Bombay HC – ESI Cannot Sleep on Rights –14 years Delay in Levying Damages on Bombay Gymkhana under Section 85-B of ESI Act, Invalid
On 15.3.1989, the ESI demanded contribution of Rs.14.92 lakhs on adhoc basis for 1972 to 1989.
On 30.8.2000, the Gymkhana deposited the said amount without prejudice.
On 23.3.2011, the ESI demanded Rs.29.17 lakhs interest for delayed contribution for 1972 to 1989.
On 20.8.2015, the ESI Court rejected the application of Gymkhana and same was confirmed by the Hih Court on 8.2.2022.
On 16.4.2014, the ESI issued notice for damages in default of payment of contribution within stipulated time.
On 30.6.2014, the ESI passed an order under Section 85B for damages of Rs.16.26 lakhs for delayed contribution for 1975 to 1983. This was set-aside by the ESI Court on the ground of limitation vide order dated 30.6.2014.
after examining the Scheme of the Act, in my view, the “reasonable period” for claiming damages under Section 85-B, which in the instant case is calculated on the basis of the default made for payment of contribution would be five years. In the instant case, admittedly, the contribution for the period 1972 to 1989 was made by the respondent-gymkhana on 7 September 2000. If five years period is taken as reasonable period from the date of this payment, then the appellant-corporation should have passed the order under Section 85-B on or before September 2005. However, in the instant case, the order under Section 85-B has been passed on 16 April 2014, which is much beyond reasonable period of five years.
- There is no explanation for the delay of fourteen years, when the damages are calculated on the basis of contribution and the said contribution was paid on 7 September 2000. The explanation that in the intervening period, the appellant-corporation has levied interest which was contested by the respondent-gymkhana and ultimately the appeal filed by the respondent-gymkhana was dismissed by this Court on 8 February 2022 cannot be accepted. This is so because, the damages have been levied admittedly on the default made for making contribution within the prescribed time provided under the Act. The levy of interest and the challenge to the said levy by the respondent gymkhana has no relation whatsoever to the order passed under Section 85-B which levied damages on the delayed payment of contribution and not on the interest. Furthermore, even the damages are calculated on contribution and not on the interest. Therefore, this contention cannot be accepted. 28. The contribution pertains to 1972 to 1989. The first appeal challenging applicability of the Act was dismissed on 12 April 1996. In 2000, the respondent-gymkhana paid up contribution. After eleven years, in 2011, interest on delayed contribution was levied which ultimately on challenge only qua rate of interest was dismissed in 2022. The damages were imposed in 2014, i.e. fourteen years after payment of contribution. The application on applicability was dismissed by the ESI Court in 1987. There was no bar on appellant-corporation to initiate proceedings under Section 85-B by any Court at any point of time. In my view, looking at these facts, the delay in imposing penalty is unreasonable.
Judgment dated 24.2.2026 of the High Court at Bombay in First Appeal (ST) No.6383 of 2019 of Regional Director of Employees State Insurance Corporation Vs. M/s. Bombay Gymkhana Ltd
