Partly allowed

The Regional Director, E.S.I,Corpn. v. M/S.Chackolas Spinning and Weaving Mills

Kerala HC2 Apr 2013Ins.APP/33/2008

Case brief

AI extract

What is this about?

In Insurance Appeal No. 33 of 2008, the Kerala High Court modified the Employees Insurance Court's order regarding damages under Section 85 B of the ESI Act imposed on a textile mill for delayed contributions due to financial crisis.

What did the court decide?

Respondent directed to pay Rs. 15,000/- as damages under Section 85 B of the Act within two months.

The Regional Director, E.S.I,Corpn. Vs… — Pension and Retirement Benefits | 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

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& THE HONOURABLE MR. JUSTICE BABU MATHEW P.JOSEPH

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TUESDAY, THE 2ND DAY OF APRIL 2013/12TH CHAITHRA 1935

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Ins. APP.No. 33 of 2008 (G)

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AGAINST THE JUDGMENT IN IC.50/2007 OF EMPLOYEES INSURANCE COURT, ALAPPUZHA DATED 28-12-2007

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APPELLANT/RESPONDENT.:

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THE REGIONAL DIRECTOR, E.S.I. CORPORATION, PANCHADEEP BHAVAN, N.S.ROUND THRISSUR.

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BY ADV. SRI.P.SANKARANKUTTY NAIR

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RESPONDENT/APPLICANT.:

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M/S. CHACKOLAS SPINNING & WEAVING MILLS LTD., KALAMASSERY, REPRESENTED BY ITS DIRECTOR PAUL JOHN CHACKOLA.

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BY ADV. SRI.E.K.NANDAKUMAR BY ADV. SRI.A.K.JAYASANKAR NAMBIAR BY ADV. SRI.K.JOHN MATHAI BY ADV. SRI.P.BENNY THOMAS BY ADV. SRI.ANIL D. NAIR

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THIS INSURANCE APPEAL HAVING BEEN FINALLY HEARD ON 02-04-2013, THE

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COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

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S. SIRI JAGAN & BABU MATHEW P. JOSEPH, JJ.

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=====================

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Ins. Appeal No. 33 of 2008 =====================

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Dated this the 2^nd day of April, 2013

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JUDGMENT

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SIRI JAGAN, J.

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The Regional Director, ESI Corporation, Thirissur, is the appellant herein. They are aggrieved by the judgment of the Employees Insurance Court, Alappuzha in I.C.No. 50 of 2007, whereby their order imposing damages on the respondent, amounting to Rs. 3,14,120/- on the respondent under Section 85 B of the Employees State Insurance Act for delay in payment of contributions for the wage periods from 4/2003 to 4/2004 and 8/2004 was set aside.

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The I.C. was filed by the respondent herein, challenging the order of the appellant dated 22-2-2007 imposing Rs. 3,14,120/- as damages under Section 85 B of the Employees State Insurance Act for delayed payment of contributions for the

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wage period mentioned above. Their contention is that they could not pay the contributions in time because of their financial

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Ins. Appeal No. 33 of 2008

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crisis which was plaguing not only the respondent but also all the textile mills in the state numbering 17 in the private sector at the relevant time. According to them, they could not pay even wages to their employees in time and it led to labour problems as well. The gratuity due to the retired employees were also not paid in time due to financial stringency. The establishment itself was closed in 2004 and much later in January 2006 the entire dues of all employees were settled along with which the contributions payable were also settled. As such, the delay in remittance of contributions was beyond the control of the respondent. Consequently the imposing of damages is also unjust and unreasonable was their contention. The E.I. Court, relying on the decision of the Division Bench of this court in

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E.S.I. Corporation v. Premanandan (2007 (2) KLT 666) held

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that since the delay in payment was only due to the financial stringency faced by the respondent, the respondent is not liable to pay damages under Section 85 B of the Act. That judgment of the Employees Insurance Court is under challenge at the instance of the Corporation in this appeal.

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The contention of the appellant is that insofar as,

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wages were paid to the employees, it was the bounden duty of

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Ins. Appeal No. 33 of 2008

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the respondent to deduct contributions from the wages of the employee and remit the same to the corporation within the time stipulated, in the Employees State Insurance Act and Scheme. Once they have failed to do so, Section 85 B of the Act automatically comes into operation and the damages calculated on the basis of Regulation 31 C of the Employees State Insurance (General) Regulations, 1950 have to be paid by the respondent is the contention raised.

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On the other hand, the learned counsel for the respondent would contend that the respondent did not actually pay wages to the employees for the period in question on due dates and the wages along with the contributions were also paid long after in January 2006 as per a settlement, whereafter contributions were also paid. The same would prove beyond any reasonable doubt that the delay in payment of contributions was on account of delay in payment of wages as well, which was in turn because of acute financial crisis faced by the respondent. Consequently, going by Premanandan's case (supra) no damages could have been validly imposed on the respondent is the contention raised.

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We have considered the rival contentions in detail.

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Ins. Appeal No. 33 of 2008

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It is not a secret that in Kerala, in 2001, almost all the private textile mills were in dire financial crisis. In fact, some of the textile mills were later taken over by the National Textile Corporation on account of the financial crisis. It was widely known that the respondent company was also in dire financial difficulties at the relevant time. The documents produced before the E.I. Court would show that for the period in question the respondent did not actually pay wages to their employees and it was long after the due dates, the wages were paid, that too pursuant to a settlement between the employees and the company. In Premanandan's case (supra) it has been categorically held that financial crisis is certainly a factor which has to be taken into account while imposing damages under Section 85 B of the Act. Of course, if the respondent had actually deducted contributions from the wages actually paid to the employees and there was delay in payment of that deducted amounts to the corporation, then may be to some extent the respondent would have been liable to pay damages for the delay despite the financial crisis. Here that is not the case. The delay was even in payment of wages to the employees. According to the respondent when they actually paid the wages, the

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Ins. Appeal No. 33 of 2008

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contributions were deducted and paid to the Corporation. In the said circumstances, we do not think that the view taken by the E.I. Court is perverse or unreasonable. Still we are of opinion that the entire damages could not have been waved insofar as it is a statutory prescription that for delay in payment of contributions damages under Section 85 B is payable. But taking into account all the facts and circumstances of the case we are of opinion that justice would be met if we direct the respondent to pay an amount of Rs. 15,000/- as damages under Section 85 B of the Act, instead of the amount demanded by the appellant. Accordingly in modification of the judgment of the E.I. Court, we direct the respondent to pay an amount of Rs. 15,000/- as damages to the appellant corporation instead of the amount demanded by the Corporation, within two months from today.

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The appeal is disposed of as above.

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Sd/-

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S. SIRI JAGAN, JUDGE

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Sd/-

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BABU MATHEW P. JOSEPH, JUDGE

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