IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE J.B.KOSHY & THE HONOURABLE MR. JUSTICE P.N.RAVINDRAN TUESDAY, THE 27TH MAY 2008 / 6TH JYAISHTA 1930 Ins.APP.No. 17 of 2003(A) ----------------------------------- IC.38/2000 of EMPLOYEES INSURANCE COURT, ALAPPUZHA .................... APPELLANT/OPPOSITE PARTIES: -------------------- 1. E.S.I. CORPORATION, PANCHADEEP BHAVAN, THRISSUR-680 020, REPRESENTED BY ITS REGIONAL DIRECTOR. 2. THE RECOVERY OFFICER, E.S.I. CORPORATION, PANCHADEEP BHAVAN, THRISSUR. BY ADV. SRI.P.SANKARANKUTTY NAIR RESPONDENT: APPLICANT: ----------------------- COCHIN TOURIST HOME, ERNAKULAM SOUTH, KOCHI-682 016, REPRESENTED BY ITS MANAGING PARTNER. BY ADV. SRI.A.V.XAVIER - R1 SMT.THUSHARA JAMES - R1 THIS INSURANCE APPEALS HAVING BEEN FINALLY HEARD ON 27/05/2008, ALONG WITH MFA. NO.1400/2001 THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: K.PADMANABHAN NAIR, J. -------------------------- INS. APPEAL No. 17 of 2003 -------------------------- Dated this the 12th day of March, 2007 REFERENCE ORDER This appeal is filed by the E.S.I Corporation challenging an order passed by the Employees Insurance Court, Alappuzha, by which it was held that employer is not liable to pay interest on the delayed payment of the contribution under Section 39 (5) of the Act. The short facts are as follows: 2. Initially, the establishment run by the respondent was covered. Subsequently, the establishment was decovered with effect from 30.6.1986. In the year 1989, the ESI Act was amended making hotel and restaurant with kitchen wherein manufacturing process is going on liable to pay contribution if 10 or more workers are employed. Hence the Corporation issued fresh demand. Challenging that order, respondent filed I.C. 101/91 before the Insurance Court. The Insurance Court upheld the contention of the respondent and held that it is not liable to pay the contribution. That decision was challenged by the appellant in M.F.A. 1189/98. That M.F.A along with other M.F.As were heard and allowed by this court on 2.11.1999. Consequent INS. APPEAL No. 17 of 2003 2 to that order, the respondent paid the contribution due from it as well as the employee due to the Corporation. On 6.7.2000, the appellant claimed interest for the delayed payment for the period from April, 1990 to July 1991. Challenging that demand, the respondent filed I.C. 38/2000. The Insurance Court set aside the demand. Challenging that order, this appeal is filed. 3. The learned counsel appearing for the appellant has argued that the view taken by the Insurance Court is illegal. It was contended that even if the employer has bona fide belief that his establishment was not covered under the provision of the Act challenge it and any dispute is pending before the E.I Court is not a ground not to pay the amount. He relied on the decision reported in Cannanore Drug Lines Vs. ESI Corporation [2007 (1) KHC 103] and an unreported decision in Employees State Insurance Corporation Vs. M/s. Hotel Methanath (Kedaram) ( Insurance Appeal No.22/03 dated 8.2.2007). 4. Learned counsel for the respondent has contended that there is a flexibility attached and if there is a dispute pending, the amount become payable only when the dispute is finally solved. He relied on the decision reported in Regional INS. APPEAL No. 17 of 2003 3 Director , E.S.I Corporation Vs. Canannore Spinning and Weaving Mills [2001 (3) KLT 393] and an unreported decision in Employees State Insurance Corporation Vs. Kothamangalam Aggregates (M.F.A 1199 of 1999 dated 6.11.2006). In Cannanore Spinning and Weaving Mills Case, the establishment was covered one. The employer was paying the contribution under Rule 50 of the Employees State Insurance (Central) Rules, 1950 was amended with effect from 1.1.1997 enhancing the wage limit from Rs.3,000/- to Rs.6,500/-. But the Corporation brought more employees under coverage consequent to this amendment and issued a notification including more employees under the scheme. Challenging that notification, the employees approached this court by filing an O.P. No.2771/1997. This court stayed recovery proceedings. Subsequently, when the Corporation demanded interest, this court held that contribution is payable only when the amendment had become operative and there was an elasticity attached to the liability. In M.F.A.1199/99, another Division Bench followed the principle laid down in the Cannanore Spinning and Weaving Mills's case (supra). In that case, the original petition was filed INS. APPEAL No. 17 of 2003 4 by the employer himself. In M.F.A No.1199/99, a Division Bench of this Court has taken the view that an elasticity is attached to the Section and interest will become payable only after the decision. Going by the plain meaning of the Section, it is not possible to hold that any elasticity is attached. There is apparent conflict between the principles laid down in The Cannanore Drug Lines Case (supra) and Hotel Methanath (Kedaram) in In. App. 22 /2003 dated 8.2.2007 at one hand and Cannanore Spinning and the Weaving Mills case (supra) and the decision reported in Kothamangalam Aggregates in M.F.A 1199/1999 dated 6.11.2006. The earlier decisions were not brought to the notice of the Bench which heard the subsequent case. It is only just and proper that this case is heard by a larger Bench. So this case is to be heard by a Division Bench of this Court. In the result, the case is adjourned for being heard by a Division Bench. The office shall place the records forthwith before the Honourable the Acting Chief Justice. K.PADMANABHAN NAIR, JUDGE ma INS. APPEAL No. 17 of 2003 5 S.SIRI JAGAN, JUDGE SJ INS. APPEAL No. 17 of 2003 6