IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 9TH DAY OF DECEMBER 2019 BEFORE THE HON’BLE MRS JUSTICE K.S.MUDAGAL MISCELLANEOUS FIRST APPEAL NO.3132 OF 2010 BETWEEN:
M/S BATA INDIA LTD., RETAIL SOUTH NO.83, INDUSTRIAL II SUBURB YESHWANTHPUR BANGALORE – 560 022 REPRESENTED BY ITS PERSONNEL MANAGER … APPELLANT (BY SRI SYED KASHIF ALI, ADV. FOR M/S SUNDARASWAMY & RAMDAS) AND:
DEPUTY DIRECTOR ESI CORPORATION NO.10, BINNY FIELDS BINNYPET, BANGALORE – 560 023 … RESPONDENT (BY SMT.GEETHA DEVI M.P., ADV.) THIS MFA IS FILED UNDER SECTION 82(2) OF THE EMPLOYEES’ STATE INSURANCE ACT, 1948 AGAINST THE ORDER DATED 22.01.2010 PASSED IN ESI APPLICATION NO.22/2007 ON THE FILE OF THE EMPLOYEES STATE INSURANCE COURT, BANGALORE, DISMISSING THE APPLICATION FILED UNDER SECTION 75 OF EMPLOYEES STATE INSURANCE ACT, 1948.
THIS MFA COMING ON FOR HEARING THIS DAY, THE COURT DELIVERED THE FOLLOWING:
J U D G M E N T M/s Bata India Limited is a Company engaged in manufacture and sale of the footwear having its branches all over the country. The appellant is its Marketing Division of South India situated at Bengaluru. The appellant looks after the sales activities of the products of Bata India Limited and registered under the Shops and Commercial Establishments Act, 1961 with effect from 15.10.1984.
2. The State Government by its notification dated 05.01.1985 marked at Ex.A1 in the Trial Court proceedings covered the appellant organization under Section 1(5) of the Employee’s State Insurance Act, 1948 (for short ‘the Act’). Vide notice Ex.A2 dated 26.02.1988 the respondent - ESI Corporation (for short ‘Corporation’) directed the appellant to cover its employees working in the marketing office and the showroom under the ESI with effect from 27.01.1985.
3. On 14.11.2006 the Corporation issued notice Ex.A3 claiming that a sum of Rs.56,993/- for the period 01.10.1984 to 26.01.1985 payable towards the employers contribution to ESI funds is due and the appellant shall pay the same. The notice further stated that the appellant if has any objection he shall appear before the Corporation on 30.11.2006 and make its defence.
4. The personal hearing was given to the appellant. The appellant opposed the claim on the ground that during the said period it was not covered under the Act and the claim was highly belated and unjustifiable one. The objections/reply filed by the appellant was marked as Ex.A4 before the ESI Court. On hearing, the Corporation rejected the objection of the appellant and passed order Ex.A5 under Section 45-A of the Act, determining that the appellant is liable to pay Rs.56,993/- for the aforesaid period and directing it to pay the said amount within 15 days etc.
5. The appellant approached the Insurance Court in E.S.I. Application No.22/2007 challenging the said order. The respondent-Corporation opposed the said application. The Insurance Court on recording the evidence and hearing the parties by the impugned order rejected the application of the appellant. Hence, the appellant is before this Court in the above appeal invoking Section 82(2) of the Act.
6. There is no dispute that the appeal lies to this Court as per Section 82(2) of the Act only on the the substantial question of law.
7. Sri.Syed Kashif Ali, learned counsel for the appellant seeks to assail the impugned order of the trial Court on the following grounds:
(i) The Act itself was made applicable to the appellant establishment with effect from 27.01.1985.
Therefore, the appellant was not covered under the Act and thus the claim for the period from 01.10.1984 to 26.01.1985 was wholly unsustainable.
(ii) As per the Second proviso to Section 45A(1) of the Act, the respondent-Corporation cannot pass an order in respect of a period beyond five years from the date on which the contribution becomes payable and as per the proviso to Section 77(1A)(b) of the Act no such claim can be made beyond the period of five years. According to him the above aspects are the substantial questions of law.
In support of his contention, he relied upon the following judgments:
(i) ESIC v. C.C.Santhakumar1 (ii) E.S.I. Corporation vs. Machine Tools (India) Ltd.2 8. Per contra, Smt.Geethadevi.M.P., learned counsel for the respondent seeks to justify the 1 (2007)1 SCC 584 2 (2014) I LLJ 464 impugned order of the trial Court on the following grounds:
(i) For determination of the contribution payable under Section 45 of the Act, there is no time limitation.
(ii) The Principal Employer namely Bata India Limited was covered under the Act with effect from 1968. Thereby all its other establishments were also covered under the Act.
(iii) The claim of the appellants Principal employer namely Bata India Limited that its other establishments were not covered was rejected by the Calcutta High Court and that was upheld by the Division Bench of the Calcutta High Court in FMA No.411/1991. Therefore, it is not open to the appellant to contend that it was not covered prior to 27.01.1985.
(iv) The respondent’s officials and officers visited the appellant’s establishments several time. But appellant failed to produce the records.
Therefore, the claim was determined on the best Judgment principle.
(v) Section 77(2) of the Act is applicable only to the Corporations petition. No substantial questions of law is involved in the case.
9. In support of her contention she relies upon the following judgments:
1. ESIC v. C.C.Santhakumar3 2. Transport Corpn. Of India v. Employees’ State Insurance Corpn.4 10. Having regard to the rival contentions, now this Court has to see whether the contentions raised by the appellant are the substantial questions of law and the ESI Court committed any error in answering them.
11. Though the aforesaid contentions were raised by the learned counsel for the appellant in the course of the arguments, the substantial questions of 3 (2007)1 SCC 584 4 2000) 1 SCC 332 law formulated by the appellant in the appeal memo are as follows:
(a) Whether the ESI Court is justified in ordering coverage of the Appellant’s Establishment, which is a shop under Shops & Commercial Establishments Act under the purview of ESI Act prior to 27.1.1985, even though the Notification dated 5.1.1985 issued by the State Government exercising its power under Section 1(5) of the ESI Act bringing the Shops & Commercial Establishments within the purview of the Act from 27.1.1985?
(b) Whether the ESI Court is justified in holding that the Appellant’s shop is liable to be covered under the ambit of ESI Act prior to 27.01.1985 on the ground that the Factory at Kolkata which engaged in the manufacturing activities was covered under the purview of ESI Act prior to 27.1.1985?
(c) Whether the ESI Court is justified in confirming the claim made by the ESI Corporation after the inordinate delay 22 years?.
12. The substantial questions of law at (a) & (b) formulated relate to the coverability of the appellant organization.
Coverability:
13. There is no dispute that the appellant is the marketing division of the Bata India Limited for managing it’s retail sale outlets in the Southern India. The learned counsel for the appellant contends that though the factory was covered with effect from 1968, the appellant does not get covered under the Act, as Section 1(4) and 1(5) of the Act covers only factories.
14. The principal employer or the head office of the appellant on the same grounds raised a dispute before the Calcutta High Court in W.P.No.7588/1976 challenging the coverage of its sales divisions/establishments. The said writ petition was dismissed on 17.03.1989. Against the said judgment the Bata India Limited preferred appeal in FMAT No.1786 of 1989/ FMA No.411 of 1991. The said judgment was marked before the ESI Court along with Ex.R15 the covering letter issued by the respondent – Corporation Delhi to the Regional Director, ESI Corporation, Regional Office, Bengaluru.
15. The said judgment is inter partes. In the said judgment about the issue in controversy, the Division Bench of the Calcutta High Court para phrased the question in dispute as follows:
“The controversy in the present case with regard to the employees who are working in the sales department in Calcutta. The question is as to whether the sales depot/sales officers of the Bata factory are covered by the Act of 1948 or not ?”
(Emphasis supplied) 16. Therefore, the question raised in the said matter and in the present matter are one and the same and this matter is directly covered by the said judgment. In that judgment High Court rejected the contention that sales divisions are not covered as they are not the factory and upheld the claim of the Corporation about the coverability. Therefore, there is no merit in the contention of the appellant that the appellant division was covered only with effect from 27.01.1985.
Regarding Delay:
17. So far as the ground of delay under Section 45A of the Act, the appellant in its petition filed before the ESI Court in ground No.f itself stated as follows:
“Just because, there is no limitation for claiming Contribution by the Respondent Corporation, it does not mean that Respondent Corporation can make claim at any time………”
18. Thus the appellant itself in its own pleading admitted that there is no limitation for claiming contribution. Further in Santhakumar’s case referred to supra relied upon by the learned counsel for the appellant himself, the Hon’ble Supreme Court held that for determining the claim under Section 45A of the Act there is no time limitation.
19. The second proviso to Section 45A(1) was relied upon by the learned counsel for the appellant to claim that there can be no claim beyond five years from the date on which contribution shall become payable. But the said proviso was inserted in the Act by amendment Act 18/2010 with effect from 01.06.2010.
20. In this case, the claim under Ex.A3 was raised in 2006 and relates to the period October 1984 to January 1985. Therefore, the appellant’s counsel cannot claim the retrospective operation of the said proviso. Therefore, the said contention is misconceived and unsustainable.
Regarding justifiability of the claim:
21. It was contended that the appellant was not supposed to maintain its records beyond five years, therefore, the claim made after 22 years was not justifiable. It was contended that since the appellant had not maintain the records, it was not in a position to submit what exactly would have been the exact liability.
22. In Santhakumar’s case relied upon by the appellant himself, the Hon’ble Supreme Court held that the Court has to see whether the demand was raised within a reasonable period of time or not, after considering the question of prejudice if any caused by the delayed action of the Corporation. It was further held that the appellant has to plead the prejudice caused to it if any, by such delay.
23. As rightly held by the trial Court in this case the issue was sub judice before the Calcutta High Court up to 23.04.2002. Ex.R.12 was issued by Bata India Limited itself to the respondent – Corporation on 07.10.2002. In that the appellant states that they have preferred Special Leave Petition against the judgment of the Calcutta High Court and there was an interim stay. The ESI Court says that having regard to the pendency of those proceedings there was delay in raising / determining the claim.
24. So far as the justification of the claim the notice Ex.A3 and the order Ex.A5 show that the claim was made holding that there were 298 employees working for 17 weeks and the contribution for them would be Rs.11.25 per worker. The same was reiterated by RW.1 in his evidence. In his cross examination the number of the said employees, the number of working days and rate of contribution was not at all denied. In addition to that no prejudice was pleaded in the application.
25. Under such circumstances, the Insurance Court was justified in upholding the justification of the claim. Therefore, it cannot be said that the order suffers any perversity or claim caused any prejudice to the appellant. Thus the substantial questions of law raised by the appellant are answered against the appellant. The appeal is dismissed with costs.
Sd/- JUDGE KG