JUDGMENT
Ram Mohan Reddy, J.
1. This is an appeal under Sub-section (2) of Section 82 of the Employees’ State Insurance Act, 1948 (for short ‘ESI Act”), questioning the order dated 15-3-2001 of the “Employees’ State Insurance Court, Hubli, allowing the ESI Application No. 10 of 2001 filed by the employer under Section 75 of the ESI Act. Section 82 enjoins upon the appellant to make out a question of law in order to maintain the appeal. Sub-section (2) of Section 82 reads as under:
“(2) An appeal shall lie to the High Court from an order of an Employees’ Insurance Court if it involves substantial question of law”.
2. The question of law that arises for consideration is:
Whether in the facts and circumstances of the case, the payment of the contribution towards overtime wages by the respondent-Company for the period from 16-1-1991 to 31-8-1992 made pursuant to the demand made on 8-12-2000 in view of the judgment dated 6-11-1996 of the Apex. Court in the case of Indian Drugs and Pharmaceuticals Limited v. Employees’ State Insurance Corporation, overruling the judgment dated 3rd July, 1989 of Division Bench of this Court in the case of Hind Art Press v. Employees’ State Insurance Corporation and Anr., 1989(2) Kar. L.J. 227, 1990-II-LLJ-195 (Kar.) the appellant-Corporation could claim and demand interest in terms of Clause (a) of Sub-section (5) of Section 39 of the ESI Act from the date when the contribution fell due?
3. Brief facts of the case are:
The respondent-Company by name M/s. Riddhi Siddhi and Chemicals Limited, Gokak, a Company incorporated under the provisions of the ESI Act, having its head office at Ahmedabad, had taken over the erstwhile unit of K.G. Gluco Biols Limited, pursuant to the proceedings before the Board for Industrial and Financial Reconstruction (for short ‘BIFR’) as the said Company was a sick Company. The sick Company, M/s. K.G. Gluco Biols Limited, was covered under the provisions of the ESI Act. The appellant-Corporation through its inspectors had inspected the records of the nick Company way back in the year 1992 and had made a report to the effect that contributions towards overtime wages were not paid. The sick Company had replied to the said report contending that this Court had held that the overtime wages would not form a part of wages under Sub-section (22) of Section 2 of the ESI Act and therefore, the question of payment of contribution does not arise. The Division Bench of this Court in the case of Hind Art Press, supra, had held that the overtime wages could not form a part of the term ‘wages’ as denned under Sub-section (22) of Section 2 of the ESI Act and hence, contribution was not payable on the said overtime wages. The said ruling was challenged before the Apex Court. The Apex Court by its judgment dated 6-11-1996 in the case of Indian Drugs and Pharmaceuticals Limited, supra, overruled the Division Bench ruling of this Court. In other words, the overtime wages were also included within the term of the definition ‘wages’ as defined in Sub-section (22) of Section 2 of the ESI Act. It appears the appellants’ Inspector submitted a report in 1992 and after securing an explanation from the Sick Company, no action was taken by the appellant-Corporation to make a demand for recovery of the contribution for the period from 16-1-1991 to 31-8-1992 in respect of overtime wages. However, by a letter dated 8-12-2000, in exercise of powers under Section 40 read with Section 39 of the ESI Act, the Joint Director of the appellant-Corporation called upon the respondent-Company to make payment of a sum of Rs. 47,750/- being the contributions towards overtime wages for the period from 16-1-1991 to 31-8-1992. The said letter though in a printed form contain the following sentence in handwriting – “in respect of overtime allowance in view of Supreme Court decision”. Pursuant to the said letter, it appears that the respondent-Company made payment of a sum of Rs. 47,750/- by depositing the same through a pay-in-slip for contribution, on 15-12-2000. Thereafter, the appellant-Corporation by its order dated 1-1-2001 addressed a letter to the Recovery Officer to recover a sum of Rs. 1,02,143/- being the contribution and interest at the rate of 15% per annum for delayed payment. Once again, by letter dated 7-3-2001 the appellant-Corporation amended the claim restricting it to a sum of Rs. 54,040/- being the interest at the rate of 15% over the contribution of the sum of Rs. 47,750/-. The respondent-Company questioned the order dated 7-3-2001 of the appellant-Corporation before the Employees’ State Insurance Court at Hubli.
4. The appellant-Corporation filed its statement of objections contending that overtime wages constituted ‘wage’ as per the definition under Sub-section (22) of Section 2 of the ESI Act and therefore, nonpayment of contribution for overtime wages on the dates specified amounted to delayed payment of contribution resulting in imposition of interest over such delayed payment in accordance with the ESI Act. The parties have let in evidence to substantiate their respective claims before the ESI Court. The ESI Court by its order dated 15-3-2001 allowed the application, set aside the notice demanding interest at Rs. 55,040/-and held that the respondent-Company was not liable to pay the interest.
5. I have heard the learned Counsels for the parties. The Division Bench ruling of this Court in the case of M/s. Hind Art Press, supra, was overruled by the Apex Court in the case of Indian Drags and Pharmaceuticals Limited, supra, holding that the overtime wages constitute a part of wages as defined under Sub-section (22) of Section 2 of the ESI Act. Soliciting an answer to the question of law, in the affirmative, the learned Counsel for the appellant drew my attention to the following provisions of the ESI Act. Sub-sections (4) and (5)(a), (5)(b) of Section 39 and Section 93-A which read as under:
“(4) The contributions payable in respect of each wage period shall ordinarily fall due on the last day of the wage period, and where an employee is employed for part of the wage period, or is employed under two or more employers during the same wage period, the contributions shall fall due on such days as may be specified in the regulations.
(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 45-1″.
“93-A. Liability in case of transfer of establishment.–Where an employer, in relation to a factory or establishment, transfers that factory or establishment in whole or in part, by sale, gift, lease or licence or in any other manner whatsoever, the employer and the person to whom the factory or establishment is so transferred shall jointly and severally be liable to pay the amount due in respect of any contribution or any other amount payable under this Act in respect of the periods up to the date of such transfer:
Provided that the liability of the transferee shall be limited to the value of the assets obtained by him by such transfer”.
6. The learned Counsel also placed reliance on the Regulations 31-A and 31-B of the ESI (General) Regulations, 1950, which reads as under:
“31. Time for payment of contribution.–An employer who is liable to pay contributions in respect of any employee shall pay those contributions within 21 days of the last day of the calendar month in which the contributions fall due:
Provided that where a factory/establishment is permanently closed, the employer shall pay contribution on the last day of its closure.
31-A. Interest on contribution due, but not paid in time.–An employer who fails to pay contribution within the periods specified in Regulation 31, shall be liable to pay interest at the rate of 6 per cent per annum in respect of each day of default or delay in payment of contribution.
31-B Recovery of interest.–Any interest payable under Regulation 31-A may be recovered as an arrear of land revenue”.
7. The learned Counsel sought to contend that the provisions of law make it mandatory that non-payment of contributions by the employer within the due date, attracts application of interest on the amount of contribution, which in the instant case, is what is done is legal and valid. He contended that the findings of the ESI Court that interest is not attracted is perverse. In addition, learned Counsel also contends that the liability of the sick company M/s. KG. Gluco Biols, is transferred to the respondent-Company in accordance with Section 93-A of the Act.
8. The learned Counsel placed reliance on the ruling in the case of Regional Director, ESI Corporation, Bangalore v. Manjog Home and Organisation and Ors., 1996(1) Kar. L.J. 80 : ILR 1995 Kar. 3430 wherein this Court has held that interest is payable on delayed payment of contribution under Sub-clause (a) of Sub-section (5) of Section 39 of the ESI Act.
9. Placing reliance on the ruling of a Division Bench of this Court in the case of Workmen of Bharath Electronics Limited and Ors. v. Employees’ State Insurance Corporation, 1995(6) Kar. L.J. 709 (DB) it was contended that Sub-section (4) of Section 40 would be nugatory if the employer was not made liable to pay the employees’ contribution.
10. Sri V. Narasimha Holla, learned Counsel for the appellant placed reliance on the decision of the Madras High Court in the case of Ennore Foundries Limited, Chennai v. Government of India and Ors. 2001 Lab. I.C. 273 (Mad.): 2000-III-LLJ-185 (Mad.) to contend that based on the maxim “actus curiae neminem grava bit” – an act of Court shall prejudice no man. The said decision arose out of the fact after dismissal of the writ petition, the stay or interim order granted had come to an end and therefore it was held that it was the duty of the Court to put the parties in the same position as they would have been before the interim orders of the Court. The learned Counsel sought to distinguish, on facts, the judgment of this Court in the case of HMT Limited, Watch Factory IV, Tumkur v. Employees’ State Insurance Corporation. (1998)92 FJR 454 (Kar.): .1998-I-LLJ-841 (Kar.)
11. However, the learned Counsel for the respondent placing reliance on this judgment strongly contended that the said judgment applies on all its fours and that the principle laid down therein that the delayed payments for which the employer could not be held responsible at all and making the payment by him impossible in the circumstances cannot be called wilful non-payment and therefore, not liable to pay interest in terms of Clause (a) of Sub-section (5) of Section 39 of the ESI Act. He therefore contended that during the interregnum between the date of the judgment of this Court and that of the Apex Court both the parties in this case had accepted, in fact, that the question of payment of contribution on the overtime wages did not arise, as the respondent-Company could not have paid the contribution nor could the appellant-Corporation receive the payment.
12. From the aforesaid contentions, it is no doubt true, that Sub-section (5) of Section 39, Section 40 of the ESI Act and Regulation 31 of the General Regulations enjoin upon the respondent-Company to make the payment of the contributions within the time fixed. The appellant-Corporation termed the payment of said contributions on 15-12-2000 by the respondent-Company, as delayed payment within the meaning of Section 39 of the Act. As a result, the appellant-Corporation levied interest under Sub-section (5) of Section 39 of the ESI Act read with Regulations 31-A and 31-B of the Regulations. The question is whether the non-payment of contribution in time is due to the voluntary act on the part of the respondent-Company or on account of its disability suffered due to the judgment of the Division Bench of this Court holding the field until overruled by the Apex Court. Similar such question arose before this Court in the case of HMT Limited, wherein it is held that non-payment of contribution in time on the facts and circumstances of that case is not such as to warrant levy of interest within the meaning of Section 39(5)(a) of the ESI Act. The circumstances in the said case are almost akin to the present case on hand. In that case as well, this Court considered the situation where the delayed payment for reasons of which employer could not be held responsible at all. In the said circumstances, making payment by the employer being impossible cannot be called wilful non-payment attracting interest in terms of Clause (a) of Sub-section (5) of Section 39 of the ESI Act.
13. Of course, Clause (a) of Sub-section (5) of Section 39 of the ESI Act read with Regulations 31-A and 31-B make it clear that the appellant-Corporation has a right to demand and recover the interest on the ground that the contributions are not paid on time. In the instant case, the contribution is paid on 15-12-2000 immediately after the notice dated 8-12-2000 issued by the appellant-Corporation indicating that the Company was liable to pay the contribution on overtime wages pursuant to the ruling of the Apex Court. The appellant-Corporation had not made such a demand at any point of time as is noticed by the records, in view of the Division Bench ruling of this Court holding that the overtime wages do not constitute a part of ‘wages’ as defined under Sub-section (22) of Section 2 of the ESI Act. The liability to pay interest in the facts and circumstances of this case is not totally excluded. The appellant-Corporation cannot fasten liability on the respondent-Company on the delayed payment of contribution in view of law that was laid down by the Division Bench of this Court until the same came to be overruled by the Apex Court on 6-11-1996. The respondent-Company at the same time cannot contend that no interest is payable at all but is certainly liable to pay interest from 6-11-1996, the date on which the Apex Court overruled the judgment of the Division Bench of this Court.
In the result, I consider it proper to hold that non-payment of contribution on the due date, in the peculiar circumstances of this case, does not warrant levying interest within the meaning of Clause (a) of Sub-section (5) of Section 39 of the ESI Act for the relevant period upto 6-11-1996 and that the respondent-Company is however liable to pay the interest from 6-11-1996 upto 14-12-2000.
The appeal is partly allowed and the order of the ESI Court is set aside. No order as to costs.