Jurisdictional fact and natural justice govern disputed ESI applicability before coercive action or prosecution can proceed.

Where statutory applicability is disputed, the existence of the conditions attracting the Employees' State Insurance Act is a jurisdictional fact that must be determined before coercive or penal action is taken. The authority must first examine whether the establishment and employees fall within the Act, and the employers must be given a fair opportunity to show that the Act does not apply. A notice issued without the requisite particulars and without a meaningful chance to comply or explain is not sustainable, because the principles of natural justice require hearing before adverse action.

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Issues: (i) Whether the applicability of the Employees' State Insurance Act to the rice mills involved a jurisdictional fact requiring a prior hearing before coercive action could be taken; and (ii) whether the notice issued without furnishing the requisite particulars and without affording an opportunity to comply was valid in law.

Issue (i): Whether the applicability of the Employees' State Insurance Act to the rice mills involved a jurisdictional fact requiring a prior hearing before coercive action could be taken.

Analysis: The Act applies only to establishments and employees falling within its statutory definition, and the existence of that applicability is a jurisdictional fact. Where applicability is disputed, the authority must first determine whether the Act governs the establishment before proceeding to penal or coercive measures. An inspection conducted before the effective date of the notification could not itself justify statutory action without first determining whether the relevant employees and the establishment satisfied the Act's requirements for the preceding period.

Conclusion: The question of applicability had to be determined as a jurisdictional fact, and the employers were entitled to an opportunity to establish that the Act did not apply.

Issue (ii): Whether the notice issued without furnishing the requisite particulars and without affording an opportunity to comply was valid in law.

Analysis: The statutory scheme requires employers to furnish returns and maintain records, while the inspection power is directed to verification of compliance. The notice in question did not call upon the employers to comply with the Act in a manner consistent with the statutory procedure, but instead threatened criminal prosecution without a meaningful opportunity to explain or regularise their position. The principles of natural justice therefore applied, and the authorities were bound to give a fair opportunity before taking adverse action.

Conclusion: The notice was not sustainable as issued and the matter required reconsideration after giving the employers an opportunity of hearing.

Final Conclusion: The impugned judgment was set aside and the matter was sent back for a fresh determination of the applicability of the Act after hearing the employers and examining the relevant records.

Ratio Decidendi: Where statutory applicability itself is disputed, the existence of the conditions attracting the Act is a jurisdictional fact that must be determined after affording a fair hearing before adverse action is taken.

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