IN THE HIGH COURT OF JUDICATURE, ANDHRA PRADESH AT HYDERABAD (Special Original Jurisdiction) FRIDAY, THE TWELVETH DAY OF MARCH TWO THOUSAND AND TEN PRESENT THE HON'BLE SRI JUSTICE K.C. BHANU CIVIL MISCELLANEOUS APPEAL No.1877 OF 1999 Between: The E.S.I. Corporation .....APPELLANT AND Usha Kiran Movies and another ....RESPONDENTS The Court made the following: THE HON’BLE SRI JUSTICE K.C. BHANU CIVIL MISCELLANEOUS APPEAL No.1877 OF 1999 JUDGMENT: This Civil Miscellaneous Appeal, under Section 82 of the Employees State Insurance Act, 1948, (for short, “the Act”) is directed against the order, dated 21.04.1999, in E.I.C.No.7 of 1998 on the file of the Employees State Insurance Court and Chairman Industrial Tribunal – I, Hyderabad, whereunder and whereby, the trail Court while directing respondent No.1 herein to pay the contribution of Rs.1,14,225/- due to the petitioner - corporation for the period 01.01.1990 to 31.08.1994, disallowed the interest on the contribution for the said period. 2. It is not in dispute that respondent No.1 voluntarily opted for coverage of the policy for the employees under the Act by submitting Form-I on 19.03.1987. Petitioner – corporation by its letter, dated 15.04.1987, informed respondent No.1 that it is neither a factory nor an establishment, and hence, it is not coverable under the Act. Thereafter, survey is conducted by the ESI Inspector and came to the conclusion that respondent No.1 would fall under the Act and respondent No.1 - establishment has to pay the contribution for the period from 01.11.1990 to 31.03.1995 vide its letter, dated 17.08.1994, followed by show-cause notice, dated 18.10.1995, demanding respondent No.1 to pay contribution from 01.11.1990 to 31.03.1995. Respondent No.1 – establishment gave a reply on 14.11.1995 informing the petitioner that in its earlier letter dated 15.04.1987 the petitioner intimated to respondent No.1 that it is neither a factory nor an establishment comes under the purview of the Act and hence, it is not coverable under the Act. Thereafter, the ESI Inspector again visited the establishment and submitted his report. Basing on his report, the petitioner – corporation demanded respondent No.1 to pay a sum of Rs.1,14,225/- towards contribution for the period from 01.01.1990 to 31.08.1994 and further a sum of Rs.81,044/- towards interest up to 30.09.1997 vide its letter, dated 04.12.1997. Challenging the recovery proceedings, respondent No.1 herein filed the case before the trial Court. 3. The trial Court after considering the evidence available on record held that though respondent No.1 herein is liable to pay the contribution from 01.01.1990 to 31.08.1994, but it is not liable to pay the interest thereon. Hence, this appeal. 4. Learned counsel for the appellant contended that the employer, who is liable to pay the contributions, shall pay those contributions within 21 days of the last day of the calendar month in which the contributions fell due; and that Regulation 31(A) of the Employees State Insurance (General Regulations), 1950, (for short, “the Regulations”) reads that an employer who fails to pay contribution within the period specified in the regulation 31(A) of the Regulations shall be liable to pay simple interest at the rate of 15% per annum and therefore, the corporation is entitled to recover the interest on the contribution due, and hence, he prays to set aside the impugned order to the extent of disallowing the grant of interest. 5. On the other hand, learned counsel for respondent No.1 contended that in view of the fact that when respondent No.1 voluntarily approached the corporation, it is stated that respondent No.1 - establishment would not fall under the Act, and because it is not declared as establishment within the meaning of ESI, respondent No.1 need not pay the amount, and therefore, there is no willful default on the part of respondent No.1 in paying the amount, and hence, he prays to dismiss the appeal. 6. It is not seriously disputed either in the trial Court or before this Court that respondent No.1 - establishment has to pay the contributions from 01.01.1990 to 31.08.1994. The finding of the trial Court with regard to the payment of contributions under the Act, has become final. Therefore, the question which requires for determination in this appeal is with regard to the payment of interest to the contributions paid by respondent No.1 – establishment to the corporation. The trial Court disallowed the interest on the ground that the petitioner herein issued a reply through Ex.P1 to respondent No.1 - establishment stating that the establishment would not come in the purview of the Act. Therefore, it is not a case of willful default on the part of respondent No.1 – establishment in payment of contributions. Regulation 31(A) of the Regulations clearly mandates that if the employer fails to pay the contribution within the period specified, the contribution shall carry simple interest at the rate of 15% per annum. Therefore, the question of willful default of contributions does not arise. Once the establishment is covered under the Act, the employer is bound to pay the contributions to the petitioner - corporation within 21 days of the last day of the calendar month in which the contributions fell due, as required under regulation 31(A) of the Regulations. Therefore, mere default in payment of contribution itself attracts regulation 31(A) and therefore, the employer is bound to pay the interest as required under regulation 31(A) of the Regulations. Therefore, in view of the regulation respondent No.1 is bound to pay the interest as claimed by the petitioner herein. Hence, the impugned order to the extent of disallowing the interest is set aside and it is made clear that respondent No.1 is liable to pay the interest as claimed by the petitioner herein. 7. Accordingly, the Civil Miscellaneous Appeal is allowed to the extent indicated above. There shall be no order as to costs. _______________ K.C. BHANU, J March 12, 2010 MD/YVL