THE DIRECTOR, EMPLOYEES' STATE INSURANCE CORPORATION, PUNE and ORS v. M/S JOLLY STEEL INDUSTRIES PVT LTD,PUNE
Liability for ESI Contributions Post-Transfer - Section 93-A of ESI Act Limits Transferor's Joint Liability to Dues Arising Only Until the Date of Lease or Transfer.
Court: Bombay High Court
Citation: 2026:BHC-AS:9350
Decision Date: 23-02-2026
List of Laws
Employees' State Insurance Act, 1948; Section 93-A, Employees' State Insurance Act, 1948; Section 45-A, Employees' State Insurance Act, 1948; Labour Law
- Facts: The respondent, M/s. Jolly Steel Industries Pvt. Ltd., originally operated a factory which it leased to Gupta Steel Industries in 1980 for three years. Despite the expiry of the lease, the lessee failed to vacate, leading to civil litigation. A settlement was reached in 1995 via consent terms before the High Court, where it was agreed that the lessee would pay all dues for the lease period; possession was eventually restored to the respondent in 1996. During this interim period, specifically from April 1992 to August 1993, the Employees' State Insurance Corporation (ESIC) raised a demand for contributions under Section 45-A of the ESI Act, seeking to hold the respondent (the transferor/lessor) liable.
- Procedural Posture: The ESI Corporation filed a First Appeal under Section 82 of the ESI Act before the Bombay High Court, challenging a lower ESI Court's order which had exonerated the respondent from the liability to pay contributions for the disputed period.
- Issue: Whether the respondent is liable under Section 93-A of the ESI Act to pay insurance contributions for a period (April 1992 to August 1993) that occurred after the factory had already been transferred by lease to another entity.
- Holding: No, the respondent is not liable. The liability for contributions arising after the date of transfer rests with the transferee who was actually running the establishment.
- Reasoning: The Court relied on a "plain reading" of Section 93-A of the ESI Act. This provision stipulates that in cases of transfer by sale, lease, or license, the employer (transferor) and the transferee are jointly and severally liable only for dues "up to the date of such transfer". Since the transfer via lease occurred in 1980 and the demand pertained to 1992-1993—a period during which the respondent was not running the factory and the lessee remained in possession—Section 93-A could not be invoked to penalize the respondent. The Court clarified that the Corporation remains at liberty to recover the said dues from the actual occupier, Gupta Steel Industries.
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