The Bombay High Court in the case of Foundever CRM India Private Limited & Anr. V. Employee State Insurance Corporation & Ors., Writ Petition (L) Numbers 36012 of 2024, decided on 19.09.2025, held that principles of natural justice cannot be circumvented by Employees’ State Insurance Corporation (“ESIC”). Coercive recovery is prohibited without notice, a hearing, and a reasoned order prior to any contribution shortfall assessment under Section 45A.
Background of the case
Foundever CRM India Private Limited (hereinafter referred to as “the Petitioner”) provides business process outsourcing services and employs about 2,000 workers, making it an establishment covered under Employees State Insurance Act, 1948 (hereinafter referred to as “ESI Act”). In May – July 2024, Employees’ State Insurance Corporation officials (hereinafter referred to as “the Respondents”) conducted multiple inspections of the Petitioner’s premises, during which the Petitioner fully cooperated and provided all requested documents. On 15 July 2024, the Social Security Officer issued an Inspection Report alleging shortfall in contributions but without giving the Petitioner any notice, opportunity to justify, or hearing. On request of the Petitioner, repeated assurances were made that no coercive steps would be taken. However, the Respondents issued sudden Demand Notices in October 2024 for ₹5.20 crore. The Petitioner sought a hearing and time to file written reply and in consequence the Respondents granted the opportunity to file reply by November 25, 2024 and promised a hearing. The Petitioner submitted interim reply before the timeline provided but without considering it and providing a hearing, the Respondents issued Recovery Notices dated 22 November 2024.
On 28 November 2024, without prior service on the Petitioner, Prohibitory Orders were issued to multiple banks, freezing accounts and directing immediate remittance of funds. The Respondents forcibly collected a demand draft for ₹5.20 crore from the Petitioner’s account. A negative lien was simultaneously placed on other accounts. Faced with crippling coercive action, the Petitioner filed a writ petition leading the Court to intervene and order deposit of the recovered amount. The Writ Petition filed by the Petitioner before the Hon’ble Bombay High Court sought quashing and setting aside of the orders of the Respondents.
Issues Before The High Court
- Whether the Respondents violated the Principles of Natural Justice and passed the orders in violation of Section 45A?
- Whether the dispute arising falls within the scope of a determination under Section 45A of the ESI Act, or whether it is a matter that must be adjudicated through proceedings under Section 75 before the Employees’ Insurance Court?
- Whether the writ petition is maintainable despite the availability of an alternative remedy under the ESI Act, given that the Respondents violated Principles of Natural Justice, thereby rendering the alternative remedy ineffective and not efficacious?
Contentions Of The Parties
The Petitioner submitted that the subject matter of the case is governed by Section 45A and as they have been deprived of opportunity to fair hearing, the action taken by the Respondents is in violation of statutory mandate given under the proviso of Section 45A as well as is in violation of Principles of Natural Justice. The Petitioner contend that the Respondents’ actions are vitiated for violating the mandatory procedural safeguards under Section 45A of the ESI Act. Relying on the Karnataka High Court’s decision in Affine Analytics Pvt. Ltd. Vs. Deputy Director, ESIC & Anr., Writ Petition No. 28396/2023, the Petitioner argues that the Corporation is statutorily bound to issue notice, provide a reasonable opportunity of hearing, and pass a reasoned order before raising any demand.
The Petitioner further relied on judgement of Bombay High Court in SBI General Insurance Company Ltd. Vs. Employees’ State Insurance Corporation & Anr., Writ Petition No. 3796 of 2024, where the writ petition was entertained despite an alternative remedy, because principles of natural justice were violated as the order passed under Section 45A was made without providing petitioner copies of interim reports on which the order was made as well as no opportunity of hearing was given to them. The Petitioner submitted that the Writ Petition was maintainable as the Supreme Court in the case of Whirlpool Corporation Vs. Registrar of Trade Marks, Mumbai & Ors. (1998) 8 SCC 1 held that an alternative remedy does not oust the writ jurisdiction of the Court where there is disregard of principles of natural justice. The Respondents, on the contrary, contended that once the contribution liability has been finalized or crystallized, the only remedy available to the employer is to challenge such determination before the Employees’ Insurance Court under Section 75(2)(a).
Decisions And Findings
The Hon’ble Bombay High Court affirmed that the Respondents’ actions were illegal, arbitrary, and in clear violation of Section 45A and principles of natural justice. The Court rejected the Respondents’ argument that Section 45A applies only when no records are furnished, holding that the provision equally applies where records are incomplete, inadequate, or insufficient for determining contribution. The Court purposely construed the wording of Section 45A and dismissed the narrow interpretation of the Respondents that limited the provision to situations in which no records are provided. The textual meaning of the phrase used in Section 45A, which stated that, no returns, no particulars, registers or records were submitted, furnished or maintained was interpreted in its entirety to encompass cases where records are not complete, are selectively disclosed, are not adequate or are not maintained in a form that enables ESIC to ascertain contributions to be made. Therefore, the subject matter of the case falls within the scope of Section 45A.
The Court noted that any decision under Section 45A whether made on the basis of full, partial or no records must be accompanied by (a) giving notice to the employer, (b) reasonable opportunity to evidence and make oral submissions and (c) reasoned/speaking order disposing of the representation by the employer. They are procedural safeguards that are required by the proviso to Section 45A and those of ESIC own Revenue Manual and cannot be waived. The Court restated that a compliance with the natural-justice norms is necessary in the quasi-judicial determinations of revenue.
Applying the principles laid down by the Supreme Court in Whirlpool Corporation v. Registrar of Trade Marks (supra), the Court held that the existence of remedies under Sections 45AA or 75 of the ESI Act does not bar a writ petition where the original action is in violation of principles of natural justice. The Court made clear that procedural fairness is not a technicality but integral to lawful exercise of sovereign revenue powers. The Respondents cannot bypass statutory safeguards by invoking internal classifications or acting precipitately. The petition was accordingly allowed in the terms prayed, and the Petitioners’ statutory and constitutional grievance vindicated.
AMLEGALS Remarks
The judgment reflects a judicial reaffirmation of procedural integrity in statutory contribution assessments. The Court’s observations highlight that coercive recovery measures undertaken without notice, hearing, or a reasoned determination fall outside the bounds of lawful authority. By invoking the principle laid down in Whirlpool Corporation Vs. Registrar of Trade Marks, Mumbai & Ors. (supra), the judgment clarifies that appellate mechanisms do not bar constitutional scrutiny where procedural safeguards are absent and where there is violation of principles of natural justice. The decision, viewed objectively, reinforces the expectation that administrative bodies must adhere to statutory procedure and natural justice, ensuring that adjudicatory processes remain transparent, disciplined, and fair.
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