IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MRS.JUSTICE K.HEMA THURSDAY, THE 25TH DAY OF AUGUST 2011/3RD BHADRA 1933 Ins.APP.No. 30 of 2009 ( ) --------------------------- AGAINST THE ORDER/JUDGMENT IN IC.60/2006 of ESI COURT, PALAKKAD DATED 02-02-2009 APPELLANTS/RESPONDENTS: --------------------------------------- 1. EMPLOYEES STATE INSURANCE CORPORATION (REP.BY ITS REGIONAL DIRECTOR), ROUND NORTH THRISSUR-680 020. 2. THE RECOVERY OFFICER, E.S.I.CORPORATION, ROUND NORTH, THRISSUR. BY ADV. SRI.T.V.AJAYAKUMAR RESPONDENT(S)/APPLICANT: -------------------------------------- M/S.A.V.T.NATURAL PRODUCTS LTD., VAZHAKKULAM, MARAMPILLY P.P., ALUVA REPRESENTED BY ITS ASSISTANT MANAGER (HR) AJU PALOKKARAN. BY ADV. SRI.K.A.ABRAHAM BY ADV. SRI.BIJU MARTIN THIS INSURANCE APPEAL HAVING BEEN FINALLY HEARD ON 25-08-2011,, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: K.HEMA ,J. ------------------------- Ins.A No.30 of 2009 -------------------------- Dated this the 25th August, 2011 J U D G M E N T A petition was filed by respondent-establishment under Section 75 of the Employees Insurance Act (hereinafter referred to as “Act” for short) before the Employees' Insurance Court ('the Court' for short) to set aside Exts.A3 and A5 which are notices issued by Corporation in Form-C-18. According to the establishment, it has no liability to pay contribution as stated in Form-C 18 notice. But a direction is issued by the said notice to pay contribution amounting to Rs.70,977 for the year 1999-2000 and Rs.4421/- for the period 2000-2001. 2. It is also the contention of the establishment that the claim is barred by limitation and no amount is recoverable from it. The claim for contribution for the period 1999-2000 was first raised only on 21.2.2006 and it was raised, without affording an opportunity of being heard. No valid claim can be raised by the Corporation in cases in which records are produced other than by filing petition Ins.A No.30 of 2009 2 under Section75, it is contended. A demand for recovery was made, as per notice dated 6.4.2006 for an amount of Rs.77,208/- as contribution as per Form-C 18 notice together with interest and charges. The establishment is not liable to pay the said amount also. 3. A written objection was filed by the Corporation -appellant contending that the claim is not barred by limitation and the contention is not sustainable in the light of the settled legal position that the bar under Section 77 will apply, only in respect of a claim made by the Corporation before the Court and not to any other proceedings initiated by the Corporation. The delay was caused only due to non- production of records by the applicant. The question of affording opportunity to the establishment does not arise since the claim is made after verification of records produced by the establishment. 4. It is also contended by Corporation that being the principal employer, of a factory covered under Section 2 (12) of the Act, respondent is liable to pay contribution and in case, there is failure to pay contribution within the time limit, interest is also leviable as per Section 39 (5) of the Act. The establishment-respondent failed to produce the Ins.A No.30 of 2009 3 necessary records on time and hence it cannot be permitted to plead limitation, it is contended. 5. No oral evidence was adduced on the side of the establishment. But, Exts.A1 to A5 were marked. RW1 was examined and Ext.B1 was marked on the side of appellant- Corporation. On consideration of the evidence, records and rival contentions, the Court set aside Exts.A3 to A5 notices. The said order is under challenge in this appeal. 6. Heard both sides. Perused the records. The Insurance Court set aside Ext.A3 and A5 mainly on the ground that a claim for recovery of contribution or interest cannot be enforced under Section 45 B to 45G of the Act. It was also held that in the absence of an order issued under Section 45A, 68 or 75 of the Act, the Corporation ought to have passed an order under Section 45A within a reasonable time, since according to the Corporation itself, the establishment failed to produce the records for the period 1999-2000. Since the Corporation failed to resort this course of action within a reasonable time, claim raised by the Corporation under Ext.A3 and A5 for contribution, interest etc are unsustainable, the court further held. Ins.A No.30 of 2009 4 7. Learned counsel for appellant-Corporation vehementally argued that no such contention was taken up by the respondent-establishment in the petition filed before the Insurance Court. Respondent did not have a contention that recovery cannot be effected or claim cannot be made, since an order under Section 45A was not passed at the appropriate period. Therefore, the impugned order is unsustainable, it is argued. 8. Learned counsel for appellant also argued that there is nothing in Section 75 of the Act to show that the Corporation has to file an application before the Insurance Court and get an order determining the contribution or interests or other dues payable. The Corporation is at liberty to make any claim in respect of contribution payable under Section 75, but that does not mean that the Corporation is precluded or prohibited from determining the amounts due from the establishment for the purpose of recovery under Section 45B to 45G of the Act, it is strenuously argued. 9. Learned counsel for appellant submitted that the legal position is made clear in the decision of Supreme Court in ESIC vs. Santhakumar [2007 (1) KLT 133]. It is specifically Ins.A No.30 of 2009 5 laid down therein that it is for the establishment to file an application before the Insurance Court, if it is aggrieved by any claim made by the Corporation. At the same time, Corporation may also be at liberty to file an application, if they want to make a claim for the contribution or other dues payable, it is submitted. 10. However, the court has misread the dictum laid down by the Supreme Court in the decision in Santhakumar's case and held that in the absence of an application filed by the Corporation under Section75 of the ESI Act and an order passed by the Court, determining the amounts payable, no recovery can be effected by virtue of Ext.A3 and A5 orders, it is argued. It is also pointed out by learned counsel for appellant that the delay occurred in making the claim only because time was sought for by the establishment for production of general ledger for the relevant period and the assessment was made stating that it was with the auditor. 11. Ledger was produced by the establishment only in December 2005 and the claim is made only on the basis of the records produced. It was also argued that contribution cannot be determined under Section 45A of the Act, in cases Ins.A No.30 of 2009 6 in which records are produced. An order under Section 45A can be passed only in cases where there is non-production of records and the said provision will not apply in cases where the records are produced by the establishment, it is argued. 12. Learned counsel for appellant took a strong stand that in the decision reported in ESIC vs. M/s. Fibre Bangalore (P) Ltd [1997 (1) SCC 625), the Supreme Court held that by necessary implication, when the employer denies the liability or applicability of the provisions of the Act or 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. 13. Learned counsel for respondent took a stand that where the records are produced, assessment has to be made under Section 75 (2) (a) of the Act as held by the Supreme Court in Santhakumar's case. It is not for the Corporation to make a claim by virtue of Ext.A3 or A5 notice. It is held by the Supreme Court in Santhakumar's case that the Corporation can determine the amount of Ins.A No.30 of 2009 7 contribution payable under Section 45 (1) on the basis of the materials available to it, “but where the records are produced, the assessment has to be made under Section 75 (2) (a) of the Act”. 14. Therefore in cases in which an order of contribution is passed otherwise than under Section 45A and the claim is disputed, the Corporation has to approach the High Court under Section 75 of the Act, it is submitted. He also referred to a decision reported in Bharat Barrel and Drum Mfg, Co Ltd and Anr. Vs. ESI Corporation [1971 2 SCC 860] to argue that the Corporation has to prefer a claim in a case where the liability for payment is disputed. Therefore, the Corporation ought to have preferred a claim and got it adjudicated as held by the Insurance Court, it is argued. 15. It is also argued by the learned counsel for the respondent that the claim is barred by limitation, since the claim was made not within five years or within a reasonable time. The Supreme Court in Santhakumar's case held that claim has to be made within a reasonable time. It cannot be said that the claim made after five years is within a reasonable time. Therefore, there is no ground to interfere Ins.A No.30 of 2009 8 with the order passed, it is argued. 16. On hearing both sides and on going through the impugned order and the records, I find that the prayer in the petition filed by respondent is to grant a declaration that the establishment is not liable to pay any amount, as per Ext.A5 recovery notice. According respondent, the establishment has no liability to pay the amount covered by Ext.A3 or A5. But, the court below did not even consider whether respondent is liable to pay the amount covered by the notices or not and whether the declaration sought for, can be granted or not. It is also relevant to note that there is a specific pleading that the establishment is not liable to pay the contribution as per, Ext.A3. But no finding is entered into by the Court regarding the respondent's liability to pay the contribution. 17. In this context, it is important to note that in a letter sent by the establishment to the Corporation in reference to the demand made under Ext.A3 notice, there is absolutely no whisper regarding the liability of the respondent to pay the amount. The establishment has thus not disputed the liability to pay the contribution or the amount covered by the notices Ext.A3 or Ext.A5. In Ins.A No.30 of 2009 9 paragraph 4 of the reply Ext.A2 this is what is stated by the establishment: “We admit the demand of contributions amounting to Rs.4421.00 on the wage element of Rs.68015.00 for the period 2000-01 for which we are ready to make the payment. However, since SBI employees are on strike, and as there are no SBT branches at Ernakulam where the challan can be paid, we request you to advise us as to how the payment can be made. Regarding the demand of contributions for the period 1999-2000, we request you to exempt the payment since the year 1999-2000 is already out of the limitation period of five years.” 18. It is, therefore, very much clear from what is stated by the establishment itself as per Ext.A2 which is a reply to the Corporation that they are not disputing the determination of quantum of contribution or the dues which are payable in respect of a claim made by the Corporation under Exts.A3 and A5. But, it is requested in Ext.A2 to exempt the payment for 1999-2000 since it is barred by limitation. It is also requested to advise how to make payment regarding period 2000-2001, since there was delay in payment due to strike of employees. 19. Before considering the rival arguments raised before this Court in the peculiar facts and circumstances of this case it is necessary to consider the scope of Section 75 Ins.A No.30 of 2009 10 of the Act. Section 75 (excluding portions which are not necessary for disposal of the appeal) reads as follows: 75 Matters to be decided by Employees' Insurance Court.-(1)If any question or dispute arises as to (a) xxxxxxx (b) xxxxxxx (c ) xxxxxxx (d) xxxxxxx (e) xxxxxxx (ee) xxxxxxx (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 required to be or which may be decided by the Employees' Insurance Court under the Act] such question or dispute [subject to the provisions of sub-section (2A) shall be decided by the Employees' Insurance Court in accordance with the provisions of this Act. (2) subject to the provisions of sub-section (2A) 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; © [***] (d) xxxxxxxx (e) xxxxxxxx (f) xxxxxxxx (2A) If in any proceedings before the Employees' Insurance Court a disablement question arises and the decision of a medical Ins.A No.30 of 2009 11 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 Employees' 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 or 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 54A in which case the Employees' Insurance Court may itself determine all the issues arising before it. 2B xxxxxxxx (3) xxxxxxxx 20. A plain reading of Section 75 of the Act reveals that the Court has jurisdiction to decide any dispute which are raised under Section 75 (1) (a) to (g) of the Act. But, the jurisdiction of the Court is limited to decide the “question” or “dispute” as to the matters which are referred to in sub clause (a) to (g) in Section 75 (1). As per Section 75 (1) (g), if any “question” arises as to any matter which is in “dispute” other than those covered under sub clause (a) to (f) of Section 75 (1) between a principal employer and the Ins.A No.30 of 2009 12 Corporation in respect of any contribution or benefit or other dues payable or recoverable under the Act, such question shall be decided by the Court, in accordance with the provisions under the Act. 21. What is to be decided by the Court under Section 75 is the “dispute” or a “question” which may arise in a “dispute” in respect of the contribution or other dues payable or recoverable. A close reading of Section 75 (1) (g) will reveal that what the court can consider and decide under the said provision is a “dispute” which is already existing between the parties. To make application under Section 75 (1) (g) there should be a pre-existing dispute. Only if such a dispute exist, a petition can be filed for decision of the Court. 22. For a “dispute” to arise, there must be an assertion by one of the parties and denial by the other. “Dispute” postulates the assertion of a claim by one party and its denial by the other (vide Gujarat State Coop. Land Development Bank Ltd. v. P.R. Mankad). The Supreme Court, in Anz Grindlays Bank Ltd. v. Union of India ((2005) 12 SCC 738), at page 745, held as follows: Ins.A No.30 of 2009 13 “The dictionary meaning of the word “dispute” is: to contend any argument; argue for or against something asserted or maintained. In Black's Law Dictionary the meaning of the word “dispute” is: a conflict or controversy, specially one that has given rise to a particular lawsuit. In Advanced Law Lexicon by P.Ramanatha Aiyar the meaning given is: claim asserted by one party and denied by the other, be the claim false or true; the term “dispute” in its wider sense may mean the wranglings or quarrels between the parties, one party asserting and the other denying the liability. In Gujarat State Coop. Land Development Bank Ltd. v. P.R. Mankad it was held that the term “dispute” means a controversy having both positive and negative aspects. It postulates the assertion of a claim by one party and its denial by the other”. 23. A “dispute” will arise only if there is an assertion by one party and denial by the other. In this case, there is an assertion from the side of the Corporation that certain amounts are due and payable by the establishment and the claim is also quantified under Exts. A3 and Ext.A5 notices , which are issued by the Corporation to the respondent (Form-C 18 notice), but there is no denial of all the facts. 24. The Corporation, as per the said notices brought to the notice of the establishment that the contributions, as per Ins.A No.30 of 2009 14 the provisions of law for the period from 1999-2000 to 2000-2001 for Rs.75,398/- have not been paid by the respondent. The establishment is also informed, as per the notice that in case of failure to pay contribution quantified in accordance with the provisions of Employees' State Insurance (General) Regulations 1950, interest at 15% per annum becomes payable under Section 39(5) of the Act or arrears of contributions on each day of default or default in payment of contributions in interest payable under Section 39 (5) of the Act may be recovered under Section 45-C to 45 -I of the Act. 25. It is also stated in Ext.A3 notice that unless contributions outstanding are paid immediately and in any case within 15 days thereof under the intimation to the office of the Corporation, the office will be constrained to cause the same to be recovered under Section 45-C to 45-I of the Act. In the reply sent to the said notice as Ext.A2, the establishment specifically admitted the payment of contribution for the period 2000-2001 and expressed their readiness to make the payment regarding the payment of contribution for the period 1999-2000. 26. The establishment also requested exemption from Ins.A No.30 of 2009 15 payment, since the claim for 1999-2000 is made beyond the limitation period of 5 years. It is clear from the words in Ext.A2 that the respondent was not disputing the liability to pay, but requesting for an exemption to make the payment which the respondent is not liable to make because of the bar by limitation. 27. Therefore, the “dispute” between the principal employer and the Corporation is not in respect of the liability of the respondent to pay the amount claimed under Ext.A3 but it narrows down to a claim made by the establishment for exemption to pay because of the bar of limitation, since the claim is made after a period of five years. Therefore, the dispute in this case is only whether respondent is entitled to have an exemption from payment of the amount claimed under Ext.A3, because of the bar of limitation. The court can decide only such “dispute” as per Section 75 of the Act. 28. The Insurance Court cannot make a roving enquiry into anything other than the “dispute” which arose prior to filing of the application. The powers of the Court is limited to decide only the “dispute” which has arisen between the parties prior to filing of Section 75. It is only such dispute and the questions relating to such dispute which alone can Ins.A No.30 of 2009 16 be considered by the Insurance Court. 29. Therefore, before proceeding to “decide”, the court shall ascertain whether any dispute arose between the parties and what exactly was such dispute which arose prior to the application. Section 75 of the Act is very clear on the point that application can be filed seeking a decision of the court in respect of a “dispute” or any “question” relating to such “dispute”. Since there is no dispute regarding the liability of the respondent to make payment of contribution as claimed by the Corporation, it is unnecessary to consider whether establishment is liable to pay compensation or not. 30. The substantial questions of law involved in this case are as follows: (i) Is not the Corporation competent to determine the contribution by itself, in cases in which the records are produced by the establishment? (ii) Is not the corporation competent to recover the contribution or other dues by way of interest etc, under Section 45B to 45G of the ESI Act in the absence of an order under Section 45A of the Act? (iii) In cases in which the records are belatedly produced after five years of the relevant period, is the Corporation precluded from making a claim for contribution on the basis of the records which are produced after such period? (iv) In case in which no order is passed under Ins.A No.30 of 2009 17 Section 45A of the Act is not Corporation empowered or competent to invoke provisions under Section 45B to 45G of the Act to recover of contribution, in cases in which records are not produced? 31. A reading of Section 4B makes it very clear that any contribution payable under the Act may be recovered as an arrear land revenue. By various provisions of the Act, contribution is payable by the principal employer. Provisions in the Regulation also lays down the manner in which and the period within which the contribution is to be paid. 32. However, there is no specific provision in the Act or in the regulation under which the Corporation can assess the quantum of contribution which is 'payable' by the principal employer, on the basis of the records which are available. But, Section 45B specifically lays down that contribution payable under the Act can be 'recovered' as an arrear of land revenue. Therefore, it is only reasonable to hold that in cases in which the contribution which has become payable under the Act, it can be recovered by the Corporation as an error of land revenue. 33. It is undisputed that the Authority which can determine as to what is the contribution payable is the Corporation, through its officers. Section 44 lays down that Ins.A No.30 of 2009 18 every principal 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 etc. Under Section 45A, the Corporation will determine the contribution payable in respect of the employees and it may also pass an order determining the amount in cases in which no particular register, etc are submitted or maintained in accordance with the provisions under Section 45. 34. Therefore, in cases in which the records are not maintained or produced, the Corporation is empowered to determine the amount of contribution payable. Therefore, it will be meaningless to say that the cases in which records are not produced, Corporation will not have any power to determine the compensation or to recover the same under Section 45 B. 35. Learned counsel for the appellant pointed out that the Corporation is entitled to recover the compensation determined by it, under Section 45B of the Act as to whether if such contribution is determined, based on the records or not. It is relevant to note that unreported decision in ESIC Vs. Lakshmi Impliments (Ins. Appeal No.41 of 2009) dated Ins.A No.30 of 2009 19 7.9.2010 which is referred to