Allowed

The Regional Director, Esi Corporation, v. Hindustan Latex Ltd.

Kerala HC3 Apr 2013Ins.APP/46/2008

Case brief

AI extract

What is this about?

The High Court of Kerala allowed an insurance appeal against the Employees Insurance Court. The High Court held that interest on delayed contributions under Section 39(5)(a) of the Employees State Insurance Act is statutory and mandatory. Consequently, the E.I. Court had no jurisdiction to exempt the respondent from paying interest for the period prior to the statutory due date, even if the delay

What did the court decide?

The appeal was allowed, the impugned judgment of the Employees Insurance Court in I.C.No.23/2005 was set aside, and it was declared that the respondent is liable to pay interest as demanded in Ext.P2.

The Regional Director, Esi Corporation, 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 & THE HONOURABLE MR. JUSTICE BABU MATHEW P.JOSEPH

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WEDNESDAY, THE 3RD DAY OF APRIL 2013/13TH CHAITHRA 1935

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Ins.APP.No. 46 of 2008 ( )

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AGAINST THE OUDGMENT IN IC.23/2005 of E.I.COURT, KOLLAM.

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APPELLANT/OPPOSITE PARTY:

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THE REGIONAL DIRECEETOR, E.S.I.CORORATION, PANCHADEEP BHVAN, NORTH SWARAJ ROUND THRISSUR AND OTHERS.

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BY ADV. SRI.T.V.AJAYAKUMAR

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RESPONDENT/APPLICANT:

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HINDUSTAN LATEZ LTD., (A GOVT. OF INDIA UNDERTAKING) AKKULAM PLANT SREEKARIAM P.O. THIRUVANANTHAPURAM.

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THIS INSURANCE APPEAL HAVING BEEN FINALLY HEARD ON 03-04-2013, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

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S. SIRI JAGAN &

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BABU MATHEW P. JOSEPH, JJ.

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Ins. Appeal No. 46 of 2008

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Dated this the 3^rd day of April, 2013

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JUDGMENT

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Siri Jagan, J.

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The Regional Director, E.S.I. Corporation, is the appellant herein. He is aggrieved by the judgment of the Employees Insurance Court, Kollam, in I.C.No.23/2005, whereby the demand made by the appellant on the respondent for payment of interest on delayed payment of contributions was set aside to the extent interest was demanded prior to 13.9.1995.

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The respondent is an establishment covered under the Employees State Insurance Act.The Central Government amended

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the wage limit for coverage of employees under the Act from Rs.1600/- to Rs.3000/- per month with effect from 1.4.1992. The employees of the applicant company challenged the same in O.P.No.5347 of 1992 before this Court. This Court upheld the

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[Ins. Appeal No.46/2008]

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validity of that amendment. It appears that some other similar employees also challenged the same up to the Supreme Court and the Supreme Court also upheld the amendment. On account of the pendency of the litigation, the respondent did not pay the contributions in respect of the period in question and, ultimately, the same was paid only after the judgment of the Supreme Court. But demand for the same was made by the appellant only by notice dated 14.9.2005 and the respondent was directed to pay the same by 13.5.1995. Damages for delayed payment was imposed and interest for the period of delay on the contributions payable was also demanded. The imposition of damages was challenged by the respondent by filing I.C.No.6/2005 and the demand for interest was challenged by filing I.C.No.23/2005. The E.I. Court took the stand that it was not because of any deliberate fault on the part of the respondent that there was delay in payment of contributions and consequently held that the demand for damages is unsustainable. The E.I. Court also held that the appellant cannot demand interest for any period prior to 13.5.1995. The challenge in this appeal is against that part of the judgment of the E.I. Court, whereby the E.I. Court has

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[Ins. Appeal No.46/2008]

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set aside the demand for interest for the period prior to 13.9.1995. According to the appellant, interest is statutory and the same cannot be reduced or waived by the E.I. Court, especially when the E.I. Court is a creature of the Employees State Insurance Act and, therefore, the E.I. Court is bound by the provisions of the Act.

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Although notice has been served on the respondent, the respondent has not chosen to enter appearance to contest the matter.

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We have considered the contentions of the appellant. Section 39(5)(a) of the Employees State Insurance Act, 1948 provides for liability of the employer to pay interest on delayed payment of contributions. The said sub-section reads as follows:

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“39(5)(a) If any contribution payable under this Act is not paid by the principal employer on the date on which such contribution has become due, he shall be liable to pay simple interest at the rate of twelve per cent per annum or at such higher rate as may be specified in the regulations till the date of its actual payment.

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Provided that higher interest specified in the regulations shall not exceed the lending rate of interest charged by any scheduled bank.”

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[Ins. Appeal No.46/2008]

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Regulation 31A of of the Employees' State Insurance (General) Regulations, 1950 also provides for the rate of interest which reads thus:

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“31A. Interest on contribution due, but not paid in time.- -An employer who fails to pay contribution within the periods specified in regulation 31, shall be liable to pay simple interest at the rate of twelve per cent per annum in respect of each day of default or delay in payment of contribution.”

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From the above, it is clear that payment of interest on delayed payment of contributions is statutory. The Employees Insurance Court is a creature of the Employees' State Insurance Act. That being so, the E.I. Court cannot pass orders contrary to the Act. Section 39(5)(a) of the Act provides that for delayed payment of contributions interest at the rate prescribed is mandatory. The fact that the delay in payment was on account of litigation pending on the question of liability to pay contributions does not in any way alter the situation. On logic also, interest cannot be be avoided because the contribution was actually payable under law to the Corporation. As such, the Corporation lost use of that contribution for the implementation of the provisions of the Act, Rules and Regulations. At the same time, the respondent had use of that money in their hands, by which they illegally gained.

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[Ins. Appeal No.46/2008]

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Therefore, naturally, the respondent will have to compensate the appellant for the loss of the use of the money legally due to them.

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In the above circumstances, we are of opinion that

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the E.I. Court has no jurisdiction whatsoever to direct that no interest is payable for the delayed payment of contributions prior to 13.5.1995, when, admittedly, the contributions were payable with effect from 1.4.1992, notwithstanding the fact that the delay in payment was on account of the litigation pending challenging the amendment of the Act. Therefore, the impugned judgment of the Employees Insurance Court, Kollam, in I.C.No.23/2005 is set aside and it is declared that the respondent is liable to pay interest as demanded in Ext.P2 notice, which was challenged in the I.C.

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The appeal is allowed as above.

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Sd/S. SIRI JAGAN, JUDGE.

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Sd/-

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BABU MATHEW P. JOSEPH, JUDGE.

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krs.

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// True Copy //

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P.S. to Judge.

The Regional Director, Esi Corporation, v. Hindustan Latex Ltd.

Case brief

What is this about?

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The Regional Director, Esi Corporation, v. Hindustan Latex Ltd.

Case brief

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What did the court decide?

What the court decided

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