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2023 Supreme(Online)(Mad) 99236
MADRAS HIGH COURT
The Regional Director – Appellant
Versus
M/s. Habib Exports, – Respondent
CMA 711 2022
The rule of laches can be applied to limit the period for which interest can be charged on an employer for delay in concluding proceedings under Section 45A of the ESI Act, even though the ESI Corporation has a statutory liability to pay interest on arrears of contribution.
Headnote:
ESI ACT - SECTION 45A - LIMITATION - LACHES - INTEREST - LIABILITY OF EMPLOYER - POWER OF ESI CORPORATION TO DETERMINE CONTRIBUTION - REASONABLE TIME - SECOND PROVISO TO SECTION 45A - APPLICATION - EFFECT OF DELAY IN CONCLUDING PROCEEDINGS - EMPLOYER'S LIABILITY TO PAY INTEREST - APPLICATION OF RULE OF LACHES - PERIOD FOR COMPUTING INTEREST - REPLOUGHING OF INTEREST BY EMPLOYER IN BUSINESS - RELEVANCE.
Fact of the Case:
The ESI Corporation challenged an order of the ESI Court, dated 28.09.2021, passed in an original petition preferred by the first respondent - employer under Section 75 of the ESI Act by which the ESI Court has set at naught the proceedings of the Corporation, dated 02.02.2007, passed under Sec. 45A ESI Act.
Finding of the Court:
The Court held that the ESI Corporation has the authority to realise the arrears of contribution of Rs.1,56,865/- with interest, payable from 26.04.2001 till 25.04.2006. And, this amount will form the basis for imposition of any damages which the Corporation may claim under Sec.85B of the Act.
Issues: 1. Whether the ESI Corporation's proceedings under Section 45A were barred by limitation?2. Whether the ESI Corporation was guilty of laches in concluding the proceedings under Section 45A?3. Whether the employer was liable to pay interest for the entire period of delay in concluding the proceedings under Section 45A?4. Whether the rule of laches could be applied to limit the period for which interest could be charged on the employer?
Ratio Decidendi: 1. The second proviso to Section 45A of the ESI Act, which introduced a five-year limitation period for concluding proceedings under Section 45A, does not apply retrospectively to proceedings concluded prior to its enactment.2. The ESI Corporation was guilty of laches in concluding the proceedings under Section 45A, as it took an unreasonable amount of time to complete the proceedings.3. The employer was not liable to pay interest for the entire period of delay in concluding the proceedings under Section 45A, as the rule of laches could be applied to limit the period for which interest could be charged.4. The period for computing interest on the employer's arrears of contribution should be limited to five years from the date on which the notice under Section 45A was issued, as this is the reasonable period for concluding such proceedings as determined by the Parliament.
Final Decision: The appeal was partly allowed, and the Corporation was permitted to realise the arrears of contribution of Rs.1,56,865/- with interest, payable from 26.04.2001 till 25.04.2006.
CMA.No.711 of 2022
IN THE HIGH COURT OF JUDICATURE AT MADRAS
Reserved on: 28.11.2023
Pronounced on: 30.11.2023
CORAM: JUSTICE N.SESHASAYEE
CMA.No.711 of 2022
The Regional Director,
Employees State Insurance Corporation,
143, Sterling Road, Nungambakkam,
Chennai – 600 034.
... Appellant
Vs
1.M/s.Habib Exports
Represented by its Proprietor Mr.Abdul Razack
81/1, S.R.P.Kovil Street,
Akaram, Chennai – 600 032.
2.Mr.SH.H.Jamuludhin
...Respondents
Prayer: Civil Miscellaneous Appeal filed under Section 82(2) of the ESI
Act, against the order of the Employees Insurance Court(Principal Labour
Court) Chennai dated 28-09-2021 made in EIOP.No.35/2007.
For Appellant
: M/s.G.Narmadha for Mr.G.Bharadwaj
For R1
: Mr.Syed Jaffer Ahmed
For R2
: Given up
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CMA.No.711 of 2022
JUDGMENT
The ESI Corporation challenges an order of the ESI Court, dated
28.09.2021, passed in an original petition preferred by the first
respondent - employer under Section 75 of the ESI Act by which the ESI
Court has set at naught the proceedings of the Corporation, dated
02.02.2007, passed under Sec. 45A ESI Act (henceforth would be
referred to as the Act).
2. The brief statement on facts necessary for appreciating the rival
submissions is as below:
(a)The first respondent is a partnership firm, and it came into
existence in 1989. The size of its business, according to the
Corporation automatically brings it within the net of the ESI Act.
However, the first respondent did not volunteer to register itself
under the Act, and waited till the provisional demand was made by
the Corporation on 21.06.1993. This demand was to take effect
from 01.03.1995, and ever since the first respondent has been
making the contribution that it has collected from its employees
promptly.
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CMA.No.711 of 2022
(b)While so, on 13.07.1995, the ESI Corporation caused an
inspection and found that the first respondent would be liable to
contribute from 01.10.1991. Accordingly, it issued a notice dated
26.04.2001, and followed it with an enquiry. The first respondent
participated in the enquiry which took place between 2002 and
2007 and finally vide its proceedings dated 02.02.2007 passed
under Section 45A, the Corporation required the first respondent to
pay Rs.1,56,865/-.
(c)Aggrieved by the same, the first respondent moved the ESI Court
with E.S.I.O.P.No.35 of 2007. Vide its order dated 28.09.2021, the
ESI Court (Principal Labour Court), Chennai, allowed the petition
on the solitary ground that the entire proceedings are bad in view of
the second proviso to Section 45A, without indicating that the
claim of the Corporation was barred by limitation, and all it states
is that the Corporation is not entitled to make the claim as there
was delay in determining the compensation.
3.The learned counsel for the Corporation submitted that Section 45A
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CMA.No.711 of 2022
enables the Corporation to determine the contribution based on the
information available before it. However, Vide amendment to the
provision that took effect from 01.06.2010, a proviso was inserted to this,
as per which the Corporation shall not pass any order under Section 45A
beyond 5 years from the date on which the contribution becomes payable.
4.The learned counsel for the appellant submitted that so far as the
present case is concerned, the proceedings under Sec.45A was concluded
on 02.02.2007, about 30 months prior to the coming into force of the
second proviso to Sec.45A. In other words, some 2 ½ years prior to the
insertion of the provision. Arguing further, the learned counsel submitted
that the amendment will have only prospective operation and cannot have
any retroactive operation to reopen a concluded proceedings. Reliance
was placed on Hindustan Times Ltd., Vs Union
