TMI Blog2009 (4) TMI 441X X X X Extracts X X X X X X X X Extracts X X X X ..... tant General, Andhra Pradesh, Hyderabad, as well as to the Ministry of Labour, Employment and Training, Government of India, New Delhi, who would be exercising the necessary control under sections 34 and 35 of the ESI Act and ensure a corrective measure. For all the aforesaid reasons, the appeal preferred by the ESI Corporation fails and is accordingly, dismissed. - COMPANY APPEAL NO. 1697 OF 2008 IN COMPANY PETITION NO. 58 OF 2000 - - - Dated:- 6-4-2009 - NOOTY RAMAMOHANA RAO, J. Smt. Pusphinder Kaur for the Appellant. M. Anil Kumar for the Respondent. JUDGMENT 1. This appeal has been preferred by the Regional Director of the ESI Corporation, Hyderabad, questioning the validity of the notice of admission/rejection of proof of debt passed by the Official Liquidator in Form No. 69 on 30-9-2008, admitting a sum of Rs. 74,366.54 as an unsecured debt of M/s. Kera Sinter Ltd., towards the appellant-Corporation. The Official Liquidator rejected the rest of the claim in a sum of Rs. 69,863.46. 2. By an order dated 28-6-1999, this court answered the reference made by the BIFR in R.C.C. No. 9 of 1992 and ordered for winding up of M/s. Kera Sinter Ltd. By ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing damages and the period of interest beyond the date of winding up, the present appeal has been preferred. 4. As per rule 154 of the Companies (Court) Rules, 1959, the value of all debts and claims against the company under liquidation shall, as far as is possible, be estimated according to the value thereof as at the time of the order of winding up of the company. Therefore, the Official Liquidator has rightly confined the consideration, while dealing with the claim of the appellant-Corporation with regard to interest claimed beyond 28-6-1999, to the date of the order of winding up of the company. To this extent, no exception need be drawn. Rule 179 of the Companies (Court) Rules, 1959, in fact enables payment of interest for the period subsequent to the order of winding up, in the event of there being surplus amount available after payment in full of all the claims of the creditors admitted to proof. Therefore, for the purpose of payment of interest for the period beyond the date of winding up, it is essentially needed that the claims of creditors are needed to be paid in full first. Depending upon the availability of surplus amount, interest for the period beyond the date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s "left out", "no such person", respectively. However, the notice addressed to the factory premises situated at Gudur, Bhongir Mandal, Nalgonda District, was neither returned undelivered nor any response was received. Therefore, the Assistant Director could not have presumed that the show-cause notice dated 5-11-2008, to have been served on the employer. In spite of noticing this fact, he had proceeded to pass the order of determination on 12-11-2008, holding that the employer did not come up with any objection. Until and unless the service of the show-cause notice is effected, he could not have expected the desired response from the addressees. Realising this folly, the Assistant Director has passed another order dated 9-3-2009, recalling the order passed on 12-11-2008. It is stated that yet another show-cause notice dated 23-1-2009, was issued fixing the date of hearing at 11.30 A.M. on 9-2-2009. It is asserted that the notice sent to the former Managing Director of the company under liquidation, Sri K. S. Reddy has been returned with postal endorsement "no such person is available". Whereas the notice sent to the factory premises has been acknowledged to have been received and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rdinarily fall due on the last date of the wage period. Sub-section (5) has statutorily recognised the obligation to pay interest for delayed payment of subscriptions at 12 per cent per annum or at such higher rates as prescribed under the regulations. Section 40 has thrust an obligation on the principal employer to pay in respect of every employee whether directly employed by him or through an immediate employer, both the employer s contribution and the employee s contribution. Section 43 of the Act dealt with the method of payment of contribution. Importantly, section 45 has provided for the corporation to appoint inspectors for the purpose of conducting enquiry into the correctness of any of the particulars stated in the returns, to be filed and maintained by every employer in terms of section 44. In the absence of any such returns or registers, enough power has been left under section 45A of this Act for determining the contributions payable to the corporation on the basis of information available with it. Thus, it is the duty of the Corporation not only to undertake periodical inspection of the establishments covered by the sweep of the said Act, but also to ensure that the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has contended that the debts payable to the ESI Corporation must be considered as having a priority over other debts/dues payable by the employer. She also placed reliance upon the provisions contained in section 94 of the ESI Act and contended that the priorities recognised therein should enable the Corporation to recover the monies due from the defaulting employer, the company under liquidation in the instant case. 10. I am afraid that both the contentions do not carry any merit. Firstly, the Supreme Court in SICOM Ltd. s case ( supra ) has reiterated the principle enunciated by the Supreme Court in Dena Bank v. Bhikhabhai Prabhudas Parekh Co. [2001] 107 Comp. Cas. 157, wherein it was held that the Crown s preferential right to recovery of debts over other creditors is confined to ordinary or unsecured creditors. The Common Law of England or the principles of equity and good conscience generally do not accord the Crown any preferential right for recovery of its debts over the mortgagee or pledgee of goods or a secured creditor. Necessary support in this regard has been drawn from the judgment rendered in Giles v. Grover [1832] 131 ER 563, to say that the Crown has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ired to submit to the Central Government, the annual report of its work and activities. In spite of these provisions, the present case on hand has demonstrated as to how careless and casual the ESI Corporation was in the matter of recovering its contribution from M/s. Kera Sinters Ltd. A perusal of the orders passed by the Assistant Director in terms of section 85B of the Act would disclose that these contributions have fallen in arrears for the periods 1989 to 1992. Nowhere, any attempt has been made to explain why so many years have been allowed to lapse to recover the arrears of contribution, interest and damages from the defaulting employer. No explanation was forthcoming as to why prosecution in terms of section 85 has not been launched for the offences committed by those who are accountable in that regard on behalf of the company under liquidation. The facts in this case reveal the lazy and laid back approach of the corporation. By its own conduct, it had committed a default in recovering contributions from the employer, which form the backbone for the ultimate benefits and purpose for which the fund was required to be expended. For all its failure, the corporation cannot n ..... X X X X Extracts X X X X X X X X Extracts X X X X
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