2016 (1) TMI 905 - HC - Indian Laws

Court Upholds Labour Court Decision on ESI Contribution Calculation

S.P. Saraswathi Traders and others Versus Regional Director, ESI Corporation, Chennai – 34

The court upheld the decision of the Labour Court, finding no fault in applying the probable percentage theory for calculating ESI contribution. It ... Determination of contribution to the ESI - Employment by the sub-contractors - Principal employer are manufacturing papers and board at Pallipalayam. - Is not the respondent ESI corporation bound by their own circulars and are they not bound to follow the judgments rendered by this Hon'ble Court in LPA.Nos.159 and 160 of 2000 on 09.03.2004 and in CMA.No.1606 of 1995 on 10.12.2003? - Has not the respondent ESI corporation acted arbitrarily and capriciously treating 90% of the contribution bill amount of ₹ 1,45,07,900/- as wages (labour charges) paid to the workmen of the contractor by the Contractor? - Is not the act of the ESI Corporation unjustified in invoking section 45-A of the Employees State Insurance Act, 1948 for making the arbitrary demand of ₹ 9,46,268.15, when the 20th appellant had forwarded all documents and books and accounts relating to Feeding charges. Held that:- This Court finds no fault in probable percentage theory applied by the labour Court for want of particulars about the exact payments made and the impugned order hence calls for no interference. However, it is made clear that the total amount payable by the 20th petitioner towards ESI contribution for the relevant period is ₹ 9,46,758/- as evident from the order made in IA.No.162 of 1999 dated 28.03.2000 and the sum of ₹ 4,96,268.15 has already been paid and the balance sum is only payable by the petitioners. The substantial questions of law are accordingly answered against the petitioners. Issues:1. Interpretation of ESI Act regarding contribution payment.2. Applicability of ESI circulars and previous judgments.3. Calculation of ESI contribution based on labor charges.4. Compliance with ESI regulations and submission of relevant records.Analysis:Issue 1: The main issue in this case is the interpretation of the Employees State Insurance Act regarding the payment of contributions. The principal employer was served a notice by the Employees State Insurance Corporation demanding ESI contribution on a certain amount paid to contractors. The Deputy Director of ESI Corporation calculated the contribution based on 90% of the amount paid to contractors, leading to a dispute over the correct calculation method.Issue 2: The petitioners argued that the ESI Corporation should follow its own circulars and previous judgments. They contended that the contribution should be based on 25% of the total amount paid as per guidelines issued by the ESI Corporation. The court examined the applicability of the circulars and previous judgments to the present case.Issue 3: The calculation of ESI contribution based on labor charges was a key point of contention. The petitioners claimed that the ESI Corporation acted arbitrarily by treating 90% of the contribution bill amount as wages paid to the contractors' workmen. The court analyzed whether the ESI Corporation's demand of a specific amount was justified under the Employees State Insurance Act.Issue 4: The case also revolved around compliance with ESI regulations and the submission of relevant records. The court noted that the principal employer had been maintaining separate records for payments made to contractors but failed to produce them during the inquiry. This raised questions about the accuracy of the contribution calculation and the adequacy of record-keeping practices.Overall, the court upheld the decision of the Labour Court, finding no fault in the application of the probable percentage theory for calculating ESI contribution. The court clarified the total amount payable by the principal employer and dismissed the civil miscellaneous appeal, emphasizing the importance of compliance with ESI regulations and the need for accurate record-keeping in such matters.