IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE HARUN-UL-RASHID TUESDAY, THE 28TH JUNE 2011 / 7TH ASHADHA 1933 Ins.APP.No. 34 of 2011() ------------------------ E.I.C.NO.31/2006 OF THE EMPLOYEES' INSURANCE COURT, KOZHIKODE. APPELLANTS / RESPONDENTS ------------------- 1. THE REGIONAL DIRECTOR, E.S.I CORPORATION, PANCHADEEP BHAVAN, THRISSUR -20. 2. RECOVERY OFFICER, E.S.I CORPORATION, PANCHADEEP BHAVAN, THRISSUR -20. BY ADV. SRI.THOMAS MATHEW NELLIMOOTTIL RESPONDENT/APPLICANT: ------------------- M.A. ABDUL RAHIMAN, S/O. ABDULLAKUNHI, CHOORI, RAMDAS NAGAR, KASARAGOD - 671 124. ADV. SRI.T.M.SREEDHARAN THIS INSURANCE APPEAL HAVING BEEN FINALLY HEARD ON 28/06/2011, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: HARUN-UL-RASHID,J. ------------------------------- INS. APPEAL NO. 34 OF 2011 ------------------------------- DATED THIS THE 28TH DAY OF JUNE, 2011 JUDGMENT The substantial question of law formulated in the appeal is as follows: “i) Whether mere financial difficulty is enough to discharge the liability of the establishment to prove that they have not acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest or acted in conscious disregard of its obligation?” 2. Appellants are the respondents in E.I.C.No.31/2006 on the file of the Employees' Insurance Court, Kozhikode. The respondents filed an application under Section 75 read with Section 77 of the Employees' State Insurance Act, 1948 for a declaration that the applicant is not liable to pay the damages of `55,181/- as per Section 85-B order No.54/94849-91-INS-1 dated 16/3/2006 for the period from 5/96 to 76/2000. The Insurance Court allowed the application and set aside the order imposing damages. This appeal is directed against the impugned order. -2- Ins. Appeal No.34/2011 3. The brief facts of the case are as follows: The respondent/applicant is the Proprietor of M/s. Safa Wood Industries. The E.S.I. Corporation issued a notice directing the applicant to cover the employees under the scheme with effect from 1-4-1993. The E.S.I. court held that the establishment was liable for coverage with effect from 2/5/1996 to 31/3/2000. The establishment remain closed after 31/3/2000 and therefore, limited the claim upto 31/3/2000. The contribution due for the aforesaid period to the tune of `55,719/- and the interest was paid later. On 16/3/2006 the Corporation has issued the order under Section 85-B of the ESI Act asking the applicant to pay an amount of `55,181/- towards damages for the delayed payment of contribution for the period from 2/5/1996 to 31/3/2000. 4. The applicant had paid the entire amount of contribution and interest on 23/9/2005. The case of the applicant is that there was no wilful negligence or deliberate act on his part for non-remittance of the contribution in time. The applicant submits -3- Ins. Appeal No.34/2011 that he agitated the issues bona fide before the court and he paid huge amount towards interest as claimed by the Corporation. The applicant pleaded that since the establishment was running in heavy loss, he was compelled to close down the establishment from 2000 onwards and that there was no wilful evasion to pay the amount in time. It is also pleaded that the delay was caused due to the pendency of the case before the ESI court. The ESI court considered the rival contentions of the parties and held that the concept of damages as per the ESI Act is absolutely in the nature of penalty and consequently all mitigating circumstances have to be looked into by the court while evaluating the sustainability of damages imposed by the ESI Corporation. The ESI court also observed that the imposition of damages under Section 85-B of the ESI Act is not mandatory on delayed payments and the discretion has to be exercised while imposing damages. The relevant observations are made by the ESI court, after evaluating the settled principles of law and decisions on the point. The ESI court -4- Ins. Appeal No.34/2011 followed the relevant decisions laid down by the Apex Court and this Court. The ESI court concluded on facts that there is no wilful or deliberate act on the part of the applicant to evade payment and that the delay caused is only excusable and there is no contumacious or dishonest conduct. In the circumstances, the ESI court set aside the order imposing damages finding that the order imposing damages is not legal and proper. The issues raised in the case were decided solely based on the facts and circumstances of the case. No question of law much less any substantial questions of law arise for consideration in the appeal. There is no merit in the appeal and the appeal is liable to be dismissed. In the result, the appeal fails and accordingly dismissed. No order as to costs. HARUN-UL-RASHID, Judge. kcv.