IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE M.N.KRISHNAN FRIDAY, THE 18TH JULY 2008 / 27TH ASHADHA 1930 M.F.A.No. 194 of 2003(D) --------------------------- IC.17/2002 of EMPLOYEES INSURANCE COURT, ALAPPUZHA .................... APPELLANT/OPPOSITE PARTY: ------------------------------------------- THE REGIONAL DIRECTOR, E.S.I. CORPORATION, THRISSUR. BY ADV. SRI.P.SANKARANKUTTY NAIR RESPONDENT/ APPLICANT: -------------------------------------- M/S. APPOLLO TYRES LIMITED, 6TH FLOOR, CHERUPUSHPAM BUILDINGS, SHANMUGHAM ROAD, KOCHI-682 031. BY ADVS. SRI.M.PATHROSE MATTHAI (SR.) SRI. SAJI VARGHESE THIS MISC. FIRST APPEAL HAVING BEEN FINALLY HEARD ON 18/07/2008, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: M.N. KRISHNAN, J --------------------------------- M.F.A.No. 194 OF 2003 -------------------------------------- Dated this the 18th day of July, 2008 J U D G M E N T This appeal is preferred by the Employees of State Insurance Corporation, against the judgment by Employees' Insurance Court in I.C. 17/2002. I.C.No. 17/2002 was filed by the respondent in the appeal seeking for a declaration that Ext. P15 - C18 notice of the respondent demanding Rs. 17,02,545/- by way of interest and Ext. P16 order of the respondent imposing Rs. 19,16,977/- as damage by way of penalty are unsustainable. After considering the entire materials the ESI Court held that the applicant is liable to pay interest in respect of ESI contribution of employees in the wage group of Rs. 1,600/- to Rs. 3,000/- for the period from 4/92 to 10/92 and for the period from 10/5/99 to 26/5/99. It was further declared that the applicant is liable to pay interest in ESI contribution of the Employees in the above wage group from 1/93 and 2/93 at the prescribed rates. It is also held that the respondent is liable to pay interest for the group of employees from Rs. 3,000/- to Rs. 6,000/- from 1/97 to 3/97. There was also M.F.A.No. 194/2003 -2- further declaration to that effect and 25% was imposed as damages by way of penalty as specified in the order. It is aggrieved by that decision, the corporation has come up in appeal contending that the Insurance Court erred in not granting the interest for a full period. The delay according to the application was on account of the pendency of litigation filed by the Employees against the Government notification and there was no opportunity for the applicant before the court, to pay the amount since there was stay of operating with respect to the payment and applicability itself. On other words, it was at the instance of the employees the matter came to a stand still and not at the instance of the employer. This point has been precisely considered by Division Bench of this Court reported in Regional Director, E.S.I Corporation v. Cannanore Spinning and Weaving Mills in 2001(2) LLJ 1573. It was also a case that there was a litigation and that litigation was at the instance of the employees. The Division Bench had interpreted the word ordinarily as follows: “In such circumstances, only when the amendment had become operative as regards the workmen concerned, the employer can pay M.F.A.No. 194/2003 -3- contribution deducting it from the wages of the workmen. Then alone there arises the contribution payable by the employer. When the amendment was thus inoperative because of the stay order, the payment in terms of the amendment had not become due to be paid. Sub Section (4) of Section 39 makes it clear that the contribution payable in respect of a period shall ordinarily fall due on the last day of the wage period. Thus, there is an amount of elasticity attached to the liability for payment of contribution making it clear that it will be ordinarily be payable as mentioned above. When there was stay order, with regard to the coverage of employees drawing wage beyond Rs. 3,000/- necessarily, the circumstances in the case is fit to invoke that elasticity and to hold that in this case it was payable only on the lapse of 21 days from the date of disposal of O.P. No. 2771/97.” On all force principles laid down in the above said decision is applicable to this case as well, and the Employees' State Insurance Court has taken into consideration that judicial principle and has passed orders. Therefore it does not call for interference. M.F.A.No. 194/2003 -4- 2. The next question is regarding damages. For some period the Employees State Court has levied damages of 25%. Whether the entire amount as claimed as damages is to be allowed, is the question. The Division Bench of this Court in the decision reported in ILR 2008(3) 132 held that from wording of Section 85(b) 'may' and not 'shall'. The principles to be followed for imposition of any penalty is laid down in the decision of the Apex Court reported in AIR 2008 SC 1322, where the Apex Court extracted the earlier decision 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” When there are sufficient circumstances which makes the employer not to pay the amount within the stipulated time, then those circumstances are to be taken into consideration and unless there is deliberate laches as a matter of course, damages shall not be levied. A reading of the Employees State Insurance Court judgment would reveal that, definitely there were circumstance which prevented the respondent herein from even making the payment M.F.A.No. 194/2003 -5- and the absence of payment on such action cannot be treated as a contumacious conduct or deliberate willful act to defeat the object of the statute. Therefore I feel that the approach made by the Employees State Insurance Court is perfectly correct and wherever it found that there has been some laches, which can be termed as deliberate, it imposed damages to an extent of 25% which is only on application of the principles and by using the judicial discretion properly. Therefore on that account also, the judgment of the court below does not call for any interference. From these decisions I find no merit in the appeal and the same is dismissed. M.N. KRISHNAN, JUDGE. vkm