IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE M.N.KRISHNAN WEDNESDAY, THE 3RD DECEMBER 2008 / 12TH AGRAHAYANA 1930 Ins.APP.No. 48 of 2008() --------------------------------- IC.NO.72/2004 of E.I.COURT, KOZHIKODE .................... APPELLANT/OPPOSITE PARTY -------------------------------------------- EMPLOYEES STATE INSURANCE CORPORATION REP.BY ITS REGIONAL DIRECTOR, ROUND NORTH, THRISSUR. BY ADV. SRI.THOMAS MATHEW NELLIMOOTTIL RESPONDENT/APPLICANT -------------------------------------- MR.BIJU REDHAKRISHANAN, THE WHOLE TIME DIRECTOR, M/S. AGREENCO FIBRE FOAM (P)LTD. BALIAPATTAM, KANNUR – 10. BY ADV. SRI.E.K.NANDAKUMAR SRI.A.K.JAYASANKAR NAMBIAR SRI.K.JOHN MATHAI SRI.P.BENNY THOMAS THIS INSURANCE APPEALS HAVING COME UP FOR ADMISSION ON 03/12/2008, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: Rs/ M.N.KRISHNAN, J ===================== INAP No.48 OF 2008 ===================== Dated this the 3rd day of December 2008 JUDGMENT This appeal is preferred against the order of the Employees' Insurance Court, Kozhikode in I.C.No.72 of 2004. By Ext.P1 order therein the E.S.I.Corporation imposed damages of Rs.17,949/- as penalty for the delayed payment of contribution. The contention of the applicant before the E.I.Court that it was due to financial difficulties and circumstances, which were beyond the control of the management it was unable to pay the amount. The court, after elaborately considering the matter had found that damages are not liable to be paid. Unlike imposition of interest under Section 39 of the E.S.I.Act it is not mandatory or obligatory on the part of the Corporation to levy damages under Section 85B of the Act. Imposition of damages is in the form of a penalty which is of a plenary nature and therefore it is desirable to exercise that discretion judiciously. Time and again the Apex Court as well as this Court have cautioned that as a matter of fact of routine affair, damages cannot be imposed. There must be contumacious conduct , deliberate evadement and intention to flagrantly INAP 48/2008 -:2:- violate the intention of the statute. Recently this point has been elaborately considered by a Division Bench of this Court in the decision reported in Regional Director, ESI Corpn. v. Managing Director, M/s.Qeteos Ltd.(ILR 2008(3) 132). This court held that “levy of damages for delayed payment of contribution is not mandatory in all cases and if there is no mens rea and the employer was unable to pay the contribution in time due to circumstances beyond its control, damages can be waived completely”. The learned Judges also referred to the earlier Supreme Court decision and quoted the guidelines given by the Apex Court as follows: “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 thereof”. Applying these decisions to the facts of the present case, it can be seen that the ESI Corporation was not right in imposing damages for delay of payment by one month. I feel it is an extreme action to which the Corporation should not have resorted to. The explanation offered is the financial difficulties and there is nothing on record to show that there is any contumacious conduct or willful or deliberate attempt to evade payment. In such circumstances, it is always desirable that the discretionary jurisdiction is exercised in favour of the person, who is not guilty of such acts. Therefore I totally concur with the view expressed by the EI Court INAP 48/2008 -:3:- regarding waiving of damages and there is nothing to interfere with the said decision. INAP is disposed of as above. M.N.KRISHNAN, JUDGE Cdp/-