Sanghvi Cylinders Pvt. Ltd. vs The Asst. Director and The Recovery Officer, Both of The Employees State Insurance Corporation

Venugopala Gowda, J.—Appellant is the applicant in the unnumbered ESI Application pending on the file of the Employees State Insurance Court at Hubli (for short "Court"). Appellant has filed an application u/s 75 of the Employees State Insurance Act, 1948 (for short ''the Act'') against the Respondents for setting aside the order passed by the Respondents claiming a total sum of Rs. 20,77,620/-towards ESI contribution from October 2000 to March 2003 and April 2004 to March 2006 and Rs. 55,328/- and Rs. 50/- being interest. Along with the application, Appellant had filed IA No. 1 u/s 75 of the Act for waiving of deposit of 50% of the contribution amount. IA No. 2 was filed in the Court for stay of operation of the order passed u/s 45(A) of the Act. Both IA 1 and 2 have been rejected and the applicant was directed to deposit Rs. 10,66,499/- within 15 days from the date of the order. The application was directed to be registered, if the said amount is deposited. Seeking to set aside the order passed on IA No. 1 and to direct the Court to register the case for adjudication without insisting the deposit, this appeal has been filed.

We have heard the learned Counsel for the Appellant and perused the record.

Learned Counsel firstly contended that, the Court is not justified in ordering the deposit of 50% of the total amount determined i.e., to the extent of Rs. 10,66,499/-, According to the learned Counsel, the Court has seriously erred in not exercising its discretion to waive the deposit, even though there is a strong prima facie case in favour of the Appellant.

Secondly, he contended that the Respondents are not justified in determining the ESI contribution on the total amount paid to the contractors for their work, without segregating the labour charges.

Thirdly, he contended that the court ought to have taken note of the fact that, even if ultimately the Appellant is held liable to pay the contribution, the total liability would not exceeded Rs. 5 lakhs and therefore, directing the Appellant to deposit Rs. 10,66,449/- is without any rationale.

To entertain an appeal u/s 82(2) of the Act, the appeal should involve substantial question of law. Considering the memorandum of appeal and the contentions of the learned Counsel, the point for consideration is:

Whether the rejection of IA No. 1 by the Court and in directing the Appellant to deposit 50% of the amount demanded by the Respondent to register the application, involves any substantial question of law for consideration?

From the record, it could be seen that the 1st Respondent has passed an order dated 29.2.2008 u/s 45-A of the Act, determining the ESI contribution by the Appellant to the extent of Rs. 20,77,620/-. Challenging the said demand and also the order dated 17.3.2008 of the 1st Respondent, application u/s 75 of the Act has been filed in the Court. Sub-section (2-B) of Section 75 of the Act stipulates that, any matter which is in dispute between the principal employer and the Corporation in respect of any contribution or any other dues, shall not be raised by the principal employer in the Employees Insurance Court, unless he has deposited with the Court 50% of the amount due from him, as claimed by the Corporation. The depositing of 50% of the amount by the principal employer is a condition precedent to entertain the appeal. The proviso to the said Sub-section confers discretion on the Court to waive or reduce the amount to be deposited, for reasons to be recorded in writing. The Legislature in its wisdom has made it obligatory to deposit 50% of the demanded amount to maintain the application in the Court. Hence, the point for consideration is, whether the Court has acted judiciously in passing the impugned order?

A perusal of the impugned order shows that the Court had directed the Appellant to produce proof of payment being made towards security charges and that it is not liable for payment of ESI contribution over the salary paid to those employees who were appointed by the contractors. Despite giving the opportunity, the Appellant/employer failed to produce the documents and no material was available to show that its contractors have paid the ESI contribution over the wages of the employees engaged in the security duty of the Appellant/ establishment. Even the agreement between the Appellant/establishment and its contractors was not produced. Hence it was held that, there is no prima facie material produced to hold that, the applicant/employer is not liable to pay the ESI contribution over the wages paid to the security staff. In view of non production of any material, the Court has arrived at the conclusion that, there is no prima facie case. In the said view of the matter has been held that IA No. 1 and 2 are liable to be rejected, also making clear that, in case the impugned demand is held to be illegal or if the calculation held to be incorrect the deposited amount can be ordered to be returned. The Court has recorded reasons as to why, waiver or reduction cannot be granted and the impugned order stayed. ''Discretion'' means that, doing of things according to the Rules of reasons and justice and not according to the private opinion i.e., according to law and not whimsically. The order should not be arbitrary, vague and whimsical, but should be just and legal. It is judicial function, which is uncontrolled by fixed Rules of law, but to be exercised in the circumstances of each case, according to the well established principles of reasons and justice and not arbitrarily. Such order passed by the lower court can be interfered with by the High Court, only when a substantial question of law is made out and the lower Court is found to have committed a patent error, resulting in a manifest injustice being caused to the applicant/Appellant. Ordinarily, the principal employer is required to deposit 50% of the claim made by the Corporation, while making the application and in challenging the demand. The waiver or reduction can be only an exception and for the reasons to be recorded in writing.

From a perusal of the impugned order, it cannot be said that there is any material error or arbitrariness on the part of the Court, in rejecting IA Nos. 1 and 2. Since, despite opportunity being granted, prima facie material was not produced by the Appellant, the Court has passed the impugned order, which is neither arbitrary nor illegal. The Court has not found any reason to exercise its discretionary jurisdiction under the proviso, to waive or reduce the amount to be deposited. The Court has acted in terms of Sub-section (2B) of Section 75 of the Act.

The second and third contentions, do not arise for consideration in this appeal, at this stage of the proceedings. They are matters which are required to be decided by the ESI Court, after the application is entertained and enquiry is held by it in to the matter. Hence the said two contentions are premature.

In view of the said facts and circumstances of the case, no substantial question of law is involved. The impugned order passed by the Court, is in proper exercise of the jurisdiction vested in it.

In the result, the appeal is not competent for lack of substantial question law for consideration and hence is hereby rejected.

However, if the Appellant deposits a sum of Rs. 10,66,449/- within a period of four weeks from today, the Court shall register the application and consider the same. If fresh IA seeking stay of the impugned demand is filed by the applicant, after depositing the amount and registration of the application, this order will not come in the way of the ESI Court considering the fresh IA for stay and passing the an order thereon in accordance with law.

Subject to the said liberty and the observations, the appeal stands rejected.