IN THE HIGH COURT OF JUDICATURE, ANDHRA PRADESH AT HYDERABAD (Special Original Jurisdiction) WEDNESDAY, THE EIGHTEENTH DAY OF MARCH TWO THOUSAND AND NINE PRESENT THE HON'BLE MR JUSTICE GODA RAGHURAM WRIT PETITION NO : 21107 of 2006 Between: The India Cements Limited, Yerraguntla Cement Plant Yerraguntla - 516 309, Kadapa District, AP rep. by Sri Rajan Ramani S/o.Rajan, Aged 55 years, R/o. Chennai. ..... PETITIONER AND 1 Employees' State Insurance Corporation Regional Office 5-9-23, Hill Fort Road, Hyderabad, rep. by the Regional Director. 2 The REcovery Officer, Employees' State Insurance ]Corporation 5-9- 23, Hill Fort Road, Hyderabad. 3 Cement Corporation of India, having its Registered Office at Core 5, Scope Complex, 7, Lodhi Road, New Delhi -110 003, rep. by its Chairman-cum-Managing Director. 4 The ICC Employees' Union, Regd. No.F-22, C/o. India Cements Ltd., Yerraguntala, Cuddapah District, Rep. by its General Secretary. .....RESPONDENT(S) Petition under Article 226 of the constitution of India praying that in the circumstances stated in the Affidavit filed herein the High Court will be pleased to to issue an order direction or writ particularly one in the nature of writ of mandamus or any other appropriate writ by declaring the action of the 2nd respondent in issuing the prohibitory orders No.52.Q/7374-46 dated 6.10.2006 as arbitrary and illegal and consequently quash and set aside the same and held that the petitioner-company is not liable to pay any amounts as demanded in the said prohibitory orders and allow the petition with costs, otherwise the petitioner-Company suffers grant los and pass such other order or orders. Counsel for the Petitioner: MR.G.VIDYASAGAR Counsel for the Respondent No.: The Court made the following: THE HON’BLE SRI JUSTICE GODA RAGHURAM W.P.No. 21107 of 2006 18-03-2009 Oral Order: The petitioner assails the prohibitory order dated 06- 10-2006 issued under Section 45-G of the Employees State Insurance Act, 1948 (for short ‘the Act’) read with the II and III Schedule of the Income Tax Act, 1961 and the Income Tax Certificate Proceeding Rules, 1962, directing the Manager, State Bank of India, Yerraguntla Branch, Kadapa to transfer an amount of Rs. 2,04,51,388-00 from the account of the petitioner in favour of the 2nd respondent. It would appear that the cement factory at Yerraguntla was initially under the control and ownership of 3rd respondent, a Government of India instrumentality. The unit went into financial distress and came before the Board of Industrial and Financial Re-construction (BIFR) as a sick unit. At that stage, the Government of India, in October, 1997 approved the sale of the Yerraguntla factory to the petitioner. A memorandum of understanding was entered into on 10-12-1997 between the petitioner and the Government of India. Resultantly the petitioner took possession and control of the factory on 20-01-1998. Earlier on 10-10-2001 an order was issued by the 2nd respondent prohibiting the petitioner from operating its bank account. Aggrieved thereby the petitioner filed W.P.No. 21531 of 2001 contending that on its representation, the State Government had issued on 22-11-2002 an order under Section 87 of the Act for the period 01-02-1998 (the date of the units purchase by the petitioner) to 31-01-2001. For the anterior period the petitioner contended, it is not liable; only the 3rd respondent herein is liable for the dues prior to 20-01-1998. By the judgment dated 14-10-2003, W.P.No. 21531 of 2001 was disposed of directing the respondents, if considered appropriate to proceed for recovery of the amounts due under law for the period anterior to 01-02-1998, by issuing notice to the petitioner and the 3rd respondent and thereafter take an appropriate decision. Consequent on the judgment above, notices were issued to the petitioner and 3rd respondent and an order dated 25-09-2006 was passed purportedly under Section 45-A of the Act determining the liability at Rs.70,69,641-00 for the period 01-03-1986 to 19-01-1998 and holding that both the 3rd respondent and the petitioner are jointly and severally liable to pay the said amount. It requires to be noticed that on 01-03-1986 by a notification by the appropriate Government the cement factory at Yerraguntla was brought within the purview of the provisions of the Act. Sri G. Vidyasagar, learned counsel for the petitioner strenuously contends that the jurisdiction under Section 45-A of the Act could not have been exercised by the 1st respondent for the period prior to 20-01-1998 (when the petitioner took possession of the factory from the 3rd respondent pursuant to the memo of understanding entered into between the petitioner and the Government of India). This contention is without substance or force and does not commend acceptance by this Court. Section 45-A of the Act enables the determination of contributions payable in respect of a factory or establishment where in respect of such factory or establishment no returns, particulars, registers or records are submitted, furnished or maintained, in accordance with the provisions of Section 44 of the Act. There are other circumstances indicated in which jurisdiction and power to make such ‘best judgment assessment’ (on the basis of information available to the Corporation), may be made, but those are not germane for the purposes of this writ petition. Sri G. Vidyasagar, learned counsel submits that since no notice was issued to the petitioner to submit returns or produce registers or records, the power under Section 45 of the Act cannot be invoked for passing the order dated 25-09- 2006, which is the basis for the impugned prohibitory order dated 06-10-2006. On text and authority the power to make an assessment and determine the amount of contributions payable in respect of the employees of a factory or establishment operates wherever 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 of the Act. Section 44 of the Act enjoins that every principal and immediate employer shall submit to the Corporation or to such officer of the Corporation as it may direct such returns in such form and containing such particulars relating to persons employed by him or to any factory or establishment in respect of which he is the principal or immediate employer as may be specified in regulations made in this behalf. It is the apparent factual scenario that the 3rd respondent which was in control and ownership of the plant prior to 20-01-1998, had submitted no returns, particulars, registers or records of ESI contributions made since 01-03-1986 (the date with effect from which the plant was notified and as an establishment falling within the regulatory ambit of the provisions of the Act). Such failure in submitting returns or in maintaining particulars, registers or records would automatically bring into operation the jurisdiction to pass an order of assessment under Section 45-A of the Act. Consequently, the petitioner cannot gainfully contend that power under Section 45-A of the Act was not validly exercised. Another contention urged on behalf of the petitioner is that the impugned prohibitory order dated 06-10-2006 has been passed even without communication of the order passed under Section 45-A of the Act viz., dated 25-09- 2006. In paragraph No.6 of the affidavit filed in support of the writ petition, the petitioner categorically pleads that after the petitioner participated in the proceedings before the 1st respondent (consequent on the judgment of the High Court dated 14-10-2003 in W.P.No. 21531 of 2001), no order was communicated to the petitioner and suddenly the prohibitory order was issued to the State Bank of India, Yerraguntla Branch, Kadapa District. In ground No.iii of the grounds of the writ petition, the petitioner reiterates that the 1st respondent without serving a copy of the order alleged to have been passed pursuant to the directions of this Court in W.P.No. 21531 of 2001, had initiated recovery proceedings and this is totally illegal and unjustified. In paragraph No.10 of the counter affidavit dated 08- 10-2006 filed by one K. Ramajogaiah, Assistant Director in the office of Regional Director, ESIC, Hyderabad (filed on behalf of the 2nd respondent), in response to the allegations in paragraph No.6 of the affidavit filed in support of the writ petition, it is asserted that the order dated 25-09-2006 (the one under Section 45-A of the Act) was passed after following the due procedure and giving opportunity to the petitioner. This answer is an evasive response to the averments of the petitioner that the order had not been communicated to it before the impugned prohibitory order dated 06-10-2006 was issued. There is no averment in paragraph No.10 clearly denying the assertion that the assessment order dated 25-09-2006 had not been communicated to the petitioner, prior to the order dated 06- 10-2006. Paragraph No.13 of the counter affidavit by the 2nd respondent is in response to ground No.iii of the grounds of the affidavit filed in support of the writ petition. It is pleaded in paragraph No.13 of the counter that the allegation in ground No.iii is denied and that the impugned orders are just and legal. This is also an unsatisfactory and ambiguous response. The 2nd respondent does not state that the order dated 25-09-2006 was communicated to the petitioner before the issuance of the prohibitory order dated 06-10- 2006. In paragraph No.26 of the counter affidavit there is an omnibus averment that the order dated 25-09-2006 was served both on the petitioner and the 3rd respondent. The issue is not whether the order dated 25-09-2006 was served on the petitioner at all. The contention by the petitioner in paragraph No.6 of the affidavit in the writ petition and in ground No.iii of the grounds is that the order had not been received by the petitioner prior to the impugned prohibitory order dated 06-10-2006. A counter affidavit is in the nature of a plea in response and a lis is not in the nature of wrestling match where litigants try to score debating points over an adversary. A public instrumentality like the 1st respondent is required to fully and fairly place all relevant facts before the Court in pleadings and produce all the relevant records. In paragraph Nos. 10, 13 or 26 the 2nd respondent fails to plead that the order of assessment under Section 45-A of the Act dated 25-09-2006 was served on the petitioner prior to the prohibitory order dated 06-10-2006. Even the vague pleadings in paragraph Nos. 10, 13 and 26 of the counter do not imply that such service was effected. In the circumstances and on the basis of the vague pleas in the counter affidavit of the 2nd respondent, the specific plea of the petitioner that no order of the assessment under Section 45-A of the Act has been received prior to the impugned prohibitory order dated 06-10-2006 remains unrebutted. Therefore, the inference is compelling that the impugned prohibitory order dated 06-10-2006 was issued prior to the communication by the 1st respondent of the order dated 25-09-2006, passed under Section 45-A of the Act. It is axiomatic that the order of a public authority becomes operative only on its communication to an authorized recipient. Since the petitioner’s liability to the ESI Corporation under the provisions of the Act was determined by the 1st respondent’s order dated 25-09-2006, communication of that order to the petitioner must precede a prohibitory order under Section 45-G of the Act. In the facts and circumstances of the case that procedure has been reversed. The prohibitory order was issued even without communication to the petitioner of the order under Section 45-A. The prohibitory order is therefore unsustainable and is accordingly quashed. It is however open to the 1st and 2nd respondents to initiate appropriate proceedings for recovery of the liability under the provisions of the Act from the petitioner in accordance with law and after communicating the order of the ESI Corporation, dated 25-09-2006, if not communicated by now. This Court rejects the petitioner’s challenge to the exercise of jurisdiction by the 1st respondent under Section 45-A of the Act, but invalidates the prohibitory order dated 06-10-2006 issued by the 2nd respondent only on the ground that the order has been issued without first communicating the order of assessment dated 25-09-2006 to the petitioner. This Court is constrained to record its disapprobation of the manner in which the counter affidavit is filed on behalf of the 1st and 2nd respondents. In the verification of the counter affidavit by one K. Ramajogaiah it recorded as under: …do hereby verify and state that the contents of the above paras of the affidavit filed in support of Vacate petition are true to my personal knowledge/based on records and believed to be correct based on legal advise, hence verified on this 8th day of October, 2006. The affidavit is in twenty seven (27) paragraphs. While the peroration is with reference to the deponent’s personal particulars, the 1st paragraph is regarding his service particulars. It is not known whether even the personal particulars of the petitioner are based on legal advice or the personal knowledge of the petitioner. Which of the paragraphs are based on personal knowledge, which on records, which on belief as to the accuracy and which on legal advice, the verification fails to clarify. A solemn procedure intended to introduce accuracy and accountability to the averments in affidavits filed into the Court, is reduced to a meaningless ritual by such careless attitude towards filing of counter affidavits. Callousness of the State instrumentality is to be deprecated. This Court hopes and trusts that the 1st and 2nd respondents will in future exhibit greater fidelity to legal procedure than has been apparent in this case. The writ petition is allowed to the extent indicated above. No costs. ____________________ GODA RAGHURAM, J Dated: 18-03-2009 Pvks