The High Court
Case Details
- 1 - NC: 2025:KHC:12745 MFA No. 3057 of 2017 C/W MFA No. 3056 of 2017 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 25TH DAY OF MARCH, 2025 BEFORE THE HON'BLE MR JUSTICE HANCHATE SANJEEVKUMAR MISCELLANEOUS FIRST APPEAL NO. 3057 OF 2017 (ESI) MISCELLANEOUS FIRST APPEAL NO. 3056 OF 2017 C/W IN MFA No. 3057/2017 BETWEEN: THE REGIONAL DIRECTOR ESI CORPORATION, PANCHDEEP BHAWAN, NO.10, BINNYFIELDS BINNYPET, BENGALURU. (BY MISS. VARSHINI.M, ADVOCATE FOR SMT. GEETHADEVI. M, ADVOCATE) AND: …APPELLANT Digitally signed by PAVITHRA B Location: HIGH COURT OF KARNATAKA THE MANAGEMENT OF JUNGAL LODGES AND RESORTS LTD., NO.49, GROUND FLOOR WEST WING, KHANIJA BHAVAN RACE COURSE ROAD BENGALURU-560 001. (BY SRI. JAGADEESHA. B.N,ADVOCATE) …RESPONDENT ACT INSURANCE THIS MFA HAS FILED U/S 82(2) OF THE EMPLOYEES STATE ORDER DATED31.01.2017 PASSED IN ESI APPLICATION NO.67/2015 ON THE FILE OF THE EMPLOYEES STATE INSURANCE COURT, BANGALORE, PARTLY ALLOWING THE APPLICATION FILED U/S 85-B OF THE ESI ACT, CLAIMING THE LEVYING DAMAGES OF RS.5,95,557/- IS THEREBY SET ASIDE. AGAINST THE - 2 - NC: 2025:KHC:12745 MFA No. 3057 of 2017 C/W MFA No. 3056 of 2017 IN MFA NO. 3056/2017 BETWEEN: THE REGIONAL DIRECTOR ESI CORPORAWTION, PANCHDEEP BHAWAN, NO.10, BINNYFIELDS, BINNYPET, BENGALURU.
Legal Reasoning
(BY MISS. VARSHINI.M, ADVOCATE FOR SMT. GEETHADEVI. M, ADVOCATE) ...APPELLANT AND: THE MANAGEMENT OF JUNGAL LODGES & RESORTS LTD., NO.49, GROUND FLOOR, WEST WING, KHANIJA BHAVAN, RACE COURSE ROAD, BENGALURU - 560 001. (BY SRI. JAGADEESHA. B.N, ADVOCATE) ...RESPONDENT THIS MFA IS FILED U/S 82(2) OF EMPLOYEES STATE INSURANCE ACT 1948, AGAINST THE ORDER DATED31.01.2017PASSED IN ESI. APPLICATION NO.103/2015ON THE FILE OF THE EMPLOYEES STATE INSURANCE COURT, BENGALURU,PARTLY ALLOWING THE APPLICATION FILED UNDER SECTION 75&76 OF THE ESI ACT, 1948. THESE APPEALS, COMING ON FOR FINAL HEARING, THIS DAY, JUDGMENT WAS DELIVERED THEREIN AS UNDER: - 3 - NC: 2025:KHC:12745 MFA No. 3057 of 2017 C/W MFA No. 3056 of 2017 CORAM: HON'BLE MR JUSTICE HANCHATE SANJEEVKUMAR ORAL JUDGMENT The ESI Corporation has preferred these two appeals questioning the orders dated 31.01.2017 passed in ESI application Nos.67 and 103 of 2015 by the Employees State Insurance Court, Bengaluru (hereinafter referred to as ‘the ESI Court’ for short) thereby, the ESI Court has set aside the orders passed under Section 85B of the Employees’ State Insurance Act, 1948 (hereinafter referred to as ‘the ESI Act’ for short) which levied damages of Rs.5,95,557/-, but the respondent is liable to pay damages to the extent of Rs.1,50,000/- only. 2. Additionally, regarding the notice dated 04.03.2015 and 10.07.2015 (Ex.R-1/C-18), which claimed interest and damages of Rs.3,11,254/-, but the ESI Court held that the respondent is liable to pay interest and damages to the extent of Rs.1,00,000/- only. The orders were modified accordingly, and these modifications are - 4 - NC: 2025:KHC:12745 MFA No. 3057 of 2017 C/W MFA No. 3056 of 2017 being challenged by the ESI Corporation in these two appeals. 3. For the sake of convenience and easy reference, the parties are referred to as per their rankings before the ESI Court. 4. The applicant (respondent herein) is a company registered under the Companies Act, 1956 and its affairs were taken over by the Government of Karnataka in the year 1988. The respondent operates 18 eco-tourism resorts situated in different places in the State of Karnataka. Since the strength of the employees in the respondent’s establishment exceeds 20, the provisions of ESI Act, 1948 are applicable. 5. The respondent is doing activities in hotel industry and manages resorts established in various parts of Karnataka. The ESI Corporation has calculated that the respondent has not made contributions amounting to Rs.5,59,557/- for the period from April-2009 December- - 5 - NC: 2025:KHC:12745 MFA No. 3057 of 2017 C/W MFA No. 3056 of 2017 2014 and also not paid interest of Rs.3,11,254/- for delayed payment of ESI contributions. Consequently, the ESI inspector made a report under Section 45A of the ESI Act and issued notice in Form No.C-18. Thereafter, the appellant/ESI authorities determined that the respondent has not made ESI contribution and has not paid interest on delayed payments for its employees for the aforementioned period. Accordingly, the orders were passed under Section 85B of the ESI Act and notice (Ex.R- 1-C.18) was issued after providing reasonable opportunities for hearing. 6. The said orders were challenged before the ESI Court. The respondent raised several grounds in both the cases including that it had paid medical expenses for its employees since they were unable to avail services of ESI hospitals at Bengaluru, which are remote from the respondent’s establishments in the State of Karnataka. Further, the respondent being a company taken over by the Government of Karnataka, had written several letters - 6 - NC: 2025:KHC:12745 MFA No. 3057 of 2017 C/W MFA No. 3056 of 2017 to the State of Karnataka and the Union of India seeking exemption from coverage under the provisions of the ESI Act, and these applications were still pending. Under these circumstances, the respondent argued that levying damages is not correct therefore, questioned the orders passed by the ESI Corporation. 7. In order to prove their case, in MFA No.3057/2017, one D.N.Naik Gowda was examined as A.W.1 on behalf of the applicant and marked documentary evidence as Exs.A-1 to A-8. The respondent examined Sathyanarayan B.C, SSO, as R.W.1 and marked documentary evidence as Exs.R-1 to R-3. In MFA No.3056/2017, the applicant examined D.N.Naik as A.W.1 and marked documentary evidence as Ex.A-1 and Ex.A-2, while the respondent marked documentary evidence as Ex.R-1. 8. The ESI Court has set aside the orders levying damages of Rs.5,95,557/- and interest and damages of Rs.3,11,254/-, but modified the orders holding that the - 7 - NC: 2025:KHC:12745 MFA No. 3057 of 2017 C/W MFA No. 3056 of 2017 respondent is liable to pay damages of Rs.1,50,000/- and interest and damages to the extent of Rs.1,00,000/-. Being aggrieved by these orders, the ESI Corporation has preferred these two appeals. 9. It is undisputed that the respondent is a company registered under the Companies Act, 1956 operating in the hotel industry and managing resorts. It is also undisputed that the respondent has more than 20 employees and that the provisions of the ESI Act are applicable to the respondent/company. The appellant/Corporation observed that the respondent failed to make ESI Contributions amounting to Rs.5,95,557/- and has not paid interest and damages of Rs.3,11,254/- for the period from April-2009 to December-2014 and accordingly passed orders under Section 85B of the ESI Act and notice Ex.R-1/C-18 notice. The only reason given by the respondent is that it paid medical reimbursement to its employees covered under the provisions of ESI Act, as they were unable to access ESI hospitals in Bengaluru and - 8 - NC: 2025:KHC:12745 MFA No. 3057 of 2017 C/W MFA No. 3056 of 2017 other remote locations therefore, once again making contributions to ESI authorities would amount to double payment. Hence, taken plea and argued in this regard that the respondent already paid medical expenses of its employees. 10. It is further argued that the respondent/company is a company owned by the State of Karnataka doing business activities of hotel industries and resorts for bringing awareness of eco-tourism among the public. In this regard, the respondent wrote several letters to the State of Karnataka and also the Union of India seeking exemption from coverage under the provisions of ESI Act. The learned counsel for the respondent submitted that due to these reasons, the respondent is not liable to make ESI contributions or pay interest and damages. It is contended that the levy of damages and interest is not correct and this is correctly held by the ESI Court, which needs no interference by this Court. - 9 - NC: 2025:KHC:12745 MFA No. 3057 of 2017 C/W MFA No. 3056 of 2017 11. On the other hand, learned counsel for the appellant submitted that there is no evidence on part of the respondent to prove that it reimbursed medical expenses for its employees and no particulars regarding such reimbursement have been furnished. Additionally, it was argued that merely writing letters seeking exemption from the ESI Act and its Rules is not asufficient ground to avoid making ESI contributions. Therefore, submitted that on untenable grounds the ESI Court set aside the orders and without any reasons modified the same by reducing the quantum of damages of Rs.1,50,000/- and interest to an extent of Rs.1,00,000/-. Hence, prays to allow the appeals and set aside the orders passed by the ESI Court and upheld the orders passed by the appellant under Section 85B of the ESI Act and on C-18-notice/Ex.R-1. 12. Upon considering the entire case on record, it is evident that the respondent has not placed any evidence before the ESI Court to demonstrate that it has reimbursed medical expenses for its employees covered - 10 - NC: 2025:KHC:12745 MFA No. 3057 of 2017 C/W MFA No. 3056 of 2017 under the ESI Act and Rules, including details of the hospitals where the employees received treatment and the hospitals to which the respondent paid the medical bills of its employees. 13. Learned counsel for the respondent took the Court through Exs.A-1 to A-8 documentary evidence, some of which are letters issued to the State of Karnataka and the Union of India seeking exemption from coverage under the provisions of ESI Act. However, it is admitted that the respondent till today has not obtained exemption from the ESI Act in its letters produced before the ESI Court. Although the respondent’s letters may claim that it reimbursed medical expenses for its employees, but for which absolutely there is no evidence placed before the ESI Court. 14. In order to claim exemption from the ESI Act, the respondent has not produced any pivotal evidence regarding the medical facilities extended to its employees in other hospitals. There is no evidence placed by the - 11 - NC: 2025:KHC:12745 MFA No. 3057 of 2017 C/W MFA No. 3056 of 2017 respondent except producing the letters to the competent authorities. As per Section 91A of the ESI Act, since there is no exemption order in favour of the respondent, the provisions of the ESI Act are applicable to the respondent. 15. Mere pending of the exemption applications before the competent authorities is not a sufficient reason for the respondent to avoid making contributions. As discussed above, the respondent except producing letters seeking exemption, there is no evidence regarding the amount expended on medical facilities for its employees covered under the ESI Act. Making ESI contribution is mandatory for covered establishments unless exempted under Section 91A of the ESI Act. Since there is no exemption in favour of the respondent, the appellant/ESI authorities were justified in levying damages for non- payment of ESI contributions from April-2009 to December-2014. Further, the ESI Court has committed error in reducing damages to Rs.1,50,000/- and interest to Rs.1,00,000/- as absolutely there is no reasons on part of - 12 - NC: 2025:KHC:12745 MFA No. 3057 of 2017 C/W MFA No. 3056 of 2017 the ESI Court why the said amount is reduced. Therefore, the orders passed by the ESI Court are liable to be set aside by confirming the orders passed by the appellant/ESI corporation under Section 85B of the ESI Act and Ex.R-1/C-18-notice, levying damages of Rs.5,95,557/- and interest of Rs.3,11,254/-. Consequently, the appeals are liable to be allowed.
Decision
16. In the result, I proceed to pass the following: ORDER i. The appeals in MFA Nos.3057 and 3056 of 2017 are allowed. ii. The orders dated 31.01.2017 passed in ESI Application Nos.67 and 103 of 2015 by the Employees State Insurance Court, Bengaluru, are hereby set aside. iii. The respondent in both the cases shall pay damages of Rs.5,95,557/- and interest to an extent of Rs.3,11,254/- towards ESI - 13 - NC: 2025:KHC:12745 MFA No. 3057 of 2017 C/W MFA No. 3056 of 2017 contributions to the appellant/ESI corporation. iv. No order as to costs. Sd/- (HANCHATE SANJEEVKUMAR) JUDGE SRA List No.: 1 Sl No.: 22