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PETITIONER: EMPLOYEES’ STATE INSURANCECORPORATION

       Vs.

RESPONDENT: M/S. F. FIBRE BANGALORE (P) LTD.

DATE OF JUDGMENT:       07/11/1996

BENCH: K. RAMASWAMY, G.B. PATTANAIK

ACT:

HEADNOTE:

JUDGMENT:                 THE 7TH DAY OF NOVEMBER 1996 Present:               Hon’ble Mr. Justice K. Ramaswamy               Hon’ble Mr. Justice G. BN. Pattanaik      R. Venugopal  Reddy, Sr.  Adv., S.A.  Wasim Qadri, Mrs. Anil Katiyar, Advs, with him for the appellant      M.N. Shroff, Adv. for the Respondent                          O R D E R      The following Order of the Court was delivered:      This appeal  by special  leave arises from the judgment dated 20.2.1979  of the Division Bench of the Karnataka High Court which  in turn  had followed  the ratio of judgment of the Full Bench in M.F.A.No.147/74, dated 19.4.1978. The Full Bench had held as under:      "In  the   result,  we  answer  the      question referred to us as follows:      Where, in cases to which provisions      of Section  45A of  the  ‘Act’  are      attracted, the  Corporation  by  an      order made  in accordance with that      section determines  the  amount  of      contributions  payable   and   that      claim is  disputed by the employer,      it would  not be  necessary for the      Corporation to seek a resolution of      that dispute  before the  Insurance      Court. Such  a claim is recoverable      as arrears  of land revenue. If the      employer disputes  the claim  it is      for him to move the Insurance Court      for relief.  In other cases - other      than cases  where determination  of      the amount  of contributions  under      Section    45A    is    made    the      Corporation,   if   it   claim   is      disputed by  the  employer,  should      seek an adjudication of the dispute      before the  Insurance Court, before      enforcing recovery."      The question  that arises for consideration is: whether

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the view  taken by  the Full  Bench of  the  High  Court  is correct  in  law?  Section  1(4)  of  the  Employees’  State Insurance Act,  1948 (for  short, ’the  Act’) envisages that the Act shall apply, in the first instance, to all factories (including factories belonging to the Government) other than seasonal  factories.   Section  1(5)   gives  power  to  the appropriate   Government   after   consultation   with   the Corporation, to notify in the official Gazette extending the provisions of  the Act  to any  of other  establishments  or class    of    establishments,    industrial,    commercial, agricultural or  otherwise. Section  1(6) envisages  that  a factory or  an establishment to which this Act applies shall continue to  be  governed  by  the  provisions  of  the  Act notwithstanding that a number of persons employed therein at any time falls below the limit specified by or under the Act or the manufacturing process therein ceases to be carried on with the  aid of  power. After its application under Chapter IV, all  employees in  factories, or establishments to which the Act  applies, shall be insured in the manner provided by this Act.  Under Section  39 (1),  the contribution  payable under the  Act in  resect of  an  employee,  shall  comprise contribution  payable   by  the  employer  and  contribution payable by  the employee  shall be  paid to the Corporation; the manner and details of payment and interest for the delay in payment  and the  rate of  interest and the procedure for recovery are  not material  for the  purpose of  this  case. Hence, they  are omitted.  Section  40  envisages  that  the principal  employer  is  enjoined  to  pay  contribution  in respect of  every employee  in the first instance whether he is  employed   directly  by  him  or  through  an  immediate employer,   both   the   employer’s   and   the   employees’ contribution. Sub-section  (2) thereof  provides with  a non obstante clause,  that subject  to the provisions of the Act and the  regulations, if any, made thereunder, the principal employer shall, in the case of an employee directly employed by him  (not being  an exempted  employee), be  entitled  to recover from  the employee  the employee’s  contribution  by deduction from his wages and not otherwise. The recovery has been provided  in Section  41 of  the  Act.  The  method  of payment of  contribution has  been adumbrated  in Section 43 where the  contribution has  not been  paid as  envisaged in Section 42  of the Act. Section 44 deals with the obligation of the employer to furnish returns and maintain registers in certain cases.  Section 45  gives power  to  the  Inspectors appointed by  the Corporation  to inspect the premises etc., the details  of which  are not  material. Section 45-A gives power  to  the  Corporation  to  determine  contribution  in certain cases. It read as under:      "45-A.       Determination       of      contribution in  certain cases.  1.      Where in  respect of  a factory  or      establishment      on      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  in      [prevented in  any manner]  by  the      principal or  immediate employer or      any other person, in exercising his      functions or discharging his duties      under Section  45, the  Corporation      may, on  the basis  of  information

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    available to it, by order determine      the amount to contributions payable      in respect of the employees of that      factory or establishment.      Provided that  no such  order shall      be passed by the Corporation unless      the principal or immediate employer      or the  person  in  charge  of  the      factory or  establishment has  been      given a  reasonable opportunity  of      being heard.      2. 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  45-B  **[or  the  recovery      under section 45C to section 45-I]"      Section  45-B  provides  for  the  contribution  to  be recovered as  arrears of the land revenue. In case it is not recovered, a  certificate is  required  to  be  given  under Section 45-C to the recovery officer for recovery thereof as arrears of  land revenue in the manner contemplated therein; the details  thereof are  not necessary  for the  purpose of this case.  When a dispute is raised in that behalf, Section 75 of the Act envisages determination by the Insurance Court as under:      "75.  Matters   to  be  decided  by      Employees’ Insurance  Court. 1.  If      any question  or dispute  arise  as      to-      (a)  whether   any  person   is  an      employee within the meaning of this      Act or  whether he is liable to pay      the employees’ contribution, or      (b) the  rate of  wages or  average      daily wages for an employee for the      purposes of this Act, or      (c)  the   rate   of   contribution      payable by  the principal  employer      in respect of any employee, or      (d) the  person who  is or  was the      principal employer  in  respect  of      any employee, or      (e) the  right of any person to pay      benefit and  as to  the amount  and      duration thereof, or      (ee) any  direction issued  by  the      Corporation under Section 55-A of a      review   of    any    payment    of      dependants’ benefits, or      (f) [xxx]      (g) any  other matter  which is  in      dispute   between    a    principal      employer and  the  Corporation,  or      between a principal employer and an      immediate employer,  or  between  a      person  and   the  Corporation   or      between an employee and a principal      or immediate  employer, in  respect      of any  contribution or  benefit or      other dues  payable or  recoverable      under this Act, or any other matter

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    required to  be  or  which  may  be      decided by the Employee’s Insurance      Court under this Act.      Such question or dispute subject to      the provisions of sub-section (2-A)      shall be  decided by the Employees’      Insurance Court  in accordance with      the provisions of this Act.      2. Subject  to  the  provisions  of      sub-section  (2-A),  the  following      claims  shall  be  decided  by  the      Employees’ Insurance Court, namely-      (a)  claim   for  the  recovery  of      contributions  from  the  principal      employer;      (b) claim  by a  principal employer      to recover  contributions from  any      immediate employer;      (c) [xxx]      (d)  claim   against  a   principal      employer under Section 68;      (e) claims under Section 70 for the      recovery of  the value or amount of      the benefits  received by  a person      when he  is not  lawfully  entitled      thereto; and      (f) any  claim for  the recovery of      any benefit  admissible under  this      Act.      2(A). If  in any proceedings before      the Employees’  Insurance  Court  a      disablement question arises and the      decision of  a medical  board or  a      medical  appeal  tribunal  has  not      been obtained  on the  same and the      decision  of   such   question   is      necessary for  the determination of      the claim  or question  before  the      Employee Insurance Court that Court      shall  direct  the  Corporation  to      have the  question decided  by this      Act and  shall  thereafter  proceed      with the determination of the claim      or question before it in accordance      with the  decision of  the  medical      board   of   the   medical   appeal      tribunal,  as   the  case  may  be,      except where  an  appeal  has  been      filed   before    the    Employees’      Insurance Court  under  sub-section      (2) of  Section 54-A  in which case      the Employees’  Insurance Court may      itself  determine  all  the  issues      arising before it.      (2B) No  matter which is in dispute      between a  principal  employer  and      the Corporation  in respect  of any      contribution  or   any  other  dues      shall be  raised by  the  principal      employer    in    the    Employees’      Insurance  Court   unless  he   has      deposited with  the Court fifty per      cent of  the amount due from him as      claimed by the Corporation:      Provided that  the court  may,  for

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    reasons to  be recorded in writing,      waive or  reduce the  amount to  be      deposited under this sub-section.      3.  No   Civil  Court   shall  have      jurisdiction to decide or deal with      any   question    or   dispute   as      aforesaid or  to adjudicate  on any      liability which  by or  under  this      Act is  to be  decided by a medical      board,  or   by  a  medical  appeal      tribunal  or   by  the   Employees’      Insurance Court.      It would  thus be seen that the employer, on making the provisions of  the Act  applicable to  the  factory  or  the establishment, as  the case  may be, is statutorily under an obligation to  register itself with the Corporation and keep depositing the employer’s and employee’s contribution within the period  specified therein.  The question  is: as  to who would approach  the Insurance  Court  for  adjudication  and determination of  a dispute whether the establishment of the employer is  attracted by  the provisions  of the Act and/or what is  the number of employees it has employed etc.? It is seen that  Section 45-A  is in the nature of best assessment judgment on  the basis  of the  information collected by the Inspector. In  the impugned  order the High Court holds that it  is   for  the   employer  to   challenge  it   and  seek adjudication. When  there was  derelication of  duty on  the employer to  either register  itself  with  the  Corporation under the  Act or  when there  is  failure  to  deposit  the contribution with  the Corporation  under the Act or failure to  deposit   the  contribution  with  the  account  of  the Corporation towards  employer’s and  employee’s contribution as envisaged  hereinbefore, the  Corporation is empowered to make best  assessment judgment  under Section  45-A and call upon  the   employer  to   deposit  the   amount  with   the Corporation.      The Full  Bench of  the High  Court has  held that in a case where the order under Section 45-A becomes final, there is no  need for  the Corporation to seek adjudication before the Insurance  Court. In all other cases, the Corporation is required to  go to  the Insurance Court, have it adjudicated and then  make a  demand. We  are of  the view that the Full Bench of  the High  Court is  clearly in error to reach that conclusion. Though  Section 75 of the Act does not envisages as to  who has to approach the Insurance Court, by necessary implication  when  the  employer  denies  the  liability  or applicability of the provisions of the Act or the quantum of the contribution  to be deposited by the employer, it is for him to  approach the  Insurance Court and seek adjudication. It is not for the Corporation in each case whenever there is a dispute, to go to the Insurance Court and have the dispute adjudicated. Otherwise;  the Act would become unworkable and defeat the object and purpose of the Act.      Under these  circumstances, we are of the view that the Full  Bench   judgment  of   the  High   Court  is   clearly unsustainable and  it is accordingly set aside. The Division Bench having  followed the Full Bench judgment fell into the same error.  Under these  circumstances, that  part  of  the judgment of  the Full  Bench and of the Division Bench which is not  consistent with the declaration of law above, stands set aside.  The Insurance Court is directed to determine the contribution payable  by the  respondent within  a period of three months from the date of the receipt of this order. The respondent is  directed to pay the amount as a condition. If it decides  to go  to the  High Court and file an appeal, it

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should first deposit the entire amount with interest payable in that behalf and thereafter approach the High Court, If so advised challenging the order of the Insurance Court.      The appeal is accordingly allowed. No costs.