Allowed

The Regional Director v. M/S Souza Cashew Industries

Karnataka HC13 Dec 2021MFA/10319/2011

Case brief

AI extract

What is this about?

This Miscellaneous First Appeal allowed by the Karnataka High Court set aside an order that had exonerated the respondent from paying ESI damages and interest. The court held that the lower court erred in accepting the defense that the establishment was leased out, especially since the respondent was convicted in criminal proceedings for non-payment of contributions.

What did the court decide?

Set aside the impugned order of the lower court; restore the orders passed under Section 85B and notices issued under Section 39(5) of the ESI Act.

The Regional Director Vs M/S Souza Cashew… — Pension and Retirement Benefits | Karnataka HC (2021)

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M.F.A.NO.10319/2011

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU

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DATED THIS THE 13^TH DAY OF DECEMBER 2021

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BEFORE

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THE HON’BLE MRS JUSTICE K.S.MUDAGAL

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MISCELLANEOUS FIRST APPEAL NO.10319/2011(ESI)

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BETWEEN:

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THE REGIONAL DIRECTOR E.S.I.CORPORATION REGIONAL OFFICE (KARNATAKA) NO.10, BINNY FIELDS BINNYPET, BANGALORE – 560023

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THE DEPUTY/JOINT DIRECTOR E.S.I. CORPORATION NO.10, BINNY FIELDS BINNYPET, BANGALORE – 560023 3. THE RECOVERY OFFICER E.S.I. CORPORATION REGIONAL OFFICE (KARNATAKA) NO.10, BINNY FIELDS BINNYPET, BANGALORE – 560023 … APPELLANTS

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(BY SRI.K.KRISHNAPPA, ADV.)

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AND:

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M/S.SOUZA CASHEW INDUSTRIES KULASHEKAR MANGALORE – 575 005 (NOW NOT IN EXISTENCE) REPRESENTED BY ITS MANAGING PARTNER SRI.WILFRED D’SOUZA … RESPONDENT (BY SRI A.R.HOLLA, ADV.)

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M.F.A.NO.10319/2011

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THIS MFA IS FILED UNDER SECTION 82(2) OF EMPLOYEE STATE INSURANCE ACT, PRAYING TO SET ASIDE THE ORDER DATED 06.10.2010 PASSED IN E.S.I. NO.3/2008 ON THE FILE OF PRESIDING OFFICER, LABOUR COURT-CUMESI COURT, MANGALORE ALLOWING THE APPLICATION FILED UNDER SECTION 75 OF E.S.I. ACT FOR SETTING ASIDE THE IMPUGNED ORDERS AND NOTICES ISSUED BY THE RESPONDENTS THEREIN.

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THIS MFA COMING ON FOR HEARING THIS DAY, THE COURT THROUGH VIDEO CONFERENCE DELIVERED THE FOLLOWING:

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J U D G M E N T

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Aggrieved by the order of the ESI Court, D.K. Mangalore in ESI No.3/2008 reversing the order of the authority under Section 85(i)(a) of Employees State Insurance Act, 1948 (‘the ESI Act’ for short) and exonerating the respondent of his liability to pay the damages and interest, the respondent in ESI No.3/2008 has filed this appeal.

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The appellants are the Officers and employees of the State Insurance Corporation established under the ESI Act. The respondent is a factory covered under the ESI Act with Code No.537805-09. The appellants issued notices to the

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M.F.A.NO.10319/2011

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respondent calling upon them to pay damages and

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interest for the following periods:

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i) July 2003 to September 2003 ii) October 2003 to November 2003 iii) December 2003 to January 2004

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The appellants claimed that the respondent failed to pay the employer’s share of contribution as required under Regulations 31A, 31B and 31C of the Employees’ State Insurance (General) Regulations, 1950. They claimed for the said period as per Section 85B of the ESI Act, the respondent is liable to pay Rs.2,19,964/- as damages and interest.

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The Joint Director of Employees’ State Insurance Corporation passed orders dated 04.12.2007 which were marked at Exs.A.6 to A.8 before the trial Court, directing the respondent to pay the aforesaid damages and interest. For recovery of the said amount the notices dated 25.01.2010 as per Exs.A.9 to A.11 were issued. Ultimately the orders as per Ex.A.13 to 15

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M.F.A.NO.10319/2011

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were passed under Section 39(5) of the ESI Act for recovery of the aforesaid amounts.

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The appellants also initiated the proceedings against the respondent in C.C.Nos.204/2005 and 807/2005 before the Special Court for Economic Offences, Bengaluru on the ground that the respondent has failed to pay the contributions for the aforesaid period to the tune of Rs.93,898/- and 1,20,833/respectively, thereby committed the offence punishable under Section 85(i)(b) of the ESI Act. The respondent was convicted in C.C.Nos.204/2005 and 807/2005 for the offences alleged and sentenced to undergo imprisonment till raising of the Court and fine of Rs.5,000/- in C.C.No.204/2005 and Rs.10,000/- in C.C.No.807/2005. Challenging those orders, the respondent preferred Crl.A.Nos.842/2007 and 843/2007 before the Fast Track (Sessions) Judge-V, Bengaluru city.

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Such being the position, the respondent challenged the notices Exs.A.9 to A.11 and orders

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M.F.A.NO.10319/2011

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Exs.A.13 to A.16 before the ESI Court, D.K.,Mangaluru in ESI No.3/2008. In the said case, it was contended that the establishment in question was leased out to Union of workers, therefore, the employer was not liable to pay any contribution. The trial Court by the impugned order held that as per Ex.A.4 the applicant had leased out the establishment to the Union of workers working in the same establishment, the order of conviction and sentence passed against the respondent are pending in appeal. Therefore, the trial Court allowed the application, set aside the order with a rider that the said order is subject to the decision of the appellate Court in Crl.A.Nos.842 and 843 of 2007.

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The respondent did not challenge the condition in the impugned order which is made subject to the result of the criminal appeals. Therefore that part of the order attained finality. Aggrieved by that order, the appellants have preferred the above appeal. It is their contention that though there was no material, the trial Court erred in accepting the contention of the

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M.F.A.NO.10319/2011

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respondent that it had leased out the establishment to Union of Workers. It is further contended that though the same contentions were taken in the prosecution of the respondent in C.C.Nos.204 and 807 of 2005 the Special Court for Economic Offences based on the same evidence rejected the defence of the respondent and had convicted him. Therefore the appreciation of the evidence by the trial Court was incorrect.

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So far as the finality of the orders passed in C.C.Nos.204 and 807 of 2005 before this Court, learned counsel for the appellant produced the copies of the judgments in Crl.A.Nos.842 and 843 of 2007. The said judgments show that the appeals of the respondent were dismissed and the orders of conviction and sentence passed against the respondent were confirmed. Under such circumstances, the respondent is liable to pay the damages and interest claimed by the appellants.

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Even on the facts of the case absolutely

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there was no material to show that the respondent had

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M.F.A.NO.10319/2011

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ceased to be the employer. On that ground also, the impugned order is liable to be set aside. Therefore, the appeal is allowed.

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The impugned order of the trial Court dated 06.10.2010 passed by the ESI Court, D.K. in ESI No.3/2008 is set aside. The order passed under Section 85B of the ESI Act and the notices issued under Section 39(5) of the ESI Act are hereby restored.

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Sd/JUDGE

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akc

The Regional Director v. M/S Souza Cashew Industries

Case brief

What is this about?

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The Regional Director v. M/S Souza Cashew Industries

Case brief

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