IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE M.N.KRISHNAN MONDAY, THE 7TH SEPTEMBER 2009 / 16TH BHADRA 1931 Ins.APP.No. 3 of 2008() --------------------------------- IC.31/2003 of EMPLOYEES INSURANCE COURT, KOLLAM .................... APPELLANT (S)/ RESPONDENT: ---------------------------- THE REGIONAL DIRECTOR, E.S.I. CORPORATION, PANCHADEEP BHAVAN, SWARAJ ROUND, THRISSUR. BY ADV. MR.P.SANKARANKUTTY NAIR RESPONDENT(S): APPLICANT: ------------------------- M/S. SHAW CASHEW COMPANY, PALLICKAL, PARTNERSHIP FIRM, REPRESENTED BY ITS MANAGING PARTNER, SRI.SABIR SHAW. THIS INSURANCE APPEALS HAVING BEEN FINALLY HEARD ON 07/09/2009, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: tss M.N.KRISHNAN, J. ........................................... Ins. Appeal NO.3 OF 2008-A ............................................. Dated this the 7th day of September, 2009 J U D G M E N T This appeal is preferred against the order of the Employees Insurance Court, Kollam in I.C.No.31/2003. The respondent herein moved an application for declaration that Ext.P2 order of the respondent imposing Rs.47,025/= as damages by way of penalty is unsustainable. A perusal of the order would reveal that the concerned firm was in a great financial difficulty and the bank that had advanced the amount had also moved the Debt Recovery Tribunal for realisation of the amount. So on account of the acute financial stringency, the company was not able to pay the contribution in time. As per the provisions of the E.S.I. Act it is statutorily mandatory to pay the interest but the question of levying of damages had been considered by the courts and it has been held that the word used under Section 85 B of the E.S.I. Act is only 'may' and not 'shall'. The Apex Court has also held that levying of damages is of a penal nature and therefore, the court should be very guarded : 2 : Ins. Appeal NO.3OF 2008-A while imposing the same. It has also been held that for imposing damages which is in the form of penalty there must be mens rea. It has also been held that mere financial stringency alone may not be a ground to waive damages in all cases. The courts have also held that if there is a recalcitrant or contumacious conduct on the part of the person to pay the amount, then necessarily the court can invoke the power to levy damages. 2. As far as this case is concerned, it is very clear that the company was in a great financial difficulty and the bank which had advanced the amount hadmoved the Debt Recovery Tribunal for realisation of the amount and the company had moved the authorities for giving some time for payment. All these things would certainly establish that there was no deliberate act on the part of the respondent herein to evade the payment and therefore, there is no contumacious conduct. The learned insurance court has also considered this matter only in the correct perspective to arrive at a correct decision. : 3 : Ins. Appeal NO.3OF 2008-A Therefore, the appeal lacks merit and the same is dismissed. M.N.KRISHNAN, JUDGE cl : 4 : Ins. Appeal NO.3OF 2008-A