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Labour Law II

Under the Supervision of: Priya Misra

SAP NO: 500012340

M/s Mukund Construction Co. v. Regional P.F. Commissioner
(2008) ILLJ 7 Guj
The Employees Provident Funds and Miscellaneous Provisions Act, 1952 is an important
social security programme which provides protection to industrial workers and their families
who are exposed to the risks of sickness, employment injury, occupational diseases and in
case of female employees to maternity. A social security legislation, was enacted to
ameliorate various risks and contingencies sustained by the workers while serving in a
factory or establishment.
In the present case, M/s. Mukund Construction Company had made an application under
Section 1(4) to the Commissioner, Provident Funds stating that their industry be included
within the act. After a series of events, the department clearly ordered that the industry would
be included in the Scheme with retrospective effect. As per the scheme, the employer was
asked to make deposits of the amount known as contribution of employer and contribution
made by the employee. Within the reasonable period of time and without any delay, the
petitioner deposited their 50% contribution but the employees did not do it. It appeared that
the employees wanted that further 25% should be paid by the employer. The employer, as a
prudent and good employer deposited that 25% also but still there was delay on the part of
the employees in making their contribution.
The department had issued a notice to the petitioner claiming that there was delay in making
deposits, therefore, an amount of interest and other damages be paid to the department. The
petitioner replied by submitting that they were not liable to pay any interest as there was no
delay on their part and that the Scheme could not be applied with retrospective effect. The
department disagreed with the submission and the defence made/raised by the petitioner and
passed a final order. Being aggrieved by the said order, the petitioner has come before
Gujarat High Court.
The arguments on the behalf of the petitioner was that in absence of any lapse on the part of
the employer, no direction for recovery of the interest and other damages could be issued
against the petitioner. The counsel submitted that retrospective operation of the Scheme and
inclusion of the industry in the Scheme would not give any additional benefit to the
department, because, the department cannot be allowed to take advantage of its own wrong
and the delay caused by it. He also submitted that in accordance with Section 1(4) liability of
the employer would be only from the date of the agreement or the date so provided in the
agreement. He submitted that the order of the department deserves to be quashed.
On the other hand, the counsel on behalf of the Respondent placed strong reliance on Section
1(4), Section 7A and 14B of the Act and submitted that the department is required to provide
certain benefits to the employees of an industry admitted to the Scheme. Under such
circumstances, the department is entitled to recover interest and damages. He also submitted
that the liability to make deposits of the contribution lies on the employer. He also submitted
that in absence of any lapse on the part of the department, the petitioner cannot get any
It can be inferred from the act that the employer is liable to contribute some amount and can
also recover the employees contribution from the wages of the employees by deducting from
his wages and submitting the same to the department. Undoubtedly, the petitioners have
deposited the sums to the department within reasonable period of time. Here the fault was on
the part of the employees who were taking a lot of time to make their contributions in spite of
the fact that the employers had conceded to that fact of contributing 25 % more which was
supposed to be contributed by the employees. Also the department should not forget the
objective with which the act was established and the benefits that are provided to the
employers as well as the employees under the act.
The E.S.I act provides for the compulsory contributory insurance of the employees that are
covered by the act. The scheme under the act is contributory in nature that both the employer
as well as the employees are required to pay their share of the contribution as specified in the
First Schedule of the Act. If any person fails to pay contribution which he is liable to pay
under the Act shall be punishable with imprisonment for a period of three years.
It was held that the department was absolutely unjustified in issuing a direction to the
petitioner for making payment of interest and damages. The order issued by the department
was quashed and the petition was allowed.
Thus it is witnessed that the benefit that can be derived from the act is to the employees. The
employees are entitled to promote the general welfare of the worker. The act has been
designed to provide cash benefit in the case of sickness, maternity and employment injury,
payment in the form of pension to the dependents of workers who dies out of employment
injury and medical benefit to the workers.
The act also provides for the establishment of ESI Corporation that serves a number of
functions and powers like promoting measures for the improvement of health and welfare of
the insured personnel; promoting measures for the rehabilitation and re-employment of
insured persons who are disabled or injured and incurring expenses in respect of such
measures from its fund up to a limit prescribed by the Central Government.