IN THE HIGH COURT OF KERALA AT ERNAKULAM
Ins.APP.No. 45 of 2007()
1. THE REGIONAL DIRECTOR,
... Petitioner
Vs
1. M/S UDUPPI ANANTHA BHAVAN,
... Respondent
For Petitioner :SRI.T.V.AJAYAKUMAR
For Respondent :SRI.E.K.NANDAKUMAR
The Hon'ble MR. Justice M.N.KRISHNAN
Dated :30/10/2008
O R D E R
M.N.KRISHNAN, J.
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Ins. Appeal No. 45 OF 2007
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Dated this the 30th day of October, 2008
JUDGMENT
This appeal is preferred against the judgment of the Employees’
Insurance Court, Alappuzha, in I.C.104/04. It was an application filed by
the establishment for a declaration that the demand of Rs.3,525/- towards
interest and imposition of damages of Rs.5,873/- as damages is to be
declared as invalid. The EI court held that both the demands are
unsustainable and therefore allowed the application. It is against that
decision, the Corporation has come up in appeal.
2. Heard the counsel for both sides. The EI court has taken a stand
that the contribution on omitted wages is payable only when the omission is
detected and a legal and proper demand is made. So it has held that there
cannot be any demand for interest in this case. The said court also held
that since the power to demand interest arises only on demand for
payment, the question of damages cannot be allowed. So far as the
finding on the question of interest is concerned, I am afraid the view of the
EI court is wrong. The applicability of the ESI Act and the liability to pay
contribution are statutorily covered and once it is found that the
establishment is liable to be covered under the ESI Act, then the amount
will become due and there cannot be any postponement of that date. A
Division Bench of this court in the decision reported in Cannanore Drug
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Lines v. E.S.I. Corporation [2007 (1) KLT 880] held that “the bonafide
impression of the appellant that the establishment was not covered under
the provisions of the ESI Act or the pendency of a dispute before the EI
Court regarding the appellant’s liability to pay ESI contribution cannot be a
valid ground for exempting the appellant from paying interest in terms of
section 39(5) and Regulations 31A. When the statute does not provide for
any such exemption, the respondent cannot exclude the amount of interest
from the demand made against the appellant. So in the light of this
decision, it is a statutory obligation cast on the Corporation to impose
interest which cannot be waived by it. Therefore the finding of the EI court
that it becomes payable only on demand is wrong and is liable to be set
aside. I find that the interest, as demanded, has to be paid.
3. The next question is regarding imposition of damages. Imposition
of damages is a discretionary jurisdiction vested with the Corporation and
there are decisions to the effect. unless there is mens rea to evade
payment or a contumacious conduct or deliberate intention to violate the
provisions of the statute, the authorities should be slow in imposing
damages. The materials available here would show that there was a bona
fide belief that the establishment need not pay contribution. The matter got
settled only at a later point of time and there was no deliberate or
contumacious conduct for not paying the amount or interest in time. This
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position has been considered by a Division Bench of this court in Regional
Director, ESI Corporation and another v. Managing Director, M/s.
Qetcos Ltd. [2008 (3) ILR 132] wherein the court has held that unless
these ingredients are proved, damages need not be imposed. So, I feel
the finding of the EI court declining to confirm the show cause notice on
damages is correct and that shall not be interfered with.
The judgment of the EI court directing that the interest need not be
paid is set aside. It is found that the establishment is bound to pay interest
from the date when it has become due. The finding of the EI court that
damages need not be levied is confirmed.
The appeal is disposed of accordingly.
M.N.KRISHNAN, JUDGE
vps
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