2006 (2) TMI 687 - HC - Indian Laws

Issues Involved:
1. Legality of the order dated 21-10-1995.
2. Applicability of Section 93-A of the ESI Act to the petitioner.
3. Liability of the petitioner to pay ESI dues.
4. Availability of alternative legal remedies.
5. Interpretation of the term "transfer" under Section 93-A of the ESI Act.

Issue-wise Detailed Analysis:

1. Legality of the order dated 21-10-1995:
The petitioner challenged the legality of the order dated 21-10-1995 and subsequent proceedings initiated by respondent No. 2, which demanded the petitioner to clear arrears of ESI dues of M/s J.J. Cold Tread, Nagpur. The petitioner argued that the purchase of the property in an auction conducted by Maharashtra State Financial Corporation (MSFC) should not be considered a transfer under Section 93-A of the ESI Act, thus absolving them of liability for the arrears.

2. Applicability of Section 93-A of the ESI Act to the petitioner:
The petitioner contended that Section 93-A of the ESI Act, which imposes liability on the transferee of an establishment for unpaid ESI dues, does not apply to their case. The petitioner argued that the transfer of property through an auction by MSFC does not constitute a transfer by the original employer, as required by Section 93-A. The court examined precedents, including Suburban Ply and Panels (P) Ltd. v. Regional Provident Fund Commissioner and Ors., which supported the petitioner's view that transfers by operation of law (such as auction sales) do not fall under the purview of Section 93-A.

3. Liability of the petitioner to pay ESI dues:
The court found that the petitioner had not accepted any liability for ESI dues when purchasing the property from MSFC. The liability for ESI contributions under Section 40 of the ESI Act rests primarily with the principal employer, and the petitioner, having purchased the property through an auction, cannot be deemed liable for the previous employer's dues. The court noted that the respondents had not made efforts to recover the dues from the original defaulters before targeting the petitioner.

4. Availability of alternative legal remedies:
Respondents argued that the petitioner had an alternative remedy under Section 75 of the ESI Act and that the writ petition should not be entertained. However, the court proceeded to hear the case, focusing on the interpretation of Section 93-A and the specific circumstances of the auction sale.

5. Interpretation of the term "transfer" under Section 93-A of the ESI Act:
The court analyzed the term "transfer" under Section 93-A, concluding that it refers to voluntary transactions between parties, such as sales, gifts, leases, or licenses. The court distinguished these from transfers by operation of law, such as auction sales conducted by secured creditors like MSFC. The court cited the decision in Swadeshi Cotton Mills, Mau Nath Bhanjan v. The Regional Director, Employees State Insurance Corporation, Kanpur, which held that acquisitions or transfers by operation of law do not fall within the scope of Section 93-A.

Conclusion:
The court held that the impugned notice and order issued by respondent Nos. 1 and 2 were to be quashed and set aside, as the petitioner could not be made liable for the dues of the original employer whose property was auctioned by MSFC. The court allowed the writ petition and ruled that the petitioner is entitled to withdraw the sum deposited in terms of the interim order, with interest accrued thereon. The court also noted that respondents may proceed against the erstwhile owners of the establishment in accordance with the law to recover the dues.

The judgment emphasized that the petitioner's purchase of the property in an auction sale conducted by MSFC did not constitute a transfer under Section 93-A of the ESI Act, thereby absolving the petitioner of liability for the previous employer's ESI dues.

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