IN THE HIGH COURT OF JUDICATURE, ANDHRA PRADESH AT HYDERABAD TUESDAY, THE EIGHTH DAY OF MARCH TWO THOUSAND AND ELEVEN Present HON’BLE SRI JUSTICE K.C.BHANU CIVIL MISCELLANEOUS APPEAL Nos.1435 of 2004 & 1436 of 2004 Between: The Deputy Director, Employees State Insurance Corporation, Regl. Office, AP. .. Appellant AND Andhra Pradesh Gas Power Corporation Ltd. & another .. Respondents The Court made the following: HON’BLE SRI JUSTICE K.C.BHANU CIVIL MISCELLANEOUS APPEAL Nos.1435 of 2004 & 1436 of 2004 COMMON JUDGMENT: These Civil Miscellaneous Appeals, under Section 82 (2) of the Employees State Insurance Act, 1948 (for short, ‘ESI Act’) are directed against the common judgment in E.I.C.Nos.46 of 2000 and 47 of 2000, dated 24.06.2003, on the file of the Chairman, Employees Insurance Court, Industrial Tribunal, Hyderabad. 2. The first respondent herein filed the E.I.C.No.46 of 2000 and 47 of 2000 under Section 75 (1)(g) of the ESI Act challenging the order, dated 20.06.2000, passed by the appellant herein under Section 45-A of the ESI Act demanding amounts towards ESI contributions. 3. For better appreciation of facts, the parties hereinafter are referred to as they are arrayed before the Tribunal. 4. The brief facts that are necessary for disposal of the present appeals may be stated as follows: The first respondent herein/petitioner is a joint venture company promoted by Andhra Pradesh State Electricity Board (now called A.P. Genco) having 21.25% share holding and remaining 45% is by Public Sector companies and the balance by Private Sector companies. The company has set up 272 M.W. Gas and Neptha based Power Generation Station at Vijjeswaram, West Godavari District for generation of power. Operation and Maintenance (O & M) of the Power Station are also being done by A.P. Genco. There are no engineers of A.P. Gas Power Corporation at the site or at head quarters. However, the petitioner had taken up workmen w.e.f. 01.08.1998 and they are kept on probation. There is no Employees State Insurance Dispensary within the peripheral area of 14 k.ms of the petitioner factory. The petitioner is paying medical allowances to the workmen at Rs.300/- per quarter and granting 15 days sick leave per year for each worker and the matter of medical reimbursement is also under serious consideration by the petitioner. On the demand made by the workers of the petitioner factory, the petitioner addressed a letter to the second respondent seeking exemption under Section 87 of the ESI Act from the operations of the provisions of the ESI Act to the employees working in the petitioner’s factory. On 23.02.2000, the petitioner addressed a reminder to the second respondent and requested for immediate action. In the month of December, 1997, the officials of the first respondent have inspected the factory and came to the conclusion that the ESI Act is applicable. Subsequently, the first respondent issued a notice on 30.11.1999 calling upon the petitioner to explain within 15 days as to why an amount of Rs.1,30,130/- should not be recovered being the contributions for the period from 01.08.1999 to 30.09.1999 and hearing was also fixed on 20.12.1999. The petitioner by then had already kept informed the first respondent about their application seeking exemption which is pending before the second respondent through their letter, dated 17.09.1999, and the petitioner was under the impression that no useful purpose would be served even if they attend for hearing on 20.12.1999, as the petitioner was to reiterate their stand that since their application for exemption is pending, the Act cannot be made applicable. The first respondent, without waiting for a decision from the second respondent, passed an order under Section 45-A of the ESI Act on 28.02.2000 demanding an amount of Rs.1,30,130/- being the contributions for the period from 01.08.1999 to 30.09.1999, along with interest of Rs.4,700/- upto 31.12.1999. The amount is highly inflated and disproportionate to the employees strength. The second respondent has got the power to grant exemption under Section 87 of the ESI Act. When the said application of the petitioner is pending before the second respondent, the first respondent has no authority under law to recover any amount from the petitioner, but it has resorted to recovery proceedings, basing on its order made under Section 45- A of the ESI Act which is prima facie illegal, void and one without jurisdiction. Hence, the applications to declare the said order as illegal, void and without jurisdiction. 5. The first respondent corporation filed written statement denying the material allegations made in the petition and contending that the petitioner is amenable to the coverage under Sections 1(3), 1(4) and 2(12) of the ESI Act as per the contents of Ex.R-12-Enquiry Report, dated 02.12.1997, issued by R.W.1-the Inspector who visited the petitioner’s factory on 02.12.1997 and submitted the report. The petitioner’s factory is engaged in the manufacturing process of power generation with the aid of gas and Neptha and employed not less than 10 persons for wages on 02.12.1997. Hence, the factory attracts the provisions of Section 2 (12) of the ESI Act w.e.f. 02.12.1997 provisionally, subject to the condition that if subsequent facts reveal that the provisions of the ESI Act apply from an earlier date, the petitioner is liable to comply with the provisions of the ESI Act from that date. Accordingly, the factum of coverage was informed to the petitioner vide the first respondent letter No.52-15269-95, dated 04.02.1998, which was duly received by the petitioner. Through this letter, the petitioner was informed of allotment of Code No.52-15269-95 and sought compliance with the provisions of the ESI Act and Regulations made thereunder. The petitioner has failed to comply with the provisions of the ESI Act. Hence, the first respondent, after following due process of law and after observing the principles of the natural justice as provided under Section 45-A of the ESI Act, invoked the powers and vide order, dated 25.08.1999, under Section 45-A of the ESI Act determined the contributions payable for the relevant period along with interest and ordered payment of the same. Failure of the petitioner to pay the same as ordered caused recovery under Sections 45-C to 45-I of the ESI Act. The petitioner approached this Court by filing W.P.No.4906 of 2000 under Article 226 of the Constitution of India for relief and the Writ Petition is still pending for final disposal. Further, as the petitioner continued to remain in default, the first respondent, after due process of law and after observing the principles of natural justice as provided under Section 45-A of the ESI Act vide Order, dated 24.11.1999, determined the contributions due for the relevant period along with interest at 15% and communicated the same to the petitioner with a request to comply with the order within 15 days of the order, failing which the due shall be recovered as per the provisions under Sections 45-C to 45-I of the ESI Act. Aggrieved by the order, the petitioner filed E.I.C.Nos.46 of 2000 and 47 of 2000, which are not maintainable. 6. Basing on the above pleadings, the following issues are framed for trial in E.I.C.Nos.46 and 47 of 2000: “1. Whether the ESI Act is not applicable in view of the fact that the exemption petition is pending with the Government? 2. Whether the petitioner is not liable to pay any amount as demanded in C-19 notice Dt 29-3-2000 for the period from 9/98 to 7/99? 3. To what relief?” 7. On behalf of the petitioner, P.W.1, the Company Secretary of the petitioner, was examined and Exs.P-1 to P-4 were marked. On behalf of the respondent, R.W.1, the then Insurance Inspector of Rajahmundry Division, was examined and Exs.R-1 to R-12 were marked. 8. The trial Court, after considering the evidence on record, came to a conclusion that since the employees who were working in the first respondent corporation, i.e., the A.P. Gas Power Corporation, were on deputation from the erstwhile Andhra Pradesh State Electricity Board and, therefore, by virtue of Ex.P- 4-G.O.Ms.No.343, M&FW Department, dated 28.07.1992, and G.O.Ms.No.272, dated 11.08.1992, exempting the first respondent corporation in computing the amounts payable under the ESI Act and, therefore, the ESI Act has no application to the present facts of the case and, accordingly, allowed the case of the first respondent corporation. Challenging the same, the present application is filed. 9. Now the points raised for consideration are: 1. Whether the order of the trial Court is correct, legal and proper? 2. Whether the employees on deputation to the first respondent corporation are liable to pay contribution towards Employees State Insurance? 10. The learned counsel for the appellant contended that at the time of preliminary inspection by R.W.1-Inspector, it was found that 68 persons were employed by the first respondent corporation and there was no pleading that those employees were exempted from payment of contribution towards Employees State Insurance; that in view of the fact that the first respondent corporation is a separate and distinct legal entity, it comes under the purview of the ESI Act, and hence, the order under challenge needs interference of this Court, as the findings are not based on proper appreciation of the evidence on record. 11. On the other hand, the learned counsel appearing for the first respondent contended that all the persons working with the first respondent corporation are the regular employees of the erstwhile Andhra Pradesh State Electricity Board and those persons who are found working with the first respondent corporation as on the date of preliminary inspection by R.W.1- Inspector are deputed to work and as such, the establishment need not be covered with regard to the contributions to the Employees State Insurance for the reason that all the employees working under the erstwhile A.P. State Electricity Board, now changed to A.P. Genco, are exempted from payment of contributions in pursuance of the original of Gazette notification issued by the Government of Andhra Pradesh under the original of Ex.P-4-G.O.Ms.No.343 HM&FW (Q-2) Department, dated 28.07.1992, and G.O.Ms.No.272, dated 11.08.1992, and that after elaborate consideration of the evidence on record, the trial Court rightly allowed the applications. Hence, the order needs no interference by this Court. 12. The factual matrix is not seriously disputed. It is not in dispute that R.W.1, the Inspector, made a preliminary inspection in the first respondent herein on 02.12.1997 under Ex.R-12- Enquiry Report. R.W.1 found that 68 persons were working with the first respondent herein. Thereafter, basing on Ex.R-12-Enquiry Report, the Employees Insurance Code number was given to the first respondent herein. After conducting a preliminary enquiry, the authorities concerned passed an order under Section 45-A of the ESI Act duly determining the liability of the employees contribution towards the Employees State Insurance. That was challenged before the ESI Court. 13. There cannot be any dispute that if an establishment engages any employees numbering more than 10 with power and 20 without power, the principal employer has to contribute towards the insurance. No doubt, the term ‘establishment’ is not defined under the ESI Act, but under Section 2 (12) of the ESI Act, ‘factory’ is defined as follows: “"factory" means any premises including the precincts thereof— (a) whereon ten or more persons are employed or were employed 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, or (b) whereon twenty or more persons are employed or were employed for wages on any day of the preceding twelve months, and in any part of which a manufacturing process is being carried on without the aid of power or is ordinarily so carried on, but does not include a mine subject to the operation of the Mines Act, 1952 (35 of 1952) or a railway running shed.” Therefore, it is a specific case of the first respondent corporation that the persons who are working in it were on deputation from the erstwhile A.P. State Electricity Board and six persons who are noticed by R.W.1 as on the date of preliminary inspection are not employed by it. Therefore, by virtue of the original of Ex.P-4, the employees of the erstwhile A.P. State Electricity Board are exempted from the payment of contribution towards the insurance. Ex.P-4 would clearly go to show that the Government of Andhra Pradesh has given an exemption to the employees working with the A.P. State Electricity Board. It is not in dispute that the ‘A.P. State Electricity Board’ has been divided into ‘A.P. Genco’ and ‘A.P. Transco’. So, this aspect has been clearly stated by P.W.1 coupled with the recitals in Ex.P-4. The evidence would go to show that exemption of payment of contribution to the Employees State Insurance for the employees of the A.P. State Electricity Board. The first respondent corporation is a separate legal entity which is distinct from the A.P. Genco, but at the same time, it has not employed any one of the persons who found working at the time of preliminary inspection made by R.W.1. Such is the case, the persons who are found at the time of inspection are not employed by the first respondent corporation. As a matter of fact, those are the persons who are deputed from A.P. Genco. Therefore, having considered this aspect, the trial Court rightly held that ‘establishment’ need not be covered under the ESI Act. That order needs no interference by this Court. 14. Accordingly, both the Civil Miscellaneous Appeals are dismissed. In pursuance of the direction of this Court, 50% of the amount has been ordered to be deposited in terms of Section 75 (2B) of the ESI Act. In view of the fact that the persons working in the first respondent corporation are on deputation from erstwhile Board, it is needless to observe that the Gas Corporation is entitled to withdraw that amount. There shall be no order as to costs. ______________ K.C.BHANU, J Date: 8th March, 2011 KL HON’BLE SRI JUSTICE K.C.BHANU CIVIL MISCELLANEOUS APPEAL Nos.1435 & 1436 of 2004 Date: 8th March, 2011 KL