JUDGMENT : Nyapathy Vijay, J. The present Appeal is filed under Section 82 of the Employees State Insurance Act, 1948 (for short ‘the Act’) against the Order in EIC.No.18 of 2005, dated 25.03.2011 passed by the Employees Insurance Court and Chairman, Industrial Tribunal-1 at Hyderabad. 2. The Appellant herein is the Petitioner in the EIC.No. 18 of 2005. 3. The facts leading to filing of the present Appeal are as follows:- The Appellant/Petitioner is a proprietary concern, which was started in the year 1978 and is involved in the manufacture of wiring products. All through, it is pleaded that the Appellant/Petitioner had engaged nine persons. While so, the Appellant/Petitioner was stood as guarantor for the Companies viz., (a) M/s Padmalaya Wire Products Pvt. Ltd., (b) Sri Padma Priya Galvanizers Pvt. Ltd., (c) Sri Chakra Wire Products Pvt. Ltd., for the loan obtained from the Bank as well as the State Financial Corporation. As they had committed default in payment of debts, the said companies as well as the Appellant industry were seized by the Bank as well as the State Finance Corporation. On account of seizure, the Appellant/Petitioner industry sustained heavy losses and stopped doing business in the manufacture of wire products from the year 1996 onwards. - 4. While so, the Appellant/Petitioner industry entered into an agreement with M/s. Jagadamba Agencies and leased out the unit to the M/s. Jagadamba Agencies in the year 2001 for the period from 2001 to 2004. The E.S.I contribution was paid upto 2001. Since the Appellant industry was seized by the Bank on 17.04.1996, the books pertaining to the Provident Fund, Gratuity, E.S.I and other things were seized and some of the books were misplaced in the process. While so, on 10.02.2005, the proceedings were issued by the Respondent-Corporation effecting attachment of the amount lying in the account No.3751 of the Appellant. On being informed, the Appellant submits that no notice was served on them in respect of the E.S.I contribution due to the Respondent No.1-Corporation and the correspondence was made with M/s. Jagadamba Agencies, the lessee of the Appellant industry. 5. It is pleaded that the Appellant on enquiry was informed by the lessee that they had paid the entire amount due to the Respondent- Corporation and handed over the proceedings dated 25.08.2004 and another proceedings dated 17.12.2004 according to which the recovery Officer forwarded the D.D. for depositing in E.S.I. account. 5. It is pleaded that the Appellant on enquiry was informed by the lessee that they had paid the entire amount due to the Respondent- Corporation and handed over the proceedings dated 25.08.2004 and another proceedings dated 17.12.2004 according to which the recovery Officer forwarded the D.D. for depositing in E.S.I. account. As the unit was leased from 25.05.2001 to 24.05.2004 to M/s. Jagadamba Agencies, the Respondent Corporation made correspondence to M/s. Jagadamba Agencies and the Appellant was unaware of the contributions payable to the Respondent- Corporation. On receipt of the notice dated 10.02.2005, a representation was made by the Appellant on 17.02.2005 narrating all the facts and issued a cheque for Rs.12,274/-, however, the representation was not considered. The Appellant submits that they are not liable to any contribution to the Respondent-Corporation and the proceedings dated 10.02.2005 demanding payment of Rs.73,985/- along with interest is illegal and unwarranted. - 6. In response, the Respondent No.1-Corporation filed Counter contending that the Appellant-Industry was registered under the Act with effect from 01.04.1990. As the Appellant-Industry had failed to comply with the provisions of the Act, the Inspectors of the Respondent No.1-Corporation inspected the Appellant-Industry on 11.10.1996 and 24.06.1997 and verified the records pertaining to the period from 01.01.1995 to 31.03.1996 and submitted the reports on 11.10.1996 and 24.06.1997. On the basis of the reports, the E.S.I. issued proceedings in Form C-18 (Actual Basis) dated 22.06.1998 directing the Appellant-Iindustry to pay a contribution of Rs.566/- on the omitted wages. Further, the Appellant-Industry was also called upon to pay a contribution of Rs.4,213/- for the period from01.05.1996 to 30.09.1996. 7. As the Appellant-Industry failed to pay the amount due, the proceedings in Form C-19 dated 31.08.1998 for recovery of the said amount were issued. The Appellant-Industry on receiving the proceedings had paid an amount of Rs.4,141/- only leaving a balance of Rs.673/- with further interest. Further, the Respondent No.1-Corporation issued proceedings in Form C-18 (Adhoc basis) dated 22.06.1998 calling upon the Appellant-Industry to show cause as to why an amount of Rs.44,616/- should not be determined as E.S.I contribution payable for the period from 01.04.1997 to31.03.1998. 8. The Appellant-Industry was given an opportunity of personal hearing on 24.07.1998. Further, the Respondent No.1-Corporation issued proceedings in Form C-18 (Adhoc basis) dated 22.06.1998 calling upon the Appellant-Industry to show cause as to why an amount of Rs.44,616/- should not be determined as E.S.I contribution payable for the period from 01.04.1997 to31.03.1998. 8. The Appellant-Industry was given an opportunity of personal hearing on 24.07.1998. Since the Appellant had failed to respond to the said notice, the Respondent No.1-Corporation issued an order on 28.09.1998 under Section 45-A of the Act determining an amount of Rs.44,616/- and the same was communicated to the Appellant- Industry. As the Appellant failed to pay the said amount, the Respondent No.1 Corporation issued the proceedings in Form C-19 dated 09.11.1998 for recovery of Rs.44,616/- along with the interest of Rs.6,049/-. After receiving the proceedings, the Appellant had paid an amount of Rs.12,642/- leaving a balance amount of Rs.38,023/-. - 9. The Respondent No.1-Corporation issued the proceedings in Form C-18 (Adhoc basis) dated 12.03.1999 calling upon the Appellant-Industry to show cause as to why an amount of Rs.22,308/- should not be determined as contribution payable for the period from 01.04.1998 to 30.09.1998. The Appellant was also given an opportunity of personal hearing on 14.04.1999. Since the Appellant-Industry had failed to respond to the said notice, the Respondent No.1-Corporation issued an order under Section 45-A of the Act on 03.05.1999. As the Appellant failed to pay the amount, the Respondent No.1 Corporation issued proceedings in Form C-19 dated 03.08.1999 for recovery of Rs.22,308/- with interest of Rs.2,186/-. 10. Further, the Respondent No.1-Corporation issued proceedings in Form C-18 (Adhoc basis) dated 02.09.1999 calling upon the Appellant-Industry to show cause as to why an amount of Rs.26,491/- should not be determined as contribution payable for the period from 01.10.1998 to 31.03.1999. In spite of an opportunity of personal hearing, the Appellant failed to pay the said amount. - 11. The Inspector of Respondent No.1-Corporation had visited the Appellant-Industry on 02.11.1999 and verified the records produced for the period from 01.10.1996 to 31.03.1997 and 01.10.1998 to 30.09.1998 and submitted report on 02.11.1999. On the basis of such report, the Respondent No.1-Corporation issued the proceedings in Form C-18 (Actual basis) dated 10.12.1999 for Rs.7,137/- and Rs.648/- towards the contributions on the omitted wages for the period from 01.10.1996 to 30.09.1999. 12. On the basis of such report, the Respondent No.1-Corporation issued the proceedings in Form C-18 (Actual basis) dated 10.12.1999 for Rs.7,137/- and Rs.648/- towards the contributions on the omitted wages for the period from 01.10.1996 to 30.09.1999. 12. On the failure of the Appellant-Industry to comply, the Respondent No.1-Corporation issued proceedings in Form C-19 dated 17.02.2000 for recovery of Rs.7,785/- and Rs.758/- towards interest to cause recovery of dues. The Appellant industry had paid an amount of Rs.7,137/- leaving a balance of Rs.1,406/- unpaid. 13. Since the Appellant-Industry had failed to pay the contribution in time for the period from 01.06.1999 to 31.05.2000 and for the period ending 30.09.1996 and 30.09.1999 as per the provisions of the Act, the Respondent No.1-Corporation issued the notice in Form HRO-219, dated 31.07.2001 and the show cause notice in Form D- 18 (damages) dated 13.07.2000 for Rs.745/- and Rs.4,976/- respectively. In spite of giving the opportunity of personal hearing, the Appellant-Industry had failed to pay the said amount and the Respondent No.1-Corporation issued proceedings in Form C-19 and D-19 dated 25.10.2001 and 25.06.2001 for the above said amount to the Recovery Officer to cause recovery of dues. - 14. Since the Appellant had failed to comply with the provisions of the Act an Inspector of E.S.I Corporation visited the Appellant- Industry on 01.06.2001 and verified the records produced for the period from 01.10.1999 to 31.05.2001 and submitted his report dated01.06.2001. 15. On that basis, the Respondent No.1-Corporation issued the proceedings in Form C-18 for Rs.800/- towards the contribution for the period from 01.03.2001 to 31.05.2001 and interest of Rs.565/-. Since the Appellant had failed to pay the said amount, the Respondent No.1-Corporation issued the proceedings in Form C-19 dated 25.10.2001 for Rs.1,365/- and interest of Rs.49/- to the Recovery Officer to cause recovery of the said dues. 16. Since the Appellant had failed to comply with the provisions of the Act, the Respondent No.1-Corporation had visited the Appellant- Industry and verified the records for the period from 01.06.2001 to 31.07.2002 and submitted the reports dated 06.03.2002, 08.04.2002, 11.07.2002 and 20.08.2002. On the basis of the reports, the Respondent No.1-Corporation issued the proceedings in Form C-18, dated 23.09.2002 for Rs.372/- on the omitted wages towards the E.S.I contribution for the period from 01.04.2001 to 31.03.2002 and 01.04.2001 to 31.07.2002. On the basis of the reports, the Respondent No.1-Corporation issued the proceedings in Form C-18, dated 23.09.2002 for Rs.372/- on the omitted wages towards the E.S.I contribution for the period from 01.04.2001 to 31.03.2002 and 01.04.2001 to 31.07.2002. Since the Appellant had failed to pay the said amount, the Respondent No.1-Corporation issued proceedings in Form C-19 dated 29.11.2002 for Rs.1,472/- and interest of Rs.141/- to the Recovery Officer to cause recovery of the said due amount. 17. Since the Appellant-Industry had failed to pay the arrears, the Respondent No.1 resorted to initiation of coercive steps under the provisions of the Act and in that process, he issued the orders dated 10.02.2005 to the Appellant’s bankers i.e. Punjab National Bank at Vijayawada. 18. It was also denied that the Appellant-Industry was not doing business from the year 1996 onwards, but the Appellant-Industry was doing its business with the employees for wages when the Inspector of the Respondent No.1-Corporation visited the Appellant- Industry on 11.10.1996 for verification of records and submitted the Ledger Verification Report dated 26.04.1997 and the Appellant did not inform about the seizure of the factory by the bank on17.04.1996. 19. All the notices were issued in the name of M/s Krishnaveni Wire Knitting Industries except for the period from 01.04.2001 to 31.07.2002 during which period, the Appellant-Industry was leased out to M/s. Jagadamba Agencies, which had come to the notice of the Respondent No.1-Corporation through Inspector’s enquiry report dated 06.03.2002. The Appellant had not informed about the transfer of firm/lease to the Respondent No.1-Corporation. One Sri P.Papaiah had worked as Appellant’s industry Manager during the period of default and he acknowledged the visit of Inspectors of the Respondent No.1-Corporation on 11.09.1996, 01.06.2001 and 20.08.2002. The said Papaiah through letter dated 18.09.2004 sought the due particulars while submitting Form No.1. - 20. The Recovery Inspector of the Respondent No.1-Corporation visited the Appellant’s factory on 03.04.2005 and 04.02.2005 and there the lessee of the Appellant industry issued a cheque of Rs.12,474/- only against dues. The inspection reports dated 16.04.1992, 11.10.1996, 02.11.1999 and 01.06.2001 and also Form No.1 dated 06.01.1990 submitted by the Appellant-Industry showed that the Appellant-Industry had engaged more than 10 persons for wages. 21. On all the occasions, the Appellant Manager acknowledged the observations of the Inspectors and other proceedings. The inspection reports dated 16.04.1992, 11.10.1996, 02.11.1999 and 01.06.2001 and also Form No.1 dated 06.01.1990 submitted by the Appellant-Industry showed that the Appellant-Industry had engaged more than 10 persons for wages. 21. On all the occasions, the Appellant Manager acknowledged the observations of the Inspectors and other proceedings. Since the Appellant-Industry had failed to pay the E.S.I contribution, the Respondent No.1-Corporation issued the certificates authorizing the Recovery Officer to recover the E.S.I contribution mentioned therein and in that process the Recovery Officer issued the proceedings dated 10.02.2005 and the same is valid. Hence, the Respondent No.1-Corporation prays to dismiss the application. - 22. On the basis of the pleadings, the following issues were framed by the trial Court; 1. Whether the order passed by the Respondent No.2 is bad in law and consequently set-aside the same? 2. To what relief? 23. On behalf of the Appellant, one Ch. Sree Rama Chandra Murthy was examined as P.W.1 and Exs.P.1 to P.10 were marked. On behalf of the Respondents, one N.Chandra Sekhar was examined as R.W.1 and Exs.R.1 to R.36 were marked. After considering the oral and documentary evidence, the E.S.I Court dismissed the Petition. Hence, the present Appeal is filed. 24. Heard Sri V. Surendra Reddy, learned Counsel for the Appellant and Sri P. Rajsekhar, learned counsel appearing for the Respondents. 25. The case of the Appellant-Industry is that the business was seized by the Bank in April 1996 and was not operational thereafter, thereby extinguishing its liability under the Act. As the appellant company was not operational, the place was given on lease to Ms. Jagadamba agencies under a registered rental agreement bearing document No.4129 of 2001 for the period 25.5.2001 to 24.5.2004 and this was marked as Ex.P.6. In the inspection reports conducted by the Officers of ESI Corporation from the year July,2002 onwards (marked as Ex.P.28 to Ex.P.33), the name of the lessee M/s. Jagadamba Agencies is reflected in all the reports as lessee. - 26. From the time of the letter dated 17.2.2005, the Appellant was consistently stating that the company was seized and thereafter given on lease to M/s. Jagadamba Agencies and there are no inspection reports between the period 1995-2001 to establish that the Appellant was running the company. - 26. From the time of the letter dated 17.2.2005, the Appellant was consistently stating that the company was seized and thereafter given on lease to M/s. Jagadamba Agencies and there are no inspection reports between the period 1995-2001 to establish that the Appellant was running the company. The argument of the counsel for the Appellant sounds prudent as if the Appellant was operating the company during the year 1995-2001, they would have responded to the letters of the ESI Corporation as they did after the lease deed was executed with M/s. Jagadamba agencies in 2001. Apart from the above, the witness examined on behalf of the Respondent Corporation has no knowledge of the functionality of the company during the said period or atleast led evidence to establish that the company was functional during the said period by showing tax returns and other documents. - 27. In view of the above, this Court is of the opinion that the order dated 25.03.2011 in EIC.No.18 of 2005 is erroneous on account of misreading of the evidence and the appeal is allowed. No order as to costs. As a sequel, pending applications, if any, shall stand closed.