Supreme Court Clarifies The Limited Scope of Section 45A of the ESI Act

The Supreme Court, in Carborandum Universal Ltd. v. Employees’ State Insurance Corporation (2025 INSC 1455), has clarified the limited circumstances in which the Employees’ State Insurance Corporation can use its powers under Section 45A of the Employees’ State Insurance Act, 1948 (“ESI Act”). Section 45A empowers the ESI Corporation to determine contribution liability on a summary basis only in exceptional circumstances, namely where an employer fails to submit or maintain statutory records or obstructs inspection by the authorities.

The judgment addresses a common issue faced by employers, where the Corporation determines contribution liability through a summary process even though records have been produced. The Court has made it clear that Section 45A is an exceptional provision and cannot be used as a substitute for regular legal proceedings under the Act.

The case arose from an inspection carried out by ESIC officials at the establishment of Carborandum Universal Ltd. During the inspection and subsequent proceedings, the employer produced statutory returns, wage registers, books of account, and records relating to employees and contractors. The employer also attended personal hearings and cooperated with the inspection process. Despite this, the Corporation concluded that the records were not sufficient for verification and passed an order determining contribution liability under Section 45A. This order was upheld by the Employees’ Insurance Court and later by the Madras High Court, leading the employer to approach the Supreme Court.

The Supreme Court allowed the appeal and set aside the orders passed by the Corporation, the Employees’ Insurance Court, and the High Court. The Court held that Section 45A can be used only when the conditions mentioned in the law are clearly met. These include situations where an employer has failed to submit or maintain statutory records under Section 44, or where a Social Security Officer is prevented from carrying out inspection under Section 45. The Court clarified that merely producing records that are incomplete, inconsistent, or disputed does not amount to non-production. Where an employer has produced records and cooperated with the inspection, any dispute regarding contribution liability must be decided through proper adjudication under Section 75 of the Act. Section 45A, being a summary power, cannot be used simply because verification of records is difficult or time-consuming.

This judgment has important consequences for both employers and the administration of the ESI Act. It restricts the use of Section 45A to genuine cases of non-compliance or obstruction and prevents its routine or mechanical application. Employers who submit records and cooperate with inspections are entitled to have disputes decided through regular legal proceedings, with full procedural safeguards, including limitation. For legal practitioners, the decision provides strong support to challenge Section 45A orders where records have been produced but are considered inadequate by the Corporation. The ruling also strengthens the principles of fairness by ensuring that summary powers are not misused.

We trust you will find this an interesting read. For any queries or clarifications please write to us at insights@elp-in.com or write to our authors:
Vivek Daswaney, Partner – Email – VivekDaswaney@elp-in.com
Srivaisanavi Arumugam, Partner – Email – SrivaisanaviArumugam@elp-in.com