Regional Director, E.S.I. Corporation v. Sterling Gases Limited

**IN THE HIGH COURT OF KERALA AT ERNAKULAM** **PRESENT:** **THE HONOURABLE MR.JUSTICE C.T.RAVIKUMAR** **&** **THE HONOURABLE MR. JUSTICE K.P.JYOTHINDRANATH** **WEDNESDAY, THE 18TH DAY OF MAY 2016 / 28TH VAISAKHA, 1938** **Ins.APP.No. 73 of 2010** **AGAINST THE ORDER/JUDGMENT IN IC 102/2008 of EMPLOYEES' INSURANCE COURT, ALAPPUZHA DATED 19-02-2010** **APPELLANT/OPPOSITE PARTY** **THE REGIONAL DIRECTOR, E.S.I. CORPORATION, PANCHADEEP BHAVAN, ROUND NORTH, THRISSUR.** **BY ADV.SRI.T.V.AJAYAKUMAR** **RESPONDENT(S)/APPLICANT:** **STERLING GASES LIMITED, “REVATHI”, 39/3480, MANIKAT CROSS ROAD, ERNAKULAM,, KOCHI- 682 016, REPRESENTED BY T.MURUGAN,, DIRECTOR.** **BY ADV. SRI.C.D.DILEEP** **THIS INSURANCE APPEAL HAVING BEEN FINALLY HEARD ON 18-05-2016, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** **Ins.APP.No. 73 of 2010** ## **APPENDIX** ## **APPELLANT'S ANNEXURES:** |**ANNEXURE A1**|**TRUE COPY OF THE AMNESTY SCHEME DATED 6.7.2006 ISSUED BY**| |---|---| ||**E.S.I. CORPORATION**| |**ANNEXURE A2**|**TRUE COPY OF THE LETTER DATED 20.11.2006 OF THE RESPONDENT**| |**ANNEXURE A3**|**TRUE COPY OF THE LETTER DATED 12.1.2007 OF THE RESPONDENT**| ## **C.T. RAVIKUMAR & K.P. JYOTHINDRANATH, JJ.** **- - - - - - - - - - - - - - - - - - - - - - - Ins.App. No.73 of 2010** **- - - - - - - - - - - - - - - - - - - - - - - Dated this the 18[th] day of May, 2016** ## **J U D G M E N T** ## **Ravikumar, J.** This appeal is preferred against the judgment dated 19.2.2010 in I.C.No.102/2008 of the Employees' Insurance Court, Alappuzha. The appellant E.S.I. Corporation initiated proceedings to recover the damages in terms of the order passed by invoking the power under Section 85B of the Employees' State Insurance Act 1948 (in short 'the Act'). Aggrieved by the said action, the respondent herein preferred I.C.No.102/2008 before the E.I. Court which culminated in the impugned judgment. 2. As per the impugned judgment, the E.I. Court set aside Ext.D3 (show cause notice in Form-D18 dated 13.9.2005) and Ext.P1, the order dated 30.6.2008 issued under Section 85B of the Act. Further, it was declared 2 Ins.App. No.73 of 2010 thereunder that the action on the part of the appellant herein/respondent therein, in adjusting Rs.1,77,063/towards damages is unsustainable and therefore, the appellant was directed to refund the above said amount to the applicant therein/respondent herein from one month from that date and in case of failure to comply with the above said direction within the above stipulated period, the amount payable under the judgment was ordered to be paid with interest at the rate of 12% per annum. 3. For a proper consideration of the appeal it will only be inappropriate to refer to certain indisputable facts obtained in this case. The respondent company engaged in manufacturing of industrial and medical gases, is covered under the E.S.I. Act with effect from 2.2.1987. Earlier, owing to the failure on the part of the respondent to pay the contribution statutorily payable in terms of the provisions under the Act Ext.D3 notice dated 30.6.2005 was issued by the appellant to the respondent. In Ext.D3 it was proposed to determine and recover from the respondent herein an 3 Ins.App. No.73 of 2010 amount of Rs.2,17,371/- as damages. It was so fixed for the period from April 2001 to March 2004. Pursuant to the receipt of Ext.D3 the respondent issued Annexure A3 letter dated 12.1.2007. It is to be noted that by that time the appellant Corporation initiated criminal proceedings against the respondent for its failure to pay the statutory compensation covering the period from April 2001 to March 2003. It is also to be noted that an amnesty scheme was also formulated by that time. Going by the same, those persons who were then facing criminal proceedings could seek for withdrawal of criminal cases pending against them by clearing all the dues, as is evident from Annexure A1 Amnesty Scheme. A perusal of Annexure A3 would reveal that the respondent against whom Calendar Case Nos.67/2003, 329/2003 and 393/2002 were pending, had chosen to avail the benefits offered as per Annexure A1 and requested the appellant to adjust the amount already remaining with them to the tune of Rs.2,47,374/-. According to the respondent, an amount of Rs.2,47,374/- was remitted 4 Ins.App. No.73 of 2010 by them in excess for the period towards damages and therefore, the respondent requested to adjust the account for the aforesaid purpose. Obviously, the said request was honoured in terms of the provisions under Annexure A1 and adjustment was made by the appellant with the amount remaining in excess to the tune of Rs.2,47,374/-. However, after effecting such adjustments it was found that still an amount of Rs.40,308/- was due towards damages. It is in the said circumstances Ext.P1 notice was issued under Section 85B of the Act. As noticed hereinbefore, on its receipt, the respondent raised challenge against the same by filing I.C.No.102/2008 which ultimately culminated in the impugned judgment. 4. We have heard the learned counsel appearing for the appellant and also the learned counsel appearing for the respondent. 5. The appellant has raised several contentions to mount challenge against the judgment dated 19.2.2010 in I.C.No. 102/2008. The core contention of the appellant is Ins.App. No.73 of 2010 5 that the Tribunal went wrong in holding that no order was passed by the appellant under Section 85B of the Act. It is contended by the learned counsel that the very operative portion would indicate that the appellant did pass such an order and in troth what was set aside by the E.I. Court is the very order passed by the appellant invoking the power under Section 85B and the said fact is very much discernible from paragraph 13 of the impugned judgment. Denial of reasonable opportunity of being heard, is also raised as a reason by the respondent. According to the appellant, the very pleadings of the respondent would reveal the fact that such an opportunity was proffered and in fact the respondent had availed of the same. A bare perusal of the impugned Ext.P1 order itself would establish the said position, it is contended. 6. Per contra, the learned counsel appearing for the respondent submitted that the Tribunal had rightly arrived at the conclusion regarding the absence of an order under Section 85B passed by the appellant in respect of an 6 Ins.App. No.73 of 2010 amount of Rs.1,77,063/-, the amount which was adjusted pursuant to Ext.D3. The learned counsel drew our attention to paragraph No.10 of the impugned judgment. A scanning of paragraph 10 would reveal that after adverting to Section 85B of the Act and taking into account the factual position obtained in this case, the E.I. Court arrived at the finding that the undertaking given by the respondent herein could not have any face value and it could not have been a reason to absolve the appellant from its bounden duty to pass an order by invoking the power under Section 85B, after complying with all statutory formalities. In short, it is evident that the E.I. Court arrived at a conclusion in respect of the amount thus adjusted pursuant to Ext.D3, no order, in terms of provisions under Section 85B, was passed by the appellant herein before effecting such adjustments. The learned counsel appearing for the respondent further contended that Ext.P1 order pertains only to the balance amount i.e. Rs.40,308/-. To buttress his contention that without passing an order under Section 85B of the Act 7 Ins.App. No.73 of 2010 recovery of damages could not be effectuated, the learned counsel for the respondent relied on the decisions of this Court in **Regional Director, E.S.I. Corporation v. Sakthi Tiles [1988 (2) KLT 280]** , **E.S.I. Corporation v. Premanandan [2007 (2) KLT 666]** and **E.SI. Corporation v. Qetcos Ltd. [2008 (3) KLT 336]** . The learned counsel also relied on a decision of the Hon'ble Apex Court in **Emp. State Insurance Corporation v. H.M.T. Ltd. [AIR 2008 SC 1322]** . 7. True that the ratio of all the decisions referred (supra), relied on by the learned counsel for the respondent, is that before imposing damages by invoking the power under Section 85B of the Act a pre-hearing in the matter has to be afforded to the defaulters and a proper adjudication with reference to the facts and circumstances is also bound to be made. The tenor of the contention is that as regards the amount which was recovered, rather adjusted, i.e.Rs.1,77,063/- adjustments were effected without observing such statutory procedures. For 8 Ins.App. No.73 of 2010 considering the sustainability of the said contentions it is only proper and profitable to consider some relevant aspects. As noticed hereinbefore, taking into account the failure on the part of the respondent in effecting the statutory contribution, Ext.D3 notice was issued as early as on 30.6.2005 8. Evidently, the amount leviable and demanded thereunder was Rs.2,17,371/-. Subsequent to its receipt for availing the benefit of Annexure A1 Amnesty Scheme offered vide Annexure A3 the respondent herein made a request to the appellant herein to adjust the amount towards statutory contribution remaining with the appellant itself. According to the respondent, at that point of time an amount of Rs.2,47,374/- was remaining in excess with the appellant and therefore, essentially the request was to adjust the said amount and to withdraw all the pending criminal cases against the company viz.C.C.Nos.67/2003, 329/2003 and 393/2002. It is not disputed before us, in fact it is indisputable, that the appellant Corporation effected such an adjustment only pursuant to Annexure A3. Ext.P1 9 Ins.App. No.73 of 2010 order was passed under Section 85B of the Act demanding an amount of Rs.40,308/- towards damages only after effecting such adjustments pursuant to Annexure A3. It is thus obvious that in respect of Rs.40,308/- an order under Section 85B was passed after affording an opportunity of being heard to the respondent. 8. As a necessary sequel to such a finding the question that crops for consideration is whether the E.I. Court was justified in interfering with the adjustment of Rs.1,77,063/- which was standing in the credit of the respondent, by the appellant on the ground of absence of an order under Section 85B of the Act. From the facts extracted hereinbefore and a perusal of the impugned judgment the position emerges is that the receipt of Ext.D3 notice by the respondent is not in dispute. So also the fact that pursuant to its receipt the respondent vide Annexure A3 requested for effecting adjustment with an amount of Rs.2,47,374/-, which was then standing in its credit. The question is, having made such a request and made the Ins.App. No.73 of 2010 10 appellant to effect adjustment with the amount remaining in its credit whether the respondent can be permitted to turn around and challenge the adjustment effected by the appellant raising the contention that no order was passed by the appellant invoking the power under Section 85B of the Act? True that if the respondent had any objection regarding the quantification of the amount as per Ext.D3 order its liability to pay any amount towards the damages the respondent could have pursued with the remedies available and could have called upon the appellant to pass an order in terms of the provisions under Section 85B of the Act, by raising necessary objections/contentions. The respondent was having a statutory right for seeking such an opportunity and raising his contentions against such a demand, in the light of the provisions under Section 85B. But the indisputable facts obtained in this case would reveal that after receipt of Ext.D3 the respondent, for obvious reasons, the respondent had chosen only to make a request for effecting adjustment of the amount with the amount Ins.App. No.73 of 2010 11 which was then in its credit and available with the appellant. In other words, the respondent did not choose to make any objection regarding the quantification made in Ext.D3 or to dispute its liability to pay any amount by way of damages and the sole request made vide Annexure A3 is to effect the adjustment towards the damages in the manner requested thereunder. The said conduct of the respondent pursuant to the receipt of Ext.D3 which carried a demand for damages can only be treated as a waiver of its statutory right available under the Act. The respondent Company, which was fully aware of the fact that in case of any objection to the demand made under Ext.D3 it could have demanded for a quantification. It would reveal that the respondent did not prefer to avail the personal hearing though such an opportunity was evidently offered under Ext.D3. In this context it is relevant to refer to Ext.D3, which reads thus:- **“In case Shri. T. Murugan,** Director desires to represent his case, he or his duly authorised representative may Ins.App. No.73 of 2010 12 appear before the undersigned on 13.10.2005 at 12.45 p.m. with necessary documents to explain the case. If he fails to attend the personal hearing on the above date and time it will be presumed that he does not want a personal hearing and the case will be decided on merits after taking into consideration the written representation submitted by him, if any.” 9. It is thus evident from Ext.D3 that the respondent herein was called upon to appear before the appellant on 13.10.2005 and the company was also at liberty to file written representation against such demand. Evidently, such an opportunity was offered in terms of the provision under Section 85B of the Act. Despite the opportunity thus offered to the respondent, the company had chosen to make only a request to effect adjustment, towards the amount demanded under Ext.D3 with the amount which was then remaining with the appellant. As noticed herein-before, the facts obtained in this case will undoubtedly reveal that the statutory right available to the respondent was virtually waived by it. In the contextual situation it is apposite to Ins.App. No.73 of 2010 13 refer to a decision of the Hon'ble Apex Court in **Sri.Siddeshwara Cooperative Bank Ltd. v. Ikbal [(2013) 10 SCC 83]** . The Hon'ble Apex Court considered the question whether the statutory right available could be waived or not. It was held that even if a provision is mandatory it could always be waived by a party or parties for whose benefit such provision has been made. There cannot not be any doubt with respect to the position that the provision for offering a reasonable opportunity of being heard and the steps for effecting quantification were made under the statute for the benefit of persons like the respondent who are liable to pay contributions in terms of the provisions under the E.S.I. Act. The conduct of the respondent in this case would undoubtedly reveal that it waived the right available thereafter and requested the appellant to make adjustment, pursuant to the receipt of Ext.D3. In such circumstances, the irresistible conclusion which can be arrived at is that at that point of time the respondent had no objection with respect to the amount 14 Ins.App. No.73 of 2010 demanded by the appellant. That apart, it is evident that after acknowledging its liability to pay the amount demanded it only requested by the appellant to adjust the amount with the excess amount which was remaining with the appellant. When this be the factual position obtained in this case, in the light of the decision in **Sri.Siddeshwara Cooperative Bank's** case (cited supra), we have no hesitation to hold that the E.I. Court went wrong in holding that action of the appellant in effecting adjustment to the tune of Rs.1,77,063/- is illegal and against the provisions. These aspects were not duly considered by the E.I. Court. In the light of the decisions referred supra the said finding of the E.I. Court beckons interference and accordingly the said finding is set aside. 10. In this context, another aspect is also to be noticed. The learned counsel for the appellant contended that the respondent did not make any direct challenge against Ext.D3 as is obvious from the prayers made in the application which is filed before the E.I. Court. Despite the Ins.App. No.73 of 2010 15 absence of direct challenge against the same the ESI court interfered with the adjustment made pursuant to the demand made by the appellant. Another fact also cannot be lost sight of. The respondent was fully aware of the pendency of the criminal cases against him initiated by the appellant owing to its failure to effect payment of the statutory contribution. Evidently, the respondent got those cases withdrawn by availing the benefit under Annexure-A1 Amnesty Scheme. If no such specific request was made by the respondent under Annexure A3 the appellant would not be made such adjustment as requested and withdrawn the criminal cases pending against the respondent. Having accepted the Amnesty Scheme and made Annexure-A3 request and thereby made the appellant to make the adjustment the respondent cannot be permitted to turn around and challenge the proceedings. The criminal proceedings initiated owing to the wrong doings which invites criminal prosecution and the respondent avoided the trial and a possible conviction the respondent on its own 16 Ins.App. No.73 of 2010 by accepting the conditions in the Amnesty Scheme and pursuant to the request for adjustment under Annexure A3, the appellant was made to withdraw the cases pending against the company. In view of the said circumstances also, the interference by the E.I. Court with respect to the adjustments made by the appellant pursuant to Ext.D3 at the instance of the respondent cannot be sustained. 11. What survives for consideration is whether Ext.P1 was liable to be set aside. It is to be noted that indisputably it is an order passed under Section 85B of the Act. The very order itself would reveal that an opportunity of being heard was afforded to the respondent and availing that opportunity the respondent had appeared and advanced arguments before the appellant. It is thereafter that Ext.P1 order was passed. From the contentions as is discernible from the impugned judgment and taking into account the contentions raised by the respondent before this Court it is evident that no challenge whatsoever was made against Ext.P1 based on any illegality or irregularity crept into the Ins.App. No.73 of 2010 17 quantification. In the light of the factual position obtained in this case the appellant cannot be heard to contend that no delay had occurred in effecting statutory payment. When there is delay in effecting such payments certainly the respondent is bound to initiate action in terms of the provisions under Section 85B of the Act. True that in the application filed before the E.I. Court the respondent took up a contention that the company is running in red and therefore, it is unjustifiable to call upon it to pay the damages. The said contention cannot be sustained in the light of a plethora of decisions. In **Qetcos** 's case cited supra after referring to various decisions of the Apex Court held that such financial difficulties of a company or the fact that instalment facility was granted for effecting payment towards the dues, cannot be reasons for waiving the liability to pay damages in terms of the provisions under Section 85B. In the circumstances, the order of the E.I. Court to the extent it set aside Ext.P1 also cannot be sustained. In view of the discussions as above, the appeal is to be 18 Ins.App. No.73 of 2010 allowed. Accordingly, the impugned judgment is set aside. The appeal is allowed as above. SD/- **C.T. RAVIKUMAR JUDGE** SD/- **K.P. JYOTHINDRANATH** **JUDGE** //True copy// P.A. TO JUDGE shg/