Employee State Insurance ... vs Bawa Inn
2014 Latest Caselaw 1012 Del

*            IN THE HIGH COURT OF DELHI AT NEW DELHI

+                         FAO No.309/2013

%                                                   24th February, 2014

EMPLOYEE STATE INSURANCE CORPORATION THROUGH ITS
REGIONAL DIRECTOR                          ..... Appellant
                  Through: Mr.K.P. Mavi, Advocate.


                          Versus
BAWA INN                                           ..... Respondent
                          Through:     Ms. Babita Seth, Advocate.


CORAM:
HON'BLE MR. JUSTICE VALMIKI J.MEHTA

To be referred to the Reporter or not? yes


VALMIKI J. MEHTA, J (ORAL)

1.           The challenge by means of this appeal under Section 82 of the

Employees' State Insurance Act, 1948 is to the judgment of the ESI Court

dated 23.5.2013 which has quashed the demand for interest and penalty

against the respondent.


2.           The demand for interest and penalty has been quashed on two

grounds. The first is the silence of the appellant for the period from 1993 to

1997 and the second is on the ground of ambiguity as to whether use of

power includes use of LPG for preparing tea, coffee etc. The claim of
FAO No.309/2013                                                 Page 1 of 4
 interest and damages in this case is for the period from 30.4.1993 to

13.8.1997.


3.             Learned counsel for the appellant argued that the ESI Court has

wrongly relied upon the letter dated 30.4.1993 of the respondent inasmuch

as this letter has not been proved to have been sent to or received by the

appellant.     It is also argued that once there is an issue of delay, the

department should be entitled to interest and penalty.


4.             Before me, it is not disputed that the provision which will apply

in the present case is regulation 31C of the Employees' State Insurance

(General) Regulations, 1950 and which reads as under:-


      "31C. Damages on contribution or any other amount due, but
      not paid in time.- If an employer fails to pay contributions 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 10%
                 but less than 4
                 months
       (iii)     4 months and above 15%
                 but less than 6
                 months
FAO No.309/2013                                                   Page 2 of 4
        (iv)    6 months and above      25%
       Provided that the Corporation, in relation to a factory or
      establishment which is declared as sick industrial company and in
      respect of which a rehabilitation scheme has been sanctioned by the
      Board for Industrial and Financial Reconstruction, may:-
      (a) in case of a change of management including transfer of
      undertaking (s) to workers' Co-operative(s) or in case of merger or
      completely waive the damages levied or leviable.
      (b) in other cases, depending on its merits, waive upto 50 per
      cent. damages levied or leviable.
      (c) in exceptional hard cases, waive either totally or partially the
      damages levied or leviable."
It is also agreed that the sub Regulation (c) of the aforesaid provision gives a

right to the corporation to waive interest and penalty in exceptional/hard

cases. The dispute is that whether the facts of the present case can be

brought by the respondent within the provision of 31C proviso (c) to deny

the claim of interest and penalty by the appellant.


5.            Even if I accept the first argument urged on behalf of the

appellant that letter dated 30.4.1993 has not been received by the appellant,

however, the impugned judgment in para 29 rightly observes that there was a

valid issue of whether the expression " use of power" as per the meaning of

that expression contained in the ESI Act includes use of LPG gas. This

vexed question as to whether use of LPG gas for the purpose of preparing of

tea and coffee by the use of power was resolved by the Supreme Court only
FAO No.309/2013                                                   Page 3 of 4
 in the year 2009 as per the judgment in the case of Bombay Anand Bhavan

Restaurant Vs. The Deputy Director, ESI Corporation and Anr. (2009) 9

SCC 61. Therefore, once the respondent had a valid basis to contest the

coverage under the ESI Act it cannot be said that respondent was

unjustifiably and arbitrarily refusing to pay the original demand. If there is a

valid basis to dispute the coverage and the original demand, consequently

there would be unnecessarily hardship upon any person if he is asked to pay

interest and penalty on the original demand because to impose penalty and

interest would be to deny opportunity to get a vexed legal issue decided by

the Court.


6.           In view of the above, there is no merit in the appeal and the

same is therefore dismissed, leaving the parties to bear their own costs.




FEBRUARY 24, 2014                             VALMIKI J. MEHTA, J.

Ne