IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE M.N.KRISHNAN THURSDAY, THE 22ND JANUARY 2009 / 2ND MAGHA 1930 Ins.APP.No. 1 of 2008(A) -------------------------- IC.73/2004 of EMPLOYEES INSURANCE COURT, ALAPPUZHA .................... APPELLANT(S): /RESPONDENT ---------------------------------------- THE REGIONAL DIRECTOR, E S I CORPORATION, ROUND NORTH, THRISSUR. BY ADV. SMT.T.D.RAJALAKSHMY, SC, ESI CORPN. RESPONDENT(S): APPLICANT --------------------------------- V.N.TUSHAR, PROPRIETOR, M/S.HOTEL SEA ROCK, KARIMPATTA CROSS ROAD, PALLIMUKKU, ERNAKULAM. THIS INSURANCE APPEALS HAVING BEEN FINALLY HEARD ON 22/01/2009, THE COURT ON THE SAME DAY PASSED THE FOLLOWING: M.N. KRISHNAN, J. = = = = = = = = = = = = = = INS.APPEAL NO. 1 OF 2008 = = = = = = = = = = = = = = = Dated this the 22nd day of January, 2009. J U D G M E N T This appeal is preferred against the judgment of the Employees Insurance Court, Alappuzha in I.C.73/04. The application was filed for setting aside the order imposing payment of interest as well as damages. The E.I. Court held that damages is not to be paid and that interest has to be paid. It is against the disallowance of imposition of damages the E.S.I. Corporation has come up in appeal. 2. Heard the learned counsel for the appellant and perused paragraph 13 of the order. It would clearly show that there was a contention raised by the applicant that it is not liable to be covered under the Act. The said matter was allowed by the E.I. Court but the matter was taken in appeal before the High Court of Kerala and it decided on 2.11.99 that hotels can be covered as a factory under the E.S.I. Act. Thereafter on conducting enquiry it was held that the establishment is covered and notice was issued for the period Ins. Appeal 1 OF 2008 -:2:- from 4/90, to 8/91 and the applicant paid the contribution in instalments commencing from 28.1.92 onwards. Now the position is well settled in the light of the decision of this Court in Regional Director, ESI Corporation v. Managing Director, M/s Qetcos Ltd. (ILR 2008 (3) Kerala Series 132). This Court held that if there are sufficient reasons including financial difficulties the damages can be completely waived. The Division Bench reiterated the position that imposition of damages is not a matter of course for the reason that it is of a penal nature and therefore the discretion has to be judicially exercised. It is also to be held that there must be a contumacious conduct or the intention to flagrantly violative the provisions of the statute in order to evade payment and only in such cases damages can be imposed. The Apex Court also held that the intention to evade payment also should be there to impose damages. A perusal of the facts available before this Court would reveal that there was a genuine dispute between the parties regarding the coverage and when the matter was ultimately decided and notice was issued, it was paid and even the E.S.I Corporation permitted the establishment to pay the Ins. Appeal 1 OF 2008 -:3:- contribution in instalments which indicates that the E.S.I Corporation realised the financial constraint of the establishments. So it is clear that there was no contumacious conduct or deliberate intention and therefore the judicial discretion has to be favourably exercised by not imposing damages so as to attract a penal imposition. I do not find any mistake committed by the E.I. Court in not granting the damages. Therefore the appeal lacks merit and the same is dismissed. M.N. KRISHNAN, JUDGE. ul/-