Research › Search › Judgment

Kerala High Court · body

2005 DIGILAW 75 (KER)

E. S. I. Corporation v. Ramaswamy

2005-02-02

K.K.DENESAN

body2005
JUDGMENT : K.K. Denesan, J. The opposite parties in I.C. No. 26/97 before the Employees Insurance Court, Kollam have preferred this appeal against the order of the Insurance Court dated 23.11.1999. By the impugned order, the Insurance Court held that the respondents/applicants (herein) cannot be made liable for contribution for the period from 18.9.1991 to 4.2.1997 on the ground that the establishment was under the receivership of Employees Provident Fund (E.P.F.) Authorities during the aforesaid period. 2. Respondents were running an establishment by name "Sreebala TVR Cine House". They filed an insurance case claiming that the establishment cannot be brought under the provisions of Employees State Insurance Act as the establishment do not have the required minimum number of employees for the purpose of coverage under the Act. 3. Respondents herein challenged the action of the appellants, demanding contributions in respect of the employees for the period from 1.7.1991 to 31.3.1997, which admittedly include the aforesaid period. Though the Insurance Court accepted the contentions of the appellants regarding coverage, as also the liability of the respondents to pay contributions under the Act in respect of the period from 1.7.1991 to 17.9.1991 and for the period from 4.2.1997 to 31.3.1997, the Court held that liability cannot be fastened on the respondents to pay contributions for the period from 18.9.1991 to 4.2.1997. 4. In paragraph 8' of the impugned order, the Insurance Court has considered the above issue which is quoted below: "8. According to the applicant and even admitted by the Corporation, the establishment was under the receivership of Employees Provident Fund (E.P.F.) Authorities from 18.9.1991 to 4.2.1997. The contention therefore is that all the affairs of the theatre were looked after by the said Receiver and the applicant had no control over the theatre and hence not liable to pay contribution for this period. This contention according to me is with substance. It is stated in Ext.B6 inspection report dated 16.9.1992 itself that the theatre was being run by the Receiver for Employees Provident Fund dues. Even then the Corporation has not taken any steps to give notice to the Employees Provident Fund Authorities for remittance of contribution. This is not a case of transfer of the establishment by the applicant by sale, gift, lease, license etc. Even then the Corporation has not taken any steps to give notice to the Employees Provident Fund Authorities for remittance of contribution. This is not a case of transfer of the establishment by the applicant by sale, gift, lease, license etc. making the applicant jointly liable for the dues but it is a case of forceable taken over of the theatre by Employees Provident Fund Authorities. Therefore the applicant cannot be made liable for the contribution for the period from 18.9.1991 to 4.2.1997 and Corporation will be at liberty to proceed against the Employees Provident Fund Authorities for the above said dues as that authority is liable for the same." 5. The learned counsel for the appellants submits that the view taken by the Insurance Court cannot be sustained in the light of the fact that respondents were Principal Employers and having regard to the provisions contained in S.44(i) of the Act read with S.45A of the Act, the respondents cannot escape the liability to pay contribution under the Act, even in respect of the period during which establishment was under the receivership of the Provident Fund Commissioner. 6. S.44(1) of the Act says that every principal and immediate employer shall submit to the Corporation or to such Officer of the Corporation as it may direct, such returns in such forms containing such particulars relating to persons employed by him or to any factory or establishment in respect of which, he is the principal or immediate employer as may be specified in regulations made in that behalf. Under S.45A of the Act, where in respect of a factory or establishment, if no returns, particulars, registers or records are submitted in accordance with S.44, Corporation has got the right to determine the amount of contribution payable in respect of the employees of that factory or establishment on the basis of information available to the Corporation. According to the appellants, contribution was demanded as authorised by the aforesaid provisions of law. The counsel for the appellants has invited my attention to the definition of the term 'Principal Employer' as defined in S.2(17) and has contended that respondents satisfy the definition of the aforesaid term. Liability cast upon the Principal Employer under S.44(1) of the Act and the powers conferred on the Corporation under S.45A of the Act are attracted to the facts of this case. 7. Liability cast upon the Principal Employer under S.44(1) of the Act and the powers conferred on the Corporation under S.45A of the Act are attracted to the facts of this case. 7. It is true that for the period from 18.9.1991 to 4.2.1997, theatre was taken over by the Employees Provident Fund Authorities and they were running the show. However, respondents continued to be the owners of the establishment. The master and servant relationship between the respondents and the employees of the establishment was not severed during the above period. Therefore the respondents were the Principal Employer of the said establishment. The learned counsel for the respondents submits that the Employees Provident Fund Commissioner was not only in occupation of the establishment and was running the show, but was having administrative powers also and was in all respects managing the establishment and therefore the Provident Fund Commissioner was the occupier of the establishment as contemplated in the Act. On that basis, the learned counsel contended that responsibility to file returns etc. as also to pay contribution cannot be fastened on the Principal Employer even assuming that respondents were the Principal Employers during the aforesaid period. The responsibility ought to be shifted to the shoulders of the real occupiers of the establishment. 8. The aforesaid contention is not altogether without any basis. This is a case where the Corporation could have taken action against the Provident Fund Commissioner for non-payment of contribution under the Act during the period covered by receivership. But the discretion rests in the Corporation and the Corporation has got the option to proceed against the occupier or the Principal Employer. Therefore, it cannot be said that action of the Corporation is without jurisdiction in as much as it had chosen to fasten the liability on the Principal Employer. 9. I accept the contentions of the counsel for the appellants that respondents who were the owners of the establishment during the period in question, satisfy the definition of the term -- Principal Employer. In the light of the statutory provisions, it cannot be said that Principal Employer should be absolved from the liability to pay contribution even in cases where somebody else is the occupier or some other authority has stepped into the shoes of the respondents and were running the show. In the light of the statutory provisions, it cannot be said that Principal Employer should be absolved from the liability to pay contribution even in cases where somebody else is the occupier or some other authority has stepped into the shoes of the respondents and were running the show. I therefore hold that the view taken by the Court below in paragraph 8' of the impugned order, is erroneous and liable to be set aside. I do so. It is declared that for the period from 18.9.1991 to 4.2.1997, respondents had the duty to pay the contribution and they are liable for the contribution under the Act. 10. The learned counsel for the respondents submits that the occupier has also got the liability to pay the contribution and hence according to the respondents, the Provident Fund Authorities alone are liable for payment of the contribution. Counsel submits that even if the payment is made by the respondents, their right to recover the said amount from the Provident Fund Authorities may be reserved. I am not examining whether any such right for recovery is there for the respondents as contended. I need only observe that this judgment will not preclude the respondents from exercising any such right, if available under law. 11. Before parting with this case, it is to be taken note of that the respondents are directed to pay the contribution for the period during which they were not in actual occupation of establishment, not running the show and not earning any profits. The Provident Fund Authorities took possession of the establishment by using the statutory machinery and exercising the power conferred on them. This is a strange situation where respondents are made liable, because, technically and in terms of the statutory provisions, they are liable. Hence I am of the opinion that, the Corporation may not be justified in realising the interest or imposing any penalty on the respondents for the delay, if any, in making the contribution. I make it clear that in the facts and circumstances of the case, it will be in the interest of justice that the appellants do not proceed against the respondents herein under S.85A of the Act r/w 31B of the regulations. Subject to the above observation, the appeal is allowed. No order as to costs.