2021 Supreme(Mad) 149

IN THE HIGH COURT OF JUDICATURE AT MADRAS
T. RAJA, J.
The Employees State Insurance Corporation, Rep. by its Regional Director, Chennai – Appellant
Versus
H.E. Abdul Azeez – Respondent
C.M.A. No. 4156 of 2019
Decided on : 09-03-2021

Point of Law: Belated payment of contribution - Payment of contribution under the ESI Act is a statutory liability and the ESI Corporation has no power to grant waiver

Headnote:

Employees State Insurance Act, 1948 - Section 82(2)- Civil miscellaneous appeal- dismiss the appeal on the ground that the appellant has not raised any substantial question of law as mandated under Section 82 of the ESI Act, further pleaded that Section 82 makes it mandatory that no appeal shall lie against the order of the ESI Court, unless it involves a substantial question of law -Whether the ESI Court is correct in setting aside the order dated 23.07.2003 by holding that the respondent had not acted in mala fide manner or with bad intention to pay damages for the belated payment of contribution when the respondent is jointly and severally liable to pay the same with the transferor of the establishment as per Section 93-A of the Act?-- Whether the respondent is not liable to pay the damages as contemplated under Regulation 31-C of the ESI (General) Regulations, 1950?” However, after hearing the parties, this Court framed the following substantial questions of law -Whether the authority under ESI Act while passing order under Section 85-B dealing with levy of damages has got any power or jurisdiction to consider as to whether the non-compliance of any of the statutory provisions including the non-payment of the contribution by the Management is a civil liability or a quasi criminal liability or a criminal liability? Whether the transferee of a Management Company under Section 93-A of the Employees State Insurance Act, has got any locus standi to question and avoid the liability to pay penalty by way of damages by raising a plea of mens rea on the part of the management, prior to the date of transfer in his favour?When there was no explanation for the delay offered in making the contribution under the Employees State Insurance Act, whether the authorities passing an order of penalty under Section 85-B of the Employees State Insurance Act is bound to consider the question of mens rea, even without any explanation offered for any such delay? Whether the authority passing an order under Section 85-B of the Employees State Insurance Act, levying penalty by way of damages has got any discretionary power to reduce the percentage of penalty, below the percentage as fixed under Regulation 31-C of the Employees State Insurance (General) Regulations, 1950? When there is no power vested with the authority while passing an order under Section 85-B of the Employees State Insurance Act, to grant any remission, other than the proviso made thereto, whether the authority could be legally directed to do an act of consideration of reducing

Finding of the Court:

A mere reading of Section 85-B of the ESI Act shows that when the employer fails to pay the amount due in respect of any contribution, the Corporation may recover damages by way of penalty not exceeding the amount of arrears, provided that the employer shall be given a reasonable opportunity of hearing. In the present case, opportunity was given. Making use of the opportunity, the respondent employer appeared and explained that he took over the establishment on 19.7.2000, therefore, he was unaware of the arrears of contribution. However, the respondent agreed to clear the arrears and accordingly paid the contribution amount of Rs.1,76,286/-. Therefore, when Section 85-B does not envisage mandatory levy of damages, in my considered opinion, as there was no mens rea, for the simple reason that the respondent came into the picture only on 19.7.2000 and took over the company, the levy of damages for the good reason that he already paid the contribution, cannot be accepted - When the personal hearing was held on 18.6.2003, the respondent appeared and submitted that he was not aware of the liability to pay the contribution for the said period, for the admitted reason that he took over the company only on 19.7.2000 and there was yet another reason produced that he incurred heavy losses on the purchase of the said company. Now the conduct of the respondent should be seen whether there was deliberate and willful negligence constituting mens rea or there is a bona fide reason for claiming that he is not liable to pay damages - subsequent transferee is liable to make the contribution with interest. Accordingly, after taking over the company on 19.7.2000, the respondent had paid the contribution on 13.9.2002 on receipt of the recovery notice and also explained that he had no knowledge of the arrears of contribution on the date of taking over the company and that the subsequent transferee also had incurred heavy losses in the purchase of the said business. Therefore, in view of the ratio laid down by the Apex Court in Bahadur Singh case, (2006) 1 SCC 368 and that when there was no mala fide intention or deliberate fault on the part of the employer, imposition of damages upon the employer for the belated payment of contribution was unreasonable –

Result: civil miscellaneous appeal dismissed