Facing ESI Inspection Challenges: Do We Need to Keep Old Records and How to Handle Bribe Requests?

Dear all, I run a hospital since May 2013 with 14 employees. I have been complying with ESI norms and depositing for employees in ESI since January 2014. In April 2016, I received an inspection SMS. The ESI inspector reached our hospital the same day. As the records were with accountants, we asked him to come on the next possible date. However, he did not show up but likely informed the authorities that we were refusing to show the records. Today, I received a letter from the authorities to explain why we did not present the records, warning of potential action including a year in jail and a fine. The inspector is soliciting money as bribes. We have never defaulted since joining ESIs. Hospitals have been under ESI since 2011. The notice now asks for records from 2010 to 2014, including ledgers, cashbooks, and vouchers. Do we need to retain records from the past six years? Can ESI officials request bills, vouchers, balance sheets, etc.? Kindly advise. Thank you.

Clarification on ESI Inspection Notice

1. You have not mentioned from which authority you received the notice. If it was from the Regional Director or Deputy Director of ESIC with jurisdiction, you can inform them in writing through a Registered AD letter, with a copy to the Social Security Officer (Inspector), and also by email about the correct facts of the SSO's visit and what happened during his visit as you deem appropriate. You can also inform the authorities that the records you maintain are available for inspection or verification, and their SSO can visit your establishment with prior intimation for verification of such records.

2. If you have made proper compliance, there is no harm in showing or producing the records of five years or more, as required by the authorities. Whatever records are required to be maintained as per Company Law or Law of Firms can be verified by the authorities. You mentioned in the thread that you started the hospital in 2013; hence, you can submit copies of the necessary documents of incorporation of the firm or company and inform the department that the production of records before the date of incorporation or start has no meaning. Please refer to the powers of the Social Security Officer as laid down under section 45 of the ESI Act, 1948, and the rules or regulations framed thereunder. Non-production of records before the authorities, as specified under the above Act, is an offense punishable under section 85 (g) of the said Act. However, if you have proper records of the incorporation of your firm or company, the department will have no alternative but to verify the records since the date of the start of your hospital, firm, or company.

With best wishes.

Inspection and Record Maintenance Requirements

The authorities have the right to inspect records, including financial records, and all documents that have a bearing on the amount payable. So yes, they have the right to ask for the records.

You need to maintain financial records for 8 years. For labor records like attendance, etc., they need to be maintained for 3 years (check state rules for the actual period applicable).

You need to meet the relevant authorities and show the necessary records. You should also reply to the notice in writing. If you have not defaulted, you should be okay. However, consult a labor consultant to understand the process. Additionally, you need to train the staff and managers on the protocol to be followed for handling government officials (and no, paying bribes is not part of handling).

Regards