M/s Electronic Net Through its Partner-Mr. Sanjeev Kumar vs. The Union of India and Ors.

M/s Electronic Net Through its Partner-Mr. Sanjeev Kumar vs. The Union of India and Ors.

Civil Writ Jurisdiction Case No. 6882 of 2014 (Hon’ble High Court, Patna)

The reliefs prayed for by the petitioner

1. For quashing/setting aside the letter (Form C-18) issued by the Deputy Director, ESIC, Regional Office, Bihar, whereby, without carrying out any quasi-judicial proceeding under Section 45A of the Employees State Insurance Act, 1948 and without passing any order of assessment as statutorily required by Section 45A(1) of the ESI Act‟ straight away demanded payment of alleged ESI contribution dues to the tune of Rs.9713612/- for the period 01.12.2010 to 31.03.2012 and directed the petitioner to pay the same within 15 days thereof failing which the respondent no.2 threatened to coercively recover the same under Section 45C to 45I of the ESI Act
2. For quashing/setting aside the letter Form C-19 issued by the Authorized officer to the Recovery Officer directing him to recover the impugned amount of Rs.9713612/- plus interest of Rs.2732058/-, totaling Rs.12445670/- from the petitioner
3. For quashing/setting aside the prohibitory order issued by the Deputy Director (Recovery Officer) to the Senior Branch Manager, Indian Overseas Bank, Shastrinagar, Patna by which respondent no.3 attached the Bank Account of the petitioner and directed the Bank to remit the impugned amount with interest to the tune of Rs.12562669/-
4. For directing the respondent Employees State Insurance authorities to refund the amount of Rs.2751118/- with interest which the Deputy Director (Recovery Officer), Employees State Insurance Corporation, Patna has coercively recovered from the Bank Account of the petitioner
5. Such other order as deemed necessary.

FACTS

• Deputy Director of the Corporation without carrying out any quasi-judicial proceeding and without passing any order of assessment as statutorily required by Section 45-A (1) of the ESI Act, straight away demanded the petitioner to pay additional amount of Rs. 97,13,612/- towards ESI dues for the period 01.12.2010 to 31.03.2012 failing which he threatened to recover the same under Sections 45-C to 45-I of the ESI Act.
• After receiving the letter, the petitioner replied to the same by letter in which it requested the respondent Deputy Director to initiate a proper proceeding under Section 45-A of the ESI Act by making the principal employer BELTRON also a party in the said proceeding.
• It was also submitted that in the absence of the assessment order under Section 45-A of the ESI Act, no recovery proceeding could be legally initiated under Sections 45-C to 45-I of the ESI Act. The petitioner also stated that whatever amount of ESI contribution it received from BELTRON it immediately deposited the same to the Corporation and if any amount is found payable, then it is the liability of the principal employer BELTRON to pay the same.
• Without an assessment order, the Authorized officer authorized the Recovery Officer to recover the impugned amount from the petitioner by arbitrarily exercising power under Sections 45- C to 45-I of the ESI Act.
• The Recovery officer issued a demand notice to the Petitioner. The Petitioner Replied to the demand notice stating that the proceeding is illegal and improper and also requested to make the principal employer a party to party to the proceeding.
• Thereafter the Recovery officer issued a prohibitory order to the Senior Branch Manager, Indian Overseas Bank, Patna to attach the Bank Account of the petitioner and remit the impugned amount.
• Thereafter, the Senior Branch Manager, Indian Overseas Bank, Patna carried out the order of the Recovery Officer and remitted Rs.27,51,118/- on 28.02.2014 to the Recovery Officer, which was lying in the bank account of the petitioner.

SUBMISSIONS OF PETITIONER

• The Petitioner qualifies immediate employer and BELTRON qualifies as the principal employer.
• The authorized Officer in his letter dated 11.12.2013 could not have raised the demand by treating the petitioner as the principal employer.
• The proceeding for recovery of any amount under Sections 45-B, 45-C to 45-I of the ESI Act was subject to an assessment order under Section 45-A(1) of the ESI Act. Without there being any assessment order under Section 45-A(1) of the ESI Act, no power could have been exercised under Sections 45-B, 45-C to 45-I of the ESI Act.
• The demand made vide letter dated 11.12.2013 and the subsequent proceeding of recovery carried out leading to recovery of Rs.27,51,118/- and continued attachment of the bank account of the petitioner are all completely illegal, without jurisdiction and void ab initio because there does not exist any formal order of assessment passed under Section 45-A(1) of the ESI Act.

SUBMISSION OF RESPONDENT

• Since the demand was made through notice in Form C-18, no opportunity for a personal hearing was required as per the provisions of the ESI Act.

CASE REFERRED

Bharat Heavy Electricals Ltd Vs. The Employees State Insurance Corporation [(2008) 3 SCC 247]

HELD:

• Recovery under Section 45-B, 45-C to 45-I of the ESI Act can only be made if it is preceded by an order of assessment under Section 45-A(1) of the ESI Act,
• Impugned demand made by the Authorized Officer regarding payment of alleged ESI contribution to the tune of Rs.97,13,612/- for the period 01.12.2010 to 31.03.2012, the impugned letter issued by the Authorized Officer in favor of the Recovery Officer directing him to recover the impugned amount plus interest from the petitioner and the notice of demand by which the Recovery Officer instituted Certificate Case No.6329 and directed the petitioner to pay the impugned amount and the prohibitory order issued by the Recovery Officer to the Senior Branch Manager, Indian Overseas Bank, Patna by which the account of the petitioner has been attached and the Bank has been directed to remit the amount cannot be sustained. They are accordingly set aside.
• Respondent nos. 1 to 3 are directed to refund the amount of Rs.27,51,118/-, which has been coercively recovered from the bank account of the petitioner, within one month from the date of receipt/production of a copy of this order

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