Judgment :- This appeal has been preferred by the Regional Director of the ESI Corporation, Hyderabad questioning the validity of the notice of admission/rejection of proof of debt passed by the Official Liquidator in Form No. 69 on 30.9.2008, admitting a sum of Rs.74,366.54 ps as an unsecured debt of M/s. Kera Sinter Limited towards the appellant corporation. The Official Liquidator rejected the rest of the claim in a sum of Rs.69,863.46 ps. By an order dated 28.6.1999, this court answered the reference made by BIFR in RCC No. 9 of 1992 and ordered for winding up of M/s. Kera Sinter Limited. By virtue of the provisions contained under Section 449 of the Companies Act, the Official Liqudiator attached to this court became the liquidator of the said company. During the course of winding up proceedings of the company, by an order passed on 10.8.2005 made in CA No. 633 of 2005, this court permitted the Official Liquidator to invite claims from the creditors of the company under liquidation. Accordingly, notice, inviting claims in Form No. 63 has been published in leading newspapers fixing the last date for receipt of the claims as 28.10.2005. In response thereto, the ESI Corporation acting through its Regional Director filed its claim on 28.2.2007 in Form No. 66 making a claim in a sum of Rs.1,44,230/-. During the course of investigation, the counsel on behalf of the appellant corporation has participated in the investigation on 30.1.2008 and produced certain documents, based upon which notice of admission/rejection of proof of debt in Form No. 69 has been issued by the Official Liquidator on 30.9.2008 admitting certain portion of the claim while rejecting the rest of the portion. Aggrieved by that portion of the said order, the present company application has been moved, which is treated as an appeal as is required to be so treated, in terms of Rule 164 of the Companies (Court) Rules, 1959. The appellant corporation has claimed arrears of contribution in a sum of Rs.38,178/-. That was admitted by the Official Liquidator. The appellant corporation has claimed interest up to 31.12.2004 on that amount. However, the Official Liquidator has admitted the debt in this regard by calculating the interest payable only up to the date of winding up i.e., 28.6.1999. The appellant corporation has claimed arrears of contribution in a sum of Rs.38,178/-. That was admitted by the Official Liquidator. The appellant corporation has claimed interest up to 31.12.2004 on that amount. However, the Official Liquidator has admitted the debt in this regard by calculating the interest payable only up to the date of winding up i.e., 28.6.1999. Hence, he has admitted a sum of Rs.34,817.54 ps as admissible while the balance claim of Rs.31,685.46 ps which represents the claim of interest beyond the date of winding up has been rejected. The appellant corporation has also claimed a sum of Rs.770/- as interest on delayed payments, which has also been admitted. The appellant corporation has also claimed further damages in a sum of Rs.601/-, which is also admitted as debt due. The appellant corporation has claimed further damages in a sum of Rs.38,178/-which has been negatived and rejected by the Official Liquidator. Therefore, questioning the validity of the order of notice of admission/rejection of the claim in respect of amount representing damages and the period of interest beyond the date of winding up, the present appeal has been preferred. As per Rule 154 of the Companies (Court) Rules, 1959, the value of all debts and claims against the company under liquidation shall, as far as is possible, be estimated according to the value thereof as at the time of the order of winding up of the company. Therefore, the Official Liquidator has rightly confined the consideration, while dealing with the claim of the appellant corporation with regard to interest claimed beyond 28.6.1999, to the date of the order of winding up of the company. To this extent, no exception need be drawn. Rule 179 of the Companies (Court) Rules, 1959, in fact enables payment of interest for the period subsequent to the order of winding up, in he Event of there being surplus amount available after payment in full of all the claims of the creditors admitted to proof. Therefore, for the purpose of payment of interest for the period beyond the date of winding up, it is essentially needed that the claims of creditors are needed to be paid in full first. Depending upon the availability of surplus amount, interest for the period beyond the date of winding will be taken up. Therefore, for the purpose of payment of interest for the period beyond the date of winding up, it is essentially needed that the claims of creditors are needed to be paid in full first. Depending upon the availability of surplus amount, interest for the period beyond the date of winding will be taken up. The next question that requires to be considered is whether the appellant corporation could claim payment of damages in terms of Section 85B of the Employees State Insurance Act, 1948, Act 34 of 1948 Act, henceforth referred to as `ESI Act'. Section 85B of the ESI Act enables the corporation to recover from the employer who fails to make or pay the amounts, by way of penalty, such damages not exceeding the amount of arrears. Therefore, it pre-supposes a determination and quantification of the damages. In fact the proviso to Section 85B of the ESI Act makes two things clear: (1) Before recovering such damages, the employer shall be given a reasonable opportunity of being heard. (2) The ESI Corporation may reduce or waive the damages recoverable under this section in relation to an establishment which is a sick industrial company in respect of which a scheme for rehabilitation has been sanctioned by BIFR. In the instant case, by the date the ESI Corporation lodged its claim or even by the date the Official Liquidator has issued the notice of admission/rejection of proof of debt in Form No. 69 on 30.9.2008, the ESI Corporation has not carried out the exercise under Section 85B of the ESI Act. Therefore, without first determining the damages payable by the employer, no claim could have been lodged by the ESI Corporation. But, it did lodge such a claim, which was rightly negatived by the Official Liquidator. Sensing the illegality committed by the ESI Corporation in lodging the claim with the Official Liquidator without accomplishing the requisite task under Section 85B of the ESI Act, the appellant corporation has produced an order of determination of the damages in terms of Section 85B passed by it on 12.11.2008 by its Assistant Director. This order dated 12.11.2008 is ex facie illegal, for, as is required by the first proviso to Section 85B, a notice of the proposed hearing is issued on 5.11.2008, fixing the date of hearing at 11 AM on 10.11.2008. This order dated 12.11.2008 is ex facie illegal, for, as is required by the first proviso to Section 85B, a notice of the proposed hearing is issued on 5.11.2008, fixing the date of hearing at 11 AM on 10.11.2008. It is stated that this show-cause notice has been issued to the former Managing Director of the company under liquidation, to its registered office and to its factory premises. It is noticed by the Assistant Director that the show-cause notice dated 5.11.2008 has not been delivered by the postal authorities and they were returned with postal remarks such as "left out", "no such person" respectively. However, the notice addressed to the factory premises situated at Gudur, Bhongir Mandal, Nalgonda District, was neither returned undelivered nor any response was received. Therefore, the Assistant Director could not have presumed that the show-cause notice dated 5.11.2008 to have been served on the employer. In spite of noticing this fact, he had proceeded to pass the order of determination on 12.11.2008 holding that the employer did not come up with any objection. Until and unless the service of the show-cause notice is affected, he could not have expected the desired response from the addressees. Realizing this folly, the Assistant Director has passed another order dated 9.3.2009 recalling the order passed on 12.11.2008. It is stated that yet another show-cause notice dated 23.1.2009 was issued fixing the date of hearing at 11.30 AM on 9.2.2009. It is asserted that the notice sent to former Managing Director of the company under liquidation Sri K.S.Reddy has been returned with postal endorsement "no such person is available". Whereas the notice sent to the factory premises has been acknowledged to have been received and hence it is contended that the show-cause notice was served. Therefore, order of determination of damages in terms of Section 85B has been passed afresh on 9.3.2009. I am afraid that even this order is an unsustainable one. The ESI Corporation is aware that M/s. Kera Sinters Limited has been ordered to be wound up by this court by virtue of the provisions contained under Section 449 of the Companies Act. The Official Liquidator attached to this court becomes its liquidator and hence it lodged the claim with the Official Liquidator. The ESI Corporation is aware that M/s. Kera Sinters Limited has been ordered to be wound up by this court by virtue of the provisions contained under Section 449 of the Companies Act. The Official Liquidator attached to this court becomes its liquidator and hence it lodged the claim with the Official Liquidator. It is the liquidator of a company which is under the process of winding up, who has to be put on notice if any charge or liability is to be created, after an order of winding up is passed against the company. No reasons are forthcoming as to why the corporation has not chosen to put the Official Liquidator on notice and instead it had preferred to keep the former Managing Director of the company on notice before passing the orders under Section 85B. The former Managing Director either by his participation or otherwise cannot create any additional liabilities for a company which is under the process of winding up. No such additional liability can be created to bind the company. For this failure itself, the order passed on 9.3.2009 clearly becomes unenforceable as against the company under liquidation, even if one were to take any such adjudicatory order into account and consideration for sustaining the claim of the ESI Corporation, in this appeal. ESI Act has been ushered in for providing certain benefits to the employees in cases of sickness, maternity and employment injury and with a view to provide certain other matters in relation thereto. The Act has been brought in to cover all factories. The ESI Corporation came to be established in terms of Section 3 of the said Act. Section 28 has provided for the purposes for which the ESI fund shall be expended. Importantly, the purposes provided therein are payment of benefits and provision towards medical treatment. Section 38 has thrust an obligation that all employees and factories or establishments to which the said Act applies shall be insured. Section 39 has provided for the contributions payable to the said ESI Corporation. Sub-section (4) of section 39 makes it clear that the contributions payable in respect of each wage period shall ordinarily fall due on the last date of the wage period. Sub-section (5) has statutorily recognized the obligation to pay interest for delayed payment of subscriptions at 12% per annum or at such higher rates as prescribed under the regulations. Sub-section (4) of section 39 makes it clear that the contributions payable in respect of each wage period shall ordinarily fall due on the last date of the wage period. Sub-section (5) has statutorily recognized the obligation to pay interest for delayed payment of subscriptions at 12% per annum or at such higher rates as prescribed under the regulations. Section 40 has thrust an obligation on the principal employer to pay in respect of every employer whether directly employed by him or through an immediate employer, both the employer's contribution and the employee's contribution. Section 43 of the Act dealt with the method of payment of contribution. Importantly, Section 45 has provided for the corporation to appoint Inspectors for the purpose of conducting enquiry into the correctness of any of the particulars stated in the returns, to be filed and maintained by every employer in terms of Section 44. In the absence of any such returns or registers, enough power has been left under Section 45A of this Act for determining the contributions payable to the corporation on the basis of information available with it. Thus, it is the duty of the corporation not only to undertake periodical inspection of the establishments covered by the sweep of the said Act, but also to ensure that the returns furnished by every employer reflect accurate and correct factual position. As is noticed supra, the main purpose for which this enactment has been made is for providing a great security cover for the employees working in factories and other establishments covered by the said Act. The benefits which the insured persons or their dependants, as the case may be, are entitled, have been provided for under Section 46 of the said Act. Thus, benefits have been conferred as a measure of social security not only to the employees but also to their dependants in case of any death resulting from the injury sustained by the employee during the course of his employment. The benefits also include sickness and maternity benefits. Therefore, greater degree of vigil is required to be exercised by the corporation and its Inspectors appointed under Section 45 for securing faithful compliance with the provisions of the said Act. In terms of Section 59, the ESI Corporation was also required to establish and maintain hospitals, dispensaries and other medical and surgical services for the benefit of the insured persons. In terms of Section 59, the ESI Corporation was also required to establish and maintain hospitals, dispensaries and other medical and surgical services for the benefit of the insured persons. Therefore, recovery of contributions from every employer alone holds the key for the purpose of carrying out successfully the objects for which the said enactment has been brought in. It will also be relevant at this stage to notice that Section 84 of the said Act has recognized furnishing of false statements by employers as a penal offence. Section 85 of the Act in fact has rendered any act of failure to pay any contribution, which under the said Act is liable to be paid or any act of failure or refusal to submit any return required by the regulations or whoever makes a false return or whoever obstructs any Inspector or other official of the corporation in discharge of his duties shall be punishable with imprisonment which may extend up to three years or with fine or with both. Such was the extent and degree, the statute has rendered the obligations of the employer for their faithful compliance. In fact the arrears of contribution payable by the employer is liable to be recovered as arrears of land revenue in terms of Section 45B of the said Act. Smt. Pushpinder. Kaur, learned counsel for the appellant corporation placing reliance upon the judgment rendered by the Supreme Court in Union of India v. Sicom Limited and another1 (2009) 2 SCC 121 has contended that the debts payable to the ESI Corporation must be considered as having a priority over other debts/dues payable by the employer. She also placed reliance upon the provisions contained in Section 94 of the ESI Act and contended that the priorities recognized therein should enable the corporation to recover the monies due from the defaulting employer, the company under liquidation in the instant case. I am afraid that both the contentions do not carry any merit. Firstly, the Supreme Court in Sicom Limited case referred to supra (1) has reiterated the principle enunciated by the Supreme Court in Dena Bank v. Bhikhabhai Prabhudas Parekh & Company (2000) 5 SCC 694 , wherein it was held that the Crown's preferential right to recovery of debts over other creditors is confined to ordinary or unsecured creditors. Firstly, the Supreme Court in Sicom Limited case referred to supra (1) has reiterated the principle enunciated by the Supreme Court in Dena Bank v. Bhikhabhai Prabhudas Parekh & Company (2000) 5 SCC 694 , wherein it was held that the Crown's preferential right to recovery of debts over other creditors is confined to ordinary or unsecured creditors. The Common Law of England or the principles of equity and good conscience generally do not accord the Crown any preferential right for recovery of its debts over the mortgagee or pledgee of goods or a secured creditor. Necessary support in this regard has been drawn from the judgment rendered in Giles v. Grower131 England Reports 563 to say that the Crown has no precedence over a pledgee of goods and the statement made by Rash Behary Ghosh on Law of Mortgages that it seems a government debt in India is not entitled to precedence over a prior secured debt. Therefore, in the face of these principles reiterated in Sicom's case (supra 1) by the Supreme Court, one wonders as to how the ESI Corporation can claim any right of precedence in the matter of repayment of its debts over any other secured creditor of the company under liquidation. Further, a perusal of the provisions contained in Section 94 of the ESI Act clearly indicates that a fiction has been created therein holding that that they shall be deemed to be included among the debts which, are set out under Section 530 of the Companies Act, in the distribution of the property or the assets of the company being wound up, to be paid in priority to all other debts, the debt or amount due in respect of any contribution or any other amount payable under the said Act. Therefore, the amount payable to the ESI Corporation by the employer is made to fall under Section 530 of the Companies Act so as to regulate the preferential payments mentioned therein which are essentially of revenue dues or tax dues by the company. Whereas, Section 529A has been incorporated by the Companies Amendment Act, 1985, creating an overriding preferential treatment for payment of certain debts which include the Workmen's dues and debts due to the secured creditors by the company under winding up. Whereas, Section 529A has been incorporated by the Companies Amendment Act, 1985, creating an overriding preferential treatment for payment of certain debts which include the Workmen's dues and debts due to the secured creditors by the company under winding up. Therefore, the debt/arrears of contribution payable to the ESI Corporation has only been listed to enjoy the same priority along with the rest of the government dues and tax dues set out under Section 530 of the said Act. It will not have any preference over the overriding priorities listed under Section 529A of the Companies Act. Hence, both these contentions do not have any merit and they are accordingly rejected. A bare perusal and a scan of the provisions of the ESI Act leave none in any doubt about the reach and vigor with which the corporation is required to act in the matter of recovering the contributions from the employers. It had also provided for men and machinery. In fact, Section 34 has provided the accounts of the corporation to be audited by the Comptroller and Auditor-General of India and in terms of Section 35, the corporation was required to submit to Central Government, the annual report of its work and activities. In spite of these provisions, the present case on hand has demonstrated as to how careless and casual the ESI Corporation was in the matter of recovering its contribution from M/s. Kera Sinters Ltd. A perusal of the orders passed by the Assistant Director in terms of Section 85B of the Act would disclose that these contributions have fallen in arrears for the period 1989 to 1992. Nowhere, any attempt has been made to explain why so many years have been allowed to lapse to recover the arrears of contribution, interest and damages from the defaulting employer. No explanation was forthcoming as to why prosecution in terms of Section 85 has not been launched for the offences committed by those who are accountable in that regard on behalf of the company under liquidation. The facts in this case reveal the lazy and laid back approach of the corporation. By its own conduct, it had committed a default in recovering contributions from the employer, which contributions form the backbone for the ultimate benefits and purpose for which the fund was required to be expended. The facts in this case reveal the lazy and laid back approach of the corporation. By its own conduct, it had committed a default in recovering contributions from the employer, which contributions form the backbone for the ultimate benefits and purpose for which the fund was required to be expended. For all its failure, the corporation cannot now indulge in a cover up action by attempting to pass belatedly orders under Section 85B of the Act. One wonders whether such sums can be recovered at all after lapse of several years, in disregard of the period of limitation provided for any such recoveries. Much has been left to be desired in the entire matter. Since there could be possibly several other instances of similar willful default, let a copy of this order be marked to the Accountant General, Andhra Pradesh, Hyderabad, as well as to the Ministry of Labour, Employment and Training, Government of India, New Delhi, who would be exercising the necessary control under Sections 34 and 35 of the ESI Act and ensure a corrective measure. For all the aforesaid reasons, the appeal preferred by the ESI Corporation fails and is accordingly dismissed. But, however, taking a compassionate view without costs.