The Associated Cement Companies Limited vs Union of India

Nawal Kishore Agarwal, J.—By way of this petition, the petitioner is seeking quashment of the recovery notices dated 23-12-2004 (Annexure P-1) and dated 18-1-2005 [Annexure P-1(A)] issued by respondent No. 3 said to be issued u/s 45-B of the Employees'' State Insurance Act, 1948 (for short "the ESI Act"). Indisputably, the petitioner-Company, vide notifications (Annexure P-2 to Annexure P-14), was exempted from the operation of the ESI Act for a period commencing from 16-9-1989 upto 15-9-2004 by way of various notifications issued by the appropriate Government u/s 87 of the ESI Act.

Respondent No. 3 issued various demand notices demanding ESI contribution amounting to Rs. 91,51,509/- for the period commencing from 16-9-2000 to 31-5-2004. The demand notices were replied by the petitioner-Company denying the aforementioned liability pursuant to the notifications issued by the appropriate Government exempting the petitioner from operation of the ESI Act. However, respondent No. 3 rejected the contention raised by the petitioner and issued impugned notices [Annexures P-1 and P-1(A)] for recovery of the above amount. Hence, this petition.

The main contention raised by Shri Pradeep Saxena, learned Counsel appearing for respondent No. 3, is that though vide notifications, regular employees were exempted but the employees, who were not permanent and/or working under the contractor, were not exempted, and therefore, to that extent, the petitioner-Company is liable to deposit the above amount towards ESI contribution.

On the other hand, Shri N.K. Vyas, learned Counsel appearing for the petitioner, by referring to Section 2(9) of the ESI Act and by placing his reliance upon the judgment of Supreme Court in the case of Royal Talkies, Hyderabad and others v. Employees'' State Insurance Corporation through its Royal Talkies, Hyderabad and Others Vs. Employees State Insurance Corporation, , would submit: employee includes every employee whether permanent, temporary or working under the contractor or employed indirectly in the establishment by the contractor and thus it cannot be said that the notification is not valid so far employees who were not permanent and/or working under the contractor are concerned. It was further contended: the impugned notices are per se illegal and deserve to be quashed.

I have heard learned Counsel for the parties and perused the paper book.

Section 87 of the ESI Act reads as under:--

"87. Exemption of a factory or establishment or class of factories or establishments.-- The appropriate Government may, by notification in the Official Gazette and subject to such conditions as may be specified in the notification, exempt any factory or establishment or class of factories or establishments in any specified area from the operation of this Act for a period not exceeding one year and may from time to time by like notification renew any such exemption for periods not exceeding one year at a time.

Exemption of persons or class of persons.-- The appropriate Government may, by notification in the Official Gazette and subject to the such conditions as it may deem fit to impose, exempt any persons or class of persons employed in any factory or establishment or class of factories or establishments to which this Act applies from the operation of the Act.''''

Exemption notice issued u/s 87 of the ESI Act would mean exemption of a factory or establishment or class of factories or establishments from the operation of the entire provisions of the ESI Act. Once the petitioner-Company is exempted from the operation of the provisions of the ESI Act, then respondent No. 3 would be debarred from taking any action under any provisions of the ESI Act. Therefore, the issuance of recovery notices [Annexure P-1 and Annexure P-1 (A)] said to be issued u/s 45-B of the ESI Act during the existence of exemption notification are per se illegal and void and in the considered opinion of this Court, the petition deserves to be allowed on this count alone.

The argument advanced by learned Counsel for the parties, in the light of definition of employee, an envisaged in Section 2(9) of the ESI Act, would be relevant only in a case where notification has been issued u/s 88 of the ESI Act and not in cases where notification has been issued u/s 87 of the ESI Act.

In view of above, the impugned notices [Annexure P-1 and Annexure P-1(A)] issued by respondent No. 3 are illegal and void and deserve to be and are hereby quashed/set aside.

In the result, the petition is allowed. No order as to costs.