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SCA/25273/2006 7/ 7 JUDGMENT
IN
THE HIGH COURT OF GUJARAT AT AHMEDABAD
SPECIAL
CIVIL APPLICATION No. 25273 of 2006
For
Approval and Signature:
HONOURABLE
MR.JUSTICE KS JHAVERI
=========================================================
1
Whether
Reporters of Local Papers may be allowed to see the judgment ?
2
To be
referred to the Reporter or not ?
3
Whether
their Lordships wish to see the fair copy of the judgment ?
4
Whether
this case involves a substantial question of law as to the
interpretation of the constitution of India, 1950 or any order
made thereunder ?
5
Whether
it is to be circulated to the civil judge ?
=========================================================
TRANSPORT
CORPORATION OF INDIALTD.THROUGH DIPTESH MATHUR - Petitioner(s)
Versus
EMPLOYEES
STATE INSURANCE - CORPORATON. & 2 - Respondent(s)
=========================================================
Appearance
:
MR
MC BHATT for
Petitioner(s) : 1,
MR SACHIN D VASAVADA for Respondent(s) :
1,
RULE SERVED for Respondent(s) : 2 -
3.
=========================================================
CORAM
:
HONOURABLE
MR.JUSTICE KS JHAVERI
Date
: 09/02/2010
ORAL
JUDGMENT
1. The
petitioner has prayed to quash and set aside the impugned order
dated 23rd
November 2006 passed by the respondent No. 1 Employee State
Insurance Corporation directing the petitioner to pay the interest
amount of Rs 21,27,087/- with interest from 30th
March 1975 to 31st
March 1988 towards ESI
contribution payable by the petitioner and further directing the
petitioner to pay Rs 39,722/- as interest amount from 1st
March 2006 to 2nd
August 2006.
2. The
petitioner company has business operations in various parts of
Gujarat. A dispute arose between the petitioner and the respondent
no.1 regarding the date from which the Employees State Insurance Act
would be applicable to the business establishments of the petitioner
in the State of Gujarat. According to the petitioner the provisions
the Employees State Insurance Act did not apply to the business
establishments of the petitioner company from 30th
March 1975 to 31st
March 1988. The respondent no.1 issued notice dated 6th
April 1990 demanding a sum of Rs.7,79,491/- as ESI dues from 30th
March 1975 to 31st
March 1988 and also made demand of Rs.3,47,122/- under the head of
interest payable from 1st
April 1988 to 31st
July 1990. Thus, the respondent no.1 demanded a total sum of
Rs.11,26,613/- from the petitioner and according to the notice it
was an adhoc assessment.
3. The
petitioner challenged the decision of the respondent no.1 by way of
initiating proceedings before Employees Insurance Court, Ahmedabad
being Application (EI) No.66 of 1990. The Employees Insurance Court,
Ahmedabad, by judgement and order dated 17th
August 1993 upheld the contention of the petitioner that the
provisions of the said Act are not applicable to the business
establishment of the petitioner from the year 1975 to 1988.
4. Feeling
aggrieved by the aforesaid judgement and order dated 17th
August 1993 the respondent no.1 preferred First Appeal No.1302 of
1996 before this Court which came to be allowed by judgement and
order dated 10th
July 2006 and set aside the order passed by the Employees Insurance
Court. Thereafter respondent no.1 issued prohibitory order on 26th
July 2006 against the petitioner demanding a sum of Rs.29,50,743/-
against which the petitioner has preferred Special Civil Application
No.15457 of 2006 before this Court. By consensus the said petition
was disposed of and the petitioner was to make a representation to
the respondent no.1. The respondent no.1 made a representation
to the respondent no.1 on 20th
November 2006. The respondent no.1 passed final order on 23rd
November 2006 directing the petitioner to pay interest amount of
Rs.21,27,087/- from 30.3.1975 to 31.3.1988 on ESI Contribution
payable by the petitioner. The petitioner was further directed to pay
Rs.39,722/- as interst amount from 1.3.2006 to 2.8.2006. It is
against the said order that the present petition has been filed.
5. Learned
Advocate for the petitioner submitted that the authority has
committed gross error in mis-interpreting and misconstruing section
39(5) of the Act; that the authority has failed to appreciate and
following the binding judgements delivered by the Apex Court; that
the dispute is only for the period between 30.3.1975 and 31.3.1988
and now practically three times the amount is demanded; that ESI
Court held that the Act did not apply to the petitioner s
establishment upto 1.4.1988 and therefore the amount was not payable
upto 17.5.1993 and thereafter till this Court delivered judgement
dated 10.7.2006 and therefore the the amount of contribution was not
due from the petitioner till 10.7.2006.
6. Learned
Advocate for the petitioner submitted that during the disputed
period employees neither availed of any medical facility provided by
the ESI Corporation nor any other incidental benefits provided by the
ESI Corporation and therefore the Corporation ought to have adopted a
pragmatic approach and ought not to have insisted for payment of the
principal amount of contribution after the judgement of this Court.
7. Learned
Advocate for the petitioner has relied upon a decision in the case of
M/s Goetze (India) Limited Vs. Employees State Insurance
Corporation, reported in AIR 2008 SCW 5263 wherein it is held that in
case of delay in making payment the liability to pay interest
being statutory there is no power to waive the same.
8. Mr.
Sachin D. Vasavada, learned Advocate appearing for respondent no.1
submitted that the petitioner has no case on merits; that the
petitioner has never disputed the amount of contribution for the
disputed period i.e. 30.3.1975 to 31.3.1988; that in view of the
judgement passed by this Court in First Appeal No.1302 of 1996 the
petitioner is liable to make the payment and that the liability of
interest is an automatic statutory liability as per section 39(5) to
be read with its Regulation No.31-A of the ESI Act and therefore the
respondent no.1 is right and justified in demanding the statutory
intesrest on unpaid amount of the contribution for the period. He
therefore submitted that the petition deserves to be dismissed
9. Learned
Advocate for the respondent has relied upon a decision in the case of
Transport Corporation of India Vs. ESIC, reported in AIR 2000 SC 238.
10. As
a result of hearing and perusal of the record, there is no dispute
with regard to the liability of the petitioner to make payment for
the period from 30th
March 1975 to 31st
March 1988. In this connection the petitioner had approached ESI
Court and the ESI Court had ruled in favour of the petitioner
holding that the said Act did not apply to its business
establishments for the period in question. The matter was examined by
this Court in First Appeal No.1302/96 and reversed the findings of
ESI Court. The operative part of the said order reads as under:
The issue involved in this appeal
is squarely covered by a decision of the Apex Court in the case of
Transport Corporation and another reported in AIR 2000 SC 230
wherein the Apex Court held as under :
From the definition of the turn
employee in S.2(9) and the definition of term immediate employer
in S. 2(13) it becomes at once clear that if a person is employed
on wages in connection with the work of establishment to which the
act applies and if the establishment is immediate employer of such
a person under whose supervision he has to undertake the work and
can be said to be employer by or through the establishment
concerned, the immediate employer, being such establishment, under
whose supervision or under whose agent’s supervision the employee
works will get covered by the sweep of the Act. The term
Principal Employer is found in sub sec. (17) of section 2. A
conjoint reading of sub-sec, (9), (13) and (17) 9f section 2,
therefore, clearly shows that if the head office or the registered
office of the establishment is controlling it branch office, the
employee working in its branch can obviously be treated to be an
employee working under the supervision of the principal employer or
his agent. Consequently, once such principal employer’s having head
office in one state of Andhra Pradesh is covered by the seep of
the Act, automatically employees working in its branches, may be
any where in India, including the branch at Bombay would get
covered by the seep of the Act. That would be the direct consequence
of the applicability of Act by the notification of the appropriate
government, namely the Andhra Pradesh Government under section 1(5)
of the Act. The provisions of Section 38, 40, regns.10-B, 226 and
the prescribed forms make the statutory scheme further clear that
the employees of branch office of an establishment would get covered
by the beneficial sweep of the Act.
5.2 In
above view of the matter, I am of the opinion that the Court below
has committed an error in passing the impugned judgement and order
and ought to have held that since, the head office of the opponent
No. 1 is covered by the said Act in the year 1975, the employees of
branch office of the opponent No. 1 would also get covered by the
beneficial sweep of the said Act. Hence, the appeal deserves to be
allowed.
11. Therefore
it was settled that the petitioner was liable to make payment for the
period between 30th
march 1975 and 31st
March 1988. Since the Head office of the petitioner has been covered
from 1975 under the provisions of the Act, the stand of the
respondent Corporation was to cover the present petitioner branch and
accordingly the Corporation issued various notices intimating the
petitioner to comply with the provisions of ESI Act with direction
to start depositing the amount of contribution in ESI Corporation.
However, the petitioner did not follow the provisions of law and had
also not responded to various notices issued to the petitioner from
time to time. It also appears
that the petitioner company has not been maintaining records as per
section 40 read with Regulation 39 of the ESI Act and even the
Officers of the respondent Corporation were not allowed to inspect
the record. It is under these circumstances that the prohibitory
order to recover the amount came to be issued.
Section
39 of the Act reads as under:
39. Contribution (1) The contributions
payable under this Act in respect tof an employee shall comprise
contribution payable by the employer (hereinafter referred to as the
employer s contribution) and contribution payable by the employee
(hereinafter referred to as the employee s contribution and
shall be paid to the corporation.
[2] &&
[3] &&..
[4] &&..
[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 percent 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 be exceed the lending rate of
interest charged by any schedule bank.
[b] Any interest recoverable under
clause (a) may be recovered as an arrear of land revenue or under
section 45-C to section 51-I .
13. Regulation
31-A reads as under:
31-a Interest on contribution due, but
not paid in time: – An employer fails to pay contributions within the
period specified in Regulation 31 shall be liable to pay simple
interest at the rate of twelve per cent per annum in respect of each
day of default or delay in payment of contributions.
Regulation 31-B Recovery of interest
Any interest payable under Regulation 31-A may be recovered as an
arrear of land revenue or under section 45-C to section 45-I of the
Act.
14. In
view of the judgement passed by this Court in First Appeal No.
No.1302/96 the provisions of ESI Act are applicable to the Head
Office as well as the present petitioner from the date of 30th
March 1975. Therefore the respondent Corporation was justified in
demanding the amount of contribution from the period from 30.3.1975
to 31.3.1988 with interest. It is by now well settled by the Apex
Court that interest amount statutorily payable cannot be waived.
It is required to be noted that the respondent Corporation has
carried out final assessment and accordingly petitioner was issued
with 45A notice to recover the statutory dues. Therefore it is
incorrect to say that the demand of the Respondent Corporation was
solely on the basis of ad hoc assessment. Further, merely because the
petitioner was pursuing the remedy, it cannot be said that the
petitioner is absolved of making interest on the amount in question.
Charging of interest is as per the provisions of the Act and it
cannot be waived even though the party was pursuing a remedy and
ultimately failed in the litigation.
13. In
the premises aforesaid, I do not find any merits in the petition. The
petition is, therefore, dismissed. Rule is discharged with no order
as to costs.
(K.S.
Jhaveri,J.)
mary//
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