Wednesday, September 28, 2011

OA No.457 /2008 on 01-04-2010






K. Manivannan,
Aged about 62 years,
S/o late K.M. Kuppuswamy,
R/at No.572, 10th Cross, 5th Main,
J.P. Nagar Phase – 3,
BANGALORE – 560 078. ... Applicant

(By Advocate Shri T.R. Sridhar)


1. Union of India,
Represented by the Secretary,
Ministry of Labour,
Shram Shakti Bhawan, Rafi Marg,
NEW DELHI – 110 001.

2. The Director General,
E.S.I.C., C.I.G. Road,
New Delhi – 110 002.

3. The Insurance Commissioner,
E.S.I.C., C.I.G. Road,
New Delhi – 110 002.

4. The Regional Director,
E.S.I.C., No.10, Binny Road,
BANGALORE – 560 078. ... Respondents

(By Advocate Shri V.N. Holla,
Addl. Central Govt. Standing Counsel)


Hon'ble Smt. Leena Mehendale, Member (A) :

The case arises against the penalty of withholding two increments without cumulative effect on the applicant based on the disciplinary enquiry for a charge of omission due to negligence in proper inspection of one company, viz., M/s. Bangalore Clothiers Ltd., resulting in possible loss of revenue to the Department (ESIC).

2. The charge sheet was issued to the applicant on 10.11.1998. The Disciplinary Authority imposed the penalty to withhold two next increments without cumulative effect vide order dated 17.04.2001. The First Appeal was rejected by order dated 03.06.2003 and the second Appeal was also rejected vide order dated 24.08.2004. On coming to the knowledge of certain information which the applicant procured under the RTI Act 2005, he submitted a Review Application which was also rejected vide order dated 17.4.2008. Thus, exhausting all the remedies, the applicant approached this Tribunal. The application is therefore, within the time limit.

3. The events leading to the case are as under:

The parent organisation viz., the ESIC (Employees State Insurance Corporation) has regular system of sending its Managers and Insurance Inspectors to inspect various industries to ascertain the number of employees, their rank and salary, the nature and place of production and the revenue that becomes due to ESIC from the industry towards medical and other Insurance of these employees. The charge is as under:

"Shri K. Manivannan, while functioning as Insurance Inspector, Wilson Garden Division, ESI Corporation, Bangalore, had conducted Regular Inspection and Ledger Verification of M/s. BANGALORE CLOTHIERS PVT LTD., BANGALORE, Code No.53-10001-19 on 9.2.96 and 20.2.96 covering the period from August 1993 to December, 1995 (Ledger verified for the period from November 1990 to March 1994). The unit was test inspected and the Test Inspecting Officer (TIO) had detected huge omitted wages. He had also observed that the employer had incurred huge expenditure for job work which were not detected by the applicant. By his act of not detecting huge omitted wages during his regular inspection, he had exhibited a clear negligence in discharge of his official duties properly. Had the test inspection not been done, there would have been substantial loss of revenue to the ESI Corporation."

4. Heard Shri T.R. Sridhar, lerned counsel for the applicant and Shri V.N. Holla, Additional Central Govt. Standing Counsel for the respondents.

5. The learned counsel for the applicant pointed out that on the face of it, the charge sheet conveys as if the regular inspection was done by the applicant on 9.2.1996 and 20.2.1996 in which he did not detect any omitted wages from the employer M/s. Bangalore Clothiers Pvt. Ltd., Bangalore and these were detected only subsequently by the TIO (Test Inspecting Officer) who later on detected huge omitted wages and hence the loss is impugned on the applicant. But the real sequence of events is not like that. The actual sequence is that on 26.8.1993 the employer's premises was inspected by one Shri B.S. Vittalachar, and his report was then test inspected by Shri Cherian Kurian, TIO on 2.7.94 and 28.7.94 The visit and inspection done by the applicant was subsequent to this in February, 1996. Even though the TIO had suspected huge omitted wages, admittedly he had not inspected the ledger for want of time. Subsequently, when the applicant inspected the ledgers, he felt that the huge expenditure for job work from the employer could be accounted on other grounds such as, not falling within the limits of Bangalore City and so on. Hence, he did not point out any recovery. The learned counsel further pointed out that during the departmental inquiry, the TIO Shri Cherian Kurien was the witness and he deposed that since he had not inspected the ledger, so he had only indicated the possibility of recovery from the employer but cannot state for sure if recovery was really due. Even then the ground for charge sheet namely causing loss to the department by not pointing out the recovery was wrongly held as "proved".

6. The learned counsel further pointed out that the Department had not ascertained the loss or made any efforts to ascertain the loss either on the date of issuing the charge sheet to the applicant or till the end of the enquiry on 31.3.2000. when the inquiry officer submitted his Inquiry Report. Only on seeing the explanation furnished by the applicant on 23.5.2000 to the disciplinary authority, the respondents became alert and commenced the correspondence with the employer after a period of six years. Only thereafter proceedings under Section 45-A of the ESI Act was initiated against the employer. This indicates that there was no application of mind to claim loss of revenue to the Corporation and there was no material to frame charges against the applicant. The fact of notice dated 15.11.1996 issued to the employer to explain why action should not be taken under Section 45-A of the ESIC Act or the fact of order dated 7.11.2000 for recovery of dues to the extent of Rs. 1,29,228/- and the fact whether actual recovery was made were not part of the evidence against the applicant in the departmental enquiry proceedings. Only, the Appellate Authority in the 1st and the 2nd Appeal while rejecting the appeal have relied upon these events. The applicant was not in the knowledge of the recovery proceedings from the employer during his enquiry and came to know about it only after demanding these documents under the RTI Act, 2005.

7. The learned counsel for the applicant has also pointed out the following dates as crucial for his case.
a) 26.8.93 – Date of inspection by Shri B.S. Vittalachar
b) 8.8.1994 - Date of Test Inspection Report of Shri Cherian Kurian the TIO.
c) 9.2.1996 & 20.2.1996 – Dates when the applicant made inspection to the
d) 20.10.1994, 15.4.1996 and 15.11.1996 – Dates of issuing notice to the employer to explain why action under Section 45-A should not be taken.
e) 10.11.1998 – Date of Charge sheet
f) 31.3.2000 – Date of completion of inquiry and submission of the Inquiry Report.
g) 30.11.2000 - Notice issued by the Department to the employer under Section 45-A.
h) 17.4.2001 - Order of penalty on the applicant.

These dates are important because they demonstrate that even after the TIO pointing out the possibility of recovery from the employer on 8.8.1994, the Department does not have any system by which such recoverable amount is monitored and pursuaded. The Department remained silent after the notice to the employer dated 15.11.1996 and started recovery process only when the applicant, during the enquiry and by way of his defence, pointed out that the Department had till then not made any efforts either to ascertain the loss or to recover the same and hence the charge of negligence against him is not tenable. The department which is charging the applicant for "exhibiting a clear negligence in discharge of his officil duties properly" was itself not systematic or prompt for monitoring its dues recoverable from the employer. Further the charge sheet was also not framed with due application of mind. The learned counsel pointed out that the Inspection Report of the applicant by itself is not quasi judicial and the action under Section 45-A can be initiated only by a senior officer who is entitled to
get another test inspection done, if he was not satisfied with the report of the applicant.

8. The learned counsel for the respondents submitted that the 1st Appeal and the 2nd Appeal and the Review Application, all three have been rejected and orders have been passed confirming the orders of the Disciplinary Authority. The departmental enquiry was carried out following the due procedure and by giving due opportunity to the applicant. He also argued that the present application is inordinately delayed since the order on 2nd appeal was passed on 24.8.2004.

9. However, as pointed out by the learned counsel for the applicant, the Review application was rejected on 20.12.2007 by the Secretary, Ministry of Labour & Employment, Govt. Of India, not after considering the RTI documents procured by the applicant, but, on the ground that "Regulation 17 (1) of ESIC (Staff and Conditions of Service) Regulations, 1959 stipulates that "not withstanding anything contained in these regulations, no appeal shall lie against any order made by the Chairman of the Standing Committee. In view of the above provision and the fact that no new ground has been furnished by Shri Manivannan, the review petition is not maintainable and hence rejected". Whereas, actually the applicant had given new grounds – namely, information obtained by him under RTI Act, who also reveals a difference in the amounts stated in notices dated 15.4.1996 and dated 7.11.2000, and the facts that these notices were not a part of departmental enquiry proceedings against him.

10. On going through the pleadings and the documents placed on record, we are of the opinion that there has been non application of mind in framing of the charges. We agree with the contentions of the learned counsel for the applicant that before charging him for negligence in pointing out recovery and thus causing loss to the department, the respondents should have ascertained the quantum of loss or atleast begun to follow up the first notice to the employer by issuing notice under Section 45-A. Though the department took up the matter with the employer from 1994 till 15.11.1996, it has not done anything after mid-April,1996 upto November, 2000 while charging the applicant for negligence in his inspection on 9.2.1996. The Appellate Authority had rejected the appeal on the ground that before 24.8.2004 (the date of rejection of the appeal), a notice under Section 45-A has been served on the employer which the employer had not contested and therefore, the recovery order came to finality. On the same ground the 2nd appeal have also been dismissed while the Review application has been dismissed on the ground that "Regulation 17 (i) of ESIC (Service & Conditions of Service) Regulations, 1959 envisages that "not withstanding anything contained in these Regulations, no appeal shall lie against any order made by the Chairman of the Standing Committee. In view of the above provision and the fact that no new ground has been furnished by Shri Manivannan, the review petition is not maintainable and hence rejected". Thus, none of them have taken into account the fact that the department itself has not pursued any action against the employer and has remained silent till 2000 after issuing him the last show cause notice on 15.11.1996.

11. We have gone through the appeal memo dated 7.10.2001 which was rejected. Then, the applicant had filed an O.A No.526/2002 before this Tribunal, which ordered the respondents to consider and dispose of the appeal on merits. This appeal then came up for hearing before the Director General and the Appellate Authority who rejected it again on 3.6.2003 (Annexure-R/5). In this order, the Appellate Authority has noted the following pleas of the applicant:

1. The allegation that the ESIC has sustained loss because of the omitted wages and huge expenditure for the job work found by the TIO in 1994 comparing the regular inspection conducted by the appellant in 1996 lacks any substance. To say that the ESIC has sustained loss, the following requirements have to be fulfilled:-

(i) The amount recovered from the employerfor the period from Aug. 93 to Dec.95 (i.e. Period of regular inspection).

(ii) The amount shown by the appellant and difference, if any, noticed for the said period.

(iii) Whether the charge sheet was issued for the period of the appellant's inspection from Aug.93 to Dec.96.

(iv) The TIO had conducted test inspection on the inspection dated 26.8.93 conducted by Shri B.S. Vittallachar and not the one conducted by the appellant.

At a subsequent place, he has also noted as under:-
"Moreovr, I find that in the instant case, dues were finally determined after affording opportunity of personal hearing to the employer who, however, did not participate in the personal hearing and did not contest the amount of wages mentioned in the notice. Therefore, the figures mentioned by the TIO gets to the stage of finality."

Therefrom, it is clear that the Appellate Authority has not, despite the prayer in the appeal, taken into consideration the aspect the department remained silent after issuing the last show-cause notice to the employer on 15.11.1996 and thereafter took no steps to proceed under Section 45-A of the ESIC Act. Thus, the department failed to ascertain whethr losses were actually there or not, before charging the officer or during his enquiry.

12. In view of the foregoing, the OA is allowed and all the impugned orders dated 17.4.2001 (Annexures-A/4), 03.06.2003 (Annexure-A/17), 24.08.2004 (Annexure-A/9) and 17.04.2008 (Annexure-A/14) are hereby quashed. The respondents are directed to grant all the benefits including the with-held amount of increments, etc. within a period of three months from the date of receipt of a copy of this order. No costs.


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