IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE M.N.KRISHNAN THURSDAY, THE 30TH OCTOBER 2008 / 8TH KARTHIKA 1930 Ins.APP.No. 45 of 2007() ------------------------ IC.104/2004 of EMPLOYEES INSURANCE COURT, ALAPPUZHA .................... APPELLANT/RESPONDENT ---------------------------- THE REGIONAL DIRECTOR, E.S.I. CORPORATION, PANCHADEEP BHAVAN, N.S.ROUND, THRISSUR-20. BY ADV. SRI.T.V.AJAYAKUMAR RESPONDENT/APPLICANT ------------------------ M/S UDUPPI ANANTHA BHAVAN, SANTHA RESTAURANT, JOSE JUNCTION, M.G.ROAD, COCHIN-11. ADV. SRI.E.K.NANDAKUMAR FOR R1 SRI.A.K.JAYASANKAR NAMBIAR FOR R1 SRI.K.JOHN MATHAI FOR R1 SRI.P.BENNY THOMAS FOR R1 SRI.ANIL D. NAIR FOR R1 THIS INSURANCE APPEAL HAVING COME UP FOR ADMISSION ON 30/10/2008, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: M.N.KRISHNAN, J. -------------------------- Ins. Appeal No. 45 OF 2007 --------------------- Dated this the 30th day of October, 2008 JUDGMENT This appeal is preferred against the judgment of the Employees’ Insurance Court, Alappuzha, in I.C.104/04. It was an application filed by the establishment for a declaration that the demand of Rs.3,525/- towards interest and imposition of damages of Rs.5,873/- as damages is to be declared as invalid. The EI court held that both the demands are unsustainable and therefore allowed the application. It is against that decision, the Corporation has come up in appeal. 2. Heard the counsel for both sides. The EI court has taken a stand that the contribution on omitted wages is payable only when the omission is detected and a legal and proper demand is made. So it has held that there cannot be any demand for interest in this case. The said court also held that since the power to demand interest arises only on demand for payment, the question of damages cannot be allowed. So far as the finding on the question of interest is concerned, I am afraid the view of the EI court is wrong. The applicability of the ESI Act and the liability to pay contribution are statutorily covered and once it is found that the establishment is liable to be covered under the ESI Act, then the amount will become due and there cannot be any postponement of that date. A Division Bench of this court in the decision reported in Cannanore Drug Ins. Appeal No.45/07 2 Lines v. E.S.I. Corporation [2007 (1) KLT 880] held that “the bonafide impression of the appellant that the establishment was not covered under the provisions of the ESI Act or the pendency of a dispute before the EI Court regarding the appellant’s liability to pay ESI contribution cannot be a valid ground for exempting the appellant from paying interest in terms of section 39(5) and Regulations 31A. When the statute does not provide for any such exemption, the respondent cannot exclude the amount of interest from the demand made against the appellant. So in the light of this decision, it is a statutory obligation cast on the Corporation to impose interest which cannot be waived by it. Therefore the finding of the EI court that it becomes payable only on demand is wrong and is liable to be set aside. I find that the interest, as demanded, has to be paid. 3. The next question is regarding imposition of damages. Imposition of damages is a discretionary jurisdiction vested with the Corporation and there are decisions to the effect. unless there is mens rea to evade payment or a contumacious conduct or deliberate intention to violate the provisions of the statute, the authorities should be slow in imposing damages. The materials available here would show that there was a bona fide belief that the establishment need not pay contribution. The matter got settled only at a later point of time and there was no deliberate or contumacious conduct for not paying the amount or interest in time. This Ins. Appeal No.45/07 3 position has been considered by a Division Bench of this court in Regional Director, ESI Corporation and another v. Managing Director, M/s. Qetcos Ltd. [2008 (3) ILR 132] wherein the court has held that unless these ingredients are proved, damages need not be imposed. So, I feel the finding of the EI court declining to confirm the show cause notice on damages is correct and that shall not be interfered with. The judgment of the EI court directing that the interest need not be paid is set aside. It is found that the establishment is bound to pay interest from the date when it has become due. The finding of the EI court that damages need not be levied is confirmed. The appeal is disposed of accordingly. M.N.KRISHNAN, JUDGE vps Ins. Appeal No.45/07 4