IMPORTANT POINT
Non-payment of mandatory contributions – Only Insurance Court constituted under Section 74 of Act of 1948 would be in a position to examine disputed questions of facts.

1. The instant appeal by special leave is directed against the impugned order dated 25th October, 2021 passed by the High Court of Judicature at Allahabad in Writ (C) No. 14971 of 2009 whereby the writ petition filed by respondent No. 1-Nagar Nigam, Allahabad was allowed.

2. The learned Single Judge of the High Court vide impugned order held that the employees of respondent-Nagar Nigam are not covered under the Employees’ State Insurance Act, 1948 (hereinafter being referred to as the ‘Act of 1948’) and as a consequence thereof, the notice dated 3rd February, 2009(hereinafter being referred to as ‘recovery notice’) issued by the Authorised Officer of the appellant-Corporation was quashed and amount already realized was directed to be refunded to the respondent-Nagar Nigam (subsequently designated as the Municipal Corporation) within three months.

3. The appellant-Corporation herein has preferred the instant appeal with a pertinent plea that the respondent-Nagar Nigam operates a Central Workshop (hereinafter ‘the workshop’), where activities of repairing and maintaining different types of vehicles are carried out. As per the appellant-Corporation, the workshop is covered by the definition of a ‘factory’ within the meaning of the Act of 1948. In the year 1964, respondent-Nagar Nigam was allotted Code No. 21-4404-74 under the Act of 1948. Recovery certificates were issued from time to time by the appellant- Corporation to the respondent-Nagar Nigam on account of nonpayment of mandatory contributions under Section 40 of the Act of 1948, whereunder the principal employer is obligated to pay both employer’s and employee’s contribution in respect of every employee working in the factory. The respondent-Nagar Nigam continued to make statutory contributions under the Act of 1948 till the year 1978, whereafter it stopped paying without any reason.

4. Owing to the non-payment of the statutory contributions by the employer, the Authorized Officer of the appellant-Corporation issued a notice dated 20th November, 2003 to respondent-Nagar Nigam under Section 45A of the Act of 1948 directing it to pay Rs. 4,72,186/- assessed on ad hoc basis pertaining to the contributions for the period commencing from June, 2002 to September, 2003 and called upon the respondent-Nagar Nigam to appear before it on 19th December, 2003. The respondent-Nagar Nigam, however, neither appeared before the Authorized Officer nor did it file any response to the notice, whereupon the Authorised Officer of the appellant-Corporation, vide letter dated 21st September, 2004 directed the Recovery Officer to recover the amount of contribution along with interest to the tune of Rs. 5,88,227/- under Sections 45C to 45I of the Act of 1948 from the respondent-Nagar Nigam. This amount subsequently came to be deducted by the appellant-Corporation from the bank account of respondent-Nagar Nigam i.e. UCO Bank, which has been arrayed as respondent No. 2 in the present appeal.

5. As the respondent-Nagar Nigam failed to make timely payments of the statutory contributions in the manner prescribed under the Employees’ State Insurance (General) Regulations, 1950, framed under the Act of 1948, a show cause notice dated 5th/6th June, 2006 was issued to the respondent-Nagar Nigam calling upon it to explain as to why damages under Section 85B of the Act of 1948, should not be levied upon it. The respondent-Nagar Nigam chose not to appear before the Authorized Officer and rather sought time to respond. On request being made on behalf of the respondent-Nagar Nigam, the hearing was adjourned on two occasions.

6. The Authorised Officer of the appellant-Corporation, vide letter dated 30th January, 2009 directed the Recovery Officer to recover damages to the tune of Rs. 3,52,670/- under Section 85B of the Act of 1948 from the respondent-Nagar Nigam. On the basis of above-mentioned letter, the Recovery Officer issued recovery notice dated 3rd February, 2009 to the respondent-Nagar Nigam for payment of the