BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT DATED : 14/03/2006 CORAM: THE HONOURABLE MR.JUSTICE A.C.ARUMUGAPERUMAL ADITYAN C.M.A.(MD)No.1061 of 1998 The Joint Regional Director E.S.I.Corporation Madurai ... Appellant Vs Hotel Ashok Bhavan Prop: A.Ayubkhan S/o Adam Raouther 101, Thiruchendur Road Palayangkottai, Tirunelveli-2 ... Respondent Prayer Appeal filed under Section 82 of the Employees State Insurance Act against the Judgment and decree passed by the learned Principal District Judge, Thirunelveli(The Employees'State Insurance Judge,Tirunelveli) in E.S.I.O.P.No.16 of 1992 dated 12.10.1995. !For Appellant ... M/s J.S.Murali ^For Respondent ... M/s Abdul Samath :JUDGMENT
This appeal has been preferred by the Joint Regional Director,
E.S.I.Corporation against the order passed in E.S.I.O.P.No.16 of 1992 on the
file of the Principal District Judge, Tirunelveli dated 12.10.1995.
2. The short facts of the case are as follows:
On 10.7.l989 hotel Ashokbhavan was started by Thiru A.Ayubkhan in Door
No.101, Trichendur Road, Palayamcottah. Several eatables were prepared and sold
in the said hotel. There were nine employees in the hotel. They are not
permanent employees. The owner of the hotel is residing on the rear portion of
the hotel and there is a hospital is being run in the first floor of the hotel
building and there are five tenants residing in the said building . With the
help of an electrical motor, water has been supplied to all the residents of the
building. The hotel is also getting water through pipe line. The petitioner is
having a grinder for his personal use. The electrical motor for the supply of
water is outside the hotel. The eatables are prepared in the hotel not with the
help of the gas but with the help of the fire wood. The petitioner’s hotel is
not a factory. Hence, the Employees State Insurance Act will not be applicable
to the petitioner’s hotel and accordingly, the respondent is not entitled to
claim any E.S.I.contribution from the petitioner. But the respondent had sent
letters dated 18.7.1991 and 9.10.1992 claiming E.S.I.Contribution from the
petitioner. During October,1992, the petitioner had sold the hotel to the
third party. The petitioner had already deposited 50% of the E.S.I.Contribution
demanded by the respondent. Hence to set aside the order passed under letters
of the respondent dated 18.7.1991 and 9.10.1992, the petitioner has filed a
petition E.S.I.O.P.No.16 of 1992 under Section 75 of the Employees State
Insurance Act, 1948.
3. The respondent in its counter has stated that on the date of the
inspection by the Inspector of the E.S.I.Corporation on 18.12.1990, there were
10 to 15 employees found working in the petitioner’s hotel. There are entries in
the ledgers maintained by the petitioner to show that there were 10 to 15
employees were working on the date of inspection by the Inspector of the
E.S.I.Corporation. On the date of inspection by the Inspector of the
E.S.I.Corporation, the petitioner himself had admitted that he was having a
grinder with 1.5 horse power in the hotel and that the petitioner has also
signed in his statement dated 18.12.1990 to the effect that there are more than
ten employees working in the petitioner’s hotel and also there are electrical
motors used for the purpose of bailing water and also a grinder. That is why the
respondent had issued letters dated 18.7.1991 and 9.10.1992 demanded
E.S.I.Contribution from the petitioner. The respondent had demanded
E.S.I.Contribution from the petitioner for the period from 1.12.1989 to
30.4.1991. So the contention of the petitioner that he had sold the hotel in the
month of October 1992 itself will not have any bearing. The E.S.I.Contribution
due from the petitioner has been calculated correctly and after going through
the ledgers maintained by the petitioner in his hotel.
4. Before the Principal District Judge, Tirunelveli, Ex P1 to P5 were
marked on the side of the petitioner and Exs R1 to R6 were marked on the side of
the respondent. Neither the petitioner nor the respondent had let in any oral
evidence.
5. On the basis of the documentary evidence, the learned Principal
District Judge, has come to a conclusion that the order passed under letters Ex
P1 dated 9.10.1992 and under Ex R3 dated 18.7.1991 respectively by the
respondent is liable to be set aside and accordingly the learned Principal
District Judge, Tirunelveli had allowed the petition with costs. Aggrieved by
the order of the learned Principal District Judge, Tirunelveli, the respondent
in E.S.I.O.P.No.16 of 19992 has preferred this appeal.
6. The substantial question of law that arose for consideration in this
appeal is whether an order under Section 45A of the Employees State Insurance
Act , the respondent is competent to pass an order under letters Exs P1 dated
9.10.1992 and under Ex R3 dated 18.7.991 demanding E.S.I.Contribution from the
petitioner?.
7. The point:
Under Section 45A of the Employees State Insurance Act 1948, the
E.S.I.Contribution is to be determined only as follows:
” Where in respect of a factory or establishment no returns, particulars,
registers or records are submitted, furnished or maintained in accordance with
the provisions of Section 44 or any Inspector or other official of the
Corporation referred to in sub Section(2) of Section 45 is prevented in any
manner by the principal or immediate employer or any other person, in exercising
his functions or discharging his duties under Sectrion 45, the Corporation may,
on the basis of information available to it, by order, determine the amount of
contributions payable in respect of the employees of that factory or
establishment
Provided that no such order shall be passed by the Corporation unless the
principal or immediate employer or the person in charge of the factory or
establishment has been given a reasonable opportunity of being heard
2) An order made by the Corporation under sub-section(1) shall be sufficient
proof of the claim of the Corporation under Section 75 or for recovery of the
amount determined by such order as an arrear of land revenue under Section 45B
or the recovery under Sections 45 C to 45-I”
8. The learned counsel for the appellant would contend that there is no
denial on the side of the respondent/petitioner in producing the records or
ledgers and other particulars demanded by the appellant/respondent at the time
of inspection by the Inspector of the E.S.I.Corportion on 18.12.1990. The
demand for E.S.I.Contribution by the appellant/respondent under Exs P1 and R3
was defended by the respondent herein under two points. The first one being the
two electrical grinders were used by the petitioner for his personal use and the
second one is that he had already sold the hotel to the third party in the year
1992 itself. The learned counsel appearing for the appellant would contend that
even in ExR4 letter written by the respondent herein/petitioner in
E.S.I.O.P.No.16 of 1992 to the respondent itself had admitted that in the hotel
grinder an electrical motor with 1.5 horse power was used and electrical motor
pump was used for bailing water from the well for the use of the hotel.The
learned counsel for the appellant would further represent that the Inspection
Report dated 18.12.1990 of the Inspector of the E.S.I.Corporation itself, the
respondent herein has admitted that an electrical grinder and an electrical
motor pump were used in the hotel. Learned Principal District Judge, Tirunelveli
without considering Ex R4 and also the endorsement made by the respondent herein
in ExR1 has come to an erroneous conclusion that both the motors were used for
the personal use of the petitioner and not for the use of the hotel.
9. The next point raised by the respondent in the counter filed by him
before the Principal District Judge, Tirunelveli in E.S.I.O.P.No.16 of 1992 was
that he had already sold the hotel in October 1992 to the third party and hence
he is not liable to pay E.S.I.Contribution. The learned counsel appearing for
the appellant meet this point by drawing the attention of this Court Section 93
A of the Employees State Insurance Act 1948 which runs as follows:
” Liability in case of transfer of establishment
Where an employer, in relation to a factory, or establishment, transfers that
factory or establishment in whole or in part, by sale, gift, lease or licence or
in any other manner whatsoever, the employer and the person to whom the factory
or establishment is so transferred shall jointly and severally be liable to pay
the amount due in respect of any contribution or any other amount payable under
this Act in respect of the periods upto the date of such transfer
Provided that the liability of the transferee shall be limited to the value of
the assets obtained by him by such transfer”.
Admittedly, under Ex P1 and Ex R3, the respondent had demanded
E.S.I.Contribution from the petitioner for the period from 1.12.1989 to
30.4.1991 whereas even according to the respondent herein, the hotel was sold
only in the month of October 1992. So as per Section 93A of the Employees
Insurance Act, the respondent herein is liable to pay E.S.I.Contribution for the
period from 1.12.1989 to 30.4.1991 . As per Section 2(12) of the E.S.I. Act
“Factory” means any premises including the precincts thereof-
a) Whereon ten or more persons are employed or were employed for wages on any
day of the preceding twelve months, and in any part of which a manufacturing
process is being carried on with the adie of power or is ordinarily so carried
on,or
b)……………..”
Here, admittedly, the power has been used for two grinders which were used in
the hotel as seen from Ex R1 Inspection Report and there were more than ten
employees were working at the time of Inspection by the Inspector of
E.S.I.Corporation on 18.12.1990. Under such circumstances, the
respondent/petitioner in E.S.I.O.P.No.16 of 1992 namely, Hotel Ashokbhavan
squarely comes within the definition of Factory as defined under Section 2(12)
of the Employees State Insurance Act 1948,. Hence,the respondent is liable to
pay E.S.I.Contribution to the appellant as demanded under Exs P1 and Ex R3
letters dated 9.10.1992 and 18.7.1991 respectively. Hence I hold on the point
that the appellant/respondent is competent to pass an order under Exs P1 dated
9.10.1992 and R3 dated 18.7.1991 respectively as against the respondent
herein/the petitioner in E.S.I.O.P.No.16 of 1992 claiming the E.S.I.Contribution
under the E.S.I.Act 1948.The point is answered accordingly.
10. In the result, this appeal is allowed and the order passed in
E.S.I.O.P.No.16 of 1992 on the file of the learned Principal District Judge,
Tirunelveli dated 12.10.1995 is hereby set aside. Time for payment of
E.S.I.contribution in two months. No costs.
sg
To
The Principal District Judge,
Tirunelveli.