JUDGMENT
1. The respondent herein filed an application under Section 75 of the ESI Act, 1948, to quash the order passed by the Corporation and to declare that the applicant is not liable to pay any damages. After recording of evidence, the ESI Court passed the following order:
“The application under Section 75 of the ESI Act is allowed. The order at Ex. A-10, dated 15-2-1991 passed by the Regional Director is quashed.
It is hereby declared that the applicant is not liable to pay any damages.
Parties shall bear their own costs”.
Being aggrieved by that order the Corporation has preferred this appeal.
2. Heard the learned Counsel for the appellant. However, the respondent remained absent even though notice was served on him.
3. The brief facts of the case are the respondent was declared a sick industry as per the Sick Industrial Companies (Special Provisions) Act, 1985 (for short, ‘the Act’). The said company was registered in 1980 and has got a factory at Belgaum which is engaged in the manufacture of cotton yarn, terry towels and cloth. The latter two items are under the 100% export scheme. As on 30-6-1987 the accumulated losses are to the tune of Rs. 791.35 lakhs. It is not in dispute that the ESI Act was applicable to the company and in pursuance of the application of the Act, there were many inspections conducted by the inspecting authorities of the Corporation. On 14th and 16th March, 1990, inspection was conducted and the inspector pointed out certain items as wages as per his inspection note. After verifying those inspection reports, notice as contemplated in Form C-18 was issued to the respondent as detailed therein. In spite of notice, the respondent had not paid the amount of Rs. 18,557.57 being the contribution to the Corporation. Subsequently, the appellant herein passed an order on 15-11-1990 imposing a penalty of Rs. 2,108/- towards penal interest and also directed to pay damages to the extent of Rs. 16,126/-. Being aggrieved by that order, the respondent preferred the application as indicated above.
4. The learned Counsel for the appellant has submitted that even though the respondent was a sick industry, the power was vested with the Corporation to waive the penalty and not with the Court. Notwithstanding the fact that notice was served on the respondent while initiating proceedings under Section 85-B, the respondent did not evince any interest to appear before the Regional Director and file any objections. The respondent also has not sought for waiving of the penalty imposed by the Corporation. Therefore, he submitted that the Court after coming to the conclusion that the respondent was entitled for reconsideration of the penalty should have remanded the matter to the Corporation for its consideration instead of setting aside the entire order. In view of this, it is now necessary to refer to the provision under Section 85-B which is also culled out in the impugned order.
5. From the perusal of the proviso, it is abundantly clear that the power is vested with the Corporation to reduce or waive the damages recoverable under this section in relation to an establishment which is a sick industrial company in respect of which the scheme for rehabilitation has been sanctioned by the Board for Industrial and Financial Reconstruction established under Section 4 of the Act subject to such terms and conditions as may be specified in regulations. Therefore, it is clear that there is no dispute that it is declared a sick industry.
6. From the perusal of the letter marked as A.W. 1, it appears that the respondent is declared a sick industry. To avail the benefits of sick industry, the respondent ought to have approached the Corporation for waiving or reducing the damages recoverable from it. However, the Court instead of complying with the proviso to Section 85-B of the Act by remanding the matter has taken the power on itself and decided the case and set aside the order passed by the Regional Director. This order calls for interference.
7. Under those circumstances, the impugned order is set aside. The matter now stands remitted to the Director/Regional Director/Joint Director of the ESI Corporation to issue fresh notice to the respondent and after hearing both sides and after giving full opportunity to the respondent, to dispose of the case in accordance with law.