Orissa High Court
Ajay Kumar Bhramar vs Union Of India & on 12 September, 2025
IN THE HIGH COURT OF ORISSA, CUTTACK
W.P.(C) No.105 of 2022
Ajay Kumar Bhramar
Bar Ray ....... Petitioner
-Versus-
Union of India &
Others ....... Opposite Parties
For Petitioner : Mr. S. K. Parida, Advocate
For Opposite Parties : Mr. M. K. Pradhan,
Sr. Panel Counsel Advocate
(For O.P. No.1)
Mr. B. Dash, Advocate
(For the Corporation)
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CORAM: JUSTICE SANJAY KUMAR MISHRA
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Date of Hearing: 14.07.2025 and Judgment: 12.09.2025
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S.K. MISHRA, J.
This Writ Petition has been preferred by the Petitioner to quash order dated 20.12.2021 (Annexure 12) vide which the Deputy Director, E.S.I. Corporation, Bhubaneswar (Opposite Party No.4) rejected the prayer of the Petitioner to waive the damages imposed on it for delayed payment of E.S.I. Contribution. Also a prayer has been made to direct the Opposite Parties to provide effective WP(C) No.105 of 2022 Page 1 of 31 medical facilities to the employees of the Petitioner's Establishment in nearby areas of Gumadera, for which they are contributing under the Employees' State Insurance Act 1948, shortly, "the E.S.I Act".
2. The factual backdrop of the case is that the Petitioner is the Proprietor of M/s Ajay Construction, situated At- Gumadera, Po/Ps - Belpahar in the District of Jharsuguda. The E.S.I Act has been duly enforced in various districts across Odisha, including Jharsuguda District, vide Gazette Notification dated 30.05.2016. The Petitioner registered his Establishment under the E.S.I. Act in March, 2017. However, due to non-availability of any medical facilities in the nearby areas, the Petitioner couldn't deduct employees' contributions due to resistance of the workers. Accordingly, he made a representation on 18.10.2018 requesting the Opposite Party No.2 to provide medical infrastructure in or around Belpahar, so that contributions could be regularised.
2.1. In response to such communication, the Opposite Party No.2 issued a letter on 30.11.2018, stating therein that the E.S.I Act had come into force in the Belpahar area WP(C) No.105 of 2022 Page 2 of 31 w.e.f 01.06.2016 and steps were being taken to extend the benefits in the newly implemented areas. However, the reply remained silent on the grievance regarding absence of medical facilities in the nearby areas, and no effective action was taken in the said regard.
2.2. The Petitioner then responded on 28.01.2019, reiterating that the nearest medical facility provided by the Corporation is around 22 KMs away, making it infeasible for the workers to access the medical facilities. Despite such difficulty, the Petitioner voluntarily began contributing under the E.S.I Act from December, 2018. A request was made vide the said communication to the authorities not to take any penal action for the previous non-contributed period from March, 2017 to November, 2018, citing the reason of employees' protest and practical difficulties. 2.3. The Petitioner, on multiple occasions, requested the Opposite Parties-E.S.I.C. to ensure the availability of medical facilities for the employees of his Establishment in nearby area, considering the fact that regular contributions are being made under the E.S.I Scheme. However, despite WP(C) No.105 of 2022 Page 3 of 31 such contributions, no E.S.I Hospital, Dispensary or empanelled private medical facilities were made available to its employees, thereby depriving them from the statutory benefits. Subsequently, on 01.09.2021, the Opposite Party - E.S.I.C issued a demand notice requiring payment of Rs.4,55,844/- towards employer and employees' contributions for the period from March, 2017 to January, 2020, citing provisions under Sections 39 & 40 of the ESI Act, 1948, r/w Regulations 29,31 & 33 of the ESI (General) Regulations, 1950, shortly, the Regulation, 1950. In compliance with the above letter, the Petitioner deposited the full amount of Rs. 4,55,844/- under protest on 20.09.2021. However, the Opposite Party No.2, through letter dated 19.10.2021, demanded payment of interest towards delayed payment of contribution of Rs.1,86,279/- U/s 39(5) of the E.S.I Act, r/w Regulation-31- A of the Regulation, 1950 and threatened to recover the same as arrears of land revenue under Sections 45-C to 45-I of the E.S.I Act, which was deposited by the Petitioner on 16.11.2021. On the same date, i.e. on 19.10.2021, another letter was issued under Regulation 31-C of the WP(C) No.105 of 2022 Page 4 of 31 Regulations, 1950, r/w Section-85-B(1) the ESI Act, by the Opposite Party No. 2 seeking recovery of damages to the tune of Rs.3,83,999/- and calling upon to show cause as to why maximum damages should not be imposed.
2.4. The Petitioner on 26.10.2021 submitted a detailed grievance petition praying for waiver of interest and damages, citing genuine hardship, prior representations, non-assessment of medical services by its employees. 2.5. Pursuant to notice dated 10.11.2021, though the Petitioner appeared before the Opposite Party No.2 on 07.12.2021, but the request for waiver was rejected. The Petitioner was directed to pay damages amounting to Rs.3,83,999/- within 30 days, failing which it was warned that recovery proceeding would be initiated under Sections 45-C to 45-I of the E.S.I Act.
2.6. The case of the Petitioner is that, its employees were reluctant to participate under the Scheme, due to absence of any E.S.I medical infrastructure around Gumadera or Belpahar. Hence, he was unable to deduct E.S.I. contributions earlier and started compliance only from WP(C) No.105 of 2022 Page 5 of 31 December, 2018.
3. The writ petition has been preferred basically to decide the legal issue regarding justification of the E.S.I. Corporation to impose maximum damages under Regulation 31-C of the Regulations, 1950, which is not mandatory. Further, the grounds urged in the writ petition to challenge the demand notice are, Section 85-B of the E.S.I Act uses the words "May Recover", indicating discretion and not compulsion. Moreover, computation and imposition of damages must be based on Section 85-B of the ESI Act and cannot derive authority solely from Regulation 31-C of the Regulations, 1950, which is a subordinate legislation. Further, substantial compliance of the provisions has already been made by paying Rs.4,55,844/- towards contribution so also Rs.1,86,279/- towards interest. The delay was due to non-availability of E.S.I medical services and employees' resistance, so also genuine hardships beyond the Petitioner's control.
4. A Counter Affidavit has been filed by the Opposite Parties-Corporation taking a stand therein that, as per the Orissa Employees' Insurance Court Rules, 1951, disputes WP(C) No.105 of 2022 Page 6 of 31 between the Employer and ESIC must be adjudicated before the Employees' Insurance Court under Section 75 of the E.S.I Act. Only the aggrieved party can knock the doors of this Court on appeal. Further, before invoking the jurisdiction of this Court, the Employer must have deposited 50% of the amount claimed by E.S.I.C. Moreover, E.S.I Medical Services are not confined to primary care. Insured employees can access tie-up hospitals anywhere in India, including for super-specialized treatment. The Petitioner failed to pay statutory contributions for an extended period, i.e., from 583 to 1613 days, causing denial of benefits to eligible employees. The delay on part of the Employer is deliberate and intentional, establishing the mens rea, justifying imposition of damages U/s 85-B of the ESI Act. Ultimately, the Petitioner was issued with notices, granted adequate opportunity of personal hearing before passing the impugned order, hence, there is no procedural infirmity.
5. In response to the Counter filed by the Opposite Parties, the Petitioner has filed a Rejoinder Affidavit stating therein that, the writ petition involves a legal issue, as to whether damages can be levied even after full payment of WP(C) No.105 of 2022 Page 7 of 31 contribution and interest, in absence of statutory mandate or mens rea. Therefore, the writ petition is maintainable despite availability of alternative remedy. Further, Section 85-B of the ESI Act is an enabling provision and there is no statutory compulsion to impose damages in every case. The factual allegations made by the Opposite Party in Para 7 to 13 of the Counter Affidavit have been denied demanding proof of such averments. Moreover, it has been stated that the claim of nationwide tie-up ESI hospital access is merely theoretical and impractical for primary or daily treatment of poor workmen residing in Belpahar in the district of Jharsuguda.
6. Apart from reiterating the grounds urged in the writ petition, learned Counsel for the Petitioner, drawing attention of this Court to the various correspondences made by the Petitioner to the ESI Authorities, dated 18.10.2018 (Annexure-2), 28.01.2019 (Annexure-4), 20.09.2021, (Annexure-6), 26.10.2021 (Annexure-9) and 07.12.2021 (Annexure-11) submitted that from day one, the Petitioner brought the fact to the notice of the ESI Authority that he is not able to deduct the contributions from the Employees- WP(C) No.105 of 2022 Page 8 of 31 Members because of non-availability of medical facilities in the nearby vicinity. It was also brought to the notice of the ESI Authorities that the concerned labourers are not willing to contribute because of lack of medical facility within 10 KMs from its Establishment. A request was made not to levy penalty for the period of 21.03.2017 to November, 2018. That apart, payment of such penalty for an amount of Rs.4,55,844/- was made under protest. Despite such bonafide conduct of the Petitioner, the impugned order dated 20th December, 2021, as at Annexure-12, was passed by the Deputy Director (I/C) ESI Corporation without taking note of the said grounds urged in the reply dated 26th October, 2021, followed by additional reply/response dated 7th December, 2021.
6.1. Learned Counsel for the Petitioner further submitted that, apart from the grounds urged in the response/reply dated 26.10.2021 to the show cause notice for levy of damages, the Petitioner appeared through his Counsel on 07.12.2021 and submitted an additional reply to the show cause notice relying on the Judgment of the WP(C) No.105 of 2022 Page 9 of 31 Supreme Court reported in (2008) 3 SCC 35 (Employees' State Insurance Corporation versus HMT Limited and Another) to satisfy the authority concerned that Section 85- B of the ESI Act provides for an enabling provision and does not make it mandatory to levy damages in every case and the words "may recover" used in Section 85-B of the ESI Act, regarding levy of damages cannot be and should not be read as "shall".
6.2. Learned Counsel for the Petitioner further submitted that, in view of the settled position of law, 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 under the statute it is held to be mandatory in character. 6.3. Learned Counsel for the Petitioner, drawing attention of this Court to the impugned order dated 20th December, 2021, as at Annexure-12 further submitted that the grounds urged in the reply submitted in response to the show cause notice, including the legal point, were not dealt WP(C) No.105 of 2022 Page 10 of 31 by the Deputy Director, while passing order under Section 85 -B of the ESI Act. Such order, being perverse, deserves to be set aside.
6.4. So far as maintainability of the writ petition, learned Counsel for the Petitioner submitted that the sole point involved in the present lis is a legal point, as the averments made in the writ petition regarding reason for the delayed payment of ESI Corporation has not been disputed by the Corporation. The only point to be decided is whether the ESI Corporation was justified to levy damages in view of the wordings "may recover" used under section 85-B of the ESI Act, 1948. The said point being a substantial question of law, even if there is alleged an alternative remedy under Section 75 (1) of the ESI Act, the writ petition is maintainable.
6.5. He further submitted that, apart from the prayer to quash the order dated 20.12.2021, a further prayer has been made by the Petitioner to direct the Opposite Parties to provide medical facilities to its employees in a nearby place for which, they are contributing and such a prayer cannot WP(C) No.105 of 2022 Page 11 of 31 be made before the EI Court, as a Writ Court can only give such a direction to the ESI Corporation.
6.6. Learned Counsel for the Petitioner further submitted that, pursuant to communication dated 30.11.2018, the Petitioner's Establishment deposited the contribution pertaining to its employees from the month of December, 2018 with a request not to take any action regarding nonpayment of contribution and other related matters on the ground of non-availability of medical facilities in and around village Gumadera and protest of the concerned workmen regarding deduction for the previous period. However, without any further communication in response to such compliance report dated 28.01.2019, after about two years of such communication, a demand was made towards unaccounted wage/salary contribution for the period from 21.03.2017 to 30.11.2018 to the tune of Rs.4,54,349/- and alleged differential contribution of Rs.1,495/- for the months of December, 2018, December, 2019 and January, 2020 and the said amount was also paid immediately thereafter on 20th September, 2021 under protest. Again, reiterating therein, vide letter dated 20th WP(C) No.105 of 2022 Page 12 of 31 September, 2021, it was brought to the notice of the Authority concerned regarding non-availability of medical facility in the nearby vicinity and availability of the same only 22 KMs away from Belpahar, with a request not to levy any penalty. However, without dealing with those grounds urged in the reply dated 26th October, 2021, followed by reply dated 7th December, 2021, the Authority concerned mechanically passed the impugned order dated 20th December, 2021 under Section 85-B of the ESI Act solely on the grounds that the Petitioner did not deposit the contribution for the aforesaid period within the stipulated time, for which, return of contribution could not be submitted/generated for the contribution periods resulting therein the inability of employees to avail the benefit under the ESI Scheme during the corresponding benefit period. The said order is also perverse for not taking into consideration the grounds urged in the show cause notice so also the Judgment of the Supreme Court reported in HMT Limited (supra), wherein it was categorically held that the provisions enshrined under Section 85 -B of the ESI Act, WP(C) No.105 of 2022 Page 13 of 31 when for the levy of damages uses the words "May recover", should not be read as "shall".
6.7. He further submitted that the impugned order was passed mechanically solely on the basis of the provisions enshrined under regulation 31-C of the Regulations, 1950 and is a product of non-application of mind. Though, there was sufficient cause for non-deposit of ESI contribution, delayed payment of ESI contribution for the period of March, 2017 to till November, 2018, the Deputy Director, ESIC failed to take note of the said admitted fact on record so also the settled position of law as held in HMT Limited (supra).
7. To substantiate his submissions, learned Counsel for the Petitioner relied on the judgment of the Supreme Court in HMT Limited (supra), in A.K. Industries Vrs. Employees Insurance Corporation, Faridabad & others reported in 2011(131) FLR-894 of the Punjab & Haryana High Court so also of this Court in M/s Samrat Industries Vrs. Regional Director, Employees State Insurance Corporation reported in 1994(II) OLR-328.
8. Apart from reiterating the facilities provided by the Corporation under the ESI Act, learned Counsel for the WP(C) No.105 of 2022 Page 14 of 31 Corporation submitted that in view of the alternative remedy under Section 75 of the ESI Act, the writ petition is not maintainable. It was further submitted that the impugned order was passed by the Authority concerned after giving due opportunity of hearing to the Petitioner. There being no infirmity in the impugned order dated 20th December, 2021, as at Annexure-12, the writ petition deserves to be dismissed.
9. As is revealed from the pleadings on record, admittedly, the Petitioner's Establishment is engaged in the process of packing of Refractories bricks at TRL Korasaki Refractory Limited at Gumadera, Belpahar since 1994. It was brought under the coverage of the ESI Act with effect from March, 2017. Immediately thereafter, vide letter dated 18th October, 2018, the Proprietor of the Petitioner- Establishment brought to the notice of the Additional Commissioner and Regional Director, ESIC, Bhubaneswar regarding non-availability of medical facility to its employees, who became members under the ESI Scheme so also its inability to deduct contribution from the members/employees because of non-availability of medical WP(C) No.105 of 2022 Page 15 of 31 facilities in the nearby vicinity. Instead of mitigating the grievance of the Petitioner regarding providing medical facilities in nearby area, a letter was given to the Petitioner by the Assistant Director (Revenue-II) indicating that he is liable to comply with the provisions under the ESI Act to enable its employees to avail the benefits under the provisions of the ESI Scheme with effect from 21.03.2017. Accordingly, a request was made to comply the provisions under the ESI Act with effect from 21.03.2017. On getting such communication, again the Petitioner wrote a letter dated 28.01.2019 to the Additional Commissioner and Regional Director, ESIC, Bhubaneswar, indicating therein that the medical facilities are available 22 KMs away from Gumadera and the workmen are reluctant to pay under the scheme so also regarding compliance of the recovery under the scheme with effect from December, 2018, with a request not to take any action regarding nonpayment of contribution and other related matters on the ground of non-availability of medical facility around village Gumadera and protest of the workman for deduction of ESI contribution from them for the previous period.
WP(C) No.105 of 2022 Page 16 of 31
10. Admittedly, after receiving the letter dated 28.01.2019 till 01.09.2021, no communication was made to the Petitioner's Establishment for non-payment of ESI contribution for the period from 21.03.2017 till November, 2018. However, on 01.09.2021 a communication was made to the Petitioner to deposit an amount of Rs.4,54,349/- towards contribution on unaccounted wage/salary for the period from 21.03.2017 till November, 2018, indicating therein that if the Petitioner fails to make the payment within 15 days thereof under intimation to the Office of the Deputy Director, ESI Corporation, the same will be recovered under Section 45-C to 45-I of the ESI Act.
11. On getting such communication, reiterating the grounds/reasons, as communicated earlier, the Petitioner deposited an amount of Rs.4,55,844/- towards contribution for the aforesaid period under protest and made a communication to the said effect on the very same day to the Deputy Director, ESI Corporation, Regional Office, Bhubaneswar. As it seems from the record, immediately thereafter, a demand was made vide demand notices, both dated 19th October, 2021, claiming therein an amount of WP(C) No.105 of 2022 Page 17 of 31 Rs.1,86,279/- towards interest of delayed payments for the period from 21.03.2017 till 20.09.2021, so also Rs.3,83,999/- towards damages for the said period. Though the Petitioner's Establishment paid the interest of Rs.1,86,279/- as per demand Notice No.5149 dated 19th October, 2021, but contested the demand made vide notice no.5149 dated 19.10.2021 towards damages by filing a detailed reply on 26.10.2021, followed by further reply dated 7th December, 2021 in response to the notice dated 10.11.2021, coupled with the judgment of the Supreme Court in HMT Limited (supra).
12. As it reveals seems from the record, the impugned order under Section 85-B of the ESI Act was passed on 20th December, 2021 after hearing the learned Counsel for the Petitioner, who appeared before the authority concerned on 7th December, 2021 and filed reply/response with a prayer to waive the damages.
13. As it further reveals from the reply/response of the Petitioner to the show cause notice, the Petitioner's Establishment though was registered in the month of March, 2017 under the ESI Act, the employees raised WP(C) No.105 of 2022 Page 18 of 31 objection for deduction of employees contribution from their wages with an allegation that they are not getting ESI facilities in the nearby vicinity and they have to travel a long distance for medical treatment. Since the employees concerned (contract labourers) raised objections, no deduction could be made timely towards employees' contribution, thereby causing delay in deposit of ESI contribution and such delay caused in making payment of contribution is neither intentional nor deliberate, but due to bona fide facts as detailed above.
14. As is revealed from the impugned order dated 20th December, 2021, the Deputy Director, ESI Corporation ordered for a damages to the tune of Rs.3,83,999/- with the following observations.
"That, as the employer did not file contribution for the above contribution period within stipulated, the same cannot be filed later on, for which, Return of Contribution could not be submitted/generated for the contribution periods resulting therein the ineligibility of the employees for benefit under the ES! Scheme during the corresponding benefit period.
That the grounds of non-compliance, i.e., non-deduction of employee's contribution from the wages, does not absolve the employer with liability to pay the contribution under the Act.
That, it shows that the delay caused in making payment of contribution is WP(C) No.105 of 2022 Page 19 of 31 intentional and deliberate, which establishes mens rea (wilful intention) of the employer to contravene the statutory provisions of the Act.
That the extent of delay ranges from 583 to 1613 days for payment of contribution for the period from 03/2017 to 01/2020, has not been challenged by the employer. Whereas, the submission of the employer,that the amount of damages is bit substantial to which they cannot pay, as their financial health is not sound, is not tenable as the financial health cannot absolve the employer to pay contributions within stipulated period.
Further, the ES! Scheme is a self- financing Scheme and mainly depends upon the contribution paid by the employers and employees covered under the Scheme. An employee who is covered under the Scheme is entitled to certain benefits from the day one of his insurable employment irrespective of whether contribution in respect of him, has been deposited in ESI Fund or otherwise. If, however, there are constant out-flows from the ESI Fund by way of disbursement of benefits without sufficiently matching in-flows into the said fund by way of timely payment of contribution, the very financial viability of the ES! Scheme will be at stake.
Under the facts and circumstances of the case as above, levy of penal damages is not only a matter of necessity but also a form of deterrent to eliminate recurrence of such delays."
(Emphasis supplied)
15. From such observation made by the Deputy Director, ESIC, it is amply clear that such damages was imposed on the Petitioner ignoring the ground of workers' resistance and distance of ESI dispensary to be more than 22 KMs for non-compliance / non-deduction of employees WP(C) No.105 of 2022 Page 20 of 31 contribution from their wages, with an observation that such ground does not absolve the employer with a liability to pay the contribution under the ESI Act. The delay caused in making payment of contribution is allegedly intentional and deliberate, which establishes mens rea of the employer to contravene the statutory provisions under the Act and the levy of penal damages is not only in the matter of necessity but also a form of deterrent to eliminate recurrence of such delays.
16. Admittedly, the ESI Scheme is a self-financing Scheme. The sole intent under the said Scheme is to provide benefits to its members-workers. There is no dispute at the bar that from day one of coverage of the Petitioner's Establishment under the ESI Act, it was brought to the notice of the ESI Authority in writing regarding discontentment of the workers, who are the members under the ESI Scheme regarding non-availability of medical facilities in the nearby vicinity, where the Establishment of the Petitioner exists. It was also brought to the notice of the Authority regarding protest of workers, who are contract WP(C) No.105 of 2022 Page 21 of 31 labourers, for deduction of ESI contribution from their salary, including deduction for the past period.
17. Admittedly, vide each and every communication made by the Petitioner to the ESI Authority; it was brought to the notice of the Authority concerned that its workers- members are not getting proper facility under the ESI Act because of non-availability of ESI dispensaries in the nearby area of village Gumadera. As is revealed from the record, in none of the replies submitted by the ESI Authority, such grievance of the Petitioner was dealt with. Rather demands after demands were made regarding ESI contribution, interests, followed by damages for the said period.
18. Admittedly, on being so demanded, the Petitioner not only deposited the ESI contribution but also the interest payable on the said ESI contribution for the aforesaid period under protest. So far as levy of damages for the said period, is under challenge in the present writ petition. While dealing with the show cause reply submitted by the Petitioner's Establishment, as it appears from the impugned order passed by the Deputy Director In-charge ESI Corporation WP(C) No.105 of 2022 Page 22 of 31 dated 20th December, 2021, without applying mind and taking into consideration the real difficulty faced by the Petitioner's Establishment to convince its employees/ contract labourers for deduction of employees' contribution from their salary/wages and deposit the same with the ESI Corporation, the impugned order has been passed mechanically referring to the provisions under Regulation 31(C) of the ESI (General) Regulation, 1950, which is extracted below for ready reference:
"31-C. Damages or contributions or any other amount due, but not paid in time- If an employer who fails to pay contribution within the periods specified under regulation 31, or any other amount payable under the Act, the Corporation may recover damages, not exceeding the rates mentioned below, by way of penalty:
Period of delay Maximum rate
of damages in
per cent per
annum of the
amount due
(i) Less than 2 months 5%
(ii) 2 months and above but 10%
less than 4 months
(iii) 4 months and above but 15%
less than 6 months
(iv) 6 months and above 25%
WP(C) No.105 of 2022 Page 23 of 31
[Provided that 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, 2016, may:-
(a)Waive up to 50 percent of the damages levied or leviable depending upon merits of the case.
(b) In exceptional hard cases, waive either totally or partially the damages levied or leviable]"
(Emphasis Supplied)
19. That apart, the grievance of the Petitioner's Establishment regarding distance of the ESI Dispensary from the Petitioner's Establishment, which causes hardship to the employees/contract labourers to avail the benefits under the ESI Scheme, was never redressed by any of the communications made by the Corporation, as detailed above, till passing of the impugned order under Section 85- B of the ESI Act. That apart, it is amply clear from the impugned order dated 20th December, 2021 that though the learned Counsel for the Petitioner, in order to substantiate the prayer made in the show cause reply not to levy of damages on it, relied on the Judgment of the Supreme Court WP(C) No.105 of 2022 Page 24 of 31 in HMT Limited (supra), the impugned order is silent about such legal point urged before the Authority concerned.
20. As is further revealed from the impugned order, despite such settled position of law and the undisputed stand of the Petitioner regarding delayed payment, the Authority concerned, vide the impugned order, observed that the "delay caused in making payment of contribution is intentional and deliberate and the same establishes mens rea (willful intention) of the Employer to contravene the statutory provisions", which is perverse.
21. Though under Regulation 31(C) of the Regulation, 1950, the rates of damages to be levied have been detailed, which varies depending on the period of delay, in HMT Limited(supra), the Supreme Court held as follows:
16. It is a well-known principle of law that a subordinate legislation must conform to the provisions of the legislative Act. Section 85-B of the Act provides for an enabling provision. It does not envisage mandatory levy of damages. It does not also contemplate computation of quantum of damages in the manner prescribed under the Regulations.
17. The statutory liability of the employer is not in dispute. An employee being required to be compulsorily insured, the employer is bound to make his part of the contribution. An employee is also bound to make his contribution under the WP(C) No.105 of 2022 Page 25 of 31 Act. But the same does not mean that levy of damages in all situations would be imperative.
18. Section 85-B of the Act uses the words "may recover". Levy of damages thereunder is by way of penalty. The legislature limited the jurisdiction of the authority to levy penalty i.e. not exceeding the amount of arrears. Regulation 31-C of the Regulations, therefore, in our opinion, must be construed keeping in view the language used in the legislative Act and not dehors the same.
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 of 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.
24. We agree with the said view as also for the additional reason that the subordinate legislation cannot override the principal legislative provisions.
25. The statute itself does not say that a penalty has to be levied only in the manner prescribed. It is also not a case where the authority is left with no discretion. The legislation does not provide that adjudication for the purpose of levy of penalty proceeding would be a mere formality or imposition of penalty as also computation of the quantum thereof became a foregone conclusion. Ordinarily, even such a provision would not be held to providing for mandatory imposition of penalty, if the WP(C) No.105 of 2022 Page 26 of 31 proceeding is an adjudicatory one or compliance with the principles of natural justice is necessary thereunder.
26. Existence of the 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.
(Emphasis Supplied)
22. That apart, in HMT Limited (supra) it was further held that an employee, being required to be compulsorily insured, the employer is bound to make his part of contribution and the employee is also bound to make his contribution under the Act, but the same does not mean that levy of damages in all the situation would be imperative. However, the Authority concerned failed to take note of such observation made by the Supreme Court while passing the impugned order. Rather, contrary to the said observation made in HMT Limited (supra), it was held that levy of penal damages is not only a matter of necessity but also a form of deterrent to eliminate recurrence of such delays, attributing such delays to be allegedly intentional and deliberate act on part of the Petitioner's Establishment to make the payment of contribution belatedly for the said period.
WP(C) No.105 of 2022 Page 27 of 31
23. So far as the issue regarding maintainability of the writ petition, this Court deems it appropriate to refer Section 81 of the Employees' State Insurance Act, 1948, which is reproduced below:
"Section 81- Reference to High Court- An Employees' Insurance Court may submit any question of law for the decision of the High Court and if it does so, shall decide the question pending before it in accordance with such decision."
(Emphasis Supplied)
24. Admittedly, one of the controversies in the present lis is, in view of the provisions enshrined under Regulation 31(C) of the Regulation, 1950 to impose damages, whether the provisions under Section 85-B of the ESI Act, 1948, concerning imposition of damages, are mandatory or directory, which is a pure question of law .The said issue has already been decided by the Supreme Court in HMT Limited (supra), as detailed above. That apart, Section 81 of the E.S.I. Act permits an Employees' Insurance Court to submit any question of law for the decision of the High Court.
Furthermore, the second prayer made in the writ petition is regarding facilitation of medical facilities in a nearby area for the convenience of the beneficiaries/ WP(C) No.105 of 2022 Page 28 of 31 insured persons. Hence, this Court is of the view that the Employees' Insurance Court may not be competent to issue directions to the ESI Authorities to do so in a proceeding U/s. 75 of the E.S.I. Act like a Writ Court. In view of the above reasons, this Court is inclined to hold that the writ petition is maintainable.
25. In view of the reasons detailed above so also the settled position of law, this Court is of the view that the order dated 20th December, 2021, passed under Section 85- B of the ESI Act at Annexure-12, is perverse and deservers interference. Accordingly, the said order is hereby set aside.
26. So far as the second prayer regarding direction to the Opposite Parties to provide medical facilities to the employees of the Petitioner's Establishment in a nearby place, as per the information available in the Official Website of ESI Corporation, various Circulars have been issued by the Corporation from time to time for setting up of ESI Hospitals and Dispensaries, including the revision of norms for up-gradation of existing Hospitals and Dispensaries so also the determination of permissible radial WP(C) No.105 of 2022 Page 29 of 31 distance between proposed and existing ESI Hospitals and Dispensaries. Admittedly, the Petitioner repeatedly ventilated such grievance in writing, stating therein that despite being covered under the ESI Act and complying with all statutory obligations, no such dispensary or alternative medical facility has been made available to the insured persons within the nearby area of its establishment, which resulted in undue hardship to the employees of the Petitioner's Establishment.
27. Hence, this Court directs the Opposite Parties- ESI Corporation to consider the grievance of the Petitioner Establishment for setting up Hospital/Dispensary and provide other ESI facilities in the nearby locality, wherein the Petitioner Establishment is situated, and take necessary steps in accordance with the guidelines issued by it from time to time for setting up of ESI Hospitals and Dispensaries, if the same has not already been done in the meantime. Such action, if so required as per the guidelines, shall be initiated and completed expeditiously preferably, within a period of six months hence.
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28. With the said observation, the writ petition stands allowed and disposed of. No order as to cost.
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S.K. Mishra, J.
Orissa High Court, Cuttack.
Dated,12th September,2025/ Mona Signature Not Verified Digitally Signed Signed by: MONALISA SWAIN Reason: Authentication Location: High Court of Orissa Date: 13-Sep-2025 14:50:25 WP(C) No.105 of 2022 Page 31 of 31