IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE M.N.KRISHNAN TUESDAY, THE 16TH FEBRUARY 2010 / 27TH MAGHA 1931 Ins.APP.No. 73 of 2009() ----------------------------------- IC.6/2008 of EMPLOYEES INSURANCE COURT, ALAPPUZHA .................... APPELLANTS/RESPONDENTS ---------------------- 1. THE REGIONAL DIRECTOR, E.S.I CORPORATION, PANCHADEEP BHAVAN, THRISSUR - 20. 2. THE RECOVERY OFFICER, E.S.I CORPORATION, PANCHADEEP BHAVAN, THRISSUR - 20. BY ADV. MR.T.V.AJAYAKUMAR, SC, ESI CORPN. RESPONDENT(S): APPLICANT ------------------------ M/S.ARJUNA NATURAL EXTRACTS (P) LTD., BANK ROAD, ALUVA, REPRESENTED BY ITS MANAGING DIRECTOR, MR.P.J.KUNJACHEN. ADV. MR.P.GEORGE VARGHESE THIS INSURANCE APPEALS HAVING BEEN FINALLY HEARD ON 16/02/2010, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: tss M.N. KRISHNAN, J. ........................................... Ins.A.No.73 OF 2009 ............................................. Dated this the 16th day of February, 2010. J U D G M E N T The appeal arises from an order of the Employees Insurance Court, Alappuzha in I.C.No.6/2008. The subject matter of dispute is with respect to the interest that is claimed for the omitted wages. The ESI Court held that no interest can be claimed and it becomes due only when it is demanded. It is against that decision, the ESI Corporation has come up in appeal and the following questions of law are formulated as i and ii. They are: “(i) Whether the finding of the learned EI Court that with regard to contribution on omitted wages, it becomes due only when proper assessment and demand is made in accordance with Section45-A of the ESI Act is not wrong and illegal in view of the provisions contained in Section 39(4) of the ESI Act and Regulation 31 of ESI (General) Regulations? (ii) Whether the further finding of the EI Court that no interest has accrued in respect of the contribution amount involved in this case is not against provision contained in Section 39(5) of the ESI Act and Regulation 31-A of the ESI (General) Regulation as well as against the law laid down in the rulings reported in 2007 (1) KLT 880, 2008 : 2 : Ins.A.No.73 OF 2009 (3) KLT 195 and 2008 (8) SCC 705?” 2. Points: The simple question to be considered is regarding the liability to pay interest. The ESI contribution under various heads is a statutory obligation of an employer and when the employer fails to comply with the statutory requirements, the ESI Corporation sets the law into motion whereby a demand is made for non-compliance of the statutory requirements. When such a dispute arises, the matter can be initially decided by the Corporation and it can be challenged by way of an application before the EI Court. Just because there is a dispute with respect to the factum of requirement to pay contribution under a particular head, it does not mean that the liability will start only from the date of determination by the court regarding the amount. Always matters are considered whether such and such amount is due from the employer. When it is found as due, it relates back to the date from which it is payable and the statute only provides 21 days’ grace time to make such payment. Just because the ESI Corporation has to initiate action for : 3 : Ins.A.No.73 OF 2009 the realisation of the amount, it does not mean that it becomes due only when it is determined. Really the amount becomes due and when it is disputed it goes to a court of law. In such cases, when the interest is liable to be paid has been considered by a Division Bench of this Court in the decision reported in Cannanore Drug Lines v. E.S.I Corporation (2007 (1) KLT 880) to I was also a party. This Court held that” “The bona fide impression of the appellant that his establishment was not covered under the provisions of the ESI Act or the pendency of a dispute before the ESI 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)(a) and regulation 31 A. 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”. 3. So, it is really a statutory obligation enforced by legal methodology. Therefore the finding of the court below that it becomes payable only when it is demanded, cannot be upheld for the reason that it becomes due at the : 4 : Ins.A.No.73 OF 2009 inception itself. 4. Therefore the order passed by the Employees Insurance Court is set aside and it is made clear that the respondent in the appeal is bound to pay interest as claimed. The respondent may be given two months’ time to make the payment and on failure of the same, action shall be initiated for the recovery. Disposed of accordingly. M.N. KRISHNAN, JUDGE cl : 5 : Ins.A.No.73 OF 2009