Dismissed

The Deputy Director v. M/S Classic Industries

Karnataka HC14 Dec 2021MFA/8295/2011

Case brief

AI extract

What is this about?

The High Court dismissed an appeal by the ESI Corporation against an order finding the respondent exempt from contributions. The court held the Inspector's report was defective for lacking employee designations and domiciles, thus upholding the exemption.

What did the court decide?

The appeal filed under Section 82(2) of the ESI Act was dismissed; the order allowing the respondent's exemption was upheld.

The Deputy Director Vs M/S Classic… — Pension and Retirement Benefits | Karnataka HC (2021)

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M.F.A.NO.8295/2011

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 14^TH DAY OF DECEMBER 2021

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BEFORE

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THE HON’BLE MRS JUSTICE K.S.MUDAGAL

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MISCELLANEOUS FIRST APPEAL NO.8295/2011(ESI)

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BETWEEN:

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THE DEPUTY DIRECTOR, E.S.I. CORPORATION REGIONAL OFFICE (KARNATAKA) NO.10, BINNY FIELDS, BINNYPET, BANGALORE – 560 023

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… APPELLANT

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(BY SRI K.KRISHNAPPA, ADVOCATE) AND:

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M/S CLASSIC INDUSTRIES KARKI, P.O. KANYANA VIA TALLUR – 576 230 KUNDAPURA TALUK REP. BY ITS PROPRIETOR SRI MOHAMMED YOUSUF HAMSA

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… RESPONDENT

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(BY SRI A.R. HOLLA, ADVOCATE)

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THIS MFA IS FILED UNDER SECTION 82(2) OF THE EMPLOYEES STATE INSURANCE ACT, AGAINST THE ORDER DATED 30.06.2011 PASSED IN E.S.I. APPLICATION NO.3/2010 ON THE FILE OF THE PRESIDING OFFICER, LABOUR COURT–CUM-ESI COURT, MANGALORE, ALLOWING THE APPLICATION FILED UNDER SECTION 75 OF THE E.S.I. ACT.

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THIS MFA COMING ON FOR FINAL HEARING THIS DAY, THE COURT THROUGH VIDEO CONFERENCE DELIVERED THE FOLLOWING:

M.F.A.NO.8295/2011

J U D G M E N T

Aggrieved by the order of the Presiding Officer, Labour Court-cum-ESI Court, Mangalore allowing the application of the respondent under Section 75 of the Employees’ State Insurance Act, 1948 (‘the ESI Act’ for short), the appellant has preferred the above appeal.

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The respondent was running the industry of manufacturing clay decorative tiles and bricks at Kanyana, Kundapura Taluk under the name and style of ’M/s.Classic Industries’. The said industry was registered as small scale industry. On 03.02.2007 the Inspector of the appellant/corporation (RW.1) inspected the respondent’s establishment and came to the conclusion that the respondent is liable to pay the employer and employees’ contribution of Insurance. During inspection he collected letter of applicant as per Ex.R.4, prepared the report as per Exs.R.6 and 7.

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Thereafter the respondent was issued with notice dated 09.03.2007 as per Ex.R.8 reporting that the respondent is the covered establishment and liable

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M.F.A.NO.8295/2011

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to pay the contribution for the period from 06.06.2006 to March-2008. The respondent replied the same on 25.04.2007 claiming that the number of his employees does not exceeds 10 and it is a seasonal industry. He also sought the information from the appellant whether his industry situates in the notified area. For that, the appellant issued reply on 08.07.2008 calling upon him to furnish the certificate of the Revenue Authority to consider his request about applicability of the ESI Act.

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The appellant issued another notice dated 14.10.2008 directing the respondent to pay ESI contribution for the period September 2006 to March 2008 in a sum of Rs.1,94,257/-. The respondent issued reply denying the claim of the appellant. Ultimately, the appellant passed order under Section 45-A of the ESI Act determining the contribution payable by the respondent at Rs.1,94,257/.

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The respondent challenged that order before the ESI Court in ESI Application No.03/2010. The appellant contested the said application denying the

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M.F.A.NO.8295/2011

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contention of the respondent that it does not come within the notified area and its employees do not exceed 10 in number etc., It also claimed that as per the Inspection report and Ex.R.4, the application of the respondent itself, the number of employees exceeded 20. The allegation of not giving sufficient opportunity or violation of principles of natural justice was also disputed.

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The trial Court recorded the evidence of both parties. On hearing the parties by the impugned order the trial Court held issue No.1 viz., whether the respondent is a seasonal industry and not covered under the Act, against the respondent. However, the trial Court upheld the contention of the respondent that its employees’ did not exceed 10 in number and it is not liable to pay the contribution. The trial Court held that the appellant has failed to establish that the number of employees in the respondent’s establishment was above 20. Therefore, the trial Court set-aside the order passed

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M.F.A.NO.8295/2011

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by the appellant/authority under Section 45-A of the ESI Act.

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The respondent has not questioned the

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finding that it is an establishment covered under the Act. Therefore, that finding has attained finality. So far as the number of employees of the respondent exceeding 20, the appellant relied on the evidence of RW-1 Insurance Inspector and Exs.R.4 to 7. The respondent though admitted his signature on Ex.R.4 i.e., Form No.01 submitted to RW.1, he disputed his knowledge about the contents of the same. RW.1 claims that during his visit he found 38 employees mentioned in Ex.R.7 and the respondent has confirmed the same in Ex.R.4.

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Ex.R.4 is based on the entries in Ex.R.7. Admittedly, the visit of RW.1 to the establishment was on 03.02.2007. Ex.R4 is purportedly submitted to RW.1 during his visit. In Ex.R.7, the full particulars of the employees like their names, addresses, domicile, length of service are not forthcoming. In that context, the

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M.F.A.NO.8295/2011

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trial Court relying on the judgment of Division Bench of this Court in Regional Director, E.S.I. Corporation Vs Karnataka Asbestos Cements Products and others¹ held that the list of the employees prepared by the ESI Inspector must contain the name, father’s name, place from which the employee hails, the designation, length of service and signature or thumb impression of such employees, otherwise it is liable to be rejected. Relying on the said judgment the trial Court held that Ex.R.7 does not contain the place and designation of the employees’ named therein. Therefore, it is liable to be rejected.

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9. The judgment in Karnataka Asbestos

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Cements Products and others’ case is rendered relying on the earlier Division Bench judgment of this Court in ESI Corporation Vs. Subbaraya Adiga² . In para-5 of the judgment in Subbaraya Adiga’s case with regard to the requirement of ESI Inspector report, this Court held as follows:-

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1 in 1991(2)KarLJ264

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2 in AIR 1988 KAR 1806

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M.F.A.NO.8295/2011

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“5………. A list of employees prepared by the E.S.I. Inspector in the course of his visit to an establishment, in order to find out whether the provisions of the E.S.I. Act are attracted to it, must

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contain the name, father’s name, place from which the employee hails, the designation, the length of service, emoluments and the signature or thumb impression of the employee, as the case may be, if at that time other persons other than the employees are present, the names and addresses of atleast two of them with their signatures and also the signature of the Proprietor or Manager or the person in-charge of the establishment should be obtained at the end of the list and a copy of which be furnished to the establishment.”

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(Emphasis supplied)

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Reading of the above judgment shows that the report of the ESI inspector must contain the names, father’s name, place from which the employee hails, the designation, the length of service, emoluments and the signature or thumb impression of the employees. It further shows that if at the time of inspection, there are other persons at the spot, the names and addresses of at least two of them and their signatures shall be taken and the signature of proprietor/Manager of the

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M.F.A.NO.8295/2011

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establishment should also be obtained at the end and copy shall furnished to the establishment.

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Exs.R.4 and R.7 show that Ex.R.7 did not contain the place from where the employees hail and their designation. RW.1 did not whisper about any other person being present or not present at the time of inspection. Though it is contended that Ex.R.4 is submitted by the respondent himself, he disputes the knowledge of the contents of the same. Some of the entries in Ex.R.4 are over-written and interpolated. More particularly in column No.16 which deals with monthwise employment position, there are sufficient corrections and overwritings regarding the number of employees and they do not bear any initial of the respondent. The appellant/RW.1 had no explanation for that. Therefore, the contention of the appellant that Ex.R.4 is sufficient to disbelieve the defense of the respondent is unacceptable.

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M.F.A.NO.8295/2011

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Having regard to such facts and circumstances and the judgments of this Court referred to supra, this Court does not find any illegality in the impugned order. Therefore, the appeal is dismissed.

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Sd/JUDGE

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akc

The Deputy Director v. M/S Classic Industries

Case brief

What is this about?

What did the court decide?

The Deputy Director v. M/S Classic Industries

Case brief

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