ESI contribution liability survives closure, as arrears accrued during coverage remain recoverable under the statutory scheme.

ESI contribution liability that accrues during an establishment's period of coverage remains recoverable even after closure. The Act creates a continuing statutory obligation to contribute to the common fund once coverage applies, and employee contributions deducted from wages are deemed entrusted to the principal employer under section 40(4). Closure does not extinguish arrears already earned while the Act operated, so a post-closure demand notice may validly seek pre-existing dues. Recovery is therefore legally permissible notwithstanding subsequent shutdown of the establishment.

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Issues: Whether contribution under the Employees' State Insurance Act, 1948 can be recovered from an establishment after its closure, when the liability to contribute arose during the period of operation.

Analysis: The Act creates a social security scheme funded by contributions paid into a common fund for the benefit of insured employees. Once an establishment is notified and the requisite employment strength exists, the employer's obligation to contribute arises from the commencement of coverage and continues during the relevant period. Under section 40(4), any employee contribution deducted from wages is deemed to be entrusted to the principal employer, and the employer cannot avoid liability by saying that the deduction was not made. The fact that the establishment later closed does not extinguish arrears that accrued while the Act applied. A demand notice issued after closure operates only as a demand for pre-existing statutory dues and does not invalidate recovery.

Conclusion: Recovery of contribution was legally permissible notwithstanding closure of the establishment, and the challenge to the demand failed.

Ratio Decidendi: Liability to pay ESI contribution, once accrued during the period of coverage, is a continuing statutory liability recoverable even after the establishment closes, because closure does not extinguish dues already earned under the Act.

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