VEMLY HOTELS Vs. KULDEEP SINGH

JUDGEMENT

(1.) Both these petitions filed under Article 226 of the Constitution of India can be conveniently disposed of by a common judgment as the facts involved in the two petitions and so also the parties are common. For the sake of convenience, instead of referring the parties as petitioners or respondents, it would be advantageous to refer to them by their titles. The Trustees of Habib Esmail Memorial Trust are owners of a hotel known as "Hotel Bombay International" situate in the building known as 'Dar-Ul-Habib' at the junction of Dinshaw Valeria Road and Netaji Subhash Road (Marine Drive), Bombay. By an agreement dated September ,24, 1968, the Trustees allowed Merchant Hotels Private Limited to conduct the hotel for a period of five years from August 1, 1968 with an option of renewal of further five years on the terms and conditions set out in the agreement. Merchant Hotels exercised the option of renewal and accordingly an agreement of renewal dated April 12,1976 was executed. In pursuance of these two agreements, Merchant Hotels conducted the hotel during the period from August 1, 1968 to July 31, 1978. From July 1970, the provisions of the Employees' State Insurance Act, 1948 (hereinafter referred to as the "Act") applied to the employees of the Merchant Hotels Private Limited on the basis that the Hotel is a "factory" falling under the provisions of Section 2(12) of the Act. The Merchant Hotels Private Limited filed Miscellaneous Petition No. 779 of 1972, in this Court contending that the Act was not applicable and for injunction restraining the authorities from applying the provisions of the Act. The petition was admitted and the interim reliefs were granted restraining the authorities from applying the provisions of the Act or from instituting any recovery proceedings. The Writ Petition was dismissed on February 12, 1982 and it was held that the provisions of the Act apply to the employees of the Hotel.

(2.) The Trustees executed an agreement dated May 13, 1979 in favour of Vemly Hotels whereby Vemly Hotels were allowed to conduct the hotel from August 1, 1978 to March 31,1983. On April 28, 1982, the Inspector appointed under the Employees' State Insurance Act visited the Office of Vemly Hotels and demanded the records of the employees during the period from July 1970 to July 1979. Vemly Hotels disclosed the record for the period from August 1, 1978, the date from which Vemly Hotels were appointed to conduct the hotel. On June 30, 1982, the Deputy Regional Director of the Employees' State Insurance Corporation issued show cause notice against the petitioners, inter alia, complaining that the Insurance Inspector was not given inspection of the ledger, cash book payment vouchers, musters, etc. for the period from July 1970 to July 1979. The notice further recites that non-production of record for inspection under Section 45 of the Act is a breach of law punishable with fine and imprisonment. The Vemly Hotels were called upon to show cause why action under Section 85 of the Act should not be taken. The Deputy Regional Director issued Notice dated October 7, 1982 to Merchant Hotels informing that as the Writ Petition filed by them in the High Court was dismissed, the arrears of contribution due from July 1, 1970 shall be paid within 15 days. The Merchant Hotels were also called upon to produce the records for inspection of the Insurance Inspector. A copy of this notice was served on Vemly Hotels and further informed that under Section 93-A of the Act, the liability of dues on transfer of establishment is joint and several and hence Vemly Hotels were called upon to arrange for payment of arrears for the period commencing from July 1, 1970 to November 12, 1978. Vemly Hotels were threatened that in case the payment of arrears is not made, then the same shall be assessed on ad hoc basis and action for recovery shall be initiated. On these notices, Vemly Hotels filed Writ Petition No. 2471 of 1982 on November 3, 1982 challenging the threats given by the authorities under the Act to recover the contribution for the period when Vemly Hotels were not on the scene. The petition came before me for admission on December 16, 1982 and Shri Jayakar, learned counsel appearing on behalf of the Corporation, stated that Vemly Hotels would be given hearing and speaking order would be passed under Section 45-A of the Act within a period of two months. The speaking order will, it was assumed, deal with the question of liability of Vemly Hotels. In view of the statement of Shri Jayakar, the admission of the petition was postponed till first week of March 1983. The Deputy Regional Director thereafter heard the Trustees and Vemly Hotels and passed a speaking order on February 22, 1983 holding that contribution amounting to Rs. 3,60,782.75 is due for the period from July 1, 1970 to November 11, 1978 alongwith interest amounting to Rs. 1,74,082.51 upto the date of order and the trustees as principal employer alongwith Vemly Hotels and Merchant Hotels as agents are liable to pay the said amount with further interest at the rate of 6% for each day of default till the recovery. The Trustees filed Writ Petition No. 1918 of 1983 in this Court under Article 226 of the Constitution of India to challenge the legality of the speaking order and this petition was lodged on August 17, 1983. On August 29, 1983, the petition filed by the Trustees was admitted and on September 10, 1984, the petition filed by Vemly Hotels was admitted. Now, both the petitions are placed before me for final hearing.

(3.) Shri Bharucha, learned counsel appearing on behalf of Vemly Hotels, submitted that Vemly Hotels started conducting the hotel with effect from August 1, 1978 and the liability to pay contribution from that day is not disputed. The learned counsel submitted that Vemly Hotels cannot be foisted with liability to pay the dues in respect of the period when Merchant Hotels were conducting the hotel. The issue, therefore, which falls for determination is whether Vemly Hotels are responsible for payment of dues for the period prior to August 1, 1978. Shri Tulzapurkar, learned counsel appearing on behalf of the Employees' State Insurance Corporation, submitted that Vemly Hotels are responsible even in respect of the period prior to their taking over the Hotel in view of the provisions of Section 93-A of the Act. This Section was inserted by Employees' State Insurance (Amendment) Act, 1975 and reads as under: