IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE M.N.KRISHNAN TUESDAY, THE 13TH OCTOBER 2009 / 21ST ASWINA 1931 Ins.APP.No. 43 of 2009() ---------------------------------- EIC.61/2006 of EMPLOYEES INSURANCE COURT, KOZHIKODE .................... APPELLANT (S)/RESPONDENT ----------------------------- THE REGIONAL DIRECTOR, E.S.I. CORPORATION, THRISSUR. BY ADV. SMT.T.D.RAJALAKSHMY, SC, ESI CORPN. RESPONDENT(S): APPLICANT ------------------------ U.MOHANAN, MANAGING PARTNER, HINDUSTAN TILE WORKS, P.B.NO.5, FEROKE, CALICUT. THIS INSURANCE APPEALS HAVING COME UP FOR ADMISSION ON 13/10/2009, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: tss M.N. KRISHNAN, J. = = = = = = = = = = = = = = INS.APPEAL NO. 43 OF 2009 = = = = = = = = = = = = = = = Dated this the 13th day of October, 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.61/06. E.I.C.61/06 is filed to set aside the imposition of damages for the period from November 2003 to March, 2005. It is contended that the delay in making the payment was not deliberate or contumacious but was on account of the reasons beyond the control of the establishment and they have no motive to disregard the law. The learned E.I.Court has considered the matter very elaborately and it can be seen from the discussion in paragraph 15 of the judgment that the net loss for the company for each year was approximately Rs.8 lakhs, 22 lakhs, 10 lakhs etc. and they were running from pillar to post to save the establishment. So it is really the inability to raise the amount and pay that has caused the delay in making the belated payment. It is true that the mere financial stringency may not be a solitary INS.APPEAL NO. 43 OF 2009 -:2:- criteria for not imposing damages. It is the sum total of the materials and the intention that has to be considered. It can be seen that under S.85B of the Employees State Insurance Act the power is granted to the Corporation to impose damages by way of penalty and the word used is 'may' and not 'shall'. So it is a discretionary jurisdiction conferred upon the authority to impose the damages. The Courts have interpreted S.85B of the Act and held that when the imposition of damages by way of penalty is of a penal consequences it has to be very cautiously and judicially exercised. This Court right from 1988 onwards had taken the view that unless one is able to establish a contumacious conduct it may not be proper to impose or levy damages. Now 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.” INS.APPEAL NO. 43 OF 2009 -:3:- The learned judges have also quoted and extracted from the decision of the Apex Court in E.S.I. Corporation v. HMT Ltd. (AIR 2008 (SC) 1322). “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.” So applying the dictum laid down in this decision to the facts of the present case it can be seen that it is true that there was a delay in making the payment of contribution. But it was on account of the unavoidable financial constraint of the establishment and there was no contumacious conduct or any mensrea to evade payment so as to attract the penal consequences embodied in S.85B of the E.S.I.Act. Therefore I do not find any ground to interfere with the decision rendered by the learned E.I.Court and therefore the appeal fails and the same is dismissed. M.N. KRISHNAN, JUDGE. ul/-