Allowed

The Director v. M/S. Vikram Hospital Pvt. Ltd.

Karnataka HC29 Nov 2024MFA/5143/2017

Case brief

AI extract

What is this about?

The Karnataka High Court allowed the miscellaneous first appeal filed by the ESI Corporation. It set aside the ESI Court order that reduced statutory damages by 50%, holding that such reduction is impermissible as the Respondent was not a sick industrial company or under a sanctioned Resolution Plan.

What did the court decide?

The Miscellaneous First Appeal was allowed and the impugned order reducing damages by 50% was set aside; the Respondent is liable to pay the full amount of damages ordered by the Corporation.

The Director Vs M/S. Vikram Hospital Pvt… — Pension and Retirement Benefits | Karnataka HC (2024)

¶1

¶2

IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 29^TH DAY OF NOVEMBER, 2024

¶3

BEFORE

¶4

THE HON'BLE MR. JUSTICE H.P. SANDESH

¶5

MISCELLANEOUS FIRST APPEAL NO.5143/2017 (ESI)

¶6

BETWEEN:

¶7

THE DIRECTOR, ESI CORPORATION, SUB REGIONAL OFFICE, 1 FLOOR, ESI DISPENSARY, BADEMAKAN EXTENSION, BANGALORE-MYSORE ROAD, MYSORE-570 007.

¶8

… APPELLANT

¶9

(BY SMT.GEETHA DEVI M. PAPANNA, ADVOCATE) AND:

¶10

M/S. VIKRAM HOSPITAL PVT. LTD., PARAMAHAMASA ROAD, YADAVAGIRI ROAD, MYSORE-570020, REPRESENTED BY ITS DR. S.B.VIKRAM.

¶11

… RESPONDENT

¶12

(R1-SERVED AND UNREPRESENTED)

¶13

THIS M.F.A. IS FILED UNDER SECTION 82(2) OF EMPLOYEES STATE INSURANCE ACT 1948, AGAINST THE ORDER DATED 16.05.2017 PASSED IN ESI. APPLICATION NO.2/2015 ON THE FILE OF THE EMPLOYEES STATE INSURANCE COURT,

¶14

¶15

MYSORE, PARTLY ALLOWING THE APPLICATION FILED UNDER SECTION 75(1)(g)OF THE ESI ACT AND ETC.

¶16

THIS APPEAL HAVING BEEN HEARD AND RESERVED FOR JUDGMENT ON 26.11.2024 THIS DAY, THE COURT PRONOUNCED THE FOLLOWING:

¶17

CORAM: HON'BLE MR JUSTICE H.P.SANDESH

¶18

CAV JUDGMENT

¶19

This miscellaneous first appeal is filed challenging the order dated 16.05.2017 passed in ESI Appl. No.2/2015 by the Employees’ State Insurance Court, Mysuru (herein after referred as ‘ESI Court’).

¶20

Heard the learned counsel appearing for the appellant. The respondent is served and unrepresented.

¶21

The factual matrix of the case of the appellant that the respondent has not paid the ESI contribution from May 2013 to August 2013 and hence, an action is invoked warranting levying the statutory damages. The delay varied from 181 days to 249 days in making the payment of monthly contribution. Hence, notice was issued with a show cause notice proposing to determine a damage amount of Rs.1,99,452/- invoking Section

¶22

¶23

85B of ESI Act read with Regulation 31-C. The said order was challenged before the ESI Court but ESI Court allowed in part reducing the same to 50% waiving remaining 50% of the damage amount. Hence, the present appeal is filed before this Court.

¶24

The main contention of the learned counsel for the

¶25

appellant is that no dispute with regard to the non-payment of the contribution and also no dispute with regard to the delay in making the payment. The counsel would vehemently contend that ESI Court committed an error in relying upon the judgments and fails to take note of Section 85B read with Regulation 31-C. The scope of wavier of damage is only in the circumstances mentioned therein at second proviso to sub-section (1) of Section 85B of ESI Act. The powers are exercised by virtue of Sections 38, 39, 40 of the ESI Act. The counsel also would submit that this Court already considered the same issue in M.F.A.No.5144/2014 vide order dated 02.06.2023 relying upon the judgment of the Apex Court in the case of HORTICULTURE EXPERIMENT STATION GONIKOPPAL, COORG vs

¶26

¶27

REGIONAL PROVIDENT FUND ORGANIZATION reported in

¶28

(2022) 4 SCC 516 wherein the Apex Court held that failure to deposit contribution – imposition of damages for delayed payment – Breach of civil obligations/liabilities committed by employer. The Apex Court held that the same is sufficient for imposition of penalty or damages. There is no further requirement on authority concerned to examine existence of element of actus reus/mens rea or to examine issue of justification, for imposing damages. The counsel referring the order passed by this Court considering the judgment of the Apex Court submits that the same is squarely applicable to the facts of the case on hand. Hence, prays for set aside the impugned order.

¶29

Having considered the grounds urged in the appeal

¶30

memo and also considering the arguments of the learned counsel for the appellant, the points that would arise for consideration of this Court are:

¶31

Whether the ESI Court committed an error

¶32

reducing the damage to 50%?

2. What order?

Point No.1

Having heard the learned counsel appearing for the appellant and also on perusal of the material available on record, it discloses that the appellant’s contention is that the order is against Section 85B of ESI Act and also against the Regulation 31C of the said Act and ought not to have reduced to 50% of the amount waving the remaining 50% of the amount of damages. This Court also while narrating the facts of the case also taken note of the judgment relied upon by the counsel for the appellant and also the principles laid down in the judgment referred supra in the case of HORTICULTURE EXPERIMENT

¶37

STATION GONIKOPPAL, COORG wherein also the Apex Court

¶38

held that there is no further requirement on authority concerned to examine existence of element of actus reus/mens rea or to examine issue of justification, for imposing damages. In view of the principles laid down in the judgment as well as Section 85B, it is clear that only could be reduced in relation to a establishment which is a sick industrial company in respect of

¶39

¶40

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 that is also subject to terms and conditions as may be specified in regulations.

¶41

It is also important to note that Regulation 31C of

¶42

the said Act also very clear if it is delay more than six months, 25% has to be imposed as damages and also proviso of Regulation 31C is very clear that if the Corporation in relation to a company in respect of which a Resolution Plan has been sanctioned by the National Company Law Tribunal under the Insolvency and Bankruptcy Code may waive 50% of the damages levied or leviable depending upon merits of the case. It is also clear that in exceptional hard cases, waive either totally or partially the damages levied or leviable. No such circumstances warranted in the case on hand except stating that Corporation also having dues in favour of the respondent herein and unless the same has been determined in a separate proceedings, same cannot be taken note of.

¶43

¶44

It is also important to note that other reason is given that Mens rea is one of the aspect to be considered for levy of the damages. In view of the judgment referred supra in the case of HORTICULTURE EXPERIMENT STATION

¶45

GONIKOPPAL, COORG, the same cannot be a criteria. The other ground is stated by the Trial Court is financial stringency of the applicant/company the amount claimed by the authority is exorbitant and it has to be reduced. This reason is also as against Section 85B as well as Regulation 31C of the ESI Act. It is not in dispute that contribution is paid belatedly and it is also statutory obligation on the part of the employer to contribute within 21 days after completion of the wage period and there is an inordinate delay in the case on hand, in payment of contribution. When such being the case, question of reducing the same to 50% does not arise and the discretion exercised by the ESI Court is erroneous and the same is not in consonance with Section 85B proviso as stated above and damages calculated based on 31C of ESI Regulations and same is not declared as a sick industry and also no such National Company Law Tribunal a Resolution Plan has been sanctioned under the

¶46

¶47

Insolvency and Bankruptcy Code. Hence, there is a force in the contention of the appellant’s counsel that the ESI Court has committed an error in passing such an order. This Court already considered the same issue in other matters and also in M.F.A.No.5144/2017 referred supra. Hence, it requires interference of this Court. Accordingly, I answer the above point as affirmative.

¶48