Director, Sub Regional Office, Employees' State Insurance Corporation, Kochi v Unity Packers Pvt. Ltd.

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE C.T.RAVIKUMAR & THE HONOURABLE MRS. JUSTICE MARY JOSEPH WEDNESDAY, THE 3RD DAY OF JANUARY 2018 / 13TH POUSHA, 1939 Ins.APP.No. 61 of 2013 ---------------------------- AGAINST THE JUDGMENT IN IC 22/2013 of EMPLOYEES INSURANCE COURT, ALAPPUZHA, DATED 29-08-2013 APPELLANT(S)/RESPONDENT -------------------------------- THE DIRECTOR SUB REGIONAL OFFICE, ESI CORPORATION, MALU'S COMPLEX, ST.FRANCIS CHURCH ROAD, KALOOR, KOCHI 17. BY ADV.SRI.T.V.AJAYAKUMAR RESPONDENT(S):APPLICANT -------------------------------- UNITY PACKERS PVT.LTD. 24/168, TOSH HOUSE, PERUMANOOR JETTY ROAD, WELLINGTON ISLAND, KOCHI 682 003. R BY ADV. SRI.B.ASHOK SHENOY R BY ADV. SMT.C.G.PREETHA R BY ADV. SRI.THOMAS P.MAKIL R BY ADV. SRI.K.V.GEORGE R BY ADV. SRI.P.N.RAJAGOPALAN NAIR R BY ADV. SRI.P.S.GIREESH THIS INSURANCE APPEAL HAVING BEEN FINALLY HEARD ON 03-01-2018, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: ## **C.T. RAVIKUMAR &** ## **MARY JOSEPH, JJ.** ## **========================== INSURANCE APPEAL No.61 OF 2013** **==========================** Dated this the 3[rd] day of January, 2018 ## **JUDGMENT** _Ravikumar, J._ This appeal is preferred against judgment dated 29.8.2013 in I.C.No.22 of 2013 passed by the Employees Insurance Court, Alappuzha. The appellant herein was the respondent and the respondent herein was the applicant, therein. The respondent herein filed the above case under section 75 read with section 77 of the Employees State Insurance Act, 1948 (for brevity 'the Act') challenging Ext.P4 order dated 4.3.2013 passed by the appellant herein under section 85B of the Act imposing Rs.1,40,317/- as damages by way of penalty for the delayed payment of contribution on omitted wages for the period from 4/1999 to 3/2004. As per the impugned judgment, the said order was set aside. It is in the said circumstances that the captioned appeal has been preferred. **Ins.A.61/2013** 2 2. According to the appellant, the E.I Court set aside Ext.P4 order mainly on the ground that the contribution involved in the case was not pertaining to regular contribution, but related to contributions on omitted wages. It is the contention of the appellant that there can be no distinction with respect to payment of ESI contribution on the ground of regular contribution or contribution on omitted wages. It is the further contention that wages are remunerations paid or payable to employee/employees as defined under section 2(22) of the Act. Going by sections 39 and 40 of the Act, the principal employer is liable to pay ESI contribution due for the relevant period within the time stipulated under Regulation 31 of the ESI (General) Regulation. In short, according to the appellant, the E.I Court had lost sight of such relevant factors while interfering with Ext.P4 order. It is also the case of the appellant that the contribution is payable within 21 days of the last calender month provided under section 39(4) read with section 31 of the ESI (General) Regulation. According to the appellant, in the case on hand, the failure to effect such contribution, rather, contribution **Ins.A.61/2013** 3 on omitted wages was deducted only in the year 2003. Thereupon, three C18 notices were issued in the year 2005 and ultimately, the final order under section 45A of the Act was passed on 31.12.2008. The said order was challenged by the respondents before the E.I Court. As per the said order dated 31.12.2008, the appellant herein had demanded an amount of Rs.8,41,055/- as contribution, on omitted wages covering the period from 1999 to 2003. In I.C 41 of 2009, after conducting an enquiry, the E.I Court passed judgment dated 4.5.2012 holding that the applicant therein/respondent herein was liable only to pay an amount of Rs.3,60,364/- as contribution on omitted wages covering the said period. It is the undisputed position that during the pendency of I.C.41/2009, the respondent herein had paid an amount of Rs.2 lakhs on 14.7.2009 and after pronouncement of judgment dated 4.5.2012, the balance amount viz., Rs.1,60,364/- was remitted on 17.7.2012. It is after such payment that the appellant herein/respondent therein had initiated proceedings for the purpose of imposing damages by way of penalty under section **Ins.A.61/2013** 4 85B of the Act. In that regard, Ext.P2 notice proposing to impose damages was issued to the respondent and an opportunity for personal hearing was offered thereunder. On its receipt, the respondent herein had submitted Ext.P3 representation explaining the circumstances that resulted in delayed payment of contribution and also seeking to drop the proposal. Dissatisfied with the explanation given for the belated payment, the appellant herein had passed Ext.P4 order whereby and whereunder an amount of Rs.1,40,317/- was imposed as damages by way of penalty under section 85B of the Act. It is challenging the said order that I.C.22 of 2013 was filed by the respondent herein before the E.I Court which ultimately culminated in the impugned judgment. 3. We have already adverted to the contentions raised by the appellant to mount challenge against the judgment passed by the E.I Court in I.C.22 of 2013. The learned counsel for the respondent/applicant submitted that the E.I Court was perfectly justified in interfering with Ext.P4 order because on evaluation of the evidence on record, the Court had arrived at the **Ins.A.61/2013** 5 conclusion that there was no mens rea to commit default or to defeat the statutory provisions by the respondent. The learned counsel further submitted that a perusal of the impugned judgment would reveal that the relevant provisions as also the relevant decisions were taken into account by the E.I Court to consider the question as to whether there was any willful omission or any contumacious conduct on the part of the respondent herein in effecting payment due under section 45A of the Act. 4. While considering the question whether the judgment passed by the E.I Court invites interference, it is only worthwhile to refer to certain indisputable facts. The fact that the respondent establishment is covered under the ESI Act is not in dispute. In other words, the fact that it is liable to pay contribution even in the case of omitted wages is not in dispute. Earlier, on detecting omission to pay contribution on omitted wages covering the period from 1999 to 2003, the appellant herein had issued three C18 notices dated 30.3.2003, 12.7.2005 and 18.1.2005 proposing to assess contribution on adhoc basis. **Ins.A.61/2013** 6 That was followed by the final order under section 45A of the Act whereby an amount of Rs.8,41,055/- was assessed as contribution and the said amount was demanded. The said assessment and demand was successfully challenged by the respondent herein by filing I.C No.41/2009. As per judgment dated 4.5.2012, the E.I Court found that only an amount of Rs.3,60,364/- was liable to be paid by the respondent. It is also to be noted that pending the said case, in pursuance of an order passed by the E.I Court, the respondent herein paid an amount of Rs.2 lakhs on 14.7.2009. The balance amount payable based on the judgment dated 4.5.2012 was remitted by the respondent herein on 17.7.2012. These aspects were duly taken note of by the E.I Court while interfering with Ext.P4 order passed under section 85B of the Act. 5. A perusal of the impugned judgment would reveal that yet another contention was also taken by the respondent herein to assail Ext.P4 order before the E.I Court. It took up the contention that delayed payment was due to the financial difficulties. Certainly, that by itself cannot be a reason for **Ins.A.61/2013** 7 delaying or for not effecting payment of contribution. It was not established by the appellant before the E.I Court that in the case on hand, the employer had deducted contribution from the employee and withheld it. Evidently, an amount of Rs.3,60,364/- was to be paid in terms of the judgment in I.C.No.41/2009. Evidently, it is in the said circumstances that the E.I Court observed that both the shares were actually paid by the respondent herein and no deduction was made towards employees share and in such circumstances, there was no question of withholding such deducted amount. Even otherwise, in the case on hand, the fact is that the final order under section 45A was passed by the appellant only on 31.12.2008. The assessment of the said amount as contribution on omitted wages and the consequential demand for payment of the said amount was admittedly challenged successfully by the respondents herein by filing I.C.41 of 2009. As noticed hereinbefore, during the pendency of the said case, under orders of the E.I Court, the respondent herein paid an amount of Rs.2 lakhs on 14.7.2009. The balance amount payable under **Ins.A.61/2013** 8 judgment in I.C 41 of 2009 dated 4.5.2012 viz., Rs.1,60,364/was paid by the respondent on 17.7.2012. 6. There is no proven case that the respondent herein had deducted the contribution from employees and then withheld it. There is also no case for the appellant that in that regard, prosecution has been initiated against the respondent and it is facing any prosecution proceedings. In the said circumstances, the short question is whether, in the given circumstances, there was any justification for passing an order imposing damages by way of penalty under Section 85 B of the Act. 7. The learned counsel appearing for the respondent relied on a decision reported in _**Quilon District Automobile Workers Co-operative Society Ltd. v. Employees State Insurance Corporation**_ **[2017 (2) KLT 21]** . In the said decision, it was held that when, by bringing amendment to section 85B of the Act, it was made as a recovery by way of penalty, damages could not be adjudged as leviable merely because of the belated payment of contribution. Since the element of penal measure crept in, merely because specified **Ins.A.61/2013** 9 maximum rates are mentioned, it cannot be said that depending upon the period of delay 'damages' has invariably to be levied at the specified maximum rates, at all circumstances without considering the question whether the maximum is to be levied. It was held:- “Above all, it is to be noted that the very expression 'may recover' would undoubtedly reveal the existence of legal discretion to consider even the question whether 'damages' need be levied, in a given circumstance.” 8. In the said decision, we had relied on the decision of the Hon'ble Apex Court reported in _**Employees State Insurance Corporation Vs. HMT Ltd.**_ , **[(2008) (3) SCC 35]** wherein the Apex Court held: “existence of _mens rea_ or _actus reus_ to contravene a statutory provision must also be held to be a necessary ingredient for levy of damages and quantum thereof”. 9. In this case, the E.I Court, after evaluating the evidence on record had arrived at a conclusion that there was no _mens rea_ on the part of the respondents to commit default and thereby defeat any provisions of law. It is also held by the E.I **Ins.A.61/2013** 10 Court that there was no willful or any contumacious conduct on the part of the respondent in the matter. On giving our anxious consideration to the circumstances involved in this case, we do not find any reason to disagree with the conclusions arrived at by the E.I Court. In the said circumstances, we do not find any reason at all to interfere with the findings of the E.I Court in the impugned judgment. In the result, this appeal is liable to fail and accordingly, it is dismissed. Sd/- **C.T.RAVIKUMAR JUDGE** **Sd/MARY JOSEPH JUDGE** spc **Ins.A.61/2013** 11 **C.T. RAVIKUMAR, J.** **Ins.A.61/2013** 12 **JUDGMENT September, 2010**