Insurance Court Must Record Reasons For Waiving Condition Of Pre-deposit Under Sec 75(2)(B) ESI Act: Kerala HC [Read Judgment]

The Single Bench comprising Justice Raja Vijayaraghavan said,

"It is luculent from the statutory provision that the Insurance Court is bound to insist that the principal employer deposits 50% of the amount unless for exceptional reasons which are to be recorded in writing, the court chooses to exercise its discretion and altogether waives the pre-deposit or reduce the same. In the case on hand, the Insurance Court has chosen to take the easier path. A perfunctory and non-speaking one-line order has been passed staying the entire proceedings until the disposal of the case."

In the instant case, the Original Petition was filed by Employees State Insurance Corporation through its Deputy Director and Recovery Officer against the interim order passed by the Employees Insurance Court Thiruvananthapuram.

The Insurance case was initially filed by Mr. Surendra Das, who was the 1^st respondent in this case. He challenged the recovery notice issued by the petitioners for recovering the dues to the Corporation for the period up to 10/2014 to an amount of Rs. 20,02,684/-.

Subsequently, the Insurance Court passed an ex-parte order saying,

" ORDER

Heard Counsel for petitioner. Stay granted as prayed till the final disposal of the case ."

Challenging this order, the ESI Corporation filed original petition in the High Court under Article 227 of the Constitution.

Adv. Adarsh Kumar who appeared for the petitioner contended that the procedure adopted by the Insurance Court is violative of Section 75(2B) of the ESI Act and that the interim order was passed without hearing the petitioners.

The court examined Section 75 (2B) of the ESI where it says,

"(2B) No matter which is in dispute between a principal employer and the Corporation in respect of any contribution or any other dues shall be raised by the principal employer in the Employees' Insurance Court unless he has deposited with the Court fifty percent. of the amount due from him as claimed by the Corporation.

Provided that the Court may, for reasons to be recorded in writing, waive or reduce the amount to be deposited under this sub-section."

It was observed that subsection (2B) of section 75 provides that unless the employer deposits 50% of the amount due with the Insurance Court as claimed by the Corporation, he will not be entitled to raise a dispute challenging the action taken by the Corporation.

Further, it was also noted that the subsection enables the court to waive or reduce the amount to be deposited if and only if adequate reasons are recorded in writing is given by the court for exercising the said discretion.

"In the case on hand, the Insurance Court has chosen to take the easier path. A perfunctory and non-speaking one-line order has been passed staying the entire proceedings until the disposal of the case...The reasons which persuaded the Insurance Court to exercise its discretion and waive the pre-deposit cannot be discerned from the order", said the court.

The court remarked that in exceptional cases the Insurance court is vested upon to record sufficient grounds in which it takes the discretion to waive pre-deposit or reduce the same. And such grounds should be taken only after the court apply its mind and take into consideration all the facts and circumstances of the case which may include balance of convenience, irreparable loss etc.

"When the statute mandates that waiving or reducing of pre-deposit shall be for reasons to be recorded in writing, it certainly does not mean that it has to be formed in a subjective or casual manner. That opinion must be formed objectively on relevant considerations. When the enactment vests discretion in the court to exercise its discretion in a particular manner, there is an implicit requirement that it shall be exercised in a reasonable and rational manner free from whims, vagaries and arbitrariness" added the court.

The court relied on the case of Union of India v. Kuldeep Singh where the apex court explained the ambit of the term 'discretion'. In the light of this case, the court noted that the Insurance court had exercised its discretion in an arbitrary and fanciful manner against the mandate of the statue.

The court also relied on several other cases of the apex court such as Raj Kishore Jha v. State of Bihar & Ors., Hindustan Times v. Union of India & Ors., Manish Goel v. Rohini Goel.

While allowing the Original petition and setting aside the interim order passed by the Insurance Court, the court said,

"In the case on hand, there are no materials before the higher courts as to what persuaded the Insurance Court to adopt the extraordinary course that it has chosen in the instant case as also in the cases the details of which are borne out from Ext.P7. No court is competent to issue a direction contrary to law nor the court can direct an authority to act in contravention of the statutory provisions. (see Manish Goel v. Rohini Goel) The courts are meant to enforce the rule of law and not to pass orders or directions which are contrary to what has been injected by law. On all counts, I find that the order passed by the Insurance Court cannot be sustained."

Further, the court also directed the Insurance Court to consider the application afresh after hearing both sides and pass appropriate orders in accordance with the statute mandate. 

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