IMPORTANT POINT
A determination order under Section 45A of the ESI Act is mandatory before issuing recovery notices for omitted wages, ensuring adherence to principles of natural justice.

JUDGMENT :

M.A. ABDUL HAKHIM, J.

1. Appellant was the Applicant before the Employees Insurance Court, Kozhikode in E.I.C. No.19/2021. The appellant filed the Application under Sections 75 & 77 of the Employees’ State Insurance Act, 1948 (for short ‘ESI Act’), challenging Ext.P2 Actual notice dated 21.01.2020 and Ext.P3 Recovery Notice dated 22.04.2021 before the E.I. Court. The Applicant is a covered establishment. The Respondent-Corporation issued Ext.P2 notice alleging that the Applicant is liable to pay contribution for the omitted wages for the period from 03.2017 to 05.2018 demanding an amount of Rs.7,88,731/-. In Ext.P2 notice, the Respondent alleged that the total wages for the said period is Rs.1,26,86,776/-, the total contribution payable is Rs.8,24,641/-, the contribution paid is Rs.35,910/- and the balance contribution payable is Rs.7,88,731/-. The Applicant was given an opportunity of hearing to appear on 19.02.2020 at 10.30 a.m. Thereafter, the Respondent issued Ext.P3 C-19 notice to the Recovery Officer of the Respondent to recover Rs.7,88,731/- + interest @ 12% per annum from 21.04.2017 from the Applicant. A copy of the said notice was marked by the Applicant.

2. The Applicant challenged Exts.P2 & P3 on the ground that the Respondent initiated the proceedings against the Applicant establishment without observing the mandatory provisions under Section 45A of the ESI Act. It is alleged that no opportunity of hearing was granted and Exts.P2 & P3 notices were issued without passing a speaking order as contemplated under Section 45A of the ESI Act.

3. The Respondent defended the Application by contending that Ext.P2 notice was issued demanding contribution of Rs.7,88,731/- for the period from 03.2017 to 05.2018, affording opportunity for personal hearing on 19.02.2020 to raise objection, if any, against the assessment of contribution. But the Applicant neither attended the personal hearing nor submitted any objection to the proposed assessment even after receipt of Ext.P2 notice. The contribution claimed in Ext.P2 was prepared on the basis of salary register in the computer system maintained at the head office of the Applicant; that the contribution payable was not assessed on the basis of assumed wages but assessed on the ESI Actual wages reflected by the salary register maintained by the Applicant and hence there is no need to issue separate order under Section 45A of the ESI Act.

4. The E.I. Court dismissed the Application holding that the Respondent afforded ample opportunity to the Applicant for personal hearing and the same was not availed by the Applicant; that the Applicant has not adduced any reliable evidence to prove their contention with regard to the payment of wages made to their employees at Kozhikode office and that the Applicant has not explained the reasons for their non- appearance in the personal hearing nor for the non-production of documents.

5. This Court formulated the following substantial question of law in this Appeal:

1. Whether the Employees Insurance Court is justified in dismissing the Application filed by the appellant in the absence of a determination order under Section 45A of the Employee’s State Insurance Act, 1948.

6. I heard the learned counsel for the appellant, Sri. Muraleedharan R., and the learned counsel for the Respondent, Sri. T.V. Ajayakumar.

7. The learned counsel for the appellant contended that in view of the specific provision under Section 45A of the ESI Act, passing of a determination order is mandatory before issuance of C-18 & C-19 notices. Admittedly, in the present case, the Respondent has not issued any determination order as required under Section 45A