- 1 - IN THE HIGH COURT OF KARNATAKA AT BANGALORE BEFORE THE HON BLE MR.JUSTICE S.N.SATYANARAYANA M.F.A.NO.1538/2011(ESI)

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1 - 1 - IN THE HIGH COURT OF KARNATAKA AT BANGALORE DATED THIS THE 28 TH DAY OF MARCH 2013 BEFORE THE HON BLE MR.JUSTICE S.N.SATYANARAYANA BETWEEN M.F.A.NO.1538/2011(ESI) 1. EMPLOYEES, STATE INSURANCE CORPORATION, REP. BY THE REGIONAL DIRECTOR, E.S.I. CORPORATION, NO.10, BINNY FIELDS, BINNYPET, BANGALORE THE DEPUTY DIRECTOR, (AUTHORISED OFFICER) E.S.I. CORPORATION, NO.10, BINNY FIELDS, BINNYPET, BANGLAORE THE RECOVERY OFFICER, E.S.I. CORPORATION, NO.10, BINNY FIELDS, BINNYPET, BANGALORE (By Sri K. KRISHNAPPA, ADV.,)... APPELLANTS AND M/S GOJER & CO., MALPE ROAD, P.O. SANTHEKATTE, UDUPI TALUK, UDUPI DISTRICT A PARTNERSHIP FIRM REP. BY ITS MANAGING PARTNER SRI. A.S. GOJER.... RESPONDENT (By Sri NATARAJ BALLAL, ADV.,)

2 - 2 - THIS MFA FILED U/S 82(2) OF THE EMPLOYEES STATE INSURANCE ACT, AGAINST THE ORDER DT PASSED IN E.S.I. NO.3/2007 ON THE FILE OF THE PRESIDING OFFICER, LABOUR COURT-CUM-ESI COURT, MANGALORE, D.K., ALLOWING THE APPLICATION FILED U/S 75(1)(g) AND SEC.77(1) OF E.S.I. ACT. THIS APPEAL COMING ON FOR ADMISSION THIS DAY, THE COURT DELIVERED THE FOLLOWING: JUDGMENT Respondents 1 to 3 in ESI application No.3/2007 on the file of Labour Court-cum-ESI Court, Dakshina Kannada, Mangalore, have come up in this appeal impugning the order dated so far as it pertains to restricting the liability of applicant in the said proceedings for payment of interest as contemplated under Section 39(5)(a) of ESI Act, 1948 from the date of demand being raised by Officer of respondent Corporation and not from the date on which it has fallen due. 2. Heard the counsel for appellants and respondent/applicant before ESI Court. Perused the order impugned. The undisputed facts are that applicant company is covered under the provisions of ESI Act from the year It is not in dispute that the contribution which is required to be paid by said company is quantified up to March 2001 when

3 - 3 - said company was closed. It is seen that contribution which was quantified has already been paid. However, there was delay in payment of said contribution. Hence, notice was caused by the Deputy Director of ESI Corporation on , which was subject matter of ESI Application No.3/2007. In the said proceedings, the contribution which was claimed as excess payment was not ordered to be refunded and said prayer was rejected. However, when it comes to payment of interest and damages on the same, it was restricted to 68 days on the amount of contribution payable by applicant therein relying upon the decision rendered by the coordinate bench of this Court in the matter of Joint Director, ESI Corporation & Another vs- Riddhi Siddhi and Chemicals Ltd., Gokak, reported in 2004(1) LLJ 546. Being aggrieved by the same, ESI Corporation has come up in this appeal. 3. On going through the order impugned with reference to the relevant provisions of law and the reported judgment on which application was disposed of it is clearly seen that there is indeed error on the part of ESI court in accepting that interest is payable from the date of notice being issued by Deputy

4 - 4 - Director of ESI Corporation and not from the date when it has fallen due as contemplated under Section 39(5)(a) of ESI Act, which reads as under: 39. Contributions: (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 the 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. (emphasis supplied) 4. Infact as rightly pointed out by appellant-esi Corporation, said legal position is rightly clarified by the Division Bench of this Court in an unreported decision in the matter of Employees State Insurance Corporation vs- M/s. Motorola India Electronics Ltd., (MFA.No.2638/2001 c/w 1782/2001, disposed off on ), wherein it is held as under: In MFA.No.2638/2001 the ESI Court has directed the appellant to pay interest from the date of the order and not from the due date. The said order is bad in law. The provisions of

5 - 5 - Section 39(5) of the Act mandates that the liability to pay interest commenced from the due date and there cannot be an order to pay interest from the date of the order by the ESI Court. In that view MFA.2638/2001 is allowed. The order is set aside, the liability to pay interest on the amount shall be from the due date. The amount of contribution and the interest is to be determined afresh. In that view of mater, this court feel that the finding of ESI Court is required to be set aside. 5. Accordingly, appeal is allowed. The respondent company is liable to pay interest from the date it has become due ie., as per notice dated So far as quantification of interest is concerned, before notifying the amount of interest that is required to be paid, all the amounts that are paid by respondent herein will have to be taken in to account and if any contribution is received, for which corporation is not entitled to, same shall be adjusted as against the interest that is required to be paid in the light of the aforesaid legal position. nd/- Sd/- JUDGE