The High Court · 2025

M/s. Sri Vaishnavi lndustries,_150/1, Kishanguda, Shamshabad, rep by its Partner Sri .PRavinder, S/o p.Rajeshwar, ag-ed about 50 t"r6, R7" 1ie, Shamshabad, R.R.District. AND ...APPELLANT

1. Employe€s State lnsurance^Corporation,, Rep byits Regional Director, 5-9_23, Hill Fort Road, Hyderabad-63

2. The Assistant Director,, Employees State lnsurance Corporation, 5_9-23, Hill ' Fort Road, Hyderabad-63. .RESPONDENTS NO:2 201 MP. OF 3 Petition under section 1sl cpc praying that in the circumstances stated in the-affidavit fired in support of the_p-elition, t'J Hign court may o" pr"l""J'.irv all further proceedings pc No.15/2005 on the fire of the Emproyees in.ri"i,"u "t court & lndustriar rribunar-r, Hyderabad, pending disposar of the above cMA. l.A. NO: 3 OF 2013(CttlA[fP-No: 1430 OF 2013) Petition under Section 151 CPC praying that in the circumstances stated in the affidavit filed in support of the petition, the High Court may be pleased to suspend the operation of the order passed by the court below in ElC.No.27l2006 dated 03.12.2012 on the file of the lndustrial Tribunal -1, pending disposal of the above CMA. Counsel for the Appellant : Sri K.V. Vani representing Mr. A.K. Jayaprakash Rao Counsel forthe Respondents: Mr. P. Vengal Reddy representing Mr. B.G. Ravinder Reddy The Court delivered the following: h THE HON'BLE SHRI JUSTICE ANIL KUMAR JUKANTI CIVIL M APPEAL Nos.578 & 630 of 2O13 COMMON JUDGMENT: Aggrieved by the order dated 06.12.2012 passed tn E.l.C.No.29 of 2006 on the file of the Employees Insurance Court and Chairman Industrial Tribunal-[, at H.yderabad (for short 'the Tribunal), this C.M.A.No.578 of 2Ol3 filed by petitioner/ a ppellant.

2. Aggrieved by the order dated O3.l2.2olt2 passed in E.l.C.No.27 of 2006 on the file of the Employees lnsurance Court and Chairman Industrial Tribunal-I, at Hy.derabad (for short 'the 'l'ribunal), this C.M.A.No.630 of 20t3 filed by petitio ne r / ap pellant.

3. Heard K.V.Vani, learned counsel representing Mr. A.K.Jayaprakash Rao, learned counsel for appellant and Mr. P.Vengal Reddy, learned counsel representing Mr. B.G.Ravinder Reddy, learned counsel for respondents. r 2 { JAK,J CMA Nos.578 & 630 of 2013

4. For reference, facts in c.M.A.No.63o of 2013 are being considered.

5. Parties are referred as in Employees lnsurance court and chairman Industrial rribunal-I, Hyderabad. Petitioner-Unit is a rice mill running under the name of vaishnavi Industries. The Unit was taken on lease from Balaji lndustries Ltd. on 08.04.1999. It is claimed by petitioner in E.l.C.No.27 of 2006 that rice mill business was only for a period of 8 months from June, 1999, to January, 2OOO, that by letter dated LO.O2.2OOO. the lease was terminated.

6. A code No.52-19173-05 is allotted to petitioner-Unit. An inspection was conducted on 25.01.2001, at the time of inspection, the Unit was functioning with the aid of power and 11 persons' were engaged in the unit as per the report of inspector. The visit note of lnspector is signed by Mr. p.Eshwar (Mastery) and Mr. Mahesh Reddy (Accountant).

7. In the month of November, 2OOl, another Inspector visited and conducted inspection. Petitioner-Unit failecl to pay 7 i I l i l 3 JAK,J CMA Nos.578 & 530 of 2013 contributions for the period from 2S.O|.2OO 1 to September,

2003. The requirement to pay contributions is under Section 40 of Employees State Insurance Act (for short ,ESI Act) r/w Regulation with Section 39 and Regulation 3 t of ESI Act (General) Regulations. C- 18 notice was issued on I 1.0g.2OO3, affording an opportunity on 06.11.2003 (for hearing) but the employer failed to attend the hearing. The order under Section 45-A, dated 15.12.2OO3, determining the contributions payable at Rs.36,363/ - was passed by the authorities.

8. The order dated 15. l2.2OO3 was challenged before the Tribunal by way of E.t.C.No.27 of 2006. The Tribunal after considered thc cvidcnce of PWI (on behalf of petitioner) and RWl and RW2 (on behalf of respondents), the documents marked i.e., Exs.Pl to P4 and Exs.Rl to R6, held that the petitioner-Unit employed I I employees, running the rice mill with the aid of power and failed to pay contributions from

25.01.2OO1 to 31.03.2003 and the Unit is liable to pay a sum of Rs.31,363/- for the period. It is this order under challenge in this CMA. 4 JAK,J CMA Nos.578 & 630 of 2013 g. It is submitted by learned counsel for petitioner/appellant that the Unit was taken on lease from 08.04. 1999 and the said lease was terminated on 10.02.2000. Learned counsel has relied upon Clauses 6 and 7 of thle termination lease deed' A copyofleasedeeddated0s.o4.lgggismarkedasEx.P2.Itis contended that though as per the lease deed, the lease was for a period of 3 years commencing from 10.04. 1999 on a monthly rent of Rs.6,OOO /- and the lease is terminable for any reason by the lessee by issuing 90 days advance notice in writing to the lessor. [t is further submitted that as the partners (Managing partner Sri P.Ravinder and other partner sri P.Narayana Reddy) suffered loss and closed the unit after a period of 8 months'

10. It is submitted that at the time of inspection, the Inspector had taken information from Accountant and Mastery and that both were not the employees of Unit. It is further submitted that out of 11 employees shown as under employmentintheUnit,3ofthemwereHamalis.Itisalso submitted that if the two persons from whom information was recorded by inspectors and 3 other Hamalis were deducted f i ! I I i I i i ,1 5 JAK,J CMA Nos.578 & 630 of 2013 from the 11 employees, the Unit would have less than 10 employees. [t is submitted that the Unit is not liable to pay any contribution under ESI Act, when it is less than 10 employees. It is further submitted that two lnspectors visited the Unit. That the l"t Inspector visited the Unit on 25.O1.2OO1, and the 2"d Inspector visited the Unit in the month of 19.11.2001. tt is further submitted that 1"t lnspector prepared the report and 2"d Inspector proceeded on the report of l"t Inspector which is not permissible under law. It is pointed out that l"t Inspector without prior notice, inspected the premises an<l that report prepared cannot be relied by )na Inspector. It is submitted that no names of 11 employees are reflected, no signatures were taken by the Inspector, the same is reflected in the cross examination. It is further pointed out that observations of Insurance Inspector do not reflect the number of employees. It is submitted that the Unit is not covered under ESI Act, not liable to pay' the contributions as the Unit was not under operation ancl the number of employees were less than 10 and the said termination lease deed has not been considered by the 6 JAK,J CMA Nos.578 & 530 of 2013 r\ authorities. [t is specifically pointed out that Clause 10 of the termination lease deed empowers the lessor that if any breach of the covenant is committed by the lessee, the lessor is entitled to terminate the lessee. It is further pointed out that as per Clause 6, the lessee can terminated the lessee for any reason during the term of lease by giving 90 days advance notice. Attention is drawn to Clause 7, stating that amount of Rs.50,0O0/- is paid as security deposit which is refundable and the said amount can be adjusted against defaulted rent. It is pointed out that lease deed was terminated as per Clauses in the deed, lease deed dated is 08.04.1999. 1 1. Learned counsel has relied upon the letter addressed by partner of M/s. Balaji [ndustries, .,h" lease deed stands terminated from LO.O2.2OOO as per Clause 10 of lease agreement. The lease deed is terminated on the ground that petitioner failed to pay rents from June, 1999. Learned counsel has invited the attention of this Court Paragraph No.14 of the order has submitted that the year of lease was mistakenly ,' r n 7 JAK,J CMA Nos.578 & 630 of 2OL3 typed and that original lease deed prevails, which is of year t999.

12. Learned counsel for the respondent Corporation has submitted that Inspection was carried on 25.01.2OO1, that a code was given to the establishment. When the Unit was inspected by the Inspector on 25.Ol.2OOl, ttrere were 11 persons were engaged on wages and Mr. P.Eshwar (Mastery) and Mr. Mahesh Reddy (Accountant) were present. That on the day of visit, rice mill was functioning engaging 1 I persons in the premises. It is submitted that petitioner clid not produce any proof of closure of business from February, 2OOO, except stating that the business was stopped and reliance placed on the letter dated LO.O2.2OOO, is an afterthought. It is further submitted that petitioner failed to pay the contribution within 21 days of the wage period as required under Sectjon 40 of ESI Act r/w Regulation with Section 39 and Regulation 31 of ESI Act (General) Regulations. In the absence of such payment, C18 notice dated 11.08.2003 was issued, by affording opportunity of hearing on 06.ll.2oo3. That as the petitioner dicl not attend 8 JAK,J CMA Nos.578 & 530 of 2013 f'. i \^!\l \ thehearing,theorderunderSection45-Awaspassed.Itis submitted that the inspection was again carried out in the .month of November, 2oo]i and that even as per inspection report dated 19.11 .2OO1, the rice mill was running'

13.Itissubmittedthaton21.ol.20ol,Accountantand Masterywerepresent,statedthattherecordswereinthe custodyofManagingPartner(Mr.P.Ravinder)andin-charge (Mr.P'NarayanaReddy).ttisfurthersubmittedthat2persons who were present in the Unit refused to sign and acknowledge thereceiptofAnnexure-Bpreparedandsignedbylnspector.It issubmittedthatTribunalconsideredExs.PltoP4&RltoR6 and the evidence of pwl, Rwl and Rw2, held that the letter dated lo.o2.2o0o, was an afterthought and there is no truth that the Unit was not running'

14. It is pointed out that even the contention that three of the employees were Hamalis as they were engaged in the Unit at the time of inspection will be considered to be employees in the Unit r 9 JAK,J CMA Nos.578 & 630 of 2013

15. Reliance is placed on the judgment of the Hon'ble Apex Court in Ro,jakamal T}.ansport qnd. @nother Vs. Emplogees' S.tate Insurance Corporation, Hgderabo4t, it is pointed out that petitioner started the business obtaining license from Civil Supplies Department and Commercial Taxes Department and no evidence has been placed on record that the establishment was closed from LO.O2.2O0O. It is lastly urged that the Unit is covered w.e.f. ,25.01.2OO1 and is liable to pay the contributions of Rs.3t,363/- for the period from 25.Ol.2OOl to 31.03.2003.

16. Heard learned counsels, perused the record and considered the submissions.

17. It is not in dispute that the Unit was leased by petitioner along with another under a lease deed' dated 08.04.1999. It is also not disputed that Unit was running for a period of 8 months. The contention of petitioner is that the lease entered in the year 1999 stood terminated in February,, 2OOO (dated lO.O2.2OO0) and that as on the date of inspection, the Unit was '(rgge) 9 scc 044 10 JAK,J CMA Nos.578 & 630 of 2013 r\ closed. Page No.3O annexed as material papers, is a copy of observations of Insurance lnspector who visited the Unit on ?5.01.2001. [n column No.5, it is reflected that persons who conducted at the time of visit were one P. Eshwar and one Mahesh Reddy, both were employees of the Unit. At column No.6, against the code number of employer, it is reflected as survey. In the observations of lnsurance Inspector, it is noted that Unit is registered under AP scheduled commodities dealer (licensing and distributing) order, 1982, vide Registration No.1429 /FGL/W R/RRD/99 (File No.A2l tt99 /99, dated

05.05. L9991. It is also reflected in the observations of Insurance Inspector that the Unit is also registered under Commercial Taxes Department vide Registration No.HYD/02/313207 /99- 2OOO, dated 15.01.1991. That on the date of visit following persons were found in the factory for wages and the number of persons noted in the observations of lnsurance Inspector are 1 1 and it is finally written that factory attracts provisions of ESI Act w.e.f. 25.01.2001. It is not in dispute that there was another inspection conducted in the month of November, 2OOl. .// L1 JAK,J CMA Nos.578 & 630 of 2013

18. It is observed from the record that Ex.R4 is a notice issued by the respondent (Form C- 1 1 notice) covering the Unit w.e.f. 25.Ol.2OOl. Ex.R5 is a C-18 notice served on one Mr. R.N.Reddy and other partner under Ex.R6 postal acknowledgment. Having received Ex.R5 notice, none appeared for the personal hearing. It is observed that dur:ing the cross examination of Pw1, the admissions of PW1 were corroborated with the evidence of RWl supported by RW2 and further supported by exhibits Pl, P2, P4 and R2 to R6.

19. It is not in dispute that Unit obtained license from civil supplies and commercial raxes Department. tf the contention of counsel for petitioner is to be accepted on the basis of letter dated lo.o2.2oo0 that the lease deed dated 08.04. tggg stood terminated on 1o.o2.2o00, the Unit could have produced the license from civil Supplies Department and Comneercial Taxes Department have not been cancelled from ro.o2.2()o0 or at any later point of time. Such cancellation letters addressed stating that the Unit is closed have not been produced. For running of any rice mill under law, licenses from civil Supplies and L2 JAK,J CMA Nos.578 & 630 of 2013 t... Commercial Taxes Departments are must, if the Unit is closed then the license stands cancelled only after addressing letters from the Unit, no such letters have been placed on record

20. Be that as it may, Section 2l9l of the ESI Act takes into it the fact that Hamalis, as on the date and as per the wages, can be considered as employees. The said proposition is reinforced by a judgment of the Hon'ble Apex Court reported in Rajakamal Transport and another Vs. Emplogees' State Insurantce CotTtoration, Hgderabad (1 supra), the Honble Apex Court, while dealing with the contention whether Hamalis are employees or not, held that Hamalis, when working in connection with the Unit or the establishment under the directions of the in-charge, can be termed as employees under the Act. Except for contending that 3 Hamalis cannot be considered, no evidence was placed on record, such as wages register and employees register before the Insurance authorities. Under the ESI Act, Unit is under the obligation to rnaintain wages register and employees register, the said registers have to be brought to the notice of the Inspecting / 13 JAK,J CMA Nos.578 & 630 of 2013 authority to substantiate the claim that number of employees are less thiln 10. No such registers were placed on record even at the time of passing Section 45-A orders by the authorities. In the absence of any such evidence adduced by the Unit, the claim that number of employees are less than 10, cannot be countenanced. The Tribunal considered the evidence at length and also considered the exhibits marked. It is ,cbserved from the order of Tribunal that PWI during cross examination gave evasive answers that no evidence of surrender of license obtained from Civil Supplies and Commercial Tax Departments was produced, such a frnding that no evidence has been produced of surrendering of license to the Depa.rtments, is a contributing factor which goes against. Ex.P2 is the copy of lease deed, dated 08.04.L999, reliance'is been pla.ced upon the \ Clauses of lease deed. One factor which needs to be observed as per the terms of lease deed (which is an unregistered one) is the lessee is empowered to terminate the lease fcrr default ir-r payment of rent by giving 9O days advance notice In the letter dated 1o.o2.2o00, it is stated that petitioner has defaulted from 74 t. JAK,J CMA Nos.578 & 630 of 2013 June, 1999. By any standard, notice of termination would have been given in the month of September, but it appears that, the lease has been terminated on LO.O2.2O0O, though, this may not be a factor which can lead to the conclusion that the Unit was in existence or not. The fact that the termination of lease deed was not pressed into service at the time of passing of order under Section 45-A is suffice evident that it is an afterthought and the same cannot be held as valid under the eye of law.

21. For reasons aforesaid, Civil Miscellaneous Appeals are devoid of merits, same are liable to be dismissed and are accordingly dismissed. No order as to costs Miscellaneous applications pending, if any, shall stand closed. To, //TRUE COPY// sd/- N. sninnnl DEPUry REGISTRAR6 SECTION OFFICER Hyderabad. (With records, if any) 1' The Employees lnsurance Court and Chairman, lndustrial Tribunal-|, At 2. One CC to Mr. f.K. Jayaprakash Rao, Advocate tOpUCl 3. one cc to Mr. B.G. Ravinder Reddy, Advocate topucl 4. Two CD Copies 4!v- HIGH COURT DATED:19/06/2025 COMMON JUDGMENT CMA.Nos.578 & 630 of 2013 .. 1 r{E 5;r, 4, ,J o B0 ![[ 20E .t () PATCiT{- DISMISSING THE APPEALS W o \y