IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE M.N.KRISHNAN MONDAY, THE 6TH OCTOBER 2008 / 14TH ASWINA 1930 Ins.APP.No. 82 of 2006() ------------------------ IC.110/2004 of EMPLOYEES INSURANCE COURT, ALAPPUZHA .................... APPELLANTS/RESPONDENTS: ------------------------------------- 1. THE REGIONAL DIRECTOR, E.S.I. CORPORATION, PANCHADEEP BHAVAN, SWARAJ ROUND NORTH, THRISSUR-20. 2. THE RECOVERY OFFICER, E.S.I. CORPORATION, THRISSUR. BY ADV. SRI.T.V.AJAYAKUMAR RESPONDENT(S): APPLICANT: ---------------------------------- M/S. INDIRA PRIYADARSINI COIR MATES & MATTINGS CO-OPERATIVE SOCIETY LTD.NO.A.754, MANNANCHERRY P.O., ALAPPUZHA. ADV. SRIR.AZAD BABU THIS INSURANCE APPEALS HAVING COME UP FOR ADMISSION ON 06/10/2008, THE COURT ON THE SAME DAY PASSED THE FOLLOWING: M.N. KRISHNAN, J. = = = = = = = = = = = = = = INS.APPEAL NO. 82 OF 2006 = = = = = = = = = = = = = = = Dated this the 6th day of October, 2008. J U D G M E N T This appeal is preferred against the judgment of the Employees Insurance Court, Alappuzha in I.C.110/04. The applicant moved an application before the said Court for a declaration that the order imposing a sum of Rs.37,236/- as damages by way of penalty is unsustainable. The brief facts would reveal that there was a delay of almost one year in making the payment demanded. There was also dispute regarding the liability of the establishment to pay the amount but it was held in favour of the Corporation and therefore the applicant has to pay the amount with interest. 2. Now, the question that arises for determination is whether damages are to be imposed or not. Under S.85B of the E.S.I Act the power to impose damages is discretionary. Or in other words, proper exercise of judicial mind is absolutely necessary for the same unlike S.39(5)(A) of the E.S.I Act which casts a statutory obligation on the Ins. Appeal 82 OF 2006 -:2:- Corporation to impose interest. The levy of damages is only made a discretionary one and the word used is 'may' instead of 'shall'. There had been lot of judicial pronouncements on the subject and a Division Bench of this Court held that there must a contumacious conduct or an intention to flagrantly violate the principles of the statute. Recently, in the decision reported in Regional Director, ESI Corporation v. Managing Director, M/s Qetcos Ltd. (ILR 2008 (3) Kerala Series 132) the Division Bench after surveying the decisions of the Apex Court held that, “Levy of damages for delayed payment of contribution, is not mandatory in all cases. If there is no mensrea and the employer was unable to pay the contribution in time due to circumstances beyond its control, damages can be waived completely.” Also referring to the decision of the Supreme Court, held that, “Existence of mensrea or actus reus to contravene a statutory provision must also be held to be a necessary ingredient for levy of damages or the quantum thereof.” Ins. Appeal 82 OF 2006 -:3:- 3. So, what is to be ascertained is whether there is mensrea to evade payment or any contumacious conduct. The Court below opined that there has been financial difficulty and it was the reason why it could not be paid in time. In all cases mere financial stringency may not be sufficient but it can be one of the factors. There are no other materials available to establish regarding the contumacious conduct or intention to violate the provisions of law. Being so, discretionary jurisdiction has to be very carefully exercised. It is desirable that it is used in favour of the establishment under the circumstances. Therefore, I do not find any ground to interfere with the decision rendered by the E.I. Court in waiving the damages. So the appeal lacks merit and it is dismissed. M.N. KRISHNAN, JUDGE. ul/-