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2022 DIGILAW 1383 (JHR)

Employees’ State Insurance Corporation v. S. and S. Combines

2022-12-08

ANIL KUMAR CHOUDHARY

body2022
JUDGMENT : ANIL KUMAR CHOUDHARY, J. 1. Heard the parties. 2. This appeal has been preferred under Section 82 of the Employees’ State Insurance Act, 1948 against the order dated 12.01.2012 passed by the Presiding Officer, Labour Court-cum-E.S.I. Court, Jamshedpur in E.S.I. Case No. 3 of 2002 by which the learned E.S.I. court has allowed the application filed by the applicant who is the sole respondent in this appeal filed under Section 75 (2) (a) of the E.S.I. Act, 1948, after holding that as the applicant has no knowledge about the Act before August, 1997 and the code number was allotted to him in August, 1997 vide Ext.4. Hence, the applicant could not deposit the contribution for the period in question and the act of the applicant is not deliberate act. Hence, the applicant is not liable to pay the contribution of E.SI of that period. 3. The case of the applicant in brief is that the applicant is the partnership firm and he is the contractor of TISCO Limited, Jamshedpur for executing the work of cleaning, painting and other miscellaneous work inside TISCO works. M/s. TISCO Limited is exempted from the application of provision of E.S.I. Act and the said Act was made applicable to the contractors of M/s. TISCO Limited with effect from August, 1997. There was a meeting conducted by the then Regional Director of E.S.I. and his team and the representative of M/s. TISCO Limited on 12.08.1997. All the contractors including the applicant were present. The minutes of the meeting was forwarded to the applicant with a direction to implement the provision of E.S.I. Act from 01.08.1997. Thereafter, the applicant complied with the provision of E.S.I. Act and since then, he never defaulted for complying the provision of the Act. The Enforcement Officer inspected the establishment of the applicant and found proper compliance of the Act and the applicant has been making the registers and records with respect to the compliance of the provisions of the Act. The applicant was issued with a show-cause dated 12.04.2001 by the opposite party no. 2 stating therein that the applicant has not paid the contribution amount for the period 01.10.1996 to 31.07.1997. The applicant submitted his explanation and denied the liability as computed by the opposite party no. 2. The applicant also sent a letter to the opposite party no. The applicant was issued with a show-cause dated 12.04.2001 by the opposite party no. 2 stating therein that the applicant has not paid the contribution amount for the period 01.10.1996 to 31.07.1997. The applicant submitted his explanation and denied the liability as computed by the opposite party no. 2. The applicant also sent a letter to the opposite party no. 1 but the reply did not meet the subjective satisfaction of the opposite party no. 2 and as per the application, the opposite party no. 2 arbitrarily computed contribution amount of Rs. 55,967/- for the period from 10/1996 to 7/1997 plus interest of Rs. 37,787/- up to 30.09.2001 and further interest payable at the rate of 15% from 01.10.2001 till the date of payment. The opposite party no. 2 sent a letter to the opposite party no. 3 for recovery of the said amount and the opposite party no. 3- Recovery Officer issued a notice to the applicant to pay the said amount of Rs. 1,03,299/-. The applicant paid dues contribution amount of Rs. 11,483/-. Hence, the computation of the dues contribution amount on the basis of 30 employees working with the applicant without any material while the applicant never employed 30 employees during the relevant period and had deposited the computed amount of Rs. 11,783/- under compulsion for the period from 10/1996 to July, 1997 i.e. 07/1997. Thus the applicant made a prayer to hold that the applicant is not liable to pay the computed amount to the corporation. 4. The opposite parties in their written show-cause challenged the maintainability of the suit on various technical grounds. The opposite parties struck to his stand of the law of the application. 5. On the basis of the rival pleadings of the parties, the E.S.I. Court formulated the following point for consideration: “Whether the applicant is liable to pay the computed amount of contribution to the corporation?” 6. In support of its case, the applicant examined only one witness and produced the relevant documents which have been marked Ext.1 to 15 while the opposite parties altogether examined three witnesses and also produced document which has been marked Ext.A. 7. In support of its case, the applicant examined only one witness and produced the relevant documents which have been marked Ext.1 to 15 while the opposite parties altogether examined three witnesses and also produced document which has been marked Ext.A. 7. The E.S.I. Court after considering the evidence in the record came to the conclusion that E.S.I. Act, 1948 was made applicable in the area of Bistupur and Golmuri of Jamshedpur with effect from 01.10.1996 vide a notification of the Government and the applicant M/s. S. & S. Combines is an establishment at Bistupur, Jamshedpur and a contractor of TISCO Limited for executing various works of TISCO. Relying upon Ext.2 which is the minutes of the meeting of the Regional Director of E.S.I.C. Patna with the contractors working with TISCO wherein, it was mentioned that the contribution will commence from the wages of August, 1997 payable in September, 1997 by the contractors and the contractors covered by the Act will be allotted a code number by the E.S.I. office and accordingly, TISCO issued a letter and directed to all its contractors and code number was allotted to the applicant on 06.08.1997. The E.S.I. Court did not believe the contention of the opposite party that there was no meeting held on 12.08.1997 on the basis of the appreciation of the evidence in the record. Upon arriving at such conclusion, the E.S.I. court relied upon the testimony of the witnesses of the opposite party that the applicant was given information vide Ext.4 dated 06.08.1997. The E.S.I. Court also considered the testimony of OPW-2 who is the Deputy Director of E.S.I.C. to the effect that contribution can be deposited by the employer only after allotment of the code number by the E.S.I. office. The E.S.I. Court also considered the testimony of OPW-2 that he being the Deputy Director himself came to know about the implementation of the provision of the Act in that area after two weeks from the said notification. The E.S.I. Court also took note of the fact that opposite party could not produce any paper publication of the notification was made in the area with regard to the implementation of the Act. On the basis of the evidence, thus on record, the E.S.I. Court came to the conclusion that the contractors were not made aware about the implementation of the Act in their locality and the opposite party no. On the basis of the evidence, thus on record, the E.S.I. Court came to the conclusion that the contractors were not made aware about the implementation of the Act in their locality and the opposite party no. 1 being the Branch Manager himself came to know after three months of the notification about the implementation of the Act in the concerned area whereas the opposite party no. 2 came to know after two weeks of such notification and considering the aforesaid facts, the E.S.I. Court passed the said order. 8. At the time of Admission of this appeal, the following substantial questions of law were framed vide order dated 18.05.2018: (i) From which date the notification no. 2324 dated 20.09.1996 will be applicable to the applicant-respondent for making ESI Contribution, from 01.10.1996 i.e. the effective date of the notification or the date of knowledge of the said notification of the applicant- respondent? (ii) In case, the applicant-respondent is liable to pay ESI Contribution from 01.10.1996 whether, the applicant-respondent will be treated as willful defaulter from the date of notification, making him liable to pay interest? 9. Mr. Ashutosh Anand, learned counsel for the appellants submits that as Section 1 (3) of the Employees’ State Insurance Act, 1948 envisages that the said Act shall come into force on such date or dates as the Central Government may, by notification in the official gazette appoint and different dates may be appointed for different provisions of this Act and for different States or for different part thereof, hence, it is crystal clear that the notification no. 2324 dated 20.09.1996 will be applicable to the applicant-respondent for making E.S.I. Contribution from 01.10.1996 i.e. the effective date of the notification and the date of knowledge of the notification is immaterial. So far as the second substantial question of law, Mr. Ashutosh Anand, learned counsel for the appellants submits that even if the sub code was not allotted to the applicant-opposite party no. 2 still, the applicant-respondent can be treated to be defaulter. It is fairly submitted by Mr. Anand that there is no word ‘willful defaulter’ but the defaulter in payment of the amount can be treated as willful defaulter and the E.S.I. Court has erroneously held that the Act of non-payment of the E.S.I. contribution was not deliberate. Mr. 2 still, the applicant-respondent can be treated to be defaulter. It is fairly submitted by Mr. Anand that there is no word ‘willful defaulter’ but the defaulter in payment of the amount can be treated as willful defaulter and the E.S.I. Court has erroneously held that the Act of non-payment of the E.S.I. contribution was not deliberate. Mr. Anand relied upon the order of the Hon’ble Supreme Court of India being order dated 17.11.2022 in Special Leave to Appeal (C) No. 16380 of 2022, the relevant portion of which reads as under: “Having heard learned counsel appearing on behalf of the appellants, the short question which is posed for consideration of this Court is “whether the ESI Court was justified in restricting the levy of interest under Section 39(5)(a) of the ESI Act for a period of two years only?” For the aforesaid purpose, Section 39(5)(a) of the ESI Act is required to be referred to, which reads as under: “39. xxx xxx xxx (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.” On a fair reading of Section 39(5) (a) of the ESI Act, the organisation/employer in default is liable to pay the simple interest @ 12% per annum or, as such, higher rate as may be specified in the regulations till the date of its actual payment. The word used in Section 39(5)(a) is “Shall.” Therefore, the interest leviable/payable is a statutory liability to pay the interest. Neither the Authority nor the Court have any authority to either waive the interest and/or reduce the interest and/or the period during which the interest is payable. From the order passed by the ESI Court, it appears that the ESI Court has reduced the period of interest to two years only. The same is not supported by any statutory provision. Neither the Authority nor the Court have any authority to either waive the interest and/or reduce the interest and/or the period during which the interest is payable. From the order passed by the ESI Court, it appears that the ESI Court has reduced the period of interest to two years only. The same is not supported by any statutory provision. On going through Section 39(5)(a) of the ESI Act, the liability to pay the interest is from the date on which such contribution has become due and till the date of its actual payment. Therefore, as such the ESI Court was not justified at all in reducing the period of interest to two years only. The respondent was liable to pay the interest under Section 39(5)(a) from the date on which the contribution became due and payable and till the date of actual payment. Submits that the E.S.I. Court has no power to reduce the period of interest and the respondent was liable to pay the interest under Section 39 (5) (a) from the date of actual payment on which the contribution became due and payable but the E.S.I. Court has not considered the amount of contribution to be paid by the applicant-respondent for the period 01.10.1996 to 31.07.1997. Hence, the matter may be remanded to the E.S.I. Court for considering the same. 10. Mr. Pandey Neeraj Rai, learned counsel for the respondent on the other hand submits that there is no excuse for ignorance of law but there is excuse for ignorance of fact as the fact remains that no one, including the responsible officers of the appellant-corporation were aware about the implementation of the provision of the E.S.I. Act in the Bistupur and Golmuri area of Jamshedpur, the finding of fact of the E.S.I. Court that there was a meeting on 12.08.1997 and consequent upon that the E.S.I. sub code was allotted to the applicant-respondent on 06.08.1997 remains undisputed; so as per the minutes of the meeting as it was told by the responsible officers being the Regional Director of the E.S.I. Corporation to the applicant and other contractors of TISCO to pay the contribution amount from the date of allotment of sub code as a bona fide contractor. It is then submitted that the applicant undisputedly paid the said amount and only after a notice was received by the applicant long after the year on 12.04.2001, the applicant deposited his admitted contribution amount though under compulsion of Rs. 11,483/-, hence it cannot be said that the applicant has committed any default or wrong for that matter. It is next submitted that the E.S.I. Court has no occasion to decide whether the amount of Rs. 11,483/- paid by the applicant-respondent was proper or not as no such occasion arose. It is next submitted by Mr. Rai that the applicant-respondent by no stretch of imagination can be said to have defaulted in paying the interest or delayed in paying the interest which is sine-quanon for payment of interest. Hence, it is submitted that this appeal being without any merit be dismissed. 11. Having heard the submission made at the Bar and after going through the materials in the record, so far as first substantial question of law as to whether from which date the notification no. 2324 dated 20.09.1996 will be applicable to the applicant-respondent for making ESI Contribution, from 01.10.1996 i.e. the effective date of the notification or the date of knowledge of the said notification of the applicant-respondent is concerned, in view of the specific provision under Section 1 (3) of the Employees’ State Insurance Act, 1948, this Court has no hesitation in holding that the notification shall come into force on such date or dates as mentioned with the effective date of notification being 01.10.1996 as mentioned in the notification no. 2324. So the first substantial question of law is answered accordingly. 12. So far as the second substantial question of law as to whether in case, the applicant-respondent is liable to pay ESI Contribution from 01.10.1996 whether, the applicant-respondent will be treated as willful defaulter from the date of notification, making him liable to pay interest is concerned, in view of the settled principle of law, as this Court has held that notification no. 2324 dated 20.09.1996 will come into effect from 01.10.1996. So the amount of contribution to be paid by the applicant-respondent for the period 01.10.1996 to 31.07.1997 which according to the applicant-respondent is Rs. 11,483/- whereas according to the appellant is Rs. 56,966.25/- which comes round off to Rs. 2324 dated 20.09.1996 will come into effect from 01.10.1996. So the amount of contribution to be paid by the applicant-respondent for the period 01.10.1996 to 31.07.1997 which according to the applicant-respondent is Rs. 11,483/- whereas according to the appellant is Rs. 56,966.25/- which comes round off to Rs. 56,967/- needs to be adjudicated by the E.S.I. Court and the E.S.I. Court keeping in view the principle of law has to consider the amount of interest if any payable to the applicant-respondent. The second substantial question of law is answered accordingly. 13. In view of the discussions made above, the impugned order dated 12.01.2012 passed by the Presiding Officer, Labour Court-cum-E.S.I. Court, Jamshedpur in E.S.I. Case No. 3 of 2002 being not sustainable in law is set aside. The case is remanded to the E.S.I. Court, Jamshedpur with a direction to hear the parties and decide as to what would be the actual contribution to be paid by the applicant-respondent for the period from 01.10.1996 to 31.07.1997 and interest if any, payable by the applicant-respondent during the said period. 14. This appeal is disposed of accordingly. 15. Let a copy of this Judgment along with the Lower Court Records be sent back to the learned court below forthwith.