JUDGMENT : 1. This appeal is preferred 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. 2. Brief facts of the appeal can be stated as follows : The respondent society was initially covered under Section 1(4) of the Employees State Insurance Act, 1948 with effect from 1st September, 1974. The respondent made a representation against this coverage and the appellant reconsidered the representation and reviewed its decision to cover the establishment of the respondent society with effect from 1st September, 1974 and covered the establishment of society with effect from 22nd November, 1976 under Section 1(5) of the Employees State Insurance Act. The appellant had issued notice dated 26.07.1984 to the respondent demanding contribution amounting to Rs.85,564/- for the period from November, 1976 to August, 1980. This notice was challenged by the respondent by filing the above said application (ESI) No.2 of 1985 before the Employees State Insurance Court at Nagpur. 3. Appellant resisted the said application. In support of its case, respondent adduced the evidence and after appreciating the evidence adduced on the record by the parties, the Industrial Court was pleased to pass an order on 2nd March, 2006 partly allowing the application and holding the society as covered under the Employees State Insurance Act and also liable for making contribution as demanded, however, disallowed the claim of appellant towards interest and the damages. 4. This order of the Industrial Court is not challenged by the respondent and therefore, so far as the findings arrived by the Industrial Court that respondent is covered under the provisions of Employees State Insurance Act, 1948 with effect from 27.11.1976 and respondent is liable to pay contribution as demanded, has attained finality. 5. The only part of order which is challenged by the appellant pertains to disallowing the claim of appellant towards interest and damages which are provided statutorily under the Employees State Insurance Act. 6. At the time of admission of the appeal, the substantial questions of law were framed as follows - (i) Whether the Corporation could not have demanded interest and damages from the respondent after passing the stay order by the ESI Court? 6. At the time of admission of the appeal, the substantial questions of law were framed as follows - (i) Whether the Corporation could not have demanded interest and damages from the respondent after passing the stay order by the ESI Court? (ii) Whether it could be said that the amount payable by the respondent towards the contribution was secured by furnishing Bank guarantee, especially when the respondent has not deposited the same before the ESI Court? 7. The necessary question, therefore, for consideration in this appeal is whether the liability of the respondent to pay interest and damages will stand absolved, on the trial Court passing the order of stay and thereafter, respondent furnishing Bank guarantee. 8. The perusal of the impugned order of the Industrial Court reveals that the Industrial Court has held that the liability of the respondent to pay damages and interest stands only upto the date before the stay was granted. It was held that once the order of stay was granted and the amount of contribution which was due was very much secured by way of Bank guarantee, the appellant could not have claimed the damages or interest or much less should have calculated the damages and interest a day before passing of the stay order by the Court. It was held that further interest and damages having been covered by the order of the Court on furnishing Bank guarantee to the extent of 100% amount under claim, claim for that amount has got to be quashed. According to the learned Industrial Court, when the stay order was granted subject to furnishing Bank guarantee, nothing had prevented the appellant from insisting on deposit of cash instead of Bank guarantee or to challenge the order of Bank guarantee, if not satisfied. However, appellant has not done so. Hence, Industrial Court directed the appellant to receive the damages and interest upto the date before passing of the stay order as the appellant will be entitled to recover the interest and damages till that date only. 9. Even a cursory perusal the impugned order of the Industrial Court is sufficient to hold that the Industrial Court has adopted a very strange approach and given the reasons which cannot be called as sound and which are to tally against the provisions of law, while disallowing the claim for interest and damages. 9. Even a cursory perusal the impugned order of the Industrial Court is sufficient to hold that the Industrial Court has adopted a very strange approach and given the reasons which cannot be called as sound and which are to tally against the provisions of law, while disallowing the claim for interest and damages. Merely because stay order was granted to the execution of the demand notices, it cannot absolve the liability to pay the interest and damages, which is a statutory liability. Even accepting that the Industrial Court has directed the respondent and respondent has accordingly furnished 100% Bank guarantee, it was only to secure the amount of contribution which was due from the respondent but in no way it can relieve the respondent from its statutory liability of payment of interest and damages. 10. The provision of Section 85 B which pertains to the power to recover damages are very clear to that effect. Said section read as follows – “85-B. Power to recover damages. – (1) Where an employer fails to pay the amount due in respect of any contribution or any other amount payable under this Act, the Corporation may recover [from the employer by way of penalty such damages not exceeding the amount of arrears as may be specified in the regulation Provided that before recovering such damages, the employer shall be given a reasonable opportunity of being heard: Provided further that the Corporation may reduce or waive the damages recoverable under this section in relation to an establishment which is a sick industrial company in respect of which a scheme for rehabilitation has been sanctioned by the Board for Industrial and Financial Reconstruction established under Section 4 of the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986), subject to such terms and conditions as may be specified in regulations. (2) Any damages recoverable under sub-section (1) may be recovered as an arrear of land revenue or under section 45C to section 45I. 11. There is further Regulation 31(c) which provides for the recovery of damages or contributions or any other amount due, but not paid in time. It lays down the rate at which such damages are to be recovered. 12. 11. There is further Regulation 31(c) which provides for the recovery of damages or contributions or any other amount due, but not paid in time. It lays down the rate at which such damages are to be recovered. 12. Similarly, as regards the liability of payment of interest also, Section 39 (5) of the Employees State Insurance Act, specifically provides as follows - “39(5)(a) - If any contribution payable under this Act is not paid by the principal employer on the date on which such contribution has become due, he shall be liable to pay simple interest at the rate of twelve per cent per annum or at such higher rate as may be specified in the regulations till the date of its actual payment: Provided that higher interest specified in the regulations shall not exceed the lending rate of interest charged by any scheduled Bank. (b) Any interest recoverable under clause (a) may be recovered as an arrear of land revenue or under section 45-C to section 45-I. Explanation. – In this sub-section, “scheduled Bank” means a Bank for the time being included in the Second Schedule to the Reserve Bank of India Act, 1934 (2 of 1934).] 13. Regulation 31 (A) lays down that an Employer who fails to pay contribution within the periods specified shall be liable to pay simple interest @ 12% per annum in respect of each day of default or delay in payment of contribution. 14. Thus, perusal of both these provisions is sufficient to prove that the liability of the paying interest on the amount of contribution is statutory liability and the provision also confers the right on the corporation to recover the damages from the employer who fails to pay such contribution. 15. As a matter of fact, the Industrial Court is also not disputing the liability of the respondent to pay such interest and damages, however, the Court has restricted the period only upto the order of stay. As stated above, the only reason on which the Industrial Court has not allowed the claim of appellant for recovery of the damages and interest for further period is that the respondent has given 100% Bank guarantee. 16. As stated above, the only reason on which the Industrial Court has not allowed the claim of appellant for recovery of the damages and interest for further period is that the respondent has given 100% Bank guarantee. 16. Hence, the question for consideration is whether the furnishing of Bank guarantee can exempt the respondent from discharging the statutory liability of payment of interest and damages on the amount of contribution, which was admittedly found due from respondent. The question is, whether after the dismissal of the application filed by the respondent and thereby holding that the respondent is covered under the provision of the Employees' State Insurance Act, whether the respondent should be relegated to the same position and thereby making it liable for interest and damages on the contribution of the subsequent period also after the stay order was passed. 17. In this respect, learned counsel for the appellant has relied upon the judgment of the Hon'ble Apex Court in the case of Kanoria Chemicals and Industries Ltd...vs...U. P. State Electricity Board and Others, (1997) 5 Supreme Court Cases 772. In that case, the proceedings were filed seeking injunction restraining the Electricity Board from recovery of the surcharge. Interim stay was granted to the relevant notification which provided for recovery of the surcharge on Electricity. Subsequently, the petition challenging the said Notification came to be dismissed. Now question was whether consumer-petitioners would be relieved of their obligation to pay the late payment surcharge for the period during which the stay order was operated. While deciding this question, it was held by the Hon'ble Supreme Court that on dismissal of the petition, it is the duty of the Court to maintain status quo ante and hence, the consumer-petitioners would not be relieved of their obligation to pay the late payment surcharge for the period the stay order had remained operative. It was held that the grant of injunction does not relieve the consumers of their obligation to pay the charges at the enhanced rates and therefore, the demand for surcharge during the period of stay is not illegal. 18. In the instant case, therefore, merely because the Court has granted stay to the recovery of amount of contribution, cannot relieve the respondent from liability of paying the interest and damages which is a statutory liability, for the relevant period during which stay order was in operation. 19. 18. In the instant case, therefore, merely because the Court has granted stay to the recovery of amount of contribution, cannot relieve the respondent from liability of paying the interest and damages which is a statutory liability, for the relevant period during which stay order was in operation. 19. As regards furnishing Bank guarantee by the respondent, learned advocate for the appellant has relied upon the judgment of the Hon'ble Apex Court in the case of Assistant Collector of Central Excise, Chandan Nagar, West Bengal ..vs.. Dunlop Indian Ltd and Others, AIR 1985 Supreme Court 330, wherein the Apex Court has deprecated the manner in which the stay orders are granted on mere furnishing Bank guarantee. It was held that the Governments are not run on mere Bank Guarantees. No governmental business or for that matter no business of any kind can be run on mere Bank guarantee. Liquid cash is necessary for the running of a Government as indeed any other enterprise. 20. In view thereof, in this case also it has to be held that mere furnishing of Bank guarantee cannot give the interest or damages, which appellant has become entitled to recover. Things would have been different if the amount of contribution was deposited in the Court and it was invested in any Fixed Deposit Receipt which could have fetched the interest and then one could have said that there was some reasoning given by the Court as appellant cannot be entitled for double recovery of the interest and damages. Here in the case, as mere furnishing of Bank guarantee did not provide the payment of interest on the amount of contribution, much less the payment of damages, that liability still remains and survives. The appellant is, therefore, entitled to recover the said amount of interest and damages from the respondent. About the quantum of the damages and interest due from the respondent, there being no dispute as such, it has to be held that the order passed by the Industrial Court rejecting the claim for damages of Rs.3,809/- and interest of Rs.1,207/- needs to be quashed and set aside. 21. The substantial questions of law which are framed for determination are answered accordingly. 22. Appeal is allowed with no order as to costs. 23. 21. The substantial questions of law which are framed for determination are answered accordingly. 22. Appeal is allowed with no order as to costs. 23. The impugned order passed by the Industrial Court rejecting the claim of the appellant for damages of Rs.3,809/- and interest of Rs.1,207/- is quashed and set aside.