JUDGMENT

This Civil Miscellaneous Appeal is directed against the order dated

09.08.2021 passed in ESIOP.No.2 of 2017 on the file of Employees State Insurance Court, Coimbatore.

2. While setting aside the order passed under Section 85 B of the Employee's State Insurance Act, 1948 dated 30.12.2015, it was observed that there was no mens rea or malafide intention for the belated remittance of contribution on the part of the respondent and reason for the non remittance of contribution is due to the losses suffered by the factory/establishment is acceptable. Hence, it was concluded by the ESI Court that imposing of damages for Rs.2,80,252/- for belated remittance of contribution is unreasonable in the said order. The present appeal is preferred by the ESI Corporation, Coimbatore.

Facts:-

3. On 30.12.2015, the Employee's State Insurance Corporation, Coimbatore passed an order under Section 85 B of the ESI Act, 1948 stating that the respondent employer did not remit the contributions for the period from 6/2012 to 12/2013 in time as required under the ESI (General) Regulations, 1950. The delay in remittance ranges from 579 days to 856 days in respect of all wage period. In as much as the employee has admitted the liability to pay the damages and also poor business cannot be considered as valid reason for delay in payment of contribution.

4. Hence, damages to tune of Rs.2,80,252/- was levied as provided under Section 85 B of the ESI Act read with regulations 31(c) of the ESI (General) regulations, 1950 at the rage of 25% per annum commensurate with the extent of delay.

5. Aggrieved by this, the petitioner preferred an application under Section 75 of the ESI Act before the Employee's State Insurance Court, Coimbatore. In the said petition, it is submitted that the petitioner is a medium scale establishment covered under the Employee's State Insurance Act, 1948. The petitioner establishment operates a small Spinning Mill, engaged in a manufacture of cotton and synthetic yarn. The petitioner establishment had never defaulted in payment of contributions and dues to the ESIC. The general industrial recession, massive power cuts, escalation of price of raw materials, reduction in prices of yarn and also the frequent price variations led the general down turn in the textile industry and stand alone spinning mills, like that of the respondent were facing severe crisis and suffered continuous financial losses. The accumulated losses eroded the net- worth of the petitioner establishment and already huge loans and debt servicing costs could not be met out of the operations. Further, the Petitioner unit had to be operated despite the huge losses, just to provide the employees with work and to be in business. The loans availed by the establishment from South Indian Bank, could not be repaid and there were regular defaults, resulting in classification of loans as NPA, leading to proceedings being initiated under THE SECURITISATION AND RECONSTRUCTION OF FINANCIAL ASSESTS AND ENFORCEMENT OF SECURITY INTEREST ACT, 2002, and the bank took over the possession and proceedings thereof were initiated for its liquidation.

6. It is further submitted that the establishment was continuously operated with mounting losses as there is no way to close down or exit the business due to statutory impediments and trade reasons. Further the establishment had to sell finished goods at distress sales, whereby goods were sold at 50% of the cost, to just keep the establishment under operation and to pay wages to workmen. The wages were paid after delay the workers were aware of the crisis and they have cooperated with the employer at the time of crisis.

7. It is further submitted that the Bank had initiated proceedings under the SARFASI Act and had taken possession of the assets of the establishment. Despite these, the establishment had not closed or retrenched or locked out the unit.

8. It is further submitted that the operation of the Petitioner establishment became impossible an