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Swadeshi Cotton Mills Rep. By Its General Manager & Another v/s The Recovery Officer & Others

    W.P.Nos.17263 & 17264 of 2006 & M.P.Nos.1 of 2006
    Decided On, 21 January 2011
    At, High Court of Judicature at Madras
    For the Petitioners: T.R. Rajaraman, Advocate. For the Respondents: R1 - A. Paramasivam, R2 - F.B. Benjamin George, S. Ravindran, R3 - M/s. T.S. Gopanan & Co., Advocates.

Judgment Text
(Prayer: Petitions under Article 226 of the Constitution of India praying for a Writ of Certiorari Calling for the records of the 1st respondent culminating in the issue of the impugned orders No.PDY/RECY/45(G)-55-13004-11 and No.PDY/RECY/45(G)-55-13002-11 dated 05.06.2006 issued by the 1st respondent and quash the same.)

1. Heard Mr.T.R.Rajaraman, learned counsel for the petitioner, Mr.A.Paramasivam, learned counsel for the 1st respondent ESI Corporation, Mr.F.B.Benjamin George for the 2nd respondent Bank and Mr.S.Ravindran, learned counsel for M/s.T.S.Gopanan & Co., for the 3rd respondent/National Textile Corporation.

2. In both the Writ Petitions, the petitioners are M/s.Swadeshi Cotton Mills and Bharathi mills, which are the units of Swadeshee-Bharathee Textile Mills Ltd., a Government of Puducherry Undertaking. In the first Writ Petition, the challenge is to the recovery order dated 5.6.2006, wherein the 1st respondent ESI Corporation demanded payment of interest and cost. In the 2nd Writ Petition, similar demand of interest and cost was made by order dated 5.6.2006.

3. In both the Writ Petitions, Notice of Motion was ordered on 13.6.2006. Pending Notice of Motion, an interim stay was granted initially for a limited period, which was subsequently extended from time to time.

4. On notice from this Court, the 1st respondent ESI Corporation filed a counter affidavit dated 13.12.2006 in W.P.No.17263 of 2006 and dated Nil (October 2006 in W.P.No.17264 of 2006. The stand taken by the 1st respondent ESI Corporation was that the petitioner Mill is a transferee company and any liability of the previous employer can be fastened on them in terms of Section 93-A of the ESI Act and with reference to payment of interest, under Section 39 (5) of the ESI Act, there cannot be any waiver or reduction.

5. The petitioner mills contended that as per the take over of the two mills, the past liability cannot be fastened with the transferee. If at all, the 1st respondent ESI Corporation will have to proceed against the previous employer, namely the National Textile Corporation. Therefore, any coercive proceedings through garnishee bank is totally illegal and not contemplated. Since the petitioners contended that the liability must be fastened on the National Textile Corporation and since they were not originally made as parties, this Court directed the petitioners to make National Textile Corporation as parties to the Writ Petitions. Accordingly Mr.T.R.Rajaraman has taken out applications for impleading the National Textile Corporation represented by the Company Secretary as party to the Writ Petitions. Accordingly, National Textile Corporation has come on record as 3rd respondent in these Writ Petitions and they are represented by M/s.T.S.Gopalan and Co.

6. The 3rd respondent also filed a counter affidavit dated 19.1.2011 together with supporting documents. It is the stand of the 3rd respondent that when the ESI Corporation demanded the very same payment, they took up the matter before the Supreme Court in SLP (Civil) Nos.3808 to 3811 of 2002. The Supreme Court by order dated 25.2.2002 granted stay of any recovery proceedings pending Notice. Subsequently, when the matter came up on 25.11.2002, the Supreme Court observed that when two Government owned Undertakings are fighting in the matter before the Court and as held by the Supreme Court in ONGC's case, it should be decided in inter-ministerial Meetings of all the Officers and therefore the parties were directed to resolve the matter across the table by convening a Meeting in this regard. Subsequently, when the matter came up before the Supreme Court on 27.1.2004, the 3rd respondent filed an affidavit stating that the matter was amicably settled with the respondent ESI Corporation and the Special Leave Petition may be disposed of in accordance with the compromise. In the affidavit, it was stated that the mutual agreement involves making of payment of the principal amount in respect of the clerical staff to ESI Corporation by National Textile Corporation and further consideration by the ESI Corporation regarding waiver of interest and damages on this amount, which was also considered favourably by ESI Corporation. Pursuant to the agreement, National Textile Corporation has deposited Rs.50 Lakhs as a final settlement. The Hon'ble Supreme Court on 27.1.2004 recorded the agreement reached between the parties and disposed of the Special Leave Petition as the issue has been settled between the parties.

7. Despite the order passed by the Supreme Court as early as 27.1.2004, it is highhanded on the part of the 1st respondent ESI Corporation to once again invoke the coercive proceedings claiming liability on the transferee as if the transferee is now liable in terms of Section 93-A of the ESI Act. The conduct of the recovery officer in issuing such a recovery order when the matter has been settled before the highest court is totally unwarranted, which only shows how the 1st respondent ESI Corporation has disobeyed the orders of the Court. It is unnecessary to raise a further litigation, which is uncalled for.

8. In fact, the Supreme Court in the earlier order dated 25.11.2002 held that when the Government owned companies are fighting in a matter before the Court and as held in ONGC's case, it should be resolved across the table by convening an inter-ministerial Meetings of all the Officers.

9. Under the circumstances, both the Writ Petitions are allowed. The impu

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gned recovery proceedings stand set aside. Because of this careless and indifferent attitude of the 1st respondent ESI Corporation, the petitioners, who are all Government owned mills were forced to file these Writ Petitions just to verify the veracity of the claim. The 3rd respondent is also unnecessarily summoned to appear. Therefore, cost should be imposed on the 1st respondent ESI Corporation. Cost is quantified to Rs.10,000/- (Rupees ten thousand only) payable by the 1st respondent ESI Corporation to each of the two petitioners as well as to the impleaded 3rd respondent. The Miscellaneous Petitions are closed.