Section 45A of the ESI Act as an Exceptional, Not Alternative, Assessment Power
A Detailed Commentary on M/S Carborandum Universal Ltd. v. ESI Corporation, 2025 INSC 1455
1. Introduction
The Supreme Court’s decision in M/S. Carborandum Universal Ltd. v. ESI Corporation, 2025 INSC 1455, is a significant pronouncement on the scope and limits of Section 45A of the Employees’ State Insurance Act, 1948 (“ESI Act”). While earlier case law (particularly ESI Corporation v. C.C. Santhakumar) had clarified that there is no limitation period for determinations under Section 45A, this judgment squarely addresses a different but crucial problem: **can Section 45A be used as an alternative assessment mechanism whenever the Corporation finds employer records “inadequate” or “unsatisfactory”?** The Court’s answer is a clear no. It holds that: - Section 45A is an **exceptional, residual power**, triggered only when there is: - complete non‑production or non‑maintenance of returns/records under Section 44, or - obstruction to inspection under Section 45. - Mere perceived inadequacy or incompleteness of records **does not** permit the Corporation to invoke Section 45A. - Where records are produced and inspection is possible, any dispute about contributions must proceed through **Section 75 and Section 77**, with the attendant **five‑year limitation bar** for Corporation’s claims. This decision therefore prevents the Employees’ State Insurance Corporation (“ESIC”) from using Section 45A as a tool to bypass statutory limitation and normal adjudicatory routes.2. Factual and Procedural Background
2.1 The Employer and Coverage
- The appellant, M/S Carborandum Universal Ltd., is a manufacturing company having a factory at Thiruvottiyur, Tamil Nadu. - The establishment is covered under the ESI Act and has an employer code. - The company contended that it has been regularly remitting contributions for all eligible employees.2.2 Inspections and Show‑Cause Notice
- ESIC inspectors conducted multiple inspections of the appellant’s Thiruvottiyur establishment between 12.08.1991 and 08.07.1992. - According to ESIC, it noticed that: - certain amounts paid as wages were being clubbed under other expenditure heads such as repairs and maintenance, extraordinary revenue, and general services; and - proper segregation of the wage component was not done. - On 27.11.1996, ESIC issued a **show‑cause notice under Section 45A**, alleging: - non‑payment of due contribution for the period August 1988 to March 1992; - non‑submission of returns; and - non‑production of complete records during earlier inspections. - An ad hoc assessment of Rs. 26,44,695 was proposed under Section 45A.2.3 Employer’s Response and Section 45A Order
- The appellant: - replied to the show‑cause notice, - attended personal hearings through an authorised representative, and - produced various records during those hearings – including ledgers, cash books, bank books, journal vouchers, contractor records, and returns of contribution. - Nevertheless, by order dated 17.04.2000, ESIC: - finally determined contribution of Rs. 5,42,575.53 for 01.08.1988 – 31.03.1992, - invoked Section 45A as the statutory basis for the determination, - directed payment with interest at: - 12% p.a. up to 31.08.1994, and - 15% p.a. from 01.09.1994, - and warned that recovery would be effected as arrears of land revenue under Sections 45C–45I.2.4 Proceedings Before Employees’ Insurance Court
- The appellant challenged the 45A order by filing an application under Section 75(1)(g) (E.I.O.P. No. 262 of 2001) before the Employees’ Insurance Court (Principal Labour Court), Chennai. - The key issues framed were: 1. Whether the order dated 17.04.2000 under Section 45A was liable to be set aside? 2. Whether the appellant was liable to pay contribution, and if so, to what extent? 3. To what relief was the appellant entitled? - The Employees’ Insurance Court: - held that the appellant had not produced necessary documents either before ESIC or before the Court; - rejected pleas of lack of jurisdiction and limitation; - upheld ESIC’s order dated 17.04.2000; and - dismissed the employer’s petition on 06.07.2015.2.5 Appeal Before the High Court
- The appellant filed C.M.A. No. 1284 of 2017 before the Madras High Court under Section 82. - The High Court: - recorded that the appellant had appeared before ESIC through its authorised representative and “produced relevant records”; - nonetheless held that: - there is **no limitation** for initiating proceedings under Section 45A; and - the Employees’ Insurance Court had properly appreciated the facts. - consequently, it dismissed the appeal on 12.10.2023 and affirmed the 45A order.2.6 Appeal Before the Supreme Court
The appellant approached the Supreme Court, raising, inter alia: - That ESIC was **not competent** to invoke Section 45A in the facts of the case since: - records were produced and there was cooperation; and - Section 45A is applicable only where there is total non-production of records or obstruction. - That the proper course was to proceed under Section 75 read with Section 77(1A)(b), which carries: - a **five‑year limitation** for ESIC to make claims. - That the use of Section 45A in 2000 for contribution relating to 1988–1992 was a device to **circumvent the limitation bar**. The Supreme Court, per Ujjal Bhuyan J. (with Manoj Misra J. concurring), allowed the appeal.3. Issues Before the Supreme Court
The core questions were:- Scope of Section 45A:
Whether ESIC could invoke Section 45A to make a best‑judgment determination of contributions when the employer had, in fact, produced books and participated in inspection and hearings, and there was no obstruction as contemplated by the statute. - Interplay with Sections 75 and 77:
If records were produced and inspection was possible, was ESIC bound to proceed via Section 75 (dispute before Employees’ Insurance Court) read with Section 77(1A)(b) (limitation), rather than using Section 45A? - Use of Section 45A to Avoid Limitation:
Can Section 45A be employed in a manner that effectively sidesteps the five‑year limitation applicable to ESIC’s claims before the Employees’ Insurance Court under Section 77(1A)(b)?
4. Statutory Framework Simplified
4.1 Contributions and Employer Obligations (Sections 38–39)
- Section 38: All employees in covered factories/establishments must be insured. - Section 39: - Contribution comprises employer’s and employee’s share. - Contributions are linked to the wage period and fall due on the last day of the wage period. - Non‑payment triggers statutory interest (12% p.a. or higher as per regulations).4.2 Duty to Maintain and Furnish Records (Section 44)
Under Section 44: - Every employer must: - submit prescribed returns with particulars of persons employed; and - maintain such registers and records as prescribed. - If ESIC believes returns have not been submitted, it may require the employer to furnish necessary particulars to decide whether the Act applies.4.3 Inspection Powers (Section 45)
Section 45 authorises appointment of Social Security Officers (earlier “Inspectors”) who may: - enter the employer's premises; - call for and inspect records; - examine the employer or employees; and - copy or extract records. These powers help ESIC verify the correctness of returns and ascertain compliance.4.4 Best‑Judgment Determination (Section 45A)
As it stood during the relevant period, Section 45A allowed ESIC to determine contributions **only in certain cases**: - Where, in respect of the factory or establishment: - no returns, particulars, registers or records are submitted, furnished or maintained under Section 44; or - an Inspector/official is “prevented” in any manner from exercising functions/duties under Section 45. In such cases, ESIC may, on the basis of information available, determine contributions by order, after giving the employer reasonable opportunity of hearing. Crucially: - Section 45A(2) states that such an order is: - sufficient proof of ESIC’s claim before the Employees’ Insurance Court under Section 75, or - a basis for recovery as arrears of land revenue under Section 45B and Sections 45C–45I.4.5 Adjudication Before Employees’ Insurance Court (Sections 74–75)
- Section 74: Constitutes Employees’ Insurance Courts. - Section 75: - Lists matters to be decided by these Courts. - Under Section 75(1)(g) and 75(2), disputes regarding contributions and claims for recovery of contributions must be decided by the Employees’ Insurance Court. - Civil courts’ jurisdiction is barred in these matters.4.6 Limitation for Claims (Section 77)
- Section 77(1): Proceedings before the Employees’ Insurance Court commence by application. - Section 77(1A)(b) and its proviso: - Cause of action for ESIC’s claim to recover contributions (including interest and damages) is deemed to arise on the date when ESIC first makes such claim. - Proviso: No claim shall be made by ESIC after five years of the period to which the claim relates. - Thus: - Employers must challenge demands within three years. - ESIC cannot raise claims older than five years (when proceeding via Section 75).4.7 Appeals to High Court (Section 82)
- Section 82(2): An appeal lies to the High Court from an order of the Employees’ Insurance Court if it involves a substantial question of law.5. Summary of the Supreme Court’s Judgment
The Supreme Court held:- Section 45A can be invoked only when:
- no returns/records are submitted, furnished or maintained as required by Section 44; or
- ESIC’s Inspector/official is prevented from discharging duties under Section 45 (i.e., there is obstruction).
- Where records have been produced and inspection has taken place, and the employer has cooperated, Section 45A is not available, even if ESIC considers the records inadequate or incomplete.
- Section 45A is not an alternative assessment mechanism that ESIC can choose at will; it is a limited, exceptional power for use only in the specific situations contemplated by the statute.
- The High Court itself recorded that:
- the employer appeared through authorised representatives; and
- relevant records were produced.
- Consequently, the order dated 17.04.2000 passed under Section 45A was without jurisdiction and wholly untenable.
- Accordingly:
- the Section 45A order (17.04.2000),
- the Employees’ Insurance Court’s order (06.07.2015), and
- the High Court’s judgment (12.10.2023) were all set aside.
- The appeal was allowed, with no order as to costs.
6. Analysis of the Court’s Legal Reasoning
6.1 Two Jurisdictional Preconditions for Section 45A
The Court distilled Section 45A into two strict, cumulative categories of cases where the provision can be used:- Non‑production / Non‑maintenance of statutory records
“No returns, particulars, registers or records are submitted, furnished or maintained in accordance with Section 44.” - Obstruction to inspection
An Inspector or other ESIC official “is prevented in any manner” from exercising functions or discharging duties under Section 45.
6.2 Non‑production vs. Inadequate Production
A central conceptual clarification introduced by the Court is the distinction between: - **Non‑production of records** (which can trigger Section 45A), and - **Inadequate, incomplete, or unsatisfactory records** (which cannot). The Court held: - “Mere inadequacy of the record would not confer jurisdiction upon the corporation to invoke Section 45A.” - “The statutory threshold is not inadequate production but non‑production.” - The Act does not permit a best‑judgment assessment merely because the record produced is insufficient to ESIC’s satisfaction. If records exist and are produced, ESIC must: - examine and verify them; and - if it disputes the employer’s computation, initiate a **Section 75 dispute**, not a Section 45A determination.6.3 Section 45A as Exceptional, Not Optional
The Court made an important structural point about the statutory design: - Section 45A is a **residuary power**, activated only when: - statutory returns/records are altogether not submitted; or - statutory inspection is effectively blocked. - It is **not** a parallel or alternative assessment mode that ESIC may choose at its convenience when: - detailed verification under Section 75 would be time‑consuming; or - the limitation under Section 77(1A)(b) has already run out. By describing the legislative intent, the Court stated: - Section 45A is meant for **exceptional situations**. - To enlarge Section 45A so as to cover perceived inadequacy of records would “tantamount to rewriting the statute.”6.4 Interplay with Sections 75 and 77
The Court carefully distinguished: - **Cases for Section 45A**: - Non‑production of records or obstruction. - No limitation period under the Act. - Order can be directly used as a basis for: - recovery as arrears of land revenue, or - proof of claim under Section 75. - **Ordinary cases for Section 75 and 77**: - Records are produced and inspection is possible. - ESIC disputes the correctness or completeness of employer’s calculations. - ESIC must file an application before the Employees’ Insurance Court under Section 75. - ESIC’s claims are subject to: - five‑year limitation under the proviso to Section 77(1A)(b). The Court reaffirmed the logic set out in Santhakumar and Cosmopolitan Club: - ESIC cannot be allowed to **rely on Section 45A to escape the limitation** placed on it by Section 77(1A)(b) in ordinary dispute situations. - The five‑year bar is a deliberate legislative choice to prevent revival of stale claims.6.5 Reading and Clarifying Santhakumar
The respondent heavily relied on ESI Corporation v. C.C. Santhakumar, which had earlier held: - No limitation applies to orders under Section 45A. - Section 45A is a best‑judgment mechanism where records are not produced or there is no cooperation. The Supreme Court in the present case: - accepted the correctness of Santhakumar on limitation; - but clarified that the **factual matrix** of Santhakumar involved: - clear non‑production of records, and - non‑cooperation by the employer; - and therefore, Section 45A was legitimately invoked there. The Court cautioned that: - Extending Santhakumar to cases where records are actually produced and personal hearings are attended would be inappropriate. - Dissatisfaction with the “quality” of records does not convert production into non‑production. In effect, the Court **confined the application of Santhakumar** to its facts and ensured it is not misread as authorising ESIC to apply Section 45A whenever it wishes.6.6 Beneficial Legislation and Jurisdictional Limits
The respondent invoked Bangalore Turf Club Ltd. v. ESI Corporation, where the Court had interpreted the Act liberally to extend coverage (by reading “shop” broadly). The present judgment: - acknowledged the ESI Act as a beneficial, social security legislation requiring liberal interpretation to extend coverage and benefits; - but underscored that: - liberal construction does not mean ignoring explicit jurisdictional conditions; - even in welfare statutes, procedural and jurisdictional limits must be respected. Thus, **beneficial interpretation applies to scope of coverage and rights of employees, not to enlarging coercive powers beyond the statutory text.**6.7 Application to the Facts of Carborandum Universal
Applying the above principles, the Court noted: - The High Court itself recorded that: - the appellant appeared through authorised representatives; - produced “relevant records” during personal hearings; - The ESIC order admitted that: - ledgers, cash books, journal vouchers, contractor records, and returns of contribution were produced; - its complaint was about absence of some “supporting bills” under certain heads. On this footing, the Court held: - There was **no obstruction** under Section 45. - There was **no non‑production** within the meaning of Section 45A. - At worst, ESIC was dealing with **perceived inadequacy or incompleteness** of records, not their total absence. - The proper course was to: - proceed under Section 75, and - respect the five‑year limitation in Section 77(1A)(b). Because ESIC wrongly chose Section 45A, the entire determination was held to be **without jurisdiction**, rendering all subsequent affirmations by the Employees’ Insurance Court and the High Court unsustainable.7. Precedents Cited and Their Influence
7.1 Bangalore Turf Club Ltd. v. ESI Corporation (2014) 9 SCC 657
- Issue: Whether a race club is a “shop” under a notification extending ESI coverage. - Holding: The ESI Act is a social welfare legislation; a liberal interpretation is warranted. A Turf Club can be treated as a “shop.” - Use in this case: - Cited by ESIC to argue for a liberal, purposive reading in favour of the Act. - The Court accepted the welfare character of the statute, but drew a line: liberal interpretation does not permit disregard of explicit jurisdictional preconditions (such as those in Section 45A).7.2 Masco (Private) Ltd. v. ESI Corporation, 1975 (II) LLJ 29 (Delhi HC)
- Facts (as summarised by the Supreme Court): - ESIC invoked Section 45A despite the employer insisting that records were available and requesting inspection. - Key reasoning of the Delhi High Court (endorsed in substance by the Supreme Court): - Section 45A is an exception, applicable when: - no returns/records are submitted or maintained; or - ESIC is obstructed from inspection. - It lays down an “extraordinary procedure” for determination in the absence of records. - Even if records are incomplete, incorrect or discrepant, but not entirely absent, the first condition of Section 45A is not met. - The term “obstructed” should be restricted to: - physical obstruction, use of force, or threatened use of force; not mere failure to comply with directions. - Influence: - The Supreme Court cited Masco to underscore the narrow scope of Section 45A and the need for actual non‑production or obstruction. - The idea that inadequate or incorrect records ≠ “no records” is central to the present judgment.7.3 EID Parry (India) Ltd. v. ESI Corporation, 2002 (3) LLN 164 (AP HC)
- Issue: Effect of the proviso to Section 77(1A)(b), inserted by Act 29 of 1989. - Holding: - The proviso places an embargo on ESIC from making claims after five years from the period to which the claim relates. - Section 45B (recovery as arrears of land revenue) applies to contributions as determined under Section 45A, but that does not nullify the limitation in Section 77(1A)(b) for claims before the Employees’ Insurance Court. - ESIC can claim arrears only for the five years immediately prior to the date of demand. - Influence: - The Supreme Court used this to reaffirm the purpose of the five‑year limitation: preventing revival of stale claims. - It supports the conclusion that ESIC cannot deploy Section 45A artificially to evade this limitation when Section 75/77 is the correct route.7.4 Cosmopolitan Club, Chennai v. Deputy Director, 2006 (2) LLN 878 (Madras HC)
- The Madras High Court analysed: - Chapter IV (Sections 45A and 45B) vis‑à‑vis Chapter VI (Sections 75 and 77). - Key conclusions (quoted and accepted by the Supreme Court): - No limitation is prescribed for initiation of proceedings under Section 45A and recovery under Section 45B. - However, where records are produced and there is cooperation: - the assessment must be made under Section 75(2)(a); - the three‑year limitation for applications under Section 75 and the five‑year bar for ESIC claims under Section 77(1A)(b) then apply. - Section 45A provides a summary, special procedure for defaulting or non‑cooperative employers. - The limitation in Section 77(1A)(b) does not apply to orders under Section 45A, but only to claims before the Employees’ Insurance Court. - Influence: - Forms the backbone of the Supreme Court’s structural reading: 45A/45B on one side, 75/77 on the other, with different functions and limitations. - The present judgment applies the “records produced ⇒ use Section 75, not 45A” logic directly to the facts of Carborandum Universal.7.5 ESI Corporation v. C.C. Santhakumar (2007) 1 SCC 584
- The Supreme Court in Santhakumar: - endorsed the Cosmopolitan Club analysis; - described Section 45A as a best‑judgment provision for use when records are not produced or there is no cooperation; - held that: - limitation under Section 77(1A)(b) applies to applications under Section 75, not to 45A orders. - Influence in the present case: - The Court reaffirmed Santhakumar on the absence of limitation for 45A. - Importantly, it clarified that: - Santhakumar was based on clear non‑production of records and non‑cooperation. - Its ratio does not justify resort to Section 45A when records were produced and inspection was possible. - Thus, Santhakumar is harmonised, not overruled, but its ambit is carefully situationally confined.7.6 Other Precedents Cited by the Appellant
The appellant also relied on: - Srikantam Talkies v. ESI Corporation, 2006 SCC OnLine AP 769; - India Pistons Ltd. v. Deputy Director, 2010 SCC OnLine Mad 6510. While the judgment text does not elaborate their reasoning, these decisions broadly support: - the limited scope of Section 45A; - the necessity of complying with limitation provisions when resorting to Section 75/77. Their citation shows that multiple High Courts have been grappling with the same structural question that the Supreme Court now definitively resolves.8. Complex Legal Concepts Explained
8.1 “Beneficial Social Security Legislation”
A “beneficial legislation” is a statute enacted to confer benefits or protections, often for weaker sections (e.g., workers). Courts interpret such laws liberally to ensure the intended benefits are not defeated by narrow or technical interpretations. In ESI law, this typically means: - interpreting “employees,” “establishments,” “shops,” etc., expansively so more workers gain coverage. But this liberal approach does **not** allow: - expansion of coercive powers beyond what the statute clearly says; or - ignoring express jurisdictional limits or procedural safeguards.8.2 “Best‑Judgment Assessment”
Borrowed from tax law, a “best‑judgment assessment” refers to: - a determination made by an authority when the taxpayer/employer has: - failed to file returns; or - concealed or refused to produce records. - The authority then estimates the liability on whatever information is available, using reasonable assumptions. Section 45A is such a best‑judgment power for ESI contributions, but can be used only when: - records are not produced/maintained at all; or - inspection is obstructed.8.3 “Jurisdictional Preconditions”
A “jurisdictional precondition” is a condition that must exist before a statutory authority can validly act. If the condition is not met: - the authority has **no jurisdiction** to act; and - its order is void or liable to be set aside. Here, the preconditions for Section 45A are: - non‑production/non‑maintenance of records under Section 44; or - obstruction under Section 45. Because Carborandum Universal had produced records and cooperated in inspections, these preconditions were not satisfied; hence ESIC **lacked jurisdiction** to use Section 45A.8.4 “Cause of Action” and Limitation under Section 77(1A)(b)
- “Cause of action” is the bundle of facts that give rise to a right to sue. - For ESIC’s claims to recover contributions: - Section 77(1A)(b) deems the cause of action to arise on the date when ESIC first makes the claim. - The proviso bars ESIC from making any claim after five years from the period to which the claim relates. In simple terms: - ESIC must act within five years of the contribution period; otherwise, its claim before the Employees’ Insurance Court is time‑barred.8.5 Non‑production vs. Inadequate Production of Records
This distinction is at the heart of the judgment: - Non‑production: - Employer fails to submit or produce prescribed records at all. - ESIC’s officials cannot verify contributions. - Section 45A can be used. - Inadequate/Incomplete Production: - Records exist and are produced (e.g., ledgers, cash books), but: - some supporting vouchers are missing; - some entries are ambiguous; or - ESIC doubts their accuracy. - ESIC must: - seek clarification, and ultimately - raise a dispute under Section 75, not Section 45A.9. Practical Impact and Future Implications
9.1 For ESIC (the Corporation)
The judgment provides clear boundaries: - ESIC may use Section 45A only when: - there is total failure to submit/maintain records under Section 44; or - there is genuine obstruction to inspection under Section 45. - ESIC may not use Section 45A when: - records are produced and inspection has occurred; and - its objection is essentially about sufficiency, accuracy, or completeness. In such ordinary cases, ESIC must: - proceed under Section 75; - ensure claims are raised within five years of the relevant contribution period under Section 77(1A)(b). In practice, this means: - ESIC will need to carefully document: - instances of non‑production; and - specific acts of obstruction. - Casual or broad assertions of “non‑production” will not survive judicial scrutiny if records were actually produced. - ESIC cannot “recharacterize” inadequate records as “no records” in order to avoid limitation.9.2 For Employers
The decision strengthens procedural protection for compliant employers while maintaining accountability for defaulters. Employers should: - Maintain and preserve all statutory registers, returns, and records as per Section 44 and regulations. - Ensure that: - when inspection is sought, full access is given; and - they retain proof (acknowledgements, letters, inspection memos) showing that records were produced. - If a Section 45A order is passed despite record production and cooperation: - they have a strong ground to challenge it as being without jurisdiction. The decision discourages: - arbitrary or retrospective bulk assessments by way of 45A for old periods when the employer had in fact cooperated and produced records.9.3 For Employees’ Insurance Courts and High Courts
The judgment signals that: - Before upholding any Section 45A order, courts must: - explicitly examine whether the statutory preconditions were satisfied; and - not treat any Section 45A order as presumptively valid. - They must distinguish: - challenges to the quantum of contribution, from - challenges to the very jurisdiction to invoke Section 45A. The Supreme Court specifically faulted both the Employees’ Insurance Court and the High Court for: - failing to address the pivotal jurisdictional question; and - treating the matter as if it were only about limitation. This serves as guidance for lower courts to structure their analysis in future disputes.9.4 Broader Doctrinal Impact
Doctrinally, the case: - reinforces: - the narrow, residual nature of Section 45A; and - a strong separation between: - the special machinery in Chapter IV (Sections 45A–45B) for non‑cooperating employers; and - the adjudicatory machinery in Chapter VI (Sections 75–77) for ordinary disputes. - ensures that: - employers who cooperate in maintaining and producing records are not treated on par with those who obstruct or conceal, merely because ESIC finds it easier to issue a 45A order than to litigate under Section 75.10. Critical Observations
A few analytical points emerge:- Balancing Enforcement and Fairness
The judgment strikes a balance:- It does not dilute ESIC’s powers against genuinely defaulting employers, since 45A remains fully available when records are not produced or inspection is obstructed.
- But it prevents overreach where an employer has substantially complied with statutory duties.
- Bright‑line vs. Grey Areas
By emphasising “non‑production” rather than “inadequate production,” the Court provides a relatively bright‑line rule. Some grey zones may, however, remain:- What if an employer produces a few token documents to create an illusion of cooperation, while withholding critical wage registers?
- At what point does “substantial inadequacy” amount to “constructive non‑production”?
- Santhakumar Harmonised, Not Undermined
The Court carefully preserves the authority of Santhakumar on the non‑applicability of limitation to Section 45A, avoiding any conflict. The innovation in Carborandum Universal lies in:- refocusing attention on the factual triggers for 45A; and
- preventing misuse of that non‑limitation principle in situations where 45A should not have been invoked in the first place.
- Welfare Legislation Does Not Mean Unbounded Discretion
The judgment is an important reminder that:- even welfare statutes operate within the rule of law; and
- the label “beneficial legislation” cannot be used to stretch statutory powers beyond their text or structure.
11. Conclusion: Key Takeaways
The Supreme Court’s decision in M/S. Carborandum Universal Ltd. v. ESI Corporation establishes and clarifies several important principles:- Section 45A is an exceptional, residual power.
It can be invoked only if:- no returns or records are submitted/maintained as per Section 44; or
- ESIC’s inspection under Section 45 is obstructed.
- Non‑production, not inadequacy, is the threshold.
Mere inadequacy, incompleteness, or unsatisfactoriness of records does not justify a best‑judgment determination under Section 45A. - Section 45A is not an alternative assessment mechanism.
ESIC cannot choose between 45A and 75/77 at will. When records are produced and inspection occurs, ESIC must proceed under Section 75, subject to the five‑year limitation under Section 77(1A)(b). - Limitation under Section 77(1A)(b) applies only to Section 75 claims.
The five‑year bar continues to apply to ESIC’s applications before the Employees’ Insurance Court, but not to determinations under Section 45A. However, ESIC cannot stretch 45A to evade that limitation by mischaracterising cases where records were in fact produced. - Jurisdictional scrutiny is essential.
Courts must, before upholding any 45A order, rigorously examine whether the statutory preconditions for its invocation were truly met. - Employers who cooperate are protected from arbitrary best‑judgment demands.
Where employers maintain and produce records, they cannot lawfully be subjected to Section 45A determinations solely because ESIC finds it difficult or time‑consuming to verify details through the normal adjudicatory route.
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