Tag Archives: inspection

ESIC inspection & Account Books of employers!


Can the ESI Inspector (the SSO) demand the ledger, cash books, balance sheets, Income Tax Assessment Reports, etc., of the employers?

What will happen if the employer says that he has not preserved the records as mandated by the Income Tax Act for six years or as per the Companies Act for eight years?

The Power Point Presentation provides a brief answer to these questions.



Click on the link below for the Power Point Presentatin

Inspection and Account Books

NB: This presention would also provide answer to the comments of Mr. Jai who said, “If an employer does not preserve records as per the Company Act and the Income Tax Act, that is none of the business of ESIC” under the thread “On Amnesty Scheme 2014: Part -II”.


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Action Against Defaulters: Quo vadis, the ESIC?

Excerpts from a news item from the Times of India dated 07.12.2012:

“It has been observed that open-ended assessment, inquiries and investigations serve no real purpose. Moreover, such inquiries often do not result in the identification of beneficiaries and only tend to harass the employers and establishments. It is accordingly directed that no inquiry or probe shall ordinarily go beyond seven years that is, it shall cover the period of default not exceeding preceding seven financial years. It is to be ensured that compliance actions are initiated in time and there is normally no reason for extending the scope of investigation and assessment inquiry beyond previous seven financial years,” Central PF commissioner R C Mishra said in a circular issued on November 30, the day he superannuated.

“This circular is anti-worker. The law of limitation does not apply on us and does not stand the test of law as there are several Supreme Court rulings on the issue,” said A D Nagpal, Hind Mazdoor Sabha secretary and a trustee on the EPFO board.

“Nagpal said that fearing action, employees often do not complain against their employer till they leave service and the new provision will make it impossible for them to claim what is due to them.”

“It is not proper to have a time limit for what is an employee’s right,” added CITU president A K Padmanabhan, who is also on the EPFO board. He said the EPF statement usually does not reach employees on time and very few actually check the balance and deposits carefully.

Even before the circular was issued, there were protests within EPFO over the move. Sources said some of the members of a committee of officers on judicial proceedings had opted out from giving their recommendations as they recognized that the move was not employee-friendly. Yet, Mishra went ahead and issued the directive.


“In a country which has precious little by way of a social safety net, the provident fund is one of the few such fallback options, even if only for those in the organized labour force. Any change in the rules governing this scheme must therefore be tested on the touchstone of whether it enhances the safety net or weakens it. Imposing a time limitation on when defaults can be investigated clearly weakens it. Most of those whose savings lie in the EPF do not regularly track whether money is being deposited in it by their employers and, if so, whether it is as much as it should be. They may well discover a default well after it happens. Clearly, they cannot be left with no scope for redress due to a time limitation clause.”

What happened in the ESIC? The ESIC had, silently, restricted the duration to five years (and not seven as in the EPFO) and got the Act amended too. The cut-off date for determining the five years period is not with reference to the financial years but with reference to the 21st of every month. The cut-off date was just left to float, so fast.

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ESIC Inspection Procedure and its Impact on Society

(Dear Readers,

We have seen the theory and practice in Administrative Procedure in the earlier Posts. We have seen the link between the internal administrative procedure of a department and its impact on public. The current Post deals with certain vital aspects of the administrative procedure evolved in the Revenue Wing of the ESI Corporation and the way it directly affects the insured persons, insurable persons, employers, Social Security Officers and the Revenue Branch Officers. All the instructions cited in the Post are available in public domain.)

The objective of the ESI Scheme is to provide a variety of benefits to the working population. The provisions for inspection mentioned in the statute are, therefore, intended only to further that objective.  Concealed employment can be detected only through proper inspection including Ledger Verification in a thorough manner. A simple visit by the Inspector or his going around the factory cannot help detecting such cases. Inspections alone can ensure that all the coverable employees have been covered without being left out, and that contribution is paid on their behalf on all items of wages. If contribution is not paid on all items of wages, the benefits payable would only be a pittance and would not help sustenance of the family of the insured persons during the periods of sickness, maternity, etc., The provision for inspection in the ESI Act is, therefore, intended, mainly, to safeguard the benefit provisions.

The ESI scheme pre-supposed mutual trust on the part of the Employers and the Corporation. It was presumed that the compliance would be honest and correct. That was why the Act did not make inspection mandatory. But, when the scheme was enforced, it was found that the reality in the field was different. The working population was denied coverage or was given benefit very very less as the wages on which the contribution was paid was very less.

Periodical and proper inspections alone could safeguard the interests of the working population by ensuring proper coverage and compliance, the authorities understood. As the saying goes, the ESIC did not get what it expected. It got only what it inspected.

Former Director General, Mr. T.C. Puri who was in charge of the ESIC during the period from 1967 to 1972 had done personal research on insurance matters and issued orders for  proper documentation of the behaviour of the employers so that the Inspection methods could be made more effective when dealing with recalcitrant employers. He ordered that such details available with the ESIC authorities must help them to ascertain which employer was ‘absolutely honest’ and ‘above board’ and which employer was ‘trying to cheat the ESI Corporation’. He said that such information must be readily available to the SSOs whenever they join a particular inspection division. Proper and necessary focus was there at that time on the inspection procedure. That set the trend of inspections for more than 24 years from 1968 to 1992.

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Filed under Amendments 2010, For Trainees

Inspection of factories

An article published in the Business Standard in December, 2010 brought out how the employees of the factories in Vellore felt that their legitimate rights would be protected only when the factories were inspected by the inspectors periodically. Long working hours, penalty for visit to toilets more than twice during a day, etc., were highlighted in that article.

As far as the ESIC is concerned, numerous cases of concealed employment are not detected because of absence of availability of information, lacunae in the Inspection Policy and lack of adequate number of Social Security Officers with reference to the actual work-load in such cases.

The ESIC has permitted the employers to register themselves online and get Employer’s Code Numbers generated. As a result, various kinds – repeat various kinds – of further problems have cropped up.

Monetary liability for the ESIC is, at present, created in respect of every TIC generated online by an employer or by a person posing as an employer even when the organisation is not sure whether the case is genuine and whether contribution as per rules would be forthcoming or not.

The EPFO is also facing only some of these problems. For more on this issue, please visit


But, the laxity in inspection does not  result in incorrect financial outgo as the EPFO pays benefits only with reference to the contribution paid, while the ESIC pays benefits not only on the basis of contribution paid but also on the basis of contribution payable but not paid.

The ESIC has not put in place adequate monitoring mechanism. The availability of man-power in the cadre of Social Security Officers is very very less when compared to the magnitude of the work in hand.

The government wants to do away with inspections, of course, for certain legitimate reasons. Please visit the following link:


But, controlling corruption and doing away with inspection are not synonymous. The government should also find a way and convince the working population how the problems faced by them would be located and solved.

Periodical and proper inspection of all factories and establishments will, alone, ensure coverage and protection of the workforce.

The very concept of compliance under the ESI Act is based on mutual trust and that was why the word ‘may’ is used instead of ‘shall’ in Sec. 45 (2) of the ESI Act, 1948.

But, the concept of Public Administration is “You do not get what you expect; you get only what you inspect’.

In other words, “Do not expect what you do not inspect”.

It would be helpful to the insured population if the inspection system of the ESI Corporation is streamlined to be ‘employee-friendly’ so that all employees are covered in time and contributions made to be paid on all items of wages as defined  under Sec. 2 (22) of the ESI Act, 1948.

ESI Corporation can ensure willing participation of labour in the making of the nation.


Filed under For Trainees, Inspections