High Court Rejects Plea of Kindergarten School Against ESI Contribution Assessment

ESI Corporation’s Claim Based on Notional Wages of Rs. 8250/- per Month Stands
The Calcutta High Court has dismissed the petition filed by M/s L.K. Shishu Shiksha Niketan, challenging an order by the Employees’ State Insurance (ESI) Court that rejected the school’s application against ESI contribution demands. The judgment delivered by Justice Ajoy Kumar Mukherjee emphasized the necessity of compliance with statutory provisions regarding deposit requirements under the Employees State Insurance Act, 1948.

M/s L.K. Shishu Shiksha Niketan, a kindergarten school, was subjected to a claim by the ESI Corporation demanding contributions for ten employees based on assumed notional wages of Rs. 8250/- per month, for the period from June 2012 to December 2016. The school contended that this calculation was arbitrary and did not reflect the actual wages paid to its staff, which were significantly lower.

The school argued that its staff were primarily volunteers receiving only conveyance allowances, and the contributions were calculated on erroneous wage assumptions. Despite these claims, the ESI Court upheld the ESI Corporation’s demands, leading the school to file a petition under Article 227 of the Constitution of India.

The High Court examined the legality of the ESI Corporation’s calculations and the jurisdiction of the ESI Court’s decision. Justice Mukherjee noted that the petitioner’s assertion of voluntary services and minimal wages was insufficient to counter the ESI Corporation’s statutory calculations. The court observed that the school failed to provide convincing evidence against the assumed notional wages used for contribution assessments.

Under Section 75(2-B) of the ESI Act, a principal employer is required to deposit 50% of the claimed amount to raise any disputes regarding contributions. The court clarified that the proviso allows for a waiver or reduction of this deposit at the court’s discretion, but the petitioner’s case did not warrant such leniency.

Justice Ajoy Kumar Mukherjee remarked, “The petitioner failed to present a good prima facie case to warrant a waiver of the statutory deposit requirement. The assumption of wages by the ESI Corporation is grounded in statutory provisions and the petitioner’s claims lack sufficient evidence to challenge the jurisdiction of the ESI Court’s order.”

The High Court’s decision to dismiss the petition reinforces the statutory framework governing ESI contributions and the necessity for compliance with procedural requirements. This judgment underscores the importance of accurate record-keeping and adherence to legal provisions in disputes concerning employee insurance contributions.

The dismissal of M/s L.K. Shishu Shiksha Niketan's petition serves as a reminder to employers about the critical nature of statutory obligations under the Employees State Insurance Act, 1948, particularly in relation to the calculation and payment of contributions based on employee wages.

Date of Decision: 29.07.2024