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2025 Supreme(Online)(Mad) 42809
IN THE HIGH COURT OF JUDICATURE AT MADRAS
T.V.Thamilselvi, J
The Deputy Director Employees State Insurance Corporation – Appellant
Versus
M/s.Vennila Clothing Company – Respondent
CMA No. 913 of 2023
For the Appellants/Petitioners: Mr.S.P.Srinivasan
For the Respondents: Mr.D.Udhayasuriyan
The requirement for maintaining proper documentation to substantiate claims of business closure under the Employees State Insurance Act is essential for disputing contribution demands.
Headnote:(A) Employees State Insurance Act, 1948 - Section 45A - Appeal against order of Employees State Insurance Court - The respondent, M/s.Vennila Clothing Company, challenged the order demanding ESI contributions from October 2014 to September 2019, claiming closure of business since September 2014 - The court found the respondent failed to provide evidence of the claimed closure and upheld obligation for contribution based on existing requests. (Para 10)
(B) Judicial discretion - Appeal court evaluation - The appellate court underscored that an opportunity to furnish documents for closure was given but not utilized by the respondent, affirming that findings were supported by the evidence presented. (Paras 9 and 10)
Facts of the case:
The respondent, M/s.Vennila Clothing Company, contested a demand from the ESI Corporation for contributions amassed while the unit was allegedly non-operational, claiming closure in September 2014 but failing to substantiate claims with documentation.
Findings of Court:
The order by the Employees State Insurance Court was ruled to have erred by remanding the matter for fresh enquiry without sufficient evidence on the respondent's part, leading to the conclusion that contributions were warranted.
Issues: The court evaluated if the order allowing remand was justified despite lack of proof for closure.
Ratio Decidendi: The court concluded that the generative evidence of the respondent's business closure was inadequate and upheld required contributions due to failure in establishing unjust claim.
Result: The findings rendered by Employees State Insurance Court are set aside and the Civil Miscellaneous Appeal is allowed.
| Table of Content |
|---|
| 1. challenge to esi contributions based on claimed business closure. (Para 1 , 2 , 5) |
| 2. burden of proof lies with the petitioner for cessation of business. (Para 6 , 7 , 8 , 9) |
| 3. contributions deemed lawfully demanded without proof of closure. (Para 10) |
JUDGMENT
Challenging the impugned order passed by the Employees State Insurance Court, Coimbatore in ESIOP No. 53 of 2020, the appellants/respondents 1 and 2 have preferred this Civil Miscellaneous Appeal.
2. Before the Employees State Insurance Court, the respondent herein viz., M/s.Vennila Clothing Company filed a petition in ESIOP No. 53 of 2020 under Sec.75 of ESI Act, 1948 and prayed to pass an order by setting aside the order No.5656-101028-018-1002/INS-IV/SRO/5064/2018-II, dated 29.03.2019 to an extent of Rs.2,72,201/- as lacking jurisdiction, without authority of law, illegal and in any event unjustifiable.
3. For the sake of convenience, the parties are ranked as per the ranking in the Original Petition.
4. Brief facts of the case is as follows :-
The petitioner viz., M/s. Vennila Clothing Company, represented by its DGM-HR contended that they had a clothing showroom of sale of cloth, knitted hosiery garments. For that, ESI Corporation allotted code No. as 56561010280181002 with effect from 01.02.2014. At that time, only nine employees were working in the petitioner's unit and the said unit was functioned from February 2014 to August 2014. After that, nine employees left the service and their CST No.334764 and TIN No.33382323760 was also been cancelled by the Assistant Commissioner, since there was no business activities from September 2014 onwards. But, the 1st respondent ESI Corporation issued a notice on 13.12.2018 demanding a sum of Rs.2,72,201/- from the petitioner for the ESI contribution for the period from October 2014 to September 2019. The petitioner contended that the unit was not functioned from September 2014 onwards and a letter was also sent by the employer to the Commercial Department for closure of unit and the cancellation of TIN number. Hence, the petitioner's unit was not functioned from September 2014 legally. So, the petitioner is not entitled to pay ESI contribution, since no wages was paid for the period from September 2014 to September 2018. Therefore, the said impugned notice issued by the 1st respondent demanding contribution of Rs.2,72,201/- for the period from October 2014 to September 2019 was under challenge before the Employees State Insurance Court in ESIOP No. 53 of
2020.
5. The said petition was contested by the respondents stating that the petitioner's company was registered under Employees State Insurance Act voluntarily by the petitioner through online and the sub-code was allotted and till September 2014, the petitioner submitted ESI payment. But, subsequently stopped payment from October 2014 due to online processing method. Hence, the petitioner committed default in payment of contribution for the period of October 2014 to September 2018. Accordingly, the notice was issued on 13.12.2018 directing them to remit the said contribution within 30 days. By way of reply, the petitioner wrote a letter stating that company was closed in the year 2014 and needs some time to produce relevant records. Hence, the opportunity was given upto February 2019 and personal hearing is also given to the petitioner at their request in the month of January 2019 and February 2019, but they has not produced any relevant records, however, one authorised representative Vadivelu appeared and submitted a letter stating that related documents could not be traced out. Accordingly, the respondent authority passed an order under Sec.45A of ESI Act determining the contribution of Rs.2,72,201/- for the wage period from 01.10.2014 to 30.09.2018 on assumed notional wages basis.
6. Being aggrieved that, the petitioner preferred an appeal under Sec.45AA before the appellate authority of the respondent corporation, but failed to deposit 25% of contribution amou
