85B Power to recover damages

Power to recover damages.

85B. (1) Where an employer fails to pay the amount due in respect of any contribution or any other amount payable under this Act, the Corporation may recover from the employer by way of penalty such damages not exceeding the amount of arrears as may be specified in the regulations:

PROVIDED that before recovering such damages, the employer shall be given a reasonable opportunity of being heard :

PROVIDED FURTHER that the Corporation may reduce or waive the damages recoverable under this section in relation to an establishment which is a sick industrial company in respect of which a scheme for rehabilitation has been sanctioned by the Board for Industrial and Financial Reconstruction established under section 4 of the Sick Industrial Companies (Special Provisions) Act, 1985, subject to such terms and conditions as may be specified in regulations.

(2) Any damages recoverable under sub-section (1) may be recovered as an arrear of land revenue or under sections 45C to 45-I.

COMMENTS

It is wrong to assume that there cannot be levied any damages or penalty from the defaulting employer unless the Corporation suffers an actual loss for the default committed by the employer. No loss except the loss of interest is suffered by the Corporation where there is a default committed by the establishment that is covered by the Act. Section 85(B) of the Act enables the Corporation to levy damages in the nature of penalty subject to ceiling prescribed under the said section.-- Joint Regional Director, ESI Corporation v. Ganesh Foundry (P) Ltd. 1995 (1) LLJ 180 .

Sec. 85B of the Act conferring discretion in the Regional Director as regards imposition of penalty calls for objective exercise within the limit pointed out in that section and such exercise must be apparent in the order. It is very much essential to find out what is the guilty conduct on the part of the party so that there is justification behind the imposition of damages.-- Regional Director, ESI Corporation v. Shakthi Tiles 1989(58) FLR 17.

Sec. 85B being penal in nature, it is obligatory for the authority to act in a judicious manner to determine the question after assessment of all the relevant factors and not in a cursory manner. Where the employer does not offer any explanation to the show cause it would not mean that the authority is absolved from the obligation of assessment that is cast upon it.-- Beema Manufacturers (P) Ltd. v. Regional Director ESI Corporation 1991 (62) FLR 743 .

The levy of damages as per s. 85(B)(1) is a levy in the nature of penalty to teach a lesson to the defaulter. Though the expression "damages" is used in the said section, the said expression could not be restricted to mean damages as understood in a contractual or tortious action.-- National Jute Manufacturers Corporation Ltd. v. ESI Corporation 1992 Lab. IC 2217 .