PAYMENT OF INTEREST ON THE AMOUNT OF CONTRIBUTION - ESI

The respondent society was initially covered under Section 1(4) of the ESI Act with effect from 01.09.1974. The respondent made a representation against this coverage and the appellant corporation reconsidered the representation and reviewed its decision to cover the establishment of the respondent society with effect from 01.09.1974 and covered the establishment of the society with effect from 22.11.1976 under Section 1(5) of the ESI Act. 

The appellant had issued notice dated 26.07.1984 to the respondent demanding contribution amounting to Rs.85,564/- for the period from November 1976 to August 1980. This notice was challenged by the respondent by filing an application before the ESI Court. The appellant resisted the application and the Industrial Court was pleased to pass an order on 02.03.2006 partially allowing the application and holding the society as covered under the ESI Act and also liable for making contribution as demanded. However, the Tribunal disallowed the appellant's claim towards interest and damages. The appellant filed the present appeal challenging the rejection of its claim towards interest and damages.At the time of admission of the appeal, two substantial questions of law were framed as  follows :-

1. Whether the corporation could not have demanded interest and damages from the respondent after passing the stay order by the ESI Court ?

2. Whether it could be said that the amount paid by the respondent towards contribution was secured by furnishing bank guarantee especially when the respondent has not deposited the same before the ESI Court. The necessary question before the High Court in the present appeal was whether the liability of the respondent to pay interest and damages stands absolved on the trial Court passing the order of stay and thereafter the respondent furnishing bank guarantee. 

The High Court observed that merely because stay order was granted to the execution of the demand notice, it cannot absolve the liability to pay the interest and damages which is a statutory liability. Even accepting that the Industrial Court has directed the respondent and the respondent has accordingly furnished 100% bank guarantee, it was only to secure the amount of contribution which was due from the respondent but in no way it can relieve the respondent from its statutory liability to pay interest and damages. 

The High Court further observed that things would have been different if the amount of contribution deposited in the Court was invested in any fixed deposit receipt which could have fetched interest and then one could have said that there was some reasoning given by the Court as the appellant cannot be entitled for double recovery of interest and damages. In this view of the matter, the High Court allowed the appeal and directed the respondent to pay damages of Rs.3809/- and interest of Rs.1207/-. Accordingly the appeal was allowed.- 

Employees State Insurance Corporation vs. Vidarbha Co- operative Marketing Society Ltd. H.C.Bom. 2017.

THE EMPLOYEES' STATE INSURANCE ACT, 1948

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