Section 85B of ESI Act : Section 85B: Power To Recover Damages

Explanation using Example

Imagine a scenario where "XYZ Textiles Pvt. Ltd." is a manufacturing company that employs 150 workers. The company is required to contribute to the Employees' State Insurance (ESI) scheme for the benefit of its employees, but due to financial mismanagement, XYZ Textiles fails to deposit the necessary contributions within the stipulated time frame.

The Employees' State Insurance Corporation (ESIC) notices the lapse and initiates action to recover the dues. Under Section 85B of the Employees State Insurance Act, 1948, ESIC has the authority to impose a penalty on XYZ Textiles for the delay. The penalty could be up to the amount of the contribution arrears.

Before imposing the penalty, ESIC provides XYZ Textiles with an opportunity to explain the delay during a hearing. After the hearing, ESIC decides to impose a penalty that is 25% of the unpaid contributions as damages for the delay.

If XYZ Textiles still fails to pay the contribution along with the imposed damages, ESIC has the power to recover the amount as if it were an arrear of land revenue, ensuring that the employees' entitlements are safeguarded.