IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE M.N.KRISHNAN THURSDAY, THE 16TH OCTOBER 2008 / 24TH ASWINA 1930 Ins.APP.No. 67 of 2006() ------------------------ IC.71/2002 of EMPLOYEES INSURANCE COURT, ALAPPUZHA .................... APPELLANT/OPPOSITE PARTY: --------------------------------------------- THE REGIONAL DIRECTOR, E.S.I. CORPORATION, PANCHADEEP BHAVAN, N.S. ROUND, THRISSUR. BY ADV. SRI.P.SANKARANKUTTY NAIR RESPONDENT: APPLICANT: ------------------------------------------ ERNAKULAM RADIO COMPANY, REPRESENTED BY ITS PARTNER, MR.P.GOPAKUMAR, M.G.ROAD, COCHIN-35. ADV. SRI.P.RADHAKRISHNAN SRI.MADHU RADHAKRISHNAN THIS INSURANCE APPEALS HAVING BEEN FINALLY HEARD ON 16/10/2008, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: Kss M.N.KRISHNAN, J ===================== INAP No.67 OF 2006 ===================== Dated this the 16th day of October 2008 JUDGMENT This appeal is preferred against the judgment of the Employees' Insurance Court, Alappuzha in I.C.No.71 of 2002. It was an application filed by the respondent herein seeking for a declaration that the demand for Rs.9,333/- towards contribution on omitted wages, claim for interest and imposition of damages are all unsustainable and such demands are liable to be set aside. The E.I.Court on a consideration found that the respondent in the appeal is bound to pay the contribution, but it set aside the demand regarding interest as well as imposition of damages. It is aggrieved by that decision, the Corporation has come up in appeal. 2. Heard the counsel on both sides. Let me first consider about the question of damages. There was a dispute with respect to the omitted wages and it had taken time for final settlement of the matter and only thereafter contribution has been paid and thereafter imposition of penalty has been invoked. Under Section 85B of the E.S.I.Act, imposition of penalty or damages is only a discretionary power and it is one which has to be INAP 67/2006 -:2:- judicially exercised. This Court had the opportunity to lay down the proposition to be followed in a recent decision in Regional Director, ESI Corporation and another v. Managing Director, M/s.Qetcos Ltd.(2008(3) ILR 132). It is very specifically stated therein that mere delay is not sufficient for imposition of damages. It has been held by the Apex Court that imposition of damages is amounting to a penalty which means it is of a penal in nature and therefore there must be strong and sufficient grounds to do the same. Here, the party was litigating and ultimately had to pay the contribution. There was no contumacious conduct or willful disobedience on the part of the party in not paying the amount in time. The Apex Court also held that while considering the question under Section 85B the factum of mens rea also has to be taken into consideration. The analysis of the materials available in this case, as discussed and found by the E.I.Court, would show that there is no mens rea and no contumacious conduct or any intention to violate the provisions of the statute. Therefore the finding of the E.I.Court nullifying the imposition of damages does not call for any interference. 3.The next question is regarding the levy of interest. Learned counsel for the respondent would strongly contend before me that in 1998 an observation slip regarding omitted wages was issued for which the INAP 67/2006 -:3:- establishment gave prompt reply and the matter was lying idle till 2001 and thereafter only a decision was taken and so it may not be proper to impose interest. Or, in other words, there was a dispute pending between the parties with respect to the main question. This factum has been considered by a Division Bench of this Court reported in Employees' State Insurance Corporation v. Hotel Methanath(Kedaram)2007(2) KLJ 708). This Court held that merely because the employer had failed to pay contribution under a bona fide impression or belief that the establishment was not covered under the provisions of the ESI Act cannot absolve the employer from the liability of paying interest on the delayed payment of ESI contribution under Section 39(5) read with Regulation 31A. Under such circumstances it was held that the Corporation is entitled to claim interest from the date on which it fell due and the date of judgment of this Court has no relevance in claiming interest. This court also held that there is no discretionary jurisdiction vested in waiving interest or postpone the interest to pay at a later date for the reason that it is a mandate cast upon the Corporation by the provisions of the statute. Therefore I find that the finding of the court below that the claim of interest is unsustainable is liable to be set aside and it has to be held that the Corporation is entitled to claim interest as demanded. INAP 67/2006 -:4:- In the result, the appeal is disposed of as follows: (1)The finding on vacating the imposition of damages is upheld. (2) The finding of the E.I Court that the establishment is not liable to pay interest is set aside and it is held that the department is entitled to claim interest as claimed and as contemplated under law. I am also informed that the amount is already deposited and if any further proceeding is necessary, notice may be issued and the matter be decided. M.N.KRISHNAN, JUDGE Cdp/-