Bombay High Court
Sbi General Insurasnce Company Limited vs Employees State Insurance Corporation on 18 September, 2024
Author: Madhav J. Jamdar
Bench: Madhav J. Jamdar
2024:BHC-OS:14882 24-WP-3796-2024.DOC
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
WRIT PETITION NO.3796 OF 2024
SBI General Insurance Company Limited ...Petitioner
Versus
Employees' State Insurance Corporation & Anr. ...Respondents
Mr. Sudhir Talsania, Senior Advocate a/w. Mr. Vishal Talsania, Mr.
Punit Damodar, Ms. Nikita Vardhan and Ms. Vidyashree Perla,
Advocates, i/b. Kanga & Company, for the Petitioner.
Mr. Shailesh S. Pathak, Advocate, for the Respondents.
CORAM: MADHAV J. JAMDAR, J.
DATED : 18th SEPTEMBER 2024
JUDGMENT:
1. Heard Mr. Sudhir Talsania, learned Senior Counsel
appearing for the Petitioner and Mr. Pathak, learned Counsel
appearing for the Respondents.
2. At the outset, Mr. Sudhir Talsania, learned Senior Counsel
appearing for the Petitioner seeks leave to amend the cause title.
Leave to amend the cause title is granted. Amendment be carried
out forthwith. Re-verification is dispensed with.
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3. By the present Writ Petition filed under Article 226 of the
Constitution of India, the challenge is to the legality and validity of
the order dated 29th December 2023/1st January 2024 passed by
the Assistant Director, Authorized Officer, Employees’ State
Insurance Corporation passed under Section 45A of the Employee
State Insurance Act, 1948 (“ESI Act”).
4. Mr. Sudhir Talsania, learned Senior Counsel appearing for
the Petitioner raised the following submissions:
(a) The impugned order dated 29th December 2023/1st
January 2024 has been served on the Petitioner on 8 th
January 2024. Thereafter, immediately the Writ
Petition has been filed on 28th February 2024.
(b) The impugned order has been passed without
following the principles of natural justice. Learned
Senior Counsel points out paragraph No.6 and 10 of
the impugned order where reference is made to the
interim reports dated 2nd June 2021 and 30th
November 2021 submitted by the Social Security
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24-WP-3796-2024.DOCOfficer and contends that on the basis of these reports,
inter alia the impugned order has been passed. He
submitted that the Petitioner came to know about the
said interim reports dated 2nd June 2021 and 30th
November 2021 when the impugned order has been
served on the Petitioner.
(c) Before passing of the impugned order, the Assistant
Director who passed the order under Section 45A of
the ESI Act has not supplied copies of the said interim
reports to the Petitioner and Petitioner’s say has not
been called on the said interim reports.
(d) In any case, as the copies of the said interim reports
have not been supplied to the Petitioner and the same
have been inter alia taken into consideration while
passing the impugned order therefore, there is
violation of the principles of natural justice.
(e) Although the contention is raised in the affidavit-in-
reply filed on behalf of the Respondent that the
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Petitioner can avail remedy of Appeal under Section
45AA of the ESI Act or can approach the Employees
Insurance Court under Sections 75 and 77 of the ESI
Act, as the impugned order passed is in violation of
the principles of natural justice, in view of the law laid
down by the Supreme Court in Whirlpool Corporation
vs. Registrar of Trade Marks, Mumbai & Ors.1, the Writ
Petition is maintainable.
He therefore submits that the impugned order be quashed
and set aside and the matter be remitted to the Authority for
deciding the same afresh, after giving the copies of the interim
reports to the Petitioner and by giving adequate opportunity.
5. On the other hand, it is the contention of Mr. Shailesh
Pathak, learned Counsel appearing for the Respondents that the
said decision in Whirlpool Corporation (supra) will not apply to
the present case. He relied on the decision of Supreme Court in the
State of Maharashtra vs. Greatship (India) Limited 2. He pointed
out paragraph Nos. 7 to 10 of the said decision. He submits that
1 (1998) 8 SCC 1
2 (2022) 105 GSTR 300: (2022) SCC OnLine SC 1262
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therefore, the Writ Petition be not entertained and the Petitioner be
relegated to the statutory remedy under Sections 75 and 77 of the
ESI Act.
6. Before considering the rival submissions, it is necessary to
set out paragraph Nos.6 and 10 of the impugned order wherein
reference is made to the interim reports dated 2nd June 2021 and
30th November 2021 submitted by the Social Security Officer,
which read as under:
“6. An interim dated 02/06/2021 was submitted by
the Social Security Officers. They informed that
following records are required for document
verification:-
1. Requisite Bills and vouchers for marked entries in
ledger for F.Y. 2015-16 and 2016-17
2. Agreement copy/work order/Contract
/Appointment letter for employees employed
directly/indirectly for purpose of risk inspection,
surveying, tagging, road side assistance and other
similar nature of business booked under HOA
“Professional and legal expenses (Schedule 4).
3. For F.Y. 2015-16 and F.Y. 2016-17, Ledger for
Fixed assent addition (Schedule 10-Leasehold
improvements, Furniture & fitting, office
equipment)
4. For F.Y. 2015-16 and F.Y. 2016-17, Agreement
copy/work order/Contract/Appointment letter for
employees employed directly or through broker or
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5. For F.Y. 2015-16 and F.Y. 2016-17, List of vendors
for which coverage/compliance details are not
available is enclosed.
10. Interim report dated 30/11/2021 by the Social
Security Officers was received in the office of the
Authorized Officer on 06/12/2021. They informed
that the proceedings against the records requested
in their interim report dated 02/06/2021 were as
follows:-
a. Against S.N. 6.1- We gave received some bills in
soft copy for few vendors of repetitive entries, most
of them are bills of unmarked entries in ledger
submitted to the office and still complete records
have not been provided to us.
b. Against S.N. 6.2 – No record is provided to us till
date.
c. Against S. N. 6.3- No record is provided to us till
date (Neither ledger nor bills are provided for F.Y.
2015-16 and F.Y. 2016-17.
d. Against S.N. 6.4 – No record is provided to us till
date.
e. Against S.N. 6.5- No record is provided to us till
date.
They informed that in the absence of the above-
mentioned records, verification of the records could
not be done and requested to provide the records.”
(Emphasis Supplied)
7. It is also necessary to see the reasons recorded in the
impugned order. The relevant portion of the impugned order
recording reasons is as follows:
“FACTS OF THE CASE AND OUTCOME
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1. Amount of contribution against revised omitted
wages determined by Social Security Officers:
Rs.2,20,754/-.
2. Since bills/vouchers for an amount of
Rs.1,87,67,961/- were not produced by the employer
to the SSOs, I have no option left but to claim
contribution on this amount.
Contribution on bills/vouchers not produced
=1,87,67,961 x 6.5%=12,19,918.
3. Since employer failed to produce any bills/vouchers
for leasehold improvements to SSO, I have no option
left but to claim contribution on 25% of the booked
amount.
Year Amount booked 25% of booked Contribution payable
amount
08/15 to 03/16 2,18,76,667 54,69,167 3,55,496
4/16 to 03/17 6,59,80,000 1,64,95,000 10,72,175
Total 8,78,56,667 2,19,64,167 14,27,671
4. Since employer failed to produce required
document to SSOs to determine whether brokers are
coverable or not, I have no option left but to claim
contribution on 60% of the booked amount in the
balance sheet:-
Year Amount booked 60% of Booked Contribution on
Amount (A) omitted wages At
6.5%
08/15 to 03/16 17,29,62,920 10,37,77,752 67,45,554
4/16 to 03/17 27,43,71,257 16,46,22,754 1,07,00,479
Total 44,73,34,177 26,84,00,506 1,74,46,033
5. Since employer failed to produce required
document to SSOs to determine whether Surveyors
are coverable or not, I have no option left but to claim
contribution on the booked amount in the balance
sheet:-
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24-WP-3796-2024.DOCYear Amount booked Contribution Payable
08/15 to 03/16 2,41,64,460 15,70,690
04/16 to 03/17 2,82,33,582 18,35,183
Total 34,05,873I have applied my mind to all material and facts and
facts made available and arrived at the conclusion that
employer is liable to pay the following contribution.
i. Contribution of Revised Omitted Wages @6.5%
=2,20,754
ii 6.5% of Vouchers/Bills not produced =12,19,918
iii Contribution on leasehold improvements-14,27,671
iv Contribution payable of brokers= 1,74,46,033
v Contribution payable of Surveyors= 34,05,873
Total Amount Payable by the employer
=2,37,20,249/-.”
Thus, it is clear that the impugned order has been passed
mainly relying on the basis of the Interim Reports dated 2 nd June
2021 and 30th November 2021 submitted by the Social Security
Officer.
8. Mr. Talsania, learned Senior Counsel relied on the decision
of the Supreme Court in the case of T. Takano vs. Securities and
Exchange Board of India & Anr. 3 and more particularly, on
paragraph Nos. 49 and 50, which read as under:
“49. In Kothari Filaments v. Commr. of Customs
[Kothari Filaments v. Commr. of Customs, (2009) 23 (2022) 8 SCC 162
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24-WP-3796-2024.DOCSCC 192 : (2009) 1 SCC (Cri) 705] , this Court held
that the Commissioner of Customs in the exercise of
its quasi-judicial powers cannot pass an order on
the basis of material which is only known to the
authorities. This Court held : (SCC pp. 195-96,
paras 14-15)
“14. The statutory authorities under the Act
exercise quasi-judicial function. By reason of
the impugned order, the properties could be
confiscated, redemption fine and personal fine
could be imposed in the event an importer was
found guilty of violation of the provisions of
the Act. In the event a finding as regards
violation of the provisions of the Act is arrived
at, several steps resulting in civil or evil
consequences may be taken. The principles of
natural justice, therefore, were required to be
complied with.
15. The Act does not prohibit application of the
principles of natural justice. The Commissioner
of Customs either could not have passed the
order on the basis of the materials which were
known only to them, copies whereof were not
supplied or inspection thereto had not been
given. He, thus, could not have adverted to the
report of the overseas enquiries. A person
charged with misdeclaration is entitled to
know the ground on the basis whereof he
would be penalised. He may have an answer to
the charges or may not have. But there cannot
be any doubt whatsoever that in law he is
entitled to a proper hearing which would
include supply of the documents. Only on
knowing the contents of the documents, he
could furnish an effective reply.”
50. The following principles emerge from the above
discussion:
50.1. A quasi-judicial authority has a duty to
disclose the material that has been relied upon at
the stage of adjudication.
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50.2. An ipse dixit of the authority that it has not
relied on certain material would not exempt it of its
liability to disclose such material if it is relevant to
and has a nexus to the action that is taken by the
authority. In all reasonable probability, such
material would have influenced the decision
reached by the authority.
50.3.Thus, the actual test is whether the material
that is required to be disclosed is relevant for
purpose of adjudication. If it is, then the principles
of natural justice require its due disclosure.”
(Emphasis Supplied)
9. In the said decision of T. Takano (supra), the Supreme Court
has recorded following as one of the conclusion:
“62.3. The disclosure of material serves a threefold
purpose of decreasing the error in the verdict,
protecting the fairness of the proceedings, and
enhancing the transparency of the investigatory
bodies and judicial institutions.”
(Emphasis Supplied)
10. The factual position in this case is required to be examined
on the touchstone of the above legal position.
10.1 The Petitioner in paragraph No.18 of the Writ Petition has
specifically raised the contention that the copies of interim reports
submitted by the Social Security Officer have not been supplied to
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them. The said paragraph No.18 in the Writ Petition reads as
under:
“18. Thereafter, it appears that the Respondent No.1
appointed two Social Security Officers for perusal
and consideration of the documents submitted by
the Petitioner. The said Social Security Officers
appear to have prepared interim reports from time
to time, copies of which were never supplied to the
Petitioner. The Petitioner has learnt of the same due
to them having been referred in the Impugned
Order.”
10.2 In the affidavit-in-reply dated 3 rd May 2024 of Mr. Sameer
M. Dhuri, working as SSO with the Employees’ State Insurance
Corporation, the contention raised in paragraph No.18 is answered
in paragraph 5(n) as follows:
“n) With reference to para 18 of the petition, I say
that Deputy Director (Incharge) had appointed 2
Social Security Officers for verification of the
voluminous records on the request of A.O. so that
the process can be completed in due time and the
same may be intimated to Bombay HC. The interim
reports submitted by SSO’s are internal matters of
the office and does not concern with the employer.
However, the details of these interim reports are
provided in 45A order dated 29/12/2023.”
(Emphasis Supplied)
10.3 Thus, what is sought to be contended by the Respondent
No.1 in the said affidavit-in-reply that the said interim reports are
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internal matters of the office of the Employees’ State Insurance
Corporation and does not concern with the employer. It is further
stated that the details of these interim reports are provided in
Section 45A order dated 29th December 2023.
10.4 Thus, it is an admitted position that copies of said reports
submitted by the Social Security Officer were not supplied to the
Petitioner and say of the Petitioner was not called on these reports
before passing the impugned order.
10.5 As noted hereinabove, in the impugned order the said
reports of the Social Security Officer have been extensively relied
on and inter alia impugned order has been passed on the basis of
said reports.
Thus, it is very clear that the impugned order has been
passed without following the principles of natural justice.
11. In view of above finding that the impugned order passed
violates the principles of natural justice, it is required to be
examined whether the Writ Petition filed under Article 226 of the
Constitution of India is required to be entertained.
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12. The Supreme Court in the decision of Whirlpool Corporation
(supra) in paragraph Nos.14 and 15 has observed as follows:
“14. The power to issue prerogative writs under
Article 226 of the Constitution is plenary in nature
and is not limited by any other provision of the
Constitution. This power can be exercised by the
High Court not only for issuing writs in the nature
of habeas corpus, mandamus, prohibition, quo
warranto and certiorari for the enforcement of any
of the Fundamental Rights contained in Part III of
the Constitution but also for “any other purpose”.”
15.Under Article 226 of the Constitution, the High
Court, having regard to the facts of the case, has a
discretion to entertain or not to entertain a writ
petition. But the High Court has imposed upon itself
certain restrictions one of which is that if an
effective and efficacious remedy is available, the
High Court would not normally exercise its
jurisdiction. But the alternative remedy has been
consistently held by this Court not to operate as a
bar in at least three contingencies, namely, where
the writ petition has been filed for the enforcement
of any of the Fundamental Rights or where there
has been a violation of the principle of natural
justice or where the order or proceedings are wholly
without jurisdiction or the vires of an Act is
challenged. There is a plethora of case-law on this
point but to cut down this circle of forensic
whirlpool, we would rely on some old decisions of
the evolutionary era of the constitutional law as
they still hold the field.”
(Emphasis Supplied)
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Thus, Mr. Sudhir Talsania, learned Senior Counsel is right in
contending that as copies of said interim reports have not been
furnished to the Petitioner and Petitioner’s say has not been called
and as the impugned order has been passed on the basis of these
reports, there is violation of the principles of natural justice and
therefore, the Writ Petition can be entertained.
13. Mr. Shailesh Pathak, learned Counsel appearing for the
Respondents has relied on the decision of Supreme Court in
Greatship (India) Limited (supra) and more particularly on
paragraph Nos. 7 to 10. The said paragraphs read as under:
“7. Applying the law laid down by this court in the
aforesaid decision, the High Court has seriously
erred in entertaining the writ petition under article
226 of the Constitution of India against the
assessment order, bypassing the statutory remedies.
8. Now so far as the reliance placed upon the
decisions of this court by the learned senior
advocate appearing on behalf of the respondent,
referred to hereinabove, are concerned, the
question is not about the maintainability of the writ
petition under article 226 of the Constitution, but
the question is about the entertainability of the writ
petition against the order of assessment by-passing
the statutory remedy of appeal. There are serious
disputes on facts as to whether the assessment order
was passed on March 20, 2020 or July 14, 2020 (as
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24-WP-3796-2024.DOCshown by the assessee to by-pass the statutory
remedy of appeal. This court has consistently taken
the view that when there is an alternate remedy
available, judicial prudence demands that the court
refrains from exercising its jurisdiction under
constitutional provisions.
9. In view of the above and in the facts and
circumstances of the case, the High Court has
seriously erred in entertaining the writ petition
against the assessment order. The High Court ought
to have relegated the writ petitioner-assessee to
avail the statutory remedy of appeal and thereafter
to avail other remedies provided under the statute.
10. Under the circumstances, the impugned
judgment and order passed by the High Court is
hereby quashed and set aside. The writ petition
filed before the High Court challenging the
assessment order and consequential notice of
demand of tax is hereby dismissed. The respondent-
assessee is relegated to avail the statutory remedy
of appeal and other remedies available under the
MVAT Act and CST Act. It is directed that if such a
remedy is availed within a period of four weeks
from today, the appellate authority shall decide and
dispose of the same on its own merits in accordance
with law without raising any question of limitation,
however, subject to fulfilling the other conditions, if
any, under the statute. It is made clear that we have
not expressed any opinion on the merits of the case
in favour of either of the parties and it is for the
appellate authority and/or appropriate authority to
consider the appeal/proceedings on its/their own
merits and without being influenced in any way by
any of the observations made by the High Court
which otherwise have been set aside by the present
order. The present appeal is allowed in the aforesaid
terms. However, in the facts and circumstances of
the case, there shall be no order as to costs.”.
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(Emphasis Supplied)
Perusal of the said paragraphs shows that the Supreme Court
has held that as far as assessment orders, parties are required to be
relegated to the statutory remedies and that when there is an
alternate remedy available, judicial prudence demands that the
court refrains from exercising its jurisdiction under constitutional
provisions. The factual position as discussed in paragraph No.8 in
case of Greatship (India) Limited (supra) shows that there was
serious dispute on facts in that case. In that case, no valid reasons
have been shown by the assessee to bypass the statutory remedy of
Appeal.
14. In the present case, the impugned order itself is passed inter
alia on the basis of the said interim reports dated 2 nd June 2021
and 30th November 2021 submitted by the Social Security Officer.
The conclusions are arrived at in the impugned order by taking
into consideration the said interim reports. The factual position on
record shows that the said reports have been submitted during the
pendency of the matter before the Respondent No.2. Admittedly,
copies of the said reports have not been supplied to the Petitioner.
In the affidavit-in-reply which has been filed on behalf of the
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Respondents, contention is raised that the said interim reports are
internal matters of the office of the ESIC and they do not concern
with the employer i.e. the Petitioner. Thus, it is clear that the
impugned order has been passed inter alia by taking into
consideration the said interim reports, copies of which have not
been supplied to the Petitioner and Petitioner’s say has not been
called. Thus, it is clear that the principles of natural justice have
been clearly violated. In view of the factual position on record, the
decision in Greatship (India) Limited (supra) will not apply to the
present case. Thus, the Writ Petition can be entertained in view of
the law laid down by the Supreme Court in Whirlpool Corporation
(supra).
15. Accordingly, the Writ Petition is disposed of by passing the
following order:
ORDER
(a) The impugned order dated 29th December 2023/1st
January 2024 passed by the Respondent No.2 under
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24-WP-3796-2024.DOCaside and the matter is remitted to the Respondent
No.2 for fresh disposal.
(b) The Respondent No.2 to supply copies of the interim
reports dated 2nd June 2021 and 30th November 2021
of the Social Security Officer to the Petitioner and give
them opportunity to file their say with respect to these
interim reports.
(c) The Respondent No.2 to pass a fresh order after giving
opportunity of hearing to the Petitioner.
(d) The Petitioner to appear before the Respondent No.2
on 14th October 2024.
(e) The Respondent No.2 to decide the proceedings filed
under Section 45A of the ESI Act expeditiously by 31 st
December 2024.
(f) It is clarified that this Court has not considered the
merits and all contentions on merits are expressly kept
open.
16. The Writ Petition is disposed of in above terms with no order
as to costs.
[MADHAV J. JAMDAR, J.]
Digitally
signed by
SONALI
SONALI MILIND
MILIND PATIL
PATIL Date:
2024.09.28
17:32:41
+0530
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