Confused About ESI Act Recovery: Why Are We Asked to Pay for Our Security Agency's Default?

Hi All, I need a suggestion from all of you on the ESI Act recovery matter. We have a cement manufacturing company located near Silchar (Assam), about 300 km from Guwahati. In our factory, we have an agreement with a security agency that supplies security services to our work at Silchar. The head office of that security agency is located in Guwahati. We have received a letter from the ESI authority stating that the security agency is a defaulter in respect of ESI contributions for their respective employees and directing us to deposit the amount as the principal employer. We have stopped their monthly bill and sent a letter to the security agency to clear the outstanding amount with the ESI authority. In this area, ESI is applicable due to the non-availability of an ESI dispensary. So, why has the ESI authority directed us to deposit the amount? Kindly help me understand what the role of the principal employer is in this case. Thank you.

Principal Employer's Responsibility Under the ESI Act

At first instance, it is the duty of the principal employer to ensure the proper deposit of contributions under the ESI Act. In case of default by a contractor, the principal employer is liable to pay all dues. Although the principal employer has the right to recover the amount from the defaulting contractor through recovery processes. If the ESI Act has been implemented in your area and your company is covered under ESI, ESI officials have the right to demand the payment of contributions.

Best regards,
Sanjay