Partly allowed

Esi Corpn. & Another v. M/S. House of Foods & Chemicals (P) Ltd.

Kerala HC11 Nov 2013Ins.APP/13/2011

Case brief

AI extract

What is this about?

The High Court of Kerala disposed of an insurance appeal where the ESI Corporation challenged an order exempting a company from damages for delayed contribution remittance due to financial difficulties. The Court held that partial fault existed regarding deducted but unpaid wages, setting fixed damages of Rs. 35,000 against the respondent.

What did the court decide?

Damages imposed are fixed at Rs. 35,000 after deducting Rs. 10,000 already deposited; balance Rs. 25,000 to be paid within one month.

Esi Corpn. & Another Vs M/S. House of Foods & Chemicals… — Banking and Recovery | Kerala HC (2013)

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IN THE HIGH COURT OF KERALA AT ERNAKULAM

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PRESENT:

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THE HONOURABLE MR.JUSTICE S.SIRI JAGAN & THE HONOURABLE MR. JUSTICE K.RAMAKRISHNAN

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MONDAY, THE 11TH DAY OF NOVEMBER 2013/20TH KARTHIKA, 1935

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Ins.APP.No. 13 of 2011 ( )

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--------------------------ORDER PASSED IN IC.NO. 7/2008 OF EMPLOYEES INSURANCE COURT, PALAKKAD DATED 19-10-2010

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APPELLANTS/OPP. PARTIES :

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1. EMPLOYEES' STATE INSURANCE CORPORATION REPRESENTED BY ITS REGIONAL DIRECTOR, ROUND NORTH THRISSUR.

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2. THE RECOVERY OFFICER, E.S.I. CORPORATION ROUND NORTH, THRISSUR.

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BY ADV. SMT. T.D. RAJALAKSHMY, SC

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RESPONDENT/APPLICANT :

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M/S.HOUSE OF FOODS & CHEMICALS (P) LTD., INDUSTRIAL DEVELOPMENT AREA, KANJIKODE PALAKKAD, PIN - 678621.

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BY ADV. SRI. M.B. PRAJITH

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THIS INSURANCE APPEAL HAVING BEEN FINALLY HEARD ON 11-11-2013, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

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S.SIRI JAGAN & K. RAMAKRISHNAN, JJ.

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Ins. App. No.13 of 2011 ================= Dated this the 11^th day of November, 2013

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J U D G M E N T

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S. Siri Jagan, J .

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The Employees' State Insurance Corporation and its Recovery Officer, Thrissur, are the appellants herein. The respondent is a company. The appellants imposed damages to the tune of Rs.1,55,752/- on the respondent for delay in remittance of contributions for the periods from December 2002 to March 2004 and April 2005 to September 2005. The respondent filed I.C.No.7/2008 before the Employees' Insurance Court, Palakkad, challenging the demand for damages imposed on them under Section 85-B of the Employees' State Insurance Act, 1948. They pleaded that the delay in payment of the contributions was on account of acute financial difficulties faced by the company during the period in question, which they sought to prove by producing Ext.A1 balance sheet of the company, for the period from March 2002 to March 2004 and examining AW1 to prove the same. The Employees' Insurance Court accepted the

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Ins. App. No.13 of 2011

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contention of the respondent that the respondent was unable to remit the contributions only because of acute financial difficulty faced by them and held that therefore the respondent is not liable to pay any damages under Section 85-B for delayed payment of contributions. The respondent had deposited Rs.10,000/- as a condition for granting stay of recovery of the balance which was directed to be adjusted against other ESI dues, if any, payable by the respondent. The appellants are challenging the order of the Employees' Insurance Court, Palakkad.

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The first contention raised by the appellants is that there was no satisfactory evidence to prove the financial difficulties which forced the respondent to delay payment of contributions. It is submitted that the mere production of the balance sheet cannot be the evidence for financial difficulties and the appellant did not produce any reliable evidence in support of the same. It is the further contention of the appellants that even assuming that there was financial difficulties in payment of

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Ins. App. No.13 of 2011

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contributions that can apply only to employer's contributions insofar as admittedly the respondent had paid wages to the employees and at the time of payment of wages the respondent was statutorily bound to deduct employees contributions from the wages so paid. It is pointed out that the respondent themselves had furnished a statement of deduction of contributions to the inspector who conducted the inspection in the factory on 28.07.2006, for the relevant period, wherein it has been shown that the contributions have been deducted from the wages of the employees which have not been remitted to the Employees' State Insurance Corporation. Therefore, according to the appellants, the delay in payment of contributions cannot be attributed entirely to financial difficulties, even assuming that there were financial difficulties. Therefore, according to the appellants, the finding of the Tribunal that delay in payment was on account of acute financial difficulties is a perverse finding which requires to be interfered with by this court.

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Ins. App. No.13 of 2011

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On the other hand the learned counsel for the respondent would contend that the respondent had satisfactorily proved financial difficulties. It is further submitted that it is settled law that financial difficulties is a good ground for defending a demand for damages under Section 85-B of the Act for delay in payment of contributions. Regarding the contention of the appellants that the appellants had deducted contributions at the time of payment of wages, it is submitted that although the contributions were shown as deducted in the statement, it was not actually deducted, but it was only a book adjustment and the respondent did not have the money in their hands for payment of the contributions stated to be deducted from the wages to the Corporation.

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We have considered the rival contentions in

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detail.

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We are not inclined to accept the contention of the appellants that the respondent had not proved acute financial difficulties to enable them to defend the demand

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for damages under Section 85-B of the Act. The

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Ins. App. No.13 of 2011

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respondent had examined AW1 to prove the same and got Ext.A1 balance sheet for the period from March 2002 to March 2004 marked in evidence which would certainly show acute financial difficulties of the respondent. In E.S.I. Corporation v. Premanandan [2007 (2) KLT

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666] this court had held that acute financial difficulties is a ground for claiming exemption from payment of damages. In this case, the respondent had proved acute financial difficulties for the relevant period. But it cannot be said that the respondent was completely without any fault in non-payment of at least some part of the contributions, especially when they had in their statement to the Corporation showed the employees contributions

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as having been deducted from the wages of the employees. That being so, we are of opinion that the respondent should be visited with some part of the damages imposed by the appellants. We quantify that amount at Rs.35,000/- (Rupees thirty five thousand only). Ten thousand rupees (Rs.10,000/-) already remitted by the respondent shall be adjusted against the damages

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Ins. App. No.13 of 2011

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fixed by us as above. The respondent shall pay the balance Rs.25,000/- also within one month.

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With the above modification of the impugned order of the Employees' Insurance Court, Palakkad, the appeal is disposed of.

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Sd/-

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S.SIRI JAGAN, JUDGE

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Sd/-

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K.RAMAKRISHNAN, JUDGE

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Shg/

Esi Corpn. & Another v. M/S. House of Foods & Chemicals (P) Ltd.

Case brief

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Esi Corpn. & Another v. M/S. House of Foods & Chemicals (P) Ltd.

Case brief

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