Remanded

The Regional Director, Esi Corpn. v. M/S. Arjuna Natural Extracts (P) Ltd.

Kerala HC7 Jan 2013Ins.APP/64/2010

Case brief

AI extract

What is this about?

This insurance appeal challenges the ESI Court's declaration that a penalty for delayed contribution was unsustainable. The High Court held the lower court erred in relying on the Section 45A order date instead of the date of liability, necessitating the case remand.

What did the court decide?

The impugned judgment is set aside; the case remanded to the court below for fresh consideration after affording an opportunity to both sides.

The Regional Director, Esi Corpn. Vs M/S. Arjuna Natural… — 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 HARUN-UL-RASHID

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MONDAY, THE 7TH DAY OF JANUARY 2013/17TH POUSHA 1934

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Ins.APP.No. 64 of 2010 (F)

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IC.48/2008 of EMPLOYEES INSURANCE COURT, ALAPPUZHA

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APPELLANTS/RESPONDENTS:

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THE REGIONAL DIRECTOR,

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E.S.I. CORPORATION, PANCHADEEP BHAVAN, P.B.NO.2

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THRISSUR-20.

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THE RECOVERY OFFICER,

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REGIONAL OFFICE, E.S.I. CORPORATION, P.B.NO.2 THRISSUR-20.

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BY ADV. SRI.P.SANKARANKUTTY NAIR

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RESPONDENT/APPLICANT:

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M/S. ARJUNA NATURAL EXTRACTS (P) LTD., BANK ROAD, ALUVA, REPRESENTED BY ITS MANAGING DIRECTOR, MR. P.J.KUNJACHAN.

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BY ADV. SRI.P.GEORGE VARGHESE

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THIS INSURANCE APPEALS HAVING BEEN FINALLY HEARD ON 07-01-2013, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

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HARUN-UL-RASHID, J.

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Ins. Appeal No.64 Of 2010 ---------------------Dated this the 7^th day of January, 2013.

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J U D G M E N T

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Respondents in the insurance case are the appellants. The appeal is directed against the judgment dated 5.2.2010 in I.C.No.48/2008 on the file of the E.S.I. Court, Alappuzha. The respondent herein as applicant filed I.C.No.48/2008 for a declaration that the order dated 30.1.2008 passed by the 1^st appellant imposing Rs.45,473/- as damages by way of penalty for

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the delayed payment of contribution for the wage period from 2001-02 to 2003-04 is unsustainable.

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The 1^st appellant has passed an order under Section 45A of the ESI Act on 28.11.2006 assessing and demanding Rs.1,99,973/-. The applicant paid the said amount on 30.12.2006. Thereafter, the 1^st appellant issued Ext.D18 notice on 30.5.2007 proposing to impose Rs.45,473/- as damages by

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way of penalty alleging delay in payment of contribution. After hearing the applicant, the 1^st appellant passed the order under Section 85B of the E.S.I Act on 30.1.2008 imposing Rs.45,473/-

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Ins.App.No.64 Of 2010

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as damages by way of penalty for the alleged delay in payment of contribution with regard to the period from 2001-02 to 2003-04.

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E.S.I Court considered the issue as to whether the action of the appellant imposing Rs.45,473/- as damages by way of penalty for the delayed payments of contribution for the period from 2001-02 to 2003-04 is legal and valid.

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The question involved in this case is contribution for accrued wages. The E.S.I Court found that the contribution on omitted wages arises only when the omission is detected and proper and valid demand is made. The court below observed that it is akin to escaped assessment as per taxation statutes. Only when the escaped income is detected and proper assessment is made, the question of payment of tax on escaped income arises. The court below held that a legal and proper claim was made by the appellant only when a determination under Section 45A order is made on 28.11.2006. The court held that the appellants can enforce the claim of contribution only when a Section 45A order is passed and prior to that, there is no enforceable claim. Thus, the claim for contribution for omitted wages ripened into a legal and proper claim only on 28.11.2006, when Section 45A order

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Ins.App.No.64 Of 2010

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was passed. It is observed that the order passed by the 1^st appellant under Section 45A was received by the applicant only on 12.12.2006 and that the applicant paid the dues within the grace period of 21 days. Therefore, the court below held that there is no delay involved in the matter and therefore action of the 1^st appellant in imposing damages for the alleged delay is illegal. The court declared that the order imposing damages by way of penalty for the delayed payment of contribution is unsustainable.

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The appellants contended that even though the payment of contribution was for the period from 2001-02 to 2003-04 and the said contribution fell due as early as in the year 2004, the Corporation has rightly exercised the discretion under Section 85B of the ESI Act and claimed damages only for the delay from the date of intimation by way of observation slip. It is pointed out that there is no satisfactory explanation for the nonpayment of contribution after the intimation of the same. Therefore, it is contended that the order passed under Section 85B by the appellants is in accordance with the provisions of the E.S.I Act. It is also pointed out that the impugned order is

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Ins.App.No.64 Of 2010

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against the mandatory provisions of Section 39(4) r/w Regulation 31(c) of the ESI Act and Regulation. Learned counsel for the appellant also placed reliance on the decision of the Division Bench of this Court in Ins.Appeal No.90/2007. The said appeal is directed against the order passed by the ESI Court, Alappuzha in I.C.No.5/2004. This Court considered a similar issue in the said appeal. This Court took the view taken by the EI court that the crucial date of determining the extent of delay is the date of passage of the order under Section 45A is wrong. This Court held that the crucial date to determine the extent of delay is the date when the liability to pay contribution arose. This Court, on the basis of the observations made therein, set aside the impugned order in I.C.No.5/2004 and remanded the case for fresh consideration.

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From the materials on record it is seen that the court below had no occasion to consider the contentions raised by the appellant in the light of the mandatory provision of Section 39(4) r/w Regulation 31(c) of the ESI Act and Regulation.

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Ins.App.No.64 Of 2010

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In the result, the impugned judgment is set aside. The case is remanded to the court below for fresh consideration and disposal after affording an opportunity to both sides to substantiate their case. Parties are at liberty to raise all contentions available to them.

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HARUN-UL-RASHID, Judge.

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bkn/-

The Regional Director, Esi Corpn. v. M/S. Arjuna Natural Extracts (P) Ltd.

Case brief

What is this about?

What did the court decide?

The Regional Director, Esi Corpn. v. M/S. Arjuna Natural Extracts (P) Ltd.

Case brief

What is this about?

What did the court decide?

What the court decided

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