Allowed

The Regional Director, Esi Corpn. v. Rekha Nandagopal

Kerala HC18 Jan 2013Ins.APP/65/2010

Case brief

AI extract

What is this about?

The High Court of Kerala allowed an appeal filed by the Regional Director of ESI Corporation against an order exempting a security agency from paying contributions on fixed travelling allowances. The court set aside the lower court's decision for failure of the respondent to adduce sufficient oral or documentary evidence to substantiate the claim that the allowance was not wages.

What did the court decide?

The impugned order was set aside and the matter was remanded to the ESI Court for fresh consideration after affording sufficient opportunity to both sides to adduce evidence.

The Regional Director, Esi Corpn. Vs Rekha Nandagopal — Insurance | Kerala HC (2013)

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IN THE HIGH COURT OF KERALA AT ERNAKULAM

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PRESENT:

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THE HONOURABLE MR.JUSTICE HARUN-UL-RASHID

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FRIDAY, THE 18TH DAY OF JANUARY 2013/28TH POUSHA 1934

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Ins.APP.No. 65 of 2010 ( )

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(AGAINST THE ORDER/JUDGMENT IN IC.58/2006 of E.I.COURT, KOZHIKODE DATED 10-09-2009)

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APPELLANT/RESPONDENT:

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THE REGIONAL DIRECTOR, E.S.I. CORPORATION,THRISSUR.

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BY ADV. SRI.P.SANKARANKUTTY NAIR

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RESPONDENT(S)/APPLICANT:

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REKHA NANDAGOPAL, PROPRIETRIX,M/S. UNITED DETECTIVE AND SECURITY AGENCY,5/3123,PADMALAYAM VETERINARY HOSPITAL,ROAD,KOZHIKODE.

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R, BY ADV. SRI.K.M.FIROZ R, BY ADV. SMT.M.SHAJNA

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THIS INSURANCE APPEALS HAVING BEEN FINALLY HEARD ON 18-01-2013, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

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al.

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HARUN-UL-RASHID,J.

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INS. APPEAL No. 65 OF 2010

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Dated this the 18^th day of January 2013

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JUDGMENT

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The Regional Director, ESI Corporation is the appellant. The appeal is directed challenging the order dated 10.9.09 in I.C.No.58/06 of the ESI Court, Kozhikode.

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The respondent herein is the applicant before the Insurance Court. The applicant filed an application seeking a declaration that the applicant is not liable to pay any contribution on the fixed travelling allowances paid to the employees engaged by the establishment. ESI Court passed the impugned order, set aside Ext.P3 order passed by the appellant and declared that the applicant is not liable to pay any amount as contribution on travelling allowances paid by them to their employees.

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The applicant produced Ext.P1 notice, Ext.P2 letter and 45-A order dated 25.9.06 marked as Ext.P3. The respondent/appellant produced Inspection report dated 10.7.06 and copies of the notice as Exts.D1 to D6.

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The applicant's establishment is engaged in the supply of security personals under them on the requirements of their

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INS.APPEAL No.65/2010 2

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customers. The establishment is a covered establishment under the provisions of the ESI Act. The Inspectors of the respondent Corporation had reported that the applicant is paying Travelling Allowance proportionally depending upon the number of days an employee attended the office which means that the rate of T.A is fixed and did not vary according to the different destinations to where they are deputed. The Corporation initiated proceedings against the applicant demanding Rs.65,743/- towards contribution on omitted wages for the period from 4/04 to 3/06. The amount was subsequently reduced to Rs. 53,343/-.

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The case of the applicant is that their establishment is a security service agency and the expenses of the establishment itself is on the basis of the order received from the customers. It is submitted that security persons are deployed to various destinations according to the orders received from the customers and hence employees so deputed were paid travelling allowance. Therefore, it is contended that travelling allowance paid to the employees are not part of wages and that it is the settled law that travelling allowance paid to the employees is not wages as defined in Section 2 (22) of the ESI Act and such an applicant is not liable to pay contribution for the

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INS.APPEAL No.65/2010 3

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said payment. The appellant Corporation had contended before the ESI Court that the applicant is tactically booked a huge part of wages under the head 'Travelling Allowance' in order to avoid payment of contribution. It is said that the applicant had shown lion portion of the salary under the head Travelling Allowance.

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The Tribunal held that any Travelling Allowance or any value of travelling concession covered by sub clause (b) cannot be included in wages covered by clause 22 of Section 2 of the Act, becomes apparent from a reading of sub clause (b) and clause (22). The Tribunal observed that the respondent had vehemently disputed the claim of the applicant and that they had not placed any cogent evidence before the Tribunal to substantiate their claim that the applicant is tactically booked a huge part of wages under the head 'Traveling Allowance” in order to avoid payment of contribution. Learned Judge followed the decision of the Madras High Court in S.Ganeshan Vs. The

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R.D. E.S.I Corporation reported in (2204-Lab-IC-1147) . Following the dictum laid down in the said decision the Tribunal held that it is seen that the applicant neither adduce oral evidence nor produce relevant documents to support his case; that apart from the wages to the security employees are paid

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INS.APPEAL No.65/2010 4

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variable traveling allowance as per their deployment to various destinations.

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It is true that Section 22 of the ESI Act exclude Travelling allowance paid defraying the expenses incurred by the employee under the head Traveling Allowance. The applicant contended before the Tribunal that they are paying travelling allowance proportionately depending upon the number of place the employee attended the office which means that the rate of T.A is fixed and did not vary according to the different destinations to where they are deputed. It is the definite case of the appellant that there is no evidence to prove that the said amount is paid to defray the actual travelling allowance or concession. The Tribunal did not go into the contentions raised by the parties. The applicant did not adduce oral or documentary evidence to prove the averments in the application. ESI Court on the basis of the averments in the application and after reading of Section 2(22) found that fixed Traveling Allowance paid to employees every month attract exclusion of Section 2 of sub clause 22 of the ESI Act. The applicant is maintaining different registers and acquittance roll in his establishment. The applicant failed to produce relevant documents for the purpose to substantiate his case. In the light

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INS.APPEAL No.65/2010 5

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of the contentions raised by the respondent as stated above, it is for the applicant to prove that the applicant is not liable to pay any contribution to the Travelling Allowance paid to employees engaged in the organisation, especially when the appellant Corporation raised contention that Traveling Allowance paid to employees are fixed and hence there is no evidence to prove said amount is paid to defray the actual Travelling Allowance or concession.

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In the result, the impugned order is set aside. There will be a direction to the ESI Court to consider the matter afresh after affording sufficient opportunity to both sides to adduce evidence.

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Sd/- HARUN-UL-RASHID JUDGE

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al/-

The Regional Director, Esi Corpn. v. Rekha Nandagopal

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The Regional Director, Esi Corpn. v. Rekha Nandagopal

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