Karnataka High Court
M/S Sree Ganesar Textile Mills Ltd vs The Asst. Director on 17 April, 2018
Equivalent citations: AIRONLINE 2018 KAR 1734, 2018 (4) AKR 459
Author: K.N.Phaneendra
Bench: K.N. Phaneendra
:1:
IN THE HIGH COURT OF KARNATAKA
DHARWAD BENCH
ON THE 17TH DAY OF APRIL 2018
BEFORE
THE HON'BLE MR. JUSTICE K.N. PHANEENDRA
M.F.A.NO.1237/2010 (ESI)
BETWEEN :
M/S. SREE GANESAR TEXTILE MILLS LTD.,
"JAYALAKSHMI" P.B. ROAD,
DAVANAGERE
REPRESENTED BY ITS
EXECUTIVE ENGINEER,
SRI. A.S. KOTRAPPA (MAJOR)
...APPELLANT
(BY SRI.R.M. KULKARNI, ADV.)
AND:
1. THE ASST. DIRECTOR,
EMPLOYEES' STATE INSURANCE CORPORATION
SARVODAYA CIRCLE,
KESHWAPUR, HUBLI.
2. THE RECOVERY OFFICER
EMPLOYEES' STATE INSURANCE CORPORATION
SARVODAYA CIRCLE,
KESHWAPUR, HUBLI.
...RESPONDENTS
(BY SRI. V.M. SHEELAVANT, ADV. FOR R1
R2- SERVED.)
:2:
THIS APPEAL FILED UNDER SECTION U/S 82(2) OF THE
EMPLOYEE'S STATE INSURANCE ACT, 1948, AGAINST THE
ORDER DATED 17.11.2009 PASSED IN ESI APPLICATION
NO.31/2005 ON THE FILE OF THE EMPLOYEE'S STATE
INSURANCE COURT, HUBLI REJECTING THE E.S.I. APPLICATION
31/2005 FILED BY THE APPLICANT UNDER SECTION 75 OF THE
EMPLOYEES STATE INSURANCE ACT, 19.
THIS APPEAL COMING ON FOR ADMISSION, THIS DAY,
THE COURT DELIVERED THE FOLLOWING:
JUDGMENT
Though these appeals are posted for admission, this court has taken up for final disposal with consent of both the counsel.
2. The appellant is a company incorporated under the provisions of Companies Act and it is a Public Limited Company having its spinning unit at Davanagere. In fact, the appellant company has become sick and due to which, in the year 1987, it was closed and the matter was referred to BIFR, at Delhi for declaring it as a sick industry. The said application was registered in a case No.49/1987. In fact, on 28.09.1997, BIFR sanctioned the scheme as per :3: Annexure-B and ordered for winding up of the appellant company declaring it as a sick Industry.
3. The AAIFR registered an appeal against the said order in appeal No.32/1992 and thereafter, the ESI Corporation has ordered demanding damages under Section 85 of the ESI Act, to the extent of Rs.10,18,890/- and the same was challenged in ESI No.28/1994 before the ESI Court. In fact, the ESI Court has allowed the said application No.28/1994 and set aside the order challenged therein only to the extent of payment of damages vide orders dated 09.08.1999.
4. In the year 1995, the approved scheme was formulated, fixing the liability of payment of contribution towards ESI and it was agreed upon the by parties before BIFR, that, and demanding of the interest by the ESI Corporation for the delayed payment was waived, but in spite of that, the respondents demanded for the same, the said order was challenged before ESI Court in application :4: No.2/1995. The interest on the delayed payment was demanded to the tune of Rs.4,92,601/-. The ESI Court on the above said application vide orders dated 10.08.1999 allowed the said application filed by the appellant and quashing the interest order passed by the ESI Corporation.
5. Being aggrieved by the same, the Corporation has filed an appeal in MFA No.4891/1999 before the Division Bench of this Court and the Division Bench of this Court up held the order passed by the ESI Court in ESI Appeal No.2/1995. But further observed that it would be desirable in fitness of things to hear the appellant before imposing the interest on the delayed payment. The respondent Corporation issued notice proposing to impose interest on the delayed payment, contrary to the accepted and sanctioned scheme by BIFR vide notice dated 27.04.2000 and imposed interest of Rs.4,92,601/- as per Annexure-E.
6. On 14.02.2002, the appellant being aggrieved by the notice dated 27.04.2000 Annexure-E filed :5: application before the BIFR. The respondent took initiative to recover the said amount by means of recovery proceedings, therefore challenging the recovery proceedings, the appellant herein filed an application in No.31/2005 before the ESI Court and after hearing the parties, the ESI Court has rejected the said application with reference to the demand of interest of Rs.4,92,601/-. Being aggrieved by the said order, the present appeal is filed.
7. The learned counsel for the appellant strenuously contends before this court that, the BIFR and as well as, as per Annexure-B, the Appellate Authority for Industrial and Financial Reconstruction (AAIFR), New Delhi have formulated the scheme and in the said scheme, it is specifically stated at scheme No.3, reliefs and concessions, that have been granted to the appellant. Particularly, the learned counsel drawn my attention with reference to reliefs granted against Central Government, the said reliefs are as follows;
:6:
Central Government
i) To agree receipt of arrear dues of PF and ESI
at Rs.7.83 lakhs and Rs.3.27 lakhs
respectively over a period of 3 years.
ii) To waive the damages and interest levied on
late payment as per the provision of Section 85B and 77 (1A) of the Employees State Insurance Act, 1948.
iii) To waive interest and damages on the late payment of PF arrears.
8. Therefore, basing on this particular order against the Central Government passed, particularly waiving of the damages and the interest levied on the delayed payment as per the provisions of Section 85B and 77(1A) of the Employees' State Insurance Act, 1948. The appellant prayed before the ESI Court for waiving of the interest imposed on the delayed payment.
9. Per contra, the learned counsel for the respondent submits that Section 39(5) (a) is a statutory mandatory provision wherein, neither the ESI nor any :7: party can accede for waiving of any interest for the delayed payment. It is a statutory empowerment of the ESI to recover the said interest. Further he submitted that this Court in a decision reported in LAWS (KAR) 2003 5 16 between ESI Corporation, Sub-Regional Office, Hubli Vs. A.P.S Star Industries Limited, Dharwad. Wherein this Court at Paragraph No.12 has categorically held that;
"The ESI Act is a beneficial piece of social security legislation and it is also held that, it cannot be said by any stretch of imagination that simply because an establishment having become a sick unit is declared so far BIFR under Sick Industrial Companies Act, it is exempted from payment of contribution or, that it is not liable to pay the contribution fallen due under the Act. So also, pendency of an industrial dispute for conciliation before the Assistant Labour Conciliation Officer, does not ipso facto prevents/ prohibits the corporation from passing an order under Section 45-A of the Act more so when proceedings came to be initiated after order was passed under Sick Industrial Companies Act declaring the unit as sick unit.":8:
10. In view of the above, even the ESI has no jurisdiction to waive the interest or reduce the interest. But on the other hand mandatory provision under Section 39(5) imposes the responsibility of the employer to make the contribution within time, if not, he shall be liable to pay interest at the rate of 12% pa. The said provision Section 39(5)(a) of the Employees' State Insurance Act, 1948 reads as follows;
39. Contributions.-
(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.
11. On plain reading of the said section, it is mandatory in nature the levying of the interest is the :9: mandate of statute and the ESI Corporation is a Statutory Body which requires to fallow statutory laws.
12. The learned counsel has not brought to the notice of this court that, in the Employees' State Insurance Act, 1948 itself, provides any relaxation so far as this interest clause is concerned or any empowerment to the ESI Corporation either to waive or reduce the interest at the rate of interest under any of the provision of law. In the absence of that, the compromise or the scheme between the parties will not come to the help of the appellant so as to seek for cancellation or waiving of the interest on the delayed payment.
13. The above said provision under Section 39(5) also further clarifies that any interest recoverable under clause (A) shall be recovered as if a land revenue or under Section 45-C to Section 45-I. Therefore, the mandatory provision as contained in the Employees' State Insurance Act, 1948 cannot be nullified by the judgment of any court : 10 : or by the ESI Corporation itself, by reducing the interest.
Therefore, the ESI Court at paragraph 12 has rightly come to the conclusion that as per the decision of the High Court as noted above even if the appellant's industry is declared as sick industry and any scheme is formulated and under the said scheme the interest cannot be waive even by consent of the parties. Because the ESI itself has no jurisdiction either to reduce the interest or to waive the interest. As such the ESI Court has rejected the said application filed by the appellant herein.
14. Under the above said circumstances, I also don't find any strong reasons to deviate from the opinion expressed by the ESI Court. Hence, the appeal is devoid of merits and the same is liable to be dismissed accordingly dismissed.
SD/-
JUDGE MNS/1-3 EM/4-end.