IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE M.N.KRISHNAN MONDAY, THE 6TH OCTOBER 2008 / 14TH ASWINA 1930 Ins.APP.No. 83 of 2006() ------------------------ IC.139/2003 of EMPLOYEES' INSURANCE COURT, ALAPPUZHA .................... APPELLANT/OPPOSITE PARTY: ------------------------------------------ THE REGIONAL DIRECTOR, E.S.I. CORPORATION, PANCHADEEP BHAVAN, THRISSUR. BY ADV. SRI.T.V.AJAYAKUMAR RESPONDENT(S): APPLICANT: ------------------------------------- M/S. MATHA TOURIST HOME, KOTHAMANGALAM, PIN-686 691, REPRESENTED BY ITS MANAGING PARTNER, E.M. JOHNY. ADV. SRI.A.V.XAVIER THIS INSURANCE APPEALS HAVING COME UP FOR ADMISSION ON 06/10/2008, THE COURT ON THE SAME DAY PASSED THE FOLLOWING: M.N. KRISHNAN, J. = = = = = = = = = = = = = = INS.APPEAL NO. 83 OF 2006 = = = = = = = = = = = = = = = Dated this the 6th day of October, 2008. J U D G M E N T This appeal is preferred against the judgment of the Employees Insurance Court, Alappuzha in I.C.139/03. By the said order the E.I. Court had set aside the imposition of damages of Rs.30,509/- by way of penalty and also a direction has been given to adjust the duplication of the contribution. It is against that decision the E.S.I. Corporation has come up in appeal specifically challenging the setting aside of the imposition of penalty. 2. A perusal of the order would reveal that the contribution involved in the case is contribution of omitted wages of Rs.1,29,116/- relating to the period from 1.4.91 to 31.3.00. The contention of the establishment was that they were undergoing severe financial difficulties and that the principal employer Sri.E.V. Mathew who was in the helm of affairs suddenly died and they had made it very clear that the delay was occasioned not on account of any deliberate act. Ins. Appeal 83 OF 2006 -:2:- 3. It is a settled position now that mere delay cannot be a cause for imposition of damages and equally the mere financial difficulty also may not be a ground for waiving the damages. What is required is there must be a contumacious conduct and mensrea to willfully evade payment thereby flagrantly violating the intention of the legislature. Under Section 39(5)(A) of the E.S.I Act the Corporation is not given any discretion with respect to interest and the word used therein is 'shall'. Under S.85(B) the word used is 'may'. 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 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 Ins. Appeal 83 OF 2006 -:3:- be held to be a necessary ingredient for levy of damages or the quantum thereof.” 4. Analyzing the facts of the case in this back drop it can be seen that a person who had been managing had suddenly disappeared from the world and there was acute financial difficulty for other persons. There is nothing before the Court to show that there was any contumacious conduct or willful disobedience. When it is so, it is always desirable to use discretionary jurisdiction in favour of the establishment rather than on the Corporation. Therefore I do not find any mistake committed by the E.S.I Court in arriving at the decision of waiving of damages and therefore the appeal lacks merit and it is dismissed. M.N. KRISHNAN, JUDGE. ul/-