IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE M.N.KRISHNAN TUESDAY, THE 3RD NOVEMBER 2009 / 12TH KARTHIKA 1931 Ins.APP.No. 9 of 2009() ----------------------- IC.46/2007 of EMPLOYEES INSURANCE COURT, ALAPPUZHA .................... APPELLANTS(RESPONDENTS IN THE INSURANCE CASE) ----------------------------------------------------------------- 1. THE REGIONAL DIRECTOR, EMPLOYEES STATE INSURANCE CORPORATION, PANCHADEEP BHAVAN, THRISSUR-20. 2. THE JOINT DIRECTOR, EMPLOYEES STATE INSURANCE CORPORATION, PALAYATHODE, KOLLAM. 3. THE RECOVERY OFFICER, E.S.I. CORPORATION, PANCHADEEP BHAVAN, THRISSUR-20. BY ADV. SRI.T.P.M.IBRAHIM KHAN, SC, ESI CORPN. RESPONDENT: APPLICANT IN THE INSURANCE CASE ---------------------------------------------- M/S.AUTOCAST LIMITED, S.N.PURAM, P.O.CHERTHALA, REPRESENTED BY ITS MANAGING DIRECTOR. ADV. SRI.K.ANAND (A.201) SMT.LATHA KRISHNAN THIS INSURANCE APPEALS HAVING COME UP FOR CONSIDERATION ON 03/11/2009, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: M.N. KRISHNAN, J. ........................................... Ins.A.No.9 OF 2009 ............................................. Dated this the 3rd day of November, 2009 J U D G M E N T This is an appeal preferred against the order of the E.I.Court in I.C.No.46/2007. An application was filed before the E.S.I Court for setting aside the order, Ext.P7, by which Employees State Insurance Corporation has imposed damages of Rs.31,943/= by way of penalty for the delayed payment of the contribution. A perusal of the order would reveal that the reason for not making the payment is that the applicant company is a sick unit with severe financial difficulties and on account of reasons beyond their control it had lead to the payment of ESI contribution belatedly. A similar question came up for consideration before a Division Bench of this Court reported in Employees State insurance Corporation v. Quetco Co. (ILR 2008 (3) 132). The Division Bench 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 : 2 : Ins.A.No.9 OF 2009 control, damages can be waived completely. Right from 1988, this Court has taken a view that mere delay in payment is not sufficient to impose damages. It has been held that there must have been a contumacious conduct or deliberate evadement of payment. It can be seen that unlike the payment of interest which is a statutory obligation, imposition of damages by way of penalty is a discretion vested with the authority. The word used under Section 85 B of the E.S. Act is ‘may and not shall’. The Apex Court had made it clear that since imposition of damages is of a plenary nature, one has to apply the mind judicially to find out whether damages can be levied or not. In the decision referred to above, the Division Bench has referred to a recent decision of the Apex Court in Employees State Insurance Corporation v. H.M.T. Ltd. (AIR 2008 SC 1322) and extracted para 21 as follows: Existence of means rea or actus reus to convene a statutory provision must also be held to be a necessary ingredient for levy of damages and/or the quantum thereof. So far as the facts of the present case is concerned, : 3 : Ins.A.No.9 OF 2009 the company has been declared as a sick unit and it was having severe financial stringency and the belated payment was beyond the control of the authorities of the establishment and therefore, it has to be held that there was no contumacious conduct or deliberate evadement of the payment or mensrea not to pay the amount. Therefore, the decision rendered by the ESI court does not call for any interference. The appeal lacks merit and the same is dismissed. M.N. KRISHNAN, JUDGE cl : 4 : Ins.A.No.9 OF 2009