IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE M.N.KRISHNAN THURSDAY, THE 22ND MAY 2008 / 1ST JYAISHTA 1930 Ins.APP.No. 47 of 2003 -------------------------------- ( ORDER DTD. 08/04/2003 IN I.C.NO.3/2001 OF E.I.COURT, KOLLAM) .................... APPELLANT/OPP.PARTY: ------------------------------------ THE REGIONAL DIRECTOR, E.S.I. CORPORATION, THRISSUR. BY ADV. SRI.T.V.AJAYAKUMAR. RESPONDENT/ APPLICANT: ---------------------------------------- THE MANAGING DIRECTOR, M/S. MARIKAR MOTORS LTD., M.G.ROAD, TRIVANDRUM. BY ADV. SRI.A.N.KUTTAN. THIS INSURANCE APPEALS HAVING BEEN FINALLY HEARD ON 22/05/2008, THE COURT ON THE SAME DAY PASSED THE FOLLOWING: M.N.KRISHNAN, J ===================== Ins.A. No.47 OF 2003 ===================== Dated this the 22nd day of May 2008 JUDGMENT This appeal is preferred against the order of the Industrial Tribunal, Kollam in I.C.No.3 of 2001 whereby it has quashed Exts.A1 to A8 orders. The point that arises for determination in the appeal is under Section 85B of the Employees State Insurance Act . The facts of the case would reveal that there was delay in payment and it was deposited with interest and thereafter action has been initiated under Section 85B of the Act claiming damages. 2. The Employees Insurance Court relying on the decision of the Calcutta High Court in Sarat Textiles(P) Ltd. v. ESI Corporation(2001(2) LLJ 744) held that the power under Section 85B can be invoked only when there is failure to pay the amount. What is found by the Insurance Court is that since the amount has already been deposited with interest, there is no failure to pay the amount and therefore Section 85B cannot be invoked to levy damages. Learned counsel appearing for the Corporation has brought to my notice a decision of a Division Bench of the Calcutta High Court reported in E.S.I.Corpn. v. M/s.Braithwaite & Co.Ltd.(2004(101) Ins.A.No.47/2003 -:2:- FLR1218), wherein the Division Bench held that the decision in the case of Sarat Textiles Ltd.(supra) where it has been held that delayed payment cannot amount to failure of payment is not a correct statement of law. So that decision relied on by the Insurance Court cannot be made use of to find in favour of the respondent in this appeal. Learned counsel for the Insurance Corporation had brought to my notice a decision of this Court reported in Regional Director, E.S.I.Corpn. v. The Managing Director, M/s.Transmatic System Ltd.( 2006(1) ILR 403) wherein a learned Judge of this Court held that damages claimed under Section 85 B is payable even if establishment has remitted insurance contribution with interest prior to notice claiming damages. The learned Judge had extracted the section as well as regulations 31 and 31 C. Reference has also been made to various decisions and ultimately a decision is arrived at holding that the Corporation is entitled to recover damages from the employer of the establishment. He has also cited before me the decision of the Punjab & Haryana High Court in Nipha Exports(P)Ltd. v. Employees' State Insurance Corporation (2003-III-LLJ 789) where also the Division Bench held that 'failure to pay' to be given wide and purposeful meaning and that it includes cases of delayed payment. 3. Learned counsel for the respondent would submit before me that Ins.A.No.47/2003 -:3:- one cannot supplement words into the section and therefore unless there is a failure of payment, Section 85B cannot be invoked. In the light of the aforesaid decisions, it is crystal clear that the words 'fails to pay' have to be given a wider interpretation and the courts have consistently taken the view that the delayed payment also amounts to failure to pay the amount. Therefore, the said contention of the learned counsel cannot be accepted. 4.From these discussions I hold that the decision rendered by the Insurance Court is not correct on the point and it requires interference and that has to be set aside. 5.Now the next question to be considered is regarding the applicability of Section 85B. A reading of Section 85B would show that it is a discretionary jurisdiction vested with the authority and one is expected to approach the subject with a judicious mind. In the decision reported in Regional Director, E.S.I.Corporation v. M/s.Blue Star 1982 Lab IC 859) it is indicated that by only stating that he had applied his mind to all relevant facts and had gone into the reasons of the employer, the responsibility of the Regional Director was not over. He must show that he applied his mind by writing a speaking order and must discuss as to what due date of payment of the contribution was, etc.etc. Learned counsel for the respondent had brought to my notice a decision of the Division Bench of this Court reported Ins.A.No.47/2003 -:4:- in Regional Director, E.S.I.Corpn., Trichur v. M/s.Sakthi Textiles, Quilon (1988(2) ILR 595). In the said decision, this Court has laid down the procedure to be followed. An order, levying damages for failure to pay the amount due in respect of any contribution payable under the Act is a quasi- judicial proceeding. The proviso to Section 85B itself indicates that before recovering such damages, the employer should be given a reasonable opportunity of being heard. It postulates that there should be an adjudication in the matter. Since the failure to carry out the statutory obligation should be adjudicated by a quasi judicial enquiry and the levy of damages is quasi-penal in character, we are of the view that such damages will not ordinarily be imposed unless the party obliged to pay the amount due acted either deliberately or in defiance of law, or was guilty of contumacious or dishonest conduct or acted in conscious disregard of its obligation. Learned counsel appearing for the Insurance Corporation at my request has passed on the order of the Deputy Director of the Insurance Corporation. On a perusal of the same, it is seen that the said Officer has not applied his judicial mind in arriving at the decision of imposing penalty. Therefore I feel the matter has to be reheard and a considered order be written after applying the judicial mind. 6.In the result, the insurance appeal is disposed of as follows:(1) The Ins.A.No.47/2003 -:5:- order passed by the Employees Insurance Court is set aside.(2) The matter is remitted back to the concerned authority and is directed to pass orders after considering the entire materials and affording opportunity of being heard to the other side and pass orders giving cogent reasons either for imposing or not imposing damages. M.N.KRISHNAN, JUDGE Cdp/-