REPORTABLE  IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.  8432 OF 2001

M/s. Goetze (India) Ltd. ...Appellant

Versus

Employees State Insurance Corporation  ...Respondents

J U D G M E N T

Dr. ARIJIT PASAYAT, J.

1. Challenge  in  this  appeal  is  to  be  order  passed  by  a

Division  Bench  of  the  Punjab  and  Haryana  High  Court

dismissing the writ petition filed by the appellant.   

2. Controversy lies within a very narrow compass.

Employees  State  Insurance  Corporation  (in  short  the

‘Corporation’),  the  respondent  herein  raised  a  demand  for

contribution under the Employees State Insurance Act, 1948

(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

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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

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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

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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.”

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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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