Summary
| Category | Data |
|---|---|
| Court | Supreme Court of India |
| Case Number | C.A. No.-014858-014858 – 2025 |
| Diary Number | 22887/2024 |
| Judge Name | HON’BLE MR. JUSTICE MANOJ MISRA |
| Bench |
HON’BLE MR. JUSTICE MANOJ MISRA HON’BLE MR. JUSTICE UJJAL BHUYAN |
| Precedent Value | Binding on all courts |
| Overrules / Affirms |
Overrules impugned orders of Employees Insurance Court and High Court Affirms the limited scope of Section 45A as per C.C. Santhakumar |
| Type of Law | Employment & Labour Law; Social Security Law |
| Questions of Law |
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| Ratio Decidendi |
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| Judgments Relied Upon |
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| Logic / Jurisprudence / Authorities Relied Upon by the Court |
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| Facts as Summarised by the Court |
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Practical Impact
| Category | Impact |
|---|---|
| Binding On | All subordinate courts |
| Persuasive For | Other High Courts |
| Overrules | Orders of Employees Insurance Court (06.07.2015) and Madras High Court (12.10.2023) |
| Distinguishes | Invocation of Section 45A is limited to non-production of records or obstruction; mere inadequacy of produced records must be handled under Section 75 |
| Follows | ESIC v. C.C. Santhakumar ((2007) 1 SCC 584) |
What’s New / What Lawyers Should Note
- Clarifies that Section 45A can be invoked only when an employer fails entirely to submit/furnish records or actively obstructs inspection.
- Holds that mere inadequacy or incompleteness of returned records, despite production, does not permit summary assessment under Section 45A.
- Reinforces that disputes over produced records must proceed under Section 75 with protection of three-year limitation under Section 77, not Section 45A.
- Confirms Section 45A orders are not subject to the five-year bar in Section 77(1A)(b), which applies only to ESIC’s contested claims under Chapter VI.
- Enables practitioners to challenge mis-invoked Section 45A assessments on jurisdictional grounds (failure of statutory pre-conditions).
Summary of Legal Reasoning
- Beneficial Purpose & Scheme
The Act is welfare-oriented; Sections 44–45A are aimed at ensuring correct returns and enabling inspection. - Pre-conditions for Section 45A
Two gateways: (a) no returns/records submitted or maintained under Section 44; or (b) active obstruction of inspection under Section 45. - Exceptional Nature of Section 45A
Being a “best judgment” summary remedy, Section 45A applies only in those narrow situations; records produced precludes its use. - Distinction from Section 75/77
Where records exist and are produced, assessment must occur under Section 75; limitation regimes differ—three years for employer challenges, five years for ESIC claims. - Precedent Analysis
Followed Santhakumar (2007) on narrow reading of Section 45A; distinguished misapplications in Masco, EID Parry, Cosmopolitan Club. - Application to Facts
Employer produced primary accounts and attended hearings; no statutory pre-conditions met; Section 45A invocation was therefore ultra vires.
Arguments by the Parties
Petitioner
- Records (ledgers, cash books, vouchers, returns) were produced repeatedly; no obstruction occurred.
- Section 45A applies only when no records exist or inspection is frustrated.
- Proper remedy was under Section 75/77 (five-year bar), not Section 45A.
- Reliance on Masco, EID Parry, Cosmopolitan Club, Srikantam Talkies, Santhakumar, India Pistons.
Respondent
- Employer failed to segregate wage components; did not furnish supporting vouchers despite multiple inspections.
- Obstruction includes partial production or incomplete records, justifying Section 45A.
- Section 45A is not subject to five-year limitation; only Section 77 claims are time-barred.
- Act must be given purposive interpretation favoring social security objectives.
Factual Background
M/s. Carborandum Universal Ltd., covered under the ESI Act, faced a show-cause notice on 27.11.1996 alleging non-payment of contributions for August 1988–March 1992. The company furnished various books and attended multiple hearings. ESIC invoked Section 45A and, by order dated 17.04.2000, determined arrears of Rs. 5,42,575.53 plus interest. The employer’s petition under Section 75(1)(g) (EIOP No. 262/2001) was dismissed on 06.07.2015. The High Court’s appeal under Section 82 failed on 12.10.2023. The Supreme Court granted special leave and heard the matter.
Statutory Analysis
- Section 44: Mandates submission of returns and maintenance of registers/records.
- Section 45: Empowers inspectors to verify returns, call for records, enter premises, examine persons.
- Section 45A: Allows summary determination of contributions only where no records are submitted or inspection is obstructed; requires hearing.
- Section 45B–45I: Provide for recovery, including as arrears of land revenue.
- Section 75: Confers jurisdiction on Employees Insurance Court to decide disputes where records exist.
- Section 77(1A)(b): Limits ESIC claims for contributions (including interest/damages) to within five years of the relevant period; employer challenges to Section 45A orders must be made within three years.
Alert Indicators
- ✔ Precedent Followed – Reaffirms ESIC v. C.C. Santhakumar (2007)