The Regional Director vs M/S Souza Cashew Industries
2021 Latest Caselaw 6008 Kant

                                  M.F.A.NO.10319/2011

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     IN THE HIGH COURT OF KARNATAKA AT BENGALURU

      DATED THIS THE 13TH DAY OF DECEMBER 2021

                       BEFORE

        THE HON'BLE MRS JUSTICE K.S.MUDAGAL

MISCELLANEOUS FIRST APPEAL NO.10319/2011(ESI)

BETWEEN:

1.     THE REGIONAL DIRECTOR
       E.S.I.CORPORATION
       REGIONAL OFFICE (KARNATAKA)
       NO.10, BINNY FIELDS
       BINNYPET, BANGALORE - 560023

2.     THE DEPUTY/JOINT DIRECTOR
       E.S.I. CORPORATION
       NO.10, BINNY FIELDS
       BINNYPET, BANGALORE - 560023

3.     THE RECOVERY OFFICER
       E.S.I. CORPORATION
       REGIONAL OFFICE (KARNATAKA)
       NO.10, BINNY FIELDS
       BINNYPET, BANGALORE - 560023
                                      ... APPELLANTS

(BY SRI.K.KRISHNAPPA, ADV.)

AND:

M/S.SOUZA CASHEW INDUSTRIES
KULASHEKAR
MANGALORE - 575 005
(NOW NOT IN EXISTENCE)
REPRESENTED BY ITS MANAGING
PARTNER SRI.WILFRED D'SOUZA           ... RESPONDENT

(BY SRI A.R.HOLLA, ADV.)
                                         M.F.A.NO.10319/2011

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     THIS MFA IS FILED UNDER SECTION 82(2) OF
EMPLOYEE STATE INSURANCE ACT, PRAYING TO SET ASIDE
THE ORDER DATED 06.10.2010 PASSED IN E.S.I. NO.3/2008
ON THE FILE OF PRESIDING OFFICER, LABOUR COURT-CUM-
ESI COURT, MANGALORE ALLOWING THE APPLICATION
FILED UNDER SECTION 75 OF E.S.I. ACT FOR SETTING
ASIDE THE IMPUGNED ORDERS AND NOTICES ISSUED BY
THE RESPONDENTS THEREIN.

     THIS MFA COMING ON FOR HEARING THIS DAY, THE
COURT THROUGH VIDEO CONFERENCE DELIVERED THE
FOLLOWING:

                     JUDGMENT

Aggrieved by the order of the ESI Court, D.K.

Mangalore in ESI No.3/2008 reversing the order of the

authority under Section 85(i)(a) of Employees State

Insurance Act, 1948 ('the ESI Act' for short) and

exonerating the respondent of his liability to pay the

damages and interest, the respondent in ESI No.3/2008

has filed this appeal.

2. The appellants are the Officers and

employees of the State Insurance Corporation

established under the ESI Act. The respondent is a

factory covered under the ESI Act with Code No.53-

7805-09. The appellants issued notices to the M.F.A.NO.10319/2011

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respondent calling upon them to pay damages and

interest for the following periods:

      i)     July 2003 to September 2003

      ii)    October 2003 to November 2003

      iii)   December 2003 to January 2004

3. The appellants claimed that the respondent

failed to pay the employer's share of contribution as

required under Regulations 31A, 31B and 31C of the

Employees' State Insurance (General) Regulations,

1950. They claimed for the said period as per Section

85B of the ESI Act, the respondent is liable to pay

Rs.2,19,964/- as damages and interest.

4. The Joint Director of Employees' State

Insurance Corporation passed orders dated 04.12.2007

which were marked at Exs.A.6 to A.8 before the trial

Court, directing the respondent to pay the aforesaid

damages and interest. For recovery of the said amount

the notices dated 25.01.2010 as per Exs.A.9 to A.11

were issued. Ultimately the orders as per Ex.A.13 to 15 M.F.A.NO.10319/2011

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were passed under Section 39(5) of the ESI Act for

recovery of the aforesaid amounts.

5. The appellants also initiated the proceedings

against the respondent in C.C.Nos.204/2005 and

807/2005 before the Special Court for Economic

Offences, Bengaluru on the ground that the respondent

has failed to pay the contributions for the aforesaid

period to the tune of Rs.93,898/- and 1,20,833/-

respectively, thereby committed the offence punishable

under Section 85(i)(b) of the ESI Act. The respondent

was convicted in C.C.Nos.204/2005 and 807/2005 for

the offences alleged and sentenced to undergo

imprisonment till raising of the Court and fine of

Rs.5,000/- in C.C.No.204/2005 and Rs.10,000/- in

C.C.No.807/2005. Challenging those orders, the

respondent preferred Crl.A.Nos.842/2007 and 843/2007

before the Fast Track (Sessions) Judge-V, Bengaluru

city.

6. Such being the position, the respondent

challenged the notices Exs.A.9 to A.11 and orders M.F.A.NO.10319/2011

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Exs.A.13 to A.16 before the ESI Court, D.K.,Mangaluru

in ESI No.3/2008. In the said case, it was contended

that the establishment in question was leased out to

Union of workers, therefore, the employer was not liable

to pay any contribution. The trial Court by the

impugned order held that as per Ex.A.4 the applicant

had leased out the establishment to the Union of

workers working in the same establishment, the order

of conviction and sentence passed against the

respondent are pending in appeal. Therefore, the trial

Court allowed the application, set aside the order with a

rider that the said order is subject to the decision of the

appellate Court in Crl.A.Nos.842 and 843 of 2007.

7. The respondent did not challenge the

condition in the impugned order which is made subject

to the result of the criminal appeals. Therefore that part

of the order attained finality. Aggrieved by that order,

the appellants have preferred the above appeal. It is

their contention that though there was no material, the

trial Court erred in accepting the contention of the M.F.A.NO.10319/2011

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respondent that it had leased out the establishment to

Union of Workers. It is further contended that though

the same contentions were taken in the prosecution of

the respondent in C.C.Nos.204 and 807 of 2005 the

Special Court for Economic Offences based on the same

evidence rejected the defence of the respondent and

had convicted him. Therefore the appreciation of the

evidence by the trial Court was incorrect.

8. So far as the finality of the orders passed in

C.C.Nos.204 and 807 of 2005 before this Court, learned

counsel for the appellant produced the copies of the

judgments in Crl.A.Nos.842 and 843 of 2007. The said

judgments show that the appeals of the respondent

were dismissed and the orders of conviction and

sentence passed against the respondent were

confirmed. Under such circumstances, the respondent

is liable to pay the damages and interest claimed by the

appellants.

9. Even on the facts of the case absolutely

there was no material to show that the respondent had M.F.A.NO.10319/2011

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ceased to be the employer. On that ground also, the

impugned order is liable to be set aside. Therefore, the

appeal is allowed.

The impugned order of the trial Court dated

06.10.2010 passed by the ESI Court, D.K. in ESI

No.3/2008 is set aside. The order passed under Section

85B of the ESI Act and the notices issued under Section

39(5) of the ESI Act are hereby restored.

Sd/-

JUDGE akc