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Hindustan Insecticides Ltd. Vs. T.M. Jaleel and ors. - Court Judgment

LegalCrystal Citation
SubjectLabour and Industrial
CourtKerala High Court
Decided On
Judge
Reported in(1985)ILLJ176Ker
AppellantHindustan Insecticides Ltd.
RespondentT.M. Jaleel and ors.
Excerpt:
- - (1) a principal employer, who has paid contribution in respect of an employee employed by or through an immediate employer, shall be entitled to recover the amount of the contribution so paid (that is to say, the employee's contribution as well as employer's contribution, if any), from the immediate employer, either by deduction from any amount payable to him by the principal employer under any contract, or as a debt payable by the immediate employer. the appellant's case is that the corporation, having initiated proceedings for the recovery of the amounts, which represented the accumulated arrears of contribution on account of the failure by the principal employer to pay the contribution in terms of sub-section (2) of section 42 of the act, the appellant (principal employer) had..........as follows:41. recovery of contribution from immediate employer. (1) a principal employer, who has paid contribution in respect of an employee employed by or through an immediate employer, shall be entitled to recover the amount of the contribution so paid (that is to say, the employee's contribution as well as employer's contribution, if any), from the immediate employer, either by deduction from any amount payable to him by the principal employer under any contract, or as a debt payable by the immediate employer.(2) in the case referred to in sub-section (1), the immediate employer shall be entitled to recover the employee's contribution from the employee employed by or through him by deduction from wages and not otherwise, subject to the conditions specified in the proviso.....
Judgment:

K. Bhaskaran, Ag. C.J.

1. We find a merit in these two appeals.

2. M.F.A. No. 33 of 1984 and M.F.A. No. 34 of 1984 are directed respectively, against the orders in E.I.C. No. 82 of 1982 and E.I.C. No. 83 of 1982 on the file of the Employees' Insurance Court, Alleppey. In both the appeals the appellant is the Hindustan Insecticides Ltd., hereinafter referred to for the sake of convenience as the principal employer'. The 1st respondent in each case is a contractor to whom loading and transport work under the appellant has been entrusted; and for the sake of convenience they would, hereinafter, be referred to as 'immediate employers'.

3. The contribution under the Employees' Insurance Act (the Act) due in respect of the employees employed under the immediate employers to the Employees' Insurance Corporation (the corporation) had not been deducted by the principal employer from the wages of the employees in question or for that matter from the bills of the immediate employers. It would appear that sometime in 1975 the Inspector of the Corporation detected that employees employed under the immediate employers had not been registered under the provisions of the Act and that the contribution due in respect of them had not been paid to the corporation. After some correspondence between the principal employer and the corporation the employees under the immediate employers were registered towards the end of 1975 or thereabout and for the period from 1st March, 1976 the immediate employers had been paying the contribution in respect of them (the employees employed by the immediate employers). Later the Inspector of the Corporation made a further detection that those employees were in the employment of the immediate employers for the period from 1965 to 1975 and that for that period also the contribution was due in respect of them. Accordingly, the 2nd respondent-the Regional Director of the Corporation, issued notice requiring the immediate employers to pay a sum of Rs. 5,107-32 and Rs. 4,084/- respectively by way of arrears of contribution for the period prior to 1st March, 1976 during which time those employees were not covered. The principal employer having paid those amounts to the corporation, sought to recover those amounts by bill adjustments from the immediate employers; and this gave rise to a dispute between the parties which was referred for adjudication to the E.S.I. Court, Alleppey, under Section 75G of the Act. The E.S.I. Court by its order dated 28th September, 1983 directed the principal employer-the 2nd respondent before that Court to pay to the immediate employers (petitioners before that Court) the amount deducted from their bills by way of recovery of the amounts paid towards the arrears of contribution paid by the principal employer in respect of the employees employed by the immediate employers who were not registered prior to 1 st March, 1976. It is aggrieved by this decision of the E.S.I. Court that these appeals have been preferred by the principal employer.

4. The counsel for the appellant submitted that the Insurance Court was in error in not having con- ; sidered the relevant provisions of the Act in the true perspective. There being no dispute on questions of fact, all that he urged before us was that neither in terms of the provisions of the Act, nor in terms of the agreement Ex.O-I4, with particular reference to Clause 21 thereof, entered into by and between the principal employer on the one hand, and the immediate employers on the other there can be any legal liability on the part of the principal employer to pay the contribution due from the employees employed by the immediate employers; and, in that view, by the operation ofSub-section (1) of Section 41 of the Act, the appellant was entitled to recover the amounts paid towards the liability of the immediate employers.

5. It was the attempt of the principal-employer to recover an amount equal to what was paid by it to the Corporation towards the arrears of contribution in respect of the employees employed by the immediate employers by bill adjustments from the immediate employers, that raised the dispute between the E.S.I. Court.

6. At the outset it has to be remembered that the attempt of the appellant was to recover an amount equal to what was paid by the appellant company to the Insurance Corporation for a period of about 10 years, when the Insurance Corporation initiated action for having kept the contribution in arrears. The question essentially is whether the principal employer who paid the arrears of contribution due in respect of the employees employed by or through the immediate employer was entitled to recover from the immediate employer such amounts as was equal to what had been paid by way of arrears of contribution, on the facts and in the circumstances of the case. It is to the principal employer that the corporation looks up primarily for realisation of contribution due to it, both in respect of the employer and the employee; but such contribution in respect of employees employed by or under the immediate employer paid by the principal employer could be recovered by him from the immediate employer. In this context, it would be worthwhile to notice the relevant features of the scheme of the Act. Chapter IV of the Act beginning with Section 38 deals with the contribution;. Section 38 provides:

All employees to be insured: - Subject to the provisions of the Act, all the employees in factories or establishments to which this Act applies shall be insured in the manner provided by this Act.

Section 39 states:

Contributions: (1) The Contribution payable under this Act in respect of an employee shall comprise contribution payable by the employer (Hereinafter referred to as the employer's contribution) and contribution payable by the employee (hereinafter referred to as the employee's contribution) and shall be paid to the Corporation

(4) The contributions payable in respect of each week shall ordinarily fall due on the last day of the week, and where an employee is employed for part of the week, or is employed under two or more employers during the same week, the contributions shall fall due on such days as may be specified in the regulations.'

Under Section 40 of the Act, it is the principal employer who is to pay contributions in the first instance.Sub-section (1) of that Section lays down:

The principal employer shall pay in respect of every employee, whether directly employed by him or by or through an immediate employer, both the employer's contribution and the employee's contribution.

Sub-section (2) reads as follows:

Notwithstanding anything contained in any other enactment but subject to the provisions of this Act and the regulations, if any, made thereunder, the principal employer shall, in the case of an employee directly employed by him (not being an exempted employee), be entitled to recover from the employee the employee's contribution by deduction from his wages and not otherwise:Provided that no such deduction shall be made from any wages other than such as relate to the period or part of the period in respect of which the contribution is payable, or in excess of the sum representing the employee's : contribution for the period.

Section 41 of the Act states as follows:

41. Recovery of contribution from immediate employer. (1) A principal employer, who has paid contribution in respect of an employee employed by or through an immediate employer, shall be entitled to recover the amount of the contribution so paid (that is to say, the employee's contribution as well as employer's contribution, if any), from the immediate employer, either by deduction from any amount payable to him by the principal employer under any contract, or as a debt payable by the immediate employer.

(2) In the case referred to in Sub-section (1), the immediate employer shall be entitled to recover the employee's contribution from the employee employed by or through him by deduction from wages and not otherwise, subject to the conditions specified in the proviso toSub-section (1) of Section 40.

Sub-section (2) of Section 42 reads:

Contribution (both the employer's contribution and the employee's contribution) shall be payable by the principal employer of each week in respect of the whole or part of which wages are payable to the employee and otherwise.

7. On a careful reading of these provisions and other relevant provisions in the Act and the scheme thereunder, it is clear to us that what is permitted to be recovered by the principal employer from the immediate employers, is the contribution paid by the principal employer in accordance with Sub-section (2) of Section 42 of the Act. No doubt, it is an undisputed fact in this case that a sum of Rs. 5107.32 and Rs. 4084/- respectively, had been paid by the principal employer towards the arrears of contribution due in respect of the employees employed by or through the immediate employers, for the period extending from 1965 to 1975, but there remains the question whether the principal employer, in law, is entitled to recover those amounts from the immediate employers by resort tos.41(1) of the Act. We have to notice that what is made recoverable by the principal employer is the sum equal to the contribution paid by him in terms of Section 42(2) of the Act. In other words, on a harmonious consideration and construction of the provisions contained in Sections 41 and 42 of the Act, would lead one to the irresistible conclusion that no other amounts, except those amounts which were paid by the principal employer, strictly in accordance witn the provisions of Sub-section (2)of Section 42 of the Act, could be recovered by the principal employer from the immediate employers. In this case, the appellant - principal employer has no case that what is sought to be recovered is the sum equal to the contribution, paid in accordance with Sub-section (2) of Section 42 of the Act. The appellant's case is that the corporation, having initiated proceedings for the recovery of the amounts, which represented the accumulated arrears of contribution on account of the failure by the principal employer to pay the contribution in terms of Sub-section (2) of Section 42 of the Act, the appellant (principal employer) had to pay it, and that being a liability that was discharged by the appellant (principal employer) on behalf of the immediate employers, the appellant was entitled to recover those amounts under Section41(1) of the Act. The fallacy in this stand taken by the appellant is obvious. The relevant provisions of the Act relied on by the appellant, in our view, are not intended to be used for settling all claims and counter-claims between the principal employer and the immediate employers. Under the scheme of the Act, these provisions enable the principal employer to recover only the amounts paid towards contribution in accordance with the provisions of Sub-section (2) of Section 42 of the Act. The expression 'who has paid contribution in respect of an employee employed by or through an immediate employer', appearing at the beginning ofSub-section (1) of Section 41 of the Act, has to be read and understood as meaning that who has paid contribution in respect of an employee employed by or through an immediate employer, in accordance with the provisions contained in Sub-section (2) of Section 42 of the Act, shall be entitled to recover the amount of the contribution so paid. To understand the rationale behind this, the proviso to Sub-section (2) of Section 40 would be of some assistance. It provides that no deduction under Sub-section (2) of Section 40 shall be made from any wages other than such as relate to the period or part of the period in respect of which the contribution is payable, or in excess of the sum representing the employees' contribution for the period. In case the contribution was paid in respect of the employees concerned in accordance with the provisions contained in Sub-section (2) of Section 42 of the Act, it would be open to the immediate employer to deduct the employees' contribution from their wages, which related to the period with respect to which the contribution was made.

8. The counsel for the appellant then drew our attention to Section 45A of the Act which reads:

Determination of contribution in certain cases. (1) Where in respect of a factory or establishment no returns, particulars, registers or records are submitted, furnished or maintained in accordance with the provisions of Section 44 or any Inspector or other official of the Corporation referred to in Sub-section (2) of Section 45 is obstructed by the principal or immediate employer or any other person, in exercising his functions or discharging his duties under Section 45, the Corporation may, on the basis of information available to it, by order determine the amount of contributions payable in respect of the employees of that factory or establishment.

(2) An order made by the corporation under Sub-section (1) shall be sufficient proof of the claims of the Corporation under Section 75 or for recovery of the amount determined by such order as an arrear of land revenue under Section 45A.

We do not understand the provision quoted above as one laying down that the amount equal to the accumulated arrears of contribution paid by the principal employer could be recovered from the immediate employers underS.41(1) of the Act. In substance, the purpose sought to be achieved by Sub-section (1) of Section 45A is to clothe the Corporation with the authority to determine on a best judgment or ad hoc basis the contribution to be paid by the principal employer or immediate employer in case where returns, particulars, registers or records are not made available to the Corporation or access to them is obstructed by the principal employer or the immediate employer. This, in our view, has no bearing to the right of the principal employer to recover the sum equal to the arrears of contribution paid by him in respect of the employees employed by or through the immediate employer.

9. In as much as Ext.C-I4 agreement specifically does not provide that any amount paid by the principal employer towards the arrears of contribution in respect of the employees employed, by or through, the immediate employers could be recovered by the principal employer from the immediate employers and this is not a payment made in accordance with the provisions contained in Section 42(2) of the Act and made recoverable by the principal employer underSub-section (1) of Section 41 of the Act or by the immediate employers under Sub-section (2) of Section 41 of the Act, the appellant had no right to make bill adjustments to recover the arrears of contribution paid from the immediate employers by resort to Section 41(1) of the Act. In that view, we find no merit in these appeals. Accordingly, we dismiss the appeals. There will be no order as to costs.


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