S.85B of the Employees State Insurance Act provides an enabling provision for damages, not mandatory, allowing discretion based on case circumstances.

1 Leave granted.

2 Interpretation and application of S.85B of the Employees State Insurance Act (The Act) and Regulation 31C of the Employees State Insurance (General) Regulations, 1950 (The Regulations) is in question in this appeal which arises out of a judgment and order dated 12.9.2005 passed by a Division Bench of the Karnataka High Court in Writ Appeal No. 2587 of 2004 allowing the appeal in part preferred from the judgment and order dated 25.3.2000 passed by a learned Single Judge of the said Court in Writ Petition No. 38753 of 1998.

3 Respondent is an 'employer' within the meaning of the provisions of S.2(17) of the Act. Indisputably, prior to issuance of the notification dated 27.3.1992, the wage ceiling of the employees was restricted to Rs. 1,600/- per month. The same was increased to Rs. 3000/- per month with a view to bring them within the purview of the Act.

4 Validity of the said notification was challenged in a large number of writ petitions by the employees. By an interim order passed by the High Court, the operation of the notification was directed to be stayed. The said writ petitions were dismissed by an order dated 5.8.1992.

5 Writ appeals were filed by the 'employees' through their respective Trade Unions. While admitting the said appeals, the interim order operating during the pendency of the writ petition was allowed to continue. The said writ appeals were also dismissed by the Division Bench of the High Court by reason of a judgment and order dated 11.7.1995, inter alia, on the premise that there was no impediment for the respondent herein to deposit the contributions of the employees concerned.

6 On and from the said date interest was claimed till the date of actual payment. Appellant thereafter also raised a claim for payment of interest for delayed payment and furthermore levied damages in terms of S.85B of the Act.

7 A writ petition filed by the respondent herein questioning the validity of the said notice dated 9.6.1998 was dismissed by an order dated 25.3.2000. A review petition was filed by the appellant herein which was also dismissed on merits.
An intra court appeal was preferred thereagainst and by reason of the impugned judgment, it was allowed in part opining :
1. that although period of delay is slightly more than two years, some reasonable time should be allowed for deposit of contributions and, thus, restricting the period of payment of interest to two years only.
2. No damage should be directed to be levied in the facts and circumstances of the case as S.85B of the Act provides for an enabling provision and does not make is mandatory to levy damages in every case.

8 Mr. C. S. Rajan, learned Senior Counsel appearing for the appellant, submitted that the High Court committed a serious error in passing the impugned judgment in so far as it failed to take into consideration the purported effect of Regulation 31C of the Regulations which provides for levy of interest as also damages.

9 Mr. C.V. Francis, learned counsel appearing on behalf of the respondent, on the other hand, would support the impugned judgment.

10 The said Act was enacted to provide for certain benefits to the employees of an establishment in case of sickness, maternity and employment injury and to make provisions for certain other matters in relation thereto.

11 Chapter IV of the Act provides for payment of contributions. S.39 of the Act postulates payment of contributions thereunder both by the 'employer' as also the 'employee'.

12 S.85B of the Act empowers the Corporation to recover damages in the event an employer fails to make the payment of the amount due in respect of contribution; subject, however, to the condition that the amount thereof would not exceed the amount of arrears as may be specified in the Regulations. Proviso appended thereto incorporates the principles of 'Natural Justice'.

13 Obligation on the part of the employer to deposit the contributions of both the 'employer' and the 'employee' is not in disp