2011 (1) TMI 1219 - HC - Companies Law

Whether the petitioner s stand is legally valid ? Held that - The provision under section 94 of the ESI Act is similar to that of section 11(2) of the EPF Act. Therefore, the reasoning found in Maharashtra State Cooperative Bank Ltd. s case (2009 (10) TMI 825 - SUPREME COURT OF INDIA), will squarely apply to the case on hand.It is, therefore, reasonable to take the view that the statutory first charge created on the assets of the establishment by sub-section (2) of section 11 and priority given to the payment of any amount due from an employer will operate against all types of debts. The contentions raised by the petitioner does not stand scrutiny of law.Appeal dismissed.

Summary

Issues:
Challenge to recovery notices issued by ESI Corporation for contribution and interest payments from 1985-2004, Protection under Sick Industrial Companies (Special Provisions) Act, 1985, Applicability of Section 22 of SICA, Priority of statutory dues under ESI Act, Distinction between statutory dues and contractual dues.

Analysis:
The petitioner, a company, challenged recovery notices by ESI Corporation for contributions and interest from 1985-2004. The petitioner claimed protection under the Sick Industrial Companies (Special Provisions) Act, 1985, citing a BIFR order and Debt Recovery Scheme provision. The respondent argued that the petitioner must dispute liability under ESI Act in ESI court and not through a writ petition. The court examined if the petitioner's stand was legally valid.

Regarding the BIFR's involvement, the court cited precedents to explain that the protection under Section 22 of SICA does not automatically apply when a scheme is framed or an operating agency is appointed. Precedents from various High Courts were referenced to establish that the BIFR's involvement does not absolve the employer from paying dues under ESI Act. The court also referred to a Supreme Court judgment on the priority of statutory dues over other debts.

The court drew parallels between Section 94 of the ESI Act and Section 11(2) of the EPF Act to assert that the reasoning in a specific Supreme Court case would apply to the present case. Additionally, the court highlighted a Supreme Court judgment distinguishing between statutory dues and contractual dues, emphasizing the priority of statutory dues over private creditors' claims. Ultimately, the court found that the petitioner's contentions did not align with legal scrutiny, leading to the dismissal of all three writ petitions without costs.

In conclusion, the judgment delved into the intricacies of statutory provisions, precedence from various courts, and Supreme Court rulings to determine the validity of the petitioner's challenge to ESI Corporation's recovery notices. The court's analysis focused on the applicability of legal protections, the priority of statutory dues, and the distinction between statutory and contractual obligations, culminating in the dismissal of the writ petitions.