Kerala High Court
Regional Director, E.S.I. Corporation vs Pradeepkumar on 11 August, 2005
Equivalent citations: 2005(4)KLT584, (2006)ILLJ544KER
Author: J.B. Koshy
Bench: J.B. Koshy
JUDGMENT J.B. Koshy, J.
1. Whether damages imposed under Section 85B of the Employees' State Insurance Act, 1948 (in short 'the Act') on the transferer employer can be recovered from the transferee in view of Section 93A, is the issue to be decided in this case. M/s. Calicut Modern Spinning and Weaving Mills Ltd., (hereinafter referred to as 'the establishment'), covered under the Act was purchased by M/s. K.K. Patodia and Associates with effect from 11-12-1989. Before the purchase there were delayed payment of contribution. By orders Ext.B2 dated 21-12-1987, Ext.B4 dated 20-5-1988 and Ext.B20 dated 2-6-1989, the E.S.I. Corporation issued damages under Section 85B of the Act for the period 4/87 to 11/88 as there was delay in payment of contribution. The above orders were passed after notice and complying with all formalities. The above damages were imposed apart from statutory interest payable for delay in payment of contribution. When arrears of contribution with interest and damages were demanded, respondent approached the Employees Insurance Court. The E.I. Court held that arrears of contribution, if any, and statutory interest can be realised from the transferee employer and damages being penal proceedings cannot be realised from the transferee employer. That being a penalty has to be realised from the transferor employer by revenue recovery or any other means.
2. It is true that power to impose and recover damages under Section 85B for nonpayment of contribution in time is a penal provision. Chapter VII of the Act provides various types of penalties. Sections 85 and 85A provide punishments for non-payment of contribution. Apart from the imposition of punishment of imprisonment and fine under Sections 85 and 85A, Section 85B entitles the Corporation to impose damages. Section 85B reads as follows:
"85B. Power to recover damages:--
(1) Where an employer fails to pay the amount due in respect of any contribution or any other amount payable under this Act, the Corporation may recover from the employer by way of penalty such damages not exceeding the amount of arrears as may be specified in the regulations:
Provided that before recovering such damages, the employer shall be given a reasonable opportunity of being heard:
Provided further that the Corporation may reduce or waive the damages recoverable under this section in relation to an establishment which is a sick industrial company in respect of which a scheme for rehabilitation has been sanctioned by the Board for Industrial and Financial Reconstruction established under Section 4 of the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986), subject to such terms and conditions as may be specified in regulations.
(2) Any damages recoverable under Sub-section (1) may be recovered as an arrear of land revenue or under Section 45C to Section 451,"
There is no dispute for the proposition that imposition of damages is a penal proceedings. The section itself says it as a 'penalty'. It can be imposed over and above the levy of interest payable under Section 68. Imposition of damages is penal in nature and it can be imposed only by speaking order as held by the Apex Court in Presolite Chemicals Ltd. v. Ram Der, 1994 Supp. (3) SCC 690. It is true that for the default of payment of contribution by the previous employer, transferee employee cannot be imprisoned. But, damages computed and imposed is a financial liability on the transferor. Section 93A reads as follows:
"93A. 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 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."
It shows that any amount due at the time of transfer can be recovered from the transferee employer. Both transferor employer and transferee employer are jointly and severally liable. Merely because damages are penal in nature, it cannot be excluded from the words "any other amount payable under the Act in respect of the periods upto the date of transfer" and can be recovered jointly and severally from the transferee and/or trnasferor, though the liability of the transferee is limited to the value of the transferred assets. In view of the clear provision of Section 93A, damages already computed in terms of money, imposed on the transferor employer can be recovered from the transferee employer also. Hence, the impugned order of the Employees Insurance Court in so far as it holds that the damages cannot be recovered from the transferee employer is set aside. Appeal allowed.