Gujarat High Court
Employees State Insurance Corp vs Vijay Engineering Works on 23 June, 2025
NEUTRAL CITATION
C/FA/2336/2004 JUDGMENT DATED: 23/06/2025
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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/FIRST APPEAL NO. 2336 of 2004
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR. JUSTICE HEMANT M. PRACHCHHAK
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Approved for Reporting Yes No
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EMPLOYEES STATE INSURANCE CORP.
Versus
VIJAY ENGINEERING WORKS
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Appearance:
MR HEMANT S SHAH(756) for the Appellant(s) No. 1
MR PANKAJ R DESAI(3120) for the Defendant(s) No. 1
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CORAM:HONOURABLE MR. JUSTICE HEMANT M.
PRACHCHHAK
Date : 23/06/2025
ORAL JUDGMENT
1. Present appeal is filed by the appellant - Employees
State Insurance Corporation against the judgment and order
dated 06.04.2004 passed by the Employees State Insurance
Court, Rajkot (hereinafter referred to as 'the E.S.I. Court") in
E.S.I. Application No. 18 of 1990, whereby, the application filed
by the respondent-Company was partly allowed and the
respondent was directed to pay Rs.11,332.17p. to the
appellant towards damages.
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2. The short facts giving rise to present appeal are that, the
respondent Company was manufacturing diesel engine with
E.S.I. Code No. 37/1211-67. That, the respondent Company
delayed in paying ESI contribution for one reason or another
between the year 1976 to 1978 and 1984 to 1987. That, during
the above period, the respondent Company deposited the
amount of share of the workers and the owners but, the
Corporation demanded payment of the contribution of the
workers and the owners on the payment which did not come
under the definition of wages, in fact, the payment made by
the respondent Company to outside persons does not come
under the definition of wages. Thus, an order was issued to the
respondent Company to pay a total amount of Rs.11,332/- on
09.04.1990 and was also ordered to pay other damages
suffered by the appellant Corporation. The said order of the
Corporation was challenged by the respondent Company
before the ESI Court by way of filing ESI Application No.18 of
1990, whereby, the application of the respondent was partly
allowed vide order dated 06.04.2004 and the respondent was
directed to pay only Rs.11,332.17p. to the appellant towards
damages.
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3. Being aggrieved and dissatisfied with the aforesaid
judgment and order passed by the ESI Court, the appellant ESI
Corporation has filed the present First Appeal under Section
82(2) of the Employees State Insurance Act, 1948.
4. Heard learned advocate Mr. Hemant Shah, appearing for
the appellant - E.S.I.C. and learned advocate Mr. Pankaj Desai,
appearing for the respondent-Company.
5. Learned advocate Mr. Shah has submitted that the order
passed by the E.S.I. Court is contrary to law and evidence on
record. He has submitted that the ESI Court has not considered
the fact that if the establishment fails to make payment of
contribution in time than the Corporation can demand and
recover the damages as per the provisions of act and
regulations. In support of his submissions, learned advocate
Mr. Shah has referred and relied upon the decision of the
Hon'ble Apex Court rendered in case of Employees' State
Insurance Corporation vs. Narniat Pharmaceuticals &
Chemicals Pvt. Ltd., reported in [1998] 1 SCC 185 and
emphasized that the damages were calculated in the light of
the extent of each default and a flat rate of damages of 19%
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was applied for computation while exercising the provisions
under Section 85(b) of the Act. He has further submitted that
the rate of damages fixed by way of penalty should be within
the ceiling of 100% of the amount of arrears of contribution
which were not paid in time and that the extent of damages
claimed would exceed the ceiling of 100%. Learned advocate
Mr. Shah has therefore, urged that the judgment and order
passed by the ESI Court is erroneous, illegal and unjust and the
same is required to be quashed and set aside and the present
appeal is required to be allowed.
6. As against that, learned advocate Mr. Desai, appearing
for the respondent, has submitted that the ESI Court has not
committed any error while passing the impugned judgment
and order. He has referred and relied upon the decision of the
Hon'ble Apex Court rendered in case of Employees' State
Insurance Corporation vs. HMT Ltd. and Another,
reported in [2008] 3 SCC 35 and submitted that the
damages imposed for the default in the case where the
contribution is not paid within stipulated time is not required to
be construed strictly. Only because a provision has been made
for levy of penalty, the same by itself would not lead to the
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conclusion that penalty must be levied in all situations. He has
further submitted that the respondent has already deposited
the amount of damages before the Corporation within time and
the receipt of the same is produced on record at page-93 of
the paper-book and the respondent is liable to get 50% refund
as directed by the ESI Court. Learned advocate Mr. Desai has
therefore, urged that the present appeal be dismissed and the
order passed by the ESI Court is required to be confirmed.
7. I have heard the learned advocates appearing for the
respective parties and perused the material placed on record. I
have also gone through the impugned judgment and order
passed by the ESI Court. Considering the submissions
advanced by both the sides and considering the decision of the
Hon'ble Apex Court referred and relied upon by the learned
advocate Mr. Desai for the respondent, I am in complete
agreement with the findings recorded by the ESI Court and
there is no any infirmity or any illegality committed by the ESI
Court in passing the impugned judgment and order and hence,
the present appeal is required to be dismissed.
8. Resultantly, the present appeal is hereby dismissed. No
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order as to costs.
9. The appellant ESI Corporation is hereby directed to
refund 50% of the amount deposited by the respondent, as
directed by the ESI Court, after due verification through
RTGS/NEFT, within a period of four (4) weeks from the date of
receipt of order of this Court.
10. At this stage, learned advocate Mr. Shah for the
appellant-Corporation requests for stay of this order for a
period of 2 months, however, considering the fact that the
appeal is of the year 2004 i.e. almost 21 years have been
passed, the request made by learned advocate Mr. Shah is
turned down.
11. Record and proceedings, if any, be sent back to the
concerned Court forthwith.
(HEMANT M. PRACHCHHAK,J)
Dolly
