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M/S. Carborandum Universal Ltd. vs. ESI Corporation

Not available · 2025 INSC 1455Decided 18 Dec 2025
Not available
Justice Manoj Misra · Justice Ujjal Bhuyan

Background

The appellant company, covered under the Employees' State Insurance (ESI) Act, was assessed by the Regional ESI Office as owing Rs. 5,42,575.53 in arrears of contribution for the period August 1988 to March 1992, with interest, under Section 45A of the Act (which allows the ESI Corporation to determine dues on the basis of "best judgment" where an employer fails to furnish records). This order was upheld by the Employees Insurance Court and by the Madras High Court, prompting the company's appeal.

Decision Breakdown

The Supreme Court held that Section 45A can only be invoked where an employer genuinely fails to produce records or obstructs inspection. It is not meant to be used merely because the Corporation finds verifying the records inconvenient or time-consuming. On the facts, the Court found the appellant company was never obstructive: it had furnished ledgers, cash books, vouchers and returns, and had attended personal hearings repeatedly; the actual grievance was that the records were "inadequate," not that they were withheld. In such a situation, the Court held, the proper statutory route for the Corporation was to examine the correctness of the produced records under Section 75 of the Act, and if a dispute persisted, to initiate proceedings within the limitation period prescribed under Section 77(1A)(b), not to invoke Section 45A. Holding the invocation of Section 45A to be a jurisdictional error, the Court set aside the original 2000 assessment order, the Employees Insurance Court's 2015 order, and the Madras High Court's 2023 judgment, and allowed the appeal.

Lesson Learnt

Statutory "best judgment" or summary-assessment powers (like Section 45A of the ESI Act) are an exception meant for genuine non-cooperation or non-production of records: a government authority cannot bypass an employer's normal right to have disputes over the adequacy of its records examined through the regular statutory dispute-resolution route (like Section 75) just because that route is slower or more inconvenient for the authority.

Official source (sci.gov.in)View Judgment (PDF)

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