IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE M.N.KRISHNAN TUESDAY, THE 27TH JANUARY 2009 / 7TH MAGHA 1930 Ins.APP.No. 27 of 2008() -------------------------------- IC.56/2006 of EMPLOYEES INSURANCE COURT, ALAPPUZHA .................... APPELLANT/RESPONDENT IN THE INSURANCE CASE ------------------------------------------------------------------------------ THE REGIONAL DIRECTOR, EMPLOYEES STATE INSURANCE CORPORATION, THRISSUR. BY ADV. SRI.T.P.M.IBRAHIM KHAN, SC, ESI CORPN. RESPONDENT/APPLICANT IN THE INSURANCE CASE ------------------------------------------------------------------------------ M/S. UNIVERSAL OLEORESINS, JAWAHAR ROAD, COCHIN-2, REPRESENTED BY ITS MANAGING PARTNER. BY ADVS. SRI.E.K.NANDAKUMAR FOR R1 SRI.A.K.JAYASANKAR NAMBIAR FOR R1 SRI.K.JOHN MATHAI FOR R1 SRI.P.BENNY THOMAS FOR R1 SRI.ANIL D. NAIR FOR R1 THIS INSURANCE APPEALS HAVING BEEN FINALLY HEARD ON 27/01/2009, THE COURT ON THE SAME DAY PASSED THE FOLLOWING: Ins.APP.No. 27 of 2008() I.A. NO. 1179 OF 2008 IN Ins.APP.No. 27 of 2008 DISMISSED. SD/- M.N.KRISHNAN, JUDGE // TRUE COPY // PA TO JUDGE rhs M.N. KRISHNAN, J ----------------------- INSURANCE APPEAL NO. 27 OF 2008 --------------------------------------------- Dated this the 27th day of January, 2009 JUDGMENT This is an appeal preferred against the order of the Employees Insurance Court, Alappuzha in I.C. No. 56/2006. The Employees State Insurance Corporation had imposed a sum of Rs. 1,27,142/- as damages by way of penalty for the wage period from 6/2000 to 9/2002. The Insurance Court set aside that order but declared that the respondent is competent to impose damages in respect of the employees' share of contribution at the proposed rate. It is against that decision the Insurance Corporation has come up in appeal. 2. Heard the learned counsel for both sides. It is the case of the applicant before the Insurance Court that on account of the severe financial crisis it was unable to pay the amount. The Employees Insurance court found that after collecting the amount from the employee and keeping it with the employer, if delay is caused to that extend, there is contumacious conduct and therefore the employer is bound to pay damages for the amount so retained. 3. Recently the question of imposition of damages was considered by a Division Bench of this Court in the decision reported Ins.Appeal 27/2008 -2- in Regional Director, ESI Corporation and another v. Managing Director v. Managing Director M/s Qetcos Ltd [ILR 2008 (3) 132]. The Division Bench of this Court held that when there are materials to show that there was severe financial crisis and there was no deliberate intention to evade payment the corporation is entitled to waive the entire damages. Relying upon large number of decisions of this court as well as the apex court, the Division Bench held that the mens rea almost must be there for the delayed payment. This court has taken a view that there must be a contumacious conduct as well as the intention to violate the provisions of the statutory mandates to evade payment. It was also held that Section 85(B) of the E.S.I. Act, the word used is “may” and not “shall”. The apex court held that when a word “may” is used and as the imposition of damages is of a penal nature, the authority imposing the same has to exercise judicial discretion for the same. Here the employer was not able to contribute the amount for the reason that it was running in a heavy loss but for having collected the amount from the employee and not deposited the same, the E.S. I Court found that damages can be levied. I feel only a reasonable approach exercising the judicial discretion in a Ins.Appeal 27/2008 -3- proper way has been done by the Employees Insurance Court which does not call for any interference. Therefore the appeal lacks merit and the same is dismissed but without costs. M.N. KRISHNAN,JUDGE vkm