The employer's obligation to pay contribution arises from the date of confirmation of coverage, and the employer cannot claim waiver of damages and interest due to the litigation period. The court emphasized the statutory nature of interest on delayed payment and the employer's responsibility to adhere to statutory provisions.

JUDGMENT

(Prayer: Civil Miscellaneous Appeal filed under Section 82(2) of the E.S.I.Act 1948 to set aside the decree and judgment of the Labour Court, Tirunelveli in ESIOP.No.9 of 2004 dated 24th March 2010.)The above appeal has been filed by the E.S.I.Corporation challenging an order passed by the Labour Court, Tirunelveli in E.S.I.O.P.No.9 of 2004 wherein two orders passed by the Corporation dated 23.09.2002 and 22.10.2002 claiming damages were set aside and the order dated 15.12.2003 claiming interest was declared to be illegal. The Labour Court had further restrained the Corporation from recovering damages from the employer. Thereafter, the Labour Court has directed the employer to pay 5% of damages for delay of 72 days in payment of contribution.

2. The E.S.I.Act was extended to the locality with effect from 1978. The employer had challenged the said extension of the Act through various proceedings before the High Court which were dismissed on 18.02.1997. Thereafter, the corporation has issued show cause notices calling upon the employer to pay contribution. Since the employer had disputed the quantum and liability, proceedings were initiated under Section 45-A of the Act and an order was passed on 18.11.1999 demanding a contribution of Rs.5,49,292/- for the period between October 1986 to March 1999. Admittedly, this order was not challenged by the employer. After dismissal of the writ petition, the employer had paid the first installment on 11.11.1999, the second installment on 29.02.2000, the third installment on 27.03.2000 and the fourth installment on 10.09.2001 towards contribution. Since the payments were made belatedly, the Corporation had initiated proceedings for recovery of damages and interest.

3. The corporation has issued a notice on 03.08.2000 claiming damages of a sum of Rs.28.802/-for the period covering January 1996 to December 1996. After giving opportunity to the employer, an order was passed on 22.10.2002 confirming the said damages. Another notice under Section 85-B of the E.S.I.Act was issued on 19.04.2001 proposing damages for Rs.2,82,320/- for a period covering October 1986 to March 1999. After giving opportunity to the parties, an order was passed on 23.09.2002 imposing damages of Rs.2,71,526/-.

4. For the delay in payment of contribution, proceedings were initiated under Section 39(5)(a) of the E.S.I.Act, by way of issuing a notice dated 24.10.2002 proposing to claim interest of Rs.3,47,913/-. After giving opportunity to the employer, a final order was passed on 15.12.2003 demanding interest of Rs.3,47,913/-. The two orders passed under Section 85-B on 22.10.2002 and 23.09.2002 and the order passed under Section 39(5) (a) on 15.12.2003 were challenged by employer by filing E.S.I.O.P.No.9 of 2004 before the Labour Court, Tirunelveli.

5. The main contention of the employer was that since litigation was pending from 1986 to 1997, for the period of litigation, damages and interest should not have been levied. The employer had further contended that the corporation has not properly appreciated the stand taken by the employer with regard to the waiver of the damages and interest. The employer had further contended that for the period between October 1986 to March 1999, the employees have not availed any E.S.I.benefits and the employer is being penalized to share the contribution of the employees also. He had further contended that the employer had not collected employees contribution from them and therefore, it would not possible for him to deposit the said amount. He had further contended that the establishment being an Beedi Industry, they are already covered under Beedi Welfare Cess Act and Beedi Welfare Fund Act. Therefore, the coverage under E.S.I. Act would twice taxing them. They have further contended that the similar establishments in Melapalayam area have been granted exemption by the Government of Tamil Nadu.

6. Based on the above said reason, the employer sought to set aside all the three orders.