Section 85-B damages order valid if considers employer's submissions; cannot be quashed for not addressing unraised factors like default number/extent/frequency; record manipulation shows mala fide, justifying levy despite liberal calculation.

JUDGMENT :

JITENDRA JAIN, J.

1. This appeal was admitted on 23 August 2011 on following substantial question of law :-

“Whether, on admitted facts, the learned Judge of the Employees State Insurance Court (ESI Court) could have set aside the order passed under Section 85-B of the Employees' State Insurance Act, 1948 (ESI Act) ?”

2. On 10 January 2006, the appellant passed an order under Section 85-B of the ESI Act, levying damages of Rs.27,849/-. The respondent was given an opportunity of hearing before levying damages. The respondent made submissions for reduction/waiver of damages. The submissions being verbal request made to the recovery officer for payment in installments and that had they known that damages are to be paid they would have paid the entire contribution at one time in lumpsum by taking a loan. The appellant considered the said reply and passed a detailed order levying damages. The said order was challenged before the ESI Court by the respondent.

3. On 22 February 2010, the ESI Court quashed the above order to the extent that it levied damages of Rs.27,849/- by observing that the order under Section 85-B has been passed in a mechanical way without application of mind to various factors such as number of defaults, extent of delay, frequency of defaults etc.

4. Being aggrieved by the above order of the ESI Court, the appellants have preferred the present appeal which came to be admitted on 23 August 2011.

5. I have heard the learned counsel for the appellants and respondent.

6. Section 85-B of the ESI Act reads as under :-

“85-B. 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 45-C to section 45-1].”

7. Section 85-B of the ESI Act provides that, where an employer fails to pay the amount due in respect of any contribution or any other amount payable under the 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. The first proviso to Section 85-B(1) provides for opportunity of hearing to the employer. The second proviso to Section 85-B(1) provides that the Corporation may reduce or waive the damages in relation to an establishment which is a sick industrial company subject to such terms and conditions as may be specified in regulations.

8. The ESI Court in the impugned order i