Case Note & Summary
The petitioner, M/s. St. John's Medical College Hospital, an establishment covered under the Employees' State Insurance Act, 1948, challenged an order dated 3.9.2012 passed by the Deputy Director, ESI Corporation, determining interest of Rs. 7,51,499/- for delayed payment of contributions, and a subsequent demand notice dated 4.12.2012. The petitioner contended that no show cause notice was issued before determining the interest amount, violating principles of natural justice. The respondents argued that in light of the Supreme Court judgment in M/s. Goetze (India) Ltd. v. Employees' State Insurance Corporation, no show cause notice was necessary. The High Court examined the issue and held that the judgment in Goetze (India) Ltd. does not dispense with the requirement of a show cause notice. The court observed that the power under Section 39(5) of the ESI Act to determine interest must be exercised after affording an opportunity of hearing to the establishment. Since no show cause notice was issued, the impugned order and demand notice were quashed. The court allowed the writ petition and set aside the orders, leaving it open to the respondents to initiate fresh proceedings after issuing a show cause notice.
Headnote
A) Administrative Law - Natural Justice - Show Cause Notice - Employees' State Insurance Act, 1948, Section 39(5) - The court held that before determining interest under Section 39(5) of the ESI Act, a show cause notice must be issued to the establishment to afford an opportunity of hearing. The impugned order and demand notice were quashed for violation of principles of natural justice. (Paras 3-4) B) Employees' State Insurance - Interest - Section 39(5) - Employees' State Insurance Act, 1948 - The court held that the judgment in M/s. Goetze (India) Ltd. v. Employees' State Insurance Corporation does not dispense with the requirement of a show cause notice before determining interest. The order determining interest without notice is unsustainable. (Paras 3-4)
Issue of Consideration
Whether the order determining interest under Section 39(5) of the Employees' State Insurance Act, 1948 without issuing a show cause notice to the establishment is sustainable in law.
Final Decision
Writ petition allowed. Impugned order dated 3.9.2012 and demand notice dated 4.12.2012 are quashed. Respondents are at liberty to initiate fresh proceedings after issuing show cause notice to the petitioner.
Law Points
- Natural justice
- Show cause notice
- Interest determination
- Section 39(5) ESI Act
- 1948
- Quashing of demand
