IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE M.N.KRISHNAN TUESDAY, THE 5TH JANUARY 2010 / 15TH POUSHA 1931 Ins.APP.No. 50 of 2008() ------------------------ ORDER DATED 27/12/2007 IN I.C.No.39/2005 of E.I.COURT, KOZHIKODE APPELLANT/RESPONDENT ---------------------------------------- THE REGIONAL DIRECTOR, E.S.I.CORPORATION, THRISSUR. BY ADV. SRI.T.V.AJAYAKUMAR RESPONDENT: APPLICANT ------------------------ THE EXECUTIVE DIRECTOR, THE COMMONWEALTH TRUST (INDIA) LTD., 7/1136, SOUTH MANANCHIRA ROAD, CALICUT-673 001. ADV. SMT.P.VIJAYAMMA FOR R1 THIS INSURANCE APPEALS HAVING BEEN FINALLY HEARD ON 05/01/2010, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: M.N.KRISHANAN,J. -------------------------- INS.APPEAL.NO.50 OF 2008 --------------------------------------- Dated this the 5th day of January,2010. JUDGMENT This is an appeal preferred against the Order of the Employees Insurance Court in I.C.No.39/2005. The said I.C was filed challenging the imposition to damages of Rs.40,485/-,Rs.43,056/- and Rs.11,096/- for the delayed payment of the contribution. In the application before the court below is contended that the company started facing acute financial crisis during the mid nineties on account of its highly labour intensive operation, reduction in the market share. It was unable to get over the financial crisis. The establishment also had to sell a bungalow located at beach road for getting over the financial crunch. It is also submitted that the said crisis continued and that resulted for the delay in payment of the Provident Fund as well as the State Insurance Benefits. The learned counsel for the appellant Corporation would contend that the discussion by the learned judge differentiating the mode of arriving at decision under Provident Fund Act and Employees State Insurance Act is incorrect and therefore, the matter requires redetermination. So far as the present case concerned, the only question is whether there exist circumstances to impose damages on INS.APPEAL.NO.50 OF 2008 2 the establishment. 2. Under Section 85 B of the ESI Act the power to impose penalty is the discretionary one and that is why the word used is 'may' and 'not' shall. The Hon'ble Apex Court had considered this question and held that when the imposition of damages is plenary in nature within the judicial discretion has to be exercised judicially and can not be imposed as a matter of routine. The Division Bench of this Court in the decision reported in Regional Director, ESI Corporation and another V. Managing Director, M/S.Qetcos Ltd., ILR 2008 (3) 132, held that levying 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 the circumstances beyond its control, damages can be waived. The Division Bench also referred to the decision of the Apex Court in ESI Corporation V. H.M.T Limited and another, AIR 2008 SC 1322. In the said decision another decision was referred to and extracted in para 21 of the said judgment. “The existence of mens rea or actus rea to contravene statutory provision imposed also to be held to be necessary ingredient levy of damages and stock or the quantum thereof”. There are other decisions of this Court also on the point that unless there is a INS.APPEAL.NO.50 OF 2008 3 contumacious conduct and deliberate intention to evade payment damages cannot be imposed as a routine. 3. From the materials available in this case it can be seen that right from 1990 on words the establishment was in financial crisis it never got resolved which also led to the sale of an important building belonging to the establishment. So it can not be held that there was any contumacious contact or deliberate negligence to evade payment. Under such circumstances the discretionary power has to be judicially exercised in favour of the establishment. I do not find any grounds to deviate from the finding rendered by the court below. Therefore, the appeal lacks merit and is dismissed. M.N.KRISHANAN,JUDGE. mns