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          IN THE 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

THE REGIONAL DIRECTOR, ESI CORPN.& ANR.     ....RESPONDENT(S)

O  R  D  E  R

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.

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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.

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

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                             ( V.S.SIRPURKAR )

                   .............................J.                               ( H.L.DATTU )

NEW DELHI; MARCH 17, 2009.