Karnataka High Court
Regional Director vs The Management Of Bangalore Turf Club ... on 10 October, 2025
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 10TH DAY OF OCTOBER, 2025
PRESENT
THE HON'BLE MRS. JUSTICE ANU SIVARAMAN
AND
THE HON'BLE DR. JUSTICE K.MANMADHA RAO
MISCELLANEOUS FIRST APPEAL NO. 7035 OF 2022 (ESI)
C/W
MISCELLANEOUS FIRST APPEAL NO.6944 OF 2022
MISCELLANEOUS FIRST APPEAL NO.6954 OF 2022
MISCELLANEOUS FIRST APPEAL NO.7003 OF 2022
MISCELLANEOUS FIRST APPEAL NO.7004 OF 2022
MISCELLANEOUS FIRST APPEAL NO.7005 OF 2022
MISCELLANEOUS FIRST APPEAL NO.7007 OF 2022
MISCELLANEOUS FIRST APPEAL NO.7008 OF 2022
MISCELLANEOUS FIRST APPEAL NO.7019 OF 2022
MISCELLANEOUS FIRST APPEAL NO.7687 OF 2022
MISCELLANEOUS FIRST APPEAL NO.7690 OF 2022
MISCELLANEOUS FIRST APPEAL NO.7691 OF 2022
MISCELLANEOUS FIRST APPEAL NO.7695 OF 2022 (ESI)
IN MFA NOS.7035 OF 2022, 6944 OF 2022, 6954 OF 2022,
7004 OF 2022, 7005 OF 2022, 7007 OF 2022,
7008 OF 2022, 7019 OF 2022, 7687 OF 2022,
7690 OF 2022, 7691 OF 2022, AND 7695 OF 2022
BETWEEN:
1. REGIONAL DIRECTOR
EMPLOYEES STATE INSURANCE CORPORATION
REGIONAL OFFICE, NO.10, BINNY FIELDS,
BINNYPET, BENGALURU - 23.
REPRESENTED BY ITS AUTHROISED
OFFICER DEPUTY DIRECTOR
2. THE RECOVERY OFFICER,
ESI CORPORATION,
NO.10, BINNY FIELDS
BINNYPET, BENGALURU - 23.
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REPRESENTED BY ITS AUTHORISED
OFFICER DEPUTY DIRECTOR
... COMMON APPELLANTS
(BY SMT: GEETHA DEVI M.P., ADVOCATE)
AND:
1. THE MANAGEMENT OF
BANGALORE
TURF CLUB LIMITED,
NO.52, RACE COURSE ROAD,
BENGALURU - 560 001.
REPRESENTED BY ITS
SECRETARY
..... COMMON RESPONDENT
(BY SRI: ANAND K.R., ADVOCATE)
MFA NO 7003 OF 2022
BETWEEN:
1. REGIONAL DIRECTOR
EMPLOYEES STATE INSURANCE CORPORATION
REGIONAL OFFICE, NO.10, BINNY FIELDS,
BINNYPET, BENGALURU - 23.
REPRESENTED BY ITS AUTHROISED
OFFICER DEPUTY DIRECTOR
2. THE RECOVERY OFFICER,
ESI CORPORATION,
NO.10, BINNY FIELDS
BINNYPET, BENGALURU - 23.
REPRESENTED BY ITS AUTHORISED
OFFICER DEPUTY DIRECTOR FOR A1 & A2
...APPELLANTS
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(BY SMT: GEETHA DEVI M.P., ADVOCATE)
AND:
1. THE MANAGEMENT OF
BANGALORE
TURF CLUB LIMITED,
NO.52, RACE COURSE ROAD,
BENGALURU - 560 001.
REPRESENTED BY ITS
SECRETARY
......RESPONDENT
(BY SRI: ANAND K.R., ADVOCATE)
MFA 7035 OF 2022 FILED U/S 82(2) OF EMPLOYEES STATE
INSURANCE ACT 1948, AGAINST THE ORDER DATED 27.05.2022
PASSED IN ESI. APPLICATION NO. 11/2015 ON THE FILE OF THE
EMPLOYEES STATE INSURANCE COURT, BENGALURU, PARTLY
ALLOWING THE APPLICATION FILED UNDER SECTION 75 AND 76
OF THE ESI ACT.
MFA 6944 OF 2022 FILED U/S.82(2) OF EMPLOYEES STATE
INSURANCE ACT, AGAINST THE ORDER DATED 31.05.2022
PASSED IN ESI APPLICATION NO.14/2015 ON THE FILE OF THE
EMPLOYEES STATE INSURANCE COURT, BENGALURU, PARTLY
ALLOWING THE APPLICATION FILED UNDER SECTION 75 AND 76
OF EMPLOYEE STATE INSURANCE ACT.
MFA 6954 OF 2022 FILED U/S 82(2) OF EMPLOYEES STATE
INSURANCE ACT, AGAINST THE ORDER DATED 31.05.2022
PASSED IN ESI. APPLICATION NO. 20/2015 ON THE FILE OF THE
EMPLOYEES STATE INSURANCE COURT, BENGALURU, PARTLY
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ALLOWING THE APPLICATION FILED UNDER SECTION 75 AND 76
OF THE ESI ACT.
MFA 7003 OF 2022 FILED U/S 82(2) OF EMPLOYEES STATE
INSURANCE ACT, AGAINST THE ORDER DATED 31.05.2022
PASSED IN ESI. APPLICATION NO.17/2015 ON THE FILE OF THE
EMPLOYEES STATE INSURANCE COURT, BENGALURU, PARTLY
ALLOWING THE APPLICATION FILED UNDER SECTION 75 AND 76
OF THE ESI ACT.
MFA 7004 OF 2022 FILED U/S 82(2) OF EMPLOYEES STATE
INSURANCE ACT, AGAINST THE ORDER DATED 31.05.2022
PASSED IN ESI. APPLICATION NO.23/2015 ON THE FILE OF THE
EMPLOYEES STATE INSURANCE COURT, BENGALURU, PARTLY
ALLOWING THE APPLICATION FILED UNDER SECTION 75 AND 76
OF THE ESI ACT.
MFA 7005 OF 2022 FILED U/S 82(2) OF EMPLOYEES STATE
INSURANCE ACT , AGAINST THE ORDER DATED 27.05.2022
PASSED IN ESI. APPLICATION NO. 10/2015 ON THE FILE OF THE
EMPLOYEES STATE INSURANCE COURT, BENGALURU, PARTLY
ALLOWING THE APPLICATION FILED UNDER SECTION 75 AND 76
OF THE ESI ACT.
MFA 7007 OF 2022 FILED U/S 82(2) OF EMPLOYEES STATE
INSURANCE ACT, AGAINST THE ORDER DATED 31.05.2022
PASSED IN ESI. APPLICATION NO.22/2015 ON THE FILE OF THE
EMPLOYEES STATE INSURANCE COURT, BENGALURU, PARTLY
ALLOWING THE APPLICATION FILED UNDER SECTION 75 AND 76
OF THE ESI ACT.
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MFA 7008 OF 2022 FILED U/S 82(2) OF EMPLOYEES STATE
INSURANCE ACT, AGAINST THE ORDER DATED 31.05.2022
PASSED IN ESI. APPLICATION NO. 25/2015 ON THE FILE OF THE
EMPLOYEES STATE INSURANCE COURT, BENGALURU, PARTLY
ALLOWING THE APPLICATION FILED UNDER SECTION 75 AND 76
OF THE ESI ACT.
MFA 7019 OF 2022 FILED U/S 82(2) OF EMPLOYEES STATE
INSURANCE ACT, AGAINST THE ORDER DATED 31.05.2022
PASSED IN ESI. APPLICATION NO.12/2015 ON THE FILE OF THE
EMPLOYEES STATE INSURANCE COURT, BENGALURU, PARTLY
ALLOWING THE APPLICATION FILED UNDER SECTION 75 AND 76
OF THE ESI ACT.
MFA 7687 OF 2022 FILED U/S 82(2) OF EMPLOYEES STATE
INSURANCE ACT 1948, AGAINST THE ORDER DATED 31.05.2022
PASSED IN ESI. APPLICATION NO. 06/2015 ON THE FILE OF THE
EMPLOYEES STATE INSURANCE COURT, BENGALURU, PARTLY
ALLOWING THE APPLICATION FILED UNDER SECTIONS 75 AND
76 OF THE ESI ACT.
MFA 7690 OF 2022 FILED U/S 82(2) OF EMPLOYEES STATE
INSURANCE ACT 1948, AGAINST THE ORDER DATED 27.05.2022
PASSED IN ESI. APPLICATION NO. 13/2015 ON THE FILE OF THE
EMPLOYEES STATE INSURANCE COURT, BENGALURU, PARTLY
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ALLOWING THE APPLICATION FILED UNDER SECTIONS 75 AND
76 OF THE ESI ACT.
MFA 7691 OF 2022 FILED U/S 82(2) OF EMPLOYEES STATE
INSURANCE ACT 1948, AGAINST THE ORDER DATED 27.05.2022
PASSED IN ESI. APPLICATION NO. 08/2015 ON THE FILE OF THE
EMPLOYEES STATE INSURANCE COURT, BENGALURU, PARTLY
ALLOWING THE APPLICATION FILED UNDER SECTIONS 75 AND
76 OF THE ESI ACT.
MFA 7695 OF 2022 FILED U/S 82(2) OF EMPLOYEES STATE
INSURANCE ACT, AGAINST THE ORDER DATED 27.05.2022
PASSED IN ESI. APPLICATION NO. 33/2016 ON THE FILE OF THE
EMPLOYEES STATE INSURANCE COURT, BENGALURU, PARTLY
ALLOWING THE APPLICATION FILED UNDER SECTIONS 75 AND
76 OF THE ESI ACT.
THESE APPEALS HAVING BEEN HEARD AND RESERVED FOR
JUDGMENT ON 21.07.2025 AND COMING ON FOR
PRONOUNCEMENT OF JUDGMENT THIS DAY, ANU SIVARAMAN
J., PRONOUNCED THE FOLLOWING:
CORAM: HON'BLE MRS. JUSTICE ANU SIVARAMAN
and
HON'BLE DR. JUSTICE K.MANMADHA RAO
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CAV JUDGMENT
(PER: HON'BLE MRS. JUSTICE ANU SIVARAMAN) Miscellaneous First Appeals No.7035/2022, 6944/2022, 6954/2022, 7003/2022, 7004/2022, 7005/2022, 7007/2022, 7008/2022, 7019/2022, 7687/2022, 7690/2022, 7691/2022 and 7695/2022 are filed aggrieved by the order dated 27.05.2022, 31.05.2022, 31.05.2022, 31.05.2022, 31.05.2022, 27.05.2022, 31.05.2022, 31.05.2022, 31.05.2022, 31.05.2022, 27.05.2022, 27.05.2022 and 27.05.2022 passed by the Employees State Insurance Court at Bengaluru in E.S.I Applications No.11/2015, 14/2015, 20/2015, 17,2015, 23/2015, 10/2015, 22/2015, 25/2015, 12/2015, 06/2015, 13/2015, 08/2015 and 33/2016, respectively.
2. We have heard Smt. Geetha Devi M.P, learned counsel appearing for the appellants and Shri. Anand K.R, learned counsel appearing for the respondent.
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3. These appeals are filed raising the following substantial questions of law:-
(i) Whether the ESI Court did not err in not levying interest from the due date as provided under Section 35(5) of the ESI Act.
(ii) Whether the finding of the ESI Court that the Application is not barred by limitation is sustainable in law as it is against Section 77 of the ESI Act?
In some of these appeals, an additional question is also raised as follows:-
(iii) Whether the Order of ESI Court modifying the contribution payable based on some formula is sustainable in law and is it not in contravention of the Section 45A of the ESI Act and also the judgment of Apex Court in Modella Wollen case?
4. The brief facts of the case are as follows:-
The respondent - Bangalore Turf Club Limited ('Turf Club' for short) was covered under Section 1(3) of the Employees' State Insurance Act, 1948 ('ESI Act' for short)
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with effect from 01.01.1984, as far as the printing press conducted by it was concerned. The Turf Club was paying contributions in respect of the printing press and the employees employed therein. On 27.01.1985, the Government of Karnataka issued a Notification under Section 1(5) of the ESI Act extending the coverage of the Act to various establishments including Clubs and Shops.
The respondent - Turf Club disputed the coverage under the Notification. On 31.05.1988, the Regional Director, Employee State Insurance ('ESI' for short), Bangalore conducted an enquiry and passed an order holding that the Turf Club is liable to be covered under the Notification issued under Section 1(5) of ESI Act and that contributions are payable. The respondent challenged this order in EI No.20/1989, disputing the order passed by the Regional Director and the finding that contributions are payable and the ESI Court dismissed the EI in the year 1998.
5. The respondent filed MFA No.3699/1988 before this Court. The said MFA was also dismissed on 04.09.2002. Thereafter, an SLP was filed by the respondent before the
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10 Apex Court, which was considered and the appeal was numbered as Civil Appeal No.2416/2003. The respondent had failed to pay the contributions for the entire period from the date of coverage, that is, 27.01.1985 onwards. In the meanwhile, the Apex Court referred the issue of coverage of Turf Club under the ESI Act to a larger Bench.
6. Though there was no interim order in the MFA or the SLP, till that date, the Apex Court while referring the matter by its order dated 28.04.2009, ordered that while the matter was being considered by the larger Bench pursuant to the reference, the respondent shall not raise any demand against the appellant - Club. Thereafter, the matter was heard by a Bench of three judges and the reference was answered holding that the appellant - Club would fall within the meaning of the word 'Shop' as mentioned in the Notification issued under the ESI Act and that the provisions of the ESI Act would extend to the Turf Club as well. The judgment of the Bench was dated 31.07.2014. Thereafter, recovery proceedings were initiated on 09.02.2015 to recover the amount under order dated 13.11.2008,
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11 28.11.2008 and 05.02.2016, which included contributions and interest passed under Section 45A of the ESI Act.
7. Therefore, show cause notices were issued and determination orders were passed in respect of the different wage periods. It was against the said determination orders passed under Section 45A of the ESI Act that the applications were preferred before the ESI Court. The details of the orders and the applications in each of these cases as provided by the learned counsel for the appellants are being reproduced herein:-
Sl. MFA Wage Contribution Show 45A Order Recovery EI No. Delay No. Number period cause notice days notice Division Bench 1 7003/2022 01/1985- Rs.16,76,900/- 13.11.2008 09.02.2015 20/2015 1212 03/1998 March 2015 2 7004/2022 1/1997- Rs.17,66,519/- 26.12.2005 28.11.2008 09.02.2015 23/2015 1212 5/1999 March 2015 3 7005/2022 04/1999- Rs.72,12,815/- 26.12.2005 13.11.2008 09.02.2015 10/2015 1212 03/2001 March 2015 4 7006/2022 04/2001- Rs.79,01,276/- 26.12.2005 13.11.2008 09.02.2015 09/2015 1212 03/2003 March 2015 5 7007/2022 01/1995- Rs.36,24,068/- 23.12.2005 13.11.2008 09.02.2015 22/2015 1212 12/1996 March 2015 6 7008/2022 4/1999- Rs.9,89,525/- 26.12.2005 13.11.2008 09.02.2015 20/2015 1212 3/2001 March 2015 7 7019/2022 4/2001- Rs.1,82,74,092/- 26.12.2005 13.11.2008 09.02.2015 12/2015 1212 3/2003 March 2015
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12 8 7031/2022 10/2006- Rs.25,99,740/- 16.04.2008 20.04.2009 09.02.2015 16/2015 1060 3/2007 March 2015 9 7035/2022 04/1999- Rs.51,38,118/- 26.12.2005 13.11.2008 09.02.2015 11/2015 1212 03/2001 March 2015 10 7687/2022 04/2003- Rs.15,50,815/- 19.09.2006 13.11.2008 09.02.2015 06/2015 1212 03/2005 March 2015 11 7690/2022 04/2003- Rs.63,77,804/- 19.09.2006 13.11.2008 09.02.2015 13/2015 1212 05/2006 March 2015 12 7691/2022 01/1997- Rs.21,00,036/- 26.12.2005 13.11.2008 09.02.2015 08/2015 1212 03/1998 March 2015 13 7695/2022 04/2007- Rs.1,03,98,960/- 13.08.2009 05.02.2016 33/2016 03/2009 March 2016
8. The respondent herein had raised a contention before the ESI Court that during the pendency of the proceedings before the various Courts there was a stay order against initiating proceedings and therefore the appellants cannot calculate interest for the said period.
Further, it was the contention of the respondent that the applications were within time since the recovery proceedings were initiated only in 2015, after the Apex Court finally decided on the issue of coverage. Further, it was contended that the amount booked under the head "Head of Account Salary and Temporary Staff Wages" in the books of accounts of the Company, could not be the sole basis for deciding the
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13 contribution payable without verifying the salary register. The calculation of contribution was also challenged on the basis that other heads of accounts were also taken into account erroneously, for calculating the contribution.
9. The appellants filed an objection pointing out that the applications are hopelessly barred by limitation under Section 77(1A) of the ESI Act and that the challenge against the orders passed under Section 45A of the ESI Act, in the year 2008 could not have been raised after the period of three years as provided in Section 77(1A) of the ESI Act. Further, it was also contended that show cause notices had been issued and the employer who did not attend the hearing or raised contentions against the determination of the contribution could not raise a challenge on those grounds. Further, it was also contended that there was no stay of the coverage or the recovery at any stage in the proceedings before this Court of the Apex Court and that the contentions to that effect are completely untenable.
10. The ESI Court accepted the factum of coverage as well as the quantification made by the appellants in part.
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14 However, it was found that the question of coverage was pending before the Courts for more than a decade and that the respondent is liable to interest only for a period of 8 months from 31.07.2014 to 09.02.2015. The Court also took the date of issuance of recovery notices as the date when the cause of action arose and held that the applications filed under Section 77(1) were within time.
11. In support of this contention, a reliance was placed on a judgment of this Court in the case of H.M.T. Limited, Watch Factory IV, Tumkur v. Employees' State Insurance Corporation and Another reported in 1998 (1) LLJ 841. Further, relying on the decision in the case of Harsh Dhingra v. State of Haryana and Others reported in AIR 2001 SC 3795, the ESI Court found that prospective declaration of law is possible and that the declaration by the Apex Court with regard to coverage has to be construed has been prospective in nature.
12. Further, the calculations submitted by the Establishments in a tabular format were accepted and it was found that only 25% of the amount is to be considered to
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15 calculate the contribution. On the specific finding that there was an interim stay by the Apex Court, the ESI Court also held that interest could not be calculated for the period when the parties were before the Courts of law.
13. The learned counsel appearing for the appellants contends that the period of limitation to file an application under Sections 75 to 77 of the ESI Act before the ESI Court is mandated by Section 77(1A) of the ESI Act. Such application has mandatorily to be made within a period of three years from the date on which the cause of action arose. It is submitted that explanation (b) to Section 77(1A) of the ESI Act provides that the cause of action in respect of a claim by the Corporation for recovering contributions (including interest and damages) from the principal employer shall be deemed to have arisen on the date on which such claim is made by the Corporation for the first time.
14. It is further submitted that Section 45A of the ESI Act provides for an order determining the amount of contribution payable in respect of the employees of the
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16 establishment. It is submitted that the determination of the contribution payable would amount to the raising of the claims as provided in explanation (b) to sub-Section 1(A) of Section 77 of the ESI Act. As such, the date of issuance of certificate under Section 45C is of no relevance for calculating the time for filing the application under Section 77 of the ESI Act and the time is to be computed from the date of the order under Section 45A of the ESI Act.
15. It is submitted that there was no challenge to the notification dated 27.01.1985 at the instance of the petitioner before this Court or the Apex Court and all that was challenged were the orders of the Regional Director dated 31.05.1988 and consequent demands. The EI as well as the MFA were dismissed. It is submitted that even in the SLP, which was filed in the year 2003 and was pending before the Apex Court, there was no stay of the notification providing for coverage or even of any demand for realization of the contributions payable. It is contended that the interim protection granted was only by the reference order dated 28.04.2009 and that too, was only against the raising
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17 of any demand against the appellant Club. It is submitted that the demand stood raised under Section 45A of the ESI Act as early as on 13.11.2008, 28.11.2008 and 05.02.2016, in the absence of any interdictory order passed by the Apex Court, the time continued to run from then onwards. It is submitted that on 31.07.2014, the larger Bench of the Apex Court also answered the reference against the respondent and held that the Turf Club is an establishment under the ESI Act and is therefore liable to be covered under the Notification issued under Section 1(5) of the ESI Act. It is therefore contended that he applications filed long after the period provided under Section 77(1A) of the ESI Act expired could not have been considered by the ESI Court. Placing reliance on Regulation 10B, 29, 31, 31A, 31B of the Employees' State Insurance (General) Regulations, 1950, it is contended that since there was no stay of the coverage, the unpaid contributions would carry interest as statutorily provided, which could not have been waived by the ESI Court.
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16. Relying on the judgment of the Apex Court in the case of Kanoria Chemicals and Industries Ltd. and Others v. U.P. State Electricity Board and Others reported in (1997) 5 SCC 772, it is contended that where the Apex Court did not stay the operation of the Notification, but only restrained the Board from collecting the arrears, there was no injunction restraining the collecting of the amounts at the enhanced rates. It is contended that an order of stay granted pending disposal of the reference comes to an end with the dismissal of the substantive proceeding and the parties are put back in the same position that they would have been, but for the interim orders of the Court. It is contended that in the absence of any order of stay against the coverage, the coverage continued and the demands having already been raised, any application would have to be filed within the time provided from the date of the demand, failing which, it could not have been considered by the Court.
17. Reliance is also placed on the decision of the Apex Court in the case of Modella Wollens Ltd. v. Employees'
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19 State Insurance Corporation and Another reported in 1994 Supp (3) SCC 580, to contend that in view of the provisions of the ESI Act, it was for the respondent to approach the ESI Court filing an application to substantiate and prove that the amount demanded by the Corporation was incorrect and as to what the correct amount to be paid was. The judgment of this Court in the case of Regional Director, Employees' State-Insurance Corporation v. P.R. Packaging Company and Others reported in 2001 (4) L.L.N. 1212 is also relied on to contend that the burden of proof to prove that the amount demanded is incorrect is always on the applicant before the ESI Court.
18. The learned counsel has also relied on Goetze (India) Limited v. Employees' State Insurance Corporation reported in (2008) 8 SCC 705, to contend that the liability to pay interest under the provisions of the ESI Act is a statutory liability and there is no power to waive such liability. It was held by the Apex Court that the question of any compromise or settlement does not arise and the responsibility to pay statutory interest would subsist
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20 if the amount is not paid in time. Reliance is also placed on Transport Corporation of India Limited through Santu Patra, Manager- Legal v. Employees State Insurance Corporation and Others reported in (2021) 11 SCC 335 on the same point.
19. In Employees State Insurance Corporation v. Karnataka State Small Industries development Corporation Ltd reported in ILR 2006 KAR 4015, this Court held as follows:-
"10. What is required to be kept in mind while examining this question is that the ESI Act is a social welfare legislation whereunder the deduction and payment of contribution has been mandated for the health and welfare of the employees who are employed in the covered establishment. In the instant case, as already noted above, the fact that the establishment is covered with effect from 27.1.1985 cannot be in dispute since the same was conceded by the KSSIDC in the original ESI proceedings itself. If that be so, the next question would be as to the liability of KSSIDC to pay the contribution and the period during which such liability had arisen. In this regard the dates are quite clear inasmuch at once the establishment is covered under the Act. The contribution would have to be paid for every wage period from the date of coverage. In these appeals, the wage periods in question is February 1985 to March 1987. With regard to payment of contribution for the said wage period, nodoubt at the
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first instance, ESI Corporation by its order dated 3.1.1989 had determined the contribution at Rs.19,27,248/- and against such determination, the KSSIDC had filed ESI Application No.39/1989 and the same was pending before the ESI Court till its disposal on 7.2.1997. It is not in dispute that during the pendency of the said proceedings, the order dated 3.1.1989 had been stayed by the ESI Court. Subsequently when the ESI application was disposed of by the ESI Court on 7.2.1997, the contribution which had been determined by the ESI Corporation was reduced by the ESI Court to Rs.6,47,380.48 ps. The said determined contribution was deposited on 25.10.1997. Further, the provisions of the Act and the regulations extracted above would clearly indicate that the Act has cast a duty on the employer himself to deduct the contribution from the empolyee and pay his contribution and for the delayed payment, the levy of interest is also contemplated under Section 39(5)(a) read with Regulations 31 and 31A. On these aspects there is no confusion whatsoever nor can the power of the ESI Corporation to levy interest be disputed in view of the unambiguous language in the provisions referred to above."
20. The learned counsel also relied on the following decisions:-
• M/s Dharak Limited v. The Regional Director, ESI Corporation and Another reported in ILR 2001 KAR 5674;
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• Syndicate Marine Enterprises v. Regional Director Regional Office Corporation (2009) reported in LAWS(BOM)-2009-2-149;
• The Bangalore Turf Club Limited v. The Regional Director, ESI Corporation reported in ILR 2002 KAR 4563;
• Bangalore Turf Club Limited v. Regional Director, Employees' State Insurance Corporation reported in (2009) 15 SCC 33;
• Bangalore Turf Club Limited v. Regional Director, Employees' State Insurance Corporation reported in (2014) 9 SCC 657;
• Rajasthan Housing Board and Others v. Krishna Kumari reported in (2005) 13 SCC 151;
• E.S.I. Corporation Represented by its Joint Director Sub Regional Office v. Kajah Enterprises (P) Ltd., represented by Joint Managing Director A. Abdul Azeez reported in 2023 SCC OnLine Mad 3858;
• Style(Dress Land) v. Union Territory, Chandigarh and Another reported in (1999) 7 SCC 89;
• M/s. Bharath Coffee House v. Regional Director, Employees State Insurance Corporation reported in 2006 SCC OnLine Ker 788;
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• Employees' State Insurance Corporation v. Hotel Kalpaka International reported in (1993) 2 SCC 9;
• Regional Director, E.S.I, Corporation v. Kerala State Drugs and Pharmaceuticals Ltd. and Others reported in 1995 Supp (3) SCC 148; • Employees' State Insurance Corpn. v. Harrison Malayalam Pvt. Ltd. reported in (1993) 4 SCC 361;
• Employees State Insurance Corporation Rep. by its Regional Director, Chennai v. Broadline Computer Systems Rep. by its General Manager, Chennai reported in 2021 SCC OnLine Mad 16979;
• M/s Escorts Ltd. v. Regional Director, ESIC reported in ILR 1986 KAR 3595, and • Gasket Radiators Pvt. Ltd. v. Employees' State Insurance Corporation and Another (1985) 2 SCC 68.
21. The learned counsel appearing for the respondent, on the other hand, contended that the respondent had challenged its coverage under the ESI Act by preferring an application leading to an order dated 13.10.1988 which was taken up in appeal before this Court and thereafter to the Apex Court. The Apex Court held that
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24 the respondent would be coverable under the provisions of the ESI Act. Till the date of judgment, interim order granted in favour of the respondent was in force. Following the decision of the Apex Court, the ESI Corporation initiated recovery.
22. The recovery orders were challenged before the ESI Court and the ESI Court stayed recovery subject to deposit of certain amounts. The ESI Court, considering the total number of cases pending between the respondent on one hand and the appellant on the other and the voluminous documents produced found that, the claim period was overlapping in more than one order passed under section 45A of the ESI Act and directed the appellant to re-verify the records and submit their report. The respondent accepted the re-verification and agreed to pay contributions to be adjusted against deposits already made under interim order.
23. The ESI Court, on the issue of interest held that the liability would arise only for an 8 month period between the judgment of the Apex Court and the respondent's deposit, rather than 7 years as claimed by the ESI
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25 Corporation, because the recovery was stayed throughout the earlier period. The Court found that the appellant's claim for interest was unsustainable and the judgments relied on by the appellant from 1985 was inapplicable. Pursuant to the order of the ESI Court, the respondent sought for refund of amounts deposited but the appellants failed to refund till date. The appellant's grounds in appeal are not legally tenable and the ESI Court's order on interest requires no interference.
24. It is further submitted that the Club was providing comparable medical facilities to its employees till the issue of coverage was finally decided by the Apex Court and that the recovery of contribution with interest would amount to double payment by the Club. It is contended that it is considering all these aspects that the ESI Court had passed a reasoned order, which is not liable to be interfered with.
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25. In support of his contentions, he has relied on the following judgments:-
• BPL Limited and Others v. R. Sudhakar and Others reported in (2004)-II-LLJ-834;
• Ravi S Naik and Sanjay Bandekar v. Union of India and Others reported in MANU/SC/0366/1944;
• Regional Director E.S.I Corporation v. Cannanore Spinning and Weaving Mills reported in 2001 II 1573;
• ESI Corporation v. Kothamangalam dated 06.11.2006 in MFA No.1199/1999;
• All Assam English Medium Schools Association, Guwahati and Another v. State of Assam and Others reported in 2016 LLR 1001;
• Central Board of Trustees, EPF v. Managing Director, Rajgad Sakhar Karkhana reported in 2019 LLR 90;
• H.M.T. Limited, Watch Factory IV, Tumkur v. Employees' State Insurance Corporation and Another in W.P.No.22421/1997 with 31947/1997 dated 21.01.1998; and • Employees State Insurance Corporation and Ors. v. Jardine Henderson Staff Association and Ors. reported in MANU/SC/3424/2006.
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26. We have considered the contentions advanced. It is clear that the Notification under Section 1(5) of the ESI Act extending the provisions of the Act to Clubs and other Establishments had been issued by the Government of Karnataka on 27.01.1985. The said notification was not challenged by the respondent. On 31.05.1988, the Regional Director, ESI conducted enquiry and passed an order holding that the Club is liable to be covered under Section 1(5) Notification of the ESI Act. This was the order against which EI No.20/1989 was filed by the respondent disputing the coverage. The said EI was dismissed in the year 1998. MFA No.3699/1988 was filed on 21.08.1998, which was also dismissed on 04.09.2002. It is thereafter that an SLP was filed. There was no interim order of stay in the MFA or even before the Apex Court in the SLP. While the SLP was pending, on 13.11.2008, 28.11.2008 and thereafter on 05.02.2016 orders under Section 45A of the ESI Act were passed by the Corporation. An order referring the cases to a larger Bench was passed by a two-Judge Bench of the Hon'ble Supreme Court of India on 28.04.2009. While
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28 referring the matter to a Larger Bench, the two Judge Bench directed as - "No further demands shall be raised". Therefore, it is clear that there was no stay of the coverage or of the demands already raised before the Apex Court at any point in time. The reference was also answered against the respondent on 31.07.2014. In the said order, the three- Judge Bench of the Hon'ble Supreme Court of India in the case of Bengalore Turf Club Limited v. Regional Director, Employees' State Insurance Corporation reported in (2014) 9 SCC 657, specifically held as under:-
"67. In light of the above discussions, the reference is answered in the following terms:
67.1. A "race club" is an "establishment" as rightly held in ESI Corpn. v. Hyderabad Race Club;
67.2. The appellant Turf Clubs are duly covered under the term "shop" for the purposes of the ESI Act and notifications issued thereunder.
68. The aforementioned are the only two issues that arise in the matter pertaining to Bangalore Turf Club Ltd., and as a consequence are the only issues dealt with in the present reference.
69. In the matters regarding Royal Western India Turf Club Ltd., it is brought to our notice by Shri J.P. Cama,
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learned counsel, that there are other issues involved as well. Therefore, we now send back the matters i.e. CAs Nos.49, 1575 of 2006, 3421 and 3422 of 2012 insofar as Royal Western India Turf Club Ltd. to an appropriate two- Judge Bench of this Court for adjudication and decision on the issues not addressed herein.
70. In our view, the interim order granted earlier need not be continued further. Accordingly, we vacate the same. Civil Appeal No.2416 of 2003 is disposed of accordingly."
Thereafter, the recovery proceedings were initiated to recover the amounts for which the determination orders under Section 45A of the ESI Act had already been passed.
27. The Apex Court in Goetze (India) Limited's case (supra), has specifically held that the liability to pay interest under the provisions of the ESI Act is statutory in nature and that there is no power to waive such liability. It is also pertinent to note that the judgment in H.M.T. Limited, Watch Factory IV, Tumkur's case (supra), dated 21.01.1998, which is relied on by the ESI Court as well as the respondent has been over-ruled in Employees' State Insurance Corporation v. HMT Ltd. and another reported in (2008) 3 SCC 35.
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28. Section 1(5) of the ESI Act reads as follows:-
"1. Short title, extent, commencement and application.-
(5) The appropriate Government may, in consultation with the corporation and [where the appropriate Government is a State Government, with the approval of the Central Government], after giving "[one month's] notice of its intention of so doing by notification in the Official Gazette, extend the provisions of this Act or any of them, to any other establishment or class of establishments, industrial, commercial, agricultural or otherwise:
[Provided that where the provisions of this Act have been brought into force in any part of a State, the said provisions shall stand extended to any such establishment or class of establishments within that part if the provisions have already been extended to similar establishment or class of establishments in another part of that State.]"
Section 2A of the ESI Act reads as follows:-
"[2A. Registration of factories and
establishments.- Every factory or
establishment to which this Act applies shall be
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registered within such time and in such manner as may be specified in the regulations made in this behalf.]"
Section 38 of the ESI Act provides that all employees in factories or establishments to which the Act applies shall be insured in manner provided by the Act.
Section 39 of the ESI Act provides that contribution payable in respect of an employee shall comprise contribution payable by the employer as well as the employee and shall be paid to the Corporation at the rates as prescribed by the Central Government.
Section 40 of the ESI Act provides that it is the principal employer's responsibility to pay the contribution in respect of every employee and deduct the employee's contribution from his wages.
Section 45A of the ESI Act provides for the determination of contributions as reads as under:-
"[45A. Determination of contributions in certain cases.-(1) Where in respect of a factory or establishment no returns, particulars, registers or records are submitted, furnished or maintained in accordance with the provisions of section 44
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or any [Social Security Officer] or other official of the Corporation referred to in sub- section (2) of section 45 is [prevented in any manner] by the principal or immediate employer or any other person, in exercising his functions or discharging his duties under section 45, the Corporation may, on the basis of information available to it, by order, determine the amount of contributions payable in respect of the employees of that factory or establishment:
[Provided that no such order shall be passed by the Corporation unless the principal or immediate employer or the person in charge of the factory or establishment has been given a reasonable opportunity of being heard:] [Provided further that no such order shall be passed by the Corporation in respect of the period beyond five years from the date on which the contribution shall become payable.] (2) An order made by the Corporation under sub-section (1) shall be sufficient proof of the claim of the Corporation under section 75 or for recovery of the amount determined by such order as an arrear of land revenue under section 45B [or the recovery under sections 45C to 45-
I]."
Section 45C of the ESI Act provides for the issuance of the Certificate to the recovery officer and mode of recovery.
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33 Section 75 of the ESI Act provides for matters to be decided by the Employees Insurance Court and Section 76 of the ESI Act provides for institution of such proceedings.
Section 77 of the ESI Act reads as follows:-
"77. Commencement of proceedings. (1) The proceedings before an Employees' Insurance Court shall be commenced by application.
[(1A) Every such application shall be made within a period of three years from the date on which the cause of action arose.
Explanation.- For the purpose of this sub-section,-
(a) the cause of action in respect of a claim for benefit shall not be deemed to arise unless the insured person or in the case of dependants' benefit, the dependants of the insured person claims or claim that benefit in accordance with the regulations made in that behalf within a period twelve months after the claim became due or within such further period as the Employees' Insurance Court may allow on grounds which appear to it to be reasonable;
(b) the cause of action in respect of a claim by the Corporation for recovering contributions (including interest and damages) from the principal employer shall be deemed to have arisen on the date on which such claim is made by the Corporation for the first time:
Provided that no claim shall be made by the Corporation after five years of the period to which the claim relates;
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(c) the cause of action in respect of a claim by the principal employer for recovering contributions from an immediate employer shall not be deemed to arise till the date by which the evidence of contributions having been paid is due to be received by the Corporation under the regulations.
(2) Every such application shall be in such form and shall contain such particulars and shall be accompanied by such fee, if any, as may be prescribed by rules made by the State Government in consultation with the Corporation."
29. It is clear from a plain reading of Section 77(1A) of the ESI Act of the ESI Court that the cause of action in respect of a claim by the Corporation for recovering contributions including interest and damages from the principal employer shall be deemed to have arisen on the date on which such claim is made by the Corporation for the first time. It cannot be disputed that once an employer is put on notice and an order of determination is passed by the Corporation, the claim for the contribution stands raised for the first time. In the circumstances, it is clear that the time as provided under Section 77(1A) of the ESI Act starts to run from the date of the order under Section 45A of the ESI
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35 Act and not from the issuance of the recovery certificate as contended by the respondent. The ESI Court has taken a view that since a challenge has been raised against the recovery notices as well and the applications are filed within 30 days of passing of the recovery notices, the application was within time, we are unable to agree with the said proposition in the light of the specific language of Section 77(1A) of the ESI Act and explanation (b) thereto.
30. Further, Chapter II of the Employees' State Insurance (General) Regulations, 1950 provides for the collection of contributions. Regulation 31A provides for payment of interest by an employer who fails to pay the contribution within the period specified in Regulation 31. It is therefore clear that the payment of the contributions as well as the interest on the delayed payment of contributions is statutory in nature. It is only in a case where there is a stay of either the coverage or the determination and recovery of contributions by a competent Court of law that an argument could have been raised by the respondent that interest cannot be recovered. The ESI Court has found that
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36 since the question of coverage was pending before the Court for 12 years, the calculating of interest from the date of determination order is impermissible and interest is payable only after the pronouncement of the final judgment by the Apex Court. However, the said contention also cannot be accepted.
31. Therefore, the questions of law raised are answered as follows:-
The first question is answered holding that there is no power in the ESI Court under the provisions of the ESI Act to grant waiver of interest where there was no stay of coverage or the determination of contribution payable.
The second question is answered holding that the applications under Section 75 of the ESI Act have to be preferred within three years from the date of determination orders being passed under Section 45A of the ESI Act. The applications filed in all these cases except in MFA No.7695/2022 were therefore belated.
The third question is answered holding that the question of re-determining the contribution payable was well
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within the power of the ESI Court; where the ESI Court had considered the materials on record and come to a conclusion that the determination of the contribution payable was factually erroneous. There is power in the Court to modify the contribution payable. The judgments of the Apex Court relied on cannot be understood as restricting the power of the ESI Court.
32. In the above view of the matter, all but the last of these appeals, that is, MFA No.7695/2022, are liable to be allowed.
33. However, in MFA No.7695/2022, Section 45A order was passed on 05.02.2016 and therefore, the application filed in March 2016 was within time. The appellants having themselves produced a re-computation of the contributions due and the ESI Court having arrived at a conclusion on the facts and materials placed before it, we are of the opinion that there is no substantial question of law raised in the said appeal which would justify interference by
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38 this Court. The said appeal, that is, MFA No.7695/2022 is therefore dismissed.
34. In the result:-
i) The appeal in MFAs No.7035/2022,
6944/2022, 6954/2022, 7003/2022,
7004/2022, 7005/2022, 7007/2022,
7008/2022, 7019/2022, 7687/2022,
7690/2022 and 7691/2022 are allowed.
ii) The impugned orders dated 27.05.2022, 31.05.2022, 31.05.2022, 31.05.2022, 31.05.2022, 27.05.2022, 31.05.2022, 31.05.2022, 31.05.2022, 31.05.2022, 27.05.2022 and 27.05.2022 passed by the Employees State Insurance Court at Bengaluru in E.S.I Applications No. 11/2015, 14/2015, 20/2015, 17,2015, 23/2015, 10/2015, 22/2015, 25/2015, 12/2015, 06/2015, 13/2015 and 08/2015, respectively are hereby set aside.
iii) The said applications filed before the ESI Court shall stand dismissed.
iv) The amounts due shall be re-computed and paid by the respondent within a
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period of three months from the date of receipt of a copy of this judgment.
v) The appeal in MFA No.7695/2022 is dismissed.
There will be no order as to costs.
All pending interlocutory applications shall stand dismissed in all the appeals.
Sd/-
(ANU SIVARAMAN) JUDGE Sd/-
(DR. K.MANMADHA RAO) JUDGE cp*