Delay condoned.
Leave granted.
Learned 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 justice”.
15.Obligation 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.
16.It 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.”
We have 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.”
It is 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.
Insofar 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.
( H.L.DATTU )