Karnataka High Court
M/S St.Johns Medical College vs The Director on 10 September, 2013
Author: Ram Mohan Reddy
Bench: Ram Mohan Reddy
1
W.P.3088/13
®
IN THE HIGH COURT OF KARNATAKA AT BANGALORE
DATED THIS THE 10TH DAY OF SEPTEMBER 2013
BEFORE
THE HON'BLE MR. JUSTICE RAM MOHAN REDDY
WRIT PETITION NO. 3088 OF 2013 (L-ESI)
BETWEEN:
M/S. ST. JOHN'S MEDICAL COLLEGE HOSPITAL
SARJAPUR ROAD
BANGALORE - 560 034
REP.BY ITS ASSOCIATE DIRECTOR
FR. IMMANUEL RAJ.
... PETITIONER
(BY SRI. S N MURTHY, AV.)
AND :
1 THE DIRECTOR
EMPLOYEES' STATE INSURANCE CORPORATION
SUB-REGIONAL OFFICE
BANGALORE SOUTH (BOMMASANDRA)
NO. 23, 9TH B & C MAIN
BTM RING ROAD
OPP. INDIAN OIL PETROL BUNK
BANGALORE - 560 029.
2 THE RECOVERY OFFICER
EMPLOYEES' STATE INSURANCE CORPORATION
SUB-REGIONAL OFFICE
BANGALORE SOUTH (BOMMASANDRA)
NO. 23, 9TH B & C MAIN
BTM RING ROAD
OPP. INDIAN OIL PETROL BUNK
BANGALORE - 560029. ... RESPONDENTS
(BY SRI. V NARASIMHA HOLLA, ADVOCATE)
2
W.P.3088/13
THIS WRIT PETITION IS FILED UNDER ARTICLE 226 OF
CONSTITUTION OF INDIA PRAYING TO QUASH THE IMPUGNED ORDERS
DATED 3.09.2012 AND 4.12.2012 PASSED BY THE FIRST RESPONDENT
CLAIMING INTEREST OF RS. 7,51,499/- AT ANNEXURE-A & B; AND ETC.
THIS PETITION IS COMING ON FOR PRL. HEARING IN 'B'
GROUP, THIS DAY THE COURT MADE THE FOLLOWING:
ORDER
Petitioner - an establishment covered under the Employees' State Insurance Corporation Act, 1948, aggrieved by the order dated 3.9.2012 Annexure-A of the Deputy Director, Employees' State Insurance Corporation, determining Rs.7,51,499/- as interest @ 12% per annum up to 31.8.1994, @ 15% per annum from 1.9.1994 upto 30.9.2005 and @ 12% per annum from 1.10.2005 onwards for the delay in payment of contribution, followed by the demand notice dated 4.12.2012 Annexure-B, has presented this petition.
2. Petition is opposed by filing statement of objections, interalia, contending that, in the light of the judgment of the Apex Court in M/s.Goetze (India) Ltd. -vs- Employees' State Insurance Corporation1, the order and demand notice impugned are sustainable and that there is no necessity to issue a show cause notice to the petitioner before determining the amount due as 1 AIR 2008 SC 3122 3 W.P.3088/13 interest. Such a due, it is stated, is contemplated under sub- section (5) of Section 39 of the Employees' State Insurance Act, 1948 (for short 'Act'). In addition, it is stated that the petitioner has an alternative and efficacious remedy of filing an application under Section 75 of the Act, calling in question the order impugned before the Employees' State Insurance Court.
3. Sri.S.N.Murthy, learned Senior Counsel for the petitioner submits that the order Annexure-A suffers from violation of the principles of natural justice i.e., Audi Alterem Partem, in not extending an opportunity of hearing to the petitioner before determination and notice of demand. Learned Senior Counsel submits that if the statute is silent over extending an opportunity of hearing, principles of natural justice, must be deemed to be read into the statute and therefore, the authority determining the quantum of money to be paid towards interest under sub-section (5) of Section 39 of the Act, is bound by the principles of natural justice to issue notice to the petitioner.
4. Per contra, Sri.Narasimha Holla, learned Counsel for the respondent - Insurance Corporation submits that, in the light of sub-section (5) of Section 39 of the Act, nothing more is necessary 4 W.P.3088/13 except to compute the amount of interest on the basis of admitted fact of delay in remitting the contribution by the petitioner. Learned Counsel places reliance upon the decision of the Apex Court in M/s.Goetze (India) Ltd. (supra).
5. Having heard the learned Counsel for the parties, perused the pleadings. The only question for decision making is:-
"Whether the Deputy Director of the Employees' State Insurance Corporation was justified in determining Rs.7,51,499/- as interest to be paid by the petitioner for delay in payment of contribution, without extending an opportunity of hearing to the petitioner by order dated 3.9.2012 Annexure-A and sequentially whether the notice of demand Annexure-B, is sustainable?"
6. Facts not in dispute are the jurisdiction of the respondent - authority to impose and recover interest for delay in remittance of contribution. Sub-section (5) of Section 39 of the Act reads thus:
"39. Contributions.- (1). . . . . .
.....
(5) (a) If any contribution payable under this Act is not paid by the principal employer in 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 5 W.P.3088/13 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 45C to section 45-I."
7. The aforesaid section undoubtedly makes the principal employer liable to pay simple interest @ 12% per annum or at such higher rate as may be specified in the regulations till the date of its actual payment, if any contribution payable under the Act is not paid on the date on which such contribution had become due. The section is indicative of an adjudication over the determination of quantum of money towards interest liable to be paid by the principal employer for the delay in remittance of contribution. It is needless to state that if there is even an element of adjudication, there is a need to follow the principles of natural justice by issuing a notice calling upon the person to be aggrieved to have his say.
"Aggrieved must be appraised" is the constitutional creed flowing from the mandate of Article 14 of the Constitution of India.
Therefore, it is impermissible to accept the submission of the learned counsel for the respondent that the determination of simple interest under Sub-section (5) of Section 39 of the Act, on delay in remitting contribution is without an adjudication. It is necessary to 6 W.P.3088/13 point out that, simple interest is to be calculated on the actual number of days of delay in the remittance of contribution.
8. Regard being had to the fact that calculation of interest is from the year 1994 upto 10.10.2005 and onwards, as indicated in the order Annexure - A, nevertheless, on the reverse page of the order, in a tabular column, is indicated the wage period from March 2011 to March 2012 and the number of days' delay in the remittance of contribution. Though the delay is during the wage period March 2011 to March 2012, nevertheless, the demand for payment of Rs.7,51,499/- is on the basis of 12% per annum upto 31.8.1994, @ 15% per annum from 1.9.1994 upto 30.9.2005 and @ 12% per annum from 1.10.2005 onwards. This is yet another reason why the authority, who passed the order Annexure-A, ought to have extended a reasonable opportunity of hearing to the petitioner, who could have put forth the plea over the calculation of interest on the delayed remittance of contribution.
9. In M/s.Goetze's case (supra), the Apex Court observed that, controversy brought before it was over the delay in making the payment of contribution leading to the Corporation issuing notices and an order under Section 45-A of the Act, which was 7 W.P.3088/13 challenged before the E.S.I.Court under Section 75 of the Act and the principal employer obtained an interim stay, while during its pendency, on a re-verification, the quantum payable was worked out. It was held that the liability to pay interest is statutory and there is no power of waiver, hence no question of compromise or settlement. In my considered opinion, the decision of the Apex Court has no application to the facts and circumstances of this case.
10. In the instant case, the respondent - ESI Corporation in its statement of objections indicated the reasons as to why the principles of natural justice is inapplicable. It is elsewhere said that if there is a power to decide and determine to the prejudice of a person, duty to act judiciously is implicit in exercise of such power. If the essentials of justice be ignored and an order to the prejudice of a person is made, the order is a "Nullity'. Natural justice is an alternative name for common sense justice. Natural justice are not codified cannons but principles ingrained into the conscious of a man.
11. In Mohinder Singh Gill -v- The Chief Election 8 W.P.3088/13 Commissioner, New Delhi & others2, at paragraph-43, page 870, the Apex Court observed thus:
"43. Indeed, natural justice is a pervasive facet of secular law where a spiritual touch enlivens legislation, administration and adjudication, to make fairness a creed of life.xxxxxxxxxx "
At paragraph-65, page-876, the Apex Court observed thus:
"65. . . . . A civil right being adversely affected is a sine qua non for the invocation of the audi alteram partem rule.xxxxxxxx."
At paragraph-75, page-881, the Apex Court further observed thus:
"75. Fair hearing is thus a postulate of decision making cancelling a poll, although fair abridgement of that process is permissible. It can be fair without the rules of evidence or forms of trial. It cannot be fair if appraising the affected and appraising the representations is absent. The philosophy behind natural justice is, in one sense participatory justice in the process of democratic rule of law."
12. In Sangram Singh -vs- Election Tribunal, Kotah and 2 AIR 1978 SC 851 9 W.P.3088/13 Another3, the Apex Court observed thus:
"Our laws of procedure are grounded on a principle of natural justice which requires that men should not be condemned unheard, that decisions should not be reached behind their backs, that proceedings that affect their lives and property should not continue in their absence and that they should not be precluded from participating in them."
13. In The State of Maharashtra and another -vs- The Jalgaon Municipal Council and others4, at paragraph-30, the Apex Court observed thus:
"30. It is a fundamental principle of fair hearing incorporated in the doctrine of natural justice and as a rule of universal obligation that all administrative acts or decisions affecting rights of individuals must comply with the principles of natural justice and the person or persons sought to be affected adversely must be afforded not only an opportunity of hearing but a fair opportunity of hearing. The State must act fairly just the same as anyone else legitimately expected to do and where the State action fails to satisfy the test it is liable to be struck down by the Courts in exercise of their judicial review jurisdiction.xxxxx"
14. In Kishor Singh Ravinder Dev etc., -vs- State of Rajasthan5 at paragraph-3, the Apex Court observed thus:
3 AIR 1955 SC 425 4 AIR 2003 SC 1659 5 AIR 1981 SC 625 10 W.P.3088/13 "Justice being injustice, it is necessary that the writ must right the wrong forthwith or must stand self-
condemned as make-believe, since justice wherever would be in jeopardy or freedom is in fetters, the court is not non-aligned and acts with sensitive speed."
15. In Haryana Financial Corporation -v- Jagdamba Oil Mills6, the Apex Court observed thus:
The concept of obligation of admission - authorities to act fairly was evolved to ensure Rule of law and to prevent the failure of justice. Doctrine of fairness is complementary to principles of natural justice which quasi judicial authorities are bound to observe."
16. In Central Inland Water Transport Corporation -v- Brojo Nath Ganguly7, the Apex Court observed thus:
"Presumption in favour of high officers that they would not act arbitrarily or capriciously would not prevail if provisions do not enjoin them to observe principles of natural justice while taking adverse action."
17. In Sahar India (Firm) -v- Commissioner of Income Tax & others8, Their Lordships of the Apex Court observed thus:
6 (2002) 3 SCC 496 7 AIR 1986 SC 1571 8 (2008)14 SCC 151 11 W.P.3088/13 "The concept of natural justice . The expression 'civil consequences' encompasses infraction of not merely property or personal rights but of civil liberties, material deprivation and non-pecuniary damages. In its wide umbrella comes everything that affects a citizen in his civil life."
18. Although learned Counsel for the respondent - Corporation would in many words submit that the doctrine of "useless formality" theory would be applicable and there would be no necessity to issue notice to the petitioner before determining the amount of interest payable under sub-section (5) of Section 39 of the Act, is unacceptable. It is no doubt true that there are several opinions of the Apex Court over exclusion of audi alterem partem rule, indicating that it would apply to cases where nothing unfair can be inferred by an opportunity of hearing to meet a case. However, a note of caution of the learned Judges is that, the Rule, cannot be applied to defeat the ends of justice or to make the law "lifeless" or "absurd" and self-defeating or completely contrary to common sense situation and that the Rule may be inapplicable in very exceptional circumstances where compulsive necessity so demands. Flexibility and the nature and scope of hearing by excluding natural justice is said to be under the following exceptional circumstances:
12W.P.3088/13
(i) need to take urgent action for safeguarding public health or safety or public interest;
(ii) the absence of legitimate expectations;
(iii) by refusal of remedies in discretion;
(iv) doctrine of pleasure such as the power to dismiss an employee at pleasure;
(v) express legislation.
There is also a situation which Prof.Wade and Forsyth terms as "dubious doctrine" that right a fair hearing may stand excluded where the court forms an opinion that a hearing would make no difference.
19. It is also stated that utter caution is needed before bringing the last exception into play. It is useful to extract the words deployed by the learned Judges of the Apex Court in Kishor Singh (supra):
"Injustice anywhere is a threat to justice everywhere. We are caught in an inescapable network of mutuality, tied in a single garment of destiny. Whatever affects one directly affects all indirectly."
20. Having regard to the aforesaid poignant observation of the Apex Court and applying the same to the facts of this case, 13 W.P.3088/13 more appropriately the infirmities noticed in the order Annexure-A over calculation of the interest payable for the delay in remittance of the contribution by the principal employer, there can be no more doubt in my mind that the order suffers from violation of principles of natural justice.
In the result, this petition is allowed. The order Annexure-A and the demand notice Annexure-B are quashed. The respondent is at liberty to continue the proceeding initiated under sub-section (5) of Section 39 of the E.S.I.Act, however, only after issuing notice to the petitioner. It is brought to the notice of the court that the respondent - E.S.I. Corporation has since recovered the amount demanded in Annexure- B notice, and if that is so, it is directed to be retained by the respondent until conclusion of the proceeding. It is needless to state that, if the petitioner were to succeed partly or otherwise, is entitled to a refund accordingly, immediately on the passing of the order.
Sd/-
JUDGE.
KNM/