Holding

The proviso to Section 77(1A)(b) does not impose a statutory limitation on the Corporation's claim under Section 45‑A; the right to recover contributions is not time‑barred, though the Court may assess reasonableness of delay.

Summary

The Employees' State Insurance Corporation (ESIC) sought to recover arrears of contributions from employers as arrears of land revenue under Section 45‑B, relying on orders passed under Section 45‑A. The Kerala High Court held that the five‑year limitation in the proviso to Section 77(1A)(b) applied to such claims, while the Madras High Court disagreed, saying no limitation was prescribed. The Supreme Court examined whether the proviso creates a statutory time‑bar and whether a "reasonable time" concept could be implied. It held that the proviso to Section 77(1A)(b) does not limit ESIC’s right to claim under Section 45‑A; no express limitation exists, though the Court may consider whether demands were made within a reasonable period. Consequently, the view of the Madras High Court was affirmed and the Kerala High Court’s decision set aside. The Court issued procedural directions for employers to approach the ESIC Court and consider reasonableness, but did not pass any order on costs.

Issues considered

Whether the proviso to Section 77(1A)(b) of the Employees' State Insurance Act, 1948 fixes a limitation period for the Corporation's claim under Section 45‑A.
Whether a concept of "reasonable time" can be read into the provision despite the absence of an express limitation.
Whether the limitation of five years applies to the Corporation's recovery of contributions as arrears of land revenue.

Legislation cited

Employees' State Insurance Act, 1948s. 45-A, s. 45-B, s. 45-C, s. 45-D, s. 45-E, s. 45-F, s. 45-G, s. 45-H, s. 45-I, s. 68, s. 75, s. 76, s. 77(1A)(b)
Employees' State Insurance (General) Regulations, 1950s. Regulation 32(2), s. Regulation 66

Subjects

Employees' State Insurance ActSection 45-ASection 77Limitation periodReasonable timeArrears of land revenueContribution recoveryStatutory interpretation

Judgment

A E.S.I.C
v.
C.C. SANTHAKUMAR

NOVEMBER 21, 2006

B [ARIJIT PASA YAT AND TARUN CHATTERJEE, JJ.]

Labour Laws:

Employees State Insurance Act, 1948: Sections 45-A, 45-B and 77(1-
C A)(b) proviso.
Recovery of arrears of contributions as arrears of land revenue-Right
of Corporation-Period of limitation-Reasonable period-The employees
State Insurance Corporation claimed ES.I. contributions from the employers
D as arrears ofland revenue-The High Court held that the limitation prescribed
under Section 77 of the Act restricted the claim for a period of jive years
which was clearly indicated by the fact that the contribution for a period of
more than jive years could not be claimed by the Corporation-Correctness
of-Held: no period of limitation has been prescribed under proviso to
Clause (b) of S. 77(1 A) to make a claim for recove1y of ES.I. contributions-
£ However, a concept of reasonable time can he read into the provision even
though not specifically providedfor-Hence, ES.I. Court directed to determine
the quantum of contribution, if any, payable and consider the question as to
whether demands were raised within a reasonable period of time or not-
Employees State Insurance (General) Regulations, 1950, Regn. 66.

F The appellant-Corporation claimed Employees State Insurance arrears
of contributions from the respondent-employers as arrears of land revenue
under Section 45-B of the Employees State Insurance Act, 1948 in pursuance
of an order under Section 45-A of the Act. A full Bench of the Kera la High
Court held that the limitation prescribed under Section 77 of the Act restricted
G the claim for a period of five years which was clearly indicated by the fact
that the contribution for a period of more than five yes could not be claimed
by the appeflant-Corporation. With reference to the proviso to Section
77(1A)(b) of the Act it was further held that a period of limitation had to be
read into the provision. On the other hand, the Madras High Court held that
the language of Section 77(1A)(b) of the Act was very clear and it did not
I-I 212
- E.s.r.c v. C.C. SANTHAKUMAR

provide for any period of limitation for raising the demand or making the
assessment. Hence the appeal.
213
A

The following questions arose before the Court:-

1. Does the proviso clause (b) of Section 77(1A) of the Employees State
Insurance Act, 1948 fix the limit of time, in which the Employees State B
Insurance Corporation can make a claim from the employer, on the basis of
the orders passed under Section 45 of the Act?

2. Whether a concept of reasonable time can be read into the provision
even though not specifically providPd for ?
c
Disposing of the appeal, the Court

HELD: 1. When there is a failure in the production of records and when
there is no cooperation, then Corporation can determine the amount and
recover the same as arrears of land revenue under Section 45-B of the
Employees State Insurance Act, 1948. But, on the other hand, if the records D
are produced and if there is cooperation, the assessment has to be made and
it can be used as sufficient proof of the claim of the Corporation under Section
75 before the Employees State Insurance Court. So, the limitation of three
years for filing an application before the Court, introduced by Act 44of1966,
can only relate to the application under Section 75 read with Section 77(1A). E
The order under Section 45-A need not be executed by the Corporation before
the E.S.I. Court under Section 77. As such, the amendment to section 77(1A)(b)
proviso by Act 29of1989 providing five year limitation has no relevance so
far as orders passed by the Corporation under Section 45-A are concerned.
(224-E, F,GJ
2.1. Where an order is passed under Section 45-A, it is the duty of the
F
employer and not the corporation to approach the E.S.I. Court. Since no
application need be filed by the Corporation after an order is passed under
Section 45-A, the limitation prescribed under Section 77 does not get
attracted. The non-payment of contribution is a continuing cause, which is
clear from the fact that the employer is enjoined to pay the interest under G
Section 39(5)(A), which was introduced by Act 29of1989, until the date of
its actual payment. (225-A, Bl

2.2. It is clear, therefore, that the right of the Corporation to recover
these amounts by coercive process is not restricted by any limitation nor could
the Government by recourse to the rule-making power prescribe a period in H
214 SUPREME COURT REPORTS [2006] SUPP. 9 S.C.R.

A the teeth of Section 68. (227-BI

Bharat Barrel and Drum Mfg. Co. ltd. v. E.S.l. Corporation, 119711 2
sec 860, relied on.
2.3. When the Act itself does not provide for any limitation on the
B Corporation's right to claim, the employers cannot rely upon regulations 32
to 66 of the Employees State Insurance (General) Regulations, 1950, dealing
with the period for maintenance of registers, to imply any limitation. (227-E)

3.• If the period of limitation, prescribed under proviso to Clause (b) of
Section 77(1A) is read into the provisions of Section 45-A, it would defeat the
C very purpose of enacting Sections 45-A and 45-B. The prescription of
limitation under Section 77(1A)(b) of the act has not been made applicable to
the adjudication proceedings under Section 45-A by the legislature since such
a restriction would restrict the right of the Corporation to determine the
claims under Section 45-A and the right of recovery under Section 45-B and,
D. further, it would give a benefit to an unscrupulous employer. The period of
five years, fixed under Regulation 32(2) of the.Regulations, is with regard to
· maintenance of registers of workmen and the same cannot take away the right
of the Corporation to adjudicate, determine and fix the liability of the employer ·
under Section 45-A of the Act, in respect of the claim other than those found
in the register of workmen, maintained and filed in terms of the Regulations.
E (228-A, B, q
4. Section 77 of the Act relates to commencement of proceedings before
the E.S.I. Court. The proviso to Clause (b) of Section 77(1-A) of the Act cannot
independently give any meaning with<;>ut reference to the main provision,
namely, Section 77 of the Act. Therefore, the proviso to Clause (b) of Section
F 77(1.,A) of the Act, fixing the period of five years for the claim made by the
Corporation, will apply only in respect of claim made by the Corporation before
the KS.I. Court and to no other proceedings. 1228-E, F)

5. The Legislature has provided for a special remedy to deal with special
cases. The determination of the claim is left to the Corporation, which is based
G on the information available to it. It shows whether information is sufficient
or not or the Corporation is able to get information from the employer or not,
on the available records, the Corporation could determine the arrears. So,
the non-availability of the records after five years, as per the Regulation, would
not debar the Corporation to determine the amount of arrears. Therefore, if
the provisions of Section 45-A are read with Section 45-B of the Act, then,
H the determination made by the Corporation is concerned, it may not be final
E.S.l.C v. C.C. SANTHAKUMAR 215
so far as the employer is concerned, if he chooses to challenge it by filing an A
application under Section 75 of the Act. If the employer fails to challenge the
said determination under Section 75 of the Act before the Court then the
determination under Section 45-A becomes final against the employer as well.
As such, there is no hurdle for recovery of the amount determined under
Section 45-B of the Act, by invoking the mode ofrecovery, as contemplated in B
Sections 45-C to 45-1. (228-G; 229-A, Bl

Employees' State Insurance Corporation v. F. Fiber Bangalore (P) Ltd.,
(1997) 1 sec 625, relied on.

6. A" reasonable period" would depend upon the factual circumstances
of the case concerned. There cannot be any empirical formula to determine C
that question. The Court/authority considering the question whether the period
is reasonable or not has to take into account the surrounding circumstances
and relevant factors to decide that question. (230-F, GJ

Hindustan Times Ltd v. Union of India, 11998) 2 SCC 242; State of D
Gujarat v. Patel Raghav Natha, 119691 2 SCC 187; Municipal Corporation
of Delhiv. Jagan Nath Ashok Kumar, (1987) 4 SCC 497; Gujarat Water Supply
& Sewerage Boardv. Unique Erectors (Gujarat) (P) Ltd., (198911SCC532;
Collector v. P. Mangamma, [20031 4 SCC 488 and Veerayee Ammal v. Seeni
Ammal, [200211 SCC 134, relied on.
E
Joseph Severance v. Benny Mathew, [2005] 7 SCC 667, cited.

P. Ramanatha Aiyar: "Advanced Law Lexicon", 3rd End., 2005, referred
to.

7. The appeal is disposed of with the following directions:- F
(1) The employers shall move the E.S.I Court within a period of two
months, if not already done.

(2) They shall deposit 25% of the amount claimed with the E.S.I. Court
along with the application in terms of Sections 75 & 76 of the Act before the G
E.S.I Court.

(3) The E.S.I. Court shall determine the quantum of contribution, if any,
payable and consider the question as to whether demands were raised within
a reasonable period of time or not after considering the question of prejudice,
H
216 SUPREME COURT REPORTS [2006] SUPP. 9 S.C.R.

A if any, for the delayed action taken by the Corporation.
(4) The approach of the E.S.I. Court and the Authorities should be that
of a watch dog and not of a blood hound even though the legislation is a
beneficial one. [233-C-D, E)

B CIVIL APPELLATE JURISDICTION: Civil Appeal No. 4291 of2000.

From the Judgment and Order dated 25-11-1997 of the High Court of
Kerala at Emakulam in M.F.A. No. 1562/1996.

WITH
c
C.A. 6295/2004, 6297/2004, 6298/2004, 4810-11/2005, 6299/2004, 6300/
2004, 6301/2004, 7366/2005, 1798/2006, 1799/2006, 1800/2006 and 2453 of2006.

C.S. Rajan, K.K. Venugopal, Vijay Narayana, VJ. Francis, Anupam Mishra,
C.M. Jaykumar, Jenis, K.V. Viswanathan, B. Raghunath, Uttara Babbar, Balaji,
D Mahalakshmi Parani, S.V. Shyamuganathan, Mahalakshmi Balaji & Co. and S.
Hariharan for the Appellant.

Pratap Venugopal, Ms. Surekha Raman, Ms. Ruma Bose, E.Venu Kumar
(for K.J. John & Co.), Biswanath Agrawalla, Rajiv Mehta, E.M.S. Anam, G.
E Prakash, B.V. Deepak, Dilip Pillai (for Mis. T.T.K. Deepak & Co.), C.N. Sreekumar,
Ms. Deepti and M.T. George for the Respondent.

The Judgment of the Court was delivered by

ARIJIT PASAYA T, J. All these appeals involve identical questions and
F are, therefore, taken up together for disposal. Some of the appeals are by the
Employees State Insurance Corporation (in short 'the Corporation') while
some others are by the employers. The Corporation questions correctness of
the judgment rendered by the full Bench of the Kerala High Court while the
employers question correctness of the judgment rendered by a Division
Bench of the Madras High Court.
G
Basic question before the two High Courts were as follows :-

Proviso to Section 77(1A)(b) of the Employees State Insurance Act,
1948 (in short the 'Act') provided limitation of 5 years for claiming contribution
and restricts the Corporation's right from recovering the arrears of contribution
H as arrears of land revenue under Section 45 (B) in pursuance of an order under
.
E.S.I.C v. C.C. SANTHAKUMAR [ARJJIT PASA YAT, J.] 217
Section 45(A) of the Act. The Corporation claimed ESI Contributions as A
arrears from various employers. Assailing those orders, some of the employers
moved the Employees State Insurance Court (in short the 'E.S.I. Court') in the
State ofKerala. The employers in the State of Tamil Nadu, however, filed writ
petitions before the Madras High Comt. The Writ Petitions were dismissed
by learned Single Judge. Writ appeals filed before the High Court did not
bring any result. The judgment of the Division Bench affirming that of learned
B
Single Judge is the subject matter of challenge in some of the appeals.
Corporation on the other hand has questioned the correctness of the judgment
of the full Bench of the Kerala High Court, which held that the limitation
prescribed under Section 77 restricting the claim for a period of five years
clearly indicated by the fact that the contribution for a period of more than c
five years cannot be claimed by the Corporation. With reference to the
proviso to Section 77(IA)(b) it was held that a period of limitation has to be
read into the provision; otherwise the employers would be greatly handicapped
and would not be in a position to establish its case as regards the number
of employees working under it. In such a situation the employer would be left
defenceless. With reference to Regulation 66 of the Employees State Insurance D
(General) Regulations, 1950 (in short the 'Regulation') it was held that the
maintenance of the register in terms of Regulation 66 was for a period of 5
years. That being so, it is clear that the complaint is confined to a period of
5 years and the employer is not bound to preserve its records for the periods
prior to that. The Madras High Court on the other hand held that the language E
of Section 77(1A)(b) is very clear and it did not provide for any period of
\imitation for raising the demand or making the assessment. Learned counsel
for the employers supported the view of the Kerala High Court. It was
submitted that any other view would make the provisions confiscatory; it
would also lead to an absurd result that the Corporation can theoretically
make a claim even after decade, thereby causing prejudice to the employers. F
It was submitted that even if it is conceded for the sake of argument that
Section 77(IA)(b) does not provide for a period of limitation the concept of
claim being raised during a reasonable period of time is inbuilt, otherwise the
action would be arbitrary. That being so it was submitted that the view
expressed by the Kerala High Court should be accepted and not that of tl1e
G
Madras High Court.

Per contra, learned counsel for the Corporation submitted that the
Kerala High Court failed to take notice of the fact that Section 77(1A) operates
in different background and has no relation to a dispute raised by an employer
~ to the demand raised for contribution by the Corporation. It was pointed out H
...
218 SUPREME COURT REPORTS [2006] SUPP. 9 S.C.R.

A that the employers in the State of Tamil Nadu instead of moving the E.S.I.
Court directly filed writ petitions without availing the alternative remedy
available. Since factual disputes were involved regarding the actual number
of employees, the writ petitions were not maintainable and the High Court has
rightly clarified the position in law though it could have thrown out the writ
B petitions on the ground that alternative forum of redressal was available.

Learned counsel for the employers submitted that remedy provided in
the Statute is really not a efficacious remedy as ·the employer would be
required to deposit 50% of the amount claimed, though the Court had discretion
to reduce the amount to be deposited. It cannot be said that an efficacious
C remedy is available.

In order to appreciate the rival submissions few provisions in the Act
need to be noted. They are as follows: '

"Section 45A. It was inserted by Act 44 of 1966 and enforced with
effect from 17.06.1967. It reads as under:
D
"Determination of contributions in certain cases (I) Where in
respect of a factory or establishment no returns, particulars,
registers or records are submitted furnished or maintained in
accordance with the provisions of S.44 or any Inspector or other
official of the Corporation referred to in Sub-sec.(2) of Section 45
E
is prevented in any manner by the principal or immediate employer
or any other person, in exercising his functions or discharging
his duties under Section 45, the Corporation may, on the basis
of information available to it, by order, determine the amount of
contributions payable in respect of the employees of that factory
F or establishment :
Provided that no such order shall be passed by the Corporation
unless the principal or immediate employer or the person in
charge of the factory or establishment has been given a reasonable
opportunity of being heard.
G An order made by the Corporation under sub-section (I) shall be
sufficient proof of the claim of the Corporation under Section 75
or for recovery of the amount determined by such order as an
arrear of land revenue under Section 45B or the recovery under
Sections 45C to 45-1."
H
E.S.l.C v. C.C. SANTHAKUMAR [ARIJIT PASA YAT, J.] 219

458. Recovery of contributions.-Any contribution payable under A
this Act may be recovered as an arrear of land revenue.

74. Constitution of Employees' Insurance Court.-(1) The State
Government shall, by notification in the Official Gazelle, constitute an
Employees' Insurance Court for such local area as may be specified
in the notification. B
(2) The Court shall consist of such number of Judges as the State
Government may think fit.

(3) Any person who is or has been a judicial officer or is a legal
practitioner of five years' standing shall be qualified to be a Judge of C
the Employees' Insurance Court.

(4) The State Government may appoint the same Court for two or more
local areas or two or more Courts for the same local area.

(5) Where more than orie Court has been appointed for the same local D
area, the State Government may by general or special order ;·egulate
the distribution of business between them.

75. Matters to be decided by Employees' Insurance Court.-(1) If any
question or dispute arises as to-

(a) whether any person is an employee within the meaning of this Act E
or whether he is liable to pay the employee's contribution, or

(b) the rate of wages or average daily wages of an employee for the
purposes of this Act, or

(c) the rate of contribution payable by a principal employer in respect p
of any employee, or

(d) the person who is or was the principal employer in respect of any
employee, or

(e) the right of any person to any benefit and as to the amount and G
duration thereof, or

(ee) any direction issued by the Corporation under section 55A on a
review of any payment of dependants' benefit, or

(g) any other.matter which is in dispute between a principal employer
and the Corporation, or between a principal employer and an immediate H
220 SUPREME COURT REPORTS [2006] SUPP. 9 S.C.R.

A employer or between a person and the Corporation or between an
employee and a principal or immediate employer, in respect of any
contribution or benefit or other dues payable or recoverable under
this Act, or any other matter required to be or which may be decided
by the Employees' Insurance Court under this Act, such question or
dispute '[subject to the provisions of sub-section (2A) shall] be
B decided by the Employees' Insurance Court in accordance with the
provisions of this Act.

(2) Subject to the provisions of sub-section (2A), the following claims
shall be decided by the Employees' Insurance Court, namely:-

C (a) claim for the recovery of contributions from the principal employer;

(b) claim by a principal employer to recover contributions from any
immediate employer;

xx xx xx
D (d) claim against a principal employer under section 68;

(e) claim under section 70 for the recovery of the value or amount of
the benefits received by a person when he is not lawfully entitled
thereto; and

E (t) any claim for the recovery of any benefit admissible under this Act.

(2A) If in any proceedings before the Employees' Insurance Court a
disablement question arises and the decision of a medical board or a
medical appeal tribunal has not been obtained on the same and the
decision of such question is necessary for the determination of the
F claim or question before the Employees' Insurance Court, that Court
shall direct the Corporation to have the question decided by this Act
and shall thereafter proceed with the determination of the claim or
question before it in accordance with the decision of the medical
board or the medical appeal tribunal, as the case may be, except where
G an appeal has been filed before the Employees' Insurance Court under
sub-section (2) of section 54A in which case the Employees' Insurance
Court may itself determine all the issues arising before it.

(28) No matter which is in dispute between a principal employer and
the Corporation in respect of any contribution or any other dues shall
H be raised by the principal employer in the Employees' Insurance Court
E.S.l.C v. C.C. SANTHAKUMAR [ARIJIT PASA YAT, J.] 221

unless he has deposited with the Court fifty per cent, of the amount A
due from him as claimed by the Corporation:

Provided that the Court may, for reasons to be recorded in writing,
waive or reduce the amount to be deposited under this sub-section.

(3) No Civil Court shall have jurisdiction to decide or deal with any B
question or dispute as aforesaid or to adjudicate on any liability
which by or under this Act is to be decided by a medical board, or
by a medical appeal tribunal or by the Employees' Insurance Court.

"77. Commencement of proceedings.-

(1) The proceedings before an Employees' Insurance Court shall be C
commenced by application.

(lA) Every such application shall be made within a period of three
years from the date on which the cause of action arose.

Explanation - For the purpose of this sub-section (a) the cause of D
action in respect of the claim for benefit shall not be deemed to arise
unless the insured person or in the case of dependants' benefit, the
dependants of the insured person claim or claim that benefit in
accordance with the regulations made in that behalf within a period
of twelve months after the claim became due or within such further E
period as the Employees' Insurance Court may allow on grounds
which appear to it to be reasonable;

(b) the cause of action in respect of a claim by the Corporation for
recovering contributions (including interest and damages) from the
principal employer shall be deemed to have arisen on the date on F
which such claim is made by the Corporation for the first time.

Provided that no claim shall be made by the Corporation after five
years of the period to which the claim relates.

(c) the cause of action in respect of a claim by the principal-employer
for recovering contributions from an immediate employer shall not be G
deemed to arise till the date by which the evidence of contributions
having been paid is due to be received by the Corporation under the
regulations.

(2) Every such application shall be in such form and shall contain
H
222 SUPREME COURT REPORTS [2006] SUPP. 9 S.C.R.

A such particulars and shall be accompanied by such particulars and
shall be accompanied by such fee, if any, as may be prescribed by
rules made by the State Government in consultation with the
Corporation."

Section 45-A provides that in a case where a factory or establishment
B fails to furnish the returns or maintain or furnish the registers etc., the
Corporation can determine the amount of contributions payable in respect of
the employees of that factory or establishment. Such an order can be passed
only after giving reasonable opportunity of hearing to the employer or the
person in-charge of the factory or establishment. The order passed by the
C Corporation shall be sufficient proof of the claim of the Corporation under
Section 75 or for recovery of the amount determined by such an order as an
arrear of land revenue under Section 45-B or under Sections 45-C to 45-1.

Section 458 provides that the contribution payable under the Act may
be recovered as arrears of land revenue. Section 45C entitles the Authorised
.D Officer to issue a certificate, specifying the amount of arrears. The Recovery
Officer, on receipt of such certificate, is entitled to attach the property, arrest
the employer and appoint a receiver for the management of the movable and
immovable properties of the factory or estc;iblishment. The provisions contained
in Sections 45~D to 45-1 lay down a detailed procedure for effecting the
recovery.
E
The next set of relevant provisions quoted above is contained in Chapter
VI. It relates to the adjudication of disputes and claims. Section 74 deals with
the constitution of Courts. Section 75(2) inter alia provides that the claim for
recovery of the contributions from the principal employer shall be decided by
F the Employees' Insurance Court. Sub-Section (28) was added by Act 29 of
1989. By this, it was provided that no matter, which is in dispute between the
principal employer and the Corporation in respect of any contribution or any
other dues, shall be raised by the principal employer in the Employee's
Insurance Court, unless he has deposited with the Court 50% of the amount
due from him, as claimed by the Corporation. However, in the proviso, a power
G has been reserved by which the Court can waive or reduce the amount of
deposit.

Section 76 relates to the institution of the proceedings.

Under Section 77, the pivotal provision in these cases for commencement
H of proceedings has been made. A perusal of Section 77 shows that the
E.S.I.C v. C.C. SANTHAKUMAR [ARIJIT PASA VAT, J.] 223
proceedings before an Employees' Insurance Court commence with the filing A
of an application. The application has to be ti led within a period of three years
from the date on which the cause of action arises. In Clause (a) of the
Explanation, provision for the fixation of the date on which the cause of action
for the claimant or his dependants arises has been fixed. In Clause (b), the
starting point for the accrual of the cause of action for the principal-employer B
has been fixed. It provides that the date on which the Corporation makes the
claim from the principal-employer for recovering the contributions including
interest and damages shall be the date of cause of action.

In the present case, the controversy centres on the proviso to Clause
(b) of Section 77(1A). The crucial question is, "Does the proviso to Clause C
(b) of Section 77(1A) fix the limit of time, in which the Corporation can make
a, claim from the employer, on the basis of the orders passed under Section
45?"

Section 45A is a part of Chapter IV. Section 77 (IA) (b) proviso is
contained in Chapter VI. The question is whether there is any connecting link D
between Chapter IV and Chapter VI.

Sections 38 to 45-1 are contained in Chapter IV while Chapter VI relates
to Sections 74 to 83. Sections 45A and 458 in Chapter IV were introduced by
Act 44 of 1966 with effect from 17 .06.1967, in order to curb the default by the
employers and to provide for an efficient method of recovery. The mode of E
recovery is provided under Sections 45-C to 45-1. On the other hand, Section
75 in Chapter VI relates to the commencement of proceedings before the E.S.l.
Court. Proviso to Clause (b) of Section 77(1A) was introduced by the Act 29
of 1989 with effect from 20.10.1989. A combined reading of the provisions
indicates that no claim shall be made by the Corporation beyond five years, F
to which the claim relates. The relevant Section in Chapter IV, which deals
with the order passed by the Corporation is Section 45A. Similarly, the
relevant Section in Chapter VI, which deals with the resolving of disputes
between the employer and the Corporation by the E.S.I. Court, is Section 77
(IA).
G
A reading of Chapter IV, as a whole, makes it clear that there is no
limitation prescribed. Section 38 imposes the obligation on the employer to
pay contribution and, upon his failure, he is liable to pay interest on a
recurring basis until it is paid. Section 40 imposes an obligation to pay on the
principal employer in the first instance. This means, even if the employees
H
224 SUPREME COURT REPORTS [2006) SUPP. 9 S.C.R.

A were those of the contractors, it is the principal employer who has to pay.
Section 44 mandates the employer to furnish proper returns so that the·
Corporation can scrutinize, assess and pass an order for a claim. Section 44
does not provide for any limitation and, originally, it did not prescribe any
mode of recovery. Therefore, Act 44 of 1966 was introduced. Under this Act,
Sections 45A and 45B were brought into force. Thereafter Sections 45-C to
B 45-I were introduced, prescribing the mode of recovery. The apparent purpose
of introduction of these Sections is to curb default by the employers and also
to provide for an efficient method of recovery without any delay.

Section 45A provides for determination of contributions in certain cases.
C When the records are not produced by the establishment before the
Corporation and when there is no cooperation, the Corporation has got the
power to make assessment and determine the amount under Section 45A and
recover the said amount as arrears of land revenue under Section 45B of the
Act. This is in the nature of a best judgment assessment as is known in taxing
statutes. When the Corporation passes an order under Section 45A, the said
D order is final as far as the Corporation is concerned. Under Section 45A(l ),
the Corporation, by an order, can determine the amount of contributions
payable in respect of the employees where the employer prevents the
Corporation from exercising its functions or discharging its duties under
Section 45, on the basis of the material available to it, after giving reasonable
E opportunity. But, where the records are produced, the assessment has to be
made under Section 75(2)(a) of the Act. Section 45A (2) provides that the
order under Section 45A(l) shall be used as sufficient proof of the claim of
the Corporation under Section 75 or for recovery of the amount determined
by such order as arrears of land revenue under Section 45B. In other words,
when there is a failure in production of records and when there is no
F cooperation, the Corporation can determine the amount and recover the same
as arrears of land revenue under Section 45B. But, on the other hand, if the
records are produced and if there is cooperation, the assessment has to be
made and it can be used as a sufficient proof of the claim of the Corporation
under Section 75 before the E.S.l. Court. So, the limitation of three years for
filing an application before the Court, introduced by Act 44 of 1966, can only
G relate to the application under Section 75 read with Section 77(1A). The order
under Section 45A need not be executed by the Corporation before the E.S.I.
Court under Section 77 . As such, the amendment to Section 77(1A)(b) proviso
by Act 29 of 1989 providing five year limitation has no relevance so far as
orders passed by the Corporation under Section 45A are concerned.
H
E.S.I.C v. C.C. SANTHAKUMAR [ARIJIT PASA YAT, J.] 225

Where an order is passed under Section 45A, it is the duty of the A
employer and not the Corporation to approach the E.S.l. Court. Since no
application need be filed by the Corporation after an order is passed under
Section 45A, the limitation prescribed under Section 77 does not get attracted.
The non-payment of contribution is a continuing cause, which is clear from
the fact that the employer is enjoined to pay the interest under Section
39(5)(A), which was introduced by Act 29 of I 989, until the date of its actual B
payment.

Prior to the incorporation of Section 45A under Act 44 of I966, the only
resort available to the Corporation was Section 75, for recovery of contribution
through the Court. Since this procedure was found to be impracticable and C
delayed process involved, a special provision was contemplated whereunder
adjudication is to be made by the Corporation itself. By reason of incorporation
of Section 45A with effect from 17.06.1967, it became possible for the
Corporation to have determination of the question, binding on the principal
employer, without resorting to the E.S.I. Court. In regard to the order under
Section 45A, the same is enforced, as envisaged under Section 45B, which D
was similarly brought into the Act, by which the contribution may be recovered
as arrears of land revenue. With regard to the decision reached by the E.S.I.
Comt in the application under Section 75, the said decision is enforced, as
envisaged in sub-section (4) of Section 75 as if it is a Civil Court. The mode
of recovery under Section 45B of the Corporation and the mode of recovery E
as per Section 75(4) by the E.S.I. Court as the Civil Court are entirely different
as both Sections 45 and 75 operate in different spheres.

In this context, it would be worthwhile to refer to Chapter V also.
Chapter V contains Sections 46 to 73. The relevant Section is 68, which reads
as follows: F
"68. Corporation's rights where a principal employer fails or neglects
to pay any contribution :- (I) If any principal employer fails or neglects
to pay any contribution which under this Act he is liable to pay in
respect of any employee and by reason thereof such person becomes
d.isentitled to any benefit or entitled to a benefit on a lower scale, the G
Corporation may, on being satisfied that the contribution should have
been paid by the principal employer, pay to the person the benefit at
the rate to which he would have been entitled, if the failure or neglect
had not occurred and the Corporation shall be entitled to recover from
the principal employer either -
H
226 SUPREME COURT REPORTS (2006] SUPP. 9 S.C.R.

A (i) the difference between the amount of benefit which is paid by the
Corporation to the said person and the amount of the benefit which
would have been payable on the basis of the contributions which
were in fact paid by the employer; or

(ii) twice the amount of the contribution which the employer failed or
B neglected to pay, whichever is greater.

(2) the amount recoverable under this Section may be recovered as if
it were an arrear of land-revenue (or under section 45-C to
Section 45-I)"

C Section 68 of the Act in Chapter V deals with the Corporation's rights,
where an employer fails to pay any contribution. Sub-section (2) to Section
68 provides that the amount recoverable under this Section may be recovered
as if it were an arrear of land revenue or under Sections 45-C to 45-1. The said
Chapter does not impose any fetter or limitation for the Corporation to recover
the amounts by coercive process. In view of the addition of the words in
D Section 68 "or under Sections 45-C to 45-1" to sub-section (2) of Section 68
by Act 29 of 1989 with effect from 20.10.1989, the said claim could be recovered
under Sections 45-C to 45-1 of the Act. There is no limitation prescribed in
the language of Section 68. Section 60 prescribes that the benefits are not
assignable to anyone else. Section 71 provides that the benefits under the
E Act are payable to the employee up to the date of his death. Thus, the
Legislature, in its wisdom, did not want to impose by fetter or limitation on
the Corporation to recover the amounts by coercive process under Chapter
v.
Section 68 of the Act has been elaborately dealt with by this Court in
F Bharat Barrel and Drum Mfg. Co. Ltd and Anr. v. ES.I. Corporation (1971]
2 sec 860. It was inter a/ia observed as follows:

"Chapter VI deals with the adjudication of disputes and claim, of
which Section 74 provides for the constitution of the Insurance Court.
Section 74 specifies the matters to be decided by that Court. Sections
G 76 and 77 deal with the institution and commencement of proceedings
and Section 78 with the powers of the Insurance Court.

These provisions in our view unmistakably indicate that the whole
scheme is dependent upon the contributions made by the employer
not only with respect to the amounts payable by him but also in
H respect of those payable by the employee. No limitation has been
E.S.l.C v. C.C. SANTHAKUMAR [ARIJIT PASAYAT, J.] 227

fixed for the recovery of these amounts by the Corporation from the A
employer; on the other hand, Section 68 empowers the Corporation to
resort to coercive process. If any such steps are proposed to be taken
by the Corporation and the employer is aggrieved, he has a right to
file and apply to the Insurance Court and have his claim adjudicated
by it in the same way as the Corporation can prefer a claim in a case B
where the liability to pay is disputed."

It is clear, therefore, that the right of the Corporation to recover these
amounts by coercive process is not restricted by any limitation nor could the
Government by recourse to the rule-making power prescribe a period in the
teeth of Section 68.
c
In the above judgment this Court has clearly held that Section 68 of the
Act empowers the Corporation to resort to coercive process, to recover the
contribution from the employer as if it were an arrear of land revenue and the
said right is not restricted by any limitation. This is a crucial Section.
D
Similarly, no limitation is provided in Chapter VII. It deals with the
imposition of penalty or levy of damages upon failure to pay contributions.
It consists of Sections from 84 to 86A.

When the Act itself does not provide for any limitation on the
Corporation's right to claim, the employers cannot rely upon Regulations 32 E
to 66, dealing with the period for maintenance of registers, to imply any
limitation.

Section 45A of the Act contemplates a summary method to determine
contribution in case of deliberate default on the part of the employer. By
amendment Act 29of1989, Sections 45-C to 45-1 were inserted in the Principal F
Act, for the purpose of effecting recovery of arrears by attachment and sale
of movable and immovable properties or establishment of the principal or
immediate employer, without having recourse to law or E.S.I Court. Therefore,
it cannot be said that a proceeding for recovery as arrears of land revenue
by issuing a certificate could be equated to either a suit, appeal or application G
in the Court. Under Section l8(2) and Sections 45-C to 45-1, after detennination
of contribution, recovery can be made straightaway. If the employer disputes
the correctness of the order under Section 45A, he could challenge the same
under Section 75 of the Act before the E.S.l. Court.

On a plain reading of Sections 45A and 45B in Chapter IV and Section H
228 SUPREME COURT REPORTS [2006] SUPP. 9 S.C.R.

' A 75 and 77 in Chapter VI of the Act, as indicated above, there cannot be any
doubt that the area and the scope and ambit of Sections 45A and 75 are quite
different.

If the period of limitation, prescribed under proviso (b) of Section
77(1A) is read into the provisions of Section 45A, it would defeat the very
B purpose of enacting Sections 45A and 458. The prescription of limitation
under Section 77(1 A)(b) of the Act has not been made applicable to the
adjudication proceedings under Section 45A by the legislature, since such a
restriction would restrict the right of the Corporation to determine the claims
under Section 45A and the right of recovery under Section 458 and, further,
C it would give a benefit to an unscrupulous employer. The period of five years,
fixed under Regulation 32(2) of the Regulations, is with regard to maintenance
of registers of workmen and the same cannot take away the right of the
Corporation to adjudicate, determine and fix the liability of the employer under
Section 45A of the Act, in respect of the claim other than those found in the
register of workmen, maintained and filed in terms of the Regulations.
D
What Section 75(2) empowers is not only the recovery of the amounts
due to the Corporation from the employer by recourse to the E.S.I. Court, but
also the settlement of the dispute of a claim by the corporation against the
employer. While this is so, there is no impediment for the Corporation also
to apply to the E.S.I. Court to determine a dispute against an employer where
E it is satisfied that such a dispute exists. If there is no dispute in the
determination either under Section 45A(I) or under Section 68, the Corporation
can straightaway go for recovery of the arrears.

Section 77 of the Act relates to commencement of proceedtngs before
F the E.S.I. Court. The proviso to sub-Section 77 of the Act cannot independently
give any meaning without reference to the main provision, namely, Section 77
of the Act. Therefore, the proviso to Clause (b) of Section 77(1 A) of the Act,
fixing the period of five years for the claim made by the Corporation, will apply
only in respect of claim made by the Corporation before the E.S.J. Court and
to no other proceedings.
G
The Legislature has provided for a special remedy to deal with special
cases. The detennination of the claim is left to the Corporation, which is based
on the information available to it. It shows whether information is sufficient
or not or the Corporation is able to get information from the employer or not,
on the available records, the Corporation could detennine the arrears. S?, the
H
E.S.l.C v. C.C. SANTHAKUMAR [ARlJIT PASAYAT, J.] 229

non-availability of the records after five years, as per the Regulation, would A
not debar the Corporation to determine the amount of arrears. Therefore, if
the provisions of Section 45A are read with Section 45B of the Act, then, the
-J determination made by the Corporation is concerned. ft may not be final so
far as the employer is concerned, if he chooses to challenge it by filing an
application under Section 75 of the Act. If the employer fails to challenge the B
said determination under Section 75 of the Act before the Court, then the
determination under Section 45A becomes final against the employer as well.
As such, there is no hurdle for recovery of the amount determined under
Section 45B of the Act, by invoking the mode of recovery, as contemplated
in Sections 45C to 45-I.

In Employees' State Insurance Corporation v. F. Fibre Bangalore (P)
c
Ltd. [1997] I SCC 625 it was observed that it is not necessary for the
Corporation to seek a resolution of the dispute before the E.S.I. Court, while
the order was passed under Section 45A. Such a claim is recoverable as
arrears of land revenue. If the employer disputes the claim, it is for him to
move the E.S.I. Court for relief. In other cases, other than cases where D
determination of the amount of contributions under Section 45A is made by
the Corporation, if the claim is disputed by the employer, then, it may seek
an adjudication of the dispute before the E.S.I. Court, before enforcing recovery.
•·'
The inevitable conclusion, therefore, is that the view of the Full Bench E
of the Kerala High Court is not correct and that of the Madras High Court
is correct.

That brings us to the other question i.e. whether a concept of reasonable
time can be read into the provision even though not specifically provided for?
Similar questions have arisen in several other statutes. p
In Hindustan Times Ltd. v. Union of India [ 1998] 2 SCC 242 this court
dealt with the power to recover damage under Section 14(B) of the Employees
Provident Fund and Misc. Provisions Act, 1952 (in short the 'Provident Fund
Act'). There also the question arose as to whether in the absence of any
period of limitation the authority under the Provident Funds Act could recover G
the damages after a long period of time. It was inter alia held as follows :

"The authority under Section 14-B has to apply his mind to the facts
of the case and the reply to the show-cause notice and pass a
reasoned order after following principles of natural justice and giving
H
230 SUPREME COURT REPORTS [2006] SUPP. 9 S.C.R.

.A a reasonable opportunity of being heard; the Regional Provident Fund
Commissioner usually takes into consideration the number of defaults,
the period of delay, the frequency of default and the amounts involved;
default on the part of the employer based on plea of power-cut,
financial problems relating to other indebtedness or the delay in
realization of amounts paid by the cheques or drafts, cannot be
B justifiable grounds for the employer to escape liability; there is no
period of limitation prescribed by the legislature for initiating action
for recovery of damages under Section 14-B. The fact that proceedings
are initiated or demand for damages is made after several years cannot
by itself be a ground for drawing an inference of waiver or that the
c employer was lulled into a belief that no proceedings under Section
14-B would be taken; mere delay in initiating action under Section
14-B cannot amount to prejudice inasmuch as the delay on the part
of the Department, would have only allowed the employer to use the ., r
monies for his own purposes or for his business especially when there
is no additional provision for charging interest. However, th~ employer
D can claim prejudice ifthere is proof that between the period of default
and the date of initiation of action under Section 14-B he has changed
his position to his detriment to such an extent that if the recovery is
made after a large number of years, the prejudice to him is of an
"irretrievable" nature; he might also claim prejudice upon proof of
E loss of all the relevant records and/or non availability of the personnel
who were, several years back in charge of these payments and
provided he further establishes that there is no other way he grounds
which could lead to "irretrievable" prejudice; further, in such cases of
"irretrievable" prejudice, the defaulter must take the necessary pleas
in defence in the reply to the show cause notice and must satisfy the
F authority concerned with acceptable material; if those pleas are rejected,
he cannot raise them in the High Court unless there is a clear pleading
in the writ petition to that effect."

A "reasonable period" would depend upon the factual circumstances of
the case concerned. There cannot be any empirical formula to determine that
G question. The court/authority considering the question whether the period is
reasonable or not has to take into account the surrounding circumstances and
relevant factors to decide that question.

In State of Gujarat v. Patel Raghav Nat ha [ 1969] 2 SCC 187 it was
H observed that when even no period of limitation was prescribed, the power
E.S.l.C v. C.C. SANTHAKUMAR [ARIJIT PASA YAT, J.] 231
is to be exercised within a reasonable time and the limit of the reasonable time A
must be determined by the facts of the case and the nature of the order which
was sought to be varied. This aspect does not appear to have been specifically
kept in view by the Division Bench. Additionally, the points relating to
applicability of the Andhra Pradesh Assigned Lands (Prohibition of Transfers)
Act, 1977, and even if it is held that the Act was applicable, the reasonableness B
of the time during which action should have been initiated were also not
considered. It would be hard to give an exact definition of the word
"reasonable". Reason varies in its conclusions according to the idiosyncrasy
of the individual and the times and circumstances in which he thinks. The
reasoning which built up the old scholastic logic stands now like the jingling
of a child's toy. But mankind must be satisfied with the reasonableness within C
reach; and in cases not covered by authority, the decision of the Judge
usually determines what is "reasonable" in each particular case; but frequently
reasonableness "belongs to the knowledge of the law, and therefore to be
decided by the courts". It was illuminatingly stated by a learned author that
an attempt to give a specific meaning to the word "reasonable" is trying to
count what is not a number and measure what is not space. It means prima D
facie in law reasonable in regard to those circumstances of which the actor,
called upon to act reasonably, knows or ought to know. (See: Municipal
Corpn. of Delhi v. Jagan Nath Ashok Kumar [ 1987] 4 SCC 497 and Gujarat
Water Supply & Sewerage Board v. Unique Erectors (Gujarat) (P) ltd
[1989] l SCC 532. As observed by Lord Romilly, M.R. in Labouchere v. E
Dawson (41 LJ Ch 472) it is impossible a priori to state what is reasonable
as such in all cases. You must have the particular facts of each case established
before you can ascertain what is rea~onable under the circumstances.
Reasonable, being a relative term is essentially what is rational according to
the dictates of reason and· not excessive or immoderate on the facts and
circumstances of the particular case. F
These aspects were highlighted in Collector and Others v. P. Mangamma
and Others [2003] 4 SCC 488.

As observed in Veerayee Ammo/ v. Seeni Ammo/ [2002] I SCC 134, it
is "looking at all the circumstances of the case; a "reasonable time" under G
ordinary circumstances; as soon as circumstances will permit; so much time
as is necessary under the circumstances, conveniently to do what the contract
requires should be done; some more protracted space than 'directly'; such
length of time as may fairly, and properly, and reasonably be allowed or
required, having regard to the nature of the act or duty and to the attending H
232 SUPREME COURT REPORTS [2006] SUPP. 9 S.C.R.

A circumstances; all these convey more or less the same idea".
According to Advanced law Lexicon by P. Ramanatha Aiyar 3rd Edition,
2005 reasonable time means as follows:

"That is a reasonable time that preserves to each party the rights
B and advantages he possesses and protects each party from losses
that he ought not to suffer.

"Reasonable Time" is defined to be so much time as is necessary,
under the circumstances, to do conveniently what the contract or
duty requires should be done in a particular case.
c If it is proper to attempt any definition of the words "reasonable
time", as applied to completion ofa contract, the distinction given by
Chief Baron Pollock may be suggested, namely, that a "reasonable
time" means as soon as circumstances will permit.

In dete1mining what is a reasonable time or an unreasonable time,
D
regard is to be had to the nature of the instrument, the usage or trade
or business, if any, with respect to such instrument, and the fact of
the particular case.

The reasonable time which a passenger is entitled to alighting
E from a train is such time as is usually required by passengers in
getting off and on the train in safety at the particular station in
question.

A reasonable time, looking at all the circumstances of the case;
a reasonable time under ordinary circumstances; as s..>on as
F circumstances will permit; so much time as is necessary under the
circumstances, conveniently to do what the contract requires should
be done; some more protracted space than "directly" such length of
time as may fairly, and properly, and reasonably be allowed or required,
having regard to the nature of the act or duty and to the attending
circumstances; all these convey more or less the same idea.
G
Reasonable time always depends on the circumstances of the
case. (Kinney)

It is unreasonable for a person who has borrowed ornaments for
use in a ceremony to detain them after the ceremony has been
H completed and the owner has demanded their return. (AIR 1930 Oudh
E.S.I.C v. C.C. SANTHAKUMAR [ARIJIT PASA YAT, J.] 233
395). A
The expression "reasonable time" means so much time as is
... necessary under the circumstances to do conveniently what the
contract or duty requires should be done in a particular case". [See:
Joseph Severance v. Benny Mathew [2005]7 SCC 667]
B
In all these cases at hand the factual aspects have not been examined,
because the grievance appears to have been focused on the applicability of
Section 77 (IA)(b).

In the circumstances we dispose of all these appeals with the following
directions : c
(1) The employers shall move the E.S.I. Court within a period of two
months, if not already done;

(2) They shall deposit 25% of the amount claimed with the E.S.I. Court
along with the application in terms of Sections 75 & 76 of the Act before the D
E.S.I. Court.

(3) The E.S.I. Court shall detennine the quantum of contribution, if any,
payable and consider the question as to whether demands were raised within
a reasonable period of time or not after considering the question of prejudice,
if any, for the delayed action taken by the Corporation. E
(4) The approach of the E.S.I. Court and the Authorities should be that
of a watch dog and not of a blood hound, even though the legislation is a
beneficial one.

We make it clear that we have not expressed any opinion on the merits F
of the case. Appeals are accordingly disposed of but without any order as
to costs.

VS.S. Appeal disposed of.