No Statutory Power To Waive Interest Under Employees' State Insurance Act: Supreme Court

The Supreme Court of India has held that there is no statutory power to waive the interest payable by an employer under the Employees' State Insurance Act, 1948. It also refused to exercise powers under Article 142 of the Constitution to do the same.

This is not a fit case to exercise the power under Article 142 of the Constitution of India, the Court said.

A Division Bench comprising Justice Ajay Rastogi and Justice Abhay S. Oka made the observation while deciding an appeal challenging the judgment of Division Bench of the Gujarat High Court in a Letters Patent Appeal directing the appellant employer to pay interest on the delayed payment of contribution for the period from 30th March 1975 to 31st March 1988.

The Bench held that the Gujarat High Court's judgement dated 10th July 2006 affirming the liability of the appellant, Transport Corporation of India Ltd, to pay contribution from 30th March 1975 onwards has attained finality and therefore, the liability of the appellant to pay contribution as demanded cannot be questioned.

While noting that the interest demanded from the appellant is in terms of Regulation 31-A of the ESI Regulations, the Bench observed that the appellant has not challenged the validity of the Regulation 31-A before the Gujarat High Court.

Therefore, with regard to the interest claimed for period prior to 20th October 1989, the Bench held that since interest has been claimed at the rate of 6% per annum as per unamended Regulation 31-A, the demand for interest cannot be faulted with in absence of any challenge to the Regulation 31-A.

The Bench also observed that the Supreme Court's judgement in the case of ESIC v. Jardine Henderson Staff Association and Ors. relied on by the appellant cannot be applied in the present case, as there the interest was waived considering the peculiar facts of the case.

Senior Advocate Ritin Rai appeared for the appellant and Advocate Atul Batra appeared for the respondent Company before the Supreme Court.

Facts: The subject matter of the present dispute is demand made by the Employees State Insurance Corporation by way of contribution payable by the appellant for the period from 30th July 1975 to 31st March 1988, demanded as per the provisions of Employees' State Insurance (General) Regulations, 1950.

The first notice issued referred to unamended Regulation 31-A of the Regulations under which interest at the rate of 6% per annum was payable on the overdue amount. Another notice dated 16th July 1990 was issued by the Insurance Corporation under the Act demanding interest at the rate of 6% per annum up to 19th of October 1989 and interest at the rate of 12% per annum up to 31st July 1990.

An application was filed by the appellant before the Employees' Insurance Court for challenging the said demand and the Employees' Insurance Court quashed the demand notices, declaring that the appellant was liable to comply with the provisions of the Act with effect from 1st April 1988 and it was not liable for the period prior to 1st April 1988.

The Gujarat High Court allowed the appeal filed by the Insurance Corporation and held that the appellant was liable to pay contribution from 30th March 1975. It held that the Head Office of the appellant was covered by the Act of 1948 in the year 1975 and therefore, employees working in Branch Office of the appellant in Gujarat get covered by the beneficial sweep of the said Act of 1948.

When recovery proceedings were initiated against the appellant in 2006, it made a representation against the demand.

The Insurance Corporation passed an order on 23rd November 2006 directing the appellant to pay interest on the delayed payment of contribution for the period from 30th March 1975 to 31st March 1988.

When this demand was challenged by the appellant, its writ petition was dismissed by order dated 9th February 2010 against which a Letters Patent Appeal was preferred by the appellant which was dismissed by the impugned Judgment and order.

Case Title: The Transport Corporation of India Ltd vs Employees State Insurance Corporation

Citation : LL 2021 SC 628

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