Can ESI Authorities Enforce Coverage Without Letting Companies Explain Their Side?

Dear All,

One of my friends has stated that ESI authorities have covered his establishment based on the inspection report of the ESI Inspector. No copy of the inspection report is issued to the establishment. They have allotted the ESI Code Number and local office and directed him to remit the contribution. Kindly clarify whether any authorities can make such decisions without giving an opportunity to an establishment/company to explain its stand?

Thank you.

Dear Mohan ji, the action taken by ESIC authorities, as narrated by you in the thread, appears to be in order as far as the procedural aspect is concerned. The initial inspection of the establishment is popularly called a "survey," but in official terms, it is called the "Preliminary Inspection Report." The purpose of this report is to determine whether the unit is coverable under the ESI Act, 1948, and the rules/regulations framed thereunder.

Powers of the Social Security Officer

The Social Security Officer has full powers to visit any establishment under Section 45 of the Act, verify the employer's records, and recommend coverage if the unit is found coverable. The employer can request a copy of the "Preliminary Inspection Report." This report can also be obtained through RTI.

Contesting Coverage Under the ESI Act

However, if the employer feels that his unit is not coverable under the said Act, he can contest this through a representation/letter to the authority that issued the code number. The employer can request re-inspection/verification of his records if considered suitable by furnishing all facts on Form 01.

Approaching the Employees' Insurance Court

In case the authorities are not willing to reopen the coverage issue, there is no alternative, in my opinion, except to approach the Employees' Insurance Court of the area having jurisdiction, as constituted under Section 74 of the said Act. However, the above actions need to be taken at the earliest to avoid prosecution, levy of interest, damages, as well as ad hoc assessment under Section 45-A of the said Act.

Regards.

Dear N. Mohan ji,

When the ESI code number is allotted to you based on an inspection report, why did you not demand the inspection report? Or, was there no such inspection?

Is your establishment not coverable under the Act? If not, you can contest the order, as suggested by our learned member Harsh Kumar, at the earliest.

You can also take a stand that the inspection report was not provided to you, which amounts to a violation of the principles of natural justice. But ensure before taking such a stand that no inspection report is provided to you.

Regards

Dear Korgaonkarji,

He has not issued any report, but later received a letter from ESIC covering the establishment and directing to remit the contribution.

Dear Mohan ji, In my opinion, you may want to trace or search for the copy of the honorable High Court judgment mentioned by one of the participants in the above remarks to enhance knowledge on the subject. If found, you may like to place the online link in this thread for the general awareness of the participants.

However, it would be even better if the employer evaluates his own particulars or facts to assess whether the coverage of his firm/unit is correct. If the employer is employing the minimum or more persons as required under the ESI Act, 1948, and the rules/regulations framed thereunder, including all regular, temporary, casual, through contract, etc., I think there is hardly any relevance in getting the copies of the said order, Inspection Report, etc., as suggested by various participants in their remarks above. "Giving an opportunity to an establishment/Company to explain its stand," as mentioned by you in your thread, is required only in actions stipulated under section 45-A of the said Act (determining contribution on an ad hoc basis). Though in said opportunity of hearing, the employer can also raise the issue that his unit was wrongly covered under the said Act.

I believe the above issue is not full of facts.

Inspection and Notification

A. The inspection must have been carried out in the Industrial Zone; therefore, the whole industrial zone may have been notified by them.

B. If not, then nearby industries in the vicinity must come under the purview of ESIC, and possibly, you were escaping the ESIC. Furthermore, ESIC has the full power to inspect and notify the area. You may ask for a copy under the Right to Information. Authorities may have inspected your factories and notified this company. The data, i.e., wages, number of employees, must have been shared by your department.

Hence, before entering into any mode, check the facts and data.

Regards, DKZ

In my opinion, the only principle and rule governing the coverage is the number of employees in that unit and not the complexity of the surroundings, etc.

Questions on ESI and Consumer Protection Act

While on the subject, I would like to know:

i) Whether ESI falls under the Consumer Protection Act since it charges for the services provided?

ii) Whether it is appropriate to even charge a daily wage person but not provide him benefits, since the benefits start only after a 3-month lapse of continuously paying for a 6-month contribution period (i.e., a total of 9 months). In other words, if you join the organization in April, first you will have to pay till September, then wait for another 3 months' period, and from January of the next year, you will be eligible for the ESI benefit!

iii) Whether the points raised by me in (ii) and (iii) above stand as bad in law and can be challenged?

iv) Is the ESI Court in existence?

Regards,
Abdul Quadir.

Dear All,

Although the employment strength is less than 10 on any day, my friend has now ensured compliance as per the ESI notice. He has done this in consideration of the future expansion plans for his business. Thank you all for your views and suggestions, which have assisted him in making this decision.