CASE TITLE- The Employees State Insurance Corporation Ltd. Vs Nagar Nigam Allahabad and Anr.
CASE NUMBER- Civil Appeal No(S). 1833 Of 2024
DATED ON- 17.05.2024
QUORUM- Hon’ble Mr. Justice J.B. Pardiwala and Hon’ble Mr. Justice Sandeep Mehta
FACTS OF THE CASE
The Appellant-Corporation preferred the instant appeal with a pertinent plea that the Respondent-Nagar Nigam operates a Central Workshop, where activities of repairing and maintaining different types of vehicles are carried out, the workshop is covered by the definition of a ‘factory’ within the meaning of the Act of 1948. In the year 1964, Respondent was allotted Code under the Act of 1948. Recovery certificates were issued from time to time by the appellant Corporation to the respondent on account of nonpayment of mandatory contributions under Section 40 of the Act of 1948, where under 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- continued to make statutory contributions under the Act of 1948 till the year 1978, where after it stopped paying without any reason. Owing to the non-payment by the employer, the Authorized Officer of the Appellant-Corporation issued a notice to respondent 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 to appear before it. The respondent- neither appeared before the Authorized Officer nor did it file any response to the notice, whereupon the Authorized Officer of the Appellant-Corporation directed the Recovery Officer to recover the amount of contribution along with interest to the tune of Rs. 5,88,227/- from the respondent. This amount subsequently came to be deducted from the bank account of respondent. As the respondent failed to make timely, a show cause notice was issued to the respondent calling upon it to explain as to why damages, should not be levied upon it. The respondent did not appear before the Authorized Officer and rather sought time to respond. The Recovery Officer issued recovery notice to the respondent for payment of the amount due. Being aggrieved by the recovery notice, the respondent filed the captioned Writ petition before the Allahabad High Court challenging the said recovery notice and seeking a direction to restrain the appellant from realising the amount. The Allahabad High Court proceeded to allow the writ petition holding that the writ petitioner was not covered under the Act of 1948 and as a consequence, recovery notice was quashed and the amount already realized by the appellant Corporation was directed to be refunded within three months.
ISSUES RAISED
- Whether the workshop of Respondent-Nagar Nigam was indulged in manufacturing process while carrying out repairs and maintenance of the tractors, trailers, loaders belonging to the Respondent-Nagar Nigam by employing more than 20 workmen?
- Whether the workshop of Respondent-Nagar Nigam was covered under the definition of ‘factory’ within the meaning of Act of 1948?
LEGAL PROVISIONS
Section 40 of The Factories Act, 1948
Section 75 of The Factories Act, 1948
Section 1(4) of The Factories Act, 1948
CONTENTIONS OF THE APPELLANT
The appellant contented that, if at all, respondent was desirous of getting the exemption from the operation of the Act of 1948, then it had to apply to the appropriate Government and procure an order of exemption and only thereafter, could it seek exemption from making payment of the employer’s contribution under Section 40 of the Act of 1948. The respondent did not appear to defend the proceedings wherein it was called upon to pay the remaining contributions. It also failed to participate in proceedings for determination of damages. The damages were determined by the appellant vide recovery certificate, however, only the consequential recovery notice was assailed in the writ petition. Since, the recovery certificate determining the damages not having been questioned, the respondent was not entitled to challenge the subsequent recovery notice which is consequential to the determination of the damages. Though a ground was taken in the writ petition that the Act of 1948 is not applicable to the respondent because the workshop of the Respondent is not covered under the definition of ‘factory’ but the fact remains that in the proceedings for recovery of contribution, no such plea was taken that the workshop of the Respondent is not covered by the definition of ‘factory’ or that no manufacturing process is carried out in the workshop. It contented that, if at all the respondent contesting the recovery notice on the ground that it was not covered under the provisions of the Act, the remedy of filing an appeal to the Employees’ Insurance Court was available to it. Rather than availing the said statutory remedy, the respondent invoked the writ jurisdiction of the High Court without any justification. He thus, implored the Court to accept the appeal and set aside the impugned order of the High Court.
CONTENTIONS OF THE RESPONDENT
The respondent contented that, there is no material on record to show that any manufacturing activity was being undertaken in the Workshop of the respondent. The employees of the respondent were being occasionally assigned the task of in-house repairs of the equipment and machinery of the respondent and thus, by no stretch of imagination, can it be concluded that the workshop was a ‘factory’ within the meaning of the Act of 1948 where any manufacturing process was being undertaken. The learned Single Judge of the High Court was justified in exercising the writ jurisdiction and quashing the impugned recovery notice He contended that the impugned order does not suffer from any infirmity warranting interference of this Court and the appeal should be dismissed.
COURT’S ANALYSIS AND JUDGEMENT
The Hon’ble court held that, neither in the pleadings of the writ petition nor in the counter affidavit filed on behalf of the respondent in this Court, is there any indication that the respondent ever sought for or was granted exemption by the appropriate Government. The appellant had issued notices to respondent to show cause, however, no response was given by the respondent to such notices. There is also no dispute that for the earlier periods, between 1964 to 1978, the respondent made regular contributions under the Act of 1948 thereby conceding to the position that its workshop was covered under the definition of ‘factory’ where manufacturing process was being carried on. If, at all, this situation had changed in the period subsequent to 1978 and before issuance of the notice, the respondent would be required to demonstrate the same by providing appropriate evidence to the Authorized Officer in response to the said notice and establish that it was not covered under the definition of ‘factory’ and that no ‘manufacturing process’ was being undertaken in its premises. Examining such an issue would require the collection of evidence and the appreciation thereof. Hence, only the Insurance Court would be in a position to examine such disputed questions of facts. Rather than exercising the writ jurisdiction, the respondent should have been approached the Insurance Court. The court held that the learned Single Judge of the High Court erred in entertaining the writ petition and interfering with the recovery notice while exercising the extraordinary writ jurisdiction conferred under Article 226 of the Constitution of India. Therefore, the appeal was allowed, and the impugned order got quashed and set aside.
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Judgement Reviewed By- Shreyasi Ghatak
