IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE M.N.KRISHNAN MONDAY, THE 18TH AUGUST 2008 / 27TH SRAVANA 1930 Ins.APP.No. 44 of 2003() ------------------------ IC.28/2000 of E.I.COURT, KOLLAM .................... APPELLANTS/OPP. PARTIES: --------------------------------------------- 1. THE REGIONAL DIRECTOR, E.S.I.CORPORATION, TRICHUR. 2. THE RECOVERY INSPECTOR, E.S.I. LOCAL OFFICE, TRIVANDRUM. BY ADV. SRI.T.V.AJAYAKUMAR RESPONDENT: APPLICANT: ----------------------------------------- THE MANAGING DIRECTOR, M/S. TRANSTAB (I) PVT. LTD., JAYA MANSION COLONY, VELLAYAMBALAM, TRIVANDRUM. BY THIS INSURANCE APPEALS HAVING BEEN FINALLY HEARD ON 18/08/2008, THE COURT ON THE SAME DAY PASSED THE FOLLOWING: Kss M.N.KRISHNAN, J ===================== INAP No.44 OF 2003 ===================== Dated this the 18th day of August 2008 JUDGMENT This appeal is preferred against the order of the Employees Insurance Court, Kollam in IC No.28 of 2000. It was an application filed challenging the claim for damages by the Employees State Insurance Coporation. The company was involved in manufacturing and marketing of voltage stabilizer. A notice was issued initially for coverage which was challenged and ultimately it was held liable and payment was made belatedly and therefore the Corporation initiated action for levying damages at the rate of 100%. It was that order which was challenged before the court below. 2. The court below relying upon the decision of the Calcutta High Court in Sarat Textiles Ltd. v. Jt.Regional Director, ESI Corpn.(2001(III) LLN 555) held that since the amount has already been paid, damages cannot be levied and therefore quashed the order. It is against that decision, the insurance corporation has come up in appeal. 3. Notice to the respondent has been affixed by paper publication. But unfortunately there is no appearance for them. Learned counsel INAP 44/2003 -:2:- appearing for the appellant Corporation had cited 3 decisions before me, i.e. 2004(101 FLR 1218(ESI Corpn. Braithwaite & Co.Ltd.(Cal.HC), ILR 2006 (1) 403(The Regional Director, ESI Corpn. v. Managing Director, M/s.Transmatic System Ltd.) and 2003(III) LLJ 789( Nipha Exports(P) Ltd. v. ESIC). A Division Bench of the Calcutta High Court in the decision referred to above in paragraph 15 of its judgment clearly held that “the decision in the case of Sarath Textiles Ltd's case where it has been held that delayed payment may not amount to failure to payment is not a correct statement of law”. A learned Judge of this Court in the decision referred to above, i.e. ILR 2006(1) 403 also it held that just because payment is made it will not take away the liability of an employer to pay damages. This court held that the insurance court did not consider the above legal principles and only came to the conclusion that as the amount had already been remitted prior to the issuance of Ext.B1 notice, there was no need to impose any damages applying Section 85 of the Act. Such conclusion of the Insurance Court is against the objects and reasons, as contained in the Preamble of the Act, when it was introduced before the Parliament, in 1989. Section 85 of the Act is filled with more strength to impose stringent conditions on the erring employers of the establishments, companies and factories. In the decision reported in 2003(III) LLJ 789 referred to above, a Division Bench INAP 44/2003 -:3:- of the Punjab & Haryana High Court held that Section 85B and Regulation 31-C in particular that the argument of the petitioner that damages could be recovered only if the employer failed to pay the contribution and not in case of delay simplicitor, was meritless and deserved to be rejected. The expression 'fails to pay' in Section 85-B had to be given a wide and purposeful meaning and would include cases of delayed payment. Therefore these three decisions would make it crystal clear that mere payment of the amount belatedly does not exonerate ipso facto escaping from the clutches of damages enshrined under Section 85 of the E.S.I.Act. Therefore the finding of the insurance court that since the amount is already paid damages cannot be levied is unsustainable and therefore it is set aside. 4. The next question to be considered is imposition of damages. It has been held in so many cases that the imposition of damage is not an automatic process and it embodies that there must be an application of mind and the discretion has to be exercised judiciously. The word used under Section 85B is not 'shall' but 'may'. The Division Bench of this Court had given the guidelines to be followed in such cases. In the decision reported in ILR 2008(3) 132 quoting the Apepx Court's decision which reads as follows. “Existence of mens rea or actus reus to contravene a statutory provision must also be held to be a necessary ingredient for levy of damages INAP 44/2003 -:4:- and/or the quantum thereof”. The learned Judges had exhaustively dealt with the methods to deal with such cases. That point requires consideration by the insurance Corporation. Further, if there is a long delay in initiating proceedings for recovery of damages, it has been held in so many decisions that it is a ground for mitigating damages. The deliberate contumacious conduct also is a matter that has to be looked into. So I direct the E.S.I.Corporation to consider imposition of damages on the basis of the above guidelines mentioned. These are all matters which the Corporation has to consider and pass orders. Therefore the order passed by the Insurance Court is set aside and it is held that mere payment of the amount is not sufficient to hold that one cannot levy damages. It is further held that E.S.I.Corporation shall consider the question of levying damages and quantum in the light of the principles laid down in ILR 2008(3) Kerala 132. It shall issue a notice to the respondent herein if appears and dispose of the matter in accordance with law. The insurance appeal is therefore allowed. M.N.KRISHNAN, JUDGE Cdp/- INAP 44/2003 -:5:-