IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE M.N.KRISHNAN WEDNESDAY, THE 21ST OCTOBER 2009 / 29TH ASWINA 1931 Ins.APP.No. 49 of 2008() ---------------------------------- AGAINST THE ORDER IN EIC.72/2004 & 5/2005 of E MPLOYEES' INSURANCE COURT, KOZHIKODE. .................... APPELLANT (S): OPPOSITE PARTIES: -------------------------- EMPLOYEES STATE INSURANCE CORPORATION, REPRESENTED BY ITS REGIONAL DIRECTOR, ROUND NORTH, THRISSUR. BY ADV. MR.THOMAS MATHEW NELLIMOOTTIL RESPONDENT(S): APPLICANT: ------------------------- MR.BIJU RADHAKRISHNAN, THE WHOLE TIME DIRECTOR, M/S.AGREENCO FIBRE FOAM (P) LTD. BALIAPATTAM, KANNUR 10. THIS INSURANCE APPEALS HAVING BEEN FINALLY HEARD ON 21/10/2009, THE COURT ON THE SAME DAY PASSED THE FOLLOWING: tss M.N.KRISHNAN, J. ........................................... Ins.A.NO.49 OF 2008 ............................................. Dated this the 21st day of October, 2009 J U D G M E N T This is an appeal preferred against the order of the Employees' Insurance Court, Kozhikode in E.I.C.No.5/2005. The facts of the said case would reveal that the Corporation had imposed a damage of Rs.41,805/= by way of penalty for the delayed payment of contribution for the wage period from 10/2002 to 1/2003. To set aside the same, the petition was filed. The reason given by the court is that there has been no means rea and therefore it was not proper on the part of the court to impose damages. It is the case of the applicant-establishment that, it was running in heavy loss and on account of the financial stringency, the delayed payment in contribution had occasioned and the matter has to be considered sympathetically. This point is squarely covered by the decisions of the Apex Court as well as this Court wherein it has been held that mere incapacity to pay the amount alone is not a ground not to impose damages. In the decision reported in Regional Director, : 2 : Ins.A.NO.49 OF 2008 E.S.I. Corporation v. Managing Director, M/s.Qetcos Ltd. (ILR 2008 (3) Page 132), a Division Bench of this Court had considered the matter in extenso. The Division Bench held that levy of damages for delayed payment of contribution is not mandatory in all the cases. 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. It is discussed and decided that the provisions under Section 85 B of the Employees State Insurance Act only uses the word 'may' and not 'shall'. The Hon'ble Apex Court had held that imposition of damages by way of penalty is of a penal nature and therefore jurisdiction conferred on the authority has to be judicially exercised. It is also settled position that unless there is contumacious conduct or deliberate intention to evade payment, under ordinary circumstances, the court shall refrain from imposing damages as penalty. In the decision referred to above, this court referred to the decision of the Apex Court in Employees State Insurance Corporation v. H.M.T Ltd.(AIR 2008 SC 1322 and extracted para 21 as : 3 : Ins.A.NO.49 OF 2008 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." So far as this case is concerned, it can be seen that the establishment was running on a huge financial loss and finding it difficult to run the establishment and that the financial stringency lead to delayed payment of the contribution and it was no attached with any means rea, contumacious conduct or deliberate intention to evade payment. So, when these things are significantly absent, then the judicial discretion has to be exercised in favour of the establishment and that is what is done precisely by the E.I Court. The order passed by the E.I court does not call for any interference. Therefore, the appeal fails and the same is dismissed. M.N.KRISHNAN, JUDGE cl : 4 : Ins.A.NO.49 OF 2008 : 5 : Ins.A.NO.49 OF 2008