IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE M.N.KRISHNAN TUESDAY, THE 17TH NOVEMBER 2009 / 26TH KARTHIKA 1931 Ins.APP.No. 26 of 2009(F) ----------------------------- (AGAINST THE ORDER IN EIC 34/06 ON THE FILE OF THE E.I.COURT KOZHIKODE.) APPELLANT/ RESPONDENT(S): --------------------------------------- THE REGIONAL DIRECTOR, E S I, CORPORATION, THRISSUR. BY ADV. SMT.T.D.RAJALAKSHMI RESPONDENT(S)/APPLICANT: ------------------------------------- U. MOHANAN, MANAGING PARTNER, HINDUSTAN TIME WORKS, P.B. NO.5, FEROKE, CALICUT. ADV. SRI.K.M.FIROZ THIS INSURANCE APPEALS HAVING BEEN FINALLY HEARD ON 17/11/2009, THE COURT ON THE SAME DAY PASSED THE FOLLOWING: M.N. KRISHNAN, J. = = = = = = = = = = = = = = INS.APPEAL NO. 26 OF 2009 = = = = = = = = = = = = = = = Dated this the 17th day of November, 2009. J U D G M E N T This appeal is preferred against the order of the Employees Insurance Court, Kozhikode in E.I.C.34/06. in E.I.C.34/06 the E.S.I.Corporation has imposed a damage of Rs.47,287/- by way of penalty for the delayed payment of contribution. It was to set aside that order the E.I.C. was filed. The establishment would contend that though it had a very steady growth due to the change of the political scenario and the belligerent stand of the trade unions coupled with general problems like economic deprivation, non availability of market for the products, scarcity of materials and unhealthy business competition had adversely affected the industry and the industry started to sustain loss every year. Large amounts became due to financial institutions, E.S.I Corporation, Employees Provident Fund, INS.APPEAL NO. 26 OF 2009 -:2:- Sales Tax Department, Income Tax Department etc. It was only on account of the absolute financial stringency the situation arose. 2. Now let me consider about S.85B of the E.S.I.Act. It is the provision under which power is granted to the Corporation to impose damages by way of penalty. The word used under 85B is 'may' and not 'shall'. There had been decisions of the Apex Court wherein it is held that imposition of damages being of a plenary nature the judicial discretion has to be exercised properly and therefore it is always not mandatory to impose damages for delayed payment of contribution. The matter again came up before various Benches of this court as well as the Apex Court and right from 1988 onwards the stand is to the effect that there must be a willful evadement of payment or contumacious conduct. In the recent decision of the Division Bench of this court reported in Regional Director, ESI Corporation v. Managing Director, M/s Qetcos Ltd. (ILR 2008 (3) Kerala Series 132) the Division Bench held that it is not INS.APPEAL NO. 26 OF 2009 -:3:- always mandatory to impose damages and further financial stringency can be taken as a ground to waive the entire damages. The Division Bench also considered the decision of the Supreme Court reported in E.S.I. Corporation v. HMT Ltd. (AIR 2008 (SC) 1322) and quoted paragraph 21 which reads 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.” 3. So from the enunciated principles one has to establish that there has been a contumacious conduct or deliberate intention to evade payment or the mensrea not to comply with the statutory mandate. As far as applying the said principles to the facts of this case it can be seen that it was on account of the growing labour problem coupled with the acute financial stringency the establishment was not in a position to make the payment. Therefore there is no deliberate evadement or contumacious conduct or mensrea INS.APPEAL NO. 26 OF 2009 -:4:- and so the imposition of damages by the E.S.I.Corporation was not done judiciously and that has been correctly interfered by the E.I.Court. Therefore the order of the E.I.Court does not call for any interference and the appeal is dismissed. M.N. KRISHNAN, JUDGE. ul/-