Karnataka High Court
Regional Director, Employees' State ... vs Manjog Home And Organisation on 31 July, 1995
Equivalent citations: [1996(74)FLR2561], ILR1995KAR3430, 1996(1)KARLJ80, (1996)IILLJ286KANT
JUDGMENT Venkataraman, J.
1. In all these Appeals, the short question that arises for consideration is as to whether interest at 12% per annum is payable in respect of contributions which the employers are found to be due after the amendment to Section 39 of the ESI Act coming into force.
2. In all these Appeals, on the applications made by the employers under Section 75 of the Act, the ESI Court after determining the contribution payable by the employers has passed an order directing the employer/respondents to pay that amount together with interest at 6% per annum from the due date to the date of payment. Section 39(5) of the ESI Act was amended by Act 29 of 1989 with effect from 20-10-1989. The amended Section reads as hereunder :-
"Section 39(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".
3. The main contention urged on behalf of the appellant is that from the date the amendment came into force, the respondents are liable to pay interest at 12% per annum on the outstanding amount and that the lower Court has not taken note of the amended provision while awarding interest at 6% upto the date of payment. Sri Gururajan, the learned Counsel for the appellant fairly submitted that the enhanced rate of interest cannot be claimed for a period prior to the amendment coming into force.
4. The learned Counsel appearing for the respondents/employers contended that as the charging period in respect of which the contribution is payable is prior to the date on which the amendment came into force, the interest will have to be awarded only at the rate which was prevailing at that period and not at the amended rate. Another ground urged is that the Regional Director/Deputy Director of the appellant/Corporation has himself in his order directed the respondents to pay the contribution together with interest of 6% per annum, that he Corporation had not filed any appeal challenging that order and that as such the Court could not have awarded interest at the rate higher than the rate which had been levied by the Regional Director/Deputy Director.
5. Section 39 of the Act makes provision for levy of interest on the contribution which has become due and which has not been paid. A defaulter in payment of the contribution cannot claim any right to pay interest at a particular rate. Interest is payable by virtue of the statutory provision which prescribes the rate. When the statute which prescribes the rate at which interest is payable is amended, it follows that from the date of amendment interest is payable in respect of all contributions which remain unpaid till that date, at the amended rate. The contention that in respect of the amount due for a charging period prior to the amendment coming into force, the old rate of interest itself has to be levied till the payment is made is untenable.
6. When the Regional Director or Deputy Director passed the order levying interest at 6% that was the rate prescribed under the statute at that time. There was no question of the Corporation filing any appeal against that order. Once the respondents challenged that order before the ESI Court, the order got merged with the order passed by the ESI Court. The Court while passing the order ought to have considered the amended provision regarding levy of interest. Section 39(5) does not give any discretion either to the authority or to the Court to levy interest at the rate lesser than 12% after the amendment came into force. As such the Court could not have awarded interest only at 6% even for a period after the coming into force of the amended Act. In all cases where contribution which has become due has remained unpaid, then interest will have to be paid at the statutory rate till the amount is paid. If the rate as provided under the statute was 6% upto 20.10.1989 and thereafter if it has become 12% then the interest will have to be paid at 6% from the date of the default upto 20.10.1989 and thereafter at 12%. If the contributions continue to remain unpaid and if the statute is again changed and higher rate is prescribed then from the date such higher rate comes into force they may have to pay even at the rate. As such in all these Appeals the order of the Court will have to be modified with regard to the rate of Interest.
7. For the above reasons, these Appeals are allowed in part and the orders of the lower Court are modified by awarding interest at the rate of 6% per annum from the date of default upto 20.10.1989 and at 12% p. a. from 20.10.1989 onwards till payment. It is made clear that before the payment is made if the rate of interest is varied by amendment of the statute, then the respondents would be liable to pay the interest at the varied rate from the date on which such variation would come into force on the amount remaining unpaid.