Back
2025 Supreme(AP) 531
IN THE HIGH COURT OF ANDHRA PRADESH AT AMARAVATI
Nyapathy Vijay, J.
M/s Krishnaveni Wire Knitting Industries - Appellant
Versus
The Employees State Insurance Corp Hyd And Another - Respondents
Civil Miscellaneous Appeal No: 535 of 2011
Decided On : 19-08-2025
Important Points
Subject
Labour Law - Employees State Insurance
Act Referred
Headnote
(B) Procedural Compliance - The Appellant failed to respond to notices and comply with previous recovery proceedings - The ESI Corporation issued due notices reflecting operational status of the Appellant prior to leasing out the business, which was not adequately challenged. (Paras 3, 19, 20)
(C) On factual determination - The evidence submitted highlighted ambiguities in the operational status of the Appellant during the relevant period, implicating liability under the Act - The lack of counter-evidence from the Respondent supported the Appellant's claim. (Paras 25, 26)
Facts of the case:
The Appellant, a proprietary concern, was seized by the bank in 1996 and entered into a lease agreement in 2001. Following issues of recovery and notice for dues, the Appellant contended non-liability under ESI contributions.
Findings of Court:
The order of the ESI Court was flawed due to misinterpretation of the evidence surrounding the Appellant's operational status.
Issues: Whether the Appellant is liable for contributions under the Act given the business was seized and not operational.
Ratio Decidendi: Misreading of operational evidence led to the conclusion that the order under appeal was erroneous; the Appellant maintained non-liability based on business status which was not properly countered by the Respondent's evidence.
Result: Appeal allowed.
For the Appellant : V Surendra Reddy
For the Respondent: P Rajasekhar
| Table of Content |
|---|
| 1. jurisdictional basis for appeal under the act. (Para 1 , 2) |
| 2. background on the appellant's business and operational difficulties. (Para 3 , 4 , 5) |
| 3. failures in compliance by the appellant with the esi act and subsequent proceedings. (Para 6 , 7 , 8 , 9 , 10 , 11 , 12 , 13 , 14 , 15 , 16 , 17) |
| 4. inspection findings contradicting appellant's claims of non-operation. (Para 18 , 19 , 20 , 21) |
| 5. trial court issues and evidence consideration. (Para 22 , 24) |
| 6. arguments regarding operational status of appellant's business. (Para 25 , 26) |
| 7. final conclusion on the erroneous nature of the trial court's order. (Para 27) |
JUDGMENT :
Nyapathy Vijay, J.
The present Appeal is filed under Section 82 of the Employees State Insurance Act, 1948 (for short ‘the Act’) against the Order in EIC.No.18 of 2005, dated 25.03.2011 passed by the Employees Insurance Court and Chairman, Industrial Tribunal-1 at Hyderabad.
2. The Appellant herein is the Petitioner in the EIC.No. 18 of 2005.
3. The facts leading to filing of the present Appeal are as follows:-
The Appellant/Petitioner is a proprietary concern, which was started in the year 1978 and is involved in the manufacture of wiring products. All through, it is pleaded that the Appellant/Petitioner had engaged nine persons. While so, the Appellant/Petitioner was stood as guarantor for the Companies viz., (a) M/s Padmalaya Wire Products Pvt. Ltd., (b) Sri Padma Priya Galvanizers Pvt. Ltd., (c) Sri Chakra Wire Products Pvt. Ltd., for the loan obtained from the Bank as well as the State Financial Corporation. As they had committed default in payment of debts, the said companies as well as the Appellant industry were seized by the Bank as well as the State Finance Corporation. On account of seizure, the Appellant/Petitioner industry sustained heavy losses and stopped doing business in the manufacture of wire products from the year 1996 onwards.
-
4. While so, the Appellant/Petitioner industry entered into an agreement with M/s. Jagadamba Agencies and leased out the unit to the M/s. Jagadamba Agencies in the year 2001 for the period from 2001 to 2004. The E.S.I contribution was paid upto 2001. Since the Appellant industry was seized by the Bank on 17.04.1996, the books pertaining to the Provident Fund, Gratuity, E.S.I and other things were seized and some of the books were misplaced in the process. While so, on 10.02.2005, the proceedings were issued by the Respondent-Corporation effecting attachment of the amount lying in the account No.3751 of the Appellant. On being informed, the Appellant submits that no notice was served on them in respect of the E.S.I contribution due to the Respondent No.1-Corporation and the correspondence was made with M/s. Jagadamba Agencies, the lessee of the Appellant industry.
5. It is pleaded that the Appellant on enquiry was informed by the lessee that they had paid the entire amount due to the Respondent- Corporation and handed over the proceedings dated 25.08.2004 and another proceedings dated 17.12.2004 according to which the recovery Officer forwarded the D.D. for depositing in E.S.I. account. As the unit was leased from 25.05.2001 to 24.05.2004 to M/s. Jagadamba Agencies, the Respondent Corporation made correspondence to M/s. Jagadamba Agencies and the Appellant was unaware of the contributions payable to the Respondent- Corporation. On receipt of the notice dated 10.02.2005, a representation was made by the Appellant on 17.02.2005 narrating all the facts and issued a cheque for Rs.12,274/-, however, the representation was not considered. The Appellant submits that they are not liable to any contribution to the Respondent-Corporation and the proceedings dated 10.02.2005 demanding payment of Rs.73,985/- along with interest is illegal and unwarranted.
-
6. In response, the Respondent No.1-Corporation filed Counter contending that the Appellant-Industry was registered under the Act with effect from 01.04.1990. As the Appellant-Industry had failed to comply with t
