IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE M.N.KRISHNAN FRIDAY, THE 13TH NOVEMBER 2009 / 22ND KARTHIKA 1931 Ins.APP.No. 32 of 2009(G) ------------------------ EIC.28/2006 of E.I.COURT, KOZHIKODE .................... APPELLANT/RESPONDENT -------------------------------------- THE REGIONAL DIRECTOR, E.S.I. CORPORATION THRISSUR. BY ADV. SMT.T.D.RAJALAKSHMY, SC, ESI CORPN. RESPONDENT(S): APPLICANT ------------------------ U.PREMARAJAN, MANAGING PARTNER M/S. WEST COAST TILE WORKS, P.B.NO.17, CHERUVANNUR, FEROKE KOZHIKODE. ADV. SRI.K.M.FIROZ FOR R1 THIS INSURANCE APPEALS HAVING BEEN FINALLY HEARD ON 13/11/2009, THE COURT ON THE SAME DAY PASSED THE FOLLOWING: M.N. KRISHNAN, J. = = = = = = = = = = = = = = INS.APPEAL NO. 32 OF 2009 = = = = = = = = = = = = = = = Dated this the 13th day of November, 2009. J U D G M E N T This appeal is preferred against the order of the Employees Insurance Court, Kozhikode in E.I.C.28/06. The applicant before the said Court moved for a declaration to set aside the order imposing damages. The grounds alleged are that the firm had very tremendous growth to start with and on account of the change in the political climate and the belligerent stand by the trade unions the establishment underwent economic deprivation, the non-availability of the market for the products, scarcity of raw materials and unhealthy business competition adversely affected the industry and the industry started to suffer loss every year. There were large amounts due to the E.S.I Corporation, Employees Provident Fund, Sales Tax Department, Income Tax Department and therefore due to the extreme financial INS.APPEAL NO. 32 OF 2009 -:2:- constrains and stringency the establishment was not able to make the payment in time which has resulted in the delay. 2. The law is fairly well settled now that the mere delay in payment of contribution is not a ground to impose damages. S.85B of the E.S.I. Act which deals with the power to impose damages use the word 'may' instead of 'shall'. The said fact had been discussed in very many decisions and it has been held that imposition of damages being plenary in nature the legislature in its wisdom had only used the word 'may' which means that the discretion has to be judiciously exercised and therefore in this case imposition of damages will militate against the very object u/s 85 B of the E.S.I.Act. 3. This position has come up for consideration before a Division Bench of this court which also did consider the views of the Apex Court in the decision reported in Regional Director, ESI Corporation v. Managing Director, M/s Qetcos Ltd. (ILR 2008 (3) Kerala Series 132). The Division Bench held that levy of damages for delayed payment of contribution, is not mandatory in all cases when INS.APPEAL NO. 32 OF 2009 -:3:- it is proved that there is no mensrea and the employer was unable to pay contribution in time due to circumstances beyond its control, damages can be waived completely. The learned Judges has also referred to the decision of the Apex Court in E.S.I. Corporation v. HMT Ltd. (AIR 2008 (SC) 1322)and extracted paragraph 22 of the said judgment which reads as follows. “Existence of mensrea 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.” As early as in 1988 a Bench of this Court had held that mere delay in making payment is not sufficient. There must be contumacious conduct or in other words in order to attract the plenary provision u/s 85B of the Act it has to be established that there was a contumacious conduct or deliberate evadement of payment or intention to deliberately evade payment and only under such circumstances the extraordinary jurisdiction of imposing damages can be levied. Applying those principles to the facts of the present case it INS.APPEAL NO. 32 OF 2009 -:4:- can be seen that the establishment which had a rapid growth had a steep decline and it owed amount to each and every person and it was beyond the control of the establishment to meet everyone's demand which ultimately resulted in the delay. So it has to be held that there has been no mensrea or willful or deliberate intention to evade payment. When it is so the discretionary jurisdiction has to be exercised in favour of the establishment and that is what is precisely done by the E.I.Court. Therefore the appeal lacks merit and the same is dismissed. M.N. KRISHNAN, JUDGE. ul/-