IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE M.N.KRISHNAN MONDAY, THE 12TH JANUARY 2009 / 22ND POUSHA 1930 Ins.APP.No. 81 of 2007() ------------------------ IC.65/2004 of EMPLOYEES INSURANCE COURT, ALAPPUZHA .................... APPELLANT/RESPONDENT ---------------------------------------- THE REGIONAL DIRECTOR E.S.I.CORPORATION PANCHADEEP BHAVAN, N.S.ROAD,THRISSUR. BY ADV. SRI.T.V.AJAYAKUMAR RESPONDENT(S)/ APPLICANT ------------------------ EXPRESS PUBLICATIONS (MADURAI) LTD, REPRESENTED BY ITS DEPUTY GENERAL MANAGER, REGIONAL OFFICE, EXPRESS HOUSE, KALOOR KOCHI-17. ADVS. SRI.U.K.RAMAKRISHNAN (SR.) FOR R1 SRI.E.K.MADHAVAN FOR R1 SMT.P.VIJAYAMMA FOR R1 SMT.UMA GOPINATH FOR R1 SRI.DEVIDAS.U.K FOR R1 SRI.V.KRISHNA MENON FOR R1 THIS INSURANCE APPEALS HAVING BEEN FINALLY HEARD ON 12/01/2009, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: M.N. KRISHNAN, J ----------------------- INSURANCE APPEAL No. 81 OF 2007 --------------------------------- Dated this the 12th day of January, 2009 JUDGMENT This is an appeal preferred against the judgment of the Employees' Insurance Court, Alappuzha in I.C. No. 65/2004. It was an application filed for quashing the order to impose damages under the provisions of the E.S.I Act. The Insurance court had set aside the order and directed the respondents to initiate fresh proceedings with notice to the applicant. It also directed that the applicant shall produce relevant materials to make out there contentions as to their financial difficulties and the respondent shall consider those and take appropriate decision in the matter. 2. Since the matter requires reconsideration, at any rate it is sufficient if the authority is directed to consider the matter in the light of the decision of this court reported in Regional Director, ESI Corporation and another v. Managing Director M/s. Qetcos Ltd [ILR 2008 (3) 132]. The Division Bench held that “If there is no mens rea and the employer was unable to pay the amount due to circumstances beyond his control to pay the contribution in time, damages can be totally waived”. Ins. Appeal No. 81/07 -2- Large number of decisions on the subject including the decision of the apex court has been referred into that case. When an authority is considering levy of damages under Section 85(B) of the E.S.I Act, it has to be understood that unlike imposition of interest it is not a statutory obligation but it is only a discretionary jurisdiction and that is why the legislature in its wisdom had only used the word “may” instead of “shall”. There are catena of decisions which highlights the principles to be followed in the imposition of damages. It has been held that since imposition of damages is of a penal nature the authority imposing the same has to exercise judicial discretion for the same. It has also been held that there must be a contumacious conduct or the intention to violate the provisions of the statute deliberately. What are the reasonable grounds and whether they are of reasonable grounds to exclude the same are of matters which requires factual consideration. In the decision referred to above the dictum laid down by the Supreme Court is extracted: “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 Ins. Appeal No. 81/07 -3- thereof”. So Insurance Corporation is directed to consider the whole matter afresh especially in the light of the latest decision referred to above. The E.S.I Corporation is at liberty to raise the contention whether the mere financial difficulty alone is a ground for mitigating the damages. Disposed of accordingly. E.S.I Corporation shall issue notice to the applicant for hearing and if he wants to file an additional objection it may be permitted and let it also be considered and matter be disposed of. M.N. KRISHNAN,JUDGE vkm