Madras High Court
M/S.Hotel Sky Park vs The Recovery Officer on 27 June, 2023
C.M.A(MD).No.246 of 2020
BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT
DATED : 27.06.2023
CORAM
THE HONOURABLE MR.JUSTICE R.VIJAYAKUMAR
C.M.A(MD)No.246 of 2020
and
C.M.P(MD)No.3618 of 2020
M/s.Hotel Sky Park,
Represented by its Managing Partner,
Tr.S.Asharaf Ali. ... Appellant/Petitioner
Vs.
The Recovery Officer,
Employees State Insurance Corporation,
4th Main Road,
K.K.Nagar,
Madurai-20. ...Respondent/Respondent
PRAYER:- Civil Miscellaneous Appeal filed under Section 82 (2) of the
Employee's State Insurance Act 1948, to set aside the decree and
judgment, dated 11.02.2020 made ready on 04.03.2020 in E.S.I.O.P.No.
19 of 2010 on the file of the Labour Court, Madurai and allow the
petition filed by the appellant.
1/10
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C.M.A(MD).No.246 of 2020
For Appellant : Mr.M.Jerin Mathew
for Mr.M.E.Ilango
For Respondent : Mr.I.Pinaygash
JUDGMENT
The present appeal has been filed by the employer challenging the
dismissal of E.S.I.O.P.No.19 of 2010 wherein an order of recovery
passed by the E.S.I corporation under Section 45-C of the Act has been
confirmed.
2. The appellant/employer is running a hotel business in Chennai
with effect from 2001 onwards and the said hotel is covered under the
E.S.I Act. They have purchased Om Saravana Bhavan International Hotel
at Dindigul under 2 sale deeds, dated 22.05.2008 and 07.06.2008 and
started their operation at Dindigul as a branch. A sub code was also
allotted to the Dindigul unit with effect from 29.09.2009. According to
the management, they have purchased only the land and building from
the individuals through 2 separate sale deeds and they have not
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C.M.A(MD).No.246 of 2020
purchased the establishment. Therefore, according to the employer, there
is no continuation of the business. They have further contended that, for
the first time, they received a notice of recovery on 29.03.2010 for the
alleged dues of their vendor Om Saravana Bhavan International Hotel for
the period between April 2004 to September 2008. Under the said order,
a sum of Rs.1,60,241/- was demanded. Challenging the said order, they
have filed E.S.I.O.P.No.19 of 2010 contending that without passing any
order under Section 45-A or providing any opportunity to them, straight
away an order of recovery has been passed.
3. The E.S.I corporation had filed a counter contending that the
vendor, namely Om Saravana Bhavan International Hotel was covered
under the E.S.I Act and they have suffered various orders. Despite the
said orders, they have not paid the contribution amount. Therefore,
invoking Section 93-A, the present recovery proceedings have been
initiated. As per Section 93-A, for the past dues, the vendor as well as the
purchaser are jointly and severally liable and therefore, the recovery
proceedings initiated as against the purchaser is legally sustainable.
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C.M.A(MD).No.246 of 2020
4. The tribunal after considering the oral and documentary
evidence let in on either side, arrived at a finding that as per Section 93-
A, the purchaser is also jointly and severally liable along with the vendor
for the past dues. The only limitation is with regard to the value of the
assets obtained by the transferee. When there is a statutory liability upon
the purchaser, the order of recovery cannot be challenged on the ground
that no opportunity was afforded to the purchaser. Based upon the said
conclusion, the petition filed by the employer was dismissed.
Challenging the same, the present appeal has been filed by the employer
raising the following substantial questions of law:
(i) Whether the Lower Court is justified in dismissing
the claim of the appellant without even framing issues with
regard the fact in issue viz., the applicability of Section 93-A
of the Employee's State Insurance Act, 1948 to the case on
hand?
(ii) Whether purchase of assets alone from
individuals without purchasing the establishment would
amount to transfer of undertaking as envisaged under
Section 93-A of the Employee's State Insurance Act, 1948?
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C.M.A(MD).No.246 of 2020
(iii) Whether the Lower Court was justified in holding
that there was a transfer of undertaking as per Section 93-A
of the Employee's State Insurance Act, 1948 without
assigning any reasons?
(iv) Whether the impugned demand notice of the
respondent, dated 29.03.2012 directing the appellant to pay
a sum of Rs.1,60,240/- is justified when the said default was
committed by one M/s Om Saravana Bhavan International
with regard to the ESI contribution of its employees and
when the appellant was not even in existence during the
relevant period?
(v) Whether it is justified on the part of the
respondent to recover the ESI corporation due amount from
the appellant at the first instance without even effecting
recovery from M/s Om Saravana Bhavan International
when they are very much available?
5. According to the learned counsel for the appellant, the Sky Park
Hotel at Dindigul is a branch unit of their Chennai Head Office and they
have been allotted a sub code. They have purchased only the land and
building and not the running business of the vendor. Further, without
issuing any notice for initiating proceedings under Section 93-A, straight
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C.M.A(MD).No.246 of 2020
away an order of recovery cannot be passed. Before the recovery order,
no notice was issued at any point of time to the present management.
Therefore, unless an opportunity is given to them, they cannot explain
whether they are liable to pay the contribution of their vendor or not.
6. Per contra, the learned counsel appearing for the E.S.I
corporation has strenuously contended that seven orders under Section
45-A have been passed as against the vendor of the appellant on various
dates from 2003 to 2007 onwards. However, those orders have not been
complied with by the vendor. He further contended that on 11.11.2009,
an attempt was made by the recovery officer to serve a notice upon the
present appellant which they had refused. He further contended that on
17.11.2009, an order has been passed as against the present management
which was never put to challenge. Therefore, the consequential recovery
proceedings cannot be challenged on the ground that they were not
afforded with any opportunity. Hence, he prayed for confirmation of the
order passed by the labour Court.
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C.M.A(MD).No.246 of 2020
7. I have carefully considered the submissions made on either side
and perused the material records.
8. It is not in dispute that one Om Saravana Bhavnan International
Hotel at Dindigul was covered under E.S.I Act from 01.12.2001 onwards.
According to the appellant, they have purchased only the land and
building under two documents, dated 22.05.2008 and 07.06.2008 and
they are covered by a different sub code which was allotted to them on
29.09.2009. They have further contended that there was no transfer of
establishment in order to invoke Section 93-A of the E.S.I Act and it is a
branch unit of the Head Office in Chennai. However, the E.S.I
corporation has disputed the said stand and has contended that it is a
transfer of business from Om Saravana Bhavan International Hotel.
Therefore, it is clear that there is a serious dispute whether the present
management is through transfer of business or it is a branch unit of their
Head Office in Chennai. The said issue has to be addressed before fixing
liability upon the management. According to the learned counsel for the
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C.M.A(MD).No.246 of 2020
appellant, they have not received the notice, dated 11.11.2009 said to
have been sent by the corporation. In such circumstances, this Court is of
the considered opinion that the purchaser of an establishment should be
given an opportunity to explain whether there is any transfer of business
or not before initiating any proceedings as against the purchaser.
Therefore, the finding of the Labour Court that no notice is necessary
before initiating proceedings as against the purchaser is not legally
sustainable.
9. In view of the above said deliberations, the order of the Labour
Court, Madurai in E.S.I.O.P.No.19 of 2010, dated 11.02.2020 is hereby
set aside. The order impugned in the said E.S.I.O.P., namely the order,
dated 29.03.2010 is also hereby set aside. The matter is remitted back to
the file of the E.S.I corporation. The E.S.I corporation shall pass orders
on merits and in accordance with law after giving due opportunity to the
appellant herein. The said exercise shall be completed within a period of
four (4) months from the date of receipt of a copy of this order. No costs.
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C.M.A(MD).No.246 of 2020
10. In view of the above said deliberations, this Civil
Miscellaneous Appeal stands allowed. No costs. Consequently,
connected Civil Miscellaneous Petition is closed.
27.06.2023
Index : Yes/No
Internet : Yes/No
NCC : Yes/No
gbg
To
1.The Labour Court,
Madurai.
2.The Section Officer,
Vernacular Section,
Madurai Bench of Madras High Court,
Madurai.
https://www.mhc.tn.gov.in/judis
C.M.A(MD).No.246 of 2020
R.VIJAYAKUMAR,J.
gbg
Order made in
C.M.A(MD)No.246 of 2020
27.06.2023
https://www.mhc.tn.gov.in/judis
