JUDGMENT

MOHAN, J.:—This appeal by special leave is directed against the judgment of the High Court of Kerala in M.F.A. No. 800/90 dated 18-12-90. The short facts leading to this appeal are as under:

The respondent-Hotel is situated in Kaloor, Cochin 17. It is a commercial establishment. In July 1985 this establishment obtained a Bar licence whereupon a Bar was started. After running the business for some time it was closed down with effect from 31-3-88.

2-3. The Insurance Inspectors of the appellant verified the records of the respondent-establishment on 29-9-87, 9-10-87 and 19-10-87. It was reported that the employment strength of the respondent-establishment including Chembaka Restaurant and Mayuri Bar was more than 19 as on 17-7-85. Therefore, it was treated as covered under the Employees State Insurance Act, 1948 (hereafter referred to as the Act) with effect from 11-7-85 provisionally. The fact of coverage was intimated to the respondent by notice dated 21-3-88. Since the final date of coverage could be decided only after verifying all the records pertaining to the date of functioning of the establishment, the respondent was requested to produce all the records such as attendance register, wage register, ledgers etc. from the date of starting of the establishment. The respondent was also called upon to start compliance under the Act with effect from 11-7-85. But there was no compliance. Hence, a notice was issued in Form C- 18 dated 26-3-88 along with a draft order for contribution amount of Rs. 49,399.75 which was assessed under Section 45-A of the Act for the period 11-7-85 to 31-3-88. Though the respondent was afforded an opportunity to appear before the officer, it was not availed of. However, a letter dated 13-7-88 was received but the explanations were not acceptable to the appellant. Subsequently, a detailed order dated 3-8-88 under Section 45-A of the Act was passed calling upon the respondent to pay a contribution of Rs. 49,399.75 together with interest at 6 per cent, failing which it would be covered as an arrear of land revenue. Again, reminder was sent on 22-9-88. No reply was received. Hence, in order to recover the contribution under S. 45-A of the Act, a claim in Form 19 was sent to the District Collector, Ernakulam on 3 1-10-48 requesting to recover the contribution for the period from 11-7-85 to 31-3-88

4. Challenging these proceedings the respondent filed an application under Section 75 of the Act before the Employees Insurance Court, Alleppey. Inter alia it was contended that the applicant (respondent in this appeal) at no time employed 20 or more persons during the relevant time. The order was illegal because under Section 45-A of the Act the respondent was entitled to a reasonable opportunity of being heard. That was no afforded.

5. These contentions were refuted by the appellant. It was incorrect to state that on no occasion the respondent employed 20 or more workmen since the inspection report dated 8-12-86 clearly established to the contrary.

6. The contention that no opportunity had been afforded before initiating the revenue recovery proceedings, was also denied in view of Form C-18 dated 23-6-88, show cause notice, dated 3-8-88 and reminder dated 22-9-88.

7. By its order dated 6th June, 1990 the Employees Insurance Court, Alleppey came to the following conclusion:

"In the result, I can only uphold the assessment made by the ESI Corporation. But when the question of recovery is considered, certain other aspects cannot be ignored. The ad hoc assessment itself was made by the opposite party after the closure of the entire establishment. All the employees working in the establishment had left by that time after accepting the termination of their services. In respect of those employees who had already left, the ESI Corporation is now trying to recover contribution. Now the position emerges is that despite the collection of contribution it will be impossible to bring under coverage those employees, because,