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IN THE HIGH COURT OF ANDHRA PRADESH AT AMARAVATI
Ravi Nath Tilhari, J.
M/s. Madhusree Computers Society, rep. by its President - Petitioner
Versus
The State of Andhra Pradesh Department of Municipal Administration and Urban Development and others – Respondents
Writ Petition No.26423 OF 2022
Decided On : 23-08-2022
ESI ACT - PRINCIPAL EMPLOYER - IMMEDIATE EMPLOYER - RECOVERY OF CONTRIBUTION - [SECTION 2(13), 2(17), 45-A, 45-C] - THE COURT HELD THAT THE PETITIONER, WHO WAS DETERMINED TO BE THE PRINCIPAL EMPLOYER UNDER THE ESI ACT, COULD NOT CHALLENGE THE RECOVERY PROCEEDINGS INITIATED AGAINST HIM FOR NON-PAYMENT OF ESI CONTRIBUTIONS, AS HE HAD FAILED TO AVAIL THE STATUTORY REMEDY OF APPEALING THE ORDER DETERMINING HIS LIABILITY.
Fact of the Case:
THE PETITIONER, A SOCIETY PROVIDING SKILLED MANPOWER ON CONTRACT BASIS, ENTERED INTO AN AGREEMENT WITH THE MUNICIPALITY TO SUPPLY MANPOWER FOR A PERIOD OF THREE YEARS. THE MUNICIPALITY DEDUCTED ESI CONTRIBUTIONS FROM THE SALARIES OF THE MANPOWER SUPPLIED BY THE PETITIONER BUT FAILED TO PAY THE SAME TO THE ESI CORPORATION. THE ESI CORPORATION ISSUED A NOTICE TO THE PETITIONER DEMANDING PAYMENT OF THE CONTRIBUTIONS, AND SUBSEQUENTLY PASSED AN ORDER DETERMINING THE AMOUNT DUE AND DIRECTING THE PETITIONER TO PAY IT WITHIN 60 DAYS. THE PETITIONER FAILED TO CHALLENGE THE ORDER AND THE ESI CORPORATION INITIATED RECOVERY PROCEEDINGS AGAINST HIM.
Finding of the Court:
THE COURT HELD THAT THE PETITIONER WAS THE PRINCIPAL EMPLOYER WITHIN THE MEANING OF SECTION 2(17) OF THE ESI ACT, AS HE WAS RESPONSIBLE FOR THE SUPERVISION AND CONTROL OF THE ESTABLISHMENT WHERE THE MANPOWER WAS EMPLOYED. THE COURT FURTHER HELD THAT THE PETITIONER COULD NOT CHALLENGE THE RECOVERY PROCEEDINGS INITIATED AGAINST HIM, AS HE HAD FAILED TO AVAIL THE STATUTORY REMEDY OF APPEALING THE ORDER DETERMINING HIS LIABILITY. THE COURT RELIED ON THE SUPREME COURT JUDGMENTS IN A.V. VENKATESWARAN V. RAMACHAND SOBHARAJ WADHWANI AND SHIVGONDA ANNA PATIL V. STATE OF MAHARASHTRA, WHICH HELD THAT A PETITIONER WHO HAS DISABLED HIMSELF FROM AVAILING THE STATUTORY REMEDY BY HIS OWN FAULT CANNOT URGE THAT AS A GROUND FOR THE COURT TO EXERCISE ITS DISCRETION IN HIS FAVOUR UNDER ARTICLE 226 OF THE CONSTITUTION.
Issues: 1. WHETHER THE PETITIONER WAS THE PRINCIPAL EMPLOYER WITHIN THE MEANING OF SECTION 2(17) OF THE ESI ACT? 2. WHETHER THE PETITIONER COULD CHALLENGE THE RECOVERY PROCEEDINGS INITIATED AGAINST HIM, GIVEN THAT HE HAD FAILED TO AVAIL THE STATUTORY REMEDY OF APPEALING THE ORDER DETERMINING HIS LIABILITY?
Ratio Decidendi: THE COURT HELD THAT THE PETITIONER WAS THE PRINCIPAL EMPLOYER WITHIN THE MEANING OF SECTION 2(17) OF THE ESI ACT, AS HE WAS RESPONSIBLE FOR THE SUPERVISION AND CONTROL OF THE ESTABLISHMENT WHERE THE MANPOWER WAS EMPLOYED. THE COURT FURTHER HELD THAT THE PETITIONER COULD NOT CHALLENGE THE RECOVERY PROCEEDINGS INITIATED AGAINST HIM, AS HE HAD FAILED TO AVAIL THE STATUTORY REMEDY OF APPEALING THE ORDER DETERMINING HIS LIABILITY. THE COURT RELIED ON THE SUPREME COURT JUDGMENTS IN A.V. VENKATESWARAN V. RAMACHAND SOBHARAJ WADHWANI AND SHIVGONDA ANNA PATIL V. STATE OF MAHARASHTRA, WHICH HELD THAT A PETITIONER WHO HAS DISABLED HIMSELF FROM AVAILING THE STATUTORY REMEDY BY HIS OWN FAULT CANNOT URGE THAT AS A GROUND FOR THE COURT TO EXERCISE ITS DISCRETION IN HIS FAVOUR UNDER ARTICLE 226 OF THE CONSTITUTION.
Final Decision: THE COURT DISMISSED THE PETITION, HOLDING THAT THE PETITIONER COULD NOT CHALLENGE THE RECOVERY PROCEEDINGS INITIATED AGAINST HIM FOR NON-PAYMENT OF ESI CONTRIBUTIONS.
JUDGMENT :
Heard Sri Harish Kumar Rasineni, learned counsel for the petitioner and Sri N. Ranga Reddy, learned counsel for the respondent Nos.2 and 3 and learned Government Pleader for Municipal Administration for the 1st respondent and perused the material on record.
2. Learned counsel for the petitioner submits that the petitioner MEPMA Section and Computer Society (in short the society) is providing a skilled manpower to organizations and institutions on contract basis. Pursuant to the tender notice dated 05.07.2017 for supply of manpower from the 2nd respondent, the petitioner entered into agreement for supply of manpower on outsourcing basis for the period from 01.08.2017 to 31.03.2018 and supplied 51 outsourcing staff to the 2nd respondent. This contract was extended for two years up to 31.08.2020 on the same terms. The 2nd respondent paid the net amount of salaries to those staff after deducting the statutory contributions like EPF, ESI etc.
3. The petitioner received a notice dated 25.09.2020 from the 5th respondent/Employees State Insurance Corporation (in short ESI Corporation) for payment of the contribution towards the employees insurance under the Employees State Insurance Act, 1948 (in short E.S.I Act) for the period with effect from 01.09.2015 to 29.02.2016 and 01.07.2018 to 31.08.2020. The petitioner approached the 2nd respondent/the Rayadurgam Municipality and again on 10.12.2020 requesting the 2nd respondent to pay the said amount to the 5th respondent as the 2nd respondent had deducted and not paid the contributions towards the E.S.I to the petitioner. Thereupon, the 2nd respondent vide letter Roc.No.328/2020/E1 dated 14.12.2020 informed the petitioner that the payment of ESI premium was under process which fact was brought to the notice of the 5th respondent.
4. Learned counsel for the petitioner further submits that in the meanwhile, the 5th respondent passed an order dated 16.02.2021 under Section 45-A of ESI Act, 1948 directing the petitioner to pay an amount of Rs.1144856/-, for the period October 2015 to February 2016 and July 2018 to August 2020 within a period of 60 days providing further that in case of failure the same shall be recovered under Sections 45-C to 45-I of the E.S.I Act. The order dated 16.02.2021 was brought to the notice of the 2nd respondent whereupon the 2nd respondent vide Roc.No./2021/ dated nil.04.2021 informed the petitioner that the financial position of the municipality was poor and so, the amount will be paid in installments to the petitioner, but no such payment was made either to the petitioner or to the ESI Corporation by the 2nd respondent.
5. The 5th respondent herein on 03.06.2022 made an application to the 6th respondent the Recovery Officer of E.S.I Corporation for recovery of the contribution amount under order dated 16.02.2021 along with interest.
6. Challenging the aforesaid proceedings the writ petition under Article 226 of the Constitution of India has been filed for the following reliefs:-
a. to declare the inaction of the 2nd and 3rd respondents in not paying the deducted/retained amounts of contributions payable to the ESI Corporation of the employees supplied by the petitioner on outsourcing basis for the period 01.08.2017 to 31.08.2020 as arbitrary and illegal and violation of petitioner’s rights guaranteed under Art 14, 19, 21 and 300A of Constitution of India and
b. to declare the action of the 5th respondent in issuing notice No.79000424200000999/9252020304 dated 25.09.2020 and subsequent proceedings dated 16.02.2021 and 03.06.2022 demanding amounts of contributions payable to the ESI Corporation of the employees supplied by the petitioner to the 2nd respondent on outsourcing basis for the period 01.08.2017 to 31.08.2020 as arbitrary and illegal and in violation of the provisions
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