IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE M.N.KRISHNAN FRIDAY, THE 19TH SEPTEMBER 2008 / 28TH BHADRA 1930 Ins.APP.No. 82 of 2007(F) ------------------------ AGAINST JUDG. IN I.C.12/07 OF E.I. Court, ALAPPUZHA. APPELLANTS/OPP. PARTIES ---------------------------------------- 1. THE REGIONAL DIRECTOR, ESI CORPORATION, THRISSUR. 2. THE RECOVERY OFFICER, ESI CORPORATION, REGIONAL OFFICE, THRISSUR. BY ADV. SMT.T.D.RAJALAKSHMY, SC, ESI CORPN. RESPONDENTS: APPLICANT ---------------------- SANJAY KUMAR AGARWAL, DIRECTOR, PERIYAR STEEEL PVT LTD., INDUSTRIAL DEVELOPMENT AREA, ERUMATHALA POST, ALUVA. BY ADV. SRI.ASOK M.CHERIAN THIS INSURANCE APPEALS HAVING BEEN FINALLY HEARD ON 19/09/2008, THE COURT ON THE SAME DAY PASSED THE FOLLOWING: M.N. KRISHNAN, J. = = = = = = = = = = = = = = INS.APPEAL NO. 82 OF 2007 = = = = = = = = = = = = = = = Dated this the 19th day of September, 2008. J U D G M E N T This appeal is preferred against the judgment of the Employees Insurance Court, Alappuzha in I.C.12/07. It was an application submitted by the applicant seeking for declaration that Ext.A1 order of the Corporation imposing Rs.32,819/- as damages by way of penalty for the delayed payment of contribution is unsustainable. 2. In the first round of litigation the E.S.I Court found in favour of the applicant and when the matter reached this Court this Court had set aside the same and remanded the matter to be considered afresh. After remand the applicant examined PW1 and Exts.A1 to A6 were marked. A perusal of the said documents would reveal that though the establishment commenced its production by December, 1996 it was not proper. It remained closed for a period from June, 1997 to March, 1998. It started operation only from 2000 January and the employer started collecting contribution Ins. Appeal 82 OF 2007 -:2:- from the employees only from 2001. The Corporation issued notice for contribution and without resorting to any litigation it prayed for time and the Corporation granted it 15 months time to pay the amount in instalments. It is thereafter an action is initiated for damages. Unlike S.39(5) of the E.S.I. Act which mandates levy of interest for delayed payment the provisions regarding to damages u/s 85B is discretionary and the word used is 'may' and not 'shall'. It does not mean that in every case the levy of damages has to be waived. But it is a matter of judicial discretion taking into consideration the totality of circumstances. 3. A Division Bench of this Court recently in the decision reported in Regional Director, ESI Corporation v. Managing Director, M/s Qetcos Ltd. (ILR 2008 (3) Kerala Series 132) held that levy of damages for delayed payment of contribution is not mandatory in all cases. If 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 Division Bench had also taken into consideration the various judicial pronouncement of the Apex Court in which the Apex Court Ins. Appeal 82 OF 2007 -:3:- has observed as follows. “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 85 B 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. Even otherwise, an endeavor should be made to construe such penal provisions as discretionary, under the statute is held to be mandatory in character.” It has been further held that, “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.” There are also catena of decisions which holds the view that unless there is a contumacious conduct or deliberate intention to evade payment so as to fragrantly violate the intention of the legislature, the Court should be slow in Ins. Appeal 82 OF 2007 -:4:- imposing damages. Applying these principles to the facts on hand it can be seen the industry though started in 1996 it was immediately closed for want of power availability. Subsequently, it had undergone a lot of financial strain and ultimately realising the factum of the financial stringency faced by the employer, the Corporation itself gave instalment facilities to pay the amount. All these matters would indicate that there has never been contumacious conduct or deliberate avoidance of payment. Or in other words, there is nothing to show that there had been the mensrea to violate the statutory provision. So, under such circumstances the judicial discretion has to be exercised in favour of the respondents in the appeal and that is what has been precisely done by the Insurance Court. I do not find any mistake or error of jurisdiction. So the appeal is devoid of merit and it is dismissed. M.N. KRISHNAN, JUDGE. ul/-