Allowed

The Regional Director v. M/S Methods Automotive

Karnataka HC10 Aug 2023MFA/2386/2016

Case brief

AI extract

What is this about?

The High Court allowed an appeal against an ESI Court order. The Court relied on a calculation memo submitted by the respondent to determine the admitted liability. The appeal allowed the respondent to pay Rs. 49,185/-, while the claim regarding security charges was rejected due to lack of proof of contribution by the agency.

What did the court decide?

Appeal allowed. Respondent directed to pay Rs. 49,185/- in favour of the ESI Corporation. Excess payment to be refunded; shortfall to be deposited within four weeks.

The Regional Director Vs M/S Methods Automotive — Company and Corporate | Karnataka HC (2023)

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1 - NC: 2023:KHC:28703 MFA No. 2386 of 2016

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU

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DATED THIS THE 10^TH DAY OF AUGUST, 2023

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BEFORE

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THE HON'BLE MR JUSTICE H.P.SANDESH

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MISCELLANEOUS FIRST APPEAL NO. 2386 OF 2016 (ESI)

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BETWEEN:

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THE REGIONAL DIRECTOR ESI CORPORATION , NO.83, PRIDE PLAZA, DEVANATHACHAR STREET, 5TH MAIN ROAD, CHAMARAJPET,BANGALORE

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THE RECOVERY OFFICER ESI CORPORATION , NO.83, PRIDE PLAZA, DEVANATHACHAR STREET, 5TH MAIN ROAD, CHAMARAJPET,BANGALORE

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…APPELLANTS

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(BY SMT.GEETHADEVI.M.PAPANNA.,ADVOCATE)

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Digitally signed by SHARANYA T Location: HIGH COURT OF KARNATAKA

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AND:

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M/S METHODS AUTOMOTIVE PVT. LTD. (FORMERLY METHORDS A PARTNERSHIP FIRM, 30/1, REAR BLOCK, 7TH CROSS, LAVELLE ROAD, BANGALORE-01 REP BY ITS DIRECTOR SRI.M.N. SHAM SUNDER

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…RESPONDENT

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(BY SRI. K R ANAND., ADVOCATE)

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THIS M.F.A. IS FILED U/S.82(2) OF THE EMPLOYEES STATE INSURANCE ACT, AGAINST THE ORDER DATED 30.01.2016 PASSED ON ESI NO.28/12 ON THE FILE OF THE

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NC: 2023:KHC:28703 MFA No. 2386 of 2016

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EMPLOYEES STATE INSURANCE COURT, BENGALURU, PARTLY ALLOWING THE APPLICATION FILED U/S.75 & 76 OF THE ESI ACT.

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THIS APPEAL, COMING ON FOR FURTHER HEARING, THIS DAY, THE COURT DELIVERED THE FOLLOWING:

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JUDGMENT

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Heard the learned counsel for appellants and also learned counsel appearing for the respondent.

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The appellants have challenged the order passed by the employees’ Court Insurance Court at Bengaluru in ESI application No.28/2012 wherein the application was allowed in part filed by the respondent herein and directed that applicant is liable to pay the contribution of fixing charges of Rs.75,000/and pay contribution amount into Rs.19,520/- towards incentive charges and order passed under section 45-A of Employees’ Insurance Act dated 23.05.2011 is modified, wherein a direction was given to pay the amount of Rs.2,03,886/-. Being aggrieved by the order of the ESI Court at Bengaluru, the present appeal is filed.

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The main contention of appellants herein that the Trial Court committed an error in modifying the order since the components of claim is in respect of fixing charges, commission, incentives, as well as security charges amount paid to M/s.Method Automative Pvt. Ltd. The main contention in this appeal is that orders of the ESI Court restricting the contribution amount of Rs.19,520/- only, an amount of Rs.75,000/- of fixing charges is only arbitrary, whimsical and without any material to support the said restriction.

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3 - NC: 2023:KHC:28703 MFA No. 2386 of 2016

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It is also contended that respondent has failed to furnish the exact labour components under the accounting head fixing charges and determining the same taking fixing charges only Rs.75,000/and determination of contribution of Rs.19,520/as against the actual fixing charges of Rs.13,15,345/- found recorded in the inspection report which is marked as Ex.A6. Therefore, the ESI Court ought to have taken the entire fixing charges for the purpose of determining the contribution.

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The other ground urged in the appeal that as regards to the incentives paid the same constitute ‘wage’ in terms of section 2(22) of ESI Act,1948 and contend that the respondent are liable to pay contribution of entire sum of Rs.8,33,550/-. The ESI Court has committed an error and there was absolutely no reason for the ESI Court to totally ignore the claim of contribution on incentive payment in the operative part of the order dated 30.01.2016. The respondent is liable to pay the entire incentive amount.

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It is also contended that in respect of the security, employees’ employed in the premises of the respondent’s establishment by the security agency that the operation of law, the respondent becomes the ‘Principle Employer’-prove the payment of contribution in respect of all those poor employed in the premises, i.e., immediate employer. Accordingly, the absence of proof regarding the payment of contribution in respect of security employees’ having produce to the respondent. For the satisfaction of the Court, the respondent is

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4 - NC: 2023:KHC:28703 MFA No. 2386 of 2016

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also liable to pay contribution of security charges as claimed by the appellants.

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It is also contended that the appellants while passing an order under section 45-A of ESI Act, taken note of all these facts into consideration and rightly to passed the order and ought not to have modified the same by the ESI Court. Hence, it requires interference. The counsel appearing for appellants has also in the argument contend that this Court has to frame substantive question of law that order passed by the ESI Court is arbitrary and not justified in reducing the amount to Rs.19,520/- only against the claim made under section 45A of ESI Act order an amount into Rs.2,03,886/- for the period from 2006-07 and also contend that the order passed by Trial Court is contrary to section 45A(2) of ESI Act and hence, it requires interference.

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Per Contra, the counsel appearing for the respondent filed a memo stating that during the course of the hearing the matter by this Court and also submission made by the respondent, directed the respondent to file the statement of calculation in support of his argument in which the respondent is comply through this memo by enclosing the said statement of calculation with the prayer to consider the same and based on that statement of calculation, filed by M/s Methods Automative Pvt ltd., comes up with the memo contending that with regard to the fixing charges is concerned, 25% on basis for calculation of Rs.13,15,345/-comes to Rs.3,28,836/- and contribution at 6.5% on 25% comes to Rs.21,374/-. Likewise,

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5 - NC: 2023:KHC:28703 MFA No. 2386 of 2016

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head of commission is concerned, 25% on basis for calculation of Rs. 8,33,550/- comes to Rs. 2,08,388/- and contribution at 6.5% on 25% comes to Rs.13,545/-; head of incentives to employees’ is concerned, 25% on basis for calculation of Rs.19,520/- comes to Rs.4,880/- and contribution at 6.5% on 25% comes to Rs.317/-; head of incentives to dealers is concerned, 25% on basis for calculation of Rs.8,58,338/comes to Rs.2,14,585/- and contribution at 6.5% on 25% comes to Rs.13,948/- and total liability is Rs.49,185/-.The counsel also vehemently contend that in respect of security charges is concerned, not liable to pay on the amount of Rs.1,09,945 on basis for calculation.

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Having heard the learned counsel appearing for the appellants and respondent and the very contention of the appellants counsel in the appeal memo is with regard to the security amount is concerned, it amounts to wages, since in respect of the security employees’ employed in the premises of the respondent establishment by the security agency that by operation of law, the respondent becomes the “ Principle employer ” and to prove the payment of contribution in respect of all those poor employees’ in his premises by the security agency i.e., immediate employee and same is not proved. In the absence of proof regarding the payment of contribution in respect of security employees’ having produced by the respondent for the satisfaction of the Court, respondent is liable to pay the contribution and security charges as claimed by the appellants’ authority.

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6 - NC: 2023:KHC:28703 MFA No. 2386 of 2016

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Learned counsel for respondent would vehemently contend that the Trial Court has rightly comes to the conclusion that for having payment is concerned, for having remitted the amount during the year 2006-07 and same is also not disputed by the appellants and hence rightly comes to the conclusion that the claim for contribution made on payment to the security agency which is a covered establishment is illegal and contrary to the law also requires to be set aside. In keeping the contention, the finding regarding security given by the Trial Court with regard to the claim made by the appellants, I do not find any error committed by the Trial Court in not considering with regard to the security claim and the claim made under the head of incentive charges and other heads, already memo is filed by the respondent regarding liability and the memo is accepted. Hence, I do not find any error in making such an observation by the Trial Court except admitted claims. Hence, in view of the memo filed by the respondent, the respondent is liable to pay an amount of Rs.49,185/-as admitted.

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The contentions of the appellants’ counsel is regarding security claim not accepted and appeal is disposed of in terms of the memo filed by the respondent’s counsel.

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In view of the discussions made above, I pass the following:

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ORDER

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The appeal is allowed.

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NC: 2023:KHC:28703 MFA No. 2386 of 2016

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In view of observation made by this Court consequent upon the memo, the respondent is directed to pay an amount of Rs.49,185/- in favour of the appellants’ corporation.

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The counsel for the respondent submit that he has already deposited the amount before the ESI Court at the initial stage, if any such amount is deposited, the same has to be adjusted, if any excess amount is paid, the same shall be refunded in favour of the respondent. If any shortfall, directed to deposit the same within four weeks.

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Sd/JUDGE

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RHS List No.: 1 Sl No.: 59

The Regional Director v. M/S Methods Automotive

Case brief

What is this about?

What did the court decide?

The Regional Director v. M/S Methods Automotive

Case brief

What is this about?

What did the court decide?

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