Back
2006 Supreme(Bom) 796
IN THE HIGH COURT OF BOMBAY
MR. JUSTICE ABHAY S. OKA
Regional Director, Employees State Insurance Corporation – Appellant
Versus
Hotel Suresh – Respondents
FIrst Appeal Nos. 2284 and 2283/2005
Decided on : 05-05-2006
For Appellants: H. V. Mehta
For Respondents: C.R. Naidu (i/b) C.R. Naidu & Co
The prevailing rate of interest at the time of default should be applied, and retrospective effect cannot be given to a penal provision of payment of interest.
Headnote:
Employees' State Insurance Act - Recovery of contribution - Section 45-A, Section 75, Section 39(5)(a) - The court held that the demand made by the Appellant was legal and valid. The only contention raised by the Appellant was regarding the rate of interest, which the court found to be in accordance with the prevailing rate provided prior to October 20, 1989. The court dismissed the Appeals.
Fact of the Case:
The Appeals were filed by the Employees' State Insurance Corporation under Section 82 of the Employees' State Insurance Act, 1948, challenging a judgment and order for recovery of contribution against the respondent. The establishment of the respondent was found covered for the purposes of the Act for a specific period, and an order for recovery of contribution was issued. The respondent filed an application invoking provisions of Section 75 of the Act.
Finding of the Court:
The court held that the demand made by the Appellant was legal and valid, and directed the respondent to pay the amount with interest at the prevailing rate from the date of the order passed under Section 45-A of the Act till the date of filing the application.
Issues: The main issue was whether the interest at the rate of 12% per annum could be ordered to be paid on a demand made under Section 45-A of the Act for a period prior to October 20, 1989, when the prevailing rate was 6% per annum.
Ratio Decidendi: The court found that the prevailing rate of interest at the time of default should be applied, and retrospective effect cannot be given to a penal provision of payment of interest.
Final Decision: The Appeals were dismissed with no orders as to costs.
Heard the advocates appearing for the parties. These Appeals are preferred by the Employees' State Insurance Corporation under Section 82 of the Employees' State Insurance Act, 1948 (hereinafter referred to as the said Act of 1948). The challenge in these Appeals is to a common judgment and order dated April 15, 2005 passed by the learned Judge of the H Employees State Insurance Court, Bombay in Application (E. S. I.) No. 13 of 1992 and in Application (E. S. I.) No. 106 of 1990 respectively. As the facts in both the Appeals are more or less similar, I have dealt with First Appeal No. 2284 of 2005. There is no dispute between the parties that the decision in First Appeal No. 2284 of 2005 will also apply to First Appeal No. 2283 of 2005.
2. The establishment of the Respondent was found covered for the purposes of the said Act of 1948 for the period between October 1, 1987 to September 30, 1989. An order for recovery of contribution of Rs. 40,4.24/- was Issued under Section 45-A of the said Act of 1948 against the respondent. Therefore, the said Application (E.S.I.) No. 13 of 1992 was filed by the Respondent by invoking provisions of Section 75 of the said Act of 1948.
3. By the impugned judgment and order, the learned Judge held that the demand made by the Appellant was legal and valid. In the operative part of the impugned judgment and order, the learned Judge has directed as under:
"In Application ESI No. 13 of 1992 applicant is hereby directed to pay an amount of Rs. 40,424 to the ESI Corporation with interest at the rate of 6% per annum from the date of the order passed under Section 45-A of the ESI Act i.e. March 28, 1991 till the date of filing this application i.e. February 14, 1992."
4. The only contention raised by the Appellant Employees' State Insurance Corporation in this Appeal is that the order of the learned Judge directing payment of interest at the rate of 6% per annum is contrary to 20 sub-section 5(a) of Section 39 of the said Act of 1948. He submitted that the learned Judge has no jurisdiction to fix the rate of interest which is lesser than the rate fixed by the statute. He has placed reliance on the decisions of 25 various High Courts in support of his contention. He submitted that there was no discretion left with the learned Judge to award less interest than what is provided in the statute. Naidu appearing on behalf of the Respondent submitted that interest at the rate of 6% is made payable as during the relevant period for which the demand was made, the said Act of 1948 provided for interest at the rate of 6% and the amendment carried out to, the statute enhancing the rate to 12 per cent per annum cannot be retrospectively applied to the demand for a period prior to the date on which the said Act of 1948 was amended for enhancing the rate of interest to 12 per cent per annum. He has also placed reliance on certain decisions a reference to which is made at a later stage.
5. I have considered the submissions. Sub-Section Sea) of Section 39 of the said Act of 1948 reads thus:
(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. .
(b) Any interest recoverable under Clause (a) may be recovered as an arrear of land revenue or under Section 45-C to Section 45-1.
Explanation: In this sub-section, "scheduled bank" means a bank for the time being included in the Second Schedule to the Reserve Bank of India Act, 1934 (2 to 1934).
Sub-section Sea) was brought on the statute book by Section 12 of the Employees' State Insurance (Amendment) Act, 1989 (hereinafter referred to as the Amendment 4(Act). T
