Andhra Pradesh High Court sets aside ESIC demand and bank account attachment

The Andhra Pradesh High Court on 13 October 2026 set aside an order of the Employees' State Insurance Corporation (ESIC) that demanded Rs 5,84,430 in contributions from a small business in Visakhapatnam, and a later order attaching its former proprietor's bank account for Rs 9,19,741. The court held that the demand had been fixed without any material and without the notices reaching the petitioner.

What Happened

According to the order, ESIC passed an order on 13 November 2024 under Section 45A of the Employees' State Insurance Act, 1948, determining the contribution payable for the period from October 2019 to April 2024. On 18 September 2026, its Recovery Officer ordered the attachment of the petitioner's account with The Federal Bank for Rs 9,19,741, including recovery cost and interest. The petitioner told the court that the business had shut down, that the petitioner now works as a salaried employee, and that the bank was appropriating the salary credited to the account.

ESIC's counsel said notices had been sent to the employer's address, that the employer did not appear for a hearing on 9 July 2024, and that no records or statements were filed.

The court held that, with no material before it, the ESIC officer could not have worked out the employees' contribution without any basis. It also held that because the business had closed in 2018, notices sent in 2023 and 2024 to that address could not have been served. It set aside both the 2024 demand and the 2026 attachment, since the attachment relied on the earlier order. ESIC is free to start fresh proceedings after giving the petitioner a proper opportunity to explain.

What It Means

For small employers and former business owners, the ruling shows that the court expects an ESIC contribution demand to rest on some material and on notice that can actually reach the person concerned. Where a demand was fixed without a hearing, the court set aside both the demand and the recovery steps built on it.

The ruling does not cancel the liability for good: ESIC may reopen the matter, but only after hearing the petitioner and considering the explanation given.

Source: High Court judgment