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AI Drafter - (New and Powerful) ✕ Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter.
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Issues: Whether a purchaser who acquires a factory or establishment in an auction sale conducted by the State Financial Corporation under Section 29(2) of the State Financial Corporations Act, 1951 can be fastened with the predecessor employer's ESI dues under Section 93-A of the Employees State Insurance Act, 1948.
Analysis: Section 93-A applies where an employer transfers a factory or establishment by sale, gift, lease, licence or in any other manner whatsoever. The provision is aimed at cases where the employer himself parts with the establishment and yet seeks to avoid statutory liability by retaining or re-routing the business interest. A sale brought about by a secured creditor in exercise of statutory powers is not a transfer by the employer. It is a transfer by operation of law, not a voluntary transfer by the defaulting employer. The purchaser in such an auction does not step into the shoes of the employer through a transfer effected by the employer and does not assume the predecessor's ESI arrears merely because the property of the establishment is conveyed to him. The liability under the Act continues to rest on the original employer, and the Corporation may proceed against the erstwhile owners in accordance with law.
Conclusion: Section 93-A was held inapplicable to the auction purchaser, and the demand and recovery action against the petitioner were quashed.
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