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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
Arun R. Pedneker, J.
The Employees State Insurance Corporation - Appellant
Versus
Dinendra Ratansi and ors. – Respondents
First Appeal No. 731 of 1992
Decided On : 10-07-2024
JUDGMENT :
1. Heard Mr. Pathak, learned counsel for the appellant and Mr. Naidu, learned counsel for Respondent Nos. 1(a) to 1(d).
2. By the present appeal, the appellant – Employees State Insurance Corporation (for short “ESIC”) challenges the order passed by the Employees Insurance Court, Mumbai dated 01.08.1988 in ESIC Application No. 130 of 1998, whereby the ESIC Court set aside the Order of ESIC in Form No. C-19, directing the occupier of the factory to pay ESIC dues in his personal capacity.
3. The questions of law that arises for consideration in the present appeal under Section 82 of the ESIC Act is as under :
4. The facts giving rise to the appeal are summarised as under :
ii. The Textile Undertaking/ Company was covered under the Employees Insurance Act. Notices were issued on 04.11.1986 to the original respondent No.1 / director occupier of the Factory directing him to personally pay ESI dues for different periods. He was further informed that in case if he fails to do so, dues would be recovered as arrears of Land Revenue. These notices were challenged by the original respondent No.1 in the High Court in Writ Petition No. 3353 of 1987. The same was dismissed. The applicant thereafter preferred appeal being Appeal No. 28 of 1988, in which the respondent- ESI Corporation was given liberty to issue fresh notice to the respondent / director afresh as an occupier of the factory for the period from 01.01.1981 to 18.10.1983. Thereafter, while disposing of the Writ Petition, liberty was granted to respondent No.1/ director of the company / occupier by this Court to file application under Section 75 of the E.S.I.C. Act to challenge the order passed by ESIC under Section 45-A for the notice period 01.01.1981 to 18.10.1983.
iii. In view of liberty granted by this Court, application was preferred by original respondent No.1/ occupier before the ESI Court challenging the recovery in his personal capacity. The ESI Court framed following issues and their findings are as under :
| Sr. No. | Issues | Answer |
| 1 | Whether Respondent No.1 has correctly determined an amount of Rs.24,65,383.81 Ps. As E.S.I. contribution by the Gold Mohur Mills Ltd. for the period 1st January 1981 to 18th October 1983, If not what amount is payable ? | … Does not arise |
| 2 | Whether there was delay and laches on the part of Respondent No.1 in recovering E.S.I. dues from Messrs. Gold Mohur Mills Ltd.? If yes, whether Respondent No.1 can now recover the same ? | … Does not arise |
| 3 | Whether the applicant was principal employer and /or occupier during the relevant period of 1st January 1981 to 18th October 1983 ? | … Does not arise |
| 4 | Whether Shri Bhave the observer appointed by the Bank of India was in complete financial control of the Company Messrs. Gold Mohur Mills Ltd. ? | … Does not arise |
| 5 | Whether the Respondents are entitled to recover E.S.I. Contribution dues of Messrs. Gold Mohur Mills Ltd. personally from the Applicant? | … No |
| 6 | If so, whether the applicant is entitled to relief claimed in para 20(c) ? | … No |
| 7 | To what other reliefs, the applicant is entitled to? | … No |
| 8 | What Order? | … As per order below |
The ES
The occupier of a factory is not personally liable for ESIC dues unless they have ultimate control over the factory's affairs; liability rests with the company.
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.
The main legal point established in the judgment is that a subsequent transferee may not be liable for belated payment of contribution under the ESI Act if there is no mens rea on their part, and the....
The main legal point established in the judgment is the joint and several liability of the transferee and the transferrer under Section 93A of the Employees State Insurance Act.
The liability to pay E.S.I. contribution and interest is determined by the effective date of the notification and the adjudication of the actual amount payable.
The Mathadi Act does not make Managing Director or Directors personally liable to pay the dues which the Board is empowered to recover from the employer.
Damages under the E.S.I. Act are discretionary, not mandatory, and must consider genuine hardships, reaffirming that penalties should not automatically apply.
The main legal point established in the judgment is the discretionary nature of imposing damages under Regulation 31C and the mandatory nature of interest payment under Section 39(5)(a).
The employer must ensure EPF contributions for all employees, including those employed through contractors, and must comply with principles of natural justice in assessment proceedings.
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