Employee State Insurance Corporation v. M/S Hindustan Unilever Ltd.

1. Respondent filed a petition under Section 75 of the Employees’ State Insurance Act, 1948 (“the Act”, for short) before the ESIC Court thereby assailed the order dated 1st December, 2008 passed by the appellant under Section 45-A of the Act. Respondent alleged that it had acquired M/s. Modern Food Industries (India) Limited in two spells i.e. in 2000 and 2003, under the disinvestment policy of Government of India and thereafter the said company became the subsidiary of respondent. As a result of amalgamation with effect from 30th March, 2007 M/s. Modern Food Industries (India) Limited lost its legal existence and stood merged with the 2014:DHC:3467 respondent. The demand raised by the appellant pertains to an undertaking of M/s. Modern Food Industries (India) Limited, known as Fruit Juice Bottling Plant (FJBP). The said concern was supplying fruit juices to the Government of Uttar Pradesh for social welfare programs. With effect from 1st April, 2003 Government of Uttar Pradesh stopped taking supplies from the said undertaking, as a result thereof said undertaking suffered huge losses towards payment of idle wages and was subsequently closed. Vide letter dated 2nd December, 2008 the above facts were notified to the appellant pursuant to the show cause notice dated 14th August, 2008 issued by the appellant. It is alleged that order under Section 45-A of the Act was passed whereby ad hoc payment of `35,269/- was calculated for the period April, 1996 to April 1998 inspite of the fact that said unit stands closed. It was further contended that the order was passed with regard to the contribution pertaining to 12 years ago and was barred by time. As per the scheme of the Act, appellant could have claimed dues for the preceding five years only, inasmuch as respondent is required to maintain records for five years only.

2. Case of the appellant before the trial court was that impugned order was validly passed after proper inspection and confirmation by the concerned officials. Reasonable opportunities were granted to the respondent to put forth its case. Appellant specifically stated that no intimation was ever given to appellant about the closure of FJBP before 23rd July, 2008. Even otherwise the same would have no effect as regards to the demand of contribution which pertained to the period when the said undertaking was functional. Appellant categorically stated that a discrepancy letter was issued to the respondent on 13th /15th September, 1999 after the inspections which were carried out on 17th August, 1999, 27th August, 1999 and 31st August, 1999. Records of the respondent were inspected by the Inspector and thereafter observation slip dated 30th August, 1999 was issued, showing details of amounts on which contribution was payable. Personal hearing was afforded before passing of the order dated 1st December, 2008.

3. ESIC Court framed following preliminary issue:- “Whether the impugned demand raised by the respondent under Section 45-A of ESI Act is beyond limitation and the said amount cannot be recovered, if so its effects?”

4. Learned ESIC Court has held that no determination of contribution could have been done under Section 45-A of the Act in respect of the period beyond five years. Accordingly, preliminary issue has been answered in favour of the respondent and against the appellant. For arriving at this view, ESIC Court has placed reliance on Sections 45-A and 77 of the Act.

5. Section 45-A before amendment reads as under:- “45A. 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 section 44 or any Inspector or other official of the Corporation referred to in sub-section (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. (2) An order made by the Corporation under sub-section (1) shall be sufficient proof if the claim of the Corporation under section 75 or for recovery of the amount determined by such order as an arrear of land revenue under section 45B or the recovery under Sections 45C or 45I.”

6. Section 45-A of the Act was amended with effect from 1st June, 2002 and a proviso with regard to limitation was included. The proviso reads, thus, “provided further that no such order shall be passed by the Corporation in respect of the period beyond five years from the date on which the contribution shall become payable”. In the old Act, no period of limitation has been prescribed for determining the contribution under Section 45-A of the Act. It is trite law that a statute, which is legislated by the Parliament any amendment made therein, would have prospective effect unless it has been specifically made effective with retrospective effect.

7. The order involved in this case pertains to period prior to the amendment. Thus, old provision would be applicable, wherein no period of limitation has been prescribed.

8. Learned counsel for the respondent has vehemently contended that Section 77 of the Act prescribes the period of limitation of five years even in the old Act. Thus, no demand under Section 45-A of the Act could have been assessed for a period prior to five years, even in respect of the period which is covered under the old Act. I do not find any force in this contention. In ESI Corpn. Vs. C.C. Santhakumar (2007) 1 Supreme Court Cases 584, Apex Court held that period of limitation as prescribed under Section 77(1-A) of the Act cannot be read into the provision of Section 45-A of the Act. It has been held that prescription of limitation under Section 77(1-A)(b) of the Act has not been made applicable to the adjudication proceedings under Section 45-A of the Act by the legislature, since such a restriction would restrict the right of the Corporation to determine the claims under Section 45-A of the Act and the right of recovery under Section 45-B of the Act and, further, it would give benefit to an unscrupulous employer.

9. Accordingly, I am of the view that ESIC Court has committed an patent error in holding that the order dated 1st December, 2008 is patently time barred as per Section 45-A of the Act in respect of the determination of the dues pertaining to the period 1996-97.

10. As regards closure of the unit is concerned, the same will have no effect since the period for which the amount has been determined, pertains to the period prior to closure, inasmuch as in the year 1996-97 unit was functional. Section 93-A of the Act provides that if an employer, in relation to a factory or establishment, transfers that factory or establishment in whole or in part, by sale, gift, lease or licence or in any other manner whatsoever, the employer and the person to whom the factory or establishment is so transferred shall jointly and severally be liable to pay the amount due in respect of any contribution or any other amount payable under this Act in respect of the periods up to the date of such transfer. Accordingly, plea of merger of the said unit with the respondent in the year 2000 and 2003 will also not absolve the respondent from the liability of FJBP since under Section 93-A of the Act transferee company is liable to make the payment of ESIC contribution in respect of the transferor company.

11. Appeal is, accordingly, disposed of in the above terms. A.K. PATHAK, J. JULY 23, 2014 rb