2011 (1) TMI 1221 - HC - Companies Law

Order dated December 6, 2004, passed under section 45A of the Employees State Insurance Act, 1948 by the respondent ESI Corporation directing petitioner to make a contribution of ₹ 4,39,028 in respect of the period 1997-98 and 1998-99 challenged Held that - In so far as the ESI Act is concerned, payment of interest is a must on delayed payment whereas levy of damages is in the nature of penalty. Therefore, any waiver or modification of damages under section 85B may be possible but not for interest levied in terms of section 39(5) of the ESI Act. The writ petition is thoroughly misconceived. Accordingly, the writ petition will stand dismissed

Summary

Issues:
Challenge to order under section 45A of the Employees' State Insurance Act, 1948 regarding contribution payment for specific period, claim of immunity under Sick Industrial Companies (Special Provisions) Act, 1985, dispute over interest liability on delayed payments.

Analysis:

1. Challenge to Order under Section 45A:
The petitioner contested an order by the ESI Corporation directing a contribution payment of Rs. 4,39,028 for specific periods. Despite partial payment, the liability of interest was imposed. The petitioner argued that their company was sick, referred to BIFR proceedings, and cited issues with trade union actions affecting contributions. Previous legal challenges were mentioned, and the petitioner sought relief due to financial difficulties caused by sickness.

2. Claim of Immunity under SICA:
The petitioner claimed immunity under section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985, stating that recovery should not be pursued due to ongoing BIFR proceedings. However, the court referred to a previous judgment that held BIFR proceedings do not prevent ESI authorities from enforcing contributions under the ESI Act, thereby rejecting the immunity claim.

3. Dispute over Interest Liability:
The Supreme Court precedent highlighted that interest on delayed payments is a statutory liability, and private negotiations on interest are not permissible. The court emphasized that interest is automatically imposed on employers for delayed contributions, and any disputes regarding interest should be addressed through legal proceedings under the ESI Act. The petitioner's reliance on a different tax case was deemed irrelevant, and the court clarified the distinction between interest and damages under the ESI Act.

4. Legal Precedents and Interpretation:
The judgment extensively cited legal precedents, including Supreme Court decisions on the ESI Act and related matters. The court emphasized the procedural requirements for challenging ESI orders, the enforcement mechanisms available to ESI authorities, and the statutory nature of interest on delayed payments. Various judgments were referenced to establish the legal principles governing contribution disputes and interest liabilities under the ESI Act.

5. Dismissal of Writ Petition:
Ultimately, the court found the writ petition to be misconceived and dismissed it, emphasizing that the petitioner could challenge any other liabilities through appropriate legal channels under the ESI Act. The court concluded that the petitioner's arguments did not warrant relief in the present case, and no costs were awarded. The judgment highlighted the importance of following legal procedures and seeking remedies through the prescribed legal avenues.

This detailed analysis of the judgment from the High Court of Madras provides insights into the legal complexities surrounding challenges to ESI orders, claims of immunity under related statutes, and the statutory imposition of interest on delayed payments under the ESI Act.