Employees State Insurance Corporation vs Vinod Iron Foundary

Rakesh Kumar Jain, J.—This appeal is directed against the order of the Employees State Insurance Court, Panipat, dated 9.10.1987,

whereby an application filed by the respondent u/s 75 of the Employees State Insurance Act, 1948 (for short, ''the Act''), challenging the validity of

the Order dated 27.1.1984 vide which the respondent was required to pay Rs. 2,101/- as damages for the period from 1.7.1977 to 2.10.1978

was allowed.

Briefly stated the facts of the case are that the respondent was provisionally covered under the provisions of the Act. The appellant served a

letter dated 18.3.1983 to the respondent requiring them to pay Rs. 7,035/- towards the contribution on adhoc basis for the period from 1.7.1977

to 2.10.1978. Earlier to that, a letter dated 7.1.1981 was received from the appellant requiring the respondent to pay Rs. 731.50 Paise towards

contribution relating to period 1.7.1977 to 2.10.1978. However, the respondent claimed that the amount was deposited on 3.3.1981. The

respondent challenged the validity of the order dated 18.3.1983. The respondent wrote a letter to the appellant and was allowed to deposit the

amount of contribution as per his own calculation. Consequently, an amount of Rs. 3,283.50 paise was deposited by the respondent in June 1983

under intimation to the appellant. On receipt of above intimation, the Employees State Insurance Corporation (for short, ''the Corporation) deputed

it''s Inspector to check the record of the respondent which was found to be in order. On 4.1.1984, the respondent was served with a show cause

notice as to why damages to the extent of Rs. 3,280.50 paise be not imposed for late deposit of the contribution. The respondent was given an

opportunity to be heard on 24.1.1984. After hearing the respondent, the appellant/Corporation levied damages to the extent of Rs. 2,101/-

calculated 19% u/s 85-B of the Act. Damages were imposed on the ground that the respondent was required to deposit the contribution vide letter

dated 5.1.1980 but it did not deposit any contribution and had taken the plea that no such letter was received. In order to prove the receipt of

letter dated 5.1.1980, the appellant produced PW-1 and PW-2 who proved entries in the dispatch register showing the issuance of letter dated

5.1.1980. The appellant also made a reference to the letter Ex.P-1 dated 7.1.1981 where in reference regarding the letter dated 5.1.1980 was

also made, but before imposing the damages, the appellant gave an opportunity of hearing to the respondent, in pursuance thereof, the respondent

filed their reply in which following plea was raised:

That there was no bad intention on the part of management not to make the payment of the ESI contribution or dues but it was due to the

ignorance that payment could not be deposited. During this period, none of our workers even obtained the benefit for the E.S.I. Apart from it the

employees share as well as the employers share was paid to us. This itself is sufficient punishment to us and we request you that the matter

regarding the damages may kindly be dropped.

After taking into consideration the aforesaid plea of the respondent, the authority concerned passed the order dated 27.1.1984 and observed as

under:

The contention of the employer that none of their workers ever obtained the benefit is not legally tenable for non levy of damages. Further their

contention that there was no bad intention on the part of the management to make the payment of dues is not accepted as delay whether deliberate

or otherwise attracts levy of damages.

The present petition has been filed u/s 75 of the Act against the order dated 27.1.1984. The Court below allowed the petition and set aside the

order passed on. 27.1.1984 levying damages on the respondent for the period from 1.7.1977 to 23.10.1978 and a recovery certificate dated

9.3.1984 has been issued in pursuance thereof. Delay in depositing the contribution was pointed out in the year 1984 for the first time after expiry

of more than three years and in such a situation, learned Counsel for the respondent had placed reliance upon two decisions of. this Court in the

case of Amin Chand & Sons v. State of Punjab and Ors. AIR 1965 P&H 441 and New Delhi Municipal Committee Kalu Ram and Anr. 1976

PLJ 351, in which it has been held that after the expiry of three years, the claim of the Corporation had become time barred, therefore, the

Corporation was not entitled to levy and recover damages.

Mr. Vikas Suri, learned Senior Standing Counsel for the appellant has vehemently contented that the Court below has erred in appreciating the

provisions of law while deciding the question of limitation. He has referred to the provisions of the Act in which Chapter IV pertains to

contributions, Chapter VI pertains to adjudication of dispute and claims and Chapter VII pertains to penalties. It is submitted by him that there is

no period of limitation provided for the purpose of levying damages. In this regard, he has relied upon a decision of the Supreme Court in the case

of E.S.I.C. Vs. C.C. Santhakumar, , to contend that in the said case, the question before the Court was ""Does the proviso to Clause (b) of

Section 77(1-A) fix the limit of time, in which the Corporation can make a claim from the employer on the basis of the orders passed u/s 45?"". The

Supreme Court observed that Section 45-A is a part of Chapter IV. Section 77(1-A)(b) proviso is contained in Chapter VI. The question is

whether there is any connecting link between Chapter IV and Chapter VI. In this regard, the Apex Court has held that where an order is passed

u/s 45-A, it is the duty of the employer and not the Corporation to approach the ESI Court. Since no application need be filed by the Corporation

after an order is passed u/s 45-A, the limitation prescribed u/s 77 does not get attracted. The non-payment of contribution is a continuing cause,

which is clear from the fact that the employer is enjoined to pay the interest u/s 39(5)(a), which was introduced by Act 29 of 1989, until the date of

its actual payment. Similarly, no limitation is provided in Chapter VII. It deals with the imposition of penalty or levy of damages upon failure to pay

contributions.

On the other hand, learned Counsel for the respondent has contended that the impugned order dated 27.1.1984 is, in any case, contrary to the

law as held by the Supreme Court in the case of Emp. State Insurance Corporation Vs. H.M.T. Ltd. and Another, . He contended that existence

of mens-rea of actus reus to contravene a statutory provision must also be held to be a necessary ingredient for levy of damages and/or the

quantum thereof. Learned Counsel has referred to the impugned order dated 27.1.1984 in which the Corporation has held that there was no bad

intention on the part of the management not to make the payment of dues is not accepted, as delay whether deliberate or otherwise attracts levy of

damages.

I have heard learned Counsel for the parties and have perused the record with their assistance.

So far as the argument of learned Counsel for the appellant in respect of the finding recorded by the Court below that the order imposing

damages was beyond period of three years and therefore, it has become time barred is concerned, the same is illegal because limitation is provided

only in Section 77(1-A) of the Act. The provision of limitation is provided under Chapter VI of the Act. There is no limitation for imposition of

damages under Chapter VII of the Act, as has been held by the Supreme'' Court in ESI Corporation v. C.C. Santhakumar''s case (supra).

Learned Counsel for the respondent failed to point out any fault with the arguments raised by learned Counsel for the appellant in this regard.

Therefore, it is held that the findings recorded by the Court below in this regard, are-erroneous, illegal and are set aside. So far as the argument of

learned Counsel for the respondent is concerned that the damages have been imposed u/s 85-B of the Act mechanically on the ground that

intention is not to be seen and without determining whether delay is deliberate or otherwise damages can be imposed is also contrary to law laid

down by the Supreme Court in Employees State Insurance Corporation v. HMT Ltd. and another (supra) wherein it has been held that existence

of mens-rea or actus reus to contravene a statutory provision must also be held to be a necessary ingredient for levy of damages and/or the

quantum.

Learned Counsel for the appellant has not been able to dispute the proposition of law as raised by the learned Counsel fro the respondent and

also accepts that the impugned order dated 7.1.1984 passed by the Corporation runs contrary to law which has been declared by the Supreme

Court. Thus, in these circumstances, the appeal filed by the Corporation is allowed. The judgment of the Court below dated 9.10.1987 and the

order dated 27.1.1984 are set aside and the matter is remanded back to the statutory authority for deciding afresh to give a finding as to whether

there was any deliberate attempt or any mens rea on the part of the respondent for not depositing the contribution within time in order to attract

levy of damages.

The parties are directed to appear before the Regional Director of the Corporation on 30.4.2009.