The Reid Co-operative Timber Works Ltd., Madras vs Employees' State Insurance Corporation

Maharajan, J.—This Is an appeal against the order of the Employees'' Insurance Court, Madras decreeing in favour of the Employees'' State

Insurance Corporation a sum of Rs. 559-62, representing interest at 6 per cent per annum upon the arrears of the employees'' contribution (Rs.

4277-80) due by Messrs., Reid Co-operative Timber Works Ltd., Madras for the period from 1-7-1959 to 30-4-1963. The factory has

preferred this appeal.

The contention of the appellant is that no interest is payable on arrears of employees'' contribution, either under the provisions of the Employees''

State Insurance Act or under the Regulations framed by the Government in exercise of the powers conferred by Section 97 of the Act. Learned

counsel for the Employees State Insurance Corporation would, however, point out that under the Interest Act, 1839. the court is empowered to

award interest. Section 1 of the Interest Act prescribes that upon all debts or sums certain payable at a certain time or otherwise, the court before

which such debts or sums may be recovered, may, if it shall think fit, allow interest to the creditor at a rate not exceeding the current rate of interest

from the time when such debts or sums certain were payable, if such debt or sums be payable by virtue of some written instrument at a certain

time; or if payable otherwise, then from the time when demand of payment shall have been made in writing, so as such demand shall give notice to

the debtor that interest will be claimed from the date of such demand until the term of payment. The contention of the appellant is that the first

clause of this section would be applicable only if the sum is payable by virtue of some written instrument and inasmuch as there is no written

instrument which obliges the appellant to pay the arrears of employees contribution, the first part of Section 1 can have no application,

I accept this contention. But it is clear that under the second part of Section 1, the appellant would be liable to pay interest from the time when

demand for payment was made in writing giving notice to the debtor that interest would be claimed from the date of such demand. Ex. A.5 is a

demand made by the Employees'' State Insurance Corporation on 10-2-1965. Be it noted that in this demand the Corporation has expressly

stated"" that interest at six per cent per annum will be charged on the arrears of contribution. As all the ingredients necessary for the application of

the second part of Section 1 of the Interest Act are present, I have little doubt that the appellant will be liable to pay interest upon the sum of Rs.

4277-80 from 10th February 1965, the date of demand,

Learned counsel for the appellant would however contend that the Employees'' Insurance Court has no power to allow interest under the

Interest Act, because, according to her, it is not a Civil Court and its jurisdiction under the Act is confined to adjudication upon the questions and

disputes which are catalogued in Section 75 of the Employees'' State Insurance Act. I find it difficult to accept this contention. In the first place, the

Interest Act itself makes no distinction between different categories of courts in relation to their power to allow interest. All that it says is that the

court before which such debts or sums may be recovered may allow interest to the creditor at the prescribed rate. The Employees'' State

Insurance Court is undeniably such a court.

In the second place, Section 75, which delimits the jurisdiction of the Employees'' Insurance Court, says in Clause (1), Sub-Clause (e) that if any

question or dispute arises as to the right of any person to any benefit and as to the amount and duration thereof, such question or dispute shall be

decided by the Employees'' Insurance Court in accordance with the provisions of that Act. The right of the Corporation to the benefit of interest

under the Interest Act is a matter which the court below is entitled to decide. Further, Section 78 of the Act says that the Employees Insurance

Court shall have all the powers of the Civil Court for the purposes mentioned there, and such court shall be deemed to be a Civil Court within the

meaning of Section 195 and Ch. XXXV, Cri. P. C. I would therefore repel the contention that the Employees'' Insurance Court has no jurisdiction

to adjudicate upon the liability of the appellant ,to pay interest to the respondent, or that it is not a court which is empowered to allow interest

under the Interest Act, 1839.

Learned counsel for the respondent next contends that the Corporation would be entitled to interest not from the date of the demand, but from

the different dates on which the employees'' contributions fell due. In support of this contention, he presses into service the cumulative effect of

Section 23 of the Indian Trusts Act and Sub-section (4) of Section 40 of the Employees'' State Insurance Act. Section 23, Clause (d) of the Trusts

Act is to the effect that where the trustee commits breach of trust, he is liable to make good the loss which the trust property"" or the beneficiary has

thereby sustained, and that a trustee, committing breach of trust is liable to pay interest in the following cases (a) where he has actually received

interest. (b) where the breach consists in unreasonable delay in paying the trust money to the beneficiary;-(c) where the trustee ought to have

received interest but has not done so; (d) where he may be fairly presumed to have received interest -- he is liable, in case (a) to account for the

interest actually received, and, in cases (b), (c) and (d), to account for simple interest at the rate of 6 per cent per annum, unless the court

otherwise directs. I am asked to presume that the appellant factory has actually collected the employees'' contribution by deducting the same from

out of their wages and on this presumption I am asked to act upon Clause (4) of Section 40 of the Act, which says that any sum deducted by the

principal employer from the wages under that Act shall be deemed to have been entrusted to him by the employee for the purpose of paying the

contribution in respect of which it was deducted. There is nothing in the evidence on record to show that the ''appellant has deducted from the

employees'' wages the employees'' contribution. On the other hand, the correspondence indicates that most of the employees had left the employ

of the appellant when the appellant was called upon to pay the employees'' contribution. The statutory presumption incorporated in Clause (4) of

Section 40: of the Employees'' State Insurance Act can be drawn only if there is evidence to show that the appellant had deducted from the wages

of the employees or the employees'' contribution. If no such deduction has been made, the appellant cannot be deemed to have been entrusted

with the employees'' contribution. If the appellant cannot be deemed to have been so entrusted, no breach of trust can arise within the meaning of

Section 23 of the Indian Trusts Act and no liability to pay interest for the period anterior to the date of demand can arise.

I therefore hold that the proper decree to pass is one directing the appellant to pay interest at 6 per cent per annum upon the sum of Rs.

4277.80 from 10-2-1965 upto 15-6-1965 the date of deposit of the entire arrears. Both the learned advocates agree that this amount comes to

Rs. 89-08. The Employees'' Insurance Court has, on a wrong interpretation of the legal position, fixed this amount at Rs. 559-62. . I direct that the

decree of the lower court be modified and the sum of Rs. 89-08 be substituted in that decree for Rs. 559-62. In the circumstances of this case, the

parties will bear their own costs in this court and the lower court.