K. Ramanna, J.
1. Both these appeals are filed by the respective appellants, challenging the legality, correctness and propriety of the order dated 30/6/2003 passed by the learned Presiding Officer, Labour Court, Mangalore, in ESI Application No. 14/2002.
2. The appellant/The Regional Director, ESI Corporation, in MFA. No. 6344/2003 has filed this appeal praying to dismiss the ESI Application No. 14/2002 on the file of the ESI Court at Mangalore.
3. Whereas, the appellant/The Management of Shagil Precision India, in MFA1391/2004 has filed this appeal praying to refund an amount of Rs. 40,000/- obtained by them under coercion.
4. Since both the appeals have been filed challenging the one and the same order passed by one and the same officer in ESI Application 14/2002, both the appeals are taken up together for the sake of convenience in order of avoid repetition of facts and law.
5. The case of the appellant in MFA. 1391/2004 is that the appellant/company engaged in manufacture of watch parts covered under the ESI Act, 1948 and the regulation made thereunder from 1999. Accordingly, respondent No. 1 allotted the code No. 53-16583/67 and the appellant has been paying ESI contribution both for employer and employees regularly to the respondent/ESI Corporation. But the appellant/establishment initially constituted at Nayakas Buildings, Marnamikatta, Mangalore-2, which was a rented building. All the manufacturing activities were carried on in that building till April, 2000. Since the applicant decided to have its own building and the premises for manufacturing the activities at Deralakatte, Mangalore and for that purpose, the construction of building at Deralakatte was entrusted to the independent contractors in the year 1999 and the same was completed in the month of April 2000. Therefore, it has shifted its manufacturing activities to its own new building only from May 2000 onwards. Till April 2000 the manufacturing activities of the appellant were carried at Nayakas building Mangalore and unfortunately, the ESI Inspector of the respondent/corporation visited the appellant/establishment on 6/2/2001 and after verification of the bills and vouchers relating to the construction of the building at Deralakatte, wrongly made observation that the appellant is liable to pay ESI contribution to the extent of Rs. 50,613/- on payment of Rs. 7,78,657/- made to the independent contractor to construct the building and the said amount was inclusive of the material charges , machinery and other expenditures paid to the contractors for the construction of the new building at Deralakatte. Therefore, the above payments are not made as wages under Section 2(22) of the ESI Act, 1948. No manufacturing activities was carried out by the appellant/establishment at Deralakatte. The observations and the conclusions made by the Insurance Inspector are against law and facts. It is the further case of the appellant that on the basis of the observations made by the Insurance Inspector, respondent No. 2 forwarded the notice dated 11/4/2001 to the appellant demanding contribution amounting to Rs. 50,613/-. Therefore, the conclusion arrived at by the respondent No. 2 in the notice referred to it is baseless. Again respondent No. 2 issued another notice dated 10/6/2001 to the respondent No. 3 advising to recover a sum of Rs. 50,613/- and interest of Rs. 3,112/- from the appellant Therefore, the respondent No. 2 in its notice dated 10/6/2001 initiated a recovery notice against the appellant in a coercive manner, even though the appellant was not required to pay the alleged contribution as demanded by the respondents. Since it was compelled by the respondents, therefore, the appellant paid Rs. 40,000/- under challan dated 17/8/2001. It is the further case of the appellant that later, it was realised that the appellant is not required to pay the alleged contribution claimed by the respondent/corporation in respect of the payment made to the independent contractors to can out the work. Therefore, the appellant addressed a letter dated 15/7/2002 to the respondent No. 2 by registered post acknowledgement due, with a request to refund the amount of Rs. 40,000/- deposited by it under coercion and requested to drop further recovery proceedings. But the respondent without considering this request, proceeded further for recovery of balance amount of Rs. 13,725/- by issuing notice dated 31/8/2002. Therefore, the appellant filed the ESI Application No. 14/2002 before the Presiding Officer of the Labour Court at Mangalore, seeking to set aside the notices of the respondent dated 11/4/2001 and 10/6/2001 and sought other consequential reliefs. The learned Presiding Officer, Labour Court after hearing the Counsel for both parties allowed the ESI Application filed by the appellant under Section 75 of the ESI Act before the Labour Court though the Labour Court by setting aside the order of the respondent made in KAR.INS.III/53-16583-67 dated 11/4/2001 as per Ex.R.14 and C.18/norice dated 10/6/2001, however refused to order for refund of the amount already deposited by the appellant but, advised the appellant herein to initiate the other appropriate proceedings against the respondents. Hence, this appeal.
6. Whereas, the appellants in MFA.6344/2003 have come up with this appeal questioning the legality and propriety of the order dated 30/6/2003 passed by the Labour Court in ESI Application No. 14/2002 on the ground that order of setting aside the proceedings initiated by the respondent/Management is totally incorrect and illegal. Hence, these appeals.
7. Heard the arguments of the learned Senior Counsel Sri Kasturi, appearing for the Management and the learned Counsel Sri. V. Narasimha Holla, appearing for the ESI Corporation.
8. During the course of arguments, learned Senior Counsel Sri K. Kasturi, appearing for the Management submitted that the initiation of proceedings against the appellant/management for payment of contribution and interest on the basis of the payment made to the independent contractors to whom the construction work was entrusted is incorrect and illegal. It is argued that under Section 2(22) of the ESI Act, the amount paid to the independent contractors to whom construction work was entrusted does not come under the purview of wages, the appellant had not directly engaged the masons and other construction work for construction of the building and has not paid amount to the labourers and masons, therefore, the order of ESI Corporation directing the appellant - Management to pay Rs. 50,613/- towards contributions is erroneous, incorrect and illegal. It is argued that the recovery proceedings initiated against the appellant for payment together with interest of Rs. 3,112/- is contrary to the facts and law. The appellant has challenged the recovery proceedings and the notice issued before the Labour Court at Mangalore, under Section 75 of the ESI Act and the learned Judge though rightly set aside the recovery proceedings, but foiled to order refund of the amount deposited by the appellant with the respondents on account of coercive method adopted by the respondents. Therefore, the learned Counsel for the appellant submitted that when the appellant deposited Rs. 40.000/- on account of the compulsion and coercion, Labour Court ought to have passed an order directing the respondents to refund the said amount. Instead of that the Court below directed the appellant to initiate other proceedings against the respondents which is improper and the Labour Court is empowered to pass a relief of refund of amount Once the Labour Court comes to the conclusion about the amount deposited by the appellant under coercion automatically the appellant is entitled for refund of the amount. Hence, to that extent prays to pass a suitable order by modifying the order passed by the Labour Court.
9. Having heard the arguments of the learned Counsel appearing on both sides, the point that arises for my consideration is whether the ESI Corporation is justified in allowing the application 14/02 filed under Section 75 of the ESI Act? If so whether the appellant in 1391/05 is entitled for refund of amount of 40,000/- deposited by it due to coercion? If so what order?
10. The appellant management in MFA. No. 1391/04 is a company manufacturing watch parts which is covered under ESI Act and the code number was allotted by the respondent. It is also an admitted feet that initially it has started manufacturing watch parts in the rented building at Marnami Katta, therefore, it started building its own building at Derala Katte by entrusting the same to independent contractors in the year 1999, accordingly, the contractor completed construction of the building in April 2000. Accordingly it has shifted the manufacturing activities to its newly constructed building at Deralakatte in May 2000 onwards. There is no dispute that the appellant/management paid a sum of Rs. 7,78,657/- to its contractor which includes material cost, machinery and other expenditures. In this behalf, to appreciate the contention of the learned Counsel on both sides, it is necessary to answer the point whether the amount so paid by the appellant to its independent contractors for construction of its own building amounts to wages?
11. As per Section 2(22) of the E.S.I. Act, 1948, 'Wages' means all remunerations paid or payable in cash to an employee, if the terms of contract employment, express or implied, were fulfilled and includes (any payment to an employee in respect of any period of authorised leave, lock-out, strike, which is not illegal or for lay off and) other additional remuneration if any, (paid at intervals not exceeding two months) but does not include-
(a) any contribution paid by the employer to any pension fund or provident fund, or under this Act;
(b) any travelling allowance or the value of any travelling concession;
(c) any sum paid to the person employed to defray special expenses entailed on him by the nature of his employment; or
(d) any gratuity payable on discharge;
12. From the reading of the above provision of law it is clear that the amount paid to the independent contractors for the construction of the building for manufacturing of the watch parts do not become wages. Therefore, the court below has rightly come to the conclusion that any amount paid other than to the employees for the purpose of purchase of materials, paid to the contractors for construction of building will not cover under the definition of wages. Therefore, the demand made by the respondents inspector by its notice dated 11-4-2000 that the appellant is liable to pay in all Rs. 50,613/- has been rightly set aside by the Court below and the same does not require any interference. The ESI court has rightly relied on the decisions rendered by the Bombay High Court reported in 1994 1 LLJ 519 the law laid in the said case is rightly applicable to the facts of the case on hand. Demand made by the ESI Corporation under its notice to pay the contribution amount is totally illegal and perverse. Though the ESI Court has rightly come to the conclusion in setting aside the order of the respondent but has come to an erroneous conclusion in not ordering for refunding the amount of Rs. 40,000/- deposited by the appellant with the respondent. Since the respondent has made the appellant to deposit the amount by wrongly issuing the notice the appellant is entitled to refund of the same but the learned Presiding Officer of the Labour Court at Mangalore, was not sure about the refund of the amount so deposited by the appellant in MFA No. 1391/2004. When the ESI Court is empowered to entertain the appeal under Section 75 of the Act and when it has come to a definite conclusion that the appellant is entitled to refund of the amount, it ought to have directed the respondents to refund the amount of Rs. 40,000/- deposited by the appellant, instead the Court below advised the appellant to initiate proper proceedings seeking refund of the amount, which is erroneous. Records indicate that Rs. 40,000/- has been deposited by the appellants, which is not in dispute. Therefore, J am of the opinion that the appellant in MFA. 1391/2004 is entitled to refund of the amount already deposited by him without initiating any separate proceedings seeking refund of the said amount. Hence, MFA. 1391/2004 is liable to be allowed in part In view of my discussions and findings I do not find any unreasonable conclusion arrived at by ESI Court in allowing the ESI Application No. 14/2002 filed by the respondent, therefore MFA No, 6344/2003 is liable to be dismissed.
13. Hence, for the foregoing reasons, MFA. No. 1391/2004 filed by the Management of the Shagil Precision India, is hereby allowed. The finding of the ESI Court to the extent directing the appellant to initiate separate proceedings to get the refund of Rs. 40,000/- deposited by it with the respondents is hereby set aside. The appellant is entitled to get the refund of Rs. 40,000/-deposited. Accordingly, respondents are directed to repay the said amount within 30 days from the date of receipt of a copy of this order.
14. MFA. No. 6344/2003 filed by the ESI Corporation is hereby dismissed as devoid of merits.