The Supreme Court in the case of M/s Carborandum Universal Ltd. v. Employees’ State Insurance Corporation (2025 LiveLaw (SC) 1232; 2025 INSC 1455 ) has authoritatively clarified that Section 45A (best-judgment assessment) is an exceptional power, not a routine administrative tool. It can be invoked only when the employer fails to produce records altogether or obstructs inspection by ESIC officials.Mere inadequacy, incompleteness, or perceived insufficiency of records does not meet the statutory threshold.
This judgment prevents ESIC from expanding Section 45A beyond its text and legislative intent.Employers who produce primary records (wage registers, ledgers, returns, vouchers), and cooperate with inspections cannot be subjected to unilateral assessments merely because ESIC is dissatisfied with the depth or detail of documentation. Now there will be reduced risk of arbitrary or inflated contribution demands, greater procedural certainty and Stronger grounds to challenge Section 45A orders before ESI Courts and High Courts.
Also read – No Direct Employer–Employee Relationship Between Principal Employer & Contract Worker: Delhi HC
Where records are produced but disputes remain (e.g., classification of wages, coverage of allowances, number of employees), ESIC must initiate proceedings under Section 75, and prove its claims through evidence and adjudication. The judgment clarifies that Section 45A cannot be used as a substitute for adjudication.
The Court emphasised that claims determined through adjudication are subject to the five-year limitation under the proviso to Section 77(1A) so ESIC cannot bypass the limitation by labelling a time-barred claim as a Section 45A “assessment. It will prevent revival of stale demands and bring ESIC practice in line with statutory time limits
The fallout of this judgment on ESIC will be that ESIC must clearly establish non-production or obstruction, and record specific findings justifying the invocation of Section 45A. Vague references to “inadequate records” will not survive judicial scrutiny.
The judgment restores the balance between enforcement and fairness under the ESI Act. It safeguards cooperative employers from summary assessments, curtails misuse of Section 45A, and reinforces the statutory scheme that disputes must be resolved through adjudication, evidence, and limitation discipline rather than administrative shortcuts.
