FAO No. 1862 of 2008 (O&M) 1 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH -- FAO No. 1862 of 2008 (O&M) Date of decision: October 14, 2009 E.S.I.C ........ Appellant Versus M/s Millennium Beer Industries Limited .......Respondent(s) Coram: Hon'ble Ms Justice Nirmaljit Kaur -.- Present: Mr. Vikas Suri, Advocate for the appellant Mr. Sanjay Vij, Advocate for the respondent -.- 1. Whether Reporters of local papers may be allowed to see the judgement? 2. To be referred to the Reporter or not? 3. Whether the judgement should be reported in the Digest? Nirmaljit Kaur, J. This is an appeal against the order dated 28.01.2008 passed by the Employees' Insurance Court, Faridabad, vide which the order dated 04.10.2001 passed by the Regional Director of the Corporation, imposing damages was partly set aside to the extent that the appellant-Corporation was entitled to recover only 25% of the disputed amount of damages as per the Circular EX PR and the excess amount was ordered to be returned to the respondent-firm. The facts in short are that the respondent-firm could not deposit FAO No. 1862 of 2008 (O&M) 2 the ESI contributions in time with the appellant-Corporation. The respondent Firm, however, deposited the entire amount of Rs.7,25,020 for the period February 1999 to December 2000, along with interest for the delayed payment to the tune of Rs.1,02,794/- on the amount. Due to the aforesaid delay in depositing the amount, a show cause notice was issued to the respondent- firm. Thereafter, damages to the tune of Rs.2,10,921/- was levied for late deposited of the said amount vide order dated 04.10.2001. The respondent firm then, filed a petition under Section 75 of the Employees' State Insurance Act,1948 (in short the ESI Act) praying for setting aside the aforesaid order dated 04.10.2001. The Employees' State Insurance Court, Faridabad partly set aside the impugned notice and held that the appellant was entitled to recover only 25% of the disputed amount. The impugned order was set aside on two grounds; firstly, the same was passed without considering the submissions made by the respondent firm and without exercising the powers conferred under 85 (b) of the ESI Act to impose damages in a judicial manner and the Authority should have considered the mitigating circumstances of the respondent firm for delay in depositing the ESI contribution for the period in question; and secondly, as per Circular EX PR dated 01.01.2008 if the employer, has deposited the interest due for the period of litigation in full, then the employer shall liable to pay only 25% of the damages levied. While challenging the impugned order passed by the Employees' State Insurance Court, the learned counsel for the appellant firstly submitted that the Insurance Court fell in error while relying on the Amnesty Scheme dated 01.01.2008. It was stated that the same was not applicable in a case where damages under Section 85 (b) of the ESI Act have been impugned. It FAO No. 1862 of 2008 (O&M) 3 only applies to cases specified in para 2(c) of the said Scheme. It was further submitted that a perusal of the scheme would show that the new Amnesty scheme was applicable only in which the employer has disputed the coverability or determination of contribution in the Employees' State Insurance Court. In the present case, neither the amount, nor, the coverability was in dispute. Hence, the respondent firm could not derive any benefit under the scheme. Secondly, it was argued that that the Employees' State Insurance Court has also failed to appreciate that it had no jurisdiction to act under the Amnesty Scheme. A perusal of para 5 would reveal that the authorities empowered to exercise jurisdiction under the New Amnesty Scheme have been specified therein and the learned Insurance Court is not named therein. More over, the respondent-employer had never applied to the designated authorities under the New Amnesty Scheme and as such could not have been granted any relief thereunder even if it was a case falling under the Scheme. Learned counsel for the respondent- firm, on the other hand, submitted that the order dated 04.10.2001 was not a speaking order and was passed in a haste and mechanical manner without application of mind and without considering the financial crisis being faced by the respondent during February 1999 to December 2000 and relied on the judgement rendered by the Hon'ble Supreme court in the case of 'M/s Prestolite of India Ltd. v. The Regional Director and another, AIR 1994 Supreme Court- 521, to state that adjudicating authority can take mitigating circumstances into consideration and should not act mechanically in applying upper most limit of damages. It was further stated that the Amnesty Scheme is duly applicable. The Scheme was being wrongly interpreted by the appellant corporation to their advantage. FAO No. 1862 of 2008 (O&M) 4 Learned counsel for the parties have been heard. The entire dispute devolves around the interpretation of the Amnesty Scheme. The same reads as follows:- “2. The New Amnesty Scheme provides for withdrawal of cases subject to following conditions:- a) Cases filed against the Insured persons under Section 84 of the ESI Act. xx xxx xxx b) Cases filed against the Employers under Section 85 and 85-A of the ESI Act:- xx xx xx c) Cases filed by employers under Section 75 of the Act:- The New Amnesty Scheme shall also include those cases in which the employer has disputed the coverability or determination of contribution in the Employees' Insurance Court, under section 75 of the Act subject to fulfilment of the following conditions: i) the employer shall pay both the Employees' and Employers' share of contribution in full for the period under litigation and he shall comply with other provisions of the Act. ii) the interest due for the period of litigation is paid in full by the employer. iii) the employer shall pay both the Employees' and Employers' share of contribution in full for the period under litigation and he shall comply with other provisions of the Act. iv) the employer shall pay both the Employees and Employers' share of contribution in full for the period under litigation and he shall comply with other provisions of the Act. v) the interest due for the period of litigation is paid FAO No. 1862 of 2008 (O&M) 5 in full by the employers. vi) the employer shall pay 25% of the damages levied or leviable for the period of litigation. vii) the employer shall also furnish an undertaking to the Corporation to the effect that he/she shall be regular in compliance with the provisions of ESI Act in future and there shall be no default on their part in any subsequent period. 3. The above New Amnesty Scheme will also be available to those employers/insured persons who have already availed of the benefits of earlier Amnesty Schemes. 4. The New Amnesty Scheme will be in force from 1st January, 2008 till 31st December, 2008. 5. The Regional Directors/Joint Directors I/c of the Regional/Sub Regional Offices will be empowered to accord sanction for withdrawal of cases referred above in para 2 (a), (b) and (c) on payment of contribution, interest due and damages as worked out under the above New Amnesty Scheme.” Clause 2(a) and (b) of the Scheme applies to cases filed by the Corporation. Whereas, Clause 2 (c) applies to cases filed by the Employers. Clause 2 (c) of the Scheme is further clear that it is also applicable to employers, who have filed petition under section 75 of the Act. In the present case, the employer filed petition under section 75 of the Act challenging the order passed under section 85 (B) of the ESI Act. Secondly, the Scheme is not limited to only those cases, where the employer has disputed the coverability or determination of contribution in the Employees Insurance Court. In fact, the Scheme reads “the New Amnesty Scheme shall also include those cases in which the employer has disputed the coverability or determination of the contribution in the Employees' State Insurance Court under section 75 of the FAO No. 1862 of 2008 (O&M) 6 Act”. The use of word 'also' makes it amply clear that all disputes under Section 75 of the Act are covered including those in which the employer has disputed the coverability or determination of the contribution subject of course to the fulfilling the conditions imposed in the scheme, itself. There is nothing to suggest that the case under Section 85 (B) of the ESI Act where the Employers has challenged the same under section 75 of the Act has been excluded. Interpretation given by the learned counsel for the appellant that it is not applicable to dispute under section 85 (B) of the ESI Act to the application of the Scheme has been narrowed down by expressing very conservative view and does not appear to logic or reasoning. Thus, the Scheme is duly applicable to the case in hand. Taking up the other argument raised by the learned counsel for the appellant that the respondent-employer had never applied to the designated authority i.e. the Regional Directors/Joint Directors, I/C of the Regional/Sub- Regional Offices, who is empowered to accord sanction for withdrawal of cases, it may be noticed that the said scheme came into operation from the year Ist January, 2008 to 31st December, 2008, i.e. during the period the petition filed under section 75 of the Act, was already pending. From the reading of wording of Clause 2 (c) of the Scheme, 'cases filed by the Employers' under section 75 of the Act' show that the scheme was applicable to the cases pending before the Insurance Court under section 75 of the Act. The Court having applied the same came to the conclusion that the Employer was liable to pay only 25% of the damages as per the scheme, cannot be set aside on the technical ground that the respondent firm should have first applied to the authorities concerned in the facts of the present case, especially FAO No. 1862 of 2008 (O&M) 7 when it has not been denied that the scheme came into operation during the pendency of the petition under section 75 of the ESI Act. Thus, there was no occasion for the respondent firm to apply to the authorities concerned. It may also be seen that the Court has partly set aside the impugned order on the basis of Ex.R6, alone but also on account of the fact that while passing the impugned order, the difficulties being experienced by the respondent firm were not taken into consideration and the same was passed in a haste and in mechanical manner. The authorities while considering the representation of the respondent firm should have given due consideration to the fact that the respondent firm during the period in question was suffering huge financial losses, as is evident from the balance sheet of the firm for the year 1999-2000 and 2000-2001, Ex PY and PZ. Case law cited by learned counsel for the respondent-firm in the case of Prestolite of India Ltd. (Supra) is fully applicable in the facts of the present case. The relevant para of the judgement read as under:- “4. It, however, appears to us that the contention of Mr. Goswami in the facts of the case, should not be accepted. Even if the regulations have prescribed general guidelines and the upper limits at which the imposition of damages can be made, it cannot be contended that in no case, the mitigating circumstances can be taken into consideration by the adjudicating authority in finally deciding the matter and it is bound to act mechanically in applying the upper most limit of the table. In the instant case, it appears to us that the order has been passed without indicating any reason whatsoever as to why grounds for delayed payment was not to be accepted. There is no indication as to why the imposition of damages at the rate specified in the order was required to be made. Simply because the appellant did not appear in person and FAO No. 1862 of 2008 (O&M) 8 produce materials to support the objections, the employee's case could not be discarded in limine. On the contrary, the objection ought to have been considered on merits.” In view of the foregoing discussion, the appeal is accordingly dismissed. (Nirmaljit Kaur) Judge October 14, 2009 mohan