AI Drafter 
TaxTMI 
TaxTMI 
2006 (11) TMI 626
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....nder Section 45(A) of the Act. The Corporation claimed ESI Contributions as arrears from various employers. Assailing those orders, some of the employers moved the Employees State Insurance Court (in short the 'E.S.I. Court') in the State of Kerala. The employers in the State of Tamil Nadu, however, filed writ petitions before the Madras High Court. The Writ Petitions were dismissed by learned Single Judge. Writ appeals filed before the High Court did not bring any result. The judgment of the Division Bench affirming that of learned Single Judge is the subject matter of challenge in some of the appeals. Corporation on the other hand has questioned the correctness of the judgment of the full Bench of the Kerala High Court, which held that the limitation prescribed under Section 77 restricting the claim for a period of five years clearly indicated by the fact that the contribution for a period of more than five years cannot be claimed by the Corporation. With reference to the proviso to Section 77(1A)(b) it was held that a period of limitation has to be read into the provision; otherwise the employers would be greatly handicapped and would not be in a position to establish its case a....
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....uce the amount to be deposited. It cannot be said that an efficacious remedy is available. In order to appreciate the rival submissions few provisions in the Act need to be noted. They are as follows: "Section 45A. It was inserted by Act 44 of 1966 and enforced with effect from 17.06.1967. It reads as under: "Determination of contributions in certain cases (1) Where in respect of a factory or establishment no returns, particulars, registers or records are submitted furnished or maintained in accordance with the provisions of S.44 or any Inspector or other official of the Corporation referred to in Sub-sec.(2) of Section 45 is prevented in any manner by the principal or immediate employer or any other person, in exercising his functions or discharging his duties under Section 45, the Corporation may, on the basis of information available to it, by order, determine the amount of contributions payable in respect of the employees of that factory or establishment. Provided that no such order shall be passed by the Corporation unless the principal or immediate employer or the person in charge of the factory or establishment has been given a reasonable opportunity of being heard.....
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....ct], such question or dispute '[subject to the provisions of sub-section (2A) shall be decided by the Employees' Insurance Court in accordance with the provisions of this Act. (2) Subject to the provisions of sub-section (2A), the following claims shall be decided by the Employees' Insurance Court, namely:-- (a) claim for the recovery of contributions from the principal employer; (b) claim by a principal employer to recover contributions from any immediate employer; xx xx xx xx (d) claim against a principal employer under section 68; (e) claim under section 70 for the recovery of the value or amount of the benefits received by a person when he is not lawfully entitled thereto; and (f) any claim for the recovery of any benefit admissible under this Act. (2A) If in any proceedings before the Employees' Insurance Court a disablement question arises and the decision of a medical board or a medical appeal tribunal has not been obtained on the same and the decision of such question is necessary for the determination of the claim or question before the Employees' Insurance Court, that Court shall direct the Corporation to have the question decided by this Act and s....
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....ns from an immediate employer shall not be deemed to arise till the date by which the evidence of contributions having been paid is due to be received by the Corporation under the regulations. (2) Every such application shall be in such form and shall contain such particulars and shall be accompanied by such particulars and shall be accompanied by such fee, if any, as may be prescribed by rules made by the State Government in consultation with the Corporation." Section 45-A provides that in a case where a factory or establishment fails to furnish the returns or maintain or furnish the registers etc., the Corporation can determine the amount of contributions payable in respect of the employees of that factory or establishment. Such an order can be passed only after giving reasonable opportunity of hearing to the employer or the person in-charge of the factory or establishment. The order passed by the Corporation shall be sufficient proof of the claim of the Corporation under Section 75 or for recovery of the amount determined by such an order as an arrear of land revenue under Section 45-B or under Section 45-C to 45-I. Section 45B provides that the contribution payable und....
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....limit of time, in which the Corporation can make a claim from the employer, on the basis of the orders passed under Section 45?" Section 45A is a part of Chapter IV. Section 77 (1A) (b) proviso is contained in Chapter VI. The question is whether there is any connecting link between Chapter IV and Chapter VI. Sections 38 to 45-I are contained in Chapter IV while Chapter VI relates to Sections 74 to 83. Sections 45A and 45B in Chapter IV were introduced by Act 44 of 1966 with effect from 17.06.1967, in order to curb the default by the employers and to provide for an efficient method of recovery. The mode of recovery is provided under Sections 45-C to 45-I. On the other hand, Section 75 in Chapter VI relates to the commencement of proceedings before the E.S.I. Court. Proviso to Clause (b) of Section 77(1A) was introduced by the Act 29 of 1989 with effect from 20.10.1989. A combined reading of the provisions indicates that no claim shall be made by the Corporation beyond five years, to which the claim relates. The relevant Section in Chapter IV, which deals with the order passed by the Corporation is Section 45A. Similarly, the relevant Section in Chapter VI, which deals with the....
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....tion 45B. In other words, when there is a failure in production of records and when there is no cooperation, the Corporation can determine the amount and recover the same as arrears of land revenue under Section 45B. But, on the other hand, if the records are produced and if there is cooperation, the assessment has to be made and it can be used as a sufficient proof of the claim of the Corporation under Section 75 before the E.S.I. Court. So, the limitation of three years for filing an application before the Court, introduced by Act 44 of 1966, can only relate to the application under Section 75 read with 77(1A). The order under Section 45A need not be executed by the Corporation before the E.S.I. Court under Section 77. As such, the amendment to Section 77(1A)(b) proviso by Act 29 of 1989 providing five year limitation has no relevance so far as orders passed by the Corporation under Section 45A are concerned. Where an order is passed under Section 45A, it is the duty of the employer and not the Corporation to approach the E.S.I. Court. Since no application need be filed by the Corporation after an order is passed under Section 45A, the limitation prescribed under Section 77 do....
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....on and the amount of the benefit which would have been payable on the basis of the contributions which were in fact paid by the employer; or (ii) twice the amount of the contribution which the employer failed or neglected to pay, whichever is greater. (2) the amount recoverable under this Section may be recovered as if it were an arrear of land-revenue (or under section 45-C to Section 45-I)" Section 68 of the Act in Chapter V deals with the Corporation's rights, where an employer fails to pay any contribution. Sub-section (2) to Section 68 provides that the amount recoverable under this Section may be recovered as if it were an arrear of land revenue or under Sections 45-C to 45-I. The said Chapter does not impose any fetter or limitation for the Corporation to recover the amounts by coercive process. In view of the addition of the words in Section 68 "or under Section 45-C to 45-I" to sub-section (2) of Section 68 by Act 29 of 1989 with effect from 20.10.1989, the said claim could be recovered under Section 45-C to 45-I of the Act. There is no limitation prescribed in the language of Section 68. Section 60 prescribes that the benefits are not assignable to anyone else. S....
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....ns 32 to 66, dealing with the period for maintenance of registers, to imply any limitation. Section 45A of the Act contemplates a summary method to determine contribution in case of deliberate default on the part of the employer. By amendment Act 29 of 1989, Sections 45-C to 45-I were inserted in the Principal Act, for the purpose of effecting recovery of arrears by attachment and sale of movable and immovable properties or establishment of the principal or immediate employer, without having recourse to law or E.S.I Court. Therefore, it cannot be said that a proceeding for recovery as arrears of land revenue by issuing a certificate could be equated to either a suit, appeal or application in the Court. Under Section 68(2) and Sections 45- C to 45-I, after determination of contribution, recovery can be made straightaway. If the employer disputes the correctness of the order under Section 45A, he could challenge the same under Section 75 of the Act before the E.S.I. Court. On a plain reading of Sections 45A and 45B in Chapter IV and 75 and 77 in Chapter VI of the Act, as indicated above, there cannot be any doubt that the area and the scope and ambit of Sections 45A and 75 are quite ....
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....s, the Corporation could determine the arrears. So, the non-availability of the records after five years, as per the Regulation, would not debar the Corporation to determine the amount of arrears. Therefore, if the provisions of Section 45A are read with Section 45B of the Act, then, the determination made by the Corporation is concerned. It may not be final so far as the employer is concerned, if he chooses to challenge it by filing an application under Section 75 of the Act. If the employer fails to challenge the said determination under Section 75 of the Act before the Court, then the determination under Section 45A becomes final against the employer as well. As such, there is no hurdle for recovery of the amount determined under Section 45B of the Act, by invoking the mode of recovery, as contemplated in Sections 45C to 45-I. In Employees' State Insurance Corporation v. F. Fibre Bangalore (P) Ltd. (1997 (1) SCC 625) it was observed that it is not necessary for the Corporation to seek a resolution of the dispute before the E.S.I. Court, while the order was passed under Section 45A. Such a claim is recoverable as arrears of land revenue. If the employer disputes the claim, it ....
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....purposes or for his business especially when there is no additional provision for charging interest. However, the employer can claim prejudice if there is proof that between the period of default and the date of initiation of action under Section 14-B he has changed his position to his detriment to such an extent that if the recovery is made after a large number of years, the prejudice to him is of an "irretrievable" nature; he might also claim prejudice upon proof of loss of all the relevant records and/or non availability of the personnel who were, several years back in charge of these payments and provided he further establishes that there is no other way he grounds which could lead to "irretrievable" prejudice; further, in such cases of "irretrievable" prejudice, the defaulter must take the necessary pleas in defence in the reply to the show cause notice and must satisfy the authority concerned with acceptable material; if those pleas are rejected, he cannot raise them in the High Court unless there is a clear pleading in the writ petition to that effect." A "reasonable period" would depend upon the factual circumstances of the case concerned. There cannot be any empirical f....
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....to the dictates of reason and not excessive or immoderate on the facts and circumstances of the particular case. These aspects were highlighted in Collector and Others v. P. Mangamma and Others (2003 (4) SCC 488). As observed in Veerayee Ammal v. Seeni Ammal (2002 (1) SCC 134), it is "looking at all the circumstances of the case; a "reasonable time" under ordinary circumstances; as soon as circumstances will permit; so much time as is necessary under the circumstances, conveniently to do what the contract requires should be done; some more protracted space than 'directly'; such length of time as may fairly, and properly, and reasonably be allowed or required, having regard to the nature of the act or duty and to the attending circumstances; all these convey more or less the same idea". According to Advanced law Lexicon by P. Ramanatha Aiyar 3rd Edition, 2005 reasonable time means as follows: "That is a reasonable time that preserves to each party the rights and advantages he possesses and protects each party from losses that he ought not to suffer. "Reasonable Time" is defined to be so much time as is necessary, under the circumstances, to do conveniently what the contract or....