The central legal point established in the judgment is the interpretation of Regulation 40 of the Employees’ State Insurance (General) Regulations, 1950, emphasizing the protection of employee's interest and the intention of the statute to prevent unjust enrichment.

Appellants are the respondents in I.C.40/99 on the file of the Employees Insurance Court, Alappuzha. Respondent herein was the applicant.

2. The case of the respondent/applicant was that the demand of Rs.68,952/- made by the appellant as arrears of contribution for the period from 1/97 to 3/98 is arbitrary and illegal. Respondent further contended that during the period from 1/97 to 3/98 an amount of Rs.33,961/- was paid in excess of the amount payable by the respondent-employer. Therefore, the respondent was eligible to get refund/adjustment of the excess amount paid.

3. The Insurance Court decided the first point against the applicant and held that it was liable to pay Rs.66,952/- to the Employees State Insurance Corporation for the periods from 1/97 to 3/98. Regarding the second issue viz., adjustment of the excess amount paid by the respondent, the ESI Court found favour with the contention of the respondent and declared that the respondent was eligible to get adjustment of Rs.33,961/- paid for the period from 1/97 to 3/98.

4. Appellants are aggrieved by the declaration granted by the ESI Court as above.

5. Learned counsel for the appellants contends that in the light of Regulation 40 of the Employees’ State Insurance (General) Regulations, 1950 (for short, ‘the Regulations’) the ESI Court erred in allowing the request made by the respondent-applicant for adjustment of them sum of Rs.33,961/-. Regulation 40 of the aforesaid Regulations read as follows:--

40. Refund of contribution erroneously paid:--

(1) Any contribution paid by a person under the erroneous belief that the contributions were payable by that person under that Act may be refunded without interest by the Corporation to the person, if application to that effect is made in writing before the commencement of the benefit period correspondent to the contribution period in which contribution was paid.

(2) Where any contribution has been paid by a person at a rate higher than that at which it was payable the excess of the amount so paid over the amount payable may be refunded without interest by the Corporation to that person, if application to that effect is made before the commencement of the benefit period correspondent to the contribution paid in which such contribution was paid.

(3) In calculating the amount of any refund to be made under this regulation there may be deducted the amount, if any, paid to any person by way of benefit on the basis of the contribution erroneously paid and for the refund of which the application is made.

(4) Where there whole or part of the amount of any contribution referred to in sub-regulations (1) and (2) are recovered from an immediately employer or deducted from the wages of an employee by the principal employer, he shall, on getting the refund of the amount due from the Corporation, be liable to pay back the amount so recovered or deducted to the person from whom the amount was so recovered or deducted.

(5) Applications for refund under this regulation shall be made in such form and in such manner and shall be supported by such documents as the Director-General may, from time to time, determine.

6. It is not in dispute that the date of commencement of the benefit period corresponding to the contribution period in which contribution was paid is 1.7.1998. The respondent submitted application for refund/adjustment on 10.7.1998. It is therefore contended by the appellants that the application for refund/adjustment ought not to have been allowed by the ESI Court, as the application was submitted beyond the period of limitation prescribed in S.40(1) of the Regulations.

7. Learned counsel for the respondent-applicant submits that the declaration granted by the ESI Court for adjustment of the excess amount paid can be sustained on two grounds. (i) Regulation 40 employs the term ‘refund’ and does not apply to a claim for ‘adjustment’. The words ‘refund’ and ‘adjustment’ to do convey exactly the same meaning, but represent different i