IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE M.N.KRISHNAN THURSDAY, THE 24TH JULY 2008 / 2ND SRAVANA 1930 Ins.APP.No. 19 of 2003() ------------------------ IC.1/2000 of EMPLOYEES INSURANCE COURT,IDUKKI .................... APPELLANT/OPPOSITE PARTY: ------------------------------------------ THE EMPLOYEES STATE INSURANCE CORPORATION, PANCHA DEEP BHAVAN, NORTH SWARAJ ROUND, THRISSUR, REP. BY ITS ASST.DIRECTOR. BY ADV. SRI.P.SANKARANKUTTY NAIR RESPONDENT: APPLICANT: ----------------------- SHRI K.S.PEETHAMBARAN, KAROTTU VEEDU, PUTHUPPALLY P.O., KOTTAYAM. BY ADV. SRI.M.J.THOMAS THIS INSURANCE APPEALS HAVING BEEN FINALLY HEARD ON 24/07/2008, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: M.N.KRISHNAN, J. -------------------------- Ins. Appeal No. 19 OF 2003 --------------------- Dated this the 24th day of July, 2008 JUDGMENT This appeal is preferred against the judgment of the Employees Insurance Court, Idukki, in I. C. No. 1/2000. The applicant therein contended that he was the licensee of a toddy shop which was covered under the provisions of the Act. The applicant received an intimation in 1998 August showing that he was a defaulter and had remit Rs.9,312/- and interest towards contribution of the year 1988-89. Ultimately the present proceeding is against the initiation of action by the ESI Corporation for levying damages. 2. Levy of damages is covered by Sec.85(b) of the ESI Act. It is only of a discretionary nature and not a mandatory as in the case of payment of interest. The word used is “may” and not “shall”. The EI Court on consideration of the materials held that there has been inordinate delay of initiating action and therefore, the ESI Corporation may not be right. The mere factum of delay shall not foreclose the issue but may be a ground with respect to mitigation of damages. The principles to be followed are succinctly laid down by a Division Ins. Appeal 19/03 2 Bench of this court in the decision reported in Regional Direction, ESI Corporation v. Managing Director, M/s Qetcos Ltd. [2008 (3) ILR 132]. The case law on the subject had been referred to and also the principle laid down by the Apex court is taken note of which reads as follows: “Existence of mens rea or actus reus to contravene a statutory provision must also be held to be a necessary ingredient for levy of damages and/or the quantum thereof.” 3. The Apex court held that “A penal provision should be construed strictly. Only because a provision has been made for levy of penalty, the same by itself would not lead to the conclusion that penalty must be levied in all situations. Such an intention on the part of the legislature is not decipherable from Section 85B of the Act. When a discretionary jurisdiction has been conferred on a statutory authority to levy penal damages by reason of an enabling provision, the same cannot be construed as imperative.” 4. So these are the guiding principles which should be followed in the case of imposition of penalty. So the court is expected to consider whether there has been a deliberate, willful and contumacious conduct on the part of the defaulter and if it is there, it Ins. Appeal 19/03 3 may be justified in imposing damages. But for reasons beyond his control without any actus mensrea, there has been delay in payment, it is where the discretionary jurisdiction of not imposing damages have to be exercised. The factum of delay if any may be also a factor that can be taken into consideration for mitigating damages. So the subject has to be decided on these principles. 5. Learned counsel for the ESI Corporation submits that there is no delay. It is also a matter that can be looked into by the court when it hears the matter again. Therefore, the judgment of the EI Court is set aside and the matter is remitted back to the court below for fresh consideration after affording equal opportunities to both sides to adduce evidence, if necessary, and the court shall dispose of the matter in accordance with principles laid down by the Division Bench of this court referred to above and also the other decision on the subject. ESI Court shall issue notice to the parties fixing the date of hearing. M.N.KRISHNAN, JUDGE vps Ins. Appeal 19/03 4