IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE M.N.KRISHNAN FRIDAY, THE 6TH NOVEMBER 2009 / 15TH KARTHIKA 1931 Ins.APP.No. 32 of 2007(F) ------------------------ IC.14/2005 of ESI COURT, PALAKKAD .................... APPELLANT OPPOSITE PARTY ----------------------------------------- EMPLOYES STATE INSURANCE CORPORATION PANCHDEEP BHAVAN,NORTH SWARAJ ROUND, THRISSUR-20,REP.BY ITS REGIONAL DIRECTOR. BY ADV. SRI.P.SANKARANKUTTY NAIR RESPONDENT(S): APPLICANT ------------------------ M/S.NILAMBUR GOOD WOOD (P) LIMITED, CHEMMARAM,NADUVATH (P.O.), MALAPPURAM DISTRICT,REP BY ITS MANAGING DIRECTOR P.G.THOMAS THARAKAN THIS INSURANCE APPEALS HAVING BEEN FINALLY HEARD ON 06/11/2009, THE COURT ON THE SAME DAY PASSED THE FOLLOWING: M.N. KRISHNAN, J. = = = = = = = = = = = = = = INS.APPEAL NO. 32 OF 2007 = = = = = = = = = = = = = = = Dated this the 6th day of November, 2009. J U D G M E N T This appeal is preferred against setting aside the order of damages imposed by the Corporation against the establishment. The authorities imposed a damage of Rs.9,279/- which was challenged and set aside by the E.S.I.Court. A perusal of the order would convincingly establish that the establishment was a very small S.S.I. Unit with utmost financial constrains and was finding it difficult even for the day-today activities including payment of wages. So when imposition of interest was done it was requested to give time and to reduce interest. So it was on account of the utmost financial stringency that the establishment was not able to pay the amount. It has been decided in very many cases that u/s 85-B of the E.S.I. Act since imposition of damages by way of penalty is of a penal consequence the authority imposing it must exercise it judiciously and the word used u/s 85 is 'may' and not 'shall'. INS.APPEAL NO. 32 OF 2007 -:2:- Recently a Division Bench of this Court relying upon the decision of the Apex Court had given a guideline to be followed including previous decision of this Court. Now the decision reported in Regional Director, ESI Corporation v. Managing Director, M/s Qetcos Ltd. (ILR 2008 (3) Kerala Series 132) the Division Bench of this 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 contribution in time due to circumstances beyond its control damages can be waived completely. The Division Bench also referred to the decision reported in E.S.I. Corporation v. HMT Ltd. (AIR 2008 (SC) 1322). It is extracted in paragraph 21 of the judgment as follows. “Existence of mensrea or actus reus to contravene a statutory provision must also be held to be a necessary ingredient for levy of damages and/or the quantum thereof.” Therefore from the authoritative pronouncements of the Courts following are necessary to impose damages namely INS.APPEAL NO. 32 OF 2007 -:3:- the contumacious conduct, deliberate intention to evade payment and the mensrea to non comply with the provisions of the statute. So far as this case is concerned a small SSI unit suffering from serious financial constrains moved again and again for mercy to the Corporation which indicates that there was never any deliberate intention to avoid payment. Therefore the E.S.I. Court has applied the provisions of law correctly and it set aside the order which does not call for any interference. Therefore the appeal fails and the same is dismissed. M.N. KRISHNAN, JUDGE. ul/-