We find another Amnesty Scheme introduced by the ESIC, as per the Hqrs. communication dated 03.03.2014. The Scheme is in force at present, up to 27.01.2015.
Origin – only for criminal cases
A look at the history of the Amnesty Scheme shows that it was introduced first in the 1990s, to grant amnesty to those employers who had actually committed offences under the ESI Act and were facing prosecution Sec. 85 of the Act. Prosecution was only for the offence committed and was not for recovery of dues, for which there were other provisions. Prosecution of employers was resorted to, in addition to and in spite of the ESIC having recovered all the arrears. ESI Corporation had a provable case against those employers and the evidence was categorical and clear. The employers wanted a reprieve so that they could turn a new leaf. And that was where the Amnesty Scheme provided a relief.
The power to sanction prosecution was vested in the Regional Directors but they had no power to withdraw the cases once filed. The employers took up such cases only with the Hqrs. Threre had, occasionally, been cases where the Hqrs. communicated permission to withdraw the criminal cases filed by the Regional Directors.
It was in those circumstances, the concept of Amnesty came as a relief to the employers, as the Regional Directors had been given powers to withdraw the criminal cases filed against the employers. Corporation granted Amnesty to them, in spite of the fact that the Corporation had produced clear documentary evidence in the Court of Law, in all those cases to prove the offence committed by the employers. Corporation was in a legally stronger position that when it condescended to withdraw those cases, it could call that process as Amnesty. The important aspect of that Amnesty Scheme was that there was no loss of revenue to the ESIC in such cases.
Overstepping
But, the employers saw in the year 2010, a New Amnesty Scheme, which went beyond Sec.85 and extended its scope to Sec. 75 also. That came really as a surprising and shocking news to everyone, at that time itself.
Because, there could be no Amnesty for cases covered under Sec. 75. Employers resort to Sec. 75, when they feel aggrieved by the orders issued by the ESI authorities under Sec.45 determining the contribution due (let alone other issues covered under Sec. 75). The employers appeal to the EI Court under Sec. 75, disputing the coverage or the quantum of contribution determined as due. It becomes the duty of the Corporation, then, to explain its case in such cases, before the EI Court and justify its order with evidence and convincing reasons. The concept of Amnesty does not apply here, at all. It is a misnomer.
If the ESI Corporation wants to “reduce the number of litigation by providing a mechanism for resolution of disputes outside the court”, as has been mentioned in the Hqrs. communication dated 03.03.2014, that mechanism cannot be called as the Amnesty Scheme. That will only be called as a mode of “Alternative Dispute Resolution.” And, Alternative Dispute Resolutions are resorted to, through the Arbitration and Conciliation Act, 1996, only when there is a dispute on business/trade related matters. The ESIC is not a commercial venture. It is preparing only Income and Expenditure Account. It is not earning Profit or incurring Loss, but only accumulates Surplus and faces Deficit. There cannot, therefore, be any out of court settlement, the ADR, for recovering or foregoing the revenue legally due to the ESIC. The Hqrs. had better had a re-look at the Amnesty Scheme, at least now, for cases under Sec. 75, without repeating the initial wrong committed in the year 2010.
Arrears are determined under Sec. 45 only in respect of defaulters, who have not paid any contribution at all or paid only some contribution and left out some amount of contribution, which is payable to the ESIC in the eye of law. The contribution due is determined under Sec. 45, only by extending the opportunity of natural justice to the employers.
Cases of total defaulters
There are umpteen cases where the Courts have upheld even the ex-parte orders of the authorities, if the orders had been issued, duly recording the facts on the basis of available evidence and after affording opportunity to the employers to explain their cases. These orders are, if issued right, legally valid and enforceable. The very contents of those orders would convince the Courts of the justifiability of the order. So, all that the ESIC has to do under Sec. 75, is only to explain its stand with reference to evidence and establish its case before the Courts of Law.
When the employer is challenging the justifiability of the order issued under Sec. 45, the ESIC should justify it, instead of trying to accommodate the employer by accepting lesser contribution from him, as he pleases**. That would imply that the ESIC is accepting that its own order under Sec. 45 might not stand the scrutiny of law. And, the ESIC cannot afford to give that impression to the public. It is a fact on record that the ESIC has not assessed how much amount legitimately due to it as Contribution, Interest and Damages, it had lost by extending the Amnesty Scheme to Sec. 75.
Cases of partial defaulters
Even more serious is the readiness of the ESIC to re-consider the cases in which contribution had been determined on omitted wages. When the employer has produced the records before the authorities, and the contribution is determined on certain items of wages omitted to have been taken into account by the employer, the authorities issue orders explaining reasons for payment of contribution on those heads of accounts. The ESIC had seen so many orders of the ESIC authorities issued under Sec. 45 A upheld by the Hon’ble Supreme Court of India. There are numerous celebrated cases, which have set precedents to guide the officers later. Many publications on the ESI Act contain these cases. There cannot be any justification for the ESIC to escape from its responsibility to explain its legitimate stand before the Court of Law and recover the arrears of Contribution and Interest legally due to it. There cannot also be any concession to those employers in the form of reduction in the Damages payable, in such cases.
‘Purpose’ of 45 AA, if any, lost
Moreover, the very purpose of Sec. 45 AA itself, as was informed informally, at that time, was to help the employers find solution in-house without going to court. The Statement of Objects and Reasons for the ESI Act amendment Bill did not say any reason for introducing 45 AA. For more: (https://flourishingesic.info/2013/04/12/appellate-authority-us-45-aa-a-comparison-with-it-act-and-epf-mp-act/)
But, the present Amnesty Scheme clearly implies that the ESIC wants to accommodate even the employer who had failed to pay the contribution due as determined under Sec. 45 A, and again under Sec. 45 AA. This message sends a strong and wrong message to the honest employers, who pay the contributions in time for all employees in respect of all items of wages. That will harm the organization in the long run.
Amnesty in Appeal cases
Besides, another serious issue is that the anomaly that was started in 2010 to extend the Amnesty provisions to Sec. 82 is continued even now. The repeated attempt of the officers in the field to the officers in the Hqrs. then, did not yield any positive result, at that time. The fact is that the ESIC cannot sound accommodative to the employers who had lost their cases in the EI Court and High Courts. When the Court of Law has upheld the order under Sec. 45, the ESIC cannot divest itself of its right to recover the dues from the employer, just because the employer has gone in appeal to the High Court or Supreme Court, when both these Courts entertain appeals only on questions of law. When the ESIC got the stamp of approval of judiciary for its orders under Sec. 45, there is no ground for the ESIC, as an public organization, to talk to the employer outside the Court.
The provisions of Amnesty Scheme, therefore, need re-consideration and the wrongs of 2010 deserve to be righted.
Undertaking
The earlier Amnesty Schemes demanded an undertaking from the employers that they would pay contribution correctly, in future. This was only a token promise, and does not have any evidentiary value for prosecuting the employer, in future. Because, the employer is, anyway, bound to pay the dues in time, as per the relevant provisions of the Act itself, whether there is an undertaking or not as mentioned in the Amnesty Scheme.
But, it was mentioned, for the first time, in the Amnesty Scheme of 2010, that if he does not give such undertaking, “he/she shall forfeit the right to avail of such Amnesty Scheme”. This clause gave the impression that there would be next Amnesty Scheme too. This clause did not imply that it was with reference to the current Amnesty Scheme only. The impression of the employers needs to be addressed to.
The message
Until then, the consultants would guide the employers not to pay any contribution to the ESIC but to file a case in the EI Court, prolong it and wait for the next Amnesty Scheme.
==
Note **: The contents in Para 2 in Page 2 of the Hqrs. letter dated 03.03.2014 will be discussed, in detail, in Part II of this Article.
Flourishing ESIC 
With the introduction of 45AA, there is no provision of reopening of recovery certificates. Amnesty Scheme gives the powers to reopen the recovery certificates once the employer applies under the scheme.
Theoretically, the position stated above seems correct but there are orders under section 45 A which have been passed under circumstances when they should not have been like after closure of factory or establishment, not taking cognizance of employers’ representations and even denying the representations on flimsy or wrong grounds. In one case, there was 45 A order was passed on assumed wages ignoring the representation of the employer even for the period inspection had been completed and the contribution on omitted wages paid.
This continues even if the employer applies under the scheme and his application is rejected on some flimsy grounds. If you could collect data how many cases were settled under the scheme and how many cases of Section 75 and 82 were actually settled, you could realise what expectations the Scheme is able to generate amongst the employers.
There seems no need to hate the consultants also. Rather, ESIC could think of regularising them like the TRP Scheme of the Income Tax Department.
The issues raised by Mr Jai are answered to:
1. Re-opening the C-19 (Certificates issued to the Recovery Officers):
The clamour for re-opening the C-19 is there only because many people believe that the arrears determined would become less after such re-opening. Contrary could also happen. When such incidents happened, the employers went to EI Court and High Court questioned the authority of the officers in having re-opened the issues already settled as per Sec. 45-A. The procedure followed by the ESIC authorities in re-opening the C-19 was unlawful (This fact had, clearly, been recorded in the Minutes of the Standing Committee itself somewhere in the year 2006, when the amendment to Sec. 45 was being considered).
2. Unlawful 45 A orders :
Mr.Jai says that 45 A orders are issued under the circumstances in which they should not have been issued. In fact, 45 A orders cannot be issued without affording opportunity to the employer to be heard. The acknowledgement for service of the Notice in Form C-18 must be on record before issuing the order under Sec. 45-A. If the order has not been issued on these lines, it is an invalid order and can be settled in-house under Sec. 45 AA too. Amnesty Scheme is not necessary for this purpose. Amnesty Scheme is not supposed to be regular and periodical. It may nor may not be introduced. What will happen to the employers who face such orders, if there was no Amnesty Scheme at all? Amnesty Scheme cannot be extended to Sec. 75 and Sec. 82 cases.
Besides, there are categorical instructions to the officers not to asses contribution for the period covered by the 45-A orders issued already on omitted wages. And, no assessment of contribution is permissible on assumed wages for the period for which contribution had been paid by the employer on his own, not to speak of the inspection done. If there are such 45-A orders, in spite of the evidence adduced by the employer, as reported by Mr.Jai, the next course of action is to complain to the Chief Vigilance Officer of the ESIC or to go to the EI Court alleging mala fide. Amnesty Scheme is not intended to provide any remedy in such cases. Mr.Jai himself has said, “This continues even if the employer applies under the scheme and his application is rejected on some flimsy grounds”.
3. Amnesty Scheme, antithesis to Sec.75 and Sec. 82:
When Sec. 75 and Sec. 82 cases cannot fall within the concept of Amnesty Scheme, the result of the response of employers is not relevant. The main issue is whether the authorities have the right to forego the revenue legitimately due to the organization, as determined under Sec. 45 in a legally valid manner. The answer is that they cannot. There is no provision in the Act empowering any officer to forego such revenue.
4. All are welcome to advance the purpose of the Act:
In regard to the Consultants, it is clarified that there is no recognized term as Consultants. ESIC permits any person to represent the employer as his authorized representative, in spite of the fact that the maintenance of records and registers is, relatively, simple. The ESIC is, thus, not averse to entertain the authorized representatives of the employers, whoever it may be, and whatever be their designation. We find advocates, auditors, employees of the employers, consultants and others known to the employers, representing the employer and / or doing the work of the employer in ESIC related-matters. As long as those representatives guide the employer rightly and work for coverage of all eligible employees and ensure payment of contribution on all items of wages and thereby advance the purpose of the Act, they would be doing real service to the society.
There is no provision in any law for any Amnesty Scheme. Still Amnesty Schemes are announced by various departments. Amnesty Schemes are perhaps an administrative extension of Lok Adalats where cases are settled through mutual consent. Hence, it would not be proper to dump Amnesty Schemes on the whole. This is a positive initiative with noble intention of sorting out the dispute through mutual consent, through a give and take situation.
The scheme is not applicable where assessment has been made on actual basis. This leaves the Scheme open for settlement only where assessment was made on ad hoc wages basis.
In the MoU entered into by ESIC with Ministry of Labour and Employment, ESIC has promised to settle 2000 cases under the scheme. Thus, if some cases are actually settled, this will save much of ESIC’s resources and earn it contribution which are otherwise locked in litigations. Amnesty Scheme, if implemented honestly and sincerely, is a win-win situation for both ESIC and employers and help earn public goodwill, so important in democratic systems.
Government of India is below the ESI Act and not above that. It does not have any authority to advise or empower the ESIC to forego the contribution due from the defaulters, when the contribution has been assessed as per law, after affording opportunity of natural justice under Sec. 45-A. More so, when the orders issued under that section have been upheld by judiciary. The analysis in Part I and II highlight the legal wrongs in the Amnesty Scheme introduced in the year 2010 and re-introduced in the year 2014 to extend the provision of the Amnesty to Sec. 75 and Sec. 82 in a very liberal way. This would only discourage honest employers from paying contribution in time.
An excellent article no doubt. But if the scheme is analysed at length it will be at once clear that it is applicable only for ad hoc determination and no compromise is contemplated in respect of Actual Wages. Talking of ad hoc wages, the ESI Act Scheme Provisions and rules are silent on this mode of determination of contribution of subsumed wages in repairs and maintenance and other such heads of accounts. Orders passed under Sec 45 A/45AA go by circulars and instruction manua.l Though the Courts have validated claiming of contribution for wages paid to employees as defined u/s 2 (9) (ii) & (iii) , the fact remains that their identification is a challenge. The matter gets more complicated when job work is done outside the premises. A water tight system would eliminate externalities and free riders. Moreover claiming contribution of 6.5 % for casual employees who in any case will not be entitled to the bouquet of benefits offered by the ESI scheme is also not fair.
Dr. Patrick Ryan
Advocate