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2016 (11) TMI 165 - HC - Indian LawsPre-deposit requirement - Validity of Section 45- AA of the Employees State Insurance Act, 1948 as it imposes a condition of pre-deposit of 25% of the demanded amount for entertaining the appeal - Held that - The requirement of pre-deposit under Section 45-AA is not mandatory and the Appellate Authority is empowered to waive, either partially or completely, the requirement of predeposit in the same circumstances and conditions as explained in detail in the PSPCL case (2016 (2) TMI 245 - PUNJAB AND HARYANA HIGH COURT ). To summarize, the Appellate Authority is empowered to partially or completely waive the condition of pre-deposit in given facts and circumstances. It is, however, not to be exercised in a routine manner or as a matter of course. Only when a strong prima facie case is made out, will the Appellate Authority consider, whether to grant interim protection/ injunction or not. Partial or complete waiver will be granted only in deserving and appropriate cases where the Appellate Authority is satisfied that the entire purpose of the appeal would be frustrated or rendered nugatory because of the condition of pre-deposit for hearing the appeal and a reasoned order would require to be passed. Accordingly, the order dated 21.02.2014 (Annexure P-20) passed by the Appellate Authority is quashed. The matter is remitted to the first appellate authority where the petitioners may file an application for interim injunction/protection before the appeals are taken up for hearing by the first appellate authority who shall adjudicate the application for grant of interim injunction/protection to the petitioner in the light of the principles set out above.
Issues Involved:
1. Constitutionality of Section 45-AA of the ESI Act regarding the pre-deposit requirement. 2. Validity of demand notices and orders issued for contribution. 3. Request for exemption from ESI Act for a specific period. 4. Authority and power of the Appellate Authority to waive the pre-deposit condition. Detailed Analysis: 1. Constitutionality of Section 45-AA of the ESI Act: The petitioner challenged Section 45-AA of the ESI Act, which mandates a pre-deposit of 25% of the demanded amount for entertaining an appeal. The petitioner argued that this condition should not be treated as mandatory and that the Appellate Authority should have the inherent power to dispense with the pre-deposit in appropriate cases. The respondents contended that the pre-deposit condition is mandatory and distinct from similar provisions in other statutes, such as the VAT Act, which were interpreted as directory by the court in the PSPCL case. The court examined various precedents, including decisions of the Hon'ble Supreme Court, and concluded that the requirement of pre-deposit under Section 45-AA is not mandatory. The court held that the Appellate Authority has the inherent power to waive, either partially or completely, the requirement of pre-deposit in appropriate cases. 2. Validity of Demand Notices and Orders Issued for Contribution: The petitioner sought quashing of the order dated 30.12.2013 and the demand notice dated 05.06.2014, which demanded contributions for the period from October 2009 to August 2010. The court noted that the petitioner had applied for an extension of exemption before the expiry of the exemption period, which was initially declined by the Central Government and later the State Government. The petitioner received a notice demanding contribution for the period from 01.10.2009 to 22.08.2010. The court did not explicitly quash these notices but focused on the procedural aspects related to the appeal and pre-deposit conditions. 3. Request for Exemption from ESI Act for a Specific Period: The petitioner requested the respondent authorities to take a decision on the exemption from 01.10.2008 to 22.08.2010. The court noted that the petitioner had applied for exemption, which was initially declined due to jurisdictional issues and later granted prospectively from 23.08.2010. The Central Government later opined that the State Government could grant retrospective exemption for the period in question. The court directed the respondent authorities to reconsider the petitioner's request for exemption in light of the Central Government's opinion. 4. Authority and Power of the Appellate Authority to Waive the Pre-deposit Condition: The court examined whether the pre-deposit condition under Section 45-AA of the ESI Act could be waived by the Appellate Authority. Citing the PSPCL case and other relevant judgments, the court concluded that the Appellate Authority has the inherent power to waive the pre-deposit condition in appropriate cases. This power is not to be exercised routinely but only when a strong prima facie case is made out, and the Appellate Authority is satisfied that the condition of pre-deposit would frustrate or render nugatory the purpose of the appeal. The court quashed the order dated 21.02.2014, which declined to entertain the appeal for non-deposit of 25% of the amount, and remitted the matter to the first appellate authority for reconsideration. Conclusion: The court held that the requirement of pre-deposit under Section 45-AA of the ESI Act is not mandatory, and the Appellate Authority has the power to waive this condition in appropriate cases. The court directed the first appellate authority to adjudicate the petitioner's application for interim protection/injunction in light of the principles set out in the judgment. The interim order dated 16.07.2014 was to continue until the decision on the application for interim protection. The case was disposed of accordingly.
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