ESI Corporation Is Obliged To Afford Hearing While Determining Contribution In Respect Of Conveyance Allowance: Bombay HC

Referring to the decision of the Apex Court in the case of Employees State Insurance Corporation vs M/s Texmo Industries [Special Leave Petition (C.) No.811/2021], the Bombay High Court held that the conveyance allowance cannot be treated differently from the traveling allowance as contemplated in the definition clause of Section 2(22) of the Employees’ State Insurance Act, 1948 (ESI Act).

Further, finding that the Respondent Corporation did not give any opportunity to the Appellant Company as contemplated in Section 45-A of the ESI Act while determining the amount of contribution in respect of conveyance allowance and that the conveyance allowance as shown by the Corporation was not part of wages as contemplated in Section 2 (22) (b) of the ESI Act, a Single Judge Bench of Justice Sandipkumar C. More observed that “the Corporation could not have issued notice dated 15.04.1991 to recover contribution of Rs. 11,584/- as part of wages. Thus, rejection of the application of the appellant-Company to that effect under the impugned judgment is erroneous and liable to be set aside”.

Advocate S.V. Dankh appeared for the Appellant, whereas Advocate V.D. Sonawane appeared for the Respondent.

The brief facts of the case were that the appellant-Company is covered under the ESI Act. The non-applicant, based on an inspection, issued a letter to the appellant claiming an amount of Rs. 11,584/- towards contribution on the amount of conveyance shown by the appellant for the period from July 1985 to September 1990. In reply, it was contended that the appellant was not liable to pay such a contribution since the conveyance allowance was exempted from the definition of ‘wages’ under Section 2 (22) (b) of the ESI Act. However, again the respondents issued one more notice to deposit the stipulated amount within 15 days, failing which 12% interest per annum would be accrued upon it. The Trial Court also rejected the prayer of the appellant that the respondents were not entitled to recover the aforesaid amount under show-cause notice. Hence, the appellant approached the High Court.

After considering the submission, the Bench found from a plain reading of Section 45-A of the ESI Act that the Corporation is obligated to give a reasonable opportunity of being heard to the person against whom the order under this Section is to be passed.

“Admittedly, the trial Court had not given any opportunity of hearing to the appellant-Company to establish the fact that the conveyance allowance was not part of wages”, added the Bench.

While noting that the appellant-Company had called upon the respondent to give a personal hearing to satisfy how the amount of contribution in respect of conveyance charges, was not recoverable from it, the Bench observed that the finding of the Trial Court that no opportunity of hearing was permissible under Section 45-A of the ESI Act, is illegal.

The High Court therefore, quashed the judgment passed by the Trial Court and declared that the respondents are not entitled to recover an amount of Rs. 11,584 from the appellant on account of contribution towards conveyance allowance.

Cause Title: Paramount Agencies v. Deputy Regional Director, E.S.I. Corporation and Anr.

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