JUDGMENT

S.B. Sinha, J.

1. Leave granted.

Background facts :

2. Appellant herein is a Public Sector Undertaking. It used to engage

contractors for various purposes. It received a notice on or about 3.9.1992

purported to have been issued under Section 45A of the Employees State

Insurance Act, 1948 (for short the Act ) on the premise that they had not

deposited the Employees State Insurance contribution for the period

19.7.1981 to 30.9.1991.

3. In its show cause, in response to the notice issued by the respondents,

the appellant stated that the workmen concerned had been engaged by the

contractors who would be in possession of the relevant records to show as to

whether or not any contribution was payable or whether the Act was

applicable in respect of the concerned workmen. A list of contractors along

with their addresses who were involved during the period in question was

annexed to the said show-cause. A prayer was made before the Authority to

implead the said contractors as parties in the said proceedings under Section

45A of the Act as immediate employers.

4. By a letter dated 8.3.1993 the said prayer was rejected by the

competent authority of the respondent, stating :

With reference to the above, I have to invite your

kind attention on the above subject and inform you

that engaging the contractors for BHEL works is

an internal affair of the factory and our

Corporation is not preventing you in any manner in

bringing along with you those contractors to

explain the nature of expenditure incurred by you

through the contractors. You are not denied any

opportunity to represent your case properly. You

may recover the ESI contribution along with

employers share from your contractors (i.e.

immediate employer) under Section 40 and 41 of

the ESI Act. As per Section 41(1) of the ESI Act,

the principal employer can recover the

contributions from the immediate employer even

as deduction from any amount payable by them

under any contract or even as a debt payable by the

contractors. So, it is not necessary for the

Employees State Insurance Corporation to implead

the contractors to enable you (principal employer)

to invoke your right of recovery. I am therefore, to

intimate you that your request as communicated in

the affidavit cannot be acceded to.

Proceedings :

5. A Writ Petition was preferred thereagainst before the Madras High

Court wherein a decision of the said court in Madras Gymkhana (represented

by its Honourary Secretary), Madras v. Employees State Insurance

Corporation (represented by its Regional Director), Madras [1990 (2)

Labour Law Notes 777] was relied upon. By an order dated 11.4.2000, a

learned Single Judge, doubting the correctness of the said decision, referred

the matter to a Division Bench opining :

In view of the judgment of the Hon ble Supreme

Court of India referred to above, namely, AIR

1993 SC pg.2655 and the other judgment namely,

JT 1989 (4) SC 380, I am of the respectful opinion

that the judgment of this Court reported in 1990-2

L.L.N pg.777 does not appear to have decided the

issue correctly and, therefore, it definitely calls for

a reconsideration by a larger Bench. The Registry

is, therefore, directed to place this order of

reference, my judgment containing reasons and the

material papers before My Lord the Hon ble Chief

Justice for referring the issue involved in this case

for consideration by a larger Bench.

6. By reason of the impugned judgment, a Division Bench of the Madras

High Court, while overruling the said decision in Madras Gymkhana (supra)

held :

The scheme of the ESI Act does not envisage

separate and independent determination of

contribution payable by the principal employer and

the immediate employer in respect of employees

directly employed by the principal employer and

the contract employees respectively. When once

the authority is satisfied that persons were

employed by or through an immediate on the

premises of the factory or establishment or under

the supervision of the principal e