The Supreme Court on Thursday brought relief to Carborandum Universal Ltd., setting aside a long-standing Employees’ State Insurance (ESI) demand that dated back more than three decades. The courtroom mood was firm but measured as the Bench made it clear that summary powers under the ESI law cannot be stretched simply because the authorities find an employer’s records “inadequate.”
Background
The dispute arose from an ESI Corporation demand of about ₹5.42 lakh, with heavy interest, for the period between August 1988 and March 1992. The corporation had invoked Section 45A of the Employees’ State Insurance Act, a provision that allows it to assess dues on a “best judgment” basis when records are not produced or inspections are obstructed.
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Carborandum Universal, which runs a factory at Thiruvottiyur in Tamil Nadu, maintained that it had produced ledgers, cash books, vouchers and contribution returns during multiple personal hearings. Despite this, the ESI Corporation passed an order in 2000 confirming the demand. That order was upheld first by the Employees’ Insurance Court in 2015 and later by the Madras High Court in 2023, prompting the company to move the Supreme Court.
Court’s Observations
A Bench of Justices Ujjal Bhuyan and Manoj Misra closely examined how and when Section 45A can be used. The judges stressed that this power is meant for exceptional situations-where there is complete non-production of records or clear obstruction to inspection.
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“The statute draws a clear line,” the bench observed, noting that Section 45A is not an alternative assessment method available at the convenience of the corporation. Mere dissatisfaction with the quality or completeness of documents, the court said, does not amount to non-production.
Importantly, the Bench pointed out that even the High Court had recorded that Carborandum Universal participated in hearings and produced records. Once that fact is accepted, the foundation for invoking Section 45A disappears. In such cases, disputes over calculations must be taken to the Employees’ Insurance Court under the regular adjudication process, within the prescribed limitation period.
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Decision
Holding that the ESI Corporation lacked jurisdiction to invoke Section 45A in the facts of the case, the Supreme Court set aside the original demand order dated April 17, 2000. As a consequence, the orders of the Employees’ Insurance Court and the Madras High Court were also quashed. The appeal was allowed, with no order as to costs.
Case Title: M/s Carborandum Universal Ltd. v. Employees’ State Insurance
Case No.: Civil Appeal No. 14858 of 2025 (arising out of SLP (Civil) No. 12442 of 2024)
Case Type: Civil Appeal (Employees’ State Insurance Act dispute)
Decision Date: December 18, 2025
