Binding rehabilitation scheme controls ESI damages waiver; corporation could not rely on subordinate regulation to deny relief.

A rehabilitation scheme sanctioned by the Board for Industrial and Financial Reconstruction, and consented to by the Employees State Insurance Corporation, had statutory force and was binding on the parties. Because the scheme expressly dealt with settlement of ESI dues and contemplated waiver of damages, the corporation could not invoke Regulation 31(c) of the ESI General Regulation 1951 to defeat the relief recorded in the sanctioned scheme. The refusal to waive damages was therefore unsustainable, the impugned demand could not be sustained, and the writ petition succeeded with the order set aside.

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Issues: Whether the Employees State Insurance Corporation could refuse waiver of damages for belated payment of contribution despite the rehabilitation scheme sanctioned by the Board for Industrial and Financial Reconstruction and the corporation's consent thereto.

Analysis: The rehabilitation scheme had been sanctioned for revival of the sick industrial company and specifically dealt with settlement of ESI dues, including consideration of waiver of damages. The scheme, having been approved by the Board for Industrial and Financial Reconstruction with the consent of the corporation, had statutory force and was binding. Regulation 31(c) of the ESI General Regulation 1951 did not preclude complete waiver in an extraordinary situation, and the corporation could not rely on the regulation to defeat its own consent recorded in the sanctioned scheme.

Conclusion: The refusal to waive damages was unsustainable, and the impugned demand could not be sustained. The issue is decided in favour of the assessee.

Final Conclusion: The writ petition succeeded and the impugned order was set aside.

Ratio Decidendi: A rehabilitation scheme sanctioned by the Board for Industrial and Financial Reconstruction, once consented to by the concerned authority, is binding and cannot be defeated by invoking a subordinate regulation to deny the relief expressly contemplated by the scheme.

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