Kristhu Jayanthi Hospital v. The Director, E.S.I.Corporation, Thiruvananthapuram and The Dy. Director, E.S.I.Corporation, Pancha Deep Bhavan, Round North, Thrissur

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE S.S.SATHEESACHANDRAN TUESDAY, THE 5TH DAY OF NOVEMBER 2013/14TH KARTHIKA, 1935 Ins.APP.No. 36 of 2011 ( ) --------------------------AGAINST THE ORDER/JUDGMENT IN IC 97/2009 of EMPLOYEES INSURANCE COURT, ALAPPUZHA DATED 29-10-2010 APPELLANT(S)/APPELLANTS/RESPONDENTS: --------------------------------------------------------------------1. THE DIRECTOR, E.S.I.CORPORATION, THIRUVANANTHAPURAM. 2. THE DY.DIRECTOR, E.S.I.CORPORATION, PANCHADEEP BHAVAN, ROUND NORTH, THRISSUR-682 020. BY ADV. SMT.T.D.RAJALAKSHMY, SC, ESI CORPN. RESPONDENT(S)/APPLICANT: ------------------------------------------------ KRISTHU JAYANTHI HOSPITAL, PERUMPILLY, NJARAKKAL, VYPIN KOCHI-682 505, REPRESENTED BY ITS ADMINISTRATOR. R, BY ADV. SRI.BECHU KURIAN THOMAS THIS INSURANCE APPEAL HAVING BEEN FINALLY HEARD ON 05-11- 2013, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: ## **S.S.SATHEESACHANDRAN,J.** ## **==========================** **INS.APPEAL No. 36 of 2011** **=========================== Dated, this the 5th day of November, 2013** ## **JUDGMENT** ## **S.S.SATHEESACHANDRAN,J.** ## **==========================** **INS.APPEAL No. 36 of 2011** **===========================** **Dated, this the 5th day of November, 2013** ## **JUDGMENT** Appeal is directed against the judgment dated 29.10.2010 in I C No.97/2009 passed by the Employees Insurance Court, Alappuzha, hereinafter referred to as the E.I Court. Respondent in the proceedings before the court below statutory corporation under the E.S.I INS.AppealNo.36/2011 2 Act, for short the Act, and its Deputy Director are the appellants. 2. Admittedly the applicant before the E.I Court, respondent in the appeal, is a covered establishment under the Act. Towards delayed payment of contribution by the applicant interest and damages were levied against the respondent for the period from 9/07 to 9/08 in terms of Sections 39 and 40 of the Act and Regulation 31A of the ESI (G1) Regulation read with section 85B of the ESI Act and Regulation 31C. Challenge raised by the respondent before the E.I.Court contending that the claim for interest and damages was unsustainable was upheld allowing his application quashing the notices demanding damages and interest. Aggrieved by such judgment appeal is preferred. 3. Respondent is a private hospital. When private hospitals in the State were brought under the coverage of the Act they moved an application for exemption from coverage. While such application for exemption was pending consideration INS.AppealNo.36/2011 3 before the Government, statutory Corporation proceeded for enforcement of the provisions of the Act on private hospitals. Then on behalf of the private hospitals their association moved a writ petition before this court and Ext.P1 judgment was rendered with some directions. Government was directed to consider and dispose the representation moved by the hospitals for exemption within the time limit fixed, and such hospitals were directed to recover and keep contributions of the employees and employer in a separate account under intimation to the Employees State Insurance Corporation. Subject to the compliance of above directions, further recovery proceedings by the Corporation were also directed to be kept in abeyance. Government after considering the representation declined the exemption applied for. Applicant thereafter remitted the contribution for the period from 7/07 to 9/08 to the E.S.I Corporation on 27.9.2008 and 17.10.2008. Corporation thereupon issued two notices one for INS.AppealNo.36/2011 4 interest and the other for damages, for delayed payment of contribution. Those notices were challenged by the applicant contending that when a particular mode for payment of contribution was directed by this court in Ext.P1 and that had been complied with, it is not proper and legal for the Corporation to initiate proceedings for interest and damages. The E.I Court taking note of the judicial pronouncements rendered by this court and also apex court held that only when there is wilful delay or any contumacious conduct or mensrea to commit delay in payment imposition of damages as penalty would arise and in the given facts of the case having regard to Ext.P1 judgment and directions issued thereunder, demand for interest and damages for delayed payment of contribution is unsustainable. Ext.P1 judgment enabled the applicant to deposit the employees' share in a separate account pending consideration of the application for exemption, and, once the application for exemption was declined contribution INS.AppealNo.36/2011 5 collected having been paid by applicant to the Corporation there was no delayed payment and as such interest and damages cannot be levied against applicant was the conclusion formed by the E.I Court to hold that demands for interest and damages towards delayed payment of contribution are unsustainable. Correctness and legality of the decision so rendered is impeached by the appellants. 4. I heard the counsel on both sides. 5. So far as the notice issued for damages for delayed payment of contribution taking into account the directions given in Ext.P1 judgment and payment of contribution made after disposal of the representation by the government declining exemption, I find the court below was justified in holding that there was no wilful default or contumacious conduct or mensrea to commit delay in payment of contribution. Though learned counsel for appellants urged that no material was placed by the applicant before the E.I Court to show that it INS.AppealNo.36/2011 6 had kept the amount due towards contribution payable by the employer and employees in a separate account as directed in Ext.P1 judgment, I find extenuating circumstance, if any, canvassed for delayed contribution presented or shown in the facts of the case cannot be eschewed from consideration in examining whether penalty for such delayed payment of contribution has to be imposed. Levy of damages is penal in nature and as such it cannot be levied in a cursory manner. The reasoning of the E.I Court taking into account Ext.P1 judgment with the directions issued thereunder to conclude that there was no contumacious conduct or mensrea to commit delay by applicant cannot be viewed as infirm or unsound. So much so I find Orders passed quashing Ext.P5 notice demanding Rs.22,040/- as damages from applicant does not warrant any interference. 6. Order of E.I. Court quashing Ext.P3 notice claiming interest on the delayed contribution cannot be approved. Ext.P1 judgment and the INS.AppealNo.36/2011 7 directions given thereunder and also declining of the exemption by the government cannot absolve the applicant from paying interest on the delayed contribution. The Apex Court in **Goetze India Ltd** ## **v. Employees State Insurance Corporation (2008(8)** **SCC 705)** referring to Section 39 of the Act and Regulations 31 and 31A has held that the liability to pay interest is statutory and there is no power of waiver. Applicant had set forth a case for exemption from coverage and moved a representation before the government to have such benefit and later Ext.P1 judgment was rendered with some directions could not absolve it from the liability to pay interest on the delayed contribution. The grounds canvassed as aforesaid cannot relieve or exempt the applicant from paying the interest on delayed contribution, which is statutory. So much so in reversal of the Order of the E.I Court it is ordered that the applicant is liable to pay the interest for delayed contribution demanded under Ext.P3 notice. INS.AppealNo.36/2011 8 Order of the Court below declaring Ext.P3 notice unsustainable is set aside. Ext.P3 notice demanding interest on delayed contribution is valid and liable to be complied with. Appeal is partly allowed to that extent. Parties are directed to suffer their costs. Sd/- **S.S.SATHEESACHANDRAN JUDGE** /true copy/ P.S to Judge tpl/- INS.AppealNo.36/2011 9 **==> picture [412 x 125] intentionally omitted <==** **----- Start of picture text -----**<br> -----------------------<br> A.S.No.893 of 1996 &<br> CROSS OBJECTION<br> -----------------------<br>JUDGMENT<br>**----- End of picture text -----**<br> 3[rd] October,2013 **S.S.SATHEESACHANDRAN JUDGE** tpl/- INS.AppealNo.36/2011 10 S.S.SATHEESACHANDRAN,J. ----------------------A.S.No.893 of 1996 & CROSS OBJECTION ----------------------- ## JUDGMENT 3[rd] October,2013