Jan 30, 2016

Maharishi Solar Tech Pvt. Ltd vs Icici Bank Ltd. & Ors on 13 August, 2013

Delhi High Court
Indian Kanoon - http://indiankanoon.org/doc/183221591/
Delhi High Court
Maharishi Solar Tech Pvt. Ltd vs Icici Bank Ltd. & Ors on 13 August, 2013

+ CS (OS) No. 312/2005

Date of Decision: 13.08.2013

MAHARISHI SOLAR TECH PVT. LTD. ...............Plaintiff

Through: Mr. K.P Mani, Mr. Sumit

Goswami, Mr. M.A.

Niyazi & Mr. Manish

Kumar, Advs.


ICICI BANK LTD. & ORS ............Defendants





1. The plaintiff has filed the instant suit seeking permanent and mandatory injunction and in the alternative, recovery of Rs. 29,52,954.67 (Rupees Twenty Nine Lakh Fifty Two Thousand Nine Hundred Fifty Four and Sixty Seven Paise). The brief facts are that the plaintiff company Maharishi Solar Tech Pvt. Ltd. is incorporated under the Companies Act, 1956 and engaged in the manufacture, production, development, import/export etc. of all instruments, machines and
C.S. (O.S.) Nos. 312/2005 Page 1 of 11 appliances for use with solar energy and any other conventional energy. Defendants no. 1 to 5 are the bankers of the plaintiff company, and defendant no. 6 is the Employees State Insurance Corporation (ESIC).

2. It is the plaintiff‟s case that a letter dated March 7, 2005 was issued to them by defendant no. 1 stating that the latter had marked a debit freeze with regard to A/c. No. 004605001120 amounting to the suit amount. It is alleged that defendant no. 6 had issued the Recovery Notice No. K/CO/CP2-2574-21-17499-90 dated March 7, 2005 to defendant no. 1 for recovering alleged dues of Rs. 68,80,200/- (Rupees Sixty Eight Lakh Eighty Thousand Two Hundred only) from the company named Maharishi Ayurved Products Ltd. (MAPL). The plaintiff alleges that defendant no. 1 has issued Pay Order No. 121910 dated March 7, 2005 for the suit amount from the plaintiff‟s account in favour of defendant no. 6 without seeking the plaintiff‟s permission. The plaintiff also contends that it has no connection or relation with MAPL, though the registered office of the two companies is the same i.e. A-14, Mohan Co-operative Industrial Estate, Mathura Road, New Delhi-110044. The plaintiff submits that both the companies are completely separate entities and do not have any common director, and hence the plaintiff cannot be made liable to pay the ESI dues of MAPL.

3. The plaintiff further submits that a dispute had arisen between defendant no. 6 and MAPL in the financial year 1998-99 regarding the recovery of Rs. 36,00,000/- (Rupees Thirty Six Lakhs). The plaintiff further submits that MAPL has challenged the Recovery Notice issued C.S. (O.S.) Nos. 312/2005 Page 2 of 11 against it by defendant no. 6, before competent authorities. The plaintiff has placed on record the relevant documents regarding the dispute between defendant no. 6 and MAPL and has also placed reliance on them to further demonstrate that the Recovery Notice issued against it pertains to MAPL, with which it has no concern or connection. The plaintiff also submits that on March 8, 2005 it issued letters to all of its bankers i.e. defendants no. 1 to 5, directing them not to entertain any recovery notice issued by defendant no. 6. The plaintiff submits that it had also specifically requested defendant no. 1 bank to stop the encashment of Pay Order No. 121910 for the suit amount which was issued in favour of defendant no. 6 vide a letter dated March 7, 2005, and further requested them to defreeze its account.

4. The plaintiff further contends that, as per the provisions of the ESI Act, the mandatory requirement of issuing Prohibitory Notice u/s. 45G has not been complied with by defendant no.6 while issuing prohibitory notices to the defendants 1 to 5. And that as per Sec. 45C of the said Act, the alleged recovery can be made only from a factory or an establishment, or as the case may be, the principal or immediate employer of the company/establishment/factory who is at default.

5. In response, the contesting defendant i.e. defendant no. 6 has raised a preliminary objection regarding the maintainability of the instant suit, in light of Sec. 75 of the ESI Act, which provides that no Civil Court shall have jurisdiction to decide a dispute between the principal employer and the corporation, in respect of the contribution C.S. (O.S.) Nos. 312/2005 Page 3 of 11 payable by the principal employer. The contesting defendant no.6 further submits that the Branch Manager of Oriental Bank of Commerce, Overseas Branch, GK - II, New Delhi, i.e. defendant no. 4, informed it that an undertaking had been given by MAPL admitting that the plaintiff is its sister concern. The contesting defendant also submits that the directors of the two companies are real brothers. And that the two brothers are the authorized signatories to the accounts held by the two companies with defendant no. 4, and therefore, it is clear that the two companies are one and the same. And that since there is a dispute in respect of the contribution payable by the principal employer and the defendant no. 6, the remedy lies before the ESI Court and not the Civil Court.

6. Defendant no. 1 in its Written Statement has submitted that it is not a proper and necessary party and that no cause of action had arisen against it. Defendant no.1 further submits that it had in fact issued a Pay Order No. 121910 dated 07.03.05 Rs. 29,52,954.67 from the account of the plaintiff company, but claimed that this act was done in compliance with the orders of defendant no.6 vide its letter dated March 07, 2005. Defendant no. 2 is a pro forma party. Defendant no. 3 submits that it has not frozen any account at the behest of defendant no. 1 and that it is not a proper or necessary party in the present proceedings. Defendant no. 5 states that it has not received any notice from defendant no. 6. No Written Statement has been filed by defendant no. 4.

C.S. (O.S.) Nos. 312/2005 Page 4 of 11

7. Vide Order dated March10, 2005 an ex parte interim injunction was passed against defendant no. 6 restraining them from effecting any recovery from the plaintiff or its bankers, in regard to the ESIC dues recoverable from MAPL. Further, it was directed that the payment already received by way of Pay Orders from defendant no. 1 shall be subject to further Orders of this Court. Lastly, the plaintiff‟s bank accounts with defendants no. 1 to 5 were ordered to remain operational, subject to the condition that in one of the banks at the choice of the plaintiff, an amount of Rupees Forty Lakhs would be retained. Vide Order dated December 11, 12007, this Court framed the following issues:

i. Whether the suit is not maintainable in view of the provisions of Sec. 75(3) of the ESI Act, 1948? OPD

ii. Whether the plaintiff is entitled to the recovery of the suit amount from defendant no. 6? OPP

iii. If issue no. 2 is in favour of plaintiff, whether the plaintiff is entitled to interest thereon at the rate of 18% per annum, or at any other rate from defendant no. 6. OPP

8. I have heard the counsel for the parties and perused through the evidence placed on record. Issue wise findings are as follows:

9. Issue no. 1 was treated as a preliminary issue on the statement of the counsel for defendant no. 6, that this being purely a legal issue, no evidence would be necessary. However, vide Order dated April 8, 2009 the following observations were made:

C.S. (O.S.) Nos. 312/2005 Page 5 of 11 "In view of the above facts and circumstances of the present case, since the evidence of the parties is yet to be recorded, it is not appropriate at this stage to pass any Order on merit as it will affect one of the parties adversely at the time of trial if the Issue no. 1 is decided on merit. But, prima facie, it appears that the suit filed by the plaintiff is maintainable. It is made clear that the defence raised by defendant no. 6 is still open and it would be considered along with the other issues, after the trial. It is ordered accordingly."

10. It is evident from the aforesaid Order, that this issue could not be determined at the preliminary stage without the parties leading evidence. It is also apparent to me that this Issue is not purely legal in nature and is a mixed question of fact and law, which must be decided on the basis of appreciation of evidence placed on record. At the outset, it is pertinent to visit the relevant provision of the Act which ousts the jurisdiction of the Civil Court. Upon a holistic reading of the entire provisions of Sec. 75 of the Act, it is apparent that the provision does not stipulate that all disputes shall be barred to be adjudicated by the Civil Court. The provisions read as follows:

"75(3): No Civil Court shall have jurisdiction to decide or deal with any question or dispute as aforesaid or to adjudicate on any liability which by or under this Act is to be decided by [a medical board, or by a medical appeal tribunal or by the Employees' Insurance Court.]" (emphasis supplied).

11. With reference to the expression „aforesaid‟ and/or „any liability which by or under this Act, the provisions of Sec. 75 (1), sub-clauses (a) to (g) and Sec. 75(2) must be analyzed. While sub-clauses (a) to (ee) C.S. (O.S.) Nos. 312/2005 Page 6 of 11 of Sec. 75(1) deal with specific nature of disputes to be adjudicated by the ESI Court, the contention of the defendant no. 6 is that, the case of the plaintiff is covered under sub-clause (g) of the said Section. The relevant provision is as follows:

"75(1)(g):any other matter which is in dispute between a principal employer and the Corporation, or between a principal employer and an immediate employer or between a person and the Corporation or between an employee and a principal or immediate employer, in respect of any contribution or benefit or other dues payable or recoverable under this Act, [or any other matter required to be or which may be decided by the Employees' Insurance Court under this Act,], such question or dispute [subject to the provision of sub-section (2A)] shall be decided by the Employees' Insurance Court in accordance with the provisions of this Act."

12. With regards to the evidence on this issue, Sh. Sunil Taneja, Joint Direct, Administration ESIC HQ, New Delhi has deposed as DW1. He states that the dues pertaining to this case were the dues of MAPL which was registered as the principal employer under the Act. Further, he admits that the plaintiff was not registered with the ESIC. He also states that he was told by one Sh. Ramesh Prabhakar from the Regional Office of defendant no. 4 that the plaintiff and MAPL had given an undertaking before the Board of Directors of defendant no 4 that they were sister concerns and that the plaintiff was paying the dues of MAPL‟s loans. When asked about this undertaking in his cross examination, DW1 admitted that he did not see any record maintained

C.S. (O.S.) Nos. 312/2005 Page 7 of 11 by defendant no.4 that reflected that the plaintiff was paying the dues of MAPL. He has also specifically stated that he was aware that MAPL and the plaintiff were two different companies with separate identities and that he did not know if these companies had common directors. Therefore, in the absence of any evidence establishing unity of ownership, functional integration, interchangeability of employees or inter-dependability between MAPL and the plaintiff, it cannot be presumed that the two are deemed to be one and the same, more so when it precludes the right of one of the entities to initiate proceedings before a Civil Court.

13. The Ld. Counsel for the plaintiff has argued, and with which I‟m in agreement, that the jurisdiction of the Civil Court is only barred when the dispute occurs between the principal employer and ESI Corporation. Undisputedly, the principal employer in the instant case, is MAPL and not the plaintiff, and hence the bar under Sec. 75 of the Act is not attracted in the instant case. Further, it is also undisputed that the plaintiff company has no factory or establishment or office within the jurisdiction of defendant no. 6, and that there was no dispute regarding any contribution between the plaintiff and the ESIC as the plaintiff is not even registered with defendant no. 6. Therefore, the plaintiff company cannot be held liable to the dues recoverable from MAPL merely on the ground that they are sister concerns sharing the same registered office or have accounts in the same bank.

C.S. (O.S.) Nos. 312/2005 Page 8 of 11

14. I find that the law on this issue is well settled through a catena of precedents. Courts in India have time and again held that in order to club two or more units/establishments together for the purpose of coverage or recovery of dues, there must be unity of ownership, functional integration, interchangeability of employees or inter- dependability between the two concerns. The Apex Court has observed this proposition in Madona Textiles v. Employees' State Insurance Corporation, (2000) 1 SCC 332. This Court has also held a similar view in ESIC v. Ved Parkash Gupta, 2008 LLR 881 (Del HC). Applying the observations made in the above mentioned cases to the present suit, there is nothing on record to suggest that such kind of unity existed between MAPL and the plaintiff. The two entities have been incorporated as distinct entities, albeit having the same registered office address. This alone cannot be sufficient to legally club the two entities together.

15. The Constitutional Bench of the Apex Court in the landmark case of Dhulabhai v. State of Madhya Pradesh, AIR 1969 SC 78 pithily summarized the position of law on ouster of jurisdiction of the Civil Court by a statute, stating thus:

"It is settled law that the exclusion of the jurisdiction of the Civil Courts is not to be readily inferred, but that such exclusion must either be explicitly expressed or clearly implied. It is also well settled that even if jurisdiction is so excluded, the Civil Courts have jurisdiction to examine into cases where the provisions of the Act have not been complied with, or the statutory tribunal has

C.S. (O.S.) Nos. 312/2005 Page 9 of 11 not acted in conformity with the fundamental principles of judicial procedure."

16. In the instant case, it is seen that defendant no. 6 has not complied with the provisions of Sections 45C and 45G of the Act which mandate notice. It is also seen that the plaintiff is not concerned with MAPL, and cannot be clubbed together with it for the purpose of the Act. Moreover, the remedy prayed for by the plaintiff is a money decree or an injunction in the alternative, which can only be awarded by a Civil Court. I find that the Issue No. 1 is in favour of the plaintiff.

17. By virtue of the aforesaid findings, it is amply clear that the plaintiff cannot be held liable for the dues recoverable by defendant no. 6 from MAPL. Therefore, I find that Issues 2 and 3 also ought to be found in favour of the plaintiff. It is admitted by defendant no. 6 in para 20 of its Written Statement, that the suit amount has already been credited to its account by way of clearing process on March 7, 2005 prior to the passing of the interim injunction by this Court. In view of the above, I hereby order recovery of the suit amount along with pendente lite and future interest at the rate of 12% per annum from the date of filing of the suit till realization against defendant no. 6. Decree be drawn accordingly.


AUGUST 13, 2013

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