Karnataka High Court
H.M.T. Limited, Watch Factory Iv vs Employees' State Insurance ... on 21 January, 1998
Equivalent citations: [1998(79)FLR511], (1998)ILLJ841KANT
Author: G. Patri Basavana Goud
Bench: G. Patri Basavana Goud
ORDER G. Patri Basavana Goud, J.
1. At Annexure-E dated December 19, 1996, the 1st respondent- ESI Corporation has demanded a sum of Rs. 64,104/- by way of interest for nonpayment of contributions by the petitioner employer in time. At Annexure-G, the 3rd respondent-Recovery Officer has issued notice to the petitioner-employer for recovery of the above said amount. In these writ petitions under Article 226 of the Constitution, the petitioner employer seeks quashing of the said two annexures.
2. In exercise of the power conferred by Section 2(9)(iii)(b) of the Employees' State Insurance Act, 1948, ('Act' for short), the State Government issued a Notification dated March 27, 1992 enhancing wage limit coverage of the employees under the Act from Rs. 1,600/- to Rs. 3,000/-. This Notification was challenged by the 2nd respondent-Union of the Employees of the petitioner in Writ Petition No. 15030/92. By an order dated April 30, 1992 at Annexure-A, the learned single Judge before whom the said writ petition came up, stayed the operation of the said Notification dated March 27, 1992, and also directed the respondents therein including the present petitioner as well as the present 1st respondent-ESI Corporation, to forbear from giving effect to the said Notification and further directed the present petitioner not to proceed to deduct contributions towards ESI Scheme from the salary of the employees. By the order dated July 15, 1992 at Annexure-B the stay was continued until further orders. The said writ petition was disposed of by the learned Single Judge on August 5, 1992 following the order in the connected Writ Petition No. 14532/92 (Workmen of Bharat Heavy Electricals Ltd. v. Union of India (1993-III-LLJ-(Suppl.)-246)(Kant).
While disposing of the above said main writ petition (supra) the learned single Judge, ex tending the doctrine, that the 'act of the Court shall prejudice no man' , restrained the ESI Corporation from recovering the amounts from the employers in respect of employees whose monthly wages are Rs. 1600-3000, up to the date of the order in the said writ petition, pro vided the said direction would not apply in case of recovery already effected in respect of some employees.
3. In so far as the above said direction of the learned Single Judge which in effect postponed the commencement of the operation of the notification, the operation of which had been upheld by the learned Single Judge up to the date of the order in the writ petition, the ESI Corporation preferred Writ Appeals, all of which came to be disposed of by the Division Bench of this Court on July 14, 1994 holding that, while affirming the decision of the learned Single Judge regarding the validity of the concerned notification, postponement of the enforcement of the said Notification is erroneous and hence the said observation of the learned Single Judge was set aside following the decision of the Supreme Court in Civil Appeal Nos. 5527-287/93 disposed of on October 11, 1993. The learned Single Judge, in the writ petitions filed by the 2nd respondent-Employees Union and by the other Employees Unions, having upheld the validity of the Notification as per the main order at , the said order was taken up in appeal by the Employees Unions. The Division Bench of this Court dismissed the said appeals, affirming the decision of the learned single Judge which had upheld the validity of the Notification concerned. This was in Workmen of Bharat Electronics Ltd. v. Employees' State Insurance Corporation (1996-II-LLJ-341)(Kant) disposed of on July 11, 1995. It needs to be mentioned that, after the learned Single Judge disposed of the concerned writ petitions and while the appeals were pending before the Division Bench, even the Division Bench had stayed the operation of the Notification concerned vide Annexure-D. Thus it was only on July 11, 1995 that the stay of operation of the Notification, as had been directed by the learned Single. Judge and by the Division Bench, came to an end though the Division Bench, as noted earlier, made it amply clear that the Notification came into effect from the date it was meant to be enforced, and not from the date of the learned Single Judge's order as had been held by the learned Single Judge.
4. Once the validity of the Notification was thus upheld and the stay of operation of the said Notification, as had been ordered by the learned Single Judge and by the Division Bench, ceased to hold the field, there remained no obstacle for the obligations on the part of the employer to be met with, both in respect of his contribution as also in respect of employees' contribution. The said obligation was duly met with by the employer making the necessary contribution. Such payment, in course of meeting the said obligation, had to be necessarily after the date of disposal of the appeals by the Division Bench. The 1st respondent-ESI Corporation termed this payment as delayed payment within the meaning of Section 39 of the Act, calling for levying of interest under Sub-section (5) of the said Section 39. Hence, the determination of interest as at Annexure-E and the recovery notice from the 3rd respondent-Recovery Officer as at Annexure-G.
5. The learned counsel for the petitioner-employer submits thus: The petitioner-employer had always been ready and willing to pay his contribution as well as employees' contribution as required under the Act and Regulations, but that any attempt on his part in doing so would have amounted to violation of the stay order initially by the learned Single Judge and later on by the Division Bench that held the field throughout. Sri Kasturi, learned counsel for the petitioner, submits that even though the stay was only with regard to recovery of employees' contribution from their wages, and even though technically, it could be said that there was no bar for the employer to pay employer's contribution even that could not be done for the reason that the learned Single Judge and the Division Bench had stayed the very operation of the Notification and as such, there was no account in respect of which the employer's contribution could have been paid and even the ESI Corporation, could not have received it as otherwise, it would have violated the terms of the stay orders. He thus submits that, it was not a voluntary act on the part of the employer so far as nonpayment of amount due under the Act and Regulations concerned within the time but that it was entirely on account of the stay orders referred to above.
6. The learned counsel for the 1st respondent-ESI Corporation, Sri Papanna challenges the very maintainability of the writ petitions on the ground that this is a question squarely falling within Clause (g) of Sub-section (1) of Section 75 of the Act, to decide which, Employees' Insurance Court has the jurisdiction and, thus, when an alternative remedy is available taking recourse to Article 226 of the Constitution may not be permitted. On merits, Sri Papanna urges that the commencement of the Notification as pointed out by the Supreme Court referred to in the decision of the Division Bench, could not have been postponed, and as such the mere fact that writ petitions were pending and writ appeals were pending, the stay of operation of the Notification holding the field in the meantime, cannot be put forth as a ground for delayed payment particularly when the validity of the Notification came to be upheld both by the learned single Judge and by the Division Bench. Lastly Sri Papanna submits that, this very submission with regard to nonpayment on account of the stay orders had been put forth before the Division Bench in , and the Division Bench had pointedly referred to this argument and had repelled the submission of the learned counsel for the present petitioner-employer and as such, apart from the said decision of the Division Bench operating as resjudicata with regard to this question, the said decision of the Division Bench on this question is also binding on this Court.
7. Section 75(1)(g) of the Act inter alia provides that to decide any question or dispute between the employer and the Corporation in respect of any dues payable or recoverable under the Act, the Employees' Insurance Court would have the jurisdiction. So far as interest claimed under Section 39(5) of the Act, which the employer disputes, as "dues" within the meaning of said Section 75(1)(g) of the Act is concerned, Employees' Insurance Court has the jurisdiction to decide the question that the petitioner has raised herein. To that extent, Shri Papanna, learned counsel for 1st respondent- ESI Corporation, is right. Notwithstanding this availability of alternative remedy, I am of the opinion that in the peculiar facts and circumstances of this case recourse to Article 226 of the Constitution has to be permitted. The entire question revolves around as to whether nonpayment of contributions in time is due to voluntary act on the part of the petitioner-employer or on account of disability that the petitioner suffered due to stay orders of the learned Single Judge and the Division Bench holding the field throughout, which disability could have been overlooked by the employer and contributions paid in time only at the risk of being hauled up for contempt of Court. Apart from this, the question also remained to be seen as to whether, as urged by Sri Papanna for the ESI Corporation, this question had already been dealt with and a decision is taken thereupon by the Division Bench in (1996-II-LLJ-341)(Kant) (supra). This in my opinion, can more appropriately be dealt with by this Court in exercise of its jurisdiction under Article 226 of the Constitution rather than by the Employees' Insurance Court under Section 75(1)(g) of the Act though, as made clear at the very outset, that, to decide a dispute like this, the State Employees' Insurance Court does very much have the jurisdiction and if either of the parties had approached the said Court for resolving this dispute, such approach could have been very much in order. It is for these reasons that the matter is being examined in exercise of the jurisdiction under Article 226 of the Constitution.
8. Sub-section (4) of Section 39 inter alia provides that the contributions payable in respect of each wage period shall fall due on the last day of the wage period. Regulation 31 of the Employees' State Insurance (General) Regulations, 1950 ('Regulations' for short) provides that, an employer who is liable to pay contribution in respect of any employee shall pay those contributions within 21 days of the last day of the calendar month in which the contributions fall due. Proviso thereto is not relevant for the present purpose. Sub-section (5) of Section 39 of the Act, which is material for the present purpose, reads thus:
"(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.
(Clause (b) not necessary for the present purpose) Regulation 31 -A provides that an employer who fails to pay contribution within the period specified in Regulation 31 shall be liable to pay interest at the rate of 12% p.a. in respect of each day of default or delay in payment of contribution. Regulation 31-B inter alia provides that, any interest payable under Regulation 31-A may be recovered as an arrear of land revenue.
Sub-section (1) of Section 40 of the Act provides that, it is the principal employer who shall pay both the employer's contribution and the employees' contribution in respect of every employee, whether directly employed by him or by or through an immediate employer."
9. It is in the light of the above said provisions that the 1st respondent-ESI Corporation has proceeded to recover the interest on the ground that the contributions are not paid in time. Factually, it is true that the contributions are not paid in time. The question is whether the delayed payment, on the facts and in the circumstances of this case, can be said to be failure on the part of the employer to pay within the meaning of Clause (a) of Sub-section (5) of Section 39 of the Act. I have extracted above the relevant portion of the said Clause (a) of Sub-section (5) of the Section 39 of the Act. The applicability of the said provision is where the employer fails to make contributions. If such failure is on account of circumstances beyond his control or if the circumstances make it impossible for the employer to make contributions even if he wanted to do so unless he risks being hauled up for contempt of Court, I am of the opinion that such failure on the part of the employer in making payment in time cannot be called a failure within the meaning of Clause (a) of Sub-section (5) so as to call for levying of interest. As seen from the narration of facts made earlier, a portion of the very Notification having been stayed by the learned Single Judge and the Division Bench, there was no enabling provision at all permitting him to make payments in respect of employees of the wage scale of Rs. 1600-3000 even if he wanted to do so. It is to be remembered that it is not the employer who had questioned the validity of the Notification, but it was the Employees' Union that had approached this Court. The employer had never felt shy of complying with the said Notification. It was the operation of the stay order initially by the learned Single Judge and later on by the Division Bench that made it impossible for the employer to make contributions firstly for the reason that the operation of the Notification itself had been stayed and secondly for the reason that, even if the employer had offered to pay, the ESI Corporation would not have been able to receive it without violating the order of the stay passed by the learned single Judge. It was thus by acts of this Court that the employer was prevented from making contributions in time and not because he did not want to pay the contributions. It is true, the validity of the Notification was eventually upheld and as such, the Notification was stated to have been come into effect from the date it was meant to have been brought into force. Nevertheless, there was no opportunity for the employer at all to make contributions until the date the Division Bench disposed of the appeals, because the stay order held the field throughout. Such delayed payments, for reasons of which the employer could not be held responsible at all, but on the other hand, making payment by him was impossible in the circumstances, cannot be called wilful nonpayment which alone attracted interest in terms of Clause (a) of Sub-section (5) of Section 39 of the Act. I have to, therefore, conclude that the delayed payment concerned herein was not the one that Section 39 (5)(a) contemplated and as such levying of interest as per Annexure-E and proceeding to recover it in the manner as at Annexure-G cannot be legally sustainable.
10. Coming to the submission of Sri. Papanna, learned counsel for 1st respondent-ESI Corporation, that this very question had earlier been dealt with and decided upon by the Division Bench (supra), it is true, the observations of the Division Bench in Paragraph 18 do indicate that this question has been dealt with by the Division Bench. But, if the judgment of the Division Bench as a whole is looked into, it is obvious that, this observation in Paragraph-18 relates to the contentions put forth on behalf of the employers as mentioned in Paragraph-14 of the said judgment. The employer contended that since the operation of the Notification had been stayed during the pendency of the proceedings in the Court, they had continued to provide medical facilities to the employees in accordance with the service conditions, that therefore, they would suffer unnecessary loss and hardship if they have to make the contributions all over again under the Act, that as noticed by the Division Bench, in short, the employers' contended that they should not be made liable for the contribution of the amounts which they have not collected from the employees due to the stay orders, that no act of Court shall prejudice the parties and that the parties are not to be made to suffer on account of delay in disposing of the application filed for vacating the stay orders. It was in this context that the Division Bench observed in Paragraph-18 that the stay order issued pending disposal of the writ petitions had no effect on the obligation of the principal employer to pay contributions as required by Section 40 of the Act. It was then that the employers proceeded to promptly make the payments. The ground urged for seeking exemption from payment for the period during which proceedings were pending before this Court as put forth by the employers, thus, was on account of their having provided medical facilities to the employees in accordance with the service conditions in the meantime. The Division Bench said that, though the fact that the stay operated, that would not absolve the petitioner from meeting with the obligations under Section 40. All that the Division Bench thereby made it clear was that as required by Section 40 of the Act, the employers had to make contributions both in respect of employees' contribution and employer's contribution right from the date the Notification came into force and that there was no excuse for the employers to contend that because stay was operating and because they had provided medical facilities in the meantime in accordance with the service conditions, they were not liable to pay contributions for the said period. This observation of the Division Bench therefore, cannot be referred to contend that the question that has arisen in this proceeding has already been adjudicated upon by the Division Bench in the above said case.
11. Thus, concluding that the nonpayment of contributions in time, on the facts and in the circumstances of this particular case, is not such as to warrant levying of interest within the meaning of Section 39(5)(a) of the Act, I hold that such levying of interest and recovery proceedings initiated in that regard as has been done under Annexures-E and G cannot be legally sustained.
12. Writ Petitions are allowed and Annexures-E and G are quashed.