FAO No. 1209 of 1987 1 In the Punjab and Haryana High Court at Chandigarh. Decided on 23.3.2009 Employees State Insurance Corporation,Faridabad --- Appellant vs M/S Vinod Iron Foundary.G.T Road,Samalkha -- Respondent. CORAM: HON'BLE MR.JUSTICE RAKESH KUMAR JAIN Present: Mr.Vikas Suri, Senior Standing Counsel, ESiC, with Mr.R.K.Saini,Advocate, for the appellant Mr.A.K.Jindal, Advocate, for the respondent. Rakesh Kumar Jain,J: (Oral) This appeal is directed against the order of the Employees State Insurance Court, Panipat, dated 9.10.1987, whereby an application filed by the respondent under Section 75 of the Employees State Insurance Act,1948 (for short, 'the Act'), challenging the validity of the order dated 27.1.1984 vide which the respondent was required to pay Rs.2101/- as damages for the period from 01.7.1977 to 2.10.1978 was allowed. Briefly stated the facts of the case are that the respondent was provisionally covered under the provisions of the Act. The appellant served a letter dated 18.3.1983 to the respondent FAO No. 1209 of 1987 2 requiring them to pay Rs.7035/- towards the contribution on adhoc basis for the period from 1.7.1977 to 2.10.1978. Earlier to that, a letter dated 7.1.1981 was received from the appellant requiring the respondent to pay Rs. 731.50 Paise towards contribution relating to period 1.7.1977 to 2.10.1978. However, the respondent claimed that the amount was deposited on 3.3.1981. The respondent challenged the validity of the order dated 18.3.1983. The respondent wrote a letter to the appellant and was allowed to deposit the amount of contribution as per his own calculation. Consequently, an amount of Rs.3283.50 paise was deposited by the respondent in June 1983 under intimation to the appellant. On receipt of above intimation, the Employees State Insurance Corporation (for short, 'the Corporation') deputed it's Inspector to check the record of the respondent which was found to be in order. On 4.1.1984, the respondent was served with a show cause notice as to why damages to the extent of RS. 3280-50 Paise be not imposed for late deposit of the contribution. The respondent was given an opportunity to be heard on 24.1.1984. After hearing the respondent, the appellant/Corporation levied damages to the extent of Rs. 2101/- calculated @ 19% under Section 85-B of the Act. Damages were imposed on the ground that the respondent was required to deposit the contribution vide letter dated 5.1.1980 but it did not deposit any contribution and had taken the plea that no such letter was received. In order to prove the receipt of letter dated 5.1.1980, the appellant produced PW-1 and PW-2 FAO No. 1209 of 1987 3 who proved entries in the despatch register showing the issuance of letter dated 5.1.1980 The appellant also made a reference to the letter Ex.P-1 dated 7.1.1981 where in reference regarding the letter dated 5.1.1980 was also made, but before imposing the damages, the appellant gave an opportunity of hearing to the respondent, in pursuance thereof, the respondent filed their reply in which following plea was raised:- “That there was no bad intention on the part of management not to make the payment of the ESI contribution or dues but it was due to the ignorance that payment could not be deposited. During this period, none of our workers even obtained the benefit for the E.S.I. Apart from it the employees share as well as the employers share was paid to us. This itself is sufficient punishment to us and we request you that the matter regarding the damages may kindly be dropped”. After taking into consideration the aforesaid plea of the respondent, the authority concerned passed the order dated 27.1.1984 and observed as under:- “The contention of the employer that none of their workers ever obtained the benefit is not legally tenable for non levy of damages. Further their contention that there was no bad intention on the part of the management to make the payment of dues is not accepted as delay whether deliberate or otherwise attracts levy of damages. FAO No. 1209 of 1987 4 The present petition has been filed under Section 75 of the Act against the order dated 27.1.1984. The Court below allowed the petition and set aside the order passed on 27.1.1984 levying damages on the respondent for the period from 1.7.1977 to 23.10.1978 and a recovery certificate dated 9.3.1984 has been issued in pursuance thereof. Delay in depositing the contribution was pointed out in the year 1984 for the first time after expiry of more than three years and in such a situation, learned counsel for the respondent had placed reliance upon two decisions of this Court in the case of M/S. Amin Chand & Sons Vs. State of Punjab and others A.I.R. 1965 Punjab 441 and New Delhi Municipal Committee Vs. Kalu Ram and another, 1976 P.L.J. 351, in which it has been held that after the expiry of three years, the claim of the Corporation had become time barred, therefore, the Corporation was not entitled to levy and recover damages. Mr.Vikas Suri, learned Senior Standing Counsel for the appellant has vehemently contended that the Court below has erred in appreciating the provisions of law while deciding the question of limitation. He has referred to the provisions of the Act in which Chapter IV pertains to contributions, Chapter V1 pertains to adjudication of dispute and claims and Chapter VII pertains to penalties. It is submitted by him that there is no period of limitation provided for the purpose of levying damages. In this regard, he has relied upon a decision of the Supreme Court in the case of ESI FAO No. 1209 of 1987 5 Corpn Vs. C.C.Santhakumar (2007) 1 Supreme Court Cases 584, to contend that in the said case, the question before the Court was “Does the proviso to clause (b) of Section 77 (1-A) fix the limit of time, in which the Corporation can make a claim from the employer on the basis of the orders passed under Section 45 ?”. The Supreme Court observed that Section 45-A is a part of Chapter IV. Section 77 (1-A) (b) proviso is contained in Chapter VI. The question is whether there is any connecting link between Chapter IV and Chapter VI. In this regard, the Apex Court has held that where an order is passed under Section 45-A, it is the duty of the employer and not the Corporation to approach the ESI Court. Since no application need be filed by the Corporation after an order is passed under Section 45- A, the limitation prescribed under Section 77 does not get attracted. The non-payment of contribution is a continuing cause, which is clear from the fact that the employer is enjoined to pay the interest under Section 39 (5) (a), which was introduced by Act 29 of 1989, until the date of its actual payment. Similarly, no limitation is provided in Chapter VII. It deals with the imposition of penalty or levy of damages upon failure to pay contributions. On the other hand, learned counsel for the respondent has contended that the impugned order dated 27.1.1984 is, in any case, contrary to the law as held by the Supreme Court in the case of Employees State Insurance Corporation v. HMT Ltd. and another (2008) 3 Supreme Court Cases 35. He contended that existence of FAO No. 1209 of 1987 6 mens-rea or actus reus to contravene a statutory provision must also be held to be a necessary ingredient for levy of damages and/or the quantum thereof. Learned counsel has referred to the impugned order dated 27.1.1984 in which the Corporation has held that there was no bad intention on the part of the management not to make the payment of dues is not accepted, as delay whether deliberate or otherwise attracts levy of damages. I have heard learned counsel for the parties and have perused the record with their assistance. So far as the argument of learned counsel for the appellant in respect of the finding recorded by the Court below that the order imposing damages was beyond period of three years and therefore, it has become time barred is concerned, the same is illegal because limitation is provided only in Section 77 (1-A) of the Act. The provision of limitation is provided under Chapter VI of the Act. There is no limitation for imposition of damages under Chapter VII of the Act, as has been held by the Supreme Court in ESI Corporation Vs. CC Santhakumar's Case (Supra). Learned counsel for the respondent failed to point out any fault with the arguments raised by learned counsel for the appellant in this regard. Therefore, it is held that the findings recorded by the Court below in this regard, are erroneous, illegal and are set aside. So far as the argument of learned counsel for the respondent is concerned that the damages have been imposed under Section 85-B of the Act mechanically on the ground FAO No. 1209 of 1987 7 that intention is not to be seen and without determining whether delay is deliberate or otherwise damages can be imposed is also contrary to law laid down by the Supreme Court in Employees State Insurance Corporation Vs. HMT Ltd. and another (Supra) wherein it has been held that existence of mens-rea or actus reus to contravene a statutory provision must also be held to be a necessary ingredient for levy of damages and/or the quantum. Learned counsel for the appellant has not been able to dispute the proposition of law as raised by the learned counsel for the respondent and also accepts that the impugned order dated 27.1.1984 passed by the Corporation runs contrary to law which has been declared by the Supreme Court. Thus, in these circumstances, the appeal filed by the Corporation is allowed. The judgment of the Court below dated 9.10.1987 and the order dated 27.1.1984 are set aside and the matter is remanded back to the statutory authority for deciding afresh to give a finding as to whether there was any deliberate attempt or any mens rea on the part of the respondent for not depositing the contribution within time in order to attract levy of damages. The parties are directed to appear before the Regional Director of the Corporation on 30.4.2009. March 23,2009 (Rakesh Kumar Jain) RR Judge Refer to Reporter: Yes.