IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE M.N.KRISHNAN WEDNESDAY, THE 6TH JANUARY 2010 / 16TH POUSHA 1931 Ins.APP.No. 14 of 2009() ------------------------ IC.18/2005 of E.I.COURT, KOLLAM .................... APPELLANTS/RESPONDENTS ------------------------------------------ 1. THE EMPLOYEES STATE INSURANCE CORPORATION, POST BAG NO.2, NORTH SWARAJ ROUND, PANCHADEEP BHAVAN, THRISSUR-20. 2. THE RECOVERY OFFICER, OFFICE OF THE RECOVERY OFFICER, EMPLOYEES STATE INSURANCE CORPORATION, POST BAG NO.2, THRISSUR-20. BY ADV. SRI.P.SANKARANKUTTY NAIR RESPONDENT/APPLICANT ------------------------ SRI.JAISON G.OOMMEN, PROPRIETOR, M/S.ST.MARY'S CASHEW FACTORY, PUTHOOR, KOLLAM DISTRICT. ADV. SRI.V.V.RAJA FOR R1 SRI.M.T.SURESHKUMAR FOR R1 THIS INSURANCE APPEALS HAVING BEEN FINALLY HEARD ON 06/01/2010, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: M.N.KRISHNAN, J. --------------------------- INS.APPEAL.No. 14 OF 2009 --------------------------- Dated this the 6th day of January, 2010 J U D G M E N T ~~~~~~~~~~~ This is an appeal preferred against the order of the Employees Insurance Court, Kollam, in I.C.No.18/2005. An application was filed by the establishment to declare the imposition of Rs.25,340/- by way of interest and damages as unsustainable. The Employees Insurance Court had set aside the order of the Corporation. It is against that decision, the Corporation has come up in appeal. The points that arises for determination are: (i) whether the applicant establishment being a transferee can be mulcted with the liability to pay interest and damages for a period prior to the date of transfer; (ii) What will be the impact of the proviso to Section 93A of the E.S.I.Act; (iii) Whether there can be realisation of damages and interest as a routine matter. INAP.No.14/2009 2 2. For the sake of convenience, all the points are answered together. There is no dispute that the establishment is a transferee. It was entrusted on a lease arrangement for the period from 15.9.2003 to 31.12.2004 and from 1.1.2005 to 31.12.2005. Now, the E.S.I. Corporation has imposed Rs.10,315/- as interest and Rs.15,025/- as damages. 3. Now the learned counsel for the Corporation would contend that a perusal of Section 93A of the E.S.I.Act will make the establishment liable. Section 93A reads as follows: “93A. Liability in case of transfer of establishment:- Where an employer, in relation to a factory or establishment, transfers that factory or establishment in whole or in part, by sale, gift, lease or licence or in any other manner whatsoever, the employer and the person to whom the factory or establishment is so transferred shall jointly and severally be liable to pay the amount due in respect of any contribution or any other amount payable under this Act in respect of the periods up to the date of such transfer: Provided that the liability of the transferee shall be limited to the value of the assets obtained by him by such transfer.” INAP.No.14/2009 3 4. A learned Judge of this Court in the decision reported in Regional Director, ESI Corporation and another v. B.Mohanachandran Nair [2009(3) KHC 192] considered this question and held that Section 93A enjoins a liability on the transferor and the transferee jointly and severally and therefore action can be pursued and initiated. The very reading of the Section would make it very clear that a lessee or a licencee is also included therein and there is joint and several liability and further the wordings in Section 93A make it very clear that the liability is in respect of the periods up to the date of such transfer. So, if there is a liability and then there is a transfer, both the transferor and the transferee are jointly and severally liable as held by this Court in the above mentioned decision. 5. The learned counsel for the respondent would strongly contended before me that the Court has not considered the impact of proviso to Section 93A. The proviso to Section 93A reads as provided that the liability of the transferee shall be limited to the value of the assets obtained by him by such transfer. A close reading of the said proviso would indicate that INAP.No.14/2009 4 what is contemplated under the proviso is to limit the liability of the transferee up to the extend of the value of the assets obtained by him by such transfer. For example, if the liability is Rs. Ten crores and the assets received is only Rs. Four crores, the liability of the transferee cannot be more than four crores as envisaged under the proviso. Therefore, the reading of the Section would make it clear that the transferor and the transferee are jointly and severally liable in that case. So far as this case is concerned, the amount involved is very meagre. 6. Now the next question is regarding the liability to pay interest as well as damages. It has to be stated that the applicant is only a transferee. He has no mens rea to evade payment. There is no contumacious conduct on his part for the dues which was due from the transferor, he had no liability at that point of time. Therefore, there is no mens rea or no contumacious conduct and so, the E.S.I. Corporation was not proper in imposing damages for the delayed payment. Therefore, the order so far as it relates to imposition of damages on Rs.15,025/ is set aside. INAP.No.14/2009 5 7. Now the next question is regarding the interest. It has been held by the Division Bench of this Court to which I was also a member that the liability of an establishment starts within 21 days from the date of determination and the obligation to pay the interest is statutory and there is no power even for the Corporation to dispense with the same. This has been decided in Cannanore Drug Lines v. E.S.I. Corporation [2007(1) KLT 880]. It has been decided “The bonafide 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.SI. 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, there will be the liability to pay the interest. Then it has also to be made clear since the transferor and the transferee are jointly and severally liable and the amount is now attempted to be INAP.No.14/2009 6 realised from the transferee. It will not affect the right of the transferee to move against the transferor for realisation of the amount paid by him on satisfaction of the dues paid to the E.S.I. Corporation. Therefore, the appeal is disposed of as follows: (i) The transferee is liable to pay the interest (ii) The order levying damages is set aside (iii) the transferee is given the power to realise the amount which he paid to the ESI Corporation from the transferor. The Insurance Appeal is disposed of accordingly. (M.N.KRISHNAN, JUDGE) ps