M R KHANNA Vs. UNION OF INDIA

JUDGEMENT

(1.) By this petition petitioner has prayed that the proceedings initiated by ESI Corporation and Recovery Officer under ESI Act for recovery of the amount due to the corporation from M/s Black Eye Detection and Security Services Private Limited ( for short the 'Company') be quashed and directions be given to ESI Corporation to do recovery from the principal employer and stay the arrest (and recovery proceedings) of the petitioner and award compensation of Rs.20 lakh to the petitioner for causing mental agony, harassment.

(2.) Briefly, the facts are that the Company was incorporated as a Private Limited Company by family members of the petitioner. In this company petitioner was one of the Directors and his son Ramesh Khanna was the Managing Director. The Company was engaged in employing security guards and detectives and these security guards were deployed as per requirement of their clients. The Company was covered under the ESI Act. However, company failed to deposit the dues of ESI for the period April 1995 to June 1997. A notice was sent to the Company on 8th July 1997 asking the Company that contribution of the employees towards ESI be deposited and challan of deposit be sent to the Division Officer of the Corporation within 15 days. Company was informed vide this notice that in case payment of contribution is not made, interest @ 12% per annum shall be liable to be paid. Despite the notice no payment of ESI contribution was made. An order under section 45-A was passed by the Assistant Regional Director wherein it was stated that Mr. S.S. Sharma, Manager, attended the office for personal hearing on 28.7.1997 and informed that he has deposited contribution from January 1997 to August 1997 only against the demand of the contribution from April 1996 to June 1997 for a sum of Rs.4,28,278/-. The Assistant Regional Director considered the record and found that employer had not deposited regular ESI contribution from March 1993 to March 1997. The balance contribution payable for period April 1993 to March 1997 was finally determined as Rs.3,74,220/- . An order was passed for payment of this contribution with interest @ 15% for each day of default up to the date of payment within a period of 15 days. The order was passed against Mr. Ramesh Khanna, Managing Director. Despite passing this order no amount was deposited. Thereafter Recovery Officer was directed by the Assistant Regional Director to effect the recovery of the due amount. A letter was written by ESI to Recovery Officer on 8.9.1997 for recovery of the dues for the period April 1995 to March 1997 amounting to Rs. 3,74,220/- plus interest of Rs.73,619/-. In this letter written to the Recovery Officer, Mr. Ramesh Khanna was shown as the principal employer. Still no recovery could be made from this Company and thereafter notice were sent to other two Directors in February 1998 namely Mr. M.R. Khanna and Mr. Ashok Verma for attending the office and payment of the dues. When show cause notice was sent by the Recovery Officer to Mr. M.R. Khanna and Mr. Ashok Verma, Mr. M.R. Khanna wrote a letter to recovery officer on 15.12.1998 depicting that due to unavoidable circumstances such as payment of income tax, house tax and renovations of house, he could not pay monthly installment; the Managing Director was responsible for all liability of the Company, he (Mr. M.R. Khanna) would however pay the installment in first week of January 1999. One Mr. Satya Kam Saini was authorized by Mr. M.R. Khanna to appear on his behalf before the Recovery Officer. Mr. S.K. Saini, Advocate sought some time from Recovery Officer to deposit the due amount and he wrote to the Recovery Officer that as per the record of the Company the liability was of Rs.85,000/- for the period from April 1995 to March 1997 and an amount of Rs.53,000/- has already been deposited and another amount of Rs.10,000/- was being deposited. He sought two months time to settle the dispute and deposit the due amount. Thereafter, again no amount was deposited and the interest on dues kept on mounting. The total amount recoverable in 1998 was Rs.4,47,859/-. When the amount was not paid by any of the Directors and none of the Directors were available, warrant of arrest were issued by the Recovery Officer. Petitioner filed a suit for permanent injunction before ESI Court challenging the recovery in the January 1999 only when respondent No. 3 and 4 threatened the attachment of the house and bank accounts of the petitioner to affect the recovery. ESI Court asked the petitioner to deposit the 50% of the amount on an application for interim relief. Assurances were given to the ESI Court time and again for deposit of this amount but this amount was not deposited. On 11.11.1999 ESI Court further extended time for deposit of 50% of the amount within seven days. The petitioner availed interim injunction without depositing the amount. On 6.9.2000 counsel for the petitioner assured the Court that 50% of the amount shall be deposited before the next hearing. The Court directed that in case 50% amount was not deposited till the next hearing, the interim order shall be vacated. Till 30.10.2000 petitioner did not deposit this amount, when the Court vacated the interim stay observing that the petitioner has misused the discretion exercised by the Court in his favour and ordered that respondent was at liberty to take action for recovery. The suit of the petitioner was dismissed by the ESI Court vide order dated 20.9.2004 In the meantime petitioner filed this writ petition in December 2003 with the above prayer.

(3.) It is submitted that petitioner had resigned from the post of Directorship in June 1997. His resignation was accepted by the Company on 1.10.1997. The plea of the petitioner is that respondent No.3 had passed the order for recovery of due amount against the principal employer and it was the principal employer who was liable for the payment of the amount. Principal employer in this case was Managing Director of the company namely Mr. Ramesh Khanna. He was solely responsible for the payment of contribution and the petitioner had nothing to do with the affairs of the Company. The resignation of the petitioner and other Directors i.e Mr. M.R. Khanna and Mr. Ashok Verma, had been accepted with effect from 1.10.1997 by Mr. Ramesh Khanna as Managing Director of the Company. Petitioner was, therefore, not at all concerned with the Company and no recovery be made from the petitioner. The order of the recovery and notice being sent to the petitioner and the proceedings initiated against the petitioner for attachment of the property and bank accounts and issuance of warrants were illegal and without jurisdiction. Petitioner had appeared before the Recovery Officer and informed him about the situation and respondent No.4 detained the petitioner and he was released only when he deposited Rs.20,000/-.