The Supreme Court ruled that the ESI Court is not empowered to restrict the period during which the interest is payable under Employees State Insurance Act, 1948.
Feeling aggrieved and dissatisfied with the judgment and order passed by the High Court of Gujarat at Ahmedabad in R/First Appeal, by which the High Court has dismissed the said appeal preferred by the appellant(s) and has not interfered with the order passed by the Employees State Insurance (ESI) Court restricting the levy of interest leviable under Section 39(5)(a) of the Employees State Insurance Act, 1948 for two years only, the Employees State Insurance Corporation and another have preferred the present appeal.
Counsel appearing on behalf of the appellants, submitted that both, the ESI Court as well as the High Court have not properly appreciated that the levy of interest under Section 39(5) (a) of the ESI Act is mandatory and neither the Court nor the Authority have any jurisdiction and/or authority to waive the interest.
It is further submitted that as such the conclusion and the findings arrived at by the ESI Court, confirmed by the High Court that the interest can be leviable for two years only is not supported by any statutory provision.
The division bench Justice M.R. Shah and Justice M.M. Sundresh observed that on a fair reading of Section 39(5) (a) of the ESI Act, the organisation/employer in default is liable to pay the simple interest @ 12% per annum or, as such, higher rate as may be specified in the regulations till the date of its actual payment.
“The word used in Section 39(5)(a) is “Shall”. Therefore, the interest leviable/payable is a statutory liability to pay the interest. Neither the Authority nor the Court have any authority to either waive the interest and/or reduce the interest and/or the period during which the interest is payable” the court said.
The court noted the ESI Court has reduced the period of interest to two years only. The same is not supported by any statutory provision.
The court held that as such the ESI Court was not justified at all in reducing the period of interest to two years only. The respondent was liable to pay the interest under Section 39(5)(a) from the date on which the contribution became due and payable and till the date of actual payment.
The court quashed and set aside the judgment and order passed by the High Court and that of the ESI Court restricting the levy of interest under Section 39(5)(a) of the ESI Act to two years.
Case title: The Regional Director/Recovery Officer & Anr. v/s Nitinbhai Vallabhai Panchasara
Citation: Special Leave Petition (C) No. 16380/2022