Allowed

Nandakumar v. the Deputy Director, Esi Corporation

Kerala HC5 Jun 2024WP(C)/4510/2018

Case brief

AI extract

What is this about?

Writ petition challenging ESI recovery proceedings for short payment of employee insurance contributions initiated without a Section 45A determination order. Holding that payable contribution, including short payments, must be determined by a Section 45A order, the court found the recovery unsustainable and remitted the matter for such an order with an opportunity of hearing.

What did the court decide?

Recovery action set aside; matter remitted to first respondent to pass Section 45A order after hearing petitioner, who was directed to appear on 18.06.2024 with records.

Nandakumar Vs the Deputy Director, Esi Corporation — Service and Employment | Kerala HC (2024)

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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 DINESH KUMAR SINGH

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WEDNESDAY, THE 5^TH DAY OF JUNE 2024 / 15TH JYAISHTA, 1946 WP(C) NO. 4510 OF 2018

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PETITIONER/S:

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NANDAKUMAR, AGED 60 YEARS, S/O NANU, SB BHAVAN, BEACH ROAD, THAMARAKULAM, KOLLAM

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BY ADV SRI.ARUN BABU

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RESPONDENT/S:

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1 THE DEPUTY DIRECTOR, ESI CORPORATION SUB REGIONAL OFFICE, ASHRAMAM, KOLLAM-691 001

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2 RECOVERY OFFICER, ESI CORPORATION, SUB REGIONAL OFFICE, ASHRAMAM, KOLLAM-691001

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3 THE MANAGER, VIJAYA BANK, VADAYATTUKOTTAI ROAD, CHAMAKADA, KOLLAM-691001

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BY ADV SMT.A.K. PREETHA

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THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 05.06.2024, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

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W.P.(C) No.4510/2018

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J U D G M E N T

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Heard Mr Arun Babu learned Counsel for the petitioner,

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and Ms A K Preetha learned Standing Counsel for the ESI Corporation.

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The present writ petition has been filed impugning

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the recovery proceedings in Ext.P2 for short payment of the employee’s insurance contributions under the Employees’ State Insurance Act 1948 (for short, ‘the Act’) by the petitioner.

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Learned Counsel for the petitioner submits that unpaid/short-paid contributions have to be determined by the 1^st respondent under Section 45A, which contemplates an order passed by the Corporation for unpaid/short-paid contributions. In the present case, no such order was passed,

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and recovery action has been initiated vide Ext.P2 under Section 45C of the Act.

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3.1 Learned Counsel for the petitioner further submits

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W.P.(C) No.4510/2018

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that the order passed under Section 45A is an appealable order under Section 45AA. The petitioner’s right to appeal has been denied in the absence of an order under Section 45A. It is further stated that no recovery can be effected from an employer unless and until an order is passed under Section 45A determining the unpaid/short-paid contribution.

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On the other hand, the learned Counsel for the respondent corporation submits that the petitioner was issued notice for detected short payment in the contribution. The petitioner did not respond to the said notice nor furnished the requisite documents. However, after some time, they submitted their audited balance sheet. The said balance sheet would show that the petitioner had not paid the correct contribution and had paid the short contribution. Therefore, there was no requirement for passing an order under Section 45A before taking the recovery action under Section 45B/45C

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of the Act.

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4.1 Learned Counsel for the respondent further

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submits that, based on the documents submitted by the petitioner himself, the amount of short-paid contribution has

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been determined, and a specific order has not been passed under Section 45A as there is no requirement for passing such an order.

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I have considered the submissions advanced by the learned Counsel for the petitioner and respondent.

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Section 45A empowers the Corporation to determine the amount of contribution payable in respect of the employees of a factory or establishment. The proviso contemplates an order under Section 45A to be passed by the Corporation while determining the amount of contribution payable in respect of the employees. Section 45A on reproduction would read as under:

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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 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:

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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.

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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. (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 section 45C to section 45-I.”

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Therefore, a contribution payable has to be determined by an order passed by the Corporation.

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In the present case, it appears that the Corporation has not passed an order under Section 45A, as required by the Statute itself. Further, the order passed under Section 45A is appealable under Section 45AA, which is a statutory right conferred on the employer or employees to challenge before the appellate authority if one of them is not satisfied with the order passed under Section 45A.

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7.1 On proper construction of Section 45A and 45AA, it

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may be said that the payable contribution has to be determined only by an order passed under Section 45A and the Corporation cannot say that on the basis of the documents submitted by the employer of a factory or establishment, the amount has been arrived at for payable contribution.

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7.2 Payable contribution would include short payment

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of the contribution besides the non-payment of the contribution. If there is short payment or non-payment of the contribution, that amount has to be determined under Section 45A by an order passed by the Corporation/competent authority. In the present case, as there has been no order passed under Section 45A, the recovery action under Section 45B/45C is unsustainable.

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7.3 Therefore, the writ petition is allowed. The matter is remitted to the 1^st respondent to pass orders under Section 45A for the alleged short payment of the contribution by the petitioner. The petitioner shall appear before the 1^st respondent on 18.06.2024 along with all the records. No further notice shall be issued to the petitioner by the 1^st respondent. The 1^st respondent shall examine the record submitted by the petitioner, if any, besides the audited balance sheet and afford an opportunity of hearing to the petitioner

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and then pass an order under Section 45A.

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With the aforesaid direction, the present writ petition

stands allowed.

Sd/-

DINESH KUMAR SINGH

JUDGE

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W.P.(C) No.4510/2018

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APPENDIX OF WP(C) 4510/2018

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PETITIONER EXHIBITS

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EXHIBIT P1THE TRUE COPY OF THE INSPECTION REPORT DATED 17.12.2012 ISSUED BY THE ESI INSPECTOR

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EXHIBIT P2THE TRUE COPY OF THE LETTER DATED 04/09/2015 ISSUED BY THE 2ND RESPONDENT TO THE PETITIONER

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EXHIBIT P3THE TRUE COPY OF THE APPLICATION DATED 14-112016 FILED BY THE PETITIONER BEFORE THE 1ST RESPONDENT

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EXHIBIT P4THE TRUE COPY OF THE APPLICATION DATED 25-112016 FILED BY THE PETITIONER BEFORE THE 1ST RESPONDENT

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EXHIBIT P5THE TRUE COPY OF THE REPLY SUBMITTED BY THE 1ST RESPONDENT DATED 05/01/2017 EXHIBIT P6THE TRUE COPY OF THE ORDER DATED 29.01.2018 ISSUED BY THE 2ND RESPONDENT TO THE 3RD RESPONDENT

Nandakumar v. the Deputy Director, Esi Corporation

Case brief

What is this about?

What did the court decide?

Nandakumar v. the Deputy Director, Esi Corporation

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

Issues for consideration

Statutes considered

Parties & counsel

Coram

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