Many times, employers tend to escape from their financial obligations on purely technical legal grounds. Our judiciary has been reasonably vigilant in such labour cases by looking at the spirit of the law and allowing a more liberal interpretation of the technical legal provision in pursuit of substantial justice.

In a recent case before the High Court of Kerala, the question was whether penal damages could be inflicted upon an erring employer who paid the ESI contribution belatedly with interest. The question arose in Regional Director, ESIC, Thrissur vs Managing Director, Transmatic System Ltd., Trivandrum (2006-2-CLR-74). M/s Transmatic System Ltd. did not pay the insurance contribution for the period between October 2000 and September 2001, claiming financial constraints. However, the same was paid in June 2002 with interest. In July 2002, a show cause notice was issued by the ESIC for imposing damages and later an order imposing damages was also issued. The employer challenged the order of the damages as it was imposed after he had belatedly paid the contribution amount with interest.

The Hon’ble High Court held that financial constraints could not be accepted as an excuse for the non-payment of contribution by the employer under the ESI Act. The Court relied on the holding of the Supreme Court in Hindustan Times Ltd. Vs Union of India (1998-Lab.I.C.-483), wherein the Apex Court held that power cuts, financial problems and disputes between partners were not relevant explanations for interfering with the imposition of the damages by the ESIC. Mere delay on the part of the ESIC in issuing a show cause notice and the subsequent order for damages cannot be treated as amounting to waiver. The Court observed that unless the employer specifically pleads and subsequently proves ‘irretrievable prejudice’ due to reasons, such as the loss of relevant records or the non-availability of personnel in charge of payments, delay is not a sufficient ground for the waiver of damages. As no such plea was taken as defense by the employer in the present case before the labour court, he cannot challenge the claim of damages under S.85B combined with Regulation 31C by the ESIC. The Court observed that the object of S.85B of the ESI Act, as amended by the Amending Act of 1989 brought into force from January 1, 1992, combined with Regulation 31C is to make the existing penal provisions regarding the non-payment of ESI contribution by the employers more stringent. It also aims to withdraw the beneficial provisions available to the establishment if the management was found misusing such benefits.

Therefore, the Hon’ble Court upheld the claim of damages by the ESIC upon the company even after it had paid the contribution after delay with interest.

In yet another case before the Division Bench of the High Court of Rajasthan, the Hon’ble Court reaffirmed that the technicalities of law should not obstruct the path of substantial justice.

In the case of Mohanlal vs Astt.Engineer, Rajasthan Agriculture Marketing Board & Anr. (2006- 2- CLR -99), the Division Bench, comprising Hon’ble Mr. Justice Shiv Kumar Sharma and Mr. Justice Harbans Lal, set aside the order of the Learned Single Judge who had reversed the award of the labour court for reinstatement with back wages.

The appellant workman in this case was terminated from service and he raised an industrial dispute challenging his termination after a period of six years. The labour court of Kota held the termination to be illegal and ordered reinstatement with back wages.

On appeal, the Learned Single Judge of the High Court set aside the award of the labour court as the dispute was raised after a period of six years. However, the objection of delay in raising the dispute was never taken by the employer before the labour court. The Single Judge ordered a compensation of Rs 5,000 in place of reinstatement on 23 August 2001, by which time the workman was already reinstated and paid back wages.

The Division Bench held that since no plea for delay was raised by the employer before the labour court, no chance was given to the workman to explain the delay. The Learned Single Judge was, therefore, not justified in substituting its opinion for the opinion of the labour court. The workman could not be deprived of the benefits under the law merely on technicalities so as to defeat the purpose of substantial justice. The appeal by the workman was allowed and the award of the labour court for reinstatement and back wages was restored.