IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE M.N.KRISHNAN FRIDAY, THE 3RD OCTOBER 2008 / 11TH ASWINA 1930 Ins.APP.No. 69 of 2006(R) ------------------------- IC.29/2003 of E.I.COURT, (INDUSTRIAL TRIBUNAL) KOLLAM .................... APPELLANT/OPPOSITE PARTY: ----------------------------------------- THE REGIONAL DIRECTOR, E.S.I. CORPORATION, REGIONAL OFFICE, THRISSUR. BY ADV. SRI.T.V.AJAYAKUMAR RESPONDENT(S)/ APPLICANT : ----------------------------------- M/S.HOTEL RESIDENCY TOWER, PRESS ROAD, THIRUVANANTHAPURAM. THIS INSURANCE APPEALS HAVING BEEN FINALLY HEARD ON 03/10/2008, THE COURT ON THE SAME DAY PASSED THE FOLLOWING: M.N. KRISHNAN, J. = = = = = = = = = = = = = = INS.APPEAL NO. 69 OF 2006 = = = = = = = = = = = = = = = Dated this the 3rd day of October, 2008. J U D G M E N T This appeal is preferred against the judgment of the Employees Insurance Court, Kollam in I.C.29/03. It was an application filed by respondents herein seeking for declaration that the imposition of damages by way of penalty u/s 85B is unsustainable. The E.I. Court on an elaborate consideration and in the light of the decision reported in Sakthi Tiles v. E.S.I. Corporation (1988 (2) KLT 280) allowed the prayer of the respondents herein and set aside the order of imposition of penalty. It is against that decision the E.S.I. Corporation has come up in appeal. 2. Unlike S.39(5) (A) of the E.S.I Act the imposition of interest is a statutory obligation whereas the levy of damages u/s 85B is a discretionary jurisdiction vested with the Corporation. It is not automatic to impose damages. It must be preceded by some contumacious conduct and the intention to violate the law deliberately. In this case there Ins. Appeal 69 OF 2006 -:2:- was some dispute regarding the omitted wages and ultimately it was decided against the respondents herein and he paid contribution in four monthly instalments. It is also averred that on account of the financial difficulties the amount could not be paid. The financial difficulty alone cannot be a ground for not imposing damages. But it can be one of the factors that can be considered to find out the contumacious or deliberate act of a person. Recently, a Division Bench of this Court in the decision reported in Regional Director, ESI Corporation v. Managing Director, M/s Qetcos Ltd. (ILR 2008 (3) Kerala Series 132) has given the guidelines. The Division Bench 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.” Quoting the Apex Court decision, i.e., “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 69 OF 2006 -:3:- The Apex Court also held that, “When a discretionary jurisdiction has been conferred on a statutory authority to levy penal damages by reason of an enabling provision, the same cannot be construed as imperative. Even otherwise, an endeavor should be made to construe such penal provisions as discretionary, under the statute is held to be mandatory in character.” 3. Applying the dictum laid down to the facts of the present case I do not find any contumacious conduct or deliberate evadement of payment but delay was occasioned on account of the financial stringency and that has been brought to the knowledge of the Corporation and it had permitted to deposit the amount in four instalments. So the mental element to evade payment is absent and therefore I find that imposition of levy of damages is not warranted in this case. So the appeal lacks merit and it is dismissed. M.N. KRISHNAN, JUDGE. ul/-