Case Note & Summary
The appellant, Employees' State Insurance Corporation (ESIC), filed an appeal under Section 82 of the Employees' State Insurance Act, 1948, challenging the order dated 2nd March 2006 passed by the Employees State Insurance Court (Industrial Court) at Nagpur in Application (ESI) No.2 of 1985. The respondent, Vidarbha Cooperative Marketing Society Limited, was initially covered under Section 1(4) of the Act with effect from 1st September 1974. Upon representation, the appellant reviewed the coverage and covered the establishment under Section 1(5) with effect from 22nd November 1976. The appellant issued a notice dated 26th July 1984 demanding contribution of Rs.85,564 for the period from November 1976 to August 1980. The respondent challenged this notice by filing the application before the Industrial Court. The Industrial Court partly allowed the application, holding that the respondent was covered under the Act and liable to pay the contribution as demanded, but disallowed the claim for interest and damages. The respondent did not challenge this order, so the findings regarding coverage and contribution liability attained finality. The appellant challenged only the part disallowing interest and damages. The High Court considered the statutory provisions under Sections 39(5)(a) and 85-B of the Act, which mandate payment of interest at 12% per annum and damages for delayed payment. The court held that the Industrial Court had no discretion to waive these statutory liabilities. The appeal was allowed, setting aside the Industrial Court's order to the extent it disallowed interest and damages, and directing the respondent to pay interest at 12% per annum and damages as per Section 85-B.
Headnote
A) Employees' State Insurance - Interest and Damages - Sections 39(5)(a) and 85-B of Employees' State Insurance Act, 1948 - Statutory Liability - The Industrial Court partly allowed the respondent's application holding it covered under the Act and liable for contribution, but disallowed the claim for interest and damages. The High Court held that interest and damages are statutorily mandated and cannot be waived by the Industrial Court. The appeal was allowed, and the respondent was directed to pay interest at 12% per annum and damages as per Section 85-B. (Paras 5-7)
Issue of Consideration
Whether the Industrial Court was justified in disallowing the claim of the appellant towards interest and damages under the Employees' State Insurance Act, 1948, despite the respondent being held liable for contribution.
Final Decision
The appeal is allowed. The order of the Industrial Court dated 2nd March 2006 is set aside to the extent it disallows the claim for interest and damages. The respondent is directed to pay interest at 12% per annum on the contribution amount and damages as per Section 85-B of the Employees' State Insurance Act, 1948.
Law Points
- Statutory interest and damages are mandatory for delayed payment of ESI contributions
- Section 39(5)(a) of ESI Act provides for interest at 12% per annum
- Section 85-B provides for damages
- Industrial Court cannot waive statutory interest and damages
