IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED:05.02.2010 CORAM: THE HON’BLE MR. JUSTICE K.CHANDRU W.P.No.2072 of 2010 and M.P.No.1 of 2010 M/S.LAKSHMI ENGINEERING WORKS REP BY ITS MANAGING PARTNER S.NAGARAJAN NO.S-34 SIDCO INDUSTRIAL ESTATE M.K.PURAM, RANIPET 632 406 VELLORE DISTRICT. [ PETITIONER ] Vs 1 THE JOINT DIRECTOR/REVENUE EMPLOYEES STATE INSURANCE CORPORATION 143, STERLING ROAD, CHENNAI 34. 2 THE RECOVERY OFFICER EMPLOYEES STATE INSURANCE CORPORATION 143. STERLING ROAD, CHENNAI 34. 3 THE MANAGER STATE BANK OF INDIA' RANIPET-632 401 VELLORE DISTRICT. [ RESPONDENTS ] Petition under Article 226 of the Constitution of India praying for a Writ of Certiorari calling for the records on the file of the 1st respondent in proceedings in Ref.TN/Ins.II/51-23510-67 dt 26.11.2009 and quash the same. For Petitioner :: Mr. V.Raghavachari for Mr.K.Sridharkumar For Respondent :: Mrs.Jayakumari for R1 & R2 O R D E R The petitioner is a management. They are covered by the provisions of the Employees State Insurance Act (for short 'ESI Act'. The petitioner was issued with a notice as to why damages under section 85-B of the ESI Act should not be levied for delayed payment of the subscription. A Notice in Form D-18 was issued to the petitioner on 18.9.2009 claiming damages for the delayed payment of subscription. 2. The petitioner gave three reasons. The first reason was that they had paid in excess of the amount claimed. Therefore, the https://hcservices.ecourts.gov.in/hcservices/ respondents should take sympathetic view in the matter of damages. The petitioner also stated that they were to get some dues from B.H.E.L and the suit is also pending in the Munsif Court. B.H.E.L is withholding some orders and the unit is under some financial constraint. The petitioner also stated that it is a small scale unit. Therefore, 100% of levy of damages should not be done. The respondent passed the impugned order dated 26.11.2009 (30.11.2009) rejecting the case of the petitioner and passed an order under Section 85-B of the ESI Act demanding damages of Rs.1,57,692/- for the delayed contribution from June 1998 to September 2001, which ranges between 1382 days to 2913 days. The petitioner after sending a letter of protest to the 1st respondent has approached this Court seeking to challenge the impugned order. 3. Heard Mr.V.Raghavachari, learned counsel representing Mr.K.Sridhar Kumar, learned counsel for the petitioner and Mrs.Jayakumari, learned counsel for ESI Corporation. 4. The contentions raised by Mr.V.Raghavachari are two-fold. The first one is that the authorities have passed a mechanical order of levying damages. Secondly, the order does not conform to the dictum laid down by the Supreme Court in Employees' State Insurance Corporation vs. HMT Ltd.and another reported in (2008) 3 SCC 35. The learned counsel placed reliance upon the following passage found in paragraphs 20 and 21: "20. It was, however, opined that in certain situations, the employer can claim the benefit of "irretrievable prejudice" in case a demand for damages is made after several years. In that case, this Court was concerned, inter alia, with a question in regard to the effect of levy of damages after a long time. The question which, inter alia, arose for consideration therein was as to whether suo motu revisional jurisdiction could be exercised by the revisional authority at any time it desires. The Court made a distinction between the cases involving "recovery of money" from an employer who had withheld the contributions made by the workmen in trust and other cases. It was in that situation the Court opined supra. We are not concerned with such a situation herein. 21. A penal provision should be construed strictly. Only because a provision has been made for levy of penalty, the same by itself would not lead to the conclusion that penalty must be levied in all situations. Such an intention on the part of the legislature is not decipherable from Section 85-B fo the Act. When a discretionary jurisdiction has been conferred on a statutory authority to levy penal damages by reason of an enabling provision, the same cannot be construed as imperative. Even otherwise, an endeavour should be made to construe such penal provisions as discretionary, unless the statute is held to be mandatory in character." In the light of the above, the learned counsel for the petitioner seeks for setting aside the impugned order. The learned counsel also https://hcservices.ecourts.gov.in/hcservices/ submitted that the order suffers from lack of reasons and the levy of exorbitant damages is not contemplated under the Act. 5. On a careful perusal of the order passed by the Supreme Court, one can come to the conclusion that it is not as if the Supreme Court had made Section 85-B or Section 14-B either redundant or unworkable. The sum and substance of the Supreme Court decision is that there should not be a mechanical levy of damages and for the reason for the delay it held that if damages are made, after several years, there may be irretrievable prejudice. 6. Under Section 85-B of the ESI Act, it is stated that when an employer fails to pay the amount due in respect of any contribution or any other amount payable under this Act, the Corporation may recover from the employer by way of penalty such damages, not exceeding the amount of arrears as may be specified in the Regulation. For making such levy, the affected party must be given a reasonable opportunity of being heard. By Central Act 29 of 1989 with effect from 1.9.1982, the second proviso has also been introduced, which is as follows: Provided further that the Corporation may reduce or waive the damages recoverable under this section in relation to an establishment which is a sick industrial company in respect of which a scheme for rehabilitation has been sanctioned by the Board for Industrial and Financial Reconstruction established under section 4 of the Sick Industrial companies (Special Provisions)Act, 1985 (1 of 1986), subject to such terms and conditions as may be specified in regulations. 7. It is not as if the Parliament is not aware of companies, which may go through sickness and covered by the BIFR. In this case, the Parliament has given direction to the Corporation to reduce or waive the damages. In other cases, all that the Supreme Court had held was that levy of damages should not be mechanical but should be informed of reasons. 8. The contention that the impugned order does not contain any reason cannot be accepted. The respondent has given three reasons in the impugned order. The first was that there was an unusual delay in paying the subscription, which ranges between 6 to 8 years. For that explanation has to be forthcoming only from the petitioner. 9. The contentions that the petitioner had suffered some trade difficulty or that they paid in excess of the legal dues were also rejected in the impugned order. Thereafter, the impugned order also shows that the delay in making contribution was detrimental to the interest of the persons as they may delay in the payment of various benefits given to the workmen under the ESI Act. Under the circumstances, the reliance placed upon the judgment in (2008) 3 SCC 35 does not stand to reason. https://hcservices.ecourts.gov.in/hcservices/ 10. In the light of the above, the writ petition stands dismissed. No costs. Connected Miscellaneous Petition stands closed. Sd/ Asst.Registrar /true copy/ Sub Asst.Registrar ajr To 1 THE JOINT DIRECTOR/REVENUE EMPLOYEES STATE INSURANCE CORPORATION 143, STERLING ROAD, CHENNAI 34. 2 THE RECOVERY OFFICER EMPLOYEES STATE INSURANCE CORPORATION 143. STERLING ROAD, CHENNAI 34. 3 THE MANAGER STATE BANK OF INDIA RANIPET-632 401 VELLORE DISTRICT. 1 cc To Mr.K.Sridhar Kumar, Advocate, SR.7305 1 cc To Mrs.S.Jayakumari, Advocate, SR.7255 W.P.No.2072 of 2010 BVN(CO) sra 12.02.2010 https://hcservices.ecourts.gov.in/hcservices/