# U.P. Cooperative Federation Ltd. & Anr v. E.S.I.C. & Ors

- **Citation:** (2022) 4 ILRA 501
- **Court:** High Court of Judicature at Allahabad
- **Decided:** 2022-04-20
- **Case number:** Writ C No. 1000927 of 2005
- **Bench:** Pankaj Bhatia
- **Source:** https://unisonlegal.in/judgment/allahabad-high-court/u-p-cooperative-federation-ltd-anr-v-e-s-i-c-ors-48343
- **Pages:** 5

## Headnote

Civil Law - Constitution of India, 1950 -
Article 226, - Employees St. Insurance Act,
1948 - Sections 1(5), 1(4), 2(12) & 2(14AA) - U.P. Cooperative Societies Act, 1965
- Section 2(a-4) Clause 3 - Demand Notice
& recovery certificates was issued by
Authority under ESI Act, - for payment of
contributions to ESI fund towards the
employer's contribution for the employees
working in PCF press - section of the
petitioner's society - for a particular
period
during
manufacturing
process
(between period of Jan. 1981 to May
1989)
-
Whether
petitioners'
establishment would be covered within
the ambit of 'ESI Act' by virtue of mandate
of Section 1(4) of ESI Act - definition of
'Manufacturing process' which was itself
adopted by the ESIC w.e.f. 20.10.1989 -
said
amendment
would
apply
prospectively - objection not considered -
writ petition - impugned orders are set
aside
with
direction
to
refund
the
deposited amount pursuance thereof to
the petitioner accordingly. (Para - 11, 12,
18, 20)

Writ Petition stands allowed. (E-11)

List of Cases cited: -

## Text

4 All. U.P. Cooperative Federation Ltd. & Anr. Vs. E.S.I.C. & Ors.
501
impound a photocopy of any document. To
that extent, the impugned orders are
without jurisdiction.

43. Consequently the writ petition is
party allowed. The levy of deficient stamp
duty, penalty and impost of interest is
sustained. The order impounding the
photocopy of the agreement to sell dated
dated 12.11.2013, is quashed. No order as
to costs.
----------
(2022)04ILR A501
ORIGINAL JURISDICTION
CIVIL SIDE
DATED: LUCKNOW 20.04.2022

BEFORE

THE HON'BLE PANKAJ BHATIA, J.

Writ C No. 1000927 of 2005

U.P. Cooperative Federation Ltd. & Anr.
 ...Petitioners
Versus
E.S.I.C. & Ors. ...Respondents

Counsel for the Petitioners:
Shireesh Kumar

Counsel for the Respondents:
Shishir Pradhan

Civil Law - Constitution of India, 1950 -
Article 226, - Employees St. Insurance Act,
1948 - Sections 1(5), 1(4), 2(12) & 2(14AA) - U.P. Cooperative Societies Act, 1965
- Section 2(a-4) Clause 3 - Demand Notice
& recovery certificates was issued by
Authority under ESI Act, - for payment of
contributions to ESI fund towards the
employer's contribution for the employees
working in PCF press - section of the
petitioner's society - for a particular
period
during
manufacturing
process
(between period of Jan. 1981 to May
1989)
-
Whether
petitioners'
establishment would be covered within
the ambit of 'ESI Act' by virtue of mandate
of Section 1(4) of ESI Act - definition of
'Manufacturing process' which was itself
adopted by the ESIC w.e.f. 20.10.1989 -
said
amendment
would
apply
prospectively - objection not considered -
writ petition - impugned orders are set
aside
with
direction
to
refund
the
deposited amount pursuance thereof to
the petitioner accordingly. (Para - 11, 12,
18, 20)

Writ Petition stands allowed. (E-11)

List of Cases cited: -

1. M/s Srinivasa Rice Mill Vs Employees St.
Insurance Corporation (2007 Vol. 1 SCC 705)

2. Bangalore Turf Club Ltd. Vs Regional Director,
ESI Corp. (2009 Vol. 15 SCC 33)

3. Sindi Sehiti M.P. Transport Cooperative
Society Ltd. Bhopal Vs Regional Director, ESI
Corporation & ors.(1997 M.P.L.S.R. 335).

(Delivered by Hon'ble Pankaj Bhatia, J.)

1. Heard Sri Shireesh Kumar,
Advocate assisted by Sri Mustafa Khan, the
counsel for the petitioner and Sri Shishir
Pradhan, the counsel for the respondents.

2. The present petition has been filed
quashing the orders dated 24.06.2004,
30.07.2004 and the recovery certificate
dated 14.02.2002 (Annexure nos. 5, 6 and 7
to the writ petition) whereby the demands
have been quantified against the petitioners
and they have been directed to pay the said
amount in exercise of the powers conferred
under the Employees State Insurance Act,
1948 ('ESI Act' for short).

3. The facts, in brief, are that the
petitioner is an apex cooperative society
created under section 2(a-4) Clause 3 of the
U.P. Cooperative Societies Act, 1965. It is
stated that the society is registered under
502 INDIAN LAW REPORTS ALLAHABAD SERIES
the Societies Registration Act and more
than 90% paid up share capital is owned by
the State Government. It is also on record
that the rules, regulations and guidelines
issued by the State Government are
normally applicable to the employees of the
petitioner's society and they also enjoy
certain benefits which are admissible to the
employees of the State Government. It is
also on record that the petitioner's society
runs and execute various schemes of the
State Government such as purchase of
wheat, paddy, sugar, fertilizer, coal etc. as
and when the same were executed to the
petitioner's society. It is stated that the
petitioner is also running P.C.F. Press and
the persons employed in the accounts
section are enjoying the benefits of the
State Government from time to time which
according to the petitioner are far superior
to the benefits flowing to the persons came
under the 'ESI' Act. It is stated that the
respondent no.1 issued a notice dated
18.11.2003 calling upon the petitioner to
show cause as to why the petitioner's
society should not be made liable for
payment of the contribution to the ESI
Fund, to which the petitioners raised their
objections. However, an order came to be
passed on 24.06.2004 wherein a demand of
Rs.33,846/-
was
raised
against
the
petitioners
allegedly
towards
the
employer's contribution for the employees
working in the account section of PCF
press for the period January 1981 to
September 1986 and from January 1988 to
May 1989 (Annexure 5).

4. It is stated that once again on
30.07.2004 a demand of Rs.1,39,262/-
towards the employer's contribution was
raised in respect of the employees working
in the accounts section of the PCF Press.
The petitioners once again stated that they
had submitted their reply to the show cause
notice dated 18.11.2003, however, the
grounds taken in the show cause notice
were not considered while raising the
demand dated 24.06.2004. It is on record
that
subsequent
thereto,
a
recovery
certificate seeking to recover a sum of
Rs.1,81,409/- was issued against the
petitioners and the opposite party no.4 was
directed to debit the said amount from the
accounts of the petitioners. The said orders
are under challenge before this Court.

5. The counsel for the petitioners
argues that the petitioners would not be
covered under the 'ESI Act' as the petitioner
is not notified under section 1(5) of the
'ESI' Act. He further argues that the
petitioners cannot be termed as a 'factory'
as defined under section 2(12) of the 'ESI
Act' so as to include the petitioners under
the ambit and scope of the 'ESI Act' by
virtue of section 1(4) of the 'ESI Act'. He
further argues that in any event the
petitioners are giving the benefits to their
employees which are far superior to the
ones that are given to the employees by
virtue of applicability of 'ESI Act'. In the
light of the said arguments, the counsel for
the petitioners argues that the orders
impugned in the present writ petition are
liable to be quashed. The petitioners has
placed reliance on the judgment of the
Supreme Court in the case of M/s
Srinivasa Rice Mill vs. Employees State
Insurance Corporation; 2007 (1) SCC
705 as well as the judgment in the case of
Bangalore Turf Club Ltd. vs. Regional
Director, ESI Corporation; 2009 (15)
SCC 33.

6. The counsel for the respondent Sri
Shishir Pradhan, on the other hand, tries to
justify the order by arguing that although
no notification under section 1(5) of the Act
has been issued. However, the petitioners'
4 All. U.P. Cooperative Federation Ltd. & Anr. Vs. E.S.I.C. & Ors.
503
establishment would be covered under
section 1(4) of the Act and by virtue of the
said section 1(4) of the Act, all factories
stand included within the ambit of the Act
and thus no fault can be found with the
orders passed against the petitioners and
impugned in the present writ petition. He
placed reliance on the judgment of the M.P.
High Court in the case of Sindi Sehiti M.P.
Transport
Cooperative
Society
Ltd.
Bhopal
vs.
Regional
Director,
ESI
Corporation
and
others;
1997
M.P.L.S.R. 335.

7. In the light of the arguments raised,
the point for determination that arises is
whether
the
petitioners'
establishment
would be covered within the ambit of 'ESI
Act' by virtue of the mandate of Section
1(4) of the ESI Act as the parties are not at
issue that no notification has been issued
under section 1(5) of the Act.

8. It is relevant to quote section 1(4) as
well as section 2(12) of the 'ESI Act' which
read as under :

Section 1(4) : - It shall apply, in the
first instance, to all the factories including
factories belonging to the government other
than seasonal factories.

Provided that nothing contained in
this sub-section shall apply to a factory or
establishment belonging to or under the
control of the Government whose employees
are
otherwise
in
receipt
of
benefits
substantially similar or superior to the
benefits provided under this Act.

Section 2(12) :- 'factory' means
any premises including the precincts thereof
whereon ten or more persons are employed
or were employed on any day of the
preceding twelve months, and in any part of
which a manufacturing process is being
carried on or is ordinarily so carried on, but
does not include a mine subject to the
operation of the Mines Act, 1952 (35 of 1952)
or a railway running shed;

9. 'ESI' Act was enacted to provide
certain benefits to the employees in case of
sickness, maternity and employment injury
and for certain other matters in relation
thereto. The intent and purpose of the Act
was to provide benefits to the sections of the
society who work within the factories and
any other establishments [if notified under
section 1(5) of the Act]. Clearly the intent of
the Act is to provide socio economic benefits
to a class of the society covered under the Act

10. A plain reading of section 1(4) of
the Act clearly provides that the Act at the
first instance was made applicable to all
factories including the factories belonging to
the government but excluding the seasonal
factories. Proviso of sub-section 4 excludes
factory or establishment belonging to or
under the control of the government whose
employees are otherwise in respect of
benefits substantially similar or superior to
the benefits provided under this Act.

11. A plain reading of the said subsection leaves no room for doubt that it is
applicable to the factories at the first
instance. The term 'factory' has been
defined under section 2(12) to mean any
premises where ten or more persons are
employed and in any part of which, a
manufacturing process is being carried on.
The word 'manufacturing process' itself
finds definition under section 2(14-AA)
and incorporates the meaning assigned to
the term 'manufacturing process' under the
Factories Act.

12. It is important to note that the
definition of the word 'manufacturing
process' as defined under section 2(14-AA)
504 INDIAN LAW REPORTS ALLAHABAD SERIES
was inserted under the ESI Act w.e.f.
October 20, 1989 by virtue of ESI
(Amendment) Act No.29 of 1989. Prior to
the said amendment the meaning of
'manufacturing process' as specified under
the Factories Act was not applicable to the
'ESI Act' and thus to that extent the
amendment incorporated w.e.f. 20.10.1989
would apply prospectively and would not
apply prior to the said amendment coming
into force.

13. In the present case, the demand
was raised for an amount of Rs.33,846/- for
the
employer's
contribution
for
the
employees working in the account section
of PCF Press for the period January 1981 to
September 1986 and from January 1988 to
May 1989. Thus, the demand pertain to the
period prior to 20.10.1989 when the
definition of 'manufacturing process' under
section 2(14-AA) was inserted under the
ESI Act. In view of the amended Act No.29
of 1989 being prospective in nature, the
definition of word 'manufacturing process'
would not be the same as expansively
assigned under the 'Factories Act' and
would
be
governed
by
the
normal
defination of 'manufacturing process'. Word
'manufacturing
process'
has
been
expansively defined under the Factories Act
even to include Printing Press activity as a
manufacturing
process
where
as
in
common parlance Printing Press cannot be
termed as a 'manufacturing process'. In
view of the same, the applicability of the
provisions of 'ESI Act' on the petitioner
would clearly not be covered by Section
1(4) of the 'ESI Act' for the period prior to
21.10.1989 and thus, the demand cannot be
justified.

14. The judgment of the Supreme
Court in the case of Bangalore Turf Club
Ltd. (supra) would not be applicable to the
facts of the present case as in the said case
the Supreme Court considered the scope of
notification of establishments under section
1(5) of the 'ESI Act'.

15. The second judgment in the case
of M/s Srinivasa Rice Mill (supra) relied
upon by the petitioner laid down in para 18
and 31 as under :

Para-18. Before an Act is made
applicable, in the event, a dispute is raised,
the authorities exercising statutory power
must determine the jurisdictional fact.
Applicability of the Act would be a
jurisdictional question. The Employer is
entitled to raise such a question before the
appropriate authority. Such a question can
also be raised for the first time before a
court exercising the power of judicial
review although ordinarily the same should
be raised before the concerned authority as
a preliminary issue.

Para 31. We, therefore, are of the
opinion that having regard to the facts and
circumstances of this case the interest of
justice would be subserved if Appellants
are given an opportunity of hearing.
Keeping in view the fact that Appellants
now know the allegations made against
them, no fresh notice need be served.
Appellants may file their returns and also
all other books of accounts before the
authorities under the Act within six weeks
from date. The authorities shall give an
opportunity of hearing to them and
determine the question as to whether a
jurisdictional fact existed for application of
the provisions of the Act in cases of the
respective employers. In the event, it is
found, upon perusal of all the documents
whereupon the employers may rely upon
and on the basis of such information as
may be sought for or directed to be
furnished by the authority to the employer
4 All. Smt. Saroj Verma Objection Filed Vs. State of U.P. & Ors.
505
and upon hearing them that the provisions
of the Act apply, the authorities may
proceed as against them as is permissible
in law.

16. In the present case, no such
exercise was ever carried out prior to
imposing
the
recovery
against
the
petitioner.

17. The third judgment in the case of
Sindi Sehiti M.P. Transport Cooperative
Society Ltd. Bhopal (supra) as cited by
the counsel for the respondents would also
not applied to the facts of the case
inasmuch as there is no issue in between
the parties that the petitioners' organization
has not been notified under section 1(5) of
the 'ESI Act'.

18. As the demand in the present case
pertain to the period January 1981 to May
1989 and I have already held that the
definition of manufacturing process as
adopted w.e.f. 20.10.1989 would not be
applicable for the period for which the
demand has been raised, clearly the
demand is unsustainable, as such the orders
dated
24.06.2004,
30.07.2004
and
14.02.2002 contained as Annexures 5, 6
and 7 to the writ petition are set aside.

19. The writ petition stands allowed.

20. The amount deposited before this
court shall be refunded to the petitioners on
their moving an appropriate application.
----------
(2022)04ILR A505
ORIGINAL JURISDICTION
CIVIL SIDE
DATED: LUCKNOW 20.04.2022

BEFORE

THE HON'BLE MRS. SANGEETA CHANDRA, J.
Writ C No. 1004498 of 2005

Smt. Saroj Verma Objection Filed
 ...Petitioner
Versus
State of U.P. & Ors. ...Respondents

Counsel for the Petitioner:
Vimal Kishore Verma

Counsel for the Respondents:
C.S.C.

Civil Law - Constitution of India, 1950 -
Article 226, Indian Stamp Act, - Sections
47A (3) & 56, - U.P. Stamp (Valuation of
Property) Rules, 1997 - Rule 7 (3)(C) - A
Registered
sale
deed
executed
-
deficiency in stamp together with interest
& penalty determined (by the authority)
relying upon ex-parte reports without
showing any details of property in it and
also behind the back of petitioner -
revision
rejected
-
writ
Petition
-
impugned orders are set aside with
direction to refund the deposited amount
pursuance thereof to the petitioner within
four months. (Para -11, 12, 13)

Writ Petition is allowed. (E-11)

List of Cases referred: -

1. Ram Khelawan @ Bachcha Vs St. of U.P.-
(2005 Vol. 98 RD 511)

2. Ram Gopal Vs St. of U.P. & ors. - (2009 Vol.
27 LCD 1335)
(Delivered by Hon'ble Mrs. Sangeeta
Chandra, J.)

1. Heard learned counsel for the
petitioner.

2. This petition has been filed
challenging the order dated 20.08.2003
passed by the Collector, Sitapur in Stamp
Case No. 15 under Section 47A (3) of the
Indian Stamp Act and also the order dated