The Regional Director, ESI Corporation vs Chemfab Alkalis Limited (Public) Limited

S.R. Singharavelu, J.—The substantial questions of law that arise for consideration is this appeal are as follows :

i. Whether the reliance of the lower Court on Section 2(12) of the Employees'' State Insurance Act as regards the statutory obligation of the

employer to seek coverage can be sustained in law?

ii. Whether the interpretation placed by the lower Court on Section 77-b of the said Act can be sustained in law ?;

iii. Whether the finding of the lower Court as regards the assessment of the concerned authority can be sustained in law ?

iv. Whether the finding of the lower Court as regards the notification applicable to the area in question can be sustained in law ?

The Regional Director, E.S.I. Corporation, Madras-34 has preferred this appeal as against the order dated 20.12.1995 passed by the learned

Second Additional District Judge (Employees'' State Insurance Court), Pondicherry.

The respondent herein filed an application under the said Act to set aside the order dated 13.12.1991 of the appellant claiming coverage of the

provisions of the said Act from 2.7.1985 to 31.10.1987.

Issue No.(ii) : The respondent is an establishment engaged in the production of caustic soda and allied chemicals and categorised as hazardous

products under the Factories Act. It had come to be covered under the said Act with effect from 1.11.1987. On 14.5.1991, a show cause notice

was issued by the appellant asking the respondent to show cause as to why the order should not be passed u/s 45-A of the said Act determining

the contribution of Rs.1,10,247/-. This figure was arrived at on the basis of a claim that the wages paged between 2.7.1985 and 31.10.1987 were

to the tune of Rs.15,01,729.05.

The respondent disputed the coverage for the period from 1985 to 1987. The appellant passed an order asserting that the factory was located

in the zone of implementation and directing that the contribution should be paid as per the demand. On the application filed by the respondent, the

order of the Regional Director - appellant was set aside by the learned Second Additional District Judge, against which, this appeal has been

preferred.

Learned counsel for the respondent firstly submitted that the claim for coverage between 2.7.1985 to 31.10.1987 by a show cause notice dated

14.5.1991 u/s 45-A of the said Act is time barred.

Sections 45-A of the said Act provides as follows :

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 Inspector 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 u/s 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.

Sections 77 and 77(1A) of the said Act read as follows :

Commencement of proceedings : (1) The proceeding before an Employees'' Insurance Court shall be commenced by application.

(1A) Every such application shall be made within a period of three years from the date on which the cause of action arose.

Explanation: For the purpose of this section,

(a) the cause of action in respect of a claim for benefit shall not be deemed to arise unless the insured person or in the case of dependants'' benefit,

the dependants of the insured person claims or claim that benefit in accordance with the regulations made in that behalf within a period of twelve

months after the claim became due or within such further period as the Employees'' Insurance Court may allow on grounds which appear to it to be

reasonable;

(b) the cause of action in respect of a claim by the Corporation for recovering contributions (including interest and damages) from the principal

employer shall be deemed to have arisen on the date on which such claim is made by the Corporation for the first time :

Provided that no claim shall be made by the Corporation after five years of the period to which the claim relates.

In this connection, learned counsel for the appellant straightaway relied upon the judgment in the case of Regional Director, ESI Corporation

Vs. M/s. Henry Woleey and Co. 1999 II LW 762 and contended that only if the claim was made by the Corporation before the Insurance Court,

then, this plea of limitation taken u/s 77 of the said Act will be applicable and so long as the claim is regarding a demand u/s 45-A of the said Act,

the question of limitation u/s 77 of the said Act may not be applicable.

What was observed in that case is as follows :

We have absolutely no hesitation in holding that the proviso will apply only in respect of a claim made by the Corporation before the Insurance

Court. We are supported in our view by the decision of a Division Bench of this Court in A.A.O.No.60 of 1980 dated 13.2.1980 (The

Pondicherry Cooperative Milk Producers Union Limited represented by the Managing Director Vs. The Regional Director of Employees State

Insurance Corporation). The following passage is of consideration relevance.

''The fourth point urged before the lower Court was that the claim was barred by limitation. The Employees State Insurance Act, 1948 does not

provide for a period of limitation for recovery of the amount due from a defaulting employer, and the only period of limitation prescribed is in

Section 77 and that applied only to the filing of an application before the Employees State Insurance Court u/s 75, and in the present case, it was

the appellant which had filed the application, and if there is any question of bar of limitation, then it was for the appellant''s application which was

liable to be dismissed''.

It was further held that a claim and demand u/s 45-A of the said Act was not barred by limitation. Applying the same proposition, it is held that the

show cause notice issued by the appellant is not time barred. Issue No.(ii) is answered in favour of the appellant.

Issue No.(iv) : Learned counsel for the respondent next relied upon ExA5 wherein the Manager of the E.S.I. Corporation, Pondicherry had

written a letter dated 5.11.1986 stating that the E.S.I.Scheme has not been extended to Periyakalapet area and hence, the respondent unit would

not attract coverage at present.

Relying upon this, it was contended by the learned counsel for the respondent that there is an estoppel as against the appellant in view of the

above letter and so, the appellant is forbidden to claim contribution as against their earlier statement made under ExA5.

This doubt gets cleared by the decision in the case of Employees State Insurance Corporation Vs. Madras Auto Service, etc. 1997 I LW 524

wherein it was held that the facts of that case, which are similar to this case, would not attract the application of principle of promissory estoppel. It

was further held as follows :

...since it is a well accepted principle of law that there can be no estoppel against statute and the statutory liability cannot be avoided on account

of ipse dixit act of any individual officer, who cannot either exempt an establishment from the payment of the statutory duty or waive the same. As

for the plea that it is beyond the reach of the respondent - management at the belated point of time when the demand was made to collect the

employees'' contribution and remit the same, I am of the view that the management cannot be allowed to take such a stand in the teeth of more

than one decision of the Apex Court on the very subject.

The liability under the said Act is a statutory liability, which cannot be disowned by any person of the E.S.I. Corporation, much less a

Manager, who is not at all competent to pass or write such letters. Therefore, the contention of the respondent is not sustainable. Issue No.(iv) is

answered in favour of the appellant.

Issue No.(i) : The learned District Judge, Pondicherry, in paragraph 13 of his judgment, has opined that Section 2(12) of the said Act does not

express or indicate that the employer has a statutory liability to seek coverage once the definition of factory is satisfied by its establishment. He

found that there is some force in the contention of the respondent in claiming that the claim of coverage without any notice of additional facts has

come to the knowledge of the appellant to justify the coverage and that the said coverage cannot be claimed.

Learned counsel for the appellant heavily relied upon ExR1 and ExR2 among whom form 01 is indicated by the appellant containing an

admission of the respondent that in 1985, there were employment of 87 persons by the respondent factory, which gives rise to the requirement of

application of the said Act. They have also contended that Section 2(12) of the said Act imposes a liability on the employer to seek coverage once

the facts within his knowledge are to the effect of attracting coverage.

It is upon this contention the Court below found that Section 2(12) of the said Act does not expressly indicate the above contention of the

appellant. Although Section 2(12) of the said Act does not directly so express, it states that factory means any premises including the precincts

thereof whereon 10 or more persons are employed. In this connection, we would like to indicate Section 2(4) of the said Act, which provides that

contribution means the sum of money payable to the Corporation by the principal employer in respect of an employee.

Thus, both the sections are interconnected inasmuch as they deal with the words ''employer'' and ''employee''. Section 2(9) of the said Act

describes ''employee''. Section 2(17) of the said Act defines ''principal employer''. Thus, a combined reading of the above provisions would only

indicate the authority that the Regional Director do have.

Therefore, it is futile on the part of the respondent to contend as if Section 2(12) of the said Act does not expressly indicate that the employer

has a a statutory liability to seek coverage. Hence, issue No.(i) is answered in favour of the appellant.

Issue No.(iii) : The appellant before the Court below strongly relied upon the notification claiming to cover the area in question under the said

Act. The respondent sought to justify their explanation by stating that even today, in the Pondicherry region, there are several villages, which have

not been brought under the said Act. It was further contended that a communication was also given by the appellant to Shasun Drugs claiming that

the area Periyakalapet was not covered in which the said unit is situated during the disputed period.

In this connection, learned counsel for the appellant emphatically contended that the factory in question is situated only at Chinnakalapet and

what was situated at Periyakalapet is the respondent''s canteen and colony. Thus, this clinches the issue and we can straightaway hold that the area

is covered and issue No.(iii) is answered in favour of the appellant.

Therefore, we restore the order dated 13.12.1991 of the appellant made in TN/INS/55/13366-34. The order of the Court below cannot be

sustained and is set aside. The civil miscellaneous appeal is allowed. No costs.