Appellant Required To Disprove Order U/S 45A Of Employees State Insurance Act, One Year Substantial Oppurtunity For Compliance: Karnataka High Court

The Karnataka High Court has dismissed an appeal by Group 4 Securitas questioning the order of the Employees State Insurance Court, wherein it rejected the application of the appellant that it was not liable to pay a contribution of Rs.65,20,855.18 determined by the ESI Corporation.

A Division bench of Justice K S Mudagal and Justice Ramachandra D Huddar dismissed the appeal with a cost of Rs 1 lakh, payable to the Karnataka State Legal Services Authority.

It said “The ESI Court on examining all the relevant documents and sound appreciation of the oral and the documentary evidence held that the appellant has not proved that the payments mentioned in the column “OT wages” were the reimbursement of the conveyance charges, which is not accountable for contribution. In fact the appellant was required to disprove the order under Section 45A of the Act and the materials relied for the said purpose. The ESI Court neither relied on inadmissible evidence nor omitted the consideration of any material documents or evidence.”

It was submitted that on 03.08.2000, 29.08.2000, 12.09.2000 and 13.09.2000 the Inspector of the Corporation visited the appellant's establishment at Bangalore and demanded for production of records for verification of contributions. After inspection, the ESI Inspector issued an observation slip dated 13.09.2000. As per the Inspector's observation, the appellant was paying overtime wages to its employees in the disguise of conveyance allowance to avoid payment of ESI contribution and had not accounted that for ESI contribution.

The Corporation accordingly served a notice on 19.10.2000 to the appellant claiming that as per their calculation, the appellant was liable to pay Rs.65,20,855, as ESI contribution in respect of its employees and called upon the appellant to show cause why the said amount shall not be recovered. The appellant attended the hearing on 20.11.2000 and requested for time to produce the documents.

Thereafter, it was submitted that the appellant did not produce the documents. Ultimately, the respondents passed an order under Section 45A of the Act on 08.02.2002 determining that the appellant was liable to pay Rs.65,20,855, towards contribution on overtime wages of its employees.

The appellant contended that the amount reflected under the head overtime wage was payment towards conveyance allowance of the employees and not the overtime wages. The appellant further contended that it was not given reasonable opportunity of hearing. The appellant further contended that the notice of hearing was not served on it.

The corporation opposed the plea saying that the appellant neither produced any records nor examined any of the employees to show that such head depicted the payment of conveyance charges or reimbursement of the conveyance charges. If such payment was made, certainly the appellant should have collected the vouchers from the employees, but no such vouchers were produced, it was argued.

The bench on going through the records noted that respondent's Inspector issued notice dated 12.09.2000 calling upon the appellant to produce the following documents for determining the correctness of the contribution. The said notice was received by the appellant. The respondents issued another notice dated 18.10.2000, pointing out certain irregularities in the payment of contribution and to rectify the same.

It was noted that the Regional Director of the Corporation issued notice dated 19.10.2000 fixing the hearing date on 20.11.2000, but the appellant did not produce the documents. Another notice dated 19.12.2000 was issued by the Corporation to the appellant giving the final opportunity of personal hearing on 09.01.2001, yet the appellant did not do the needful. Ultimately, it was found that the Deputy Director of the Corporation passed an order dated 08.02.2002 under Section 45A of the Act determining the contribution payable at Rs.65,20,855, for the period April 1997 to July 2000.

Following which the bench observed “The above circumstances show that more than one year time was granted to the appellant which constitutes not only reasonable opportunity contemplated under Section 45A of the Act but substantial opportunity...the contention that the respondents have not given proper opportunity to the appellant during the hearing of the proceedings under Section 45A of the Act carries no merit.”

Court held that it was for the appellant to disprove the correctness of determination made under Section 45A of the Act.

The bench said “In the present case since the records were not produced before the Corporation during determination under Section 45A of the Act, the ESI Court had to accept such determination unless and until the same was disproved by the appellant.”

Referring to the findings of the ESI court on the issue of evidence led by the appellate to disprove the claim of the respondent, the bench held that the ESI Court on examining all the relevant documents held that the appellant had not proved that the payments mentioned in the column “OT wages” were the reimbursement of the conveyance charges, which is not accountable for contribution.

"In fact the appellant was required to disprove the order under Section 45A of the Act and the materials relied for the said purpose. The ESI Court neither relied on inadmissible evidence nor omitted the consideration of any material documents or evidence” it held.

Rejecting the prayer of the appellant to remand back the matter for fresh consideration, the court said that the records of the case showed that the appellant had failed to discharge its burden of disproving determination made under the order under Section 45A of the Act and that the impugned judgment was passed on weighing the evidence and other materials on record in a judicious manner.

Accordingly it dismissed the appeal.

Appearance: Advocate J.Pradeep Kumar for Appellant

Advocate M N Kumar for Respondent

Citation No: 2023 LiveLaw (Kar) 500

Case Title: M/s GROUP 4 SECURITAS GUARDING LIMITED AND The Regional Director, ESI Corporation.

Case No: Miscellaneous First Appeal No 7749/2013

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