M/S. Goetze (India) Ltd vs Employees State Insurance Corporation

(in short the `Act') on the component of efficiency bonus for the

period January 1988 to September, 1989 by order dated

23.7.1992. The demand was challenged before the ESI Court

under Section 75 of the Act. Pending the proceedings before

the ESI Court, Corporation by letter dated 1.3.1997 asked for

production of record for the purpose of re-verification for the

period from 1989 to 1991 and from 1992 to 1994 to determine

the amount payable.

The respondent Corporation on re-verification

determined the actual amount payable as follows:

(a) 1/88 to 3/89 as Rs.2,26,454/-

(b) 4/89 to 3/94 as Rs.5,28,071/-

___________________ Total Rs.7,54,525/- __________________

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Appellant agreed to pay the contribution and paid the

same in October/November, 1997.

Appellant took the stand that there was a bonafide

dispute about eligibility. Since eligibility to "efficiency bonus"

under the scheme was subject to attendance of 50 days in a

quarter is payable and paid quarterly. Appellant took the

stand that it falls outside the definition of wages under Section

2(22) of the Act. Appellant took the plea that its stand was

supported by a judgment of this Court in Whirlpool of India

Ltd. v. Employees' State Insurance Corporation [2000(3) SCC

185]. The ESI Court disposed of the matter on 6.1.1998

taking note of the stand of the appellant that it had deposited

the definite amount after re-verification and the bank

guarantee furnished by the appellant was released. On

11.1.2000 the Corporation wrote a letter to the appellant

demanding payment of interest on the amount paid to the

Corporation for the period from 1988 to 1994 as covered by

order dated 6.1.1998 and directed payment of interest

3 amounting to Rs.4,61,825/-. The appellant questioned the

demand before the High Court by filing a writ petition. The

appellant's stand was that a compromise had been arrived at

as is apparent from the order of the ESI Court to the effect

that nothing was payable by the appellant. Corporation took

the stand that the liability to pay interest was statutory and,

therefore, there could not have any compromise. In any event

the submission of the appellant that nothing further was

payable as ESI contribution was noted and therefore, the bank

guarantee was released. There was no question of any

compromise to waive the interest which is not statutorily

permissible. The High Court accepted the stand and dismissed

the writ petition.

3. In support of the appeal learned counsel for the

appellant submitted that there was an order of stay and

therefore the question of any interest does not arise. Further

when the counsel for the Corporation himself stated that

nothing further was payable, it clearly indicated that there

4 was a statement on the compromise for waiver of interest. It

was pointed out that with a view to buy peace the appellant

had agreed to pay the amount though this case was clearly

covered by Whirlpool's case (supra).

4. Learned counsel for the respondent on the other hand

submitted that there is no question of any compromise to

waive interest because the same is statutorily payable. There

cannot be any compromise without any authority when there

is no provision for any compromise or statement. It is

therefore stated that the High Court's view is right.

5. In order to appreciate rival submissions it would be

necessary to take note of few provisions, Sections 39 and

Regulations 31 and 31A reads as follows:

"Section 39- Contributions xx xx xx 5(a) If any contribution payable under this Act is not paid by the principal employer on the 5 date on which such contribution has become due he shall be liable to pay simple interest at the rate of 12% per annum or at such higher rate as may be specified in the regulations till the date of its actual payment."

"Regulation 31 - Time for payment of contribution An employer who is liable to pay

contributions in respect of any employee shall pay those contributions within 21 days of the last day of the calendar month in which the contributions fall due;

Provided that where a factory/establishment is permanently closed, the employer shall pay contribution on the last day of its closure."

"Regulation 31A - Interest on contribution due, but not paid in time An employer who fails to pay contribution within the periods specified in regulation 31, shall be liable to pay interest at the rate of 12% per annum in respect of each day of default or delay in payment of contribution."

6 6. As there was delay in making the payment of the

contribution the Corporation had issued notice on 29.6.1990

at the first instance and thereafter the order was passed

under Section 45(A) of the Act on 23.7.1992. The same was

challenged before the ESI Court in which an interim stay was

granted on 9.10.1992. During the pendency of the matter

there was re-verification and the quantum payable by the

payment was worked out. The liability to pay interest is

statutory. There is no power of waiver. The question of any

compromise or settlement does not really arise. Even

otherwise the order of the ESI Court referred to and relied

upon by the appellant is of no assistance to the appellant. It

only noted statement of the appellant that he had deposited

contribution payable. The reference to "no further due" is

obviously relatable to the contribution payable and nothing

beyond that.

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7. Above being the position, the appeal is sans merit,

deserves dismissal, which we direct. There shall be no order

as to costs.

..............................J.

(Dr. ARIJIT PASAYAT)

............

..................J. (P. SATHASIVAM) New Delhi July 7, 2008

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