Karnataka High Court
The Director vs M/S. Vikram Hospital Pvt. Ltd on 2 June, 2023
Bench: H.P.Sandesh
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MFA No. 5144 of 2017
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 2ND DAY OF JUNE, 2023
BEFORE
THE HON'BLE MR JUSTICE H.P.SANDESH
MISCELLANEOUS FIRST APPEAL NO. 5144 OF 2017 (ESI)
BETWEEN:
1. THE DIRECTOR
ESI CORPORATION,
SUB REGIONAL OFFICE,
1ST FLOOR, ESI DISPENSARY,
BADEMAKAN EXTENSION,
BANGALORE-MYSORE ROAD,
MYSORE-570 007.
...APPELLANT
(BY SRI. GEETHADEVI M.P., ADVOCATE [THROUGH VC])
AND:
1. M/s. VIKRAM HOSPITAL PVT. LTD.,
PARAMAHAMSA ROAD,
Digitally signed
by SHARANYA T YADAVAGIRI ROAD,
Location: HIGH MYSORE-570 020,
COURT OF REPRESENTED BY ITS
KARNATAKA
DR. S.B.VIKRAM
...RESPONDENT
(RESPONDENT IS SERVED AND UNREPRESENTED)
THIS MFA IS FILED U/S 82(2) OF EMPLOYEES STATE
INSURANCE ACT 1948, AGAINST THE ORDER DATED
16.05.2017 PASSED IN ESI. APPLICATION NO.3/2015 ON THE
FILE OF THE JUDGE, EMPLOYEES STATE INSURANCE COURT,
MYSORE, PARTLY ALLOWING THE APPLICATION FILED UNDER
SECTION 75(1)(g)OF THE ESI ACT.
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MFA No. 5144 of 2017
THIS APPEAL COMING ON FOR ADMISSION THIS DAY,
THE COURT DELIVERED THE FOLLOWING:
JUDGMENT
This matter is listed for admission. Heard the learned
counsel appearing for the appellant. Though the respondent is
served, he did not choose to engage the counsel or to appear
before the Court.
2. This appeal is filed under Section 82(2) of the
Employees State Insurance Act, 1948, against the order dated
16.05.2017 passed in ESI Application No.3/2015 on the file of
the Employees' State Insurance Court, Mysore, partly allowing
the application filed under Section 75(1)(g) of the ESI Act.
3. The factual matrix of the case of the ESI., is that
the respondent establishment is a Hospital. The respondent is
covered under the provisions of the ESI Act and it was allotted
a code number. By operation of Sections 39 and 40 of ESI Act
read with Regulation 31 of the ESI Regulation 1950, the
respondent was liable to pay ESI contribution. The ESI
contribution for the period covering from November 2012 to
April 2013, was paid by the respondent belatedly. Therefore,
there was a delay in contribution ranging from 253 days to 341
MFA No. 5144 of 2017
days, depending upon the due dates for monthly contribution in
terms of Regulation 31 of ESI Regulation 1950. Accordingly, a
notice dated 03.04.2014 was issued to the respondent under
Section 85(B) of the Act read with regulation 31-C of the ESI
(General) Regulation 1950. After giving opportunities to the
respondent to present its case with regard to the proposed
determination of damages under Section 85-B of the ESI Act.
After considering the respondent's reply an order was passed
by the statutory authority on 22.01.2015, determining and
claiming a damage of Rs.3,95,473/-. The respondent was liable
to pay the said amount as statutory damages, for the delay in
payment of contribution for the period herein before narrated.
It is contended that the respondent herein has approached the
ESI Court in ESI Application No.3/2015 challenging the said
order/Demand Notice dated 22.01.2015. The ESI Court by an
order dated 16.05.2017 has partly allowed the said application,
restricting the quantum of damages due, to 50% of
Rs.3,95,473/- only, by modifying the 85-B order dated
16.05.2017, wherein the claim was Rs.3,95,473/-. Being
aggrieved by the said order, the present appeal is filed before
this Court.
MFA No. 5144 of 2017
4. The main contention of the learned counsel
appearing for the appellant before this Court is that the
damage amount of Rs.3,95,473/- for the delay in payment of
contribution for the period i.e., November 2012 to April 2013.
The said calculation is made based on the regulation. The
respondent was duty bound to pay the contribution regularly, in
terms of Sections 39 and 40 of the ESI Act read with Regulation
31 of ESI (General) Regulation 1950. The liability on the
respondent for payment of contribution is by operation of law.
The respondent need not be issued with any Section 45-A order
for this purpose, in view of the fact that for the above said
period, the contribution due and paid belatedly was in respect
of regular monthly paid employees, covered under the
provisions of the ESI Act as "Insured Persons" as defined under
Section 2(9) of the ESI Act. The respondent on its own duty
bound to pay ESI contribution regularly, under Sections 39 and
40 of the ESI Act.
5. It is contended that when the amount was not paid
towards the contribution and merely because the payment of
contribution amount with interest that will not take away the
proviso to Sub Section (1) of Section 85-B of the ESI Act and
MFA No. 5144 of 2017
they are bound to pay the damages and determination of
damages by the statutory authority dated 22.01.2015 cannot
be faulted. The Trial Court has committed an error in ignoring
the very proviso of the ESI Act and the judgment of this Court
in the case of Workmen of BEL v. ESIC reported in ILR 1995
KAR 2539, is very clear that they are bound to pay the
damages. The very order passed by the Trial Court is
erroneous.
6. The learned counsel appearing for the appellant in
support of her arguments relied upon the judgment of the Apex
Court in the case of Horticulture Experiment Station
Gonikoppal, Coorg v. Regional Provident Fund
Organization reported in (2022) 4 SCC 516, wherein, the
Apex Court held that the failure to deposit contribution -
Imposition of damages for delayed payment - Breach of civil
obligations/liabilities committed by employer. The Apex Court
held that, is sufficient for imposition of penalty or damages -
There is no further requirement on authority concerned to
examine existence of element of actus reus/mens rea or to
examine issue of justification, for imposing damages. The
learned counsel also brought to the notice of this Court the
MFA No. 5144 of 2017
paragraph Nos.14 and 15 of the judgment, wherein, the Apex
Court has taken note of the earlier judgments. In paragraph
No.15, the Apex Court came to the conclusion that after
detailed discussion taking note of the exposition of law on the
subject, it is well-settled that means that mens rea or actus
reus is not an essential element for imposing penalty or
damages for breach of civil obligations and liabilities. Hence,
the learned counsel would vehemently contend that the
principle laid down in the judgment is applicable to the case on
hand.
7. The learned counsel also brought to the notice of
this Court that the reasoning given by the Trial Court, while
considering the issue involved between the parties in paragraph
No.18, the Trial Court came to the conclusion that admittedly
when the amount was due to the ESI Corporation, it is paid
along with its interest and the matter is to be considered
regarding the damages. The notice produced by the respondent
at Ex.R1 discloses that the Corporation has imposed the
damages at the rate of 25% in respect of the delayed payment
by counting the number of days delay. In this regard, there is
due of Rs.1,99,452/- to the Corporation disputing this aspect as
MFA No. 5144 of 2017
the contribution is paid along with interest, the damages are to
be assessed and also an observation is made that no doubt, the
ESI authority has calculated the damages as per Regulation
31(c) of the ESI Regulations. On considering the financial
stringency of the applicant/Company, the amount claimed by
the authority is exorbitant and it has to be reduced. On
considering the defense of the applicant, it discloses that there
is no mens rea on the part of the applicant in making the
delayed payment. Mens rea is one of the aspects to be
considered for levy of the damages. Hence, reduced the
amount.
8. The learned counsel appearing for the appellant
would vehemently contend that the Trial Court has committed
an error while discussing the mens rea in paragraph No.19 of
its judgment and the Apex Court in the judgment referred
supra categorically held that the breach of civil
obligations/liabilities committed by the employer, the same
itself is sufficient for imposition of penalty or damages. There is
no further requirement on authority concerned to examine
existence of element of actus reus/mens rea or to examine
issue of justification, for imposing damages. Having taken note
MFA No. 5144 of 2017
of the principles laid down in the judgment referred supra and
also the reasoning given by the Trial Court, wherein, the Trial
Court came to the conclusion that no mens rea. The question of
considering the mens rea does not arise in view of the
principles laid down in Horticulture Experiment Station
Gonikoppal, Coorg's case (supra), it is a breach of civil
obligations committed by the employer. The Apex Court also
held that it is sufficient for imposition of penalty or damages
and no further requirement on authority concerned to examine
with regard to existence of mens rea. When such being the
case, the very judgment relied upon by the learned counsel for
the appellant is aptly applicable to the case on record. The Trial
Court has proceeded in an erroneous approach that mens rea is
one of the aspect to be considered for levy of the damages. It
is not in dispute that the contribution was not made on time,
there was a delay and the interest and damages to be
calculated at the rate of 25% in respect of the delayed payment
while counting the number of days delay. When the Apex Court
says that, it can be recovered by means of penalty or damages
and the damages is also calculated based on Regulation 31(c)
of the ESI Regulations, the Trial Court has committed an error
MFA No. 5144 of 2017
in reducing the amount by applying mens rea and the same is
not permitted. Hence, the order passed by the Trial Court
requires to be set aside.
9. In view of the discussions made above, I pass the
following:
ORDER
(i) The appeal is allowed.
(ii) The impugned order dated 16.05.2017 passed
in ESI Application No.3/2015 on the file of the
Judge, Employees State Insurance Court,
Mysore, is set aside.
(iii) The respondent is directed to pay the
damages as claimed by the appellant.
Sd/-
JUDGE
CP
