IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 17TH DAY OF FEBRUARY, 2025 PRESENT THE HON'BLE MRS. JUSTICE ANU SIVARAMAN AND THE HON'BLE MR. JUSTICE VIJAYKUMAR A. PATIL MISCELLANEOUS FIRST APPEAL NO. 3716 OF 2017 (ESI) BETWEEN: THE JOINT REGIONAL DIRECTOR ESI CORPORATION No.10, BINNY FIELDS BINNYPET BENGALURU-23 ...APPELLANT (BY SRI. NARASIMHA SWAMY N.S., ADVOCATE) AND: M/s. CREATIVE DRESSES PVT. LTD. No.50 B1, 50 C1 BOMMASANDRA INDUSTRIAL AREA HOSUR ROAD BENGALURU-560 099 BY ITS MANAGING DIRECTOR MR. ABHISHEK AGARWAL …RESPONDENT (BY SRI. JOSEPH KANIKARAJ, ADVOCATE) THIS MFA IS FILED U/S 82(2) OF EMPLOYEES STATE INSURANCE ACT, 1948, AGAINST THE ORDER DATED 31.01.2017 PASSED IN ESI APPLICATION No.53/2011 ON THE FILE OF THE EMPLOYEES STATE INSURANCE COURT, BENGALURU, PARTLY ALLOWING THE APPLICATION FILED UNDER SECTION 75 OF THE ESI ACT, 1948. - 2 THIS APPEAL HAVING BEEN HEARD AND RESERVED FOR JUDGMENT ON 04.02.2025 AND COMING ON FOR PRONOUNCEMENT OF JUDGMENT THIS DAY, ANU SIVARAMAN J., PRONOUNCED THE FOLLOWING: CORAM: HON'BLE MRS. JUSTICE ANU SIVARAMAN and HON'BLE MR. JUSTICE VIJAYKUMAR A. PATIL CAV JUDGMENT (PER: HON'BLE MRS. JUSTICE ANU SIVARAMAN) This MFA is filed by the appellant - ESI assailing the order dated 31.01.2017 passed by the Employees State Insurance Court, Bengaluru in E.S.I. Application No.53/2011. 2. We have heard Shri. N.S. Narasimha Swamy, learned counsel appearing for the appellant and Shri. Joseph Kanikaraj, learned counsel appearing for the respondent. 3. Respondent - Establishment is a Company covered under the Employees State Insurance Act, 1948 ('ESI Act' for short) engaged in manufacturing of Dress Materials business. They have not paid the contribution from January 2007 to March 2009. The same was observed on verification of records on 13.08.2010, 07.09.2010 and 09.09.2010. A detailed inspection report along with the - 3 additional remarks was sent to regional office. Subsequently, appellant issued a show-cause notice dated 04.11.2010 to respondent, proposing to determine the contribution under Section 45-A of ESI Act. Respondents were given opportunity of personal hearing and called upon to produce the records and an order under Section 45-A of ESI Act was passed on 02.05.2011 assessing the contribution of Rs.29,18,281/-. The said order was challenged by the respondent. On 29.08.2011, appellant authority passed a detailed order and rejected the appeal. Respondent has approached the ESI Court and sought to set aside the order dated 31.01.2007, has partly allowed the said application, restoring the quantum of contribution due to Rs.50,000/- only. 4. The learned counsel appearing for the appellant submits that the contribution amount of Rs.29,18,281/- claimed for the period from 2006 to 2008 was regular contribution, in respect of the amount spent towards payment of wages of laborers. - 4 5. The respondent had been issued with a show- cause notice dated 04.11.2010. The respondent failed to utilize the opportunity to produce records and prove that the amount of Rs.3,84,58,357/- booked after the manufacturing process started w.e.f. 01.01.2007 was actually spent before the commencement of manufacturing process as contended by the respondent. Accordingly, contribution was worked out at Rs.24,99,794/-. He further contended that respondent spent a sum of Rs.77,72,171/- only towards material and labour charges. The nomenclature indicates both material and labour are involved, but the respondent failed to produce bifurcation figures of labour and material. Hence, 25% of the said expenditure was treated as labour charges and a sum of Rs.1,26,298/- was treated as contribution due. Contribution was claimed in the Labour element involved in the accounting heads "Furniture and Fixtures" and "Plant and Machinery" which was worked out at Rs.35,510/- plus Rs.8,619/-. - 5 6. Further, it is contended that as verified from the records of the respondent, a sum of Rs.3,48,68,207/- was spent by the respondent, before the commencement of the manufacturing process i.e., 01.01.2007. This amount being spent before the commencement of the manufacturing process, no contribution was determined or claimed. In the absence of production of relevant records by the respondent to dislodge the order under Section 45-A of the Act, the order needs to be upheld and recovery to be allowed. He further contends that the trial Court is not justified in not considering the evidence in proper perspective. The trial Court has not given any justification for reducing the claim of contribution from Rs.24,99,794/- to 50,000/-. The Trial Court order is arbitrary and not reliable on any of the provisions under the ESI Act. Therefore, by virtue of Section 45-A(2) of the ESI Act, the 45-A order dated 02.05.2011 and appellate order dated 29.08.2011 passed by the statutory authorities prevails. - 6 7. In support of his contention, he has relied on the following judgments:- (i) RDESIC v. South India Flour Mills(P) Ltd., reported in AIR 1986 SC 1686; (ii) ESIC v. Harrison Malayalam Pvt. Ltd., reported in (1993) 4 SCC 361; (iii) ESIC v. The Central Press and another reported in (1977) 2 SCC 581; and (iv) RDESIC v. P.R Packaging Company and Others reported in 2001 (2) KLLR 1026. 8. The learned counsel appearing for the respondent however submits that all the aspects raised by the appellant are appropriately considered by the ESI Court and that the findings recorded are perfectly legal and justified. It is further contended that an appeal under Section 82(2) of the ESI Act is maintainable only on a substantial question of law. It is submitted that as far as the present case is concerned all that is raised in the appeal are questions of facts and there is no question of law raised, much less a substantial question of law and therefore the appeal itself would not be - 7 maintainable. It is further submitted that it was in the peculiar facts and circumstances of the instant case that the determination has been made by the ESI Court and that there is absolutely no fault committed by the said Court. 9. We have considered the contentions advanced. We notice that the specific contentions raised by the parties have been considered by the ESI Court. The ESI Court specifically found that the manufacturing process started only on 01.01.2007. Each head of account on which contribution was claimed was specifically examined by the ESI Court with reference to the oral and documentary evidence adduced. After considering the statutory provisions and the binding precedents, the ESI Court held as follows:- "40. Therefore, considering the Section 2(22), Section 2(9), 2(12) & Section 2(14)(AA) of the Act, the applicant establishment does not come fall within the scope of ESI provisions protract the ESI coverage and not claim the contribution. As the factory was not manufacturing prior to 01.01.2007, the law mandates under the ESI provisions and Factories Act, that there should be manufacturing activities, preliminary or incidental to the establishment work. Hence, considering - 8 overall aspects of the case, I am of the view that the applicant is liable to pay the contribution but not as claimed by the ESI Corporation." 10. It is after considering the details of all the contributions actually paid by the respondent after the manufacturing process had started in January 2007 and verifying the details of the contributions claimed by the appellant that the ESI Court came to the conclusion that only an amount of Rs.50,000/- would be payable as contribution at best. 11. The powers of the ESI Court are provided in Section 75 of the ESI Act. The ESI Court, exercising jurisdiction under Section 75 of the ESI Act in a Court for all purposes since the jurisdiction of all other Courts stand ousted. The Court is well within its power to consider the facts and to fix the contribution payable. A finding as to the amount of contribution as determined by the ESI Court cannot be interfered in appeal in the absence of a substantial question of law being raised therein. - 9 12. From a plain reading of the question raised in the appeal, we find that no question of law much less, a substantial question of law has been raised in the appeal which would justify any interference by this Court in the order under appeal. 13. In the above circumstances, we are of the opinion that no grounds are made out for interference in the order of the ESI Court. The appeal fails, the same is accordingly dismissed. Sd/- (ANU SIVARAMAN) JUDGE Sd/- (VIJAYKUMAR A. PATIL) JUDGE cp*