Vs. C.C. Santhakumar  Insc 829 (21 November 2006)
Pasayat & Tarun Chatterjee
(C.A.Nos.6295/2004, 6297/2004, 6298/2004, 4810-11/2005, 6299/2004, 6300/2004,
6301/2004, 7366/2005, 1798/2006, 1799/2006, 1800/2006, AND 2453/2006) ARIJIT
these appeals involve identical questions and are, therefore, taken up together
for disposal. Some of the appeals are by the Employees State Insurance
Corporation (in short 'the Corporation') while some others are by the
Corporation questions correctness of the judgment rendered by the full Bench of
the Kerala High Court while the employers question correctness of the judgment
rendered by a Division Bench of the Madras High Court.
question before the two High Courts were as follows :- Proviso to Section
77(1A)(b) of the Employees State Insurance Act, 1948 (in short the 'Act')
provided limitation of 5 years for claiming contribution and restricts the
Corporation's right from recovering the arrears of contribution as arrears of
land revenue under Section 45 (B) in pursuance of an order under Section 45(A)
of the Act. The Corporation claimed ESI Contributions as arrears from various
employers. Assailing those orders, some of the employers moved the Employees State Insurance Court (in short the 'E.S.I. Court') in
the State of Kerala. The employers in the State of Tamil Nadu, however, filed writ petitions
before the Madras High Court. The Writ Petitions were dismissed by learned
Single Judge. Writ appeals filed before the High Court did not bring any
result. The judgment of the Division Bench affirming that of learned Single
Judge is the subject matter of challenge in some of the appeals. Corporation on
the other hand has questioned the correctness of the judgment of the full Bench
of the Kerala High Court, which held that the limitation prescribed under
Section 77 restricting the claim for a period of five years clearly indicated
by the fact that the contribution for a period of more than five years cannot
be claimed by the Corporation. With reference to the proviso to Section
77(1A)(b) it was held that a period of limitation has to be read into the
provision; otherwise the employers would be greatly handicapped and would not
be in a position to establish its case as regards the number of employees
working under it. In such a situation the employer would be left defenceless.
With reference to Regulation 66 of the Employees State Insurance (General)
Regulations, 1950 (in short the 'Regulation') it was held that the maintenance
of the register in terms of Regulation 66 was for a period of 5 years.
being so, it is clear that the complaint is confined to a period of 5 years and
the employer is not bound to preserve its records for the periods prior to
that. The Madras High Court on the other hand held that the language of Section
77(1A)(b) is very clear and it did not provide for any period of limitation for
raising the demand or making the assessment. Learned counsel for the employers
supported the view of the Kerala High Court. It was submitted that any other
view would make the provisions confiscatory; it would also lead to an absurd
result that the Corporation can theoretically make a claim even after decade,
thereby causing prejudice to the employers.
submitted that even if it is conceded for the sake of argument that Section
77(1A)(b) does not provide for a period of limitation the concept of claim
being raised during a reasonable period of time is inbuilt, otherwise the
action would be arbitrary. That being so it was submitted that the view
expressed by the Kerala High Court should be accepted and not that of the
Madras High Court.
contra, learned counsel for the Corporation submitted that the Kerala High
Court failed to take notice of the fact that Section 77(1A) operates in
different background and has no relation to a dispute raised by an employer to
the demand raised for contribution by the Corporation. It was pointed out that
the employers in the State of Tamil Nadu
instead of moving the E.S.I.
Court directly filed
writ petitions without availing the alternative remedy available. Since factual
disputes were involved regarding the actual number of employees, the writ
petitions were not maintainable and the High Court has rightly clarified the
position in law though it could have thrown out the writ petitions on the
ground that alternative forum of redressal was available.
counsel for the employers submitted that remedy provided in the Statute is
really not a efficacious remedy as the employer would be required to deposit
50% of the amount claimed, though the Court had discretion to reduce the amount
to be deposited. It cannot be said that an efficacious remedy is available.
order to appreciate the rival submissions few provisions in the Act need to be
noted. They are as follows:
45A. It was inserted by Act 44 of 1966 and enforced with effect from
17.06.1967. It reads as under:
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 S.44 or any
Inspector or other official of the Corporation referred to in Sub-sec.(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.
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.
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." 45B. Recovery of contributions.--Any
contribution payable under this Act may be recovered as an arrear of land
Constitution of Employees' Insurance Court.—
The State Government shall, by notification in the Official Gazelle, constitute
an Employees' Insurance
Court for such local
area as may be specified in the notification.
The Court shall consist of such number of Judges as the State Government may
Any person who is or has been a judicial officer or is a legal practitioner of
five years' standing shall be qualified to be a Judge of the Employees' Insurance Court.
The State Government may appoint the same Court for two or more local areas or
two or more Courts for the same local area.
Where more than one Court has been appointed for the same local area, the State
Government may by general or special order regulate the distribution of
business between them.
Matters to be decided by Employees' Insurance Court.--(1) If any question or
dispute arises as to—
any person is an employee within the meaning of this Act or whether he is
liable to pay the employee's contribution, or
rate of wages or average daily wages of an employee for the purposes of this
rate of contribution payable by a principal employer in respect of any
person who is or was the principal employer in respect of any employee, or
right of any person to any benefit and as to the amount and duration thereof,
direction issued by the Corporation under section 55A on a review of any
payment of dependants' benefit, or
any other matter which is in dispute between a principal employer and the
Corporation, or between a principal employer and an immediate employer or
between a person and the Corporation or between an employee and a principal or
immediate employer, in respect of any contribution or benefit or other dues
payable or recoverable under this Act, or any other matter required to be or which
may be decided by the Employees' Insurance Court under this Act], such question
or dispute '[subject to the provisions of sub-section (2A) shall be decided by
the Employees' Insurance Court in accordance with the provisions of this Act.
Subject to the provisions of sub-section (2A), the following claims shall be
decided by the Employees' Insurance Court,
for the recovery of contributions from the principal employer;
by a principal employer to recover contributions from any immediate employer;
xx xx xx
against a principal employer under section 68;
under section 70 for the recovery of the value or amount of the benefits
received by a person when he is not lawfully entitled thereto; and
claim for the recovery of any benefit admissible under this Act.
If in any proceedings before the Employees' Insurance Court a disablement
question arises and the decision of a medical board or a medical appeal
tribunal has not been obtained on the same and the decision of such question is
necessary for the determination of the claim or question before the Employees'
Insurance Court, that Court shall direct the Corporation to have the question
decided by this Act and shall thereafter proceed with the determination of the
claim or question before it in accordance with the decision of the medical
board or the medical appeal tribunal, as the case may be, except where an
appeal has been filed before the Employees' Insurance Court under sub- section
(2) of section 54A in which case the Employees' Insurance Court may itself
determine all the issues arising before it.
No matter which is in dispute between a principal employer and the Corporation
in respect of any contribution or any other dues shall be raised by the
principal employer in the Employees' Insurance Court unless he has deposited
with the Court fifty per cent, of the amount due from him as claimed by the
that the Court may, for reasons to be recorded in writing, waive or reduce the
amount to be deposited under this sub- section.
Civil Court shall
have jurisdiction to decide or deal with any question or dispute as aforesaid
or to adjudicate on any liability which by or under this Act is to be decided
by a medical board, or by a medical appeal tribunal or by the Employees' Insurance Court.
Commencement of proceedings .-
The proceedings before an Employees' Insurance Court shall be commenced by application.
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-
the cause of action in respect of the 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 claim or claim that benefit in accordance with
the regulations made in that behalf within a period of 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;
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;
that no claim shall be made by the Corporation after five years of the period
to which the claim relates.
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.
Every such application shall be in such form and shall contain such particulars
and shall be accompanied by 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." Section 45-A provides that in a case
where a factory or establishment fails to furnish the returns or maintain or
furnish the registers etc., the Corporation can determine the amount of
contributions payable in respect of the employees of that factory or establishment.
Such an order can be passed only after giving reasonable opportunity of hearing
to the employer or the person in-charge of the factory or establishment. The
order passed by the Corporation shall be sufficient proof of the claim of the
Corporation under Section 75 or for recovery of the amount determined by such
an order as an arrear of land revenue under Section 45-B or under Section 45-C
45B provides that the contribution payable under the Act may be recovered as
arrears of land revenue. Section 45C entitles the Authorised Officer to issue a
certificate, specifying the amount of arrears. The Recovery Officer, on receipt
of such certificate, is entitled to attach the property, arrest the employer
and appoint a receiver for the management of the movable and immovable
properties of the factory or establishment. The provisions contained in
Sections 45-D to 45-I lay down a detailed procedure for effecting the recovery.
next set of relevant provisions quoted above is contained in Chapter VI. It
relates to the adjudication of disputes and claims. Section 74 deals with the
constitution of Courts. Section 75(2) inter alia provides that the claim for
recovery of the contributions from the principal employer shall be decided by
the Employees' Insurance
(2B) was added by Act 29 of 1989. By this, it was provided that no matter,
which is in dispute between the principal employer and the Corporation in
respect of any contribution or any other dues, shall be raised by the principal
employer in the Employee's Insurance Court,
unless he has deposited with the Court 50% of the amount due from him, as
claimed by the Corporation. However, in the proviso, a power has been reserved
by which the Court can waive or reduce the amount of deposit.
76 relates to the institution of the proceedings.
Section 77, the pivotal provision in these cases for commencement of
proceedings has been made. A perusal of Section 77 shows that the proceedings
before an Employees' Insurance
Court commence with
the filing of an application.
application has to be filed within a period of three years from the date on
which the cause of action arises. In Clause (a) of the Explanation, provision
for the fixation of the date on which the cause of action for the claimant or
his dependants arises has been fixed. In Clause (b), the starting point for the
accrual of the cause of action for the principal-employer has been fixed. It
provides that the date on which the Corporation makes the claim from the
principal-employer for recovering the contributions including interest and
damages shall be the date of cause of action.
present case, the controversy centres on the proviso to Clause (b) of Section
77(1A). The crucial question is, "Does the proviso to Clause (b) of
Section 77(1A) fix the limit of time, in which the Corporation can make a claim
from the employer, on the basis of the orders passed under Section 45?"
Section 45A is a part of Chapter IV. Section 77 (1A) (b) proviso is contained in
Chapter VI. The question is whether there is any connecting link between
Chapter IV and Chapter VI.
38 to 45-I are contained in Chapter IV while Chapter VI relates to Sections 74
to 83. Sections 45A and 45B in Chapter IV were introduced by Act 44 of 1966
with effect from 17.06.1967, in order to curb the default by the employers and
to provide for an efficient method of recovery.
mode of recovery is provided under Sections 45-C to 45-I.
other hand, Section 75 in Chapter VI relates to the commencement of proceedings
before the E.S.I. Court. Proviso to Clause (b) of Section
77(1A) was introduced by the Act 29 of 1989 with effect from 20.10.1989. A
combined reading of the provisions indicates that no claim shall be made by the
Corporation beyond five years, to which the claim relates. The relevant Section
in Chapter IV, which deals with the order passed by the Corporation is Section
45A. Similarly, the relevant Section in Chapter VI, which deals with the
resolving of disputes between the employer and the Corporation by the E.S.I. Court, is Section 77 (1A).
reading of Chapter IV, as a whole, makes it clear that there is no limitation
prescribed. Section 38 imposes the obligation on the employer to pay
contribution and, upon his failure, he is liable to pay interest on a recurring
basis until it is paid. Section 40 imposes an obligation to pay on the
principal employer in the first instance. This means, even if the employees
were those of the contractors, it is the principal employer who has to pay.
Section 44 mandates the employer to furnish proper returns so that the
Corporation can scrutinize, assess and pass an order for a claim. Section 44
does not provide for any limitation and, originally, it did not prescribe any
mode of recovery. Therefore, Act 44 of 1966 was introduced. Under this Act,
Sections 45A and 45B were brought into force. Thereafter Sections 45-C to 45-I
were introduced, prescribing the mode of recovery. The apparent purpose of
introduction of these Sections is to curb default by the employers and also to
provide for an efficient method of recovery without any delay.
45A provides for determination of contributions in certain cases. When the
records are not produced by the establishment before the Corporation and when
there is no cooperation, the Corporation has got the power to make assessment
and determine the amount under Section 45A and recover the said amount as
arrears of land revenue under Section 45B of the Act. This is in the nature of
a best judgment assessment as is known in taxing statutes. When the Corporation
passes an order under Section 45A, the said order is final as far as the
Corporation is concerned. Under Section 45A(1), the Corporation, by an order,
can determine the amount of contributions payable in respect of the employees
where the employer prevents the Corporation from exercising its functions or
discharging its duties under Section 45, on the basis of the material available
to it, after giving reasonable opportunity. But, where the records are
produced, the assessment has to be made under Section 75(2)(a) of the Act.
Section 45A (2) provides that the order under Section 45A(1) shall be used as
sufficient proof of the claim of the Corporation under Section 75 or for
recovery of the amount determined by such order as arrears of land revenue
under Section 45B. In other words, when there is a failure in production of
records and when there is no cooperation, the Corporation can determine the
amount and recover the same as arrears of land revenue under Section 45B. But,
on the other hand, if the records are produced and if there is cooperation, the
assessment has to be made and it can be used as a sufficient proof of the claim
of the Corporation under Section 75 before the E.S.I. Court. So, the limitation of three years for filing an
application before the Court, introduced by Act 44 of 1966, can only relate to
the application under Section 75 read with 77(1A). The order under Section 45A
need not be executed by the Corporation before the E.S.I.
under Section 77. As such, the amendment to Section 77(1A)(b) proviso by Act 29
of 1989 providing five year limitation has no relevance so far as orders passed
by the Corporation under Section 45A are concerned.
an order is passed under Section 45A, it is the duty of the employer and not
the Corporation to approach the E.S.I. Court. Since no application need be filed by the Corporation
after an order is passed under Section 45A, the limitation prescribed under
Section 77 does not get attracted.
non-payment of contribution is a continuing cause, which is clear from the fact
that the employer is enjoined to pay the interest under Section 39(5)(A), which
was introduced by Act 29 of 1989, until the date of its actual payment.
to the incorporation of Section 45A under Act 44 of 1966, the only resort
available to the Corporation was Section 75, for recovery of contribution
through the Court. Since this procedure was found to be impracticable and
delayed process involved, a special provision was contemplated whereunder
adjudication is to be made by the Corporation itself. By reason of
incorporation of Section 45A with effect from 17.06.1967, it became possible
for the Corporation to have determination of the question, binding on the
principal employer, without resorting to the E.S.I.Court. In regard to the
order under Section 45A, the same is enforced, as envisaged under Section 45B,
which was similarly brought into the Act, by which the contribution may be
recovered as arrears of land revenue.
regard to the decision reached by the E.S.I. Court in the application under Section 75, the said decision is
enforced, as envisaged in sub-section (4) of Section 75 as if it is a Civil Court. The mode of recovery under Section
45B of the Corporation and the mode of recovery as per Section 75(4) by the E.S.I. Court as the Civil Court are entirely different as both
Sections 45 and 75 operate in different spheres.
this context, it would be worthwhile to refer to Chapter V also. Chapter V
contains Sections 46 to 73. The relevant Section is 68, which reads as follows:
Corporation's rights where a principal employer fails or neglects to pay any contribution
any principal employer fails or neglects to pay any contribution which under
this Act he is liable to pay in respect of any employee and by reason thereof
such person becomes disentitled to any benefit or entitled to a benefit on a
lower scale, the Corporation may, on being satisfied that the contribution
should have been paid by the principal employer, pay to the person the benefit
at the rate to which he would have been entitled, if the failure or neglect had
not occurred and the Corporation shall be entitled to recover from the
principal employer either
difference between the amount of benefit which is paid by the Corporation to
the said person and the amount of the benefit which would have been payable on
the basis of the contributions which were in fact paid by the employer; or
the amount of the contribution which the employer failed or neglected to pay,
whichever is greater.
amount recoverable under this Section may be recovered as if it were an arrear
of land-revenue (or under section 45-C to Section 45-I)" Section 68 of the
Act in Chapter V deals with the Corporation's rights, where an employer fails
to pay any contribution. Sub-section (2) to Section 68 provides that the amount
recoverable under this Section may be recovered as if it were an arrear of land
revenue or under Sections 45-C to 45-I. The said Chapter does not impose any
fetter or limitation for the Corporation to recover the amounts by coercive
process. In view of the addition of the words in Section 68 "or under
Section 45-C to 45-I" to sub-section (2) of Section 68 by Act 29 of 1989
with effect from 20.10.1989, the said claim could be recovered under Section
45-C to 45-I of the Act.
is no limitation prescribed in the language of Section 68.
60 prescribes that the benefits are not assignable to anyone else. Section 71
provides that the benefits under the Act are payable to the employee up to the
date of his death.
the Legislature, in its wisdom, did not want to impose by fetter or limitation
on the Corporation to recover the amounts by coercive process under Chapter V.
68 of the Act has been elaborately dealt with by this Court in Bharat Barrel
and Drum Mfg. Co. Ltd. and Anr. v. E.S.I. Corporation (1971 (2) SCC 860). It
was inter alia observed as follows:
VI deals with the adjudication of disputes and claim, of which Section 74
provides for the constitution of the Insurance Court. Section 74 specifies the matters to be decided by that
Court. Sections 76 and 77 deal with the institution and commencement of
proceedings and Section 78 with the powers of the Insurance Court.
provisions in our view unmistakably indicate that the whole scheme is dependent
upon the contributions made by the employer not only with respect to the
amounts payable by him but also in respect of those payable by the employee. No
limitation has been fixed for the recovery of these amounts by the Corporation
from the employer; on the other hand, Section 68 empowers the Corporation to
resort to coercive process. If any such steps are proposed to be taken by the
Corporation and the employer is aggrieved, he has a right to file and apply to
the Insurance Court and have his claim adjudicated by it in the same way as the
Corporation can prefer a claim in a case where the liability to pay is
disputed." It is clear, therefore, that the right of the Corporation to
recover these amounts by coercive process is not restricted by any limitation
nor could the Government by recourse to the rule-making power prescribe a
period in the teeth of Section 68.
above judgment this Court has clearly held that Section 68 of the Act empowers
the Corporation to resort to coercive process, to recover the contribution from
the employer as if it were an arrear of land revenue and the said right is not
restricted by any limitation. This is a crucial Section.
no limitation is provided in Chapter VII. It deals with the imposition of
penalty or levy of damages upon failure to pay contributions. It consists of
Sections from 84 to 86A.
the Act itself does not provide for any limitation on the Corporation's right
to claim, the employers cannot rely upon Regulations 32 to 66, dealing with the
period for maintenance of registers, to imply any limitation.
45A of the Act contemplates a summary method to determine contribution in case
of deliberate default on the part of the employer. By amendment Act 29 of 1989,
Sections 45-C to 45-I were inserted in the Principal Act, for the purpose of
effecting recovery of arrears by attachment and sale of movable and immovable
properties or establishment of the principal or immediate employer, without
having recourse to law or E.S.I Court. Therefore, it cannot be said that a
proceeding for recovery as arrears of land revenue by issuing a certificate
could be equated to either a suit, appeal or application in the Court. Under
Section 68(2) and Sections 45- C to 45-I, after determination of contribution,
recovery can be made straightaway. If the employer disputes the correctness of
the order under Section 45A, he could challenge the same under Section 75 of
the Act before the E.S.I.
plain reading of Sections 45A and 45B in Chapter IV and 75 and 77 in Chapter VI
of the Act, as indicated above, there cannot be any doubt that the area and the
scope and ambit of Sections 45A and 75 are quite different.
period of limitation, prescribed under proviso (b) of Section 77(1A) is read
into the provisions of Section 45A, it would defeat the very purpose of
enacting Sections 45A and 45B. The prescription of limitation under Section
77(IA)(b) of the Act has not been made applicable to the adjudication
proceedings under Section 45A by the legislature, since such a restriction
would restrict the right of the Corporation to determine the claims under
Section 45A and the right of recovery under Section 45B and, further, it would
give a benefit to an unscrupulous employer. The period of five years, fixed
under Regulation 32(2) of the Regulations, is with regard to maintenance of
registers of workmen and the same cannot take away the right of the Corporation
to adjudicate, determine and fix the liability of the employer under Section
45A of the Act, in respect of the claim other than those found in the register
of workmen, maintained and filed in terms of the Regulations.
Section 75(2) empowers is not only the recovery of the amounts due to the
Corporation from the employer by recourse to the E.S.I. Court, but also the
settlement of the dispute of a claim by the corporation against the employer.
this is so, there is no impediment for the Corporation also to apply to the E.S.I. Court to determine a dispute against an
employer where it is satisfied that such a dispute exists. If there is no
dispute in the determination either under Section 45A(1) or under Section 68,
the Corporation can straightaway go for recovery of the arrears.
77 of the Act relates to commencement of proceedings before the E.S.I. Court. The proviso to sub-Section 77 of
the Act cannot independently give any meaning without reference to the main
provision, namely, Section 77 of the Act.
the proviso to Clause (b) of Section 77(1A) of the Act, fixing the period of
five years for the claim made by the Corporation, will apply only in respect of
claim made by the Corporation before the E.S.I. Court and to no other proceedings.
Legislature has provided for a special remedy to deal with special cases. The
determination of the claim is left to the Corporation, which is based on the
information available to it.
shows whether information is sufficient or not or the Corporation is able to
get information from the employer or not, on the available records, the
Corporation could determine the arrears. So, the non-availability of the
records after five years, as per the Regulation, would not debar the
Corporation to determine the amount of arrears. Therefore, if the provisions of
Section 45A are read with Section 45B of the Act, then, the determination made
by the Corporation is concerned. It may not be final so far as the employer is
concerned, if he chooses to challenge it by filing an application under Section
75 of the Act. If the employer fails to challenge the said determination under
Section 75 of the Act before the Court, then the determination under Section
45A becomes final against the employer as well. As such, there is no hurdle for
recovery of the amount determined under Section 45B of the Act, by invoking the
mode of recovery, as contemplated in Sections 45C to 45-I.
Employees' State Insurance Corporation v. F. Fibre Bangalore (P) Ltd. (1997 (1)
SCC 625) it was observed that it is not necessary for the Corporation to seek a
resolution of the dispute before the E.S.I. Court, while the order was passed
under Section 45A. Such a claim is recoverable as arrears of land revenue. If
the employer disputes the claim, it is for him to move the E.S.I. Court for relief. In other cases, other
than cases where determination of the amount of contributions under Section 45A
is made by the Corporation, if the claim is disputed by the employer, then, it
may seek an adjudication of the dispute before the E.S.I. Court, before enforcing recovery.
inevitable conclusion, therefore, is that the view of the Full Bench of the Kerala
High Court is not correct and that of the Madras High Court is correct.
brings us to the other question i.e. whether a concept of reasonable time can
be read into the provision even though not specifically provided for? Similar
questions have arisen in several other statutes.
Hindustan Times Ltd. v. Union of India (1998 (2) SCC 242) this court dealt with
the power to recover damage under Sections 14(B) of the Employees Provident
Fund and Misc.
Act, 1952 (in short the 'Provident Fund Act'). There also the question arose as
to whether in the absence of any period of limitation the authority under the
Provident Funds Act could recover the damages after a long period of time. It
was inter alia held as follows :
authority under Section 14-B has to apply his mind to the facts of the case and
the reply to the show-cause notice and pass a reasoned order after following
principles of natural justice and giving a reasonable opportunity of being
heard; the Regional Provident Fund Commissioner usually takes into
consideration the number of defaults, the period of delay, the frequency of default
and the amounts involved; default on the part of the employer based on plea of
power-cut, financial problems relating to other indebtedness or the delay in
realization of amounts paid by the cheques or drafts, cannot be justifiable
grounds for the employer to escape liability; there is no period of limitation
prescribed by the legislature for initiating action for recovery o damages
under Section 14-B. The fact that proceedings are initiated or demand for
damages is made after several years cannot by itself be a ground for drawing an
inference of waiver or that the employer was lulled into a belief that no
proceedings under Section 14-B would be taken; mere delay in initiating action
under Section 14-B cannot amount to prejudice inasmuch as the delay on the part
of the Department, would have only allowed the employer to use the monies for
his own purposes or for his business especially when there is no additional
provision for charging interest. However, the employer can claim prejudice if
there is proof that between the period of default and the date of initiation of
action under Section 14-B he has changed his position to his detriment to such
an extent that if the recovery is made after a large number of years, the
prejudice to him is of an "irretrievable" nature; he might also claim
prejudice upon proof of loss of all the relevant records and/or non
availability of the personnel who were, several years back in charge of these
payments and provided he further establishes that there is no other way he
grounds which could lead to "irretrievable" prejudice; further, in
such cases of "irretrievable" prejudice, the defaulter must take the
necessary pleas in defence in the reply to the show cause notice and must
satisfy the authority concerned with acceptable material; if those pleas are
rejected, he cannot raise them in the High Court unless there is a clear
pleading in the writ petition to that effect." A "reasonable
period" would depend upon the factual circumstances of the case concerned.
There cannot be any empirical formula to determine that question. The
court/authority considering the question whether the period is reasonable or
not has to take into account the surrounding circumstances and relevant factors
to decide that question.
State of Gujarat v. Patel Raghav Natha (1969 (2) SCC 187) it was observed that
when even no period of limitation was prescribed, the power is to be exercised
within a reasonable time and the limit of the reasonable time must be
determined by the facts of the case and the nature of the order which was
sought to be varied. This aspect does not appear to have been specifically kept
in view by the Division Bench.
the points relating to applicability of the Andhra Pradesh Assigned Lands
(Prohibition of Transfers) Act, 1977, and even if it is held that the Act was
applicable, the reasonableness of the time during which action should have been
initiated were also not considered. It would be hard to give an exact
definition of the word "reasonable". Reason varies in its conclusions
according to the idiosyncrasy of the individual and the times and circumstances
in which he thinks. The reasoning which built up the old scholastic logic
stands now like the jingling of a child's toy. But mankind must be satisfied
with the reasonableness within reach; and in cases not covered by authority,
the decision of the Judge usually determines what is "reasonable" in
each particular case; but frequently reasonableness "belongs to the
knowledge of the law, and therefore to be decided by the courts". It was
illuminatingly stated by a learned author that an attempt to give a specific
meaning to the word "reasonable" is trying to count what is not a
number and measure what is not space.
means prima facie in law reasonable in regard to those circumstances of which
the actor, called upon to act reasonably, knows or ought to know. (See:
Municipal Corpn. of Delhi v. Jagan Nath Ashok Kumar (1987 (4)
SCC 497) and Gujarat Water Supply & Sewerage Board
v. Unique Erectors (Gujarat) (P) Ltd. (1989 (1) SCC 532). As
observed by Lord Romilly, M.R. in Labouchere v. Dawson (41 LJ Ch 472) it is impossible a priori to state what is
reasonable as such in all cases. You must have the particular facts of each
case established before you can ascertain what is reasonable under the
circumstances. Reasonable, being a relative term is essentially what is
rational according to the dictates of reason and not excessive or immoderate on
the facts and circumstances of the particular case.
aspects were highlighted in Collector and Others v. P. Mangamma and Others
(2003 (4) SCC 488).
observed in Veerayee Ammal v. Seeni Ammal (2002 (1) SCC 134), it is
"looking at all the circumstances of the case; a "reasonable
time" under ordinary circumstances; as soon as circumstances will permit;
so much time as is necessary under the circumstances, conveniently to do what
the contract requires should be done; some more protracted space than
'directly'; such length of time as may fairly, and properly, and reasonably be
allowed or required, having regard to the nature of the act or duty and to the
attending circumstances; all these convey more or less the same idea".
to Advanced law Lexicon by P. Ramanatha Aiyar 3rd Edition, 2005 reasonable time
means as follows:
is a reasonable time that preserves to each party the rights and advantages he
possesses and protects each party from losses that he ought not to suffer.
Time" is defined to be so much time as is necessary, under the
circumstances, to do conveniently what the contract or duty requires should be
done in a particular case.
is proper to attempt any definition of the words "reasonable time",
as applied to completion of a contract, the distinction given by Chief Baron
Pollock may be suggested, namely, that a "reasonable time" means as
soon as circumstances will permit.
determining what is a reasonable time or an unreasonable time, regard is to be
had to the nature of the instrument, the usage or trade or business, if any,
with respect to such instrument, and the fact of the particular case.
reasonable time which a passenger is entitled to alighting from a train is such
time as is usually required by passengers in getting off and on the train in
safety at the particular station in question.
reasonable time, looking at all the circumstances of the case; a reasonable
time under ordinary circumstances; as soon as circumstances will permit; so
much time as is necessary under the circumstances, conveniently to do what the
contract requires should be done; some more protracted space than
"directly" such length of time as may fairly, and properly, and
reasonably be allowed or required, having regard to the nature of the act or
duty and to the attending circumstances; all these convey more or less the same
time always depends on the circumstances of the case. (Kinney) It is
unreasonable for a person who has borrowed ornaments for use in a ceremony to
detain them after the ceremony has been completed and the owner has demanded
their return. (AIR 1930 Oudh 395).
expression "reasonable time" means so much time as is necessary under
the circumstances to do conveniently what the contract or duty requires should
be done in a particular case". [See: Joseph Severance v. Benny Mathew
(2005(7) SCC 667)] In all these cases at hand the factual aspects have not been
examined, because the grievance appears to have been focused on the
applicability of Section 77 (1A)(b).
circumstances we dispose of all these appeals with the following directions :
The employers shall move the E.S.I. Court within a period of two months, if not
They shall deposit 25% of the amount claimed with the E.S.I. Court along with
the application in terms of Sections 75 & 76 of the Act before the E.S.I.
The E.S.I. Court shall determine the quantum of contribution, if any, payable
and consider the question as to whether demands were raised within a reasonable
period of time or not after considering the question of prejudice, if any, for
the delayed action taken by the Corporation.
The approach of the E.S.I. Court and the Authorities should be that of a watch
dog and not of a blood hound, even though the legislation is a beneficial one.
make it clear that we have not expressed any opinion on the merits of the case.
Appeals are accordingly disposed of but without any order as to costs.