M.N. Chandurkar, J. - (1.) A question of some importance arises in all these three appeals. The question is whether the arrears of Employer's contribution required to be deposited under the Employee's State Insurance Act, 1948, due from a public limited company registered under the Indian Companies Act which owns and runs a factory can be recovered from the personal property of the directors of the Company.
(2.) ALL these three appeals arise out of identical orders made by the learned Single Judge who dismissed the three petitions filed by the original petitioners, the appellants in these appeals, challenging the notices issued by the Collector of Bombay under section 5 of the Revenue Recovery Act, 1890, read with section 267 of the Maharashtra Land Revenue Code, 1966. Appeal No. 311 of 1979 arises out of the petition which was filed by the seven directors of Digvijay Spinning and Weaving Company Limited, which is a Company registered under the Indian Companies Act, 1913. All the petitioners were served with two notices of demand for the sums of Rs. 4,10,985.51 and Rs. 3,56,041.75 being the employer's special contributions under the Employee's State Insurance Act, 1948 (hereinafter referred to as "the Act") for the quarters ending on 30 -6 -1968 and 30 -9 -1968 and 31 -12 -1968 to 31 -3 -1970 respectively with interest at 6% per annum. It is not in dispute that originally the Company was taken over by the Union of India under section 18A of the Industries Development and Regulation Act, 1951, with effect from 9th July 1969 and the Maharashtra State Textile Corporation was appointed as the Authorised Controller of the said Company. Later, on the promulgation of the Sick Textile Undertakings (Nationalisation) Ordinance, 1974, on 21st September 1974 the right, title and interest of the Company in question vested in the Union of India. Therefore, when the two notices dated 27th August 1974 were issued to the petitioners, they sent a reply to the Collector of Bombay stating that the claim should be referred to the Commissioner appointed under the above Ordinance and that they were not liable to pay any amount and consequently, the amounts claimed could not be recovered as arrears of land revenue. The Collector not having stayed his hands, the petitioners -directors filed Miscellaneous Petition No. 944 of 1974. The learned Single Judge, who decided the petition, held that the Company functioned through its directors and officers and even though the Company can be termed as an "occupier", still there was no prohibition to treat the directors as occupiers of the Company and construing the beneficial legislation as the Act, according to the learned Judge, it must be held that the directors of the Company are the principal employers within the meaning of section 2(17) of the Act. Consequent to this finding, the learned Single Judge held that the application for recovery of the amounts made to the Collector by the Regional Director of the Employee's State Insurance Corporation and the consequent notices issued by the Collector of Bombay were not invalid. One of the contentions raised before the learned Judge was that the petitioners had ceased to be directors from 9th July 1969 and they could not, therefore, be held responsible for contribution after the expiry of the quarter immediately following July 1969. This was accepted by the learned Judge and a statement was made on behalf of the respondents that fresh demand notices would be served upon the petitioners.
(3.) APPEAL No. 379 of 1979 arises out of Miscellaneous Petition No. 1214 of 1975 in which the original petitioner claimed that he was only an additional director appointed on 13th September 1960 and he resigned from that post on 2nd October 1965. The Company of which the original petitioner was an additional director was India United Mills Co. Ltd., which consisted of six units situated in Bombay. According to the original petitioner he had joined as an additional director in pursuance of an invitation by the Board of Directors on the verbal consent of the then Labour Minister. This Mill was taken over by the Union of India and was put under the Authorised Controller with effect from 29th November 1965. The Collector of Bombay issued a notice of demand under section 267 of the Maharashtra Land Revenue Code styling the original petitioner as director -partner and the demand was to the tune of Rs. 3,69,890.52 being the unpaid amount of employer's special contribution upto the end of four quarters of 1965. When this notice was served on the original petitioner on 27th September 1975 he informed the Regional Director that he was merely a technical director to advise the Mill and was not a partner as alleged. He denied that he was liable under the Act. He made a grievance that no show -cause notice was ever issued to him nor was any hearing given. He denied that he was at any time the occupier or employer or managing agent of the Mill. He stated that he had no controlling interest except the qualifying shares in the said Company. The proceedings before the Collector finally came to be challenged in Miscellaneous Petition No. 1214 of 1975. The learned Single Judge, following the view which he had already taken mentioned earlier in this judgment, dismissed the petition holding that the petitioner -director was a principal employer. Dealing with the contention that no opportunity was given to the petitioner prior to the issue of the recovery notice, the learned Judge held that it was not contemplated that an inquiry should be made before the issuance of a demand notice, because according to the learned Judge if on the service of the demand notice a dispute is raised, the Act provided for a complete procedure. The reference was obviously to section 75 of the Act. In fact, the learned Judge left it open to the petitioner to approach the Employees' Insurance Court under section 75 of the Act where he could have his claim decided as well as the question whether after the appointment of the Authorised Controller, the liability of the former director came to an end. The learned Judge further took the view that the question as to whether the dues of the employer's special contribution could be recovered personally from the petitioner could also be adjudicated by the Insurance Court. The learned Judge thus declined to go into the questions raised before him.;