Kaleen Corporation vs Employees' State Insurance Corporation

Y. Venkatachalam, J.—Invoking Article 226 of the Constitution of India, the petitioner herein has filed the present writ petition, seeking for

a writ of certiorari to call for the records in respondent''s notice Ref. No. TN/INS/8691/18 and, dated October 10, 1990, and to quash the same.

In support of the writ petition, the petitioner herein has filed an affidavit wherein they have narrated all the facts and circumstances that forced

them to file the present writ petition and requested this Court to allow the writ petition as prayed for. Per contra, on behalf of the respondent, a

counter-affidavit has been filed rebutting all the material allegations levelled against them one after the other and ultimately requested this Court to

dismiss the writ petition for want of merits.

Heard the arguments advanced by the learned counsel appearing for the parties. I have perused the contents of the affidavit and the counter-

affidavit together with all other relevant material documents available on record in the form of typed set of papers. I have also taken into

consideration the various points raised by learned counsel appearing for the respective parties during the course of their arguments.

In the above facts and circumstances of the case, the only point that arises for consideration is, as to whether there are any valid grounds to

allow this writ petition or not.

The brief facts of the case of the petitioner, as seen from the affidavit are as follows: The petitioner herein is a manufacturer of ready-made

garments. The petitioner employs on its rolls about 200 employees and it does not employ any person other than these persons. This concern also

purchases raw materials such as fabrics, lining materials like stiff collars for shirts or soft lining material for lining the trousers around waist and

supply them to job work contractors. These job work contractors are mostly independent tailors, they may be either a single tailor or big

establishments employing several tailors. The petitioner herein employs a master tailor who cuts the cloth to various sizes. These cut pieces will be

sent to the job work contractors for stitching the garments. The contractors will be informed of the requirements of the petitioner, viz., the time

within which the work should be finished, the thread (colour/material, i.e., cotton or polyester) and buttons (colour/shape/material, i.e., plastic or

metal) and labels to be used, lining width, etc. The petitioner reserves the right to reject the goods stitched if the goods do not satisfy the

requirements/specifications of the petitioner. The petitioner is not under any obligation to receive the stitched garments if they are not to the

satisfaction of the petitioner. However, in order to maintain the quality, the petitioner, before accepting the owner of any contractor, will have a few

samples stitched by him and only if the samples are stitched satisfactorily, he will be given the contract. At the time when the contract is entered

into, security deposit may be received from the job work contractor. The stitching work, either of samples or as per contract, the occasional

embroidery work, washing, dyeing and ironing are all done by the independent job work contractors, by themselves personally or through their

employees. The petitioner has absolutely no control or power of supervision over them. The work is done by various tailors who are absolute

strangers to the petitioners in their residences or shops. It is not possible for the petitioner to be constantly present in several tailoring shops and

control or supervise their work. The petitioner does not even go to them. They are not the employees of the petitioner nor has the petitioner any

interest either in the persons employed by the contractors or in the premises where they do the job work. The raw materials will be delivered to the

contractors only. They deliver back garments with their bill and payments will be made if the garments are stitched as per the requirements of the

petitioner. The only right or privilege of the petitioner is to reject the garments if they are not stitched as per its requirements. That being so, the

respondent issued a notice in Form No. C-18 (ad hoc basis), dated December 13, 1985, calling upon the petitioner to pay E.S.I. contributions for

the periods from 1980-81, 1981-82, 1982-83, in respect of washing, dyeing, and ironing charges, embroidery charges, job work, sample stitching

charges, lining charges, labour charges, etc., amounting to Rs. 2,95,044.48. The petitioner replied on January 10, 1986, stating that it need not

pay, whereupon the respondent passed an order in No. TN/INS-IV/51/8691/18 and, dated March 4, 1986, calling upon the petitioner to pay Rs.

2,92,330.40 towards ESI contributions on the total amount paid towards the aforesaid charges. The petitioner filed an E.S.I. O.P.No.49 of 1986,

before the Employees'' Insurance Court for a declaration that the above order was illegal, null and void on the ground that the said E.S.I.

contribution need not be paid. The original petition was allowed by the Court on July 6, 1989, holding that the said amount need not be paid and

this order is binding on the respondent. While so, on October 22, 1990, the petitioner herein, received a letter No. TN/INS-IV/51/8691/18 and

dated October 10, 1990, from the respondent referring to the visits on January 25, 1990 and February 5, 1990, of their inspection and stating,

inter alia:

(a) that towards job work, done by outsiders, the sum of Rs. 35,91,866.20 was paid to them;

(b) that under various heads of account, the total amount of Rs. 38,59,516.55 was paid; and

(c) that the sum of Rs. 2,79,814.94 is payable by way of ESI contribution.

Further, it called upon the petitioner to pay the said amount. It also threatened that if 1 the said amount is not paid in full, the issue of ""no due

certificate"" will not be issued. It is stated by the petitioner that since the petitioner is an exporter without the issuance of a ""no due certificate"" it

cannot export garments, which will cause great loss or money running into several millions of rupees and loss of reputation with the foreign buyers

which will cause an irreparable further damage in future. Consequent on this letter, the respondent issued a notice under Form No. C-18 (ad hoc

basis) in No.TN/INS-IV/51/8691/18, and, dated October 10, 1990, calling upon the petitioner to pay Rs. 2,79,814.94 by way of contribution for

the period 1/88 to 12/89, allegedly exercising its powers u/s 45-A of the Employees'' State Insurance Act. This notice was issued without

jurisdiction as the earlier similar demand was declared to be illegal. The respondent acted in disregard of law. The notice of demand is ex facie

illegal and is in imprudent disregard of the Court''s order. The petitioner wrote a letter, dated October 24, 1990, to the respondent and requested

it to issue a ""no due certificate"" but in vain. No reasonable opportunity was given to the petitioner to explain its case. Hence, another O.P.No. 105

of 1990 was filed before the Court. After hearing the arguments, the Court passed an order in C.M.P No. 191 of 1990 on November 7, 1990,

observing that the question whether demand made by the respondent was legal or not would not be decided at that stage, and also that at this

stage, the petitioner cannot contend that the petitioner is not to pay the sum of Rs. 2,79,814.94 towards contribution to the respondent. The Court

also observed that it found no sufficient reason either to waive or reduce the amount to be deposited by the petitioner into the Court and granted

interim stay on a condition that the petitioner deposits a sum of Rs. 1,39,907 on or before December 17, 1990, failing which interim stay granted

would be vacated. The Employees'' Insurance Court has refused to waive in spite of the fact that in an earlier ESI OP similar demand was held to

be illegal and so the respondent issued the present notice without jurisdiction. Thus, substantial justice was not done to the petitioner and there is a

failure of justice. According to the petitioner, the alternative remedy has turned out to be too costly, illusory, onerous and one which caused undue

delay and hardship. Further, it is his case that though he had approached another forum, he can still file the present writ petition as the notice

passed u/s 45-A of the ESI Act was illegal as it is violative of principles of natural justice, void ab initio as similar demand was already held to be

illegal and arbitrary. Hence, this writ petition.

Per contra, it is contended by the respondents that the above writ petition is liable to be dismissed on the short ground in view of the fact that the

petitioner referred O.P. No. 105

of 1990 against the very impugned order before the Employees'' Insurance Court which is still pending, that the petitioner while filing the above

O.P. No. 105 of 1990, inter alia, filed a petition for stay of all further proceedings pursuant to the impugned order, dated October 10, 1990, and

that the said Employees'' Insurance Court passed an order in the said stay application, that it found no sufficient reasons either to waive or reduce

the amount to be deposited by the petitioner in the Court and granted interim stay on condition that the petitioner''s deposit a sum of Rs. 1,39,907

into Court, on or before December 17, 1990, failing which the interim stay granted will be vacated. But it is contended by the respondents that the

petitioner herein without complying with the order passed by the Employees'' Insurance Court, filed the present writ petition and obtained stay of

the impugned order and that the petitioner also did not even withdraw the O.P. No. 105 of 1990 filed in the Employees'' Insurance Court,

Madras, before the filing of this writ petition, and the said O.P. is still pending before the Employees'' Insurance Court. Therefore, it is categorically

contended by the respondents that there cannot be parallel proceedings on the same issue, one before the Employees'' Insurance Court and one

before this Court. According to the respondents, admittedly, all the raw materials are supplied by the petitioner-firm and the cutting work is also

done by them directly. Further, the stitching work is carried out in accordance with the specifications given by the petitioner-firm. The very facts

disclosed that the contractors are immediate employers as defined u/s 2(13) of the E.S.I Act and that, therefore, the employees working under

them become employees of the petitioner by virtue of Section 2(9) of the E.S.I. Act. It is stated by the respondents that it may be that the

petitioner has got a right to reject the goods stitched if they do not satisfy the requirements/ specifications of the petitioner. But, from this averment

no inference can be drawn that there is no supervision of the work done by the immediate employer. It is contended by the respondents that it is

unbelievable that the petitioner did not have any supervision over the work entrusted to the contractors. They contend that the order made in O.P.

No. 49 of 1986, dated July 6, 1989, is not binding on the respondents since the said order is totally unconnected and entirely different with the

facts and circumstances of the present case, and it related to the period from 1980 to 1983 in respect of different types of work and different

employees working under different immediate employers. Therefore, according to the respondents the finding in the said case has no binding nature

as far as the present case is concerned. Further, against the said order the respondents have also filed a OMA which is pending before this Court.

They also contend that the claim made in the impugned order is a consequence of the inspection made by the E.S.I. Corporation authorities on

January 25, 1990 and February 5, 1990, that the entire figures had been taken from the ledgers of the petitioner and the order has been passed on

actual basis and not on ad hoc basis and that, therefore, consequently the petitioner is bound to pay the amount claimed in the impugned order and

also that so long as the amount remained due, ""no due certificate"" cannot be issued. It is reiterated by the respondents that in view of the pendency

of the original petition before the Employees'' Insurance Court the present writ petition is premature and the same is liable to be dismissed on this

ground alone. They also contend that the order in O.P.No. 49 of 1986 is not a bar for the impugned order since both vary on every aspect. Even

otherwise, as already stated, the order passed in O.P No.49 of 1986 has not reached its finality in view of the pendency of the OMA against the

said order. Thus, it is the case of the respondents that the contention put forth by the petitioner as regards the alternative remedy are without

substance and that, therefore, the entire writ petition is devoid of merits.

Having seen the entire material available on record and from the claims and counter-claims made by the parties herein the following facts are

admitted. The claim made in the impugned order is a consequence of the inspection made by the ESI authorities on January 25, 1990, and

February 5, 1990. Aggrieved by the said order the petitioner herein filed O.P.No. 105 of 1990 and C.M.P. No. 191 of 1990 for stay of all further

proceedings pursuant to the impugned order.

On that stay petition the Employees'' Insurance Court passed a conditional order. It is clear from the records that the petitioner herein without

complying with order passed by the Employees'' Insurance Court, Madras, filed the present writ petition and obtained stay of the impugned order.

Regarding all these aspects there is no dispute. It is also significant to note that the petitioner herein has not withdrawn O.P. No. 105 of 1990 filed

before the Employees'' Insurance Court before filing this writ petition and the said original petition is still pending on the file of the Employees''

Insurance Court, Madras. That being so, it is the categorical contention of the respondents that there cannot be parallel proceedings on the same

issue, one before the Employees'' Insurance Court and one before this Court and that, therefore, in view of the pendency of the said original

petition the present writ petition is premature and the same is liable to be dismissed on this ground alone. In the facts and circumstances of the

case, I see every force in the said arguments of the respondents. Because, as rightly contended by the respondents, simply because the prayer of

the petitioner for stay had been made conditional, it cannot be stated that the alternative remedy provided has become illusory or ineffective. That

apart, I am of the view that the question of alternative remedy being costly, onerous or causing undue hardship, is not a ground to bypass the same.

However, the petitioner has availed of the alternative remedy and the same is still pending, this writ petition is premature and that, therefore, the

same is not sustainable. Further, in this writ petition, the petitioner herein has raised so many grounds. They may raise all those grounds before the

concerned Court in the pending proceedings. In this view of the matter, I am not inclined to go into the merits of the case and the other contentions

raised by the parties in this case. Therefore, this Court has come to the conclusion that in view of the pendency of O.P.No. 105 of 1990 the

present writ petition is premature and that, therefore, the same is liable to be dismissed on this ground alone.

In the result, the writ petition is dismissed. No costs. Consequently W.M.P. No.30832 of 1990 also is dismissed and the interim order of stay

granted therein is hereby vacated.