IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE S.SIRI JAGAN TUESDAY, THE 15TH NOVEMBER 2011 / 24TH KARTHIKA 1933 WP(C).No. 37236 of 2007(G) -------------------------------------- PETITIONER: ------------------- THE KADUTHURUTHY CO-OPERATIVE RUBBER MARKETING & PROCESSING SOCIETY LTD. NO.1397, KADUTHURUTHY P.O., KOTTAYAM DISTRICT, REPRESENTED BY ITS MANAGING DIRECTOR. BY ADVS. SRI.V.G.ARUN, SRI.T.R.HARIKUMAR. RESPONDENTS: ------------------------ 1. THE REGIONAL DIRECTOR, EMPLOYEES STATE INSURANCE CORPORATION, PANCHADEEP BHAVAN, NORTH SWARAJ ROUND, TRICHUR. 2. THE RECOVERY OFFICER, EMPLOYEES STATE INSURANCE CORPORATION, POST BAG NO.2, TRICHUR-20. 3. THE BRANCH MANAGER, HDFC BANK LTD., UNITY BUILDINGS, K.K.ROAD, KOTTAYAM DISTRICT. R1 & R2 BY SRI.P.SANKARANKUTTY NAIR S.C, R3 BY ADVS. SRI.P.SANJAY, SMT.A.PARVATHI MENON. THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 15/11/2011, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: W.P.(C).NO.37236/2007-G: APPENDIX PETITIONER'S EXHIBITS:- EXT.P.1: COPY OF THE NOTICE NO. 54-14087-24-I N S P OF THE R.1. DTD. 22/09/03. EXT.P.2: COPY OF THE APPLICATION FOR EXEMPTION FILED BY THE PETITIONER DTD. NIL. EXT.P.3: COPY OF THE COVERING LETTER NO.F/147/2003 OF THE PETITIONER DTD. 22/12/2003. EXT.P.4: COPY OF THE LETTER NO. 30111/B3/2003/LBR OF THE GOVERNMENT DTD. 22/01/2004. EXT.P.5: COPY OF THE NOTICE NO. 54-14087-24/INS.IV OF THE R1. DT. 31/03/2004. EXT.P.6: COPY OF THE DEMAND NOTICE NO. 54-14087-24, RECOVERY BY THE R.1. DTD. 09/09/2004. EXT.P.7: COPY OF THE ORDER NO. 23726/B3/04/LBR OF THE GOVERNMENT DTD. 10/11/2004. EXT.P.8: COPY OF THE NOTICE NO. 54-14087-24/RECOVERY OF THE R.1. DTD. 16/11/2004. EXT.P.9: COPY OF THE NOTICE ISSUED BY THE R.3. DTD. 01/08/2005. EXT.P.10: COPY OF THE STATEMENT OF ACCOUNTS OF THE PETITIONER AT 3RD RESPONDENT FROM 5-4-2005 TO 30-6-2007. EXT.P.11: COPY OF THE LETTER NO. 54-14087-24/RECOVERY OF THE R.1. DTD. 11/08/2005. EXT.P.12: COPY OF THE G.O.(RT).NO.2739/2006/LBR DTD. 14/11/2006. EXT.P.13: COPY OF THE REQUEST NO. F/147/2007 BY THE PETITIONER DTD. 16/08/2007. RESPONDENT'S EXHIBITS:- NIL. //TRUE COPY// P.A. TO JUDGE Prv. S. SIRI JAGAN, J. ------------------------------------------- W.P.(C) No.37236 of 2007 ---------------------------------------------- Dated this the 15th day of November, 2011 JUDGMENT The petitioner is a Co-operative Society functioning within the Kaduthuruthy Panchayat area. By a notification under the Employees' State Insurance Act, the Kaduthuruthy Panchayat area was brought within the purview of the Employees' State Insurance Scheme with effect from 1.9.2002. By Ext.P1 dated 22.9.2003, the 1st respondent intimated the petitioner that they are liable to be covered under the Act and directed them to take appropriate steps in that regard. Pursuant to the same, the petitioner got themselves registered under the Act in December 2003. Simultaneously, by Ext.P3 application dated 22.12.2003, the petitioner applied to the Government of Kerala for exemption from payment of contributions under the Act invoking power of the Government under Section 87 of the Employees' State Insurance Act. While the application for exemption was pending, the Corporation initiated proceedings for recovery of W.P.(C)No.37236/07 2 contributions under the Act. Ext.P6 demand dated 9.9.2004 was issued to the petitioner. The petitioner, immediately, requested the Government to direct the Corporation to keep in abeyance further proceedings for recovery. Pursuant thereto, by Ext.P7, the Government requested the Corporation that the application for exemption may be placed before the Regional Board of the Corporation for a decision and to stay further steps till then. Despite that request made by the Government, the Corporation continued the coercive recovery proceedings and recovered the amount from the bank account of the petitioner with the 3rd respondent bank by initiating garnishee proceedings. Subsequently, the Government, by Ext.P12 order, exempted the petitioner, under Section 87 of the Employees' State Insurance Act, from the provisions of the Act for a period of one year from 1.9.2002. In view of the exemption so granted, by Ext.P13, the petitioner requested the 1st respondent to refund the amounts coercively recovered from the bank account of the petitioner for the period covered by Ext.P12 exemption. Having received no favourable reply, the petitioner has filed this writ petition seeking the following W.P.(C)No.37236/07 3 reliefs: “i) to issue a writ of mandamus of any other writ, direction or order, directing the respondents 1 and 2 to refund the amount of Rs.160738-00 illegally recovered from the petitioner's account with interest from the date of recovery till date of refund. ii) to declare the recovery of ESI contribution for the exempted period as illegal and against the provisions of the ESI Act.” 2. A counter affidavit has been filed by the Corporation taking the stand that they are not liable to refund the amount already paid, particularly in view of clause 3 of Ext.P12 exemption order, which stipulates that the contributions for the exempted period, if already paid, shall not be refunded. According to them, the Government has no power to stay recovery proceedings under any provisions of the Act and Ext.P7 can, at the most, be only a request from the Government to the Corporation, which the corporation may or may not accept. In this case, the Corporation decided not to accept the request of the Government and continued with the revenue recovery proceedings. They would contend that once contributions are recovered, the same amounts to contributions paid by the petitioner within the ambit of clause W.P.(C)No.37236/07 4 3 of Ext.P12 and therefore, the contribution so paid is not liable to be refunded. 3. The learned counsel for the petitioner points out that it is totally unjust to construe clause 3 to included the amount recovered by coercive means as well. According to them, clause 3 of Ext.P12 would only cover those amounts voluntarily paid by the employer. According to them, otherwise, the whole process would be meaningless. They would contend that it is not a secret that, usually the Government passes orders on an exemption application under Section 87 only after the period of exemption is over. It can only be so since the Government has to ascertain the views of the Corporation in respect of the claim for exemption. It is further pointed out that at the relevant time Section 91A of the Act was in force, which granted powers to the Government to exempt an establishment from coverage prospectively or retrospectively. Therefore, according to the petitioner, only the amounts voluntarily paid are covered by clause 3 of Ext.P12. 4. I have considered the rival contentions in detail. I W.P.(C)No.37236/07 5 am inclined to agree with the petitioner, insofar as if the contention of the respondents is accepted then the same would result in absolute injustice. It is not a secret that at least prior to the amendment of Section 87 in 2010 the Government used to pass orders granting exemption only after the period of exemption is over. That is why clause 3 is incorporated inExt.P12 to the effect that the contributions for the exempted period,if already paid, shall not be refunded. If orders are passed prior to the commencement of exemption itself, then that clause itself is not necessary. In this case, the Government did the next best thing realising that it is likely that the passing of final orders would take some time, insofar as the Government is liable to obtain the views of the Corporation in respect of the claim for exemption prior to passing orders. By issuing Ext.P7 requesting the Corporation to place the application for exemption filed by the petitioner before the Regional Board of the Corporation for a decision and to stay further steps for recovery of contributions till then. I am of opinion that coming from a State Government, the Corporation which is a statutory authority, ought to have W.P.(C)No.37236/07 6 considered the request made by the Government for stay, till they could pass orders, with the respect it deserves. At least they should have intimated the Government that they are not inclined to stay further proceedings. This is all the more so, when Section 89 of the Act makes it incumbent on the Government to give a reasonable opportunity to the Corporation to make representation on the request for exemption and that representation has to be considered by the Government before passing orders. Here, by Ext.P7, the Government has requested the Corporation to place the matter before the Regional Board for a decision in accordance with the Section 89 of the Act and to stay recovery in the meanwhile. It is after getting that request coercive recovery proceedings were taken against the petitioner. In that view, I am of opinion that it was incumbent for the Corporation to keep further proceeding in abeyance, at least for a coercive recovery till the Regional Board takes a decision on the subject in accordance with Section 89 for intimation to the Government as requested in Ext.P7. Instead, what the Corporation has done is to ignore Ext.P7 and to continue recovery proceedings W.P.(C)No.37236/07 7 coercively by initiating garnishee proceedings, which, to say the least, is unbecoming of a statutory Corporation. 5. Further I am of opinion that in the circumstances explained above, clause 3 of Ext.P12 can be construed only as relating to contribution paid voluntarily. Here, there is absolutely no voluntary payment. The petitioner has done everything in their capacity to get exemption and to avoid payment till their application for exemption is considered. Despite the same, the Corporation like a Shylock continued proceedings and recovered the amount forcibly. Such recovery cannot be construed as coming within the purview of clause 3 of Ext.P12. The respondents have also no case that any benefit arising from the Employees' State Insurance Act and Scheme has been given to any of the employees of the petitioner also. In the above circumstances a purposive interpretation is called for. Therefore, I am inclined to hold that the 1st respondent is liable to refund the amount already collected as contributions by coercive means from the petitioner for the period from 1.9.2002 t0 31.8.2003, the period covered by Ext.P12. The amount shall be refunded to W.P.(C)No.37236/07 8 the petitioner, as expeditiously as possible, at any rate, within two months from the date of receipt of a copy of this judgment. The writ petition is allowed as above. S. SIRI JAGAN, JUDGE acd W.P.(C)No.37236/07 9