IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE M.N.KRISHNAN TUESDAY, THE 30TH SEPTEMBER 2008 / 8TH ASWINA 1930 Ins.APP.No. 46 of 2007(F) ------------------------ IC.12/2002 of EMPLOYEES INSURANCE COURT, ALAPPUZHA .................... APPELLANT/RESPONDENT: ----------------------------------------- THE REGIONAL DIRECTOR, E.S.I. CORPORATION, THRISSUR. BY ADV. SRI.T.V.AJAYAKUMAR RESPONDENT/APPLICANT: ------------------------------------- M/S. ORIENT PRE TREAD (P) LTD., KIZHAKKAMBALAM, ERNAKULAM. ADVS. SRI.E.K.NANDAKUMAR SRI.A.K.JAYASANKAR NAMBIAR SRI.K.JOHN MATHAI SRI.P.BENNY THOMAS SRI.ANIL D. NAIR THIS INSURANCE APPEALS HAVING BEEN FINALLY HEARD ON 30/09/2008, THE COURT ON THE SAME DAY PASSED THE FOLLOWING: vkm M.N.KRISHNAN, J. -------------------------- Ins. Appeal No. 46 OF 2007 --------------------- Dated this the 30th day of September, 2008 JUDGMENT This appeal is preferred against the judgment of the Employees' Insurance Court, Alappuzha, in I.C. 12/02. It was an application filed by the applicant therein seeking for a declaration that their establishment is not liable to be covered under the ESI Act and the order of the respondent dated 4.1.02 assessing the ESI Contribution for the period from 4/1995 to 12/2000 is unsustainable. The EI Court held that any claim made prior to 4.1.1997 is barred by the law of limitation and further that the interest can be claimed at the prescribed rate only from 25.1.02, i.e., 21 days after the date of demand. 2. Learned counsel for the ESI Corporation has brought to my notice the decision of the Apex Court in Employees State Insurance Corporation v. Santhakumar [2007 (1) KLT 133] wherein the Apex court held as follows: “If the period of limitation, prescribed under proviso (b) of S.77(1A) is read into the provisions of S.45A, it would defeat the very purpose of enacting Sections 45A and 45B. The prescription of limitation under S.77(1A)(b) of the Act has not been made applicable to the adjudication proceedings under S.45A by the legislature, since such a restriction Ins. Appeal 46/07 2 would restrict the right of the Corporation to determine the claims under S.45A and the right of recovery under S.45B and further, it would give a benefit to an unscrupulous employer. The period of five years fixed under Regulation 32(2) of the Regulations, is with regard to maintenance of registers of workmen and the same cannot take away the right of the Corporation to adjudicate, determine and fix the liability of the employer under S.45A of the Act, in respect of the claim other than those found in the register of workmen, maintained and filed in terms of the Regulations. S.77 of the Act relates to commencement of proceedings before the ESI Court . The proviso to sub-s. 77 of the Act cannot independently give any meaning without reference to the main provision, namely, S.77 of the Act. Therefore, the proviso to Clause (b) of S.77 (1A) of the Act, fixing the period of five years for the claim made by the Corporation, will apply only in respect of claim made by the Corporation before the ESI Court and to no other proceedings”. 3. In the light of the said decision, it has to be held that the limitation will apply only to a proceeding initiated by the ESI Corporation in a court and not for a proceeding to be initiated by the Corporation against the establishment. The Apex court also reversed the decision of this court in E.S.I. Corporation v. Excel Glasses Ltd.[2003 (3) KLT 42 (F.B)]. So in the light of the Apex court's decision it has to be held that there is no limitation. Therefore, the finding of the court below is set aside. 4. The next question that arises for determination is regarding the period from which the interest would commence. This Ins. Appeal 46/07 3 matter is also covered by a decision of the Division Bench of this court reported in Cannanore Drug Lines v. E.S.I. Corporation [2007 (1) KLT 880] wherein it is held that “Neither the provisions in the E.S.I. Act nor the provisions in the E.S.I. (General) Regulations give any discretion to the respondent to exempt the appellant from the liability to pay interest on the delayed payment of E.S.I. Contribution. The bona fide impression of the appellant that his establishment was not covered under the provisions of the E.S.I. Act or the pendency of a dispute before the E.S.I. Court regarding the appellant's liability to pay E.S.I. Contribution cannot be a valid ground for exempting the appellant from paying interest in terms of S.39(5)(a) and Regulation 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 just because that there was a bona fide belief of the establishment that it is not covered under the Act will not exonerate it from paying the interest when ultimately it is found that it is an establishment coming under the ESI Act. So that finding also cannot be sustained. Ins. Appeal 46/07 4 In the result the appeal is allowed. The finding of the EI Court on the question of limitation as well as fixing the date of commencement of the interest is set aside. Since the assessment also covers the period from 1.4.95 onwards, the ESI Corporation has to refix the amount after hearing the establishment, pass appropriate orders and thereafter proceed in accordance with law for realisation of the amount and interest. The appeal is disposed of accordingly. M.N.KRISHNAN, JUDGE vps Ins. Appeal 46/07 5