2006 (11) TMI 626 - SC - Indian Laws

Whether proviso to Section 77(1A)(b) of the Employees State Insurance Act 1948 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? Whether a concept of reasonable time can be read into the provision even though not specifically provided for?

Issues Involved:
1. Limitation period for claiming contributions under the Employees State Insurance Act, 1948.
2. Jurisdiction and procedural aspects of the Employees State Insurance Court.
3. Reasonableness of delay in raising claims by the Corporation.

Detailed Analysis:

1. Limitation Period for Claiming Contributions:

The primary issue was whether the proviso to Section 77(1A)(b) of the Employees State Insurance Act, 1948, which prescribes a limitation of five years for claiming contributions, restricts the Corporation's right to recover arrears of contributions as arrears of land revenue under Section 45(B) in pursuance of an order under Section 45(A) of the Act. The Kerala High Court held that the limitation period of five years applies, preventing the Corporation from claiming contributions for periods extending beyond five years. This was based on the rationale that employers would be handicapped in defending claims due to the unavailability of records after five years, as mandated by Regulation 66. Conversely, the Madras High Court ruled that Section 77(1A)(b) does not provide for any period of limitation for raising demands or making assessments.

2. Jurisdiction and Procedural Aspects of the Employees State Insurance Court:

The judgment also addressed the procedural aspects and jurisdiction of the Employees State Insurance Court (E.S.I. Court). The Kerala High Court's interpretation was that the limitation period should be read into the provisions to avoid arbitrary actions by the Corporation. However, the Supreme Court clarified that Section 45A, which allows the Corporation to determine contributions in certain cases, operates independently of the limitation period prescribed under Section 77(1A)(b). The Supreme Court emphasized that Section 45A provides a summary method for determining contributions when employers fail to furnish necessary records, and such determinations can be directly recovered as arrears of land revenue under Section 45B without the need for proceedings before the E.S.I. Court.

3. Reasonableness of Delay in Raising Claims by the Corporation:

The Supreme Court also considered whether a concept of "reasonable time" should be read into the provision, even though not specifically provided for. The Court referred to various precedents, including *Hindustan Times Ltd. v. Union of India*, which dealt with the power to recover damages under the Employees Provident Fund and Miscellaneous Provisions Act, 1952. It was held that even in the absence of a prescribed period of limitation, actions must be initiated within a reasonable time, considering the facts and circumstances of each case. The Court directed that the E.S.I. Court should determine the reasonableness of the delay in raising claims, considering any prejudice caused to the employers due to such delays.

Conclusion:

The Supreme Court concluded that the view of the Kerala High Court was incorrect and upheld the Madras High Court's interpretation. The Court directed that employers should move the E.S.I. Court within two months, deposit 25% of the claimed amount, and the E.S.I. Court should determine the quantum of contributions payable and consider the reasonableness of the delay in raising claims. The Court emphasized that the approach of the E.S.I. Court and the Authorities should be that of a watchdog, not a bloodhound, even though the legislation is beneficial.

Disposition:

The appeals were disposed of with specific directions to ensure that the claims were adjudicated fairly and within a reasonable period, without expressing any opinion on the merits of the case. Appeals were disposed of without any order as to costs.

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