The main legal point established is that a lessor is not liable for ESI dues during the lease period and Section 93-A does not apply upon the termination of the lease.

JUDGMENT

M.S.JAWALKAR, J. - Heard learned Counsel for the appellant and learned Counsel for the respondent No.1.

2. The present appeal is filed challenging the judgment and order dated 19/09/2006 passed by learned Judge, Employee State Insurance Court, Nagpur in Application (ESI) No. 20/2003. By this judgment, the application of the appellant was dismissed upholding confirmation of attachment effected by respondent No.1 - ESI vide order dated 04/06/2003 and declaring the appellant as Principal Employer, for the purpose of computation of ESI dues during the tenure of lease granted by the appellant to respondent No.2 to run the Craft Paper Manufacturing Unit for the period 16/12/1994 to 15/12/2001.

3. The MSTC (Maharashtra State Textile Corporation) is a wholly owned Government of Maharashtra Enterprises. By an ordinance, the entire undertaking known as Empress Mills (Textile Unit), its Craft Paper Manufacturing Unit (Paper Division), stood vested in 1986 to MSTC. Simultaneously, with such a vesting the same was transferred to and vested with the MSTC. The Government of Maharashtra decided to close down the entire corporation and the process of closing down was under implementation with the approval of Board of Industrial and Financial Reconstruction, New Delhi (for short 'BIFR'). Under the provisions of Industries Company (Special Provisions) Act, 1985, the Corporation was declared as a sick industrial company. During the pendancy of the proceedings a proposal for running the said Craft Paper Manufacturing Unit was submitted before the BIFR by promoters of the respondent No.2 - Co-operative Society and the BIFR granted it's approval in principle for formation of such workers co-operative society for the running of the said paper unit of the appellant on co-operative basis. In view thereof, the appellant agreed to sign and execute a lease agreement with the respondent No.2 to run the paper division.

4. The agreement was executed on 16/12/1994 and was registered on 15/04/1995. The period of lease agreed to be of seven years with provision for extension. There is no dispute about execution of lease agreement. As per terms, the Corporation agreed to grant lease at the nominal rate of Rs.1 per annum. The property movable and immovable handed over to the respondent No.2 as per the details in annexure - A of the said lease agreement.

5. This Court's attention was drawn to the terms of lease agreement wherein by Clause - 4, the lessee is bound to pay all rants, taxes, licenses and other fee, charges, dues assessment and outgoings from the date of commencement of the lease and in consequence thereof and that it shall also bind its employees as may be necessary for the conduct of its business. The respondent No.2 had agreed to comply with the requirements of various provisions including Factories Act, Employees State Insurance Act Provident Fund and Miscellaneous Provisions Act. It is also pointed out in Clause 5(c) that the respondent No. 2 was given liberty to decide the terms and conditions of employment of its employees and that no right was left in the appellant to interfere in the decision of the respondent No.2 - Society after the commencement of the lease. The appellant was not liable and responsible for any financial implications deemed to have been suffered by the respondent No.2 on account of any orders passed by the Court of competent jurisdiction. It is submitted by learned Counsel for appellant that the appellant thus had no supervision and control over the employees of the respondent No.2 - Society in any manner whatsoever. The respondent No.2 - Society was vested with necessary power and jurisdiction to make appointment, supervise, control and determine the service conditions of its employees as may be engaged by it during currency of the lease. Thus the appellant was not a "contractor" nor a "principal employer" in relation to the respondent No.2 in view of Section 2(1)(c) and 2(1) (g) of the said Act. So also the employe