New Delhi, December 22, 2025 — In a significant clarification of statutory powers under the Employees’ State Insurance Act, 1948, the Supreme Court of India in the case of M/s Carborandum Universal Ltd. v. Employees’ State Insurance Corporation (2025 LiveLaw (SC) 1232; 2025 INSC 1455 ) has held that the Employees’ State Insurance Corporation (ESIC) cannot resort to Section 45A of the Act to make a “best judgment assessment” merely because the documents produced by an employer are perceived to be inadequate or deficient. The key determinant for invoking Section 45A, the Court stressed, is not the quality of the records produced, but their complete non-production or an obstruction to inspection by the employer.
The bench comprising Justice Manoj Misra and Justice Ujjal Bhuyan allowed an appeal filed by M/s Carborandum Universal Ltd. against the Madras High Court and the Employees Insurance Court (Principal Labour Court), Chennai, judgment setting aside the demand order issued by ESIC.
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In the underlying dispute, the ESIC had issued a show-cause notice in 1996, alleging non-payment of contributions and non-submission of returns for the period from August 1988 to March 1992. It subsequently passed an assessment order in 2000 under Section 45A, demanding over ₹5.4 lakh, plus interest. The employer had produced ledgers, cash books, vouchers, and statutory returns during multiple hearings; however, according to ESIC, it had not furnished certain supporting bills.
The Supreme Court underscored that Section 45A’s purpose is to empower the Corporation to assess contributions only in exceptional cases where the employer either fails to produce the required records under Section 44 or obstructs an official in the performance of duties under Section 45. Mere inadequacy of the records, or dissatisfaction with their completeness, does not equate to non-production, and therefore cannot justify a Section 45A assessment.
The Court emphasized that where records have been produced and the employer cooperates, ESIC must proceed under Section 75 to determine dues, subject to the five-year limitation period prescribed under the proviso to Section 77(1A)(b) of the Act. ESIC cannot use Section 45A to circumvent the statutory limitation by re-casting the claim as a “best judgment assessment
The judgment clarifies a contentious aspect of ESI law and limits ESIC’s power to resort to summary assessments. It reinforces the statutory scheme that prioritises normal adjudication procedures where records are available, and the employer has cooperated with the inspection process.
