The delay in remitting social security contributions attracts mandatory damages under Section 85B of the ESI Act, regardless of subsequent reassessment of the quantum, as the liability is a strict civil obligation and does not require proof of mens rea.

MISCELLANEOUS FIRST APPEAL NO. 7347 OF 2015 (ESI)

BETWEEN:

1. THE EMPLOYEES STATE

INSURANCE CORPORATION,

NO.10, BINNY FIELDS,

BINNY PET,

BANGALORE-560 023,

REP. BY ITS JOINT DIRECTOR.

2. THE JOINT DIRECTOR

THE EMPLOYEES STATE

INSURANCE CORPORATION,

NO.10, BINNY FIELDS,

BINNY PET,

BANGALORE-560 023.

3. THE DEPUTY DIRECTOR

THE EMPLOYEES STATE

INSURANCE CORPORATION,

NO.10, BINNY FIELDS,

BINNY PET,

BANGALORE-560 023.

…APPELLANTS

(BY SRI. PRAVEEN KUMAR S, ADVOCATE FOR

SRI. YATHISH S., ADVOCATE)

AND:

M/S HARSHA WHEEL MOVERS PVT. LTD.,

NO.11, SADARAMANGALA,

INDUSTRIAL AREA,

MAHADEVAPURA POST,

WHITE FIELD ROAD,

BANGALORE-560 048,

REP. BY ITS GENERAL MANAGING DIRECTOR,

MR. ASHOK SHARMA

…RESPONDENT

(V/O DATED 07.01.2019 PAPER PUBLICATION

IS ACCEPTED IN R/O RESPONDENT)

THIS MFA IS FILED U/S 82(2) OF THE EMPLOYEES STATE INSURANCE ACT, 1948, AGAINST THE ORDER DATED 31.07.2015 PASSED IN E.S.I. APPLICATION NO.30/2010 ON THE FILE OF THE EMPLOYEES STATE INSURANCE COURT, BANGALORE, ALLOWING THE APPLICATION FILED U/S 75 OF THE ESI ACT.

THIS APPEAL, COMING ON FOR HEARING, THIS DAY, JUDGMENT WAS DELIVERED THEREIN AS UNDER:

CORAM: HON'BLE MRS. JUSTICE K.S. HEMALEKHA

ORAL JUDGMENT

The question that falls for consideration is “whether delay in payment of ESI contribution, though subsequently reassessed and paid, would still attract damages under Section 85B of the Employees’ State Insurance Act, 1948?”

2. This miscellaneous first appeal is filed by the Employees State Insurance Corporation (‘Corporation’ for short), calling in question the order dated 31.07.2015 passed in ESI Application No.30/2010 by the Employees State Insurance Court, Bengaluru (‘ESI Court’ for short), whereby the application filed by the respondent-employer came to be allowed and the order dated 11.01.2008 passed under Section 85B of the Employees’ State Insurance Act, 1948 (‘ESI Act’ for short), levying damages of ₹1,19,396/- was set aside.

Brief facts:

3. The respondent-employer is covered under the provisions of ESI Act. The contribution payable for the period from July 1992 to March 1995 was not remitted within the prescribed period and came to be paid belatedly during the years 2005-2007.

4. Subsequently, after inspection and verification of the records, the Corporation issued a show-cause notice dated 29.10.2007, proposing levy of damages under Section 85B of the ESI Act for delayed payment of contribution. After considering the reply, the competent authority passed an order dated 11.01.2008 levying damages of ₹1,19,396/-. Aggrieved by the same, the respondent-employer filed ESI Application No.30/2010, wherein the ESI Court, by the impugned order allowed the application and set aside the order of damages on the ground that the contribution was reassessed and finally determined only at a later point of time.

5. Learned counsel for the appellant-corporation would contend that the respondent-employer is under a statutory obligation to remit contribution within the time prescribed under the ESI Act and Regulation. The contributions relating to the period from 1992 to 1995 have been admittedly paid only in the years 2005-2007 and there is an inordinate delay attracting Section 85B . It is submitted that the ESI Court has erred in holding that there was no delay merely because the contribution was reassessed at a later stage. The reassessment of contribution does not obliterate the delay, nor does it shift the statutory due date. It is submitted that the impugned order is contrar