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 MFA.No. 1400 of 2001() --------------------------------- IC.21/1999 of EMPLOYEES INSURANCE COURT, ALAPPUZHA .................... APPELLANT: RESPONDENT ------------------ THE EMPLOYEES STATE INSURANCE CORPORATION, PANCHADEEP BHAVAN, NORTH SWARAJ ROUND, THRISSUR 680 020. BY ADV. SRI.T.P.M.IBRAHIM KHAN,SR.SC, RAILWAYS RESPONDENT/ APPELLANT -------------------- BHARAT HOTEL, DURBAR HALL ROAD, KOCHI 16 REP.BY ITS MANAGING PARTNER. BY ADV. SRI.U.K.RAMAKRISHNAN (SR.) SRI.P.V.LOHITHAKSHAN SMT.P.VIJAYAMMA SRI.SANDEEP.E. THIS MISC. FIRST APPEAL HAVING BEEN FINALLY HEARD ON 27/05/2008, ALONG WITH INAP NO. 17 OF 2003 THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: J.B.KOSHY & P.N.RAVINDRAN, JJ. -------------------------------------- M.F.A.No.1400 OF 2001 & Ins. Appeal No.17 of 2003 ------------------------------------- Dated 27th May, 2008 JUDGMENT Koshy,J . In these cases, there was a dispute regarding the coverage of establishments of the respondents. Initially, Employees' Insurance Court was of the view that the establishments were not covered. Later, after appellate decision it was finally held that both establishments are covered and they are liable to pay contribution. Then the question is whether they are liable to pay interest on the contribution payable. Employees' Insurance Corporation was of the view that interest is payable from the due date of payment of contribution and accordingly demands were raised. The E.I. Court held that since there was a decision of the Court, establishments bona fide believed that they are not liable to pay contribution and in the above circumstances, interest is not payable for the past period. That is questioned by the Insurance Corporation in these appeals. 2. When the appeals came up for hearing, the learned single Judge noticed difference in opinion in Cannanore Drug Lines v. ESI MFA.1400/2001 & 17/2003 2 Corporation (2007 (1) KHC 103) and Regional Director E.S.I. Corporation v. Cannanore Spinning and Weaving Mills (2001 (3) KLT 393) in which one of us (Justice J.B.Koshy) was a party. In the Cannanore Spinning and Weaving Mills' case (supra) employees approached the court and got a stay and, therefore, the employer was prevented from paying contribution. On that circumstances, this court held that they are not liable to pay contribution for the period in which they were prevented from paying contribution because of the court order. Parties shall not suffer due to court order. The unreported decision in M.F.A.No.1199 of 1999 is based on the facts of that case. 3. In these cases, it is true that date of coverage of establishments and number of persons employed in the establishments etc. were disputed, but, that is finally settled. Once it is held that contribution is payable from a particular date and if there is delay, interest is payable from that date as it is a statutory obligation to pay interest. Parties themselves went to the court and obtained stay. Section 39(5)(a) of the Employees' State Insurance Act,1948 reads as follows: MFA.1400/2001 & 17/2003 3 “39. Contributions.- xx xx xx (5) (a) If any contribution payable under this Act is not paid by the principal employer on the date on which such contribution has become due, he shall be liable to pay simple interest at the rate of twelve per cent, per annum or at such higher rate as may be specified in the regulations till be date of its actual payment: Provided that higher interest specified in the regulations shall not exceed the lending rate of interest charged by any scheduled bank.” Regulation 31A of the Employees' State Insurance (General) Regulations, 1950 reads as follows: “31A. Interest on contribution due, but not paid in time.- An employer who fails to pay contribution within the periods specified in regulation 31, shall be liable to pay (simple interest at the rate of (twelve per cent) per annum) in respect of each day of default or delay in payment of contribution).” The statutory provisions are very clear and capable of one interpretation only. Hence, ratio of the decision in Cannanore Drug Lines case (supra) lays down the correct legal principle and there is no conflict between the decision in Cannanore Drug Lines case and Cannonore Spinning and Weaving Mills case (supra) as facts are different. But, if the delay was occurred due to bona fide reasons, damages can be waived on the facts of each case as imposition of MFA.1400/2001 & 17/2003 4 damages is penal in nature and mens rea is necessary unlike statutory obligation to pay interest for delayed payment of contribution. In the above circumstances, imposition of interest on the contribution from the due date of payment has to be upheld. In the above circumstances, both appeals are allowed. However, if there is any dispute regarding the calculation of interest or amount, parties are free to approach the Employees' State Insurance Corporation. J.B.KOSHY JUDGE P.N.RAVINDRAN JUDGE tks