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2025 Supreme(Online)(Guj) 6367
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
HEMANT M. PRACHCHHAK, J
E S I C – Appellant
Versus
MINAXI TAXTILES LIMITED – Respondent
FIRST APPEAL NO. 4970 of 2007
For the Appellants/Petitioners: MR SACHIN D VASAVADA
For the Respondents: MR KV GADHIA
The obligation to pay ESI contributions arises only upon the commencement of manufacturing activities, thereby excluding earlier construction wages.
Headnote:(A) Employees State Insurance Act, 1948 - Sections 2(12), 39 and 40 - Appeal against the ESI Court's injunction order - The ESI Court restrained ESI Corporation from recovering Rs. 1,29,021/- from respondent company, asserting that manufacturing did not commence until 1997, thus denying liability for omitted wage contributions owed from construction workers. (Paras 2, 6, 7)
(B) Statutory Liability - Definition of 'factory' and obligations under ESI Act clarified - ESI Court held that contributions are only owed once manufacturing activities commenced, emphasizing jurisdiction limitations in demanding payment for construction wages lacking evidential connection to factory work. (Paras 6, 7)
Facts of the case:
ESI Corporation sought to recover unpaid contributions from MINAXI TAXTILES LIMITED for wages related to new factory construction done prior to the commencement of manufacturing activities, which the court found were not established as necessary under the ESI Act.
Findings of Court:
ESI Court correctly determined no manufacturing work commenced prior to 1997, thereby upholding non-liability for contributions demanded against the respondent.
Issues: The primary issue was whether the respondent was liable for contributions regarding wages paid for construction work prior to operational factory status under the ESI Act.
Ratio Decidendi: The court affirmed that manufacturing need be demonstrated for the ESI contributions to be applicable, rendering earlier recovery efforts as unjustified.
Result: Appeal dismissed with no order as to costs.
| Table of Content |
|---|
| 1. introduction of appeal and context. (Para 1 , 2) |
| 2. filing of the appeal against the lower court decision. (Para 3) |
| 3. arguments presented by both appellants and respondents. (Para 4 , 5) |
| 4. court observations and application of legal principles. (Para 6 , 7) |
| 5. final decision on the appeal. (Para 8) |
ORAL JUDGMENT
1. Present appeal is filed by the appellant – Employees State Insurance Corporation against the judgment and order dated 07.08.2007 passed by the Employees State Insurance Court, Ahmedabad (hereinafter referred to as ‘the E.S.I. Court”) in E.S.I. Application No. 12 of 2000, whereby, the appellant Corporation was restrained by permanent injunction from recovering the amount of Rs. 1,29,021/- from the respondent herein.
2. The short facts giving rise to present appeal are as under :-
2.1 The respondent Company herein is/was covered under the provisions of benevolent legislation since 1995. That, as per the provisions of ESI Act, the Act is applicable to specified area and accordingly Chhatral has been covered since 1995 and the respondent Company was, initially, started its business in the name and style of Minaxi Textiles, a partnership firm. That subsequently, the said Partnership Firm transformed into Company and late it came to be known as M/s. Minaxi Textiles Limited. That, previously the respondent Company was running only one unit at Plot No. 3534 and to extend their business, present respondent Company constructed another factory building as Unit no.2 at Plot No. 3311, which was adjacent to the Unit 1 of the present respondent Company. That, the all expenses incurred were debited in the books of Unit No. 1.
2.2 It is the case of the appellant that, on carrying out the inspection of books of accounts, it was noticed by the appellant Corporation that the respondent Company had paid various labour expenses including the labour expenses to the workers for construction of new Factory building viz. Security Expenses. Soldering Expenses, Mending Expenses, Beam - Ginning expenses and spent Rs. 23,45,852/- towards Factory construction work but no contribution was paid on the same. That on noticing above default on part of the respondent Company, the appellant Corporation issued notice dated 02/06/1998 to recover the contribution on omitted wages to the tune of Rs. 24,479 for miscellaneous job and Rs. 1,29,021/- towards omitted wages paid to the workers for the construction of Factory Building, against which, the respondent Company paid Rs. 24,479/- and decided to contest qua Rs. 1,29,021/-. That, despite various opportunities given to represent the case, the respondent Company did not produce convincing documentary evidence showing the fact that they were not liable to pay the contribution for the omitted wages. As no recourse was left with the appellant, the appellant Corporation initiated recovery proceedings by issuing speaking order in form of C-19 dated 10/03/2000 to recover the contribution on omitted wages with interest to the tune of Rs. 1,59,402/-. Being aggrieved by the said order, the respondent Company straight way preferred an application u/s. 75 being El Application No. 12/2000. That El Court, without considering the facts of the present case and without appreciating the evidences, passed the impugned order dated 07.08.2007 allowing the application of the respondent Company.
3. Being aggrieved and dissatisfied with the aforesaid judgment and award passed by the learned Commissioner, the appellant Insurance Company has filed the present First Appeal under Section 82 of the Employees State Insurance Act, 1948 .
4. Heard learned advocate Mr. Sachin D. Vasavada, appearing for the appellant – E.S.I.C. and learned advocate Mr.
Yogi Gadhia, appearing for the respondent.
5. Learned advocate Mr. Vasavada, for the appellant – Corporation, has submitted that the impugned judgment and order passed by the learned Commissioner is illegal, arbitrary, erroneous and unsustainable in law as well as on facts. He ha
