution period' are defined in Section 2(23) of the Act, Rule 2(lC) are Rule 2(2-A) of the Rules. Rule 58(2)(b) is a very significant provision. For a person who becomes an employee for the first time within the meaning of the Act, the contribution period under Regulation (4) commences from the date of such employment from the contribution period current on that day and corresponding benefit period shall commence on the expiry of the period of nine months from the date of such employment. In cases where employment injuries results in death before the commencement of the first benefit period. Rule 58(2Xb)(ii) provides the method of computation of dependent benefit. It provides for computation of dependent benefits in the case of an employee dying as a result of employment injuries sustained before the first benefit period and before the expiry of the first wage period.”

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25.For the forgoing discussion, substantial question of law No.1, 2 & 3 is answered in negative.

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26.In view of the aforementioned discussions and the decisions of Hon’ble Supreme Court, the order impugned is not sustainable and is liable to be set aside.

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27.Accordingly, the appeal is allowed and the impugned order is hereby set aside. No order as to costs.

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Sd/-

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(Parth Prateem Sahu)

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JUDGE

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NIsha

Employee State Insurance Corporation v. M/s. Navdurga Fuel Private Ltd.

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Employee State Insurance Corporation v. M/s. Navdurga Fuel Private Ltd.

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