(Prayer: Civil Miscellaneous Appeal filed under Section 82(2) of ESI Act, against the order of the Employees Insurance Court (Principal Labour Court, Chennai) dated 12.11.2018 made in E.I.O.P.No.169 of 2006.)
1. The judgment and decree dated 12.11.2018 passed in E.S.I.O.P.No.169 of 2006 is under challenge in the present Civil Miscellaneous Appeal.
2. The ESI Corporation is the appellant. The appeal is filed mainly on the ground that the spirit of the order passed by the competent authority under Section 45A of the Act was not considered by the ESI Court and the ESI Court trusted upon the ledger entries made by the respondent/Corporation without verifying the genunity and the actual expenditure made.
3. The learned counsel appearing for the appellant reiterated that in the absence of any proof to establish such expenditure by producing documents, it would be improper on the part of the ESI Court in accepting the contention of the respondent and not considering the order passed by the Authorities under Section 45A of the ESI Act. Therefore, mere submission of a ledger before the ESI Court is insufficient. Admittedly, the respondent/Company had not produced any document before the ESI Authorities at the time of conducting an enquiry under Section 45A of the Act. Without producing any document before the competent authorities and allowing the Authorities to pass an order under Section 45A of the Act and thereafter, by filing an appeal under Section 75, the respondent had produced the documents before the ESI Court stating that all the expenditures are not wages. Those allowances and other expenditures cannot be taken into consideration for the purpose of determination of contribution payable under the Act.
4. The learned counsel appearing for the appellant is of the opinion that the ESI Court believing the ledger entires made by the respondent/Company formed an opinion that those expenditures including the purchase of gift, pooja expenses, purchase of newspapers and magazines and purchase of computers are not falling under the Act for the purpose of determination of contribution and accordingly, set aside the order passed under Section 45A of the Act. Such a view adopted by the ESI Court is not in consonance with the provisions of the Act. Thus, the Corporation is constrained to move the present appeal.
5. The learned Senior Counsel appearing on behalf of the respondent/Company sterroneously objected the said contention by stating that it is not as if the new documents are produced before the ESI Court. All the documents pertaining to the expenditure were submitted and those documents were marked as Exs.P3 to P8. Ex.P3 pertains to Salary Registers, Ex.P4 is the Contract issued by the DFID India, New Delhi, Ex.P5 is the Ledger sheets salaries and wages and Ex.P6 is the certain work orders from the Medical Education Department and Ex.P7 is the Copies of invoices from M/s.TRS Forms and Services Private Limited, Ex.P8 is the copies of ledger sheets relating to Service Charges paid, purchase-peripherals.
6. When all these documents were produced to establish that the expenditures met out are not wages and therefore, those expenditures cannot be taken into consideration for the purpose of determining the contribution payable, the ESI Court has rightly considered this aspect and set aside the order passed under Section 45A. Therefore, the appeal is untenable.
7. The learned Senior Counsel further reiterated that in the appeal, the appellant/Corporation has not raised any substantial question of law warranting further interference with reference to the findings made based on the ledgers submitted by the respondent/Company. Thus, the appeal is to be dismissed.
8. The learned Senior Counsel further solicited the attention of this Court with reference to the findings made by the ESI Court in Paragraph Nos.13 and 14 which are all relevant to the documents produced by the respondent/Company as well as the deposition of witnesses and crossexamination.
9. Considering the arguments as advanced, this Court is of the opinion that admittedly, an enquiry was conducted under Section 45A of the Act by the Competent Authority. Section 45A order dated 31.10.2006 reveals that the employer was afforded with an opportunity of personal hearing to present his case in person with relevant records and to raise his objections, if any, on 05.07.2005. Whereas, the employer had neither replied to the notice nor did he appear before the competent authority on 05.07.2005. The employer failed to attend personal hearing on 05.07.2005 but attended on 06.07.2005, requesting for postponement of personal hearing and next personal hearing was fixed on 27.07.2005. The employer did not produce the relevant records. As requested by the employer, personal hearing was postponed on 10.08.2005. The employer after attended on 11.08.2005, again requested to postpone the hearing vide his letter No.BCS/ESIC-5/2005-06 dated 10.08.2005. Accordingly, next personal hearing was offered on 22.08.2005. The employer did not attend personal hearing. Hence, no more personal hearing was given on 06.10.2005. The employer failed to attend the personal hearing on 06.10.2005 and a final opportunity was given on 20.02.2006. The employer attended personal hearing on 20.02.2006 but did not produce any records. One more personal hearing was given on 14.03.2006. The employer did not turn up for personal hearing on 14.03.2006 and hence, final opportunity was given on 05.04.2006 but the employer failed to attend for personal hearing.
10. The sequences of fact narrated by the Competent Authority in the order passed under Section 45A of the Act reveals that absolutely, there is no co-operation on the part of the respondent/employer for the purpose of conducting effective enquiry proceedings under Section 45A of the Act. While attending the Statutory hearing, the employer is expected to establish their case or to defend their case. Going on seeking adjournments one way or another or attempting to frustrate the enquiry proceedings can never be encouraged. In the present case, several opportunities were given by the Competent Authority/Appellant Corporation. Inspite of several opportunities, the respondent/employer had not produced any documents enabling the Authorities to make an assessment and pass an order under Section 45A. The mindset of the employer and their conduct regarding the manner in which they responded to the enquiry reveals that they had not respect towards such statutory enquiry conducted under Section 45A of the Act. This Court with displeasure record the conduct of the employer, more specifically, while conducting Statutory Enquiry under the ESI Act, which is a welfare legislation. The Act is enacted for the welfare of the poor workmen. Medical facilities and other compensation, schemes are provided under the Act. Therefore, the employers are also bound to respond to such welfare legislations in order to redress the grievance of workmen when they are in distress. It is not as if the employers are doing favours to the workmen. It is a statutory obligation on the part of the employer to respond to the welfare legislations and participate effectively during the enquiry proceedings to be conducted by the Statutory Authorities under the provision of the Act. If the conduct of the employer in this regard is not satisfactory, the manner in which the respondent/employer avoided and evaded the enquiry proceedings before the competent authority would draw a factual inference that during the relevant point of time, they could not able to produce any documents in the enquiry proceedings. If at all they possess all such valid documents for expenditures met out, the respondent/employer would have submitted all those documents before the Authorities. Contrarily, they have not produced any such document before the Authorities. Thus, an inference in such circumstances is to be drawn that the documents were not available with the employers, during the relevant point of time or they had not produced willingly.
11. When the enquiry proceedings are conducted by following the procedures and an order was passed by the Authority under Section 45A of the Act, this Court is of the considered opinion that Sub-Clause 2 to Section 45A of the Act is to be applied. Section 45A(ii) enumerates that " 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 124 [or the recovery under sections 45C to 45-I]".
12. The order passed under Section 45A(1) shall be sufficient proof of the claim of the Corporation under Section 75. Therefore, the burden is shifted to the person, who prefers an appeal, to establish that such an order is not in consonance with the provisions of the Act. The burden of proof cannot be shifted on the Corporation to establish the manner in which the contribution is determined. Contrarily, the onus lies on the person who files an appeal against such an order passed under Section 45A. In the event of not establishing the same, the appeal under Section 75 is not entertainable.
13. Let us now consider the judgment of the ESI Court and the findings made therein. Undoubtedly, paragraph No.13 of the judgment deals about the documents filed by the respondent/Companies. In Ex.P3/Salary Register, it was found that the Dearness Allowance was striked out against which it is written in the pen as conveyance allowance. P.W.1 has also admitted that there is a correction about the Dearness Allowance in the Salary Register but he had given the explanation that since the Register was printed register and the DA was printed, they have struck out the DA and written as conveyance allowance with pen. P.W.1 has elaborately stated in his evidence that the "conveyance payment" made to the employees towards conveyance charges, petrol expenses and diesel expenses etc., and on the air travel expenses of the Proprietor.
14. At this juncture, this Court would like to draw an inference that the ledgers were produced and the calculation made was also explained by P.W.1. The learned Senior Counsel also reiterated that in a printed Register, they struck out the Dearness Allowance and written the applicable expenditures. This being the routine procedure always accepted by the ESI Court. However, the learned counsel for the appellant/Corporation raised a serious doubt about the entries made in such Registers by the respondent/Company itself.
15. In respect of entires made in the ledgers, the appellant/Corporation had no opportunity to conduct investigation and verify the genunity of the entires made by the employer. It is to be considered that in the event of submitting the original documents at the first instance before the ESI Court by the employer in an appeal filed under Section 75 of the Act, the opportunity of the Departmental Investigating Agency is taken away which is otherwise contemplated under the provisions of the Act. Investigation is a tool to cull out the truth. If such an opportunity is not made available to the competent authorities, then the sanctity of the documents produced by the employer at the first instance before the ESI Court are doubtful. Thus, the Competent Authority must be provided with an opportunity to scrutinize the Registers, conduct investigations and enquiries and form an opinion with reference to the genunity of the entries as well as the factual details.
16. In the case on hand, Section 45A order reveals that the respondent/employer had not participated in the enquiry proceedings. Thus, the Competent Authorities had no occasion to verify the genunity of the documents filed by the respondent before the ESI Court. Thus, the appellant/Department is deprived from conducting an investigation and enquiry with reference to the Registers, ledgers as well as entries made therein by the employer. This aspect was not considered by the ESI Court.
17. Apart from this, the ESI Court is entertaining an appeal under Section 75 of the Act. Though it is to be considered as an original proceedings as Section 75 appeal is filed against the order passed by the Authority Competent under Section 45A of the Act, this Court is of the opinion that an opportunity must be provided to the Authorities to investigate and conduct an enquiry if at all a new document is filed by the employer before the ESI Court. In the absence of providing any opportunity to the Corporation Officials, there is every possibility of miscarriage of justice as the ESI Court may not be competent in all circumstances to understand the nuances of the investigations to be conducted under the provisions of the ESI Act by the competent authorities.
18. Thus, an opportunity is certainly mandatory under the provisions of the Act. As such, investigation and enquiry would reveal many factors, which would not have been revealed before the ESI Court. The nature of the Court proceedings as well as examination of witnesses cannot be compared with the investigation procedures and the enquiry procedures to be conducted by the Competent Authorities in the manner prescribed under the Rules and with the guidelines of the Higher Authorities of the Department. All these factors are playing pivotal role in order to cull out the truth with reference to the facts and circumstances made available, suppressed or not revealed by the parties etc. These all are the considerations to be shown by the ESI Court while admitting the document at the first instance, which were not adjudicated by the Competent Authority under Section 45A of the Act. A difference is to be drawn in respect of the documents produced by the employers before the competent authority under Section 45A of the Act and the documents produced before the ESI Court at the first instance by either of the parties. Though Section 75 is an original proceedings, if any document is filed by the employer, which was not produced before the competent authorities, then mere inspection before the ESI Court is insufficient and the Authorities must be provided with an opportunity to conduct further investigations regarding the manner in which such documents were produced and its genunity or otherwise. In the event of not allowing the Authorities to conduct investigation in respect of such new document, undoubtedly, the same will result miscarriage of justice and the Courts cannot interfere with the entries made by such employer in the ledgers.
19. As rightly pointed out by the learned counsel appearing for the appellant/Corporation, in the present case, the respondent/employer had not produced any bills, Vouchers, Receipts etc., in order to substantiate the entries made in the ledgers produced. In the absence of any such proof to establish the actual expenditure met out, mere ledger entries cannot be trusted upon. In the present case, the ESI Court has believed these factors and set aside the order passed under Section 45A of the Act, which is not in consonance with the provisions of Sub-Clause 2 to Section 45A of the Act. Under Sub-Clause 2 to Section 45A, the order passed shall be sufficient proof of claim of the Corporation under Section 75. Therefore, the employer, in order to rebut the order, must produce all the documents enabling the authorities to conduct an investigation and arrive a conclusion. Admittedly, in the present case, all such ledgers were produced by the respondent/employer before the ESI Court. The fact remains that Section 45A order was passed on 31.10.2006 and the appeal was also filed in November 2006. When the respondent/employer had not produced any document or ledgers before the Authorities in the year 2006 in an enquiry conducted under Section 45A of the Act, it is doubtful how they produced all the documents before the ESI Court in the very same year. Therefore, the conduct of the respondent in this regard raised a doubt in the mind of the Court. When such a doubt is established, then it is not proper on the part of the Court to form an opinion that all those ledgers produced by the respondent/Companies are genuine and based on such ledgers, the order passed under Section 45A is to be set aside. Such a finding is not in consonance with the provisions of the Act.
20. The employers always escape from such statutory liability in a clever and calculated manner. Human mind always tends to do so often with the business community. Thus, the Authorities as well as the Courts are expected to be cautious, while dealing with such documents, which are all commercial transactions. The genunity of those entries and the documents are to be ascertained only by conducting proper investigation, which is contemplated under the provisions of the Act. Mere acceptance or admission of documents are insufficient. In view of the fact that in the present case, the respondent/employer submitted the ledgers more specifically Exs.P3 to P8, at the first instance before the ESI Court and admittedly, all these ledgers were not submitted before the competent authority, while conducting an enquiry under Section 45A, there is no reason to trust upon the ledgers filed before the ESI Court and the ESI Court has also committed an error in accepting those documents, in the absence of any supportive document to establish the expenditure by producing vouchers, receipts, bills etc.
21. Section 45 of the ESI Act contemplates Social Security Officers, their functions and duties. Accordingly, any Social Security Officer or other official of the Corporation authorized in this behalf by it, may, for the purposes of enquiring into the correctness of any of the particulars stated in any return referred to in Section 44 or for the purpose of ascertaining whether any of the provisions of this Act has been complied with?. Accordingly, they are empowered to conduct an inspection even by entering into office or other premises and direct them to produce the documents and examine such accounts, books etc.
22. The learned Senior Counsel also reiterated that the Authorities when empowered under the provisions of the Act to conduct such inspection in the event of non-production of document, they should have invoked the provisions of Section 45A of the Act. However, the said arguments advanced by the learned Senior Counsel for the respondent/Company is disputed by the learned counsel appearing for the appellant by stating that in the present case, the inspection was conducted by the Competent Authority, more specifically, the Inspector. The Inspection Report reveals that the ledger verification for the years 1999-2000, 2001-02 & 2002-03 were verified and the date of visits are 07.03.2005, 08.03.2005, 17.03.2004 & 28.03.2005. During the inspection also, the Authorities could not trace out the complete details regarding the Vouchers, wages paid. The learned counsel appearing for the appellant reiterated that during such inspection, many documents are disowned by the employer. Thus, the Authorities are helpless.
23. In the present case, even during enquiry under Section 45A, the respondent/employer had not produced any document and the inspection conducted under Section 45A also reveals that certain documents were concealed. Inspite of these, they have produced certain documents before the Court at the first instance, which caused greater prejudice to the interest of the Department in ascertaining the genunity of those documents. Therefore, the Court has proceeded based o
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n erroneous guidance. 24. The learned Senior Counsel raised a ground that the ESI Authorities has also inspected the ledgers during cross-examination of witnesses. Such inspection during the cross-examination of witnesses in the Court would not be a factor to be considered for the purpose of setting aside the order passed under Section 45A of the Act. While cross-examination of witnesses, these Authorities are appearing as witnesses and they are not acting as Authorities Competent under the provisions of the Act. They are not empowered to exercise their powers under the Act, while deposing before the Court of law. Thus, the nature of capacity before the ESI Authority proceedings under Section 45A as well as the Court cannot be equated based on such deposition. The Courts are not expected to arrive a conclusion, in the absence of any proper original investigation to be conducted under the provisions of the Act. 25. In view of the facts and circumstances as narrated above, this Court is of the opinion that the question of law raised that an order passed under Section 45A(1) shall be sufficient proof of the claim of the Corporation under Section 75 is discussed as detailed above. Under Sub-clause 2 to Section 45A of the Act, a person who prefers an appeal under Section 75 must establish that the order passed under Section 45A(1) is not in consonance with the Act. Contrarily, the findings arrived by the ESI Court that the Corporation has not established the nature of the wages paid are in violation of the Act and accordingly, the said question stands answered in favour of the appellant/Corporation. 26. In view of the fact that the burden of proof erroneously shifted by the ESI Court on the ESI Corporation which is in violation of Sub-Clause 2 to Section 45A of the ESI Act, this Court is inclined to consider the appeal. Accordingly, the impugned order dated 12.11.2018 passed in E.I.O.P.No.169 of 2006 is set aside and Civil Miscellaneous Appeal stands allowed. No costs. 27. If at all any grievance exists for the respondent/employer, it is left open to the respondent to approach the competent Authority in the manner known to law.