EMPLOYEE'S STATE INSURANCE CORPORATIONversusM/S. F. FIBRE BANGALORE (P) LTD.

          EMPLOYEE'S STATE INSURANCE CORPORATION                          A
                               v.
               M/S. F. FIBRE BANGALORE (P) LTD.

                          NOVEMBER 7, 1996

             [K. RAMASWAMY AND G.B. PATTANAlK, JJ.]                       B

        Labour Law

        Employees State Insurance Act, 1948 :

        S. 75-Determination of contribution-Dispute regarding-
                                                                          c
Adjudication by Employees Insurance Court-Held, though s. 75 does not
envisage as to who has to approach the Insurance Court, by necessary
implication, when the employer denies the liability or the applicability of
the provisions of the Act or the quantum of the contribution to be deposited
by him, it is for the employer and not for the Corporation, to approach the D
Insurance Court and seek adjudication-The Full Bench of the High Court
erred in holding that in all cases (except in a case where the order u!s 45-
A becomes final) the Corporation .is required to go to the Insurance Court,
have the matter adjudicate and then make a demand-This view of the
Full Bench of the High Court is set aside.
                                                                          E
        CIVIL APPELLATE JURISDICTION : Civil Appeal No. 2733 of
1980.

     From the Judgment and Order dated 20.2.79 of the Kamataka High
Court in M.F.A. No.147 of 1974.                                            p

     R. Venugopal Reddy, S.A. Wasim Qadri and Mrs. Anil Katiyar for
the Appellant.

        M.N. Shroff for the Respondent.
                                                                           G
        The following Order of the Court was delivered :

      This appeal by spec<al leave arises from the judgment dated 20.2.1979
of the Division Bench of the Karnataka High Court which in turn had
followed the ratio of judgment of the Full Bench in M.F.A.No.147/74, H
                                   609
     610                     SUPREME COURT REPORTS [1996] SUPP. 8 S.C.R.


A dated 19.4.1978. The Full Bench had held as under:

                  "In the result, we answer the question referred to us as follows:

                          Where, in cases to which provisions of Section 45A
                  of the 'Act' are attracted, the Corporation by an order made
B                 in accordance with that section determines the amount of
                  contributions payable and that claim is disputed by the
                  employer, it would not be necessary for the Corporation to
                  seek a resolution of that dispute before the Insurance Court.
                  Such a claim is recoverable as arrears of land revenue. Ifthe
                  employer disputes the claim it is for him to move the Insurance
c                 Court for relief. In other cases-other than cases where
                  determination of the amount of contributions under Section
                  45A is made the Corporation, if its claim is disputed by the
                  employer, should seek an adjudication of the dispute before
                  the Insurance Court, before enforcing recovery."
D
           The question that arises for consideration is : whether the view taken
  by the Full Bench of the High Court is correct in law? Section 1(4) of the
  Employees' State Insurance Act, 1948 (for short, 'the Act') envisages that
  the Act shall apply, in the first instance, to all factories (including factories
  belonging to the Government) other than seasonal factories, Section I (5)
E gives power to the appropriate Government after consultation with the
  Corporation, to notify in the official Gazette extending the provisions of
  the Act to any of other establishments or class of establishments, industrial,
  commercial, agricultural or otherwise. Section 1(6) envisages that a factory
  or an establishment to which this Act applies shall continue to be governed
  by the provisions of the Act notwithstanding that a number of persons
F employed therein at any time falls below the limit specified by or under
  the Act or the manufacturing process therein ceases to be carried on with
  the aid of power. After its application under Chapter IV, all employees in
  factories, or establishments to which the Act applies, shall be insured in
  the manner provided by this Act. Under Section 39(1), the contribution
G payable under the Act in resect of an employee, shall comprise contribution
   payable by the employer and contribution payable by the employee shall
   be paid to the Corporation; the manner and details of payment and interest
   for the delay in payment and the rate of interest and the procedure for
   recovery are not material for the purpose of this case. Hence, they are
  omitted, Section 40 envisages that the principal employer is enjoined to
H pay contribution is respect of every employee in the first instance whether
     EMPLOYEES' STATE INSURANCE CORPN. '· F FIBRE BANGALORE (P) LTD.   611


he is employed directly by him or through an immediate employer, both          A
the employer's and the employees' contribution. Sub-section (2) thereof
provides, with a non obstnate clause, that subject to the provisions of the
Act and the regulations, if any made thereunder, the principal employer
shall, in the case of an employee directly employed by him (not being an
exempted employee), be entitled to recover from the employee the
employee's contribution by deduction fro1n his wages and not otherwise.        B
The recovery has been provided in section 41 of the Act. The method of
payment of contribution has been adumbrated In Section 43 where the
contribution has not been paid es envisaged in Section 42 of the Act.
Section 44 deals with the obligation of the employer to fiirnish returns
and maintain registers in certain cases. Section 45 gives power to the
Inspectors appointed by the Corporation to inspect the premises etc., the      C
details of which are not material. Section 45-A gives power to the
Corporation to determine contribution in certain cases. It read as under:

             "45-A. Determination of contribution in certain cases. I.
             Where in respect of a factory or establishment on returns,
             particulars, registers or records are submitted, furnished or D
             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 in [prevented in any
             manner] by the principal or immediate employer or any other
             person, in exercising his fiinctions or discharging his duties    E
             under Section 45, the Corporation may, on the basis of
             information available to it, by order determine the amount
             to contributions payable in respect of the employees of that
             factory or establishment.

             Provided that no such order shall be passed by the Corporation    F
             unless the principal or immediate employer or the person
             incharge 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)         G
             shall be sufficient proof of 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 45-B
             [or the recovery under section 45C to Section 45-1]"

     Section 45-B provides for the contribution to be recovered as arrears     H
    612                     SUPREME COURT REPORTS (1996] SUPP. 8 S.C.R.


A of the land revenue. In case it is not recovered, a certificate is required to
    be given under Section 45-C to the recovery officer for recovery thereof
    as arrears of land revenue in the manner contemplated therein; the details
    thereof are not necessary for the purpose of this case. When a dispute is
    raised in that behalf, Section 75 of the Act envisages determination by the
    Insurance Court as under;
B
                  "75. Matters to b~ decided by Employees Insurance Court.
                  I. If any question or dispute arise as to-

                        (a) whether any person is an employee within the
              meaning of this Act or whether he is liable to pay the employees
c             contribution, or

                  (b)the rate of wages or average daily wages for an employee
              for the purposes of this Act, or

                  (c) the rate of contribution payable by the principal employer
D             in respect of any employee, or

                 (d) the person who is or was the principal employer in respect
              of any employee, or

E                (e) the right of any person to pay benefit and as to the amount
              and duration thereof, or

                 (ee) any direction issued by the Corporation under Section
              55-A of a review of any payment of dependants benefits, or

F                 (f)    [xxxx]

                 (g) any other matter which is in dispute between a principal
              employer and the Corporation, or between a principal employer
              and an immediate employer, or between a person and the
G             Corporation or between an employee and a principal or
              immediate employer, in respect of any contribution or benefit
              or other dues payable or recoverable under this Act, or any
              other matter required to be or which may be decided by the
              Employees Insurance Court under this Act.

H                 Such question or dispute subject to the provisions of sub-
EMPLOYEES' STATE INSURANCE CORPN. '· f. FIBRE BANGALORE (P) LTD   6 J)


    section (2-A) shall be decided by the Employees Insurance Court       A
    in accordance with the provisions of this Act.

       2. Subject to the provisions of sub-section (2-A) the following
    claims shall be .decided by the Employees Insurance Court,
    namely-
                                                                          B
       (a) claim for the recovery of contributions from the principal
     employer;

        (b) claim by a principal employer to recover contributions
     from any immediate employer;
                                                                          c
        (c) [xxxxx]

        (d) claim against a principal employer under Section 68;

        (e) claims under Section 70 for the recovery of the value or      D
     amount of the benefits received by a person when he is not
     lawfully entitled thereto; and

         (f) any claim for the recovery ofany benefit admissible under
     this Act.
                                                                          E
         2 (A). If in any proceedings before the Employee's 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 Employee
     Insurance Court that Court shall direct the Corporation to have      F
     the question decided by this Act and shall thereafter proceed
     with the determination of the claim or question before it in
     accordance with the decision of the medical board of the medical
     appeal tribunal, as the case may be, except where an appeal has
     been filed before the Employee's Insurance Court under sub-          G
     section(2) of Section 54-A in which case the employee's
     Insurance Court may itself determine all the issues arising before
     it.

       (2B) No matter which is in dispute between a principal
     employer and the Corporation in respondent of any contribution       H
    614                      SUPREME COURT REPORTS [1996] SUPP. 8 S.C.R.


A             or any other dues shall be raised by the principal employer in
              the Employee's Insurance Court unless he has deposited with
              the Court fifty per cent of the amount due from him as claimed
              by the Corporation:

                 Provided that the Court may, for reasons to be recorded in
B             writing, waive or reduce the amuunt to be deposited under this
              sub-section.

                 3. No Civil Court shall have jurisdiction to decide or deal
              with any question or dispute as aforesaid or to adjudicate on
              any liability which by or under this Act is to be decided by a
c             medical board, or by a medical appeal tribunal or by the
              Employee's Insurance Court.

           It would thus be seen that the employer, on making the provisions of
    the Act applicable to the factory or the establishment, as the case may be,
D   is statutorily under an obligation to register itself with the Corporation
    and keep depositing the employer's and employee's contribution within
    the period specified therein. The question is : as to who would approach
    the Insurance Court for adjudication and determination ofa dispute whether
    the establishment of the employer is attracted by the provisions of the Act
    and/or what is the number of employees it has employed etc.? It is seen
E   that Section 45-A is in the nature of best assessment judgment on the basis
    of the information collected by the Inspector. In the impugned order the
    High Court holds that it is for the employer to challenge it and seek
    adjudication. When there was dereliction of duty on the employer to either
    register itself with the corporation under the Act or when there is failure
    to deposit the contribution with the Corporation under the Act or failure
F   to deposit the contributor with the account of the Corporation towards
    employer's and employee's contribution as envisaged hereinbefore, the
    Corporation is empowered to make best assessment judgment under Section
    45-A and call upon the employer to deposit the amount with the Corporation.

G       The Full Bench of the High Court has held that in a case where the
  Order under Section 45-A becomes final, there is no need for the
  Corporation to seek adjudication before the Insurance Court. In all other
  cases, the Corporation is required to go to the Insurance Court, have it
  adjudicated and then make a demand. We are of the view that the Full
  Bench of the High Court is clearly in error to reach that conclusion. Though
H Section 75 of the Act does not envisages as to who has to approach the
      EMPLOYEES' STATE INSURANCE CORPN. '· F. FIBRE BANGALORE (P) LTD.   615


Insurance Court, by necessary implication when the employer denies the           A
liability or applicability of the provisions of the Act or the quantum of the
contribution to be deposited by the employer, it is for him to approach the
Insurance Court and seek adjudication. It is not for the Corporation in
each case whenever there is a dispute, to go to the Insurance Court and
have the dispute adjudicated. Otherwise; the Act would become unworkable
and defeat the object and purpose of the Act.                                    B

       Under these circumstances, we are of the view that the Full Bench
judgment of the High Court is clearly unsustainable and it is accordingly
set aside. The Division Bench having followed the Full Bench judgment
fell into the same error. Under these circumstances, that part of the judgment
of the Full Bench and of the Division Bench which is not consistent with         C
the declaration of law above, stands set aside. The Insurance Court is
directed to determine the contribution payable by the respondent within a
period of three months from the date of the receipt of this order. The
respondent is directed to pay the amount as a condition. If it decides to go
to the High Court and file an appeal, it should first deposit the entire
amount with interest payable in that behalf and thereafter approach the          D
High Court, if so advised challenging the order of the Insurance Court.

      The appeal is accordingly allowed. No costs.

RP.                                                         Appeal allowed.      E