Chapter IV

Contributions

38. All employees to be insured

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

39. Contributions

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.
The contributions shall be paid at such rates as may be prescribed by the Central Government :

PROVIDED that the rates so prescribed shall not be more than the rates which were in force immediately before the commencement of the Employees’ State Insurance (Amendment) Act, 1989.
The wage period in relation to an employee shall be the unit in respect of which all contributions shall be payable under this Act.
The contributions payable in respect of each wage period shall ordinarily fall due on the last day of the wage period , and where an employee is employed for part of the wage period or is employed under two or more employers during the same wage period , the contributions shall fall due on such days as may be specified in the regulations.
1. If any contribution payable under this Act is not paid by the principal employer on the date on which such contribution has become due, he shall be liable to pay simple interest at the rate of twelve per cent per annum or at such higher rate as may be specified in the regulations till the date of its actual payment :
  
  PROVIDED that higher interest specified in the regulations shall not exceed the lending rate of interest charged by any scheduled bank.
2. Any interest recoverable under clause(a) may be recovered as an arrear of land revenue or under section 45C to section 45-I.
  
  Explanation : In this sub-section, “scheduled bank” means a bank for the time being included in the Second Schedule to the Reserve Bank of India Act, 1934 (2 of 1934).

Comments

Contribution which the management is liable to make under s. 39 has to be made by the management on its own accord for the fact that payment is not conditional on any demand by the ESI Corporation.– ESI Corporation v. Amalgamations Repco Ltd. 1983 (2) LLJ 193.

There can be the making of a demand for remitting contribution for a period that is prior to the date of insurance.– Bombay Ammonia v. ESI Corporation 1991 Lab. IC 1893.

40. Principal employer to pay contributions in the first instance

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.
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.
Notwithstanding any contract to the contrary, neither the principal employer nor the immediate employer shall be entitled to deduct the employer’s contribution from any wages payable to an employee or otherwise to recover it from him.
Any sum deducted by the principal employer from wages under this Act shall be deemed to have been entrusted to him by the employee for the purpose of paying the contribution in respect of which it was deducted.
The principal employer shall bear the expenses of remitting the contributions to the Corporation.

Comments

All the directors are excluded and even those directors who are designated as occupier, from the liability to be proceeded against in case there is some lapse exhibited by the company in respect of the remittances of the employer and employee’s share of contributions under the ESI Act.– ESI Corporation v. G.N. Mathur 1991 (63) FLR 115.

There can be the conviction of the person accused for the non-compliance of the submission of the contribution cards to the corporation under s. 85(a) of the Act.– ESI Corporation v. S.C. Sarkar 1986 (68) FJR 217.

41. Recovery of contribution from immediate employer

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 employer’s contribution as well as the employee’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.

(1A) The immediate employer shall maintain register of employees employed by or through him as provided in the regulations and submit the same to the principal employer before the settlement of any amount payable under sub-section
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 to sub-section (2) of section 40.

42. General provisions as to payment of contributions

No employee’s contribution shall be payable by or on behalf of an employee whose average daily wages during a wage period are below such wages as may be prescribed by the Central Government.

Explanation : The average daily wages of an employee shall be calculated in such manner as may be prescribed by the Central Government.
Contribution (both the employer’s contribution and the employee’s contribution) shall be payable by the principal employer for each wage period in respect of the whole or part of which wages are payable to the employee and not otherwise.

43. Method of payment of contribution

Subject to the provisions of this Act, the Corporation may make regulations for any matter relating or incidental to the payment and collection of contributions payable under this Act and without prejudice to the generality of the foregoing power such regulations may provide for–

The manner and time of payment of contributions
The payment of contributions by means of adhesive or other stamps affixed to or impressed upon books, cards or otherwise and regulating the manner, times and conditions in, at and under which, such stamps are to be affixed or impressed
The date by which evidence of contributions having been paid is to be received by the Corporation
The entry in or upon books or cards of particulars of contributions paid and benefits distributed in the case of the insured persons to whom such books or cards relate
The issue, sale custody, production, inspection and delivery of books or cards and the replacement of books or cards which have been lost, destroyed or defaced.

44. Employers to furnish returns and maintain registers in certain cases

Every principal and immediate employer shall submit to the Corporation or to such officer of the Corporation as it may direct such returns in such form and containing such particulars relating to persons employed by him or to any factory or establishment in respect of which he is the principal or immediate employer as may be specified in regulations made in this behalf
Where in respect of any factory or establishment the Corporation has reason to believe that a return should have been submitted under sub-section (1) but has not been so submitted, the Corporation may require any person in charge of the factory or establishment to furnish such particulars as it may consider necessary for the purpose of enabling the Corporation to decide whether the factory or establishment is a factory or establishment to which this Act applies.
Every principal and immediate employer shall maintain such registers or records in respect of his factory or establishment as may be required by regulations made in this behalf.

45. Inspectors, their functions and duties

The Corporation may appoint such persons as Inspectors, as it thinks fit, for the purposes of this Act, within such local limits as it may assign to them.
Any Inspector appointed by the Corporation under sub-section (1) (hereinafter referred to as Inspector), or other official of the Corporation authorized in this behalf by it may, for the purposes of enquiring into the correctness of any of the particulars stated in any return referred to in section 44 or for the purpose of ascertaining whether any of the provisions of this Act has been complied with–
1. Require any principal or immediate employer to furnish to him such information as he may consider necessary for the purposes of this Act; or
2. At any reasonable time enter any office, establishment, factory or other premises occupied by such principal or immediate employer and require any person found in charge thereof to produce to such Inspector or other official and allow him to examine such accounts, books and other documents relating to the employment of persons and payment of wages or to furnish to him such information as he may consider necessary; or
3. Examine, with respect to any matter relevant to the purposes aforesaid, the principal or immediate employer, his agent or servant, or any person found in such factory, establishment, office or other premises, or any person whom the said Inspector or other official has reasonable cause to believe to be or to have been an employee;
4. Make copies of, or take extracts from, any register, account book or other document maintained in such factory, establishment, office or other premises;
5. Exercise such other powers as may be prescribed.
An Inspector shall exercise such functions and perform such duties as may be authorized by the Corporation or as may be specified in the regulations.

Comments

Prevention of the contravention of the provisions of the Act falls within the duty of the Inspector, a power that this s. 45 confers and in case of infringement to take appropriate steps under the Act.– Vidya Sagar Kejriwal v. ESI Corporation 1991 (62) FLR 17.

45A. Determination of contributions in certain cases

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 prevented in any manner 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 :

PROVIDED that no such order shall be passed by the Corporation unless the principal or immediate employer or the person in charge of the factory or establishment has been given a reasonable opportunity of being heard.
An order made by the Corporation under sub-section (1) shall be sufficient proof of the claim of the Corporation under section 75 or for recovery of the amount determined by such order as an arrear of land revenue under section 45B or the recovery under section 45C to section 45-I .

COMMENTS

Section 45A gives the power to the Corporation so as to determine whether the employer is liable for contribution, similarly it is for the employer to raise that he does not have to pay any contribution and to make him taking the matter to the court.– Smith India Granite Corporation v. ESI Corporation 1986 (1) LLN 588.

In case there is a failure on the part of the employer to produce the records Corporation has got the power to make assessment under s. 45A, recovery of which can be made under s. 45B of the Act. But in those cases where the records are produced the assessment has to be done in accordance with s. 75(2)(a) of the Act.– R.S. Ganesh Das Dhomi Mal v. ESI Corporation 1988 (56) FLR 111.

Where there is an action to determine what is the contribution and for the recovery of the same, taken under s. 45A of the Act, there is no period of limitation prescribed under the Act.– Kirloskar Pneumatic Co. Ltd. v. ESI Corporation 1987 (1) LLN 906.

It is only optional for the Corporation to serve show cause notice before the proceedings under s. 45A are launched. Proceedings would not stand vitiated on account of absence of notice.– A.P. Handloom Weavers’ Co-operative Society Ltd. v. ESI Corporation 1988 (2) LLJ 515 .

45B. Recovery of contributions

Any contribution payable under this Act may be recovered as an arrear of land revenue.

45C. Issue of certificate to the Recovery Officer

Where any amount is in arrears under this Act, the authorized officer may issue, to the Recovery Officer, a certificate under his signature specifying the amount of arrears and the Recovery Officer, on receipt of such certificate, shall proceed to recover the amount specified therein from the factory or establishment or, as the case may be, the principal or immediate employer by one or more of the modes mentioned below–
1. Attachment and sale of the movable or immovable property of the factory or establishment or, as the case may be, the principal, or immediate employer;
2. Arrest of the employer and his detention in prison
3. Appointing a receiver for the management of the movable or immovable properties of the factory or establishment or, as the case may be, the employer:
  
  PROVIDED that the attachment and sale of any property under this section shall first be effected against the properties of the factory or establishment and where such attachment and sale is insufficient for recovering the whole of the amount of arrears specified in the certificate, the Recovery Officer may take such proceedings against the property of the employer for recovery of the whole or any part of such arrears.
The authorized officer may issue a certificate under sub-section (1) notwithstanding that proceedings for recovery of the arrears by any other mode have been taken.

45D. Recovery Officer to whom certificate is to be forwarded

The authorized officer may forward the certificate referred to in section 45C to the Recovery Officer within whose jurisdiction the employer–
1. Carries on his business or profession or within whose jurisdiction the principal place of his factory or establishment is situate; or
2. Resides or any movable or immovable property of the factory or establishment or the principal of immediate employer is situate.
Where a factory or an establishment or the principal or immediate employer has property within the jurisdiction of more than one Recovery Officers and the Recovery Officer to whom a certificate is sent by the authorized officer–
1. Is not able to recover the entire amount by the sale of the property, movable or immovable, within his jurisdiction; or
2. Is of the opinion that, for the purpose of expediting or securing the recovery of the whole or any part of the amount, it is necessary so to do,
  
  He may send the certificate or, where only a part of the amount is to be recovered, a copy of the certificate certified in the manner prescribed by the Central Government and specifying the amount to be recovered to the Recovery Officer within whose jurisdiction the factory or establishment or the principal or immediate employer has property or the employer resides, and thereupon that Recovery Officer shall also proceed to recover the amount due under this section as if the certificate or the copy thereof had been the certificate sent to him by the authorised officer.

45E. Validity of certificate and amendment thereof

When the authorized officer issues a certificate to a Recovery Officer under section 45C, it shall not be open to the factory or establishment or the principal or immediate employer to dispute before the Recovery Officer the correctness of the amount, and no objection to the certificate on any other ground shall also be entertained by the Recovery Officer.
Notwithstanding the issue of a certificate to a Recovery Officer, the authorized officer shall have power to withdraw the certificate or correct any clerical or arithmetical mistake in the certificate by sending an intimation to the Recovery Officer.
The authorized officer shall intimate to the Recovery Officer any orders withdrawing or cancelling a certificate or any correction made by him under sub-section (2) or any amendment made under sub-section (4) of section 45F.</p.

45F. Stay of proceedings under certificate and amendment or withdrawal thereof

Notwithstanding that a certificate has been issued to the Recovery Officer for the recovery of any amount, the authorized officer may grant time, for the payment of the amount, and thereupon the Recovery Officer shall stay the proceedings until the expiry of the time so granted.
Where a certificate for the recovery of amount has been issued, the authorized officer shall keep the Recovery Officer informed of any amount paid or time granted for payment, subsequent to the issue of such certificate.
Where the order giving rise to a demand of amount for which a certificate for recovery has been issued has been modified in appeal or other proceedings under this Act, and, as a consequence thereof, the demand is reduced but the order is the subject-matter of a further proceeding under this Act, the authorized officer shall stay the recovery of such part of the amount of the certificate as pertains to the said reduction for the period for which the appeal or other proceeding remains pending.
Where a certificate for the recovery of amount has been issued and subsequently the amount of the outstanding demand is reduced as a result of an appeal or other proceeding under this Act, the authorized officer shall, when the order which was the subject-matter of such appeal or other proceeding has become final and conclusive, amend the certificate or withdraw it, as the case may be.

45G. Other modes of recovery

Notwithstanding the issue of a certificate to the Recovery Officer under section 45C, the Director General or any other officer authorized by the Corporation may recover the amount by any one or more of the modes provided in this section.
If any amount is due from any person to any factory or establishment or, as the case may be, the principal or immediate employer who is in arrears, the Director General or any other officer authorized by the Corporation in this behalf may require such person to deduct from the said amount the arrears due from such factory or establishment or, as the case may be, the principal or immediate employer under this Act and such person shall comply with any such requisition and shall pay the sum so deducted to the credit of the Corporation:

PROVIDED that nothing in this sub-section shall apply to any part of the amount exempt from attachment in execution of a decree of a civil court under section 60 of the Code of Civil Procedure, 1908.
1. The Director General or any other officer authorized by the Corporation in this behalf may, at any time or from time to time, by notice in writing, require any person from whom money is due or may become due to the factory or establishment or, as the case may be, the principal or immediate employer or any person who holds or may subsequently hold money for or on account of the factory or establishment or, as the case may be, the principal or immediate employer, to pay to the Director General either forthwith upon the money becoming due or being held or at or within the time specified in the notice (not being before the money becomes due or is held) so much of the money as is sufficient to pay the amount due from the factory or establishment or, as the case may be, the principal or immediate employer in respect of arrears or the whole of the money when it is equal to or less than that amount.
2. A notice under this sub-section may be issued to any person who holds or may subsequently hold any money for or on account of the principal or immediate employer jointly with any other person and for the purposes of this sub-section, the shares of the joint-holders in such account shall be presumed, until the contrary is proved, to be equal.
3. A copy of the notice shall be forwarded to the principal or immediate employer at his last address known to the Director General or, as the case may be, the officer so authorized and in the case of a joint account to all the joint-holders at their last addresses known to the Director General or the officer so authorized.
4. Save as otherwise provided in this sub-section, every person to whom a notice is issued under this sub-section shall be bound to comply with such notice, and, in particular, where any such notice is issued to a post office, bank or an insurer, it shall not be necessary for any pass book, deposit receipt, policy or any other document to be produced for the purpose of any entry, endorsement or the like being made before payment is made notwithstanding any rule, practice or requirement to the contrary.
5. Any claim respecting any property in relation to which a notice under this sub-section has been issued arising after the date of the notice shall be void as against any demand contained in the notice.
6. Where a person to whom a notice under this sub-section is sent objects to it by a statement on oath that the sum demanded or any part thereof is not due to the principal or immediate employer or that he does not hold any money for or on account of the principal or immediate employer, then, nothing contained in this sub-section shall be deemed to require such person to pay any such sum or part thereof, as the case may be, but if it is discovered that such statement was false in any material particular, such person shall be personally liable to the Director General or the officer so authorized to the extent of his own liability to the principal or immediate employer on the date of the notice, or to the extent of the principal or immediate employer’s liability for any sum due under this Act, whichever is less.
7. The Director General or the officer so authorized may, at any time or from time to time, amend or revoke any notice issued under this sub-section or extend the time for making any payment in pursuance of such notice.
8. The Director General or the officer so authorized shall grant a receipt for any amount paid in compliance with a notice issued under this sub-section and the person so paying shall be fully discharged from his liability to the principal or immediate employer to the extent of the amount so paid.
9. Any person discharging any liability to the principal or immediate employer after the receipt of a notice under this sub-section shall be personally liable to the Director General or the officer so authorized to the extent of his own liability to the principal or immediate employer so discharged or to the extent of the principal or immediate employer’s liability for any sum due under this Act, whichever is less.
10. If the person to whom a notice under this sub-section is sent fails to make payment in pursuance thereof to the Director General or the officer so authorized, he shall be deemed to be a principal or immediate employer in default in respect of the amount specified in the notice and further proceedings may be taken against him for the realisation of the amount as if it were an arrear due from him, in the manner provided in sections 45C to 45F and the notice shall have the same effect is an attachment of a debt by the Recovery Officer in exercise of his powers under section 45C.
The Director General or the officer authorized by the Corporation in this behalf may apply to the court in whose custody there is money belonging to the principal or immediate employer for payment to him of the entire amount of such money, or if it is more than the amount due, an amount sufficient to discharge the amount due.
The Director General or any officer of the Corporation may, if so authorized by the Central Government by general or special order, recover any arrears of amount due from a factory or an establishment or, as the case may be, from the principal or immediate employer by distraint and sale of its or his movable property in the manner laid down in the Third Schedule to the Income-tax Act, 1961.

45H. Application of certain provisions of the Income Tax Act

The provisions of the Second and the Third Schedules to the Income Tax Act, 1961 and the Income Tax (Certificate Proceedings) Rules, 1962, as in force from time to time, shall apply with necessary modifications as if the said provisions and the rules referred to the arrears of the amount of contributions, interests or damages under this Act instead of to the income-tax:

PROVIDED that any reference in the said provisions and the rules to the “assessee” shall be construed as a reference to a factory or an establishment or the principal or immediate employer under this Act.

45I. Definitions

For the purposes of sections 45C to 45H :

“Authorized officer” means the Director General, Insurance Commissioner, Joint Insurance Commissioner, Regional Director or such other officer as may be authorized by the Central Government, by notification in the Official Gazette;
“Recovery officer” means any officer of the Central Government, State Government or the Corporation, who may be authorized by the Central Government, by notification in the Official Gazette, to exercise the powers of a recovery officer under this Act.