Madras High Court

Employees' State Insurance ... vs M/S Martin Spinning Mills Pvt. Ltd on 4 October, 2021

                                                                         C.M.A. No.3634 of 2014

                                   IN THE HIGH COURT OF JUDICATURE AT MADRAS

                                               DATED : 04.10.2021

                                                      CORAM

                               THE HONOURABLE MR. JUSTICE ABDUL QUDDHOSE

                                              C.M.A. No.3634 of 2014
                                                & M.P.No.1 of 2014


                     1.Employees' State Insurance Corporation,
                       through its Joint Director,
                      Sub-Regional Office,
                      1897, Trichy Road, Panchdeep Complex,
                      Ramanathapuram, Coimbatore.

                     2.The Recovery Officer,
                       Sub-Regional Office,
                       1897, Trichy Road, Panchdeep Complex,
                       Ramanathapuram, Coimbatore.                       ....   Appellants

                                                    versus

                     1.M/s Martin Spinning Mills Pvt. Ltd.,
                       Unit-II, through its General Manager
                        Mr.Arunachalam,
                      Door No.54, Mettupalayam Road,
                      C.N.Mills Post, Coimbatore-641 029.

                     2.The Branch Manager,
                      Karur Vysya Bank,
                      483, Dr.Nanjappa Road,
                      Ashoka Plaza, Coimbatore.                        ... Respondents


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https://www.mhc.tn.gov.in/judis/
                                                                                 C.M.A. No.3634 of 2014

                               Civil Miscellaneous Appeal filed under Section 82 of the Employees'
                     State Insurance Act, 1948 to set aside the order passed in E.S.I.O.P No.6 of
                     2012 dated 17.12.2013 by the Employees' State Insurance Court,
                     Coimbatore.

                               For Appellant           :     Mr.S.P.Srinivasan

                               For Respondents         :     No appearance


                                                      JUDGMENT

This appeal has been filed by the Employees' State Insurance

Corporation aggrieved by the order passed by the Employees' State

Insurance Court, Coimbatore, on 17.12.2013 in E.S.I.O.P No.6 of 2012, in

which, the recovery notice issued by the appellant/Corporation to recover

damages and interest from the first respondent was set aside and the

petition filed in E.S.I.O.P No.6 of 2012 under Section 75(2) of the

Employees' State Insurance Act, 1948, was allowed in favour of the first

respondent.

2.Heard Mr.S.P.Srinivasan, learned counsel for the appellants and

there is no representation for the respondents.

https://www.mhc.tn.gov.in/judis/ C.M.A. No.3634 of 2014

3.The appeal is admitted on the following substantial questions of

law:-

(a) Whether the ESI Court was right in allowing the ESIOP by setting aside the recovery notice dated 19.09.2011 and Prohibitory Order dated 24.04.2012 issued by the 2nd appellant herein?

(b) Whether ESI Court was correct in accepting the claim of the 1st respondent that there was no transfer of establishment under Section 93A of the ESI Act?

(c) Whether ESI Court was correct in holding that Regulation 31-C of the Employees' State Insurance (General) Regulations, 1950, was not exercised and is applicable to this case?

(d)Whether in the absence of any finding on the issue of payment of interest amounting to Rs.32,45,295/- due to the ESI Corporation that is mandatory as per 31-A of the Employees' State Insurance (General) Regulations, 1950, the judgment and decree of the Hon'ble ESI Court is sustainable?

4.While passing the impugned order, the Employees' State Insurance

Court, Coimbatore, raised the following points for consideration.

https://www.mhc.tn.gov.in/judis/ C.M.A. No.3634 of 2014

(a) Whether the first respondent is liable to pay the interest and damages which were payable by the erstwhile establishment viz., M/s Lakshana Cotton Spinning Mills Private Limited?

(b) To what relief the first respondent is entitled to?

5.The contention of the appellant in this appeal as well as before the

Employees' State Insurance Court, Coimbatore, is that as regards interest,

the first respondent cannot seek waiver under the Employees' State

Insurance (General) Regulations, 1950. Even though the Employees' State

Insurance Court, Coimbatore, under the impugned order has formulated the

aforementioned points for consideration, the said Court has admittedly

adjudicated only on the issue of non payment of damages by the first

respondent as per Regulation 31-C of the Employees' State Insurance

(General) Regulations, 1950. But it did not adjudicate on the issue of non

payment of interest even though the Employees' State Insurance Court,

Coimbatore, had formulated specific issue on the question of non payment

of interest also.

https://www.mhc.tn.gov.in/judis/ C.M.A. No.3634 of 2014

6.It is also the contention of the appellant before this Court as well as

before the Employees' State Insurance Court, Coimbatore, that since the

first respondent has purchased the plant and machineries from the erstwhile

management, they are liable to pay the outstanding ESI contributions to the

appellant/Corporation. Even though such a plea was taken by the

appellant/Corporation, as seen from the impugned order, the said plea was

not adjudicated upon by the Employees' State Insurance Court, Coimbatore.

7.Regulation 31-A deals with interest on contribution due, but not

paid on time and it reads as follows:

“31-A. Interest on contribution due, but not paid in time:- An employer who fails to pay contribution within the periods specified in regulation 31, shall be liable to pay [simple interest at the rate of [twelve per cent] per annum] in respect of each day of default or delay in payment of contribution.]”

8.Regulation 31-C of the Employees' State Insurance (General)

Regulations, 1950, deals with damages or contributions or any other amount

due, but not paid in time.

https://www.mhc.tn.gov.in/judis/ C.M.A. No.3634 of 2014

9.The contention of the appellant/Corporation before this Court as

well as before the Employees' State Insurance Court, Coimbatore, is that the

first respondent cannot seek waiver for non payment of interest, but can

seek waiver only for damages under Regulation 31-C. As seen from the

impugned order, Regulation 31-A, which deals with interest on contribution

due but not paid in time referred to supra, has admittedly not been

considered by the Employees' State Insurance Court, Coimbatore. The

Court below has only considered the issue of non payment of damages by

the first respondent. Therefore, this Court is of the considered view that the

matter will have to be remanded back to the Employees' State Insurance

Court, Coimbatore, for fresh consideration of the following issues.

(a) Whether the first respondent is liable to pay interest for the delayed payment of the Employees' State Insurance contributions and whether the reasons given for non payment is admissible interest under Regulation 31-A of the Employees' State Insurance (General) Regulations, 1950?

(b) Whether the first respondent is liable to pay Employees' State Insurance contributions payable by the

https://www.mhc.tn.gov.in/judis/ C.M.A. No.3634 of 2014

erstwhile management to the extent of the purchase made by the first respondent?

Since the matter is remanded back to Employees' State Insurance Court,

Coimbatore, for fresh consideration, there is no necessity for this Court to

adjudicate the substantial questions of law formulated by this Court.

10.In the result, the impugned order dated 17.12.2013 passed by the

Employees' State Insurance Court, Coimbatore, in ESIOP No.6 of 2012 is

hereby set aside and the matter is remanded back to the very same

Employees' State Insurance Court, Coimbatore, for fresh consideration with

regard to the aforementioned issues alone. The Employees' State Insurance

Court, Coimbatore, is directed to pass final orders after giving sufficient