Holding

The employer's liability to pay interest on delayed contributions is statutory and cannot be waived by any compromise or settlement.

Summary

M/s. Goetze (India) Ltd. was directed by the Employees' State Insurance Corporation (ESIC) to pay contributions on the efficiency bonus component for the period 1988-1994 under the Employees' State Insurance Act, 1948. After re‑verification, the employer paid the assessed amount in 1997 but ESIC later demanded interest on the delayed payment, invoking the statutory interest provision. The employer contended that a compromise had been reached, waiving any interest liability, and filed a writ petition challenging the demand. ESIC argued that interest liability is statutory under Section 39 of the Act and cannot be waived by any compromise. The Supreme Court held that the liability to pay interest is statutory, there is no power to waive it, and the reference in the ESI Court order to "no further due" pertained only to the contribution, not interest. Consequently, the appeal was dismissed and the employer remained liable for interest.

Issues considered

Whether the employer is statutorily liable to pay interest on delayed contributions under the Employees' State Insurance Act, 1948.
Whether such statutory interest liability can be waived or compromised by agreement between the parties.

Legislation cited

Employees' State Insurance Act, 1948s. 2(22), s. 39, s. 45(A), s. 75

Subjects

Employees' State Insurancestatutory interestemployer contributionwaiver of interestcompromise settlementSection 39Regulation 31A

Judgment

[2008] 10 S.C.R. 190

A M/S. GOETZE (INDIA) LTD.
v.
EMPLOYEES STATE INSURANCE CORPORATION
(Civil Appeal No. 8432 of 2001)
JULY 7, 2008 ff
B
[DR. ARIJIT PASAYAT AND P. SATHASIVAM, JJ.]

Employees' State Insurance Act, 1948
s.45(A) - Employer's contribution - Delayed payment
c of - Liability of employer to pay interest - Held: Liability to
pay interest is statutory- There is no power of waiver- There-
fore, any question of compromise or settlement, does not
arise-Interest.
The demand raised by the respondent-Corporation
D
for contribution under the Employees' State Insurance Act,
1948 on the component of efficiency bonus was chal-
lenged by the appellant-employer and ultimately the lat-
ter agreed to pay and paid the same. Thereafter the Cor-
poration demanded payment of interest on the amount
E
paid belatedly, which was questioned by the appellant in
a writ petition before the High Court. The stand of the
appellant was that the amount was paid under a compro-
mise arrived at between the parties as was apparent from
the order of the ESI Court to the effect that thereafter noth- ...y-•
F ing was payable by the appellant. The case of the Corpo-
ration was that there was statutory liability to pay the in-
terest and, therefore, there was no question of any com-
promise to waive the interest. The High Court dismissed
the writ petition. Aggrieved, the employer filed the instant
G appeal.
Dismissing the appeal, the court f...-~~

HELD: 1.1. As there was delay in making the pay-
ment of the contribution, the Corporation issued notice
H 190
M/S. GOETZE (INDIA) LTD. v. EMPLOYEES STATE 191
INSURANCE CORPORATION [DR. ARIJIT PASAYAT, J.]

on 29.6.1990 at the first instance. Thereafter the order was A
passed under Section 45(A) of the Employees' State In-
surance Act,1948 on 23.7.1992. The same was challenged
before the ESI Court in which an interim stay was granted
on 9.10.1992. During the pendency of the matter there
was re-verification and the quantum payable by the ap- B
pellant was worked out. The liability to pay interest is
statutory. There is no power of waiver. The question of
any compromise or settlement does not really arise.
[Para 6] [194-D-F]
1.2. Even otherwise, the order of the ESI Court re- C
ferred to and relied upon by the appellant is of no assis-
tance in this regard. It only noted statement of the appel-
lant that he had deposited contribution payable. The ref-
erence to "no further due" is obviously relatable to the
contribution payable and nothing beyond that. [Para 6] D
[194-F-G]
CIVILAPPELLATE JURISDICTION: Civil Appeal No. 8432
of 2001
From the final order dated 19/12/2000 of the High Court E
of Punjab and Haryana at Chandigarh in C.W.P. No. 13918/
2000

M.L. Varma, Meera Mathur and Satya Mitra for the Appellant.
I - ..-
C.S. Rajan, Annupam Mishra and VJ. Francis for the Re- F
spondent.

The Judgment of the Court was delivered by

Dr. ARIJIT PASAYAT, J. 1. Challenge in this appeal is to
be order passed by a Division Bench of the Punjab and Haryana G
High Court dismissing the writ petition filed by the appellant.
2. Controversy lies within a very narrow compass.

Employees State Insurance Corporation (in short the 'Cor-
poration'), the respondent herein raised a demand for contribu- H
192 SUPREME COURT REPORTS [2008] 10 S.C.R.

·f-...:.
A tion under the Employees State Insurance Act, 1948 (in short the
'Act') on the component of efficiency bonus for the period January
1988 to September, 1989 by order dated 23.7.1992. The de-
mand was challenged before the ESI Court under Section 75 of
the Act. Pending the proceedings before the ESI Court, Corpora-
s tion by letter dated 1.3.1997 asked for production of record for the !' ·
purpose of re-verification for the period from 1989 to 1991 and
from 1992 to 1994 to determine the amount payable.
The respondent Corporation on re-verification determined
the actual amount payable as follows:
c
(a) 1/88 to 3/89 as Rs.2,26,454/-
(b) 4/89 to 3/94 as Rs.5,28,071/-
Total Rs.7,54,525/-
D Appellant agreed to pay the contribution and paid the same >-
in October/November, 1997.
Appellant took the stand that there was a bonafide dis- ,
1.-

pute about eligibility. Since eligibility to "efficiency bonus" un-
der the scheme was subject to attendance of 50 days in a quar-
E ter is payable and paid quarterly. Appellant took the stand that it
falls outside the definition of wages under Section 2(22) of the
Act. Appellant took the plea that its stand was supported by a
judgment of this Court in Whirlpool of India Ltd. v. Employees'
State Insurance Corporation [2000(3) SCC 185]. The ESI Court
F disposed of the matter on 6.1.1998 taking note of the stand of
the appellant that it had deposited the definite amount after re-
verification and the bank guarantee furnished by the appellant
was released. On 11.1.2000 the Corporation wrote a letter to
the appellant demanding payment of interest on the amount paid
G to the Corporation for the period from 1988 to 1994 as covered
by order dated 6.1.1998 and directed payment of interest
amounting to Rs.4,61,825/-. The appellant questioned the de-
mand before .the High Court by filing a writ petition. The
appellant's stand was that a compromise had been arrived at
H as is apparent from the order of the ESI Court to the effect that
MIS. GOETZE (INDIA) LTD. v. EMPLOYEES STATE 193
INSURANCE CORPORATION [DR. ARIJIT PASAYAT, J.]

nothing was payable by the appellant. Corporation took the A
stand that the liability to pay interest was statutory and, there-
fore, there could not have any compromise~ In any event the
submission of the appellant that nothing further was payable as
ESI contribution was noted and therefore, the bank guarantee
was released. There was no question of any compromise to B
waive the interest which is not statutorily permissible. The High
Court accepted the stand and dismissed the writ petition.
3. In support of the appeal learned counsel for the appellant
submitted that there was an order of stay and therefore the ques-
tion of any int~rest does not arise. Further when the counsel for • C
the Corporation himself stated that nothing further was payable,
it clearly indicated that there was a statement on the compro-
mise for waiver of interest. It was pointed out that with a view to
buy peace the appellant had agreed to pay the amount though
this case was clearly covered by Whirlpool's case (supra). D
4. Learned counsel for the respondent on the other hand
submitted that there is no question of any compromise to waive
interest because the same is statutorily payable. There cannot
-I
be any compromise without any authority when there is no pro-
vision for any compromise or statement. It is therefore stated E
that the High Court's view is right.
5. In order to appreciate rival submissions it would be nec-
essary to take note of few provisions, Sections 39 and Regula-
\
tions 31 and 31A reads as follows: F
"Section 39- Contributions
xx xx xx
5(a) If any contribution payable under this Act is not paid
by the principal employer on the date on which such G
-l contribution has become due he shall be liable to pay
simple interest at the rate of 12% per annum or at such
higher rate as may be specified in the regulations tiil the
date of its actual payment."
H
194 SUPREME COURT REPORTS [2008] 10 S.C.R.

A "Regulation 31 - Time for payment of contribution
An employer who is liable to pay contributions in respect
of any employee shall pqy those contributions within 21
days of the last day of the calendar month in which the
contributions fall due;
. B
Provided that where a factory/establishment is permanently
closed, the employer shall pay contribution on the last day
of its closure."
"Regulation 31A - Interest on contribution due, but not
C paid. in time
An employer who fails to pay contribution within the periods
specified in regulation 31, shall be liable to pay interest at
...
the rate of 12% per annum in respect of each day of default I
or delay in payment of contribution."
D ::;,.
>-
6. As there was delay in making the payment of the~~ontri-
bution the Corporation had issued notice on.~9.6.199d;~ the
first instance and thereafter the order was pa~sed under Sec-
tion 45(A) of the Act on 23.7.1992. The sam'ewas challenged ...
E before the ESI Court in which an interim stay was granted on
9.10.1992. During the pendency of thtatter there was re-veri-
fication and the quantum payable b~:~ ·e appellanJ was worked
out. The liability to pay interest is statutory. There is no power of
-
,;-

waiver. The question of any compromise or settlement does
.F not really arise. Even otherwise the''order of the ESI Court re- y~

ferred to and relied upon by the appellant is of no assistance to
the appellant. .It only noted statement of the appellant that he
had deposited contribution payable. The refere.nce to "no fur-
ther due" ·is obviously rel~table to the contributibn~P,ayable and
nothing beyond that. \.
G. t
7. Above being the position, the app,eal is· sans merit, de-
serves dismissal, which we direct. There shajl be no order as ,!. -~ ·"

to costs. ·Y .. ,
. /. ' ,.
R.P. 'Appeal 'dis~,issed. ~
H fl

'7 !-