The Regional Director vs M/S Uduppi Anantha Bhavan on 30 October, 2008

Kerala High Court
The Regional Director vs M/S Uduppi Anantha Bhavan on 30 October, 2008




Ins.APP.No. 45 of 2007()

                      ...  Petitioner


                       ...       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.
                       Ins. Appeal No. 45 OF 2007
                 Dated this the 30th day of October, 2008


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

Ins. Appeal No.45/07

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

Ins. Appeal No.45/07

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.


Ins. Appeal No.45/07

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