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.
-
2
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
-
3
(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
-
4
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.
-
5
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
-
6
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
-
7
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.
-
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)
-
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
-
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,
-
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
2 7004/2022 1/1997- Rs.17,66,519/- 26.12.2005 28.11.2008 09.02.2015 23/2015 1212
5/1999 March
3 7005/2022 04/1999- Rs.72,12,815/- 26.12.2005 13.11.2008 09.02.2015 10/2015 1212
03/2001 March
4 7006/2022 04/2001- Rs.79,01,276/- 26.12.2005 13.11.2008 09.02.2015 09/2015 1212
03/2003 March
5 7007/2022 01/1995- Rs.36,24,068/- 23.12.2005 13.11.2008 09.02.2015 22/2015 1212
12/1996 March
6 7008/2022 4/1999- Rs.9,89,525/- 26.12.2005 13.11.2008 09.02.2015 20/2015 1212
3/2001 March
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
-
8 7031/2022 10/2006- Rs.25,99,740/- 16.04.2008 20.04.2009 09.02.2015 16/2015 1060
3/2007 March
9 7035/2022 04/1999- Rs.51,38,118/- 26.12.2005 13.11.2008 09.02.2015 11/2015 1212
03/2001 March
10 7687/2022 04/2003- Rs.15,50,815/- 19.09.2006 13.11.2008 09.02.2015 06/2015 1212
03/2005 March
11 7690/2022 04/2003- Rs.63,77,804/- 19.09.2006 13.11.2008 09.02.2015 13/2015 1212
05/2006 March
12 7691/2022 01/1997- Rs.21,00,036/- 26.12.2005 13.11.2008 09.02.2015 08/2015 1212
03/1998 March
13 7695/2022 04/2007- Rs.1,03,98,960/- 13.08.2009 05.02.2016 33/2016
03/2009 March
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
-
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.
-
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
-
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
-
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
-
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.
-
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'
-
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
-
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
-
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;
-
• 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;
-
• 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
-
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
-
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.
-
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.
-
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
-
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,
-
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
-
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
-
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.
-
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;
-
(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
-
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
-
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
-
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
-
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
-
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*
