U.R.D.Co-Op.M.P.S.Union Ltd. Vs. The Regional Director, Esi Corpn.& ANR.
 INSC 538 (17 March 2009)
SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO.1740 OF
2009 (Arising out of SLP(C)No.18354 of 2006) BANGALORE U.R.D.CO-OP.M.P.S.UNION
LTD. .....APPELLANT(S) VERSUS
O R D E R
counsel for the appellant mainly argues before us the question of damages and
points out that the High Court has held that the damages cannot be quantified
and have to be read as compulsory damages in terms of Section 85-B of the
Employees' State Insurance Act, 1948 (read with Regulation 31-A of the
Employees' State Insurance(General) Regulation, 1950). We have seen both the
provisions. Learned counsel for the appellant very heavily relies upon a
decision reported in (2008) 3 SCC 35 (Employees' State Insurance Corporation
vs. HMT Ltd. and another) where this Court is of the view in paragraphs 14, 15
and 16 to the effect that there is a discretion in respect of the
quantification of the damages. The said paragraphs run as under :- "14.
Section 85-B of the Act empowers the Corporation to recover damages in the
event an employer fails to make the payment of the amount due in respect of
contribution; subject, however, to the condition that the amount thereof would
not exceed the amount of arrears as may be specified in the Regulations. The
proviso appended thereto incorporates the principles of "natural
on the part of the employer to deposit the contributions of both the
"employer" and the "employee" is not in dispute. What is in
dispute is as to whether the amount of damages specified in Regulation 31-C of
the Regulations is imperative in character or not.
is a well-known principle of law that a subordinate legislation must conform to
the provisions of the legislative Act. Section 85-B of the Act provides for an
enabling provision. It does not envisage mandatory levy of damages. It does not
also contemplate computation of quantum of damages in the manner prescribed
under the Regulations."
seen the impugned Judgment of the High Court wherein the High Court in
paragraph 6 has observed :- ".........In so far as appeal MFA 4036/03 is
concerned, here again, the only circumstance under which the Corporation is
vested with the discretion to waive or reduce interest is provided under Section
85-B of the Act and the fact that there was no malafide intention on the part
of the respondent, is not a circumstance which would require the appellant to
consider waiver or reduction of the damages that are likely to be imposed, for
default in making contributions in time. Accordingly, the said appeal deserves
to be allowed."
obvious that the High Court has taken the view that the discretion is
prohibited due to the language of Section 85-B of the Act. This Court has
already taken a view that the levy of damages is not mandatory and that there
is nothing in the Act to suggest imperatively the computation of damages only
in the manner prescribed under the Regulation. Under these circumstance, we
feel that insofar as the damages aspect is concerned, the High Court should
decide the question of damages in the light of principles laid down by this
Court in the case of Employees' State Insurance Corporation vs. HMT Ltd. and
another (supra). The High Court is directed accordingly to re-hear the parties
on the question of damages alone.
as the interest is concerned, we do not think that there is any case for
interference particularly in view of the decision in Goetze (India) Ltd. vs.
Employees' State Insurance Corporation, reported in (2008) 8 SCC 705 and that
aspect is closed. The matter is accordingly remitted to the High Court and the
High Court will dispose of the matter in the light of the directions given by
us in respect of damages alone. The appeal is disposed of accordingly. There
shall be no order as to costs.
.............................J. 3 ( V.S.SIRPURKAR )
.............................J. ( H.L.DATTU )
MARCH 17, 2009.