1 IN THE HIGH COURT AT CALCUTTA CONSTITUTIONAL WRIT JURISDICTION APPELLATE SIDE BEFORE: THE HON’BLE JUSTICE SHAMPA DUTT (PAUL) WPA 14289 of 2012 Height Insurance Services Ltd. Vs. ESI Corporation & Ors. For the Petitioner :Mr. Partha Sarathi Sengupta, Adv. Mr. Arnab Chakraborty, Adv. Mr. Sukalyan Chakraborty, Adv. For the Respondent No. 1 to 4 : Mr. Subal Maitra, Adv. Mr. Arindam Maitra, Adv. Judgment reserved on : 17.08.2026 Judgment delivered on : 17.09.2026 SHAMPA DUTT (PAUL), J.:- 1. The present writ application has been preferred challenging an order dated 24.05.2012, along with the show cause notices dated 14.03.2012 issued by the respondent authorities. The petitioner’s case in short is that the petitioner is a Corporate Agent and holding a License issued by the IRDAI. By virtue of an agreement dated 23.09.2008 read with an Addendum Agreement dated 24.03.2009, entered into by and between the petitioner and one Golden Trust Financial Services, (GTFS). GTFS was engaged as 'Pure Agent' for providing certain facilitates, infrastructure and services through various branches and network channel (comprising of Independent Large number of Contingent Individual Self-Employed Business Procuring Persons - Re Definition of 2 "Network". Evidently, the petitioner had no control over such pan India 'Network' which is not even a pre-determined group since anybody can join the Network Channel or leave the same at their sweet will. The aforesaid agreement also clearly demonstrates that GTFS was performing on a non-exclusive basis and thus was working under similar or other arrangements with various other business enterprises as well as carried on its own business. Therefore, GTFS was providing such Network facilities to various other clients and the petitioner had no control, supervision and authority over the network. The agreement dated 23.09.2008 was for eight months. 2. On 19.03.2012, the petitioner was served with a Show Cause Notice dated 14.03.2012 under section 45A of the ESI Act, inter alia, proposing a recovery of Rs. 6,13,70,229.00. It appears from the Show Cause Notice that no particulars regarding the date of inspection or others were provided in the Show Cause Notice. It also appears that in a most mechanical manner 6.5% of the payment made to GTFS by the petitioner was proposed to be charged as a Contribution and Interests was also sought to be imposed. 3. On 11.05.2012 the petitioner duly replied to the Show Cause Notice and produced all challans, returns with the names of employees, contributions made against them and other particulars and contended that the payment made to GTFS was erroneously taken as the basis of calculation of contribution since GTFS was providing basic 3 infrastructures, i.e. Office Premises, Computer Equipment, Air Conditioners, furniture and fixture and all official stationeries and also other allied acts, deeds as required by the agency for performing its obligation as Pure Agent. Further, for performing its obligation as pure agent, GTFS was reimbursed with some amounts of incentive/ other expenses/service charges etc. paid by them to the said Network. It was categorically contended that such an expenditure cannot be treated as "wages" under the definition of ESI Act, 1948 and thus cannot be the basic of such Show Cause notice. 4. The petitioner states that it appears from the bare reading of the said impugned order dated 24.05.2012 that the said order does not contain any reasoning at all. In fact, apart from quoting the observations of the purported Inspection Report and some points from the representation of the petitioner, no reason whatsoever has been accorded and merely after quoting such points, it has been stated that "for the above reasons" the authority reached such conclusion. It transpires that in the Inspection Report, the operating expenses of Rs. 59,11,97,368.00 and the Service Charges of Rs. 35,29,60,000.00 has been taken as the basis for calculation of the contribution at an imaginary percentage of 6% which is devoid of any reason whatsoever. 5. The petitioner argues that the agreement itself shows that GTFS had a massive pre-existing network channel, which comprise approximately eight lac independent self-employed individuals, who help in lead 4 generation for business procurement. There exists no contract of employment, whether expressed or implied between the petitioner and the multitude of independent individuals forming the network channel of GTFS. The petitioner exercises absolutely no supervisory control whatsoever, disciplinary authority or administrative oversight over the personnel comprising the said network channel. As already indicated, the individual independent economic actors who join and leave the network channel at their own volition. They are not bound by any Master-Servant relationship which is a Sine-Qua-Non for the applicability of the ESI Act. GTFS itself is a distinct independent commercial establishment covered under the provisions of the ESI Act. It possesses its own separate ESI Code No. (ie. 41000228960001002) and it is independently responsible for maintaining statutory compliance and remitting contributions for its actual regular pay-roll employees who manage the infrastructure. It is also very important to point out that the agreement dated 23.09.2008 with GTFS was entered into for a period of eight months only, whereas by the impugned order, claim was made for the purported wage period of April, 2008 to March, 2009 which shows the non-application of mind. 6. Mr. Sengupta learned senior Counsel for the petitioner has relied upon an order dated 02.08.2012 passed in the present writ application, wherein the Court while admitting the writ application was pleased to pass an interim order, on observing as follows:- 5 “i) The Constitutional Writ Jurisdiction cannot be said to be totally excluded. ii) The impugned order does not discuss as to whether the persons were employees or not. iii) The manner in which the enquiry was made or materials revealed by such enquiry was not mentioned in the impugned order. iυ. Applicability of the Act on the persons who have received the sum as purported wages have not been disclosed or discussed in the order. υ. A lump sum amount paid to Respondent No.5 has been taken as the basis of the computing. vi. Prima facie flaw observed in the decision making process.” 7. The Court had, also, specifically observed that the various aspects regarding the materials based on which the Hearing Officer had came to the finding, has to be gone into by the Court. 8. The respondents herein have challenged the maintainability of the writ application on the ground that the impugned order is an appealable order under Section 45AA and Section 75 of the ESI Act. The respondent relied upon the following judgments:- i) Commissioner of Income Tax v. Chhabil Das Agarwal reported in (2014) 1 SCC 603. 6 ii) Titagarh Paper Mills Co. Ltd. v. State of Orissa (1983) 2 SCC 433. iii) Mahesh Kumar Golani & Anr. v. Calcutta Municipal Corporation & Ors. 1992 (2) CLJ 21. 9. This Court is of the view that as the Bench which initially admitted the writ application admitted the same on specific findings as to why the same is maintainable, this court accepts the said findings as to the maintainability of the writ application. The said order admitting the writ application was never challenged by the respondents and as such they cannot agitate the issue at this stage. 10. The petitioner argues that in a proceeding under Section 45A of the ESI Act, mere inadequacy of records produced by the employer, does not allow the authorities to decide against the establishment. Relying upon the judgment of the Hon’ble Supreme Court in Carborandum Universal Limited v. ESIC Corporation reported in 2025 SCC Online SC 2864, the petitioner submits that the Court clarified that in such cases the proper remedy lies in section 75. Therefore, the ESIC was obligated to initiate a dispute before the Employees Insurance Court under Section 75(2)(A) and not apply the provision of Section 45A. 11. The petitioner further relies upon the judgments of the Hon’ble Supreme Court in:- (i) Whirlpool Corporation v. Registrar of Trade Marks (1998) 8 SCC 1, 7 (ii) M.G. Abrol, Additional Collector of Customs Vs Shantilal Chhotelal & Co. AIR 1966 SC 197, (iii) Sovachand Mulchand Vs Collector of Central Excise; AIR 1968 CAL 174, (iv) Ram & Shyam Company v. State of Haryana (1985) 3 SCC 267, (v) CESC Ltd. v. Subhash Chandra Bose (1992) 1 SCC 441, (vi) M/s. Silver Jubilee Tailoring House v. Chief Inspector of Shops & Establishments, AIR 1974 SC 37, (vii) ESIC v. Premier Clay Products (1994) Supp (3) SCC 567, (viii) Managing Director, Hassan Cooperative Vs Asst. Regional Director, (2010) 11 SCC 537, [Para 1, 4 to 7, 11 to 19, 24, 25, 27 to 34). 12. The petitioner has relied upon the following judgments on the ground that the order is to be a reasoned order ((i) Mohindhr Singh Gill & Anr. v. Chief Election Commissioner reported in (1978) 1 SCC 405. (ii) Commissioner of Police Bombay v. Gordhandas Bhanji reported in 1951 SCC Online SC 70). 13. The respondent nos. 1 to 3 have filed their written notes and argue that, order under Section 45A is an well reasoned order and further submits that the determination of contribution have been made only with regard to the arrear contribution dues on account of omitted wages (i.e. contribution on wages payable but not paid) towards "Service Charges" 8 and "Operating Expenses". In this regard, provisions of Section 2(22) of the E.S.I. Act, 1948, is to be read with the provisions of Section 2(9) of the said Act. Section 2(22) provides inter alia that "Wages means all remuneration paid or payable in cash to every employee". 14. Section 2(9) provides inter alia that "employee means every person employed for wages in or in connection with the work of a factory or establishment to which this Act applies and includes any person employed for wages on any work connected with the administration of the factory or establishment, or any part, department or branch thereof, or with the purchase of raw materials, or the distribution or sale of the products of the factory or establishment". Now, matter nos. (iii) and (iv) of Section 97(1) of the E.S.I. Act, 1948, have the effect, as if the same have been enacted in E.S.I. Act, (vide section 97(3) of the said Act). 15. The respondent has relied upon the following judgments:- (i) Commissioner of Income Tax & Ors. v. Chhabil Dass Agarwal reported in (2014) 1 SCC 603. (ii) Royal Talkies, Hyderabad and Ors. v. Employees State Insurance Corporation through its regional Director, Hill Fort Road, Hyderabad, AIR 1978 SC 1478. 16. Parties have exchanged affidavits in the present case and Mr. Mitra appearing for the ESI has relied upon the judgment of the Hon’ble Supreme Court in:- 9 (i) Employees State Insurance Corporation v. M/s. Harrison Malayalam Pvt. Ltd. & Ors. (Civil Appeal No. 1133 of 1990 dt. 30.08.1993). (ii) Indrapuri Studio Pvt. Ltd. v. Employees State Insurance Corporation reported in AIR 1961 Cal 381. (iii) Calcutta Electric Supply Corporation (India) Ltd. vs Employees’ State Insurance & Ors., 1987(1) CHN 208. 17. On careful consideration of the impugned order dated 24,05,2012, it appears that the authority has noted the points as raised in the representation along with relevant documents submitted by the petitioner. 18. Next the authority has also set out the terms of the agreement between the petitioner and Golden Trust Financial Services. 19. Finally the authority’s finding is as follows:- “……………Now from the foregoings, it is evident and clear that M/s. Golden Trust Financial Services acted as a sub- agent of the Direct agent of M/s. Reliance life Insurance Co. Ltd.; simultaneously its infrastructure, even employees, were put to prosper/flourish the insurance business of the Agency Co./Direct agent. As such, this Pure Agent may be termed here as the Immediate Employer under the Agency Co. and its employees, working for and on behalf of the Agency Co., as the contract employees, u/S. 2(13) & 2(9) respectively of the ESI Act, 1948, as amended. Hence, the Service Charges reimbursed to the above Pure Agent construed Wages u/S. 10 2(22) of the ESI Act to attract contribution u/S. 2(4) of the said Act. But while determining arrears of contribution on adhoc basis, I have kept in mind the question of profit margin of the Pure Agent, cost of its infrastructure, e.g. computers, office furniture, office premises, its wear & tear, cost towards its repairs & maintenance, depreciation, electricity, water & other charges, taxes and also other overhead/statutory expenditure. As such, I am of the opinion of considering 35% of the total bill amount excluding Service Tax, Education Cess and Higher Education Cess, as wages, to determine arrears of contribution @ 6.5% thereon, which are worked out to .[(35,29,60,000 - (3,00,00,000+6,00,000+3,00,000)- (20,00,000+40,000 +20,000) x 35% x 6.5%] or, Rs. 72,80,000. Besides, so far as the payment of Operating Expenses (Incentive) is concerned, it is observed that the same had initially been paid to the Network (meant an independent large contingent of business procuring persons) by the Pure Agent for and on behalf of the Agency Co. as was subsequently reimbursed by the Agency Co. The employer (here the Agency Co.) did not, however, produce any evidences for detailing of the payments made, i.e, names and status of persons to whom such incentives had been paid, total monthly income of each of those persons through incentive and other sources, places of posting/field of work in respect of those persons, etc. as to decide their coverability u/S. 2(9) of the ESI Act. The employer did not even bother to divulge that the Pure Agent had independent ESI Code No. and also their position of compliance during the period under this Show 11 Cause Notice. As such, I have no alternative but to determine arrears of contribution considering 60% of the total bill amount as wages, giving relief to the balance amount towards profit margin of the Immediate Employer and their other overhead and statutory expenditure, which are worked out to (59,11,368 x 60% x 6.5%) or, Rs. 2,30,56,697.35. Thus, total arrears of contribution are determined for Rs.3,03,36,698/-, as rounded off, which is fair, reasonable and according to law.” 20. Admittedly the petitioner was availing the services of M/s. Golden Trust Financial Services for its business, whose employees were engaged in the work of the petitioner, who even bought the statutory for the said agent M/s. Golden Trust Financial Services. The agreement between the parties is a contract for services to be provided as required. 21. The findings of the authority in the impugned order appears to be a well reasoned order, as set out earlier herein (relevant extract). 22. The findings as follows is the deciding issue herein:- “…………..it is evident and clear that M/s. Golden Trust Financial Services acted as a sub-agent of the Direct agent of M/s. Reliance life Insurance Co. Ltd.; simultaneously its infrastructure, even employees, were put to prosper/flourish the insurance business of the Agency Co./Direct agent. As such, this Pure Agent may be termed here as the Immediate Employer under the Agency Co. and its employees, working for and on behalf of the Agency Co., as the contract employees, 12 u/S. 2(13) & 2(9) respectively of the ESI Act, 1948, as amended.……” 23. The case herein is under the ESI Act, 1948, wherein:- “Section 2(9) defines:- (9)“employee” means any person employed for wages in or in connection with the work of a factory or establishment to which this Act applies and- (i) who is directly employed by the principal employer, on any work of, or incidental or preliminary to or connected with the work of, the factory or establishment, whether such work is done by the employee in the factory or establishment or elsewhere; or (ii) who is employed by or through an immediate employer, on the premises of the factory or establishment or under the supervision of the principal employer or his agent on work which is ordinarily part of the work of the factory or establishment or which is preliminary to the work carried on in or incidental to the purpose of the factory or establishment;” 24. Section 2(13) of the Act defines “immediate employer”:- “Section 2. ……………. (13)“immediate employer”, in relation to employees employed by or through him, means a person who has undertaken the execution, on the premises of a factory or an establishment to which this Act applies or under the supervision of the principal employer or his agent, of the whole or any part of any work which is ordinarily part of the work of the factory or establishment of the principal employer or is preliminary to the work carried 13 on in, or incidental to the purpose of, any such factory or establishment, and includes a person by whom the services of an employee who has entered into a contract of service with him are temporarily lent or let on hire to the principal employer [and includes a contractor];” 25. Herein the Golden Trust Financial Services is prima facie the immediate employer of its employees. 26. Section 2(17) of the ESI Act defines “principal employer”:- “Section 2 ………………… (17) “principal employer” means- (i) in a factory, the owner or occupier of the factory and includes the managing agent of such owner or occupier, the legal representative of a deceased owner or occupier, and where a person has been named as the manager of the factory under [the Factories Act, 1948 (63 of 1948)], the person so named; (ii)in any establishment under the control of any department of any Government in India, the authority appointed by such Government in this behalf or where no authority is so appointed, the head of the Department; (iii)in any other establishment, any person responsible for the supervision and control of the establishment;” 27. There being no definition of “employer” under the ESI Act, the principal employer is the petitioner herein and is thus liable under the Act where the circumstances and arrangement is such, and there is nothing to stop the authorities who can proceed against the “principal employer” in such cases, without proceeding against the immediate employer and in doing so, there is no irregularity in such proceedings and action. 14 28. Under the ESI Act, an authority may proceed against either the principal employer or the immediate employer, where an employee is employed through an immediate employer, under the supervision of the principal employer or his agent ……. Section 2(9)(ii) of the Act, and in such cases the authority is clearly within it’s power to proceed against the principal employer as in the present case and there being no irregularity in the impugned reasoned order and the same being in accordance with law, requires no interference. 29. WPA 14289 of 2012 is thus dismissed. 30. Applications, if any, connected thereto stand disposed of consequently. 31. Interim order, if any, stands vacated. 32. Photostat certified copy of this Judgment, if applied for, be given to the parties on priority basis upon compliance of all formalities. (Shampa Dutt (Paul), J.) Later Petitioner prays for stay of the judgment, which is refused. (Shampa Dutt (Paul), J.)