According to the Supreme Court, the ESI Court has no authority to limit the period during which interest is payable under Section 39(5)(a) of the Employees State Insurance Act of 1948. The bench of Justices MR Shah and MM Sundresh, referring to Section 39(5), observed that the reduction to two years is not supported by any statutory provision.

"The interest leviable/payable is a statutory liability to pay the interest. Neither the Authority nor the Court have any authority to either waive the interest and/or reduce the interest and/or the period during which the interest is payable... On going through Section 39(5)(a) of the ESI Act, the liability to pay the interest is from the date on which such contribution has become due and till the date of its actual payment."

The court also stated that the ESI Court erred in relying on the decision in Employees State Insurance Corporation vs. HMT Ltd. (2008) 3 SCC 3 when determining whether to levy interest under Section 39(5)(a) of the ESI Act. The court stated that the aforementioned decision dealt with Section 85, where the word "may" is used. The word "shall" is used in Section 39(5)(a) of the ESI Act, the court added.

The Employees State Insurance (ESI) Court in this case limited the levy of interest leviable under Section 39(5)(a) of the Employees State Insurance Act, 1948, to only two years. The Allahabad High Court dismissed the appeal against the said order. The issue raised in the Employees State Insurance Corporation's appeal was whether the ESI Court was justified in limiting the levy of interest under Section 39(5)(a) of the ESI Act to only two years.

Case details: Regional Director/ Recovery Officer vs Nitinbhai Vallabhai

Citation: SLP(C) 16380/2022 

Link: https://main.sci.gov.in/supremecourt/2022/25167/25167_2022_5_15_39740_Order_17-Nov-2022.pdf