IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE M.N.KRISHNAN THURSDAY, THE 30TH OCTOBER 2008 / 8TH KARTHIKA 1930 Ins.APP.No. 41 of 2007() ------------------------ IC.12/2005 of EMPLOYEES INSURANCE COURT, ALAPPUZHA .................... APPELLANT/ RESPONDENT ------------------------------ THE REGIONAL DIRECTOR,E.S.I. CORPORATION,PANCHADEEP BHAVAN,THRISSUR-20. BY ADV. SRI.P.SANKARANKUTTY NAIR RESPONDENT/APPLICANT ----------------------------------- M/S.KERALA CONSTRUCTION COMPANIES LTD., K.R.PURAM PO.,CHERTHALA-688 556 REP BY ITS MANAGING DIRECTOR. ADV. SRI.H.B.SHENOY FOR R1 SRI.B.ASHOK SHENOY FOR R1 SRI.THOMAS P.MAKIL FOR R1 SMT.LAKSHMI B.SHENOY FOR R1 THIS INSURANCE APPEALS HAVING COME UP FOR ADMISSION ON 30/10/2008, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: M.N.KRISHNAN, J. -------------------------- Ins. Appeal No. 41 OF 2007 --------------------- Dated this the 30th day of October, 2008 JUDGMENT This appeal is preferred against the judgment of the Employees’ Insurance Court, Alappuzha, in I.C. 12/05. It was an application filed for a declaration to set aside the order imposing penalty for the delayed payment of contribution. The applicant company is a Government of Kerala undertaking engaged mainly in the manufacture of sand lime bricks. From the very inception, it was running on a continuous loss and acute financial difficulties on account of various factors. There was even difficulties for paying wages, electricity charges, water charges and ultimately to pay the contribution under the Employees State Insurance Act and the establishment has to approach the Government of Kerala for financial assistance. So it is in this background the question of levy of damages has to be considered. 2. Under the provisions of the ESI Act the levy of interest is a statutory obligation cast on the authorities under section 39(5) and there is no discretion vested with it to waive the interest. But when Ins. Appeal No.41/07 2 the question of levying of damages comes up for consideration, section 85B uses the word “may” in spite of the word “shall” which one will not find under section 39(5) of the Act. Therefore it is a discretionary jurisdiction that is vested with the authorities in the case to levy damages. Whether the mere delay in payment would constitute a ground for imposing damages, is a matter that has been considered by the various courts. Recently, a Division Bench of this court in the decision reported in Regional Director, ESI Corporation and another v. Managing Director, M/s. Qetcos Ltd. [2008 (3) ILR 132] held that levying of damages for delayed payment of contribution is not mandatory in all cases. If there is no mens rea and the employer was unable to pay the contribution in time due to the circumstances beyond his control, damages can be waived completely. A Division Bench after referring to various decisions of the Supreme Court had quoted the observation of 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”. 3. So the mere non-payment of contribution would not Ins. Appeal No.41/07 3 automatically result in imposition of damages. The earlier Division Bench also had the opportunity to consider this question and has held that there must be some contumacious conduct or willful or deliberate intention to evade payment in order to levy damages. So far as the case on hand is concerned, the establishment is a Governmental one which had to seek the financial assistance for the purpose of even paying water charges as well as statutory contribution under the ESI Act. By any stretch of imagination, one cannot hold that there was a contumacious conduct or a deliberate intention to avoid payment much less any mens rea to do away with the statutory requirement. In such case, as held by the Division Bench of this court, the discretionary power has to be exercised judiciously in favour of the establishment and not in favour of the Corporation. Therefore, I concur with the finding of the EI Court. The appeal lacks merit and therefore it is dismissed. M.N.KRISHNAN, JUDGE vps Ins. Appeal No.41/07 4