Employees State Insurance Corporation v. K.S. Unni

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE K.T.SANKARAN & THE HONOURABLE MR.JUSTICE M.L.JOSEPH FRANCIS TUESDAY, THE 18TH DAY OF SEPTEMBER 2012/27TH BHADRA 1934 Ins.APP.No. 78 of 2012 () ------------------------IC.20/2011 of EMPLOYEES INSURANCE COURT, PALAKKAD APPELLANT/RESPONDENT: ----------------------------------- EMPLOYEES STATE INSURANCE CORPORATION REPRESENTED BY ITS REGIONAL DIRECTOR PANCHADEEP BHAVAN, NORTH SWARAJ ROUND THRISSUR-20. BY ADV. SRI.P.SANKARANKUTTY NAIR RESPONDENT/APPLICANT: ---------------------------------- K.S.UNNI SECRETARY, BHARATHIYA VIDHYA BHAVAN, POOCHATTY ERAVIMANGALAM, THRISSUR. THIS INSURANCE APPEALS HAVING COME UP FOR ADMISSION ON 18-092012, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: ## **K.T.SANKARAN & M.L.JOSEPH FRANCIS, JJ. ----------------------------------------------Ins. Appeal No.78 of 2012 ----------------------------------------------Dated 18[th] September, 2012. J U D G M E N T** ## **K.T.Sankaran, J.** By notification dated 8.10.2007 issued by the Government of Kerala under Section 1(5) of the Employees' State Insurance Act, 1948 (for short, 'the Act'), the provisions of the Act were extended to private educational institutions. The validity of the notification was challenged by several C.B.S.E. school managements, including the respondent, before the High Court of Kerala. The Writ Petitions were dismissed on 3.7.2009. 2. The appellant issued order under Section 45A of the Act directing the respondent to remit a sum of `.5,87,193/as the employer's contribution to the Fund. According to the respondent, a request was made by it to grant time upto 31.7.2010 to remit the amount and the Assistant Director of the Employees State Insurance Corporation granted that prayer. The respondent remitted the sum of `.5,87,193/-, as per cheque dated 25.7.2010. On 27.9.2010, a notice was issued by the appellant, directing the respondent to remit a sum of `1,42,063/-, the amount being the interest on the contribution 2 Ins. Appeal No.78 of 2012 amount at the rate of 12.75% for the belated remittance. The respondent remitted the interest claimed as well, on 15.12.2010. Thereafter, the respondent received a notice directing him to remit a sum of `1,54,334/- towards damages on the ground of delay in remitting the contribution for the period from August, 2007 to March, 2009. A representation was made by the respondent against the proposal to impose damages. The Joint Director, Employees State Insurance Corporation conducted a personal hearing and as per the order dated 21.12.2010, limited the damages to `77,167/-, after waiving 50% of the total sum claimed. 3. The order dated 21.12.2010 issued under Section 85B of the Act was challenged by the respondent in I.C.No.20 of 2011 before the Employees' Insurance Court, Palakkad. The Employees' Insurance Court, by the order dated 21.5.2012, allowed the application in favour of the respondent, which is under challenge in this Insurance Appeal. 4. In the order dated 21.5.2012, the Employees' Insurance Court held thus : “This is a case where the provisions of the ESI Act 3 Ins. Appeal No.78 of 2012 were implemented for the first time and the applicant and other school managements challenged the relevant notification dated 8.10.2007 before the Hon'ble High Court, which dismissed the writ petition on 8.7.2009 and the applicant remitted the contribution of `5,87,193/- for the period from 10/2007 to 03/2009 by cheque dt. 25.7.2010 and the interest of `1,42,063/- by cheque dt. 14.12.2010, despite financial difficulties. It is quite natural to take some time for obtaining the copy of the judgment in the writ petition, verifying the records for ascertaining the contribution etc. The opposite party has not denied the averment of the applicant that the request for time upto 31.7.2010 for remitting the contribution was allowed by its Assistant Director. The contribution is seen remitted within that time. In the circumstances, it cannot he held that there were penal circumstances or culpable delay for invoking the provisions of Sec.85-B of the Act.” 5. The respondent is the Secretary of Bharathiya Vidhya Bhavan, Poochatty, Thrissur. Admittedly, Bharathiya Vidhya Bhavan is an organization founded in 1938 by Kulapathi K.M.Munshi with the blessings of Mahatma Gandhi. The respondent committed default for the first time. The Act was extended to C.B.S.E. educational institutions only on 8.10.2007. The notification was under challenge in a batch of Writ Petitions before the High Court. After the dismissal of the Writ Petitions, the respondent remitted the amount of contribution. Interest 4 Ins. Appeal No.78 of 2012 was claimed at 12.75%. The respondent remitted the interest also. Thereafter, the respondent was directed to remit penal interest for the same period. No contumacious conduct was attributable to the respondent. There was no recurrence of default. Default was not a frequent affair in the case of the respondent. In the peculiar facts and circumstances of the case, the Employees' Insurance Court thought that the respondent should be exonerated from paying damages. 6. The Employees' Insurance Court held that the appellant did not deny the averment made by the respondent that the request for time upto 31.7.2010 for remitting the contribution was allowed by the Assistant Director of Employees' State Insurance Corporation. We have perused a copy of the petition under Section 75 of the Act submitted by the respondent and copy of the written objection filed on behalf of the appellant. There is a specific averment in the petition filed by the appellant that time upto 31.7.2010 was granted by the Assistant Director to pay the contribution. That averment was not denied at all in the written objection. The learned counsel for the appellant submitted that the appellant did not Ins. Appeal No.78 of 2012 5 allow the request by any written order and that a contention as raised before the E.I.Court was not raised by the respondent before the Joint Director in the proceedings under Section 85B of the Act. 7. When a specific averment is made by a party and the opposite party did not deny the same, it shall be taken that the said averment was admitted by the opposite party. It is not relevant whether the respondent raised such a contention before the Joint Director, who passed the order dated 21.12.2010. The question is whether time was granted. On that point, the specific averment made by the respondent was not denied by the appellant. Therefore, it has to be taken that time was granted to the respondent to pay the contribution, on or before 31.7.2010. The respondent paid the contribution amount before that date. Interest was also paid subsequently on the appellant making such a demand. 8. The learned counsel for the appellant relied on the judgment of the Supreme Court in **M/s.Hindustan Times Ltd. v. Union of India and others** (AIR 1998 SC 688), wherein, the Supreme Court held thus : 6 Ins. Appeal No.78 of 2012 “28. From the aforesaid decisions, the following principles can be summarised. The authority under Section 14-B has to apply his mind to the facts of the case and the reply to the show cause notice and pass a reasoned order after following principles of natural justice and giving a reasonable opportunity of being heard; the Regional Provident Fund Commissioner usually takes into consideration the number of defaults, the period of delay, the frequency of default and the amounts involved; default on the part of the employer based on plea of power-cut, financial problems relating to other indebtedness or the delay in realisation of amounts paid by the cheques or drafts, cannot be justifiable grounds for the employer to escape liability; there is no period of limitation prescribed by the legislature for initiating action for recovery of damages under Section 14-B.” ## 9. In **M/s.Hindustan Times Case** (supra), the Supreme Court held that the Regional Provident Fund Commissioner has to take into consideration the number of defaults, the period of delay, the frequency of default and the amount involved. In the present case, there was only one default. No contumacious conduct on the part of the respondent is pointed out. It is also an admitted fact that a Writ Petition challenging the notification was pending before the High Court. In these circumstances, we are of the view that this is an exceptionally hard case, where total waiver of damages should have been made invoking clause (c) of the Ins. Appeal No.78 of 2012 7 proviso to Regulation 31C of the Employees' State Insurance (General) Regulations, 1950. Though not specifically stated in the order impugned, the Employees' Insurance Court granted that benefit in the peculiar facts and circumstances of the case. No grounds are made out for interference in the appeal filed under Section 82(2) of the Act. 10. An appeal under Section 82 of the Act can be entertained only on a substantial question of law. No substantial question of law is involved in the case. For the aforesaid reasons, the Insurance Appeal is dismissed _in limine._ Sd/- ## **K.T.SANKARAN, JUDGE.** Sd/- ## **M.L.JOSEPH FRANCIS, JUDGE.** tgs (true copy)