THE HON’BLE SHRI JUSTICE ANIL KUMAR JUKANTI CIVIL MISCELLANEOUS APPEAL No.295 OF 2014

JUDGMENT:

This Civil Miscellaneous Appeal is filed aggrieved by the order dated 23.11.2011 in E.I.C.No.43 of 2007 on the file of the Employees Insurance Court and Chairman Industrial Tribunal-I (for short, ‘the Tribunal’), Hyderabad.

2. Heard Mr. C. Niranjan Rao, learned counsel for appellant, and Mr. P. Rajasekhar, learned Standing Counsel for respondent Nos.1 to 3.

3. Appellant is one of the Directors of M/s.Maa Durga Industries situated at Rudraram, Patancheru Mandal, company was manufacturing machine components. In 1994, Mahesh Co-operative Bank sanctioned a term loan and State Bank of India (SBI) sanctioned working capital loan. Recovery proceedings were initiated before the Debts Recovery Tribunal by SBI against the company. The company filed a case against SBI before National Credit Framework (NCRF), Delhi. The machinery, plant, land and building were hypothecated to Mahesh Bank. For recovery of amounts payable to Mahesh Bank, an auction was conducted and the said plant, machinery, land and building were sold to M/s.Charminar Pressure Vessels Private Limited in January, 2001. Appellant resigned as Director w.e.f. 30.09.2002. Company was due an amount of Rs.11,09,698/- including interest to Employees State Insurance Corporation (ESI Corporation). Code No.52-12975-66 was allotted by ESI Corporation, covering w.e.f. 01.05.1996, company paid contributions from 01.05.1996 to 30.09.1996, failed to pay contributions later. A notice in Form C-18, dated 04.12.1998, was issued for the period 01.10.1996 to 30.09.1998. An opportunity to appear on 02.02.1999 was given. Time was sought, none appeared before the ESI Corporation.

4. An order dated 19.08.1999 under Section 45A of the Employees State Insurance Act, 1948 (for short, ‘the Act’) determining the contributions payable by Company amounting to Rs.5,52,765/- was passed. Recovery Officer issued prohibitory orders claiming contributions of Rs.11,09,698/- including interest. An amount of Rs.5,00,000/- was paid and a balance of Rs.6,09,698/- was due. Steps were initiated, as per the Act, for recovery of amounts, due to the Corporation. On the basis of certificate issued by the authorized officer, attachment of properties of the factory was issued on 18.07.2007.

5. Arrest memo dated 10.09.2007 was also issued. On issuance of arrest memo (Ex.P1), appellant filed a petition under Section 75(1)(g) of Act questioning the jurisdiction of the Recovery Inspector of ESI Corporation. It is only subsequent to issuance of Ex.P1, two cheques bearing Nos.351296 and 351297 were issued and out of the due amount of Rs.11,09,698/-, an amount of Rs.5,00,000/- were paid and the remaining amount was not paid. The Tribunal, based on the pleadings, framed three issues, which are as follows:

1. Whether the petitioner is not liable to pay the contribution amount of Rs.11,06,198/- as demanded by the respondent No.1?

2. Whether the arrest memo order dated 10.09.2007 passed by 1^st respondent is against the principles of natural justice and is liable to be set aside?

3. To what relief?

6. The second issue pertains to arrest memo dated

10.09.2007.

7. Grievance of appellant/petitioner is, authorities did not follow the procedure mandated under Section 45C of the Act. Further grievance is that second issue framed, being a crucial one pertaining to arrest, Tribunal erred in not delving into the aspect and deciding the issue. Hence, Civil Miscellaneous Appeal.

8. Learned counsel for appellant submitted that company was closed in the year 1996 and properties of the company i.e., plant, machinery, land and building were auctioned. It is further submitted that question of paying contributions from 01.10.1996 to 30.09.1998 would not arise, as no operations were carried out. It is further submitted that except stating that the company received certain orders, no evidence has been brought on record that the company was in operation upto September,