IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE HARUN-UL-RASHID WEDNESDAY, THE 29TH OCTOBER 2008 / 7TH KARTHIKA 1930 Ins.APP.No. 42 of 2004() ------------------------ IC.24/2001 of E.I.COURT, KOLLAM .................... APPELLANT ----------------------------- THE MANAGING DIRECTOR, KERALA STATE FILM DEVELOPMENT, CORPORATION, CHALACHITHRA KALABHAVAN, VAZHUTHACADU, THIRUVANANTHAPURAM. BY ADV. SRI.P.GOPALAKRISHNAN NAIR RESPONDENT(S): --------------- THE REGIONAL DIRECTOR, ESI CORPORATION, REGIONAL OFFICE, TRICHUR. ADV. SRI.T.V.AJAYAKUMAR SRI.A.ABDUL KHARIM THIS INSURANCE APPEALS HAVING BEEN FINALLY HEARD ON 29/10/2008, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: C .N. RAMACHANDRAN NAIR & HARUN-UL-RASHID, JJ. -------------------------------------------- INS.APP. No. 42 OF 2004 -------------------------------------------- Dated this the 29th day of October, 2008 JUDGMENT Ramachandran Nair,J. Appeal is filed by a Government company against the order of the Employees Insurance Court rejecting it's claim for exemption from payment of damages under Section 85B of the Employees State Insurance Act, 1948 read with Regulation 31C of the Employees State Insurance (General) Regulations, 1950. We have gone through the order of the Employees Insurance Court and have heard counsel appearing for the ESI Corporation. Appellant admittedly delayed remittances of contribution beyond the period prescribed under Regulation 31C and consequently there was delay in payment. Even though substsantial amount payable is attributable on account of coverage of employees drawing salary upto Rs. 6500/- which was under challenge and stay was granted by this Court, respondents have excluded the period of stay for the purpose of levy of damages. We 2 find that the Insurance Court has also taken into account the fact that no damages is demanded for the period of delay in payment of contribution during the period stay order granted by this Court on employees' petition was in force. Therefore this argument of counsel for the ESI Corporation is only to be accepted and appellant's challenge against levy and demand of damages on this ground is rejected. 2. Even though damages is payable for the delay we notice from the order that the appellant had pleaded financial difficulty as a ground for delayed payment. Besides this, additional demand was not accepted on account of coverage of large number of employees drawing higher salary, which was under contest by the employees themselves. We feel the difficulty in arranging funds by the appellant is perfectly justified. The appellant is a Government of Kerala concern, which is admittedly short of cash, which made payment through post-dated cheques which are normally not accepted by the Corporation. Since financial difficulty is self-evident and respondents have accepted the same, we feel, discretion under Section 85B read with Regulation 31C should have been exercised and the damages demanded should not have 3 exceeded more than the normal rate of interest charged to compensate the respondents. Even though maximum damages provided under Regulation 31C is 25% of the amount payable, we find from the schedule that for the delay of upto 2 months the damages provided is 5% which works out to 30% per annum. In view of the financial difficulty of the appellant which is a Government of Kerala undertaking, we modify the order demanding damages, confirmed by the EI Court, by directing Corporation to levy and demand damages at 12% per annum to be worked out on monthly basis at the rate of one per cent per month. Appeal is disposed of as above. (C.N.RAMACHANDRAN NAIR) Judge. (HARUN-UL-RASHID) Judge. kk 4