1. This appeal is against the order passed by the E.S.I. Judge, Tiruchirapalli in E.S.I.O.P. No. 3/1975 filed under Section 75 of the Employees State Insurance Act (hereinafter called as ‘the Act’)
2. The petitioner in his petition contends briefly as follows: The petitioner is a partnership firm engaged in Sheet Metal hard-wares manufacturing from 1-4-1971. Prior to the partnership business, it was a Proprietary Concern of one Jambunathan as a Proprietor. There are eight persons employed in the petition-mentioned Firm in the premises. The respondent filed an application in E.S.I O.P. No. 2/1967 for passing a decree against the petitioner for a sum of Rs. 2270/- as due from the petitioner towards employer's contribution for the period from 1-9-1963 to 25-3-1967. The Court found that there are more than 20 persons employed in the factory and a direction was given to the Proprietorship Concern to pay a sum of Rs. 2270/- as employer's contribution. During the pendency of the said proceedings from 1967, from 1-4-1967 the workers in the-Proprietary Concern went away and the factory was closed from November, 1970. From 21-3-1967, there were only less than 20 employees and the maximum number of employees was 17. When the Partnership concern was formed, the total number of employees employed was only 8 persons, The Authorities have held that the petitioner Concern is not a factory within the meaning of the Factories Act. Since the petitioner Concern ceased to be a factory within the meaning of the Employees State Insurance Act as well as the Factories Act, there is no liability on the part of the petitioner to make employer's contribution or employees contribution. In September 1975, the respondent has issued a notice stating that the sum of Rs. 21,642-70 with future interest is due from the petitioner concern, Even while correspondence was pending between the petitioner and the respondent, final orders were passed in September, 1975. The petitioner Concern is not liable to make any contribution for the period mentioned in the notice. The notice has made a claim even for the period covered in the E.S.I.O.P. No. 2/1967. There were no arrears of any employer's contribution. The respondent had issued a certificate to the Collector to recover the amount under Revenue Recovery Act. When the petitioner is questioning the arrears of employers and employees contribution, the respondent should have issued a show cause notice.. But, without issuing any such notice, on adhoc basis, it has come to the conclusion that the petitioner is bound to pay the said amount. Hence the petition for declaration that the petitioner is not liable to pay any contribution under the Act as claimed in the petition.
3. The respondent in their counter contends as follows: The petitioner industry is a partnership Firm. E.S.I. O.P. No. 2/1967 was filed for recovery of Rs.. 2,270/- towards the employer's contribution for the period from 1-9-1963 to 25-3-1967. After the decree, the amount has been paid by the petitioner. It is incorrect to state that there are only eight persons employed in the petitioner Firm from 1-4-1971. The petitioner has failed to produce the records for the purpose of inspection and for assessing the amount due from them towards contribution. The respondent had to assess the contribution payable by the petitioner in an ad hoc basis in consideration of the records available with them. It is false to state that there were less than 20 employees from 21-3-1967 and when the Proprietorship became a Partnership Concern, there are only eight employees. From the inspection report for the period 1-4-1967 to 17-6-1970, it is clear that during certain periods the number of employees were engaged for more 20, for certain periods, the employer did not give records to show the actual number of persons employed. The claim of the petitioner that it does not come under the definition of the 'factory' as per the definition in the employees' State Insurance Act is not incorrect. The finding Of the Authorities under the Factories Act that the petitioner is not a factory under the said Act does not mean that the same is not a factory under the E.S.I. Act., and they are absolved from paying contribution. It is false to say that notice demanding payment of Rs. 21,642-70 with interest was issued in September, 1975 all of a sudden.. The notice was issued after necessary intimation. The allegation that period covered in the earlier E.S.I.O.P. 2/1967 was also stated as a period for payment of contribution is not correct. A show cause notice was issued as contemplated under the Act. Final notice was issued after complying with the provisions laid down for the same. The respondent had to demand the amount on adhoc basis on account of the failure of the petitioner to produce the records. The order passed by the respondent is legal and the petition is not maintainable.
4. On the above pleadings the learned E.S.I. Judge has held that the respondent has fixed the contribution payable by the petitioner from the report of the Inspector and from the information gathered otherwise and it cannot be stated that it is incorrect and that the Employees' State Insurance Act is applicable to the petitioner Concern and dismissed the petition.
5. Aggrieved over the same, the petitioner has come forward with this appeal.
6. This petition under Section 75 of the Act has been filed by the petitioner contending that the petitioner is a partnership concern and the respondent-Corporation had issued a certificate to the Collector of Tiruchi to recover certain amount viz. , Rs. 21,642-45 with further interest as arrears of contribution payable by the petitioner without taking into consideration that the petitioner concern ceased to be a factory within the meaning of Employees State Insurance Act and the petitioner Concern is not liable to make any contribution for the period mentioned in the notice issued to them and therefore a decree for declaration that the petitioner Concern is not liable to make any contribution as claimed by the respondent should be granted. The respondent resisted the same by contending that from the inspection report of the Inspector, for the period from 1-4-1967 to 17-6-1970, it is clear that for certain period, the number of employees engaged under the petitioner were more than 20 and for certain other periods, the employer did not produce the records to show the actual number of persons employed and from the available records, it was found out that the number of persons employed were more than 20 and the petitioners claim that their Concern is not a factory under the Employees State Insurance Act is not tenable and the amount demanded being the contribution payable by the petitioner during the relevant period, the order passed by the respondent demanding the amount is legal. The learned District Judge who held an enquiry in his impugned order has given a specific finding that the petitioner Concern comes under the definition of the word 'factory' and from the inspection report of the inspector it is clear that the petitioner is liable to make the contribution as demanded by the respondent and dismissed the petition. It is against the order the present appeal has been filed by the petitioner.
7. The learned counsel appearing for the appellant challenges the order on several grounds They are: There is no evidence that the appellant employed 20 or more persons to bring it under the definition of the word 'factory'; No personal hearing was given and no final order was passed under Section 45-A of the Art, no valid delegation of the powers to demand contribution issued to the inspector and the claim is barred by time. The entire proceeding has been initiated in pursuance of the order passed under Section 45-A of the Act which is based on the report of the inspector who has been examined as R.W.I. Since the appellant challenges the powers of the inspector, to have an inspection and submit a report and contends that there is no proper delegation of powers in order to enable the respondent to pass the order under Section 45-A, we have to see it at the first instance, The respondent has filed the resolution of the Employees State Insurance Corporation dated 10-4-1981 which empowers the Director General, the Regional Director, Deputy Regional Director and Assistant Regional Director in respect of the factory or establishment within the area in his charge and in his Region to determine by ordering the amount of contribution payable by the factory or establishment. The inspection was done by the Inspector of the area, in which, the petition mentioned establishment is situated and he has submitted a report for the inspection carried on by him on 16th and 17th June 1970. In pursuance of this inspection report, the Regional Director has passed the order under Section 45-A of the Act. Therefore, it cannot be stated that there is no delegation of power for the Regional Director to pass the impugned order. The learned counsel appearing for the appellant has argued that an order under Section 45-A should be in writing and signed by the Authority concerned and in the present case, no such order has been passed, but this argument is not a tenable one since the Regional Director has sent a notice dated 22nd October, 1974 to the petitioner-establishment specifically calling upon the petitioner to pay the contribution on receipt of the said letter arid in any case not after 7 days thereof, failing which the Office will be obliged to determine the contribution under Section 45-A of the Act and it has also enclosed a draft copy of the order. This draft order has been signed by the Regional Director. The learned counsel appearing for the appellant would argue that demand has been made for contribution for the same period for which an E.S.I.O.P., has already been filed and it is pending before the District Court. But, this argument of the learned counsel is not tenable since the notice dated 22nd October, 1974 in which contribution towards employer's special contribution has been demanded separately and in a separate notice dated 22-10-1974 contribution towards employees contribution has been demanded separately. Therefore the contention of the learned counsel appearing for the appellant that for the period covered in the earlier E.S.I.O.P., this demand has been made and it is a defect, is not a tenable one. The draft order having been signed by the Regional Director, the contention of the learned counsel appearing for the appellant that the order is not in writing and it has not been signed by the proper person and therefore there is no proper delegation is not a tenable one.
8. The contention of the learned counsel appearing for the appellant that the demand is time barred is not tenable since the limitation provided under Section 77-A of the Act is only for filing a petition under Section 75 of the Employees State Insurance Act before the E.S.I. Judge and this limitation is not for the demand being made by the Corporation. The liability to pay contribution is not a liability under the General Law. It is one created under the statute viz., the Employees State Insurance Act to the first time. This Act provides for amenities and benefits to be provided to the Workman for the contributions payable under the Act. There is no alternative mode of recovery of any liability created under the General Law. The Act has not provided any period of limitation for exercising the power under Section 45-A of the Act, because, the employers who fail to submit returns, or obstruct the respondent from obtaining necessary information, by carrying out inspection through its Officials should not be allowed to avoid contribution payable by them and thereby get benefited on the basis of their own unlawful act. It is only to enforce the recovery and fulfil the object of enactment, the limitation is prescribed under Section 45-A of Act. The argument of the learned counsel appearing for the appellant that the demand is barred by limitation is therefore not acceptable.
9. The learned counsel appearing for the appellant has argued that under the Factories Act, it has been declared that the petitioner establishment is not a factory and therefore they are not liable to pay any contribution. Declaration by Authorities under the Factories Act that the petitioner-institution is not a 'factory' cannot remove the petitioner's institution from the definition of the word 'factory' as defined under the Employees State Insurance Act. During the relevant period, the definition was like this, 'Factory' means any premises including the precincts thereof wherein 20 or more persons are employed or work as employees for wages on any day of the preceding twelve months and in any part of which, a manufacturing process is being carried on with the aid of power or is ordinarily so carried on but does not include a mine subject to the operations of the (Mines Act 1952) or a railway running shed. The Inspector's report consists of two parts viz. , the Form part and enquiry part. In the enquiry part, the inspector has noted that as per the Weekly Wage Role, seven persons were found working on 1-4-1967 and eight persons were found working on monthly wage basis. The name of the persons who work for weekly wages and name of the persons who work for daily, and monthly wages were also given by the inspector. In addition, the report further states that there were 13 workers who were working on different wages and it was found out by the Inspector from the payment vouchers. The name of the person, the wages given to them, were also noted by the Inspector in his report. The report further shows that during 1968-1969 and 1969-1970, as per the Ledger entries, 16 persons were working besides two casual workers who have been paid by vouchers, that apart as per the report, some casual workers were engaged in polishing Section, welding Section through contractors and the details of the payment were not available since it was not produced to him. The report is also to the effect that the employer constantly engages casual workers at piece rate basis in the polishing section, welding section and handmade section, and proper Wage Records and Attendance Registers were not made available for his inspection. The inspector has also noted that there are equipment's in polishing, handmade and welding Sections available within the factory premises and the statement of the employer that polishing, handmade and welding work are done through contractors outside the factory is not believed by him. From the report of the inspector, it is clear that the respondent establishment was engaging workers on weekly payment wages, monthly payment wages, casual payment basis and through contractors. The learned counsel appearing for the appellant has argued that the Inspector has not recorded the statement of these workers said to have been employed under the employer and therefore his report cannot be accepted. But R.W. 1. the Inspector has not been cross-examined to the effect that the particulars given by him in his report are incorrect, and that he had not examined any of the employees whose names are mentioned by him in his report. The petitioner who contends that there are not 20 persons employed during the relevant period has not even given evidence to that effect. The petitioner having failed to give either oral or documentary evidence in support of his contention that there are less than 20 persons during the relevant period, cannot argue that the particulars given by the Inspector in his report is not correct.
10. Similarly, the learned counsel appearing for the appellant has argued that there is no evidence that power is used to hold that the respondent-establishment comes under the definition 'factory'. The learned counsel has relied upon the decision reported in Kalpana Kala Kendra, Kanpur v. E.S.I. Corporation (1985 Labour and Industrial Cases 763) in support of his above contention. It was a case where there was no evidence by corroboration that electric power was used for manufacturing process and there was evidence on behalf of the Firm that electric power was used once in two or four months and in which the report of the Inspector has not stated that aid of power was not taken for manufacturing process. It was under those circumstances, it was held in the above decision that the Firm cannot be considered as a factory. But, in the present case, the report shows that there are equipments that there is power available, that the contention of the employer that polishing and welding is done outside is not believable. Above all, the employer has not examined himself to speak that power was used in their manufacturing process, There is no explanation as to why equipments and power which are available in the premises is not used by the employer to hold that it is not a factory. Where there are equipments and power is also available for carrying on polishing and welding by the persons named, the presumption is that manufacturing process was also carried on with the aid of power. There is not even a suggestion to R.W. 1 that power was not used. In these circumstances, the argument of the learned counsel appearing for the appellant that power was not used and there were less than 20 persons employed in the establishment and therefore the petitioner's establishment cannot be considered as a factory is not a tenable one.
11. The learned counsel appearing for the appellant has argued that after the Proprietary Concern has become a partnership Concern from 1-4-1967, many employees have left the employment and therefore the establishment cannot be considered as a factory during the relevant period. In the decision reported in E.S.I. Corporation v. Harrison Malayalam Pvt. Ltd. (AIR 1993 S.C. 2655) it has been held that the obligation to make contribution does not cease if employee ceasing to be employee after contribution period and benefit period expiring. In the present case, the Proprietary Concern was covered under the Employees State Insurance Act is admitted by the petitioner. Therefore, even assuming that some of the employees left the establishment after it has become a partnership Concern, the obligation to make the contribution cannot be said to have ceased.
12. The learned counsel appearing for the appellant would argue that an order under Section 45-A of the Act cannot be clubbed to show cause notice and if it is clubbed, it is not a valid one. The learned counsel has not pointed out any decision to that effect. But, this argument of the learned counsel is contradictory, to his own argument that a show cause notice was not issued before passing the impugned order by the respondent-Corporation. The same argument appears to have been advanced before the E.S.I. Judge also. The E.S.I. Judge has pointed out that the inspector has directed the employer to produce the documents and Registers even at the time of the inspection in June, 1970. The respondent has issued notices under Exs. A-4, A-5 and A-6 and the petitioner has not claimed that he has sent any reply for these notices. When the petitioner has been issued with three notices by the respondent to show cause as to why contribution should not be demanded from the petitioner-establishment and the petitioner has failed to give reply to any one of the three notices, the contention of the learned counsel appearing for the appellant that there was no show cause notice issued prior to the passing of the impugned order is not tenable. As I have already observed this argument is self-contradictory to the argument that show cause notice and order under Section 45-A of the Act cannot be clubbed together which leads to the inference that in the notice issued finally, enclosing a draft order, the petitioner has been asked to show cause as to why the final order should not be passed.
13. The learned counsel appearing for the appellant would argue that when the establishment refuses to furnish returns Section 45-A cannot be invoked. In the decision reported in E.I.D. Parry (India) Ltd. v. The Regional Director, Tamil Nadu E.S.I. Corporation (1995-1 M.L.J. 261) it is stated under what circumstances the order under Section 45-A should be passed and one circumstance is the non-cooperation on the part of the employer in providing voluntary information and data required to be furnished on the basis on which the employer should have but failed to make the contributions. It has been held in the above decision that the failure to submit returns in accordance with the provisions of Section 44 of the Employees' State Insurance Act is sufficient for invoking the powers under Section 45-A of the Act. The conditions for invoking Section 45-A can be stated as follows: '(1) Establishment has not furnished the returns, Registers etc., in accordance with Section 44.(2) The determination is based on information available to the Corporation. (3) The determination must be by an order.' When we go through the Inspector's report and the draft order passed by the Regional Director, we are able to see that all these three conditions are satisfied. The learned counsel appearing, for the appellant would argue that the employer should have been heard before passing of the order. It is no doubt true that the Corporation being a quasi-Judicial Authority, the principles of natural justice would apply to the proceeding under Section 45-A and it is obligatory on the part of the Corporation to hear a defaulting employer who might be affected by the Corporation's decision under Section 45-A of the Act. But, we have already seen that in spite of three notices issued by the respondent-Corporation, the petitioner has not sent any reply and he has not co-operated with the Corporation. Therefore it cannot be stated that there is a failure on the part of the respondent-Corporation to give a hearing to the employer before passing the impugned order. In this connection, I would like to refer to the decision reported in A.P. Handloom Weavers Co-Op. Society Ltd. v. E.S.I. Corporation, Hyderabad (1988 Labour and Industrial Cases 481) wherein it has been held as follows:
'For the purpose of making a best judgment assessment under S. 45-A it is not necessary that the Corporation should give a prior show cause notice to the employer. The earlier defaults made by the company either by not filing returns or not maintaining registers or in not co-operating with the Corporation in holding the assessment are sufficient for taking action under S. 45-A Before initiating proceedings under Sec 45-A, no notice therefore, is contemplated by the Act. Once the conditions mentioned in the section for initiating proceedings under S. 45-A are in existence, it is permissible for the Corporation to take action under S. 45-A without issuing any prior notice in that behalf.
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' The learned counsel appearing for the appellant has argued that the E.S.I Corporation is under an obligation to hear an employer to determine a contribution payable by him if there is any dispute regarding its liability and the determination of the same should be in conformity with the principles of natural justice. As I have already observed it is not as if the respondent has not given any opportunity to the petitioner to be heard in person. In spite of notices issued by the respondent, the petitioner who have failed to produce the relevant records, returns, Registers etc., has not even sent any reply and the respondent has been compelled to pass the assessment order by adopting the best judgment method. In the above back-ground it cannot be stated that the E.S.I. Corporation is under an obligation to hear the employer before determining the contribution and in this case, it has not been done and therefore the order u/s 45 A cannot be sustained. The principal employer has not only failed to make the Registers of permanent employees available, but also has failed to give Registers of the Contract Labourers, casual labourers who are found in the factory by the inspector at the time of the inspection and therefore the argument of the learned Counsel that the failure to produce the returns by the petitioner cannot enable the E.S.I. Corporation to take it for granted that there is a factory is not convincing. The argument of the learned counsel appearing for the appellant that the report of the Inspector on whose basis the impugned order has been passed is not specific in giving the particulars of the employees is not a tenable one since the report would give the name of employee, the wages earned by him either weekly wise or monthly wise and as a casual or under a Contractor. Therefore, it cannot be stated that the report of the Inspector cannot be the basis for determining the contribution. The petitioner on whom the burden lies heavily to show that the petitioner-establishment does not come under the definition of the word 'factory' having failed to discharge the said burden, only wants to establish that the impugned order is not a proper order and the order passed by the E.S.I Judge has therefore to be set aside. I am of opinion that the above contention of the appellant is not convincing and acceptable to interfere with the order of the E.S.I. in the light of the material placed before the Court. In that view, I hold that the appeal is without merit. 14. In the result, the appeal is dismissed. No costs.