IN THE HIGH COURT OF KERALA AT ERNAKULAM
MFA No. 1179 of 2001(D)
1. REGIONAL DIRECTOR,ESI CORPN
... Petitioner
Vs
1. APPOLLO TYRES LTD.
... Respondent
For Petitioner :SRI.P.SANKARANKUTTY NAIR
For Respondent :SRI.S.S.NAIR
The Hon'ble MR. Justice J.B.KOSHY
The Hon'ble MRS. Justice K.HEMA
Dated :31/10/2007
O R D E R
J.B. KOSHY & K.HEMA, JJ.
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M.F.A.No. 1179 of 2001
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Dated this the 31st day of October, 2007
Judgment
Koshy,J.
This case is referred to the Division Bench noticing
conflict of views in the decisions in Regional Director, ESI
Corporation v. Cannanore Spinning and Weaving Mills (2001 (3) KLT
393) and Cannanor Drug Lines v. ESI Corporation (2007 (1) KLT 880)
regarding liability to pay interest on delayed contribution due to the
stay order issued by the court.
2. Respondent is a factory covered under the ESI Act.
The wage ceiling for coverage under the Employees’ State Insurance
Act was extended from Rs.3,000/- to Rs.6,500/- with effect from
1.1.1997. Unions challenged the above notification before this
Court and this Court granted a stay. In view of the above stay
order, respondent was not able to collect the contribution from the
employees who were drawing salary between Rs.3,000/- and
Rs.6,500/-, but, later, stay was vacated and coverage was accepted
M.F.A.No.1179/2001 2
by the court. When the stay was vacated, the entire employees’
contribution and employers’ contribution were paid by the
respondent. Then, appellant ESI Corporation demanded interest for
the delayed payment. Contention of the respondent was that they
were willing to pay the amount even at the first instance, but, they
were unable to pay the amount because of the stay and, therefore,
they are unable to pay the interest. It is not the respondent
employer who obtained the stay, but, employees got the stay.
Therefore, employer was unable to pay the contribution amount
during the period. Since the employees who were drawing salary
between Rs.3,000/- and Rs.6,500/- were not covered, employer had
to pay the entire medical and other benefits due to them. After
vacation of the stay, Corporation got the entire contribution without
paying any benefits, that is, employers’ and employees’
contribution. Therefore, actually, it is the Corporation who gained
because of the stay. In any event, after paying all the benefits and
paying retrospective contribution, whether they are liable to pay
interest also for no fault on their part is the question. On an
identical facts, this Court in Regional Director, ESI Corporation v.
Cannanore Spinning and Weaving Mills (2001 (3) KLT 393) held that
interest is not liable. We are of the view that interest cannot be
M.F.A.No.1179/2001 3
levied on the facts of the case. It is true that in Cannanor Drug
Lines v. ESI Corporation (2007 (1) KLT 880), a Division Bench of this
Court held that Corporation has no discretion to exempt employers
from liability to pay interest for delayed payment of ESI contribution.
If a party is not paying the contribution correctly in time on a wrong
impression, Corporation is bound to pay interest. Even if a party
obtains stay from the Court and later it is vacated, the employer
who got the stay cannot say that they will not pay the interest. If
the establishment is not paying the contribution due, even if on a
bonafide impression that the establishment is not covered, they are
liable to pay statutory interest on the delayed payment of
contribution if finally it is held that the establishment is covered
under the ESI Act. Here, employer was prevented by the stay order
issued by the court, an act of the court, at the instance of the
employees. On the facts of this case, E.I. court, following the
decision of this Court in Cannanore Spinning and Weaving Mills case
held that interest need not be paid. It is not a question of ESI
Corporation granting exemption from payment of interest as interest
cannot be waived by the ESI Corporation as held by the Division
Bench in Cannanore Drug Lines v. ESI Corporation (2007 (1) KLT
880) if employer fails to pay contribution on a bona fide belief.
M.F.A.No.1179/2001 4
Therefore, on the facts, the decision in Cannanore Drug Lines v. ESI
Corporation (2007 (1) KLT 880) is not in conflict with the decision in
Regional Director, ESI Corporation v. Cannanore Spinning and
Weaving Mills (2001 (3) KLT 393). The reference is answered
accordingly and on the facts of this case, we see no ground to
interfere in the order of the E.I. court. Appeal dismissed.
J.B.KOSHY
JUDGE
K. HEMA
JUDGE
vaa
M.F.A.No.1179/2001 5
J.B. KOSHY AND
K.HEMA,JJ.
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M.F.A. No.1179 of 2001
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Judgment
Dated:31st October, 2007