J 2015 SCC OnLine Ori 158 2016 Lab IC NOC 4 4 Anirudhpatwary Nalsaracin 20231123 202042 1 8

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2015 SCC OnLine Ori 158 : 2016 Lab IC (NOC 4) 4
In the High Court of Orissa

(BEFORE A.K. RATH, J.)
In the matter of an application under Articles 226 &

227 of the Constitution of India.
M/s. Utkal Polyweave Industries Pvt. Ltd. …
Petitioner
Versus
Regional Director, Employees' State Insurance
Corporation & others … Opposite Parties
OJC No. 16716 of 1998
Decided on May 13, 2015
Advocates who appeared in this case :
For Petitioner … Mr. Siddhartha Ray, Advocate
For Opp. Parties … Mr. Purnendu Prasad Ray, Advocate
Dr. A.K. Rath, J. In this writ application under Article 226 of the
Constitution of India, the petitioner has prayed, inter alia, to quash the
notice dated 17.11.1998, vide Annexure-1, issued by the Recovery
Officer, Employees' State Insurance Corporation, Bhubaneswar,
opposite party no. 3, prohibiting the petitioner to withdraw the amount
from Vijaya Bank, Balasore and restraining the said Bank from making
any payment to the petitioner. By the said notice the Bank was also
directed to transfer an amount of Rs. 35,621/- to the Employees' State
Insurance Fund Account No. 1 of the E.S.I. Corporation, Regional
Office, Bhubaneswar within seven days from the date of receipt of the
order, failing which, opposite party no. 3 would take further
proceedings to recover the amount due from the Bank as per Rule 36
(3)(b) of the Income Tax (Certificate Proceedings) Rules, 1962.
2. Shorn of unnecessary details, the short facts of the case of the
petitioner are that it is a Private Limited Company registered under the
Indian Companies Act, 1956. The petitioner company is engaged in the
manufacturing and selling of HDPE Woven Sacks Fabrics and Tapes. The
petitioner company has employed number of persons in its industries.
It regularly deposits the ESI contribution from time to time. While the
matter stood thus, on 21.9.1995 it received the demand notice issued
by the opposite party no. 3 in respect of contribution pertaining to the
period from March, 1987 to June, 1990 and thereafter upto 31.7.1995
amounting to Rs. 31,905/-. On 18.12.1995, the petitioner made a
representation to the Regional Director, Employees State Insurance
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Corporation, Bhubaneswar, opposite party no. 1, stating therein that

the verification report by the ESI authorities basing on the
determination of contribution made, had not been supplied to the
petitioner. A request was made to give a chance to the petitioner to
produce its records and afford personal hearing, vide Annexure-2.
Finally reminder was sent on 9.3.1996, vide Annexure-3.
3. Further case of the petitioner is that on 7.9.1996, it received a
notice from opposite party no. 3. In the said notice, the petitioner was
directed to appear before him on 13.9.1996 for making payment of the
certificate amount, failing which, the opposite party no. 3 would
proceed to recover the amount through coercive measure. On
31.5.1997, the petitioner received another letter from the Deputy
Director (Revenue), Employees State Insurance Corporation,
Bhubaneswar, opposite party no. 2, refusing to afford the personal
hearing and directed the petitioner to deposit the amount due as per
the certificate issued. It is further stated that on 21.11.1998 when the
petitioner went to Bijaya Bank for operating the bank account, he was
refused to do so and informed that prohibitory order has been received
from opposite party no. 3 for not allowing him to withdraw any amount
from the account, vide Annexure-1.
4. Pursuant to issue of notice, a counter affidavit has been filed by
the opposite parties. The sum and substance of the case of the opposite
parties is that under Section 75 of the Employees' State Insurance Act,
1948 (hereinafter referred to as “the ESI Act”), a dispute between the
Principal Employer and the Corporation is to be adjudicated by the
Employees' Insurance Act as per the procedure laid down under the
Orissa Employees' Insurance Court Rules, 1951. Since the disputed
questions of facts are involved, the same cannot be adjudicated in the
writ application. It is further stated that the ESI Act had been made
applicable to the petitioner company with effect from 24.3.1987. On
inspection of the records of the petitioner company by the Inspectors of
the Corporation, it was found that the contribution of Rs. 20,222/- had
not been paid for the period from March, 1987 to June, 1990. The
opposite party no. 2 issued letters on 28.3.1991 and 11.10.1993 to the
petitioner to pay the aforesaid contribution. The petitioner did not pay
the same. The opposite party no. 2 issued a certificate on 4.9.1995 to
the opposite party no. 3 to recover the amount of Rs. 20,222/- along
with interest of Rs. 11,683/- calculated upto 31.7.1995, total Rs.
31,905/- and further interest from 1.8.1995 to the date of recovery
under Section 45-C to 45-I of the ESI Act. On receipt of the aforesaid
certificate, opposite party no. 3 registered Certificate Case No. 347 of
1995 and issued a notice on 21.9.1995 to the petitioner to recover the
certificate dues. Further, on subsequent inspection of records of the
petitioner company by the Inspectors of the Corporation, it was also
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found that the contribution of Rs. 770/- had not been paid for the
period from July, 1990 to May, 1995. Thereafter, opposite party no. 2
issued a certificate on 28.4.1997 to the opposite party no. 3 to recover
the contribution of Rs. 770/- along with interest of Rs. 187/-, calculated
upto 31.1.1997, totalling to Rs. 957/- and further interest from
1.2.1997 to the date of recovery under Section 45-C to 45-I of the ESI
Act. On receipt of the said certificate, opposite party no. 3 registered
Certificate Case No. 236 of 1997 and issued notice on 21.5.1997 to the
petitioner to recover the certificate dues. It is further stated that on
further inspection of records of the petitioner company by the Inspector
of the Corporation, it was also found that no compliance was made for
the period from June, 1995 to February, 1996 in respect of three
security guards. As the petitioner did not pay the same, opposite party
no. 2 issued a certificate on 20.1.1998 to the opposite party no. 3 to
recover the contribution of Rs. 2,451/- along with interest of Rs. 308/-,
calculated upto 30.6.1997, totalling to Rs. 2,759/- and further interest
from 1.7.1997 to the date of recovery. The petitioner did not pay the
certificate dues pertaining to the aforesaid three certificates, i.e.,
Certificate Case Nos. 347 of 1995, 236 of 1997 and 22 of 1998 though
he was statutorily liable to pay the same. As such, opposite party no. 3
issued prohibitory order dated 17.11.1998, vide Annexure-1, to recover
the certificate dues of Rs. 35,621/- pertaining to the aforesaid three
certificates.
5. Mr. Sidharth Ray, learned counsel for the petitioner, submitted
that the existence of alternative remedy available under the ESI Act is
not a bar to entertain the writ application. He further submitted that no
opportunity of hearing was provided to the petitioner before issuing
notice dated 17.11.1998, vide Annexure-1. In support of his
contentions, he cited the decisions of the Supreme Court in the case of
Kishinchand Chellaram v. The Commissioner of Income Tax, Bombay
City-II, AIR 1980 SC 2117, State of H.P. v. Gujarat Ambuja Cement
Ltd., AIR 2005 SC 3936, Harbanslal Sahnia v. Indian Oil Corpn. Ltd.,
AIR 2003 SC 2120, Commissioner of Income Tax v. Chhabil Dass
Agarwal, (2014) 1 SCC 603 and the decision of this Court in the case of
Babulal Agrawal v. State of Orissa, 108 (2009) CLT 440.
6. Mr. Purnendu Prasad Ray, learned counsel for the opposite parties,
on the other hand, submitted that the dispute in question can be
adjudicated by the Employees' Insurance Court under Section 75 of the
ESI Act. Since alternative remedy is available under the ESI Act, the
writ application is not maintainable. He further submitted that the
provisions of Section 45-A of the ESI Act will be attracted only if
returns, registers or records are not submitted by the principal or
immediate employer or any other person mentioned therein or the
Inspector or other official of the Corporation is prevented in any manner
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by the principal or immediate employer or any other person in

exercising its functions or discharging its duties under Section 45 of the
ESI Act. He further submitted that in the instant case such contingency
does not arise as the petitioner himself produced returns and records
and on the basis of the information in the said returns and records, the
amount of Rs. 31,905/- was determined.
7. On the pleadings of the parties and the submissions made at the
Bar, really two points arise for consideration of this Court.
I. Whether the existence of alternative remedy would operate as a
bar in entertaining a writ application under Article 226 of the
Constitution?
II. Whether the notice dated 17.11.1998, vide Annexure-1, issued
by the opposite party no. 3 is an infraction of principle of natural
justice?
8. Point No. I
After survey of the earlier decisions, the Supreme Court in Whirlpool
Corporation v. Registrar of Trade Marks, Mumbai, (1998) 8 SCC 1 in
paragraphs 15 and 20 of the report held as follows:
“15. Under Article 226 of the Constitution, the High Court, having
regard to the facts of the case, has a discretion to entertain or not to
entertain a writ petition. But the High Court has imposed upon itself
certain restrictions one of which is that if an effective and efficacious
remedy is available, the High Court would not normally exercise its
jurisdiction. But the alternative remedy has been consistently held by
this Court not to operate as a bar in at least three contingencies,
namely, where the writ petition has been filed for the enforcement of
any of the Fundamental Rights or where there has been a violation of
the principle of natural justice or where the order or proceedings are
wholly without jurisdiction or the vires of an Act is challenged. There is
a plethora of case-law on this point but to cut down this circle of
forensic whirlpool, we would rely or some old decisions of the
evolutionary era of the constitutional law as they still hold the field.”
xxx xxx xxx
“20. Much water has since flown under the bridge, but there has
been no corrosive effect on these decisions which, though old, continue
to hold the field with the result that law as to the jurisdiction of the
High Court in entertaining a writ petition under Article 226 of the
Constitution, in spite of the alternative statutory remedies, is not
affected, specially in a case where the authority against whom the writ
is filed is shown to have had no jurisdiction or had purported to usurp
jurisdiction without any legal foundation.”
9. The same view was expressed in Gujarat Ambuja Cement Ltd.
(supra) and Harbanslal Sahnia (supra).
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10. Thus alternative remedy is not a bar to entertain a writ

application under Article 226 of the Constitution in at least three
categories mentioned in Whirlpool Corporation (supra), namely, where
the writ application has been filed for the enforcement of any of the
Fundamental Rights or where there has been a violation of the principle
of natural justice or where the order or proceedings are wholly without
jurisdiction or the vires of an Act is challenged.
11. Point No. II
The concept of natural justice has undergone a sea change in recent
years. The old distinction between a judicial act and an administrative
act has withered away. Even an administrative order which involves
civil consequences must be consistent with the rules of natural justice.
The expression “civil consequences” encompasses infraction of not
merely property or personal rights, but of civil liberties, material
deprivations, and non pecuniary damages. It takes within its sweep
everything that affects a citizen in his civil life.
12. In Uma Nath Pandey v. State of Uttar Pradesh, AIR 2009 SC
2375, the Supreme Court held as follows : -
“6. Natural justice is another name for commonsense justice. Rules
of natural justice are not codified canons. But they are principles
ingrained into the conscience of man. Natural justice is the
administration of justice in a commonsense liberal way. Justice is based
substantially on natural ideals and human values. The administration of
justice is to be freed from the narrow and restricted considerations
which are usually associated with a formulated law involving linguistic
technicalities and grammatical niceties. It is the substance of justice
which has to determine its form.
7. The expressions “natural justice” and “legal justice” do not
present a water-tight classification. It is the substance of justice which
is to be secured by both, and whenever legal justice fails to achieve this
solemn purpose, natural justice is called in aid of legal justice. Natural
justice relieves legal justice from unnecessary technicality, grammatical
pedantry or logical prevarication. It supplies the omissions of a
formulated law. As Lord Buckmaster said, no form or procedure should
ever be permitted to exclude the presentation of a litigants' defence.
8. The adherence to principles of natural justice as recognized by all
civilized States is of supreme importance when a quasi-judicial body
embarks on determining disputes between the parties, or any
administrative action involving civil consequences is in issue. These
principles are well settled. The first and foremost principle is what is
commonly known as audi alteram partem rule. It says that no one
should be condemned unheard. Notice is the first limb of this principle.
It must be precise and unambiguous. It should appraise the party
determinatively the case he has to meet. Time given for the purpose
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should be adequate so as to enable him to make his representation. In

the absence of a notice of the kind and such reasonable opportunity,
the order passed becomes wholly vitiated. Thus, it is but essential that
a party should be put on notice of the case before any adverse order is
passed against him. This is one of the most important principles of
natural justice. It is after all an approved rule of fair play. The concept
has gained significance and shades with time. When the historic
document was made at Runnymede in 1215, the first statutory
recognition of this principle found its way into the “Magna Carta”. The
classic exposition of Sir Edward Coke of natural justice requires to
“vocate, interrogate and adjudicate”. In the celebrated case of Cooper
v. Wandsworth Board of Works [(1863) 143 ER 414], the principle was
thus stated:
“Even God did not pass a sentence upon Adam, before he was called
upon to make his defence. “Adam” says God, “where are thou? hast
thou not eaten of the tree whereof I commanded thee that thou
shouldest not eat”.”
13. It is apt to refer here the verdict in Kesar Enterprises Limited v.
State of Uttar Pradesh, (2011) 13 SCC 733 wherein the Supreme Court
was considering the applicability of principles of natural justice to Rule
633(7) of the Utter Pradesh Excise Manual. The said Rule provided that
if certificate was not received within the time mentioned in the bond or
pass, or if the condition of bond was infringed, the Collector of the
exporting district or the Excise Inspector who granted the pass shall
take necessary steps to recover from executant or his surety the
penalty due under the bond. In para-30 of the report, it is held as
under;
“30……..we are of the opinion that keeping in view the nature, scope
and consequences of direction under sub-rule (7) of Rule 633 of the
Excise Manual, the principles of natural justice demand that a show
cause notice should be issued and an opportunity of hearing should be
afforded to the person concerned before an order under the said Rule is
made, notwithstanding the fact that the said Rule does not contain any
express provision for the affected party being given an opportunity of
being heard.”
14. In Kishinchand Chellaram (supra), the Supreme Court held that
the proceedings under the income tax law are not governed by the
strict rules of evidence and, therefore, it might be said that even
without calling the manager of the bank in evidence to prove this letter,
it could be taken into account as evidence. But before the I.T
authorities could rely upon it, they were bound to produce it before the
assessee so that the assessee could controvert the statements
contained in it by asking for an opportunity to cross-examine the
manager of the bank with reference to the statements made by him.
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15. This Court in the case of Ferro Alloys Corporation Limited v.

State of Orissa, 77 (1994) CLT 248 held that where a material is sought
to be utilized against an assessee, adequate opportunity has to be
granted to it to rebut the same before the materials can be utilized
against the assessee. The same view was echoed in Babulal Agrawal
(supra).
16. An identical question came up for consideration before this Court
in Star Security Service v. The Deputy Director (Revenue), Employees
State Insurance Corporation, Bhubaneswar, WP(C) No. 11815 of 2003
disposed of on 4.12.2003. A Division Bench of this Court held that even
de hors the provisions of the proviso to Section 45-A of the ESI Act the
petitioner was entitled to reasonable opportunity of being heard before
determination of the quantum of contribution payable by the petitioner
by virtue of the principles of natural justice.
17. It is neither disputed nor denied by the opposite parties that no
opportunity of hearing was provided to the petitioner before
determining the amount of Rs. 31,905/-. The submission of Mr. Ray
that no opportunity of hearing is required to be provided to the
petitioner has no legs to stand in view of the decisions referred to
supra. Neither the matter which was sought to be utilised against the
petitioner was supplied to him nor the petitioner had been afforded any
opportunity of hearing before determination of the amount. Had the
petitioner been given an opportunity of hearing, it could have come out
with extenuating circumstances defending such action, though default
was made and opposite party no. 2 was not satisfied with the
explanation offered.
18. In view of the analysis made in the preceding paragraphs, the
inescapable conclusion is that the notice dated 17.11.1998, vide
Annexure-1, issued by the Recovery Officer, Employees' State
Insurance Corporation, Bhubaneswar, opposite party no. 3, is an
infraction of the principle of natural justice. The same is accordingly
quashed. This Court directs the Deputy Director (Revenue), Employees
State Insurance Corporation, Bhubaneswar, opposite party no. 2, to
afford an opportunity of hearing to the petitioner and determine afresh
the quantum of contribution payable for the aforesaid period by the
petitioner. The petitioner will appear before the opposite party no. 2 on
15th June, 2015 when opposite party no. 2 will either hear the petitioner
or fix up another date of hearing and thereafter pass a fresh order in
accordance with law. Since the petitioner does not dispute the
applicability of the ESI Act to his establishment and disputes the
quantum of contribution, in case the petitioner is still aggrieved, it is
open to the petitioner to raise the dispute under the ESI Act before the
Employees' Insurance Court.
The writ application is allowed. There shall be no order as to costs.
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SCC Online Web Edition, © 2023 EBC Publishing Pvt. Ltd.

Page 1 Thursday, November 23, 2023

2015 SCC OnLine Ori 158 : 2016 Lab IC (NOC 4) 4

In the High Court of Orissa

In the matter of an application under Articles 226 &

Corporation, Bhubaneswar, opposite party no. 1, stating therein that

by the principal or immediate employer or any other person in

10. Thus alternative remedy is not a bar to entertain a writ

should be adequate so as to enable him to make his representation. In

15. This Court in the case of Ferro Alloys Corporation Limited v.

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