Orissa High Court

Pramod Kumar Pradhan vs Union Of India And Others on 18 January, 2023

     IN THE HIGH COURT OF ORISSA AT CUTTACK
                   W.P.(C) No.16724 of 2014
                    (Through Hybrid mode)

Pramod Kumar Pradhan                      ....                Petitioner

                               -versus-
Union of India and others                 ....         Opposite Parties


Advocates appeared in this case:

For petitioner           : Mr. K. Ray, Advocate
                           Mr. A. K. Baral, Advocate


For opposite parties     : Mr. P. K. Parhi, DSG
                           Mr. A. P. Ray, Advocate
                           Mr. P. P. Ray, Advocate



          CORAM: JUSTICE ARINDAM SINHA
                       JUDGMENT

18.01.2023

1. Mr. Nayak, learned advocate appearing on behalf of petitioner

had moved the writ petition on 3rd January, 2023. He had submitted,

his client was liable to pay the contribution and interest as there was

default. Criminal proceeding was launched by the corporation. Then,

the corporation provided amnesty scheme, under which the demand

was paid. The payment was made on 30th May, 2007. Long

// 2 //

thereafter, by impugned notice dated 4th July, 2013, the corporation

raised further demand, in addition to the earlier demand, paid up

under the amnesty scheme. He relies on clause (b) under sub-section

(1-A) in section 77 of Employees' State Insurance Act, 1948 to

submit, the special statute provides for limitation barring the demand

in impugned notice.

2. Mr. A. P. Ray, learned advocate appearing on behalf of the

corporation, on that date had submitted, demand by impugned notice

was in respect of interest that was erroneously omitted in the demand

earlier made and paid under amnesty. His further submission was that

section 77 only operates in respect of proceedings before the

insurance Court. He had relied on judgment of the Supreme Court in

Goetze (India) Limited v. Employees' State Insurance

Corporation, reported in AIR 2008 SC 3122 to submit, law was

declared that liability to pay interest is statutory. There is no power of

waiver. The question of any compromise or settlement does not really

arise

3. On hearing both sides, Court had made observations. In this

context paragraph 3 from order dated 3rd January, 2023 is reproduced

below.

WP(C) no.16724 of 2014 // 3 //

"3. Observations have been made by Court in context of another judgment of the Supreme Court in Employees' State Insurance Corporation v. F. Fibre Bangalore (P) Ltd., reported in (1997) 1 SCC 625, paragraph 5. Mr. A.P.Ray prays for adjournment."

4. Today Mr. K. Ray relies on judgment of the Supreme Court in

Vikrant Tyres Ltd v. ITO, Mysore, reported in AIR 2001 SC 800.

Paragraph 11 is reproduced below.

"11. The High Court also fell in error in relying on Section 3 of the Validation Act to construe Section 220(2) in the manner in which it has done in the impugned judgment. Section 3 of the Validation Act, in our opinion, cannot be relied upon to construe the authority of the Revenue to demand interest under Section 220 of the Act. The said Section was enacted to cope up with a different fact-situation. That Section only revives the old demand notice which had never been satisfied by the assessee and which notice got quashed during some stage of the challenge and finally the said quashed notice gets restored by an order of a higher forum. In such situation, Section 3 of the Validation Act restores the original demand notice which was never satisfied by the assessee and the said Section does away with the need to issue a fresh notice. Beyond that, that Section cannot be resorted to for reviving a demand notice which is already fully satisfied."

(emphasis supplied)

WP(C) no.16724 of 2014 // 4 //

5. Mr. A. P. Ray in response to reliance on Vikrant Tyres Ltd.

(supra) relies on view taken by the Full Bench of Punjab and Haryana

High Court in E.S.I. Corpn., Chandigarh v. Oswal Woollen Mills,

reported in 1980 Lab IC 1064. Relied upon passage is reproduced

below.

"It is a hallowed rule of construction that in construing a statute, the definitions from an altogether different enactment are not helpful and indeed dangerous to advert to and the more so, where their language is plainly and significantly different."

(emphasis supplied)

6. The facts are, there was default by petitioner. That led to

accrual and demand of interest on aggregate default along with the

principal dues. In addition the corporation resorted to initiate criminal

proceeding in accordance with law, for recovery. Court has

ascertained that the amnesty granted to petitioner was in fact that

itself and not waiver. On petitioner having paid the aggregate

demand, he obtained amnesty from the criminal prosecution. In other

words, the corporation, upon recovery, did not prosecute. Instead, it

withdrew and the proceeding was dropped.

WP(C) no.16724 of 2014 // 5 //

7. It is not disputed at the Bar that the amnesty was obtained by

petitioner on paying aggregate demand, as calculated by the

corporation. The corporation now says, it made mistake in the

calculation. Hence, upon discovery, subsequent demand by impugned

notice dated 4th July, 2013, issued long after the payment was made

on 30th May, 2007. Question for adjudication is whether this

subsequent demand is barred by clause-(b) under sub-section (1-A) in

section 77. Clause-(b) is reproduced below.

"(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 year of the period to which the claim relates;"

8. Cause of action for the corporation, on the claim subsequently

made by impugned notice dated 4th July, 2013, undoubtedly arose in

respect of original demand made, followed by prosecution. Hence, by

the clause, petitioner asserts that impugned notice is barred, for it to

be set aside and quashed.

WP(C) no.16724 of 2014 // 6 //

9. In F. Fibre Bangalore (P) Ltd. (supra) the Supreme Court

declared that by necessary implication of provision under section 75, (Act

of 1948), when the employer denies liability or applicability of provisions

in the Act or quantum of contribution, it is for him to approach the

insurance Court. Instead of doing so petitioner has moved the writ Court

challenging the notice. The challenge is not so much a dispute but that the

demand itself is barred by law and in raising it, the corporation acted in

excess of its powers.

10. Sub-section (2) in section 220 of Income Tax Act, 1961 is

reproduced below without the provisos.

"(2) If the amount specified in any notice of demand under section 156 is not paid within the period limited under sub- section (1), the assessee shall be liable to pay simple interest at one per cent for every month or part of a month comprised in the period commencing from the day immediately following the end of the period mentioned in sub- section (1) and ending with the day on which the amount is paid:"

In Vikrant Tyres Ltd. (supra) the Supreme Court found that section

3 in Taxation Laws (Continuation and Validation of Recovery

Proceedings) Act, 1964 could not be relied upon to construe authority

of revenue to demand interest under section 220 in the Act, of 1961.

The provision in the validation Act only revived the old demand

notice, which had never been satisfied by the assessee and which

WP(C) no.16724 of 2014 // 7 //

notice was quashed during some stage of the challenge and finally

restored by order of higher forum. In such situation section 3 of the

validation Act restored original demand, which was not satisfied,

doing away with issuance of fresh notice of demand. However, that

section cannot be resorted to for reviving a demand notice, which is

already fully satisfied. On behalf of petitioner contention is that

impugned notice arises out of a fully satisfied demand and hence, the

challenge is covered by Vikrant Tyres Ltd. (supra), for it to be set

aside and quashed.

11. Therefore, on the one hand we have a satisfied demand and

subsequent plea of mistake and on the other, the claim based on

mistake, contended to be barred by limitation as cause of action for it

arose on original demand.

12. In this situation some illumination may be had from section

22 in Contract Act, 1872. The section is reproduced below.

"22. Contract caused by mistake of one party as to matter of fact.--A contract is not voidable merely because it was caused by one of the parties to it being under a mistake as to a matter of fact."

True it is that petitioner and the corporation do not have contractual

relation. The demand originally made and subsequently, as caused by

WP(C) no.16724 of 2014 // 8 //

mistake in calculation earlier, is a statutory demand as declared in

Goetze (supra). Nevertheless, the principle of the provision can be

applied. The principle is that as the contract is not voidable merely

because it was caused by one of the parties to it being under mistake

as to a matter of fact. So also impugned notice is not voidable or bad

because it was caused by the corporation being under mistake in

having raised original demand. Petitioner's obligation to pay is

statutory. The statute (Act of 1948) provides for determination,

demand and recovery, including by initiation of criminal proceedings.