IN THE HIGH COURT OF KERALA AT ERNAKULAM
Ins.APP.No. 43 of 2008()
1. THE REGIONAL DIRECTOR,
... Petitioner
2. THE RECOVERY OFFICER,
Vs
1. MUTHOOT APT CERAMICS LIMITED,
... Respondent
For Petitioner :SRI.T.V.AJAYAKUMAR
For Respondent : No Appearance
The Hon'ble MR. Justice M.N.KRISHNAN
Dated :05/09/2008
O R D E R
M.N.KRISHNAN, J.
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Ins. Appeal No. 43 OF 2008
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Dated this the 5thday of September, 2008
JUDGMENT
This appeal is preferred against the judgment of the
Employees’ Insurance Court, Alappuzha, in I.C. No.32/04. The ESI
Corporation initiated action against the applicant before that court for
levying damages by way of penalty for the delayed payment of
contribution for the wage periods. It was challenged before the court
below. The court below set at naught the initiation of proceedings
and also attempted to distinguish the decision reported in M/S.
Hindustan Times Ltd. v. Union of India [AIR 1998 SC 688]. Time
went again. It has been held by the courts that the mere delay in
making the payment on account of financial loss by itself is not a
ground for waiving the imposition of damages of a party. But the
courts have reiterated the imposition of damages as not a routine
realistic affair but as a sound application of judicial discretion. While
exercising the judicial discretion, the facts to be noted are whether
there is any contumacious conduct, deliberate evadement of
payment and a flagrant violation of the provisions of the statute.
One has to remember that ESI Act is also a labour welfare legislation
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intended to confer benefits on the employees. So one should not by
mere reasoning of some financial difficulty be excluded from paying
the damages. But what is important is the contumacious conduct.
So the approach of the EI Court that the sustainment of loss is itself
a ground for waiving the damages cannot be said to be the correct
position by itself. But it may be one of the circumstances which can
be also looked into by the court to find out whether really there is a
deliberate or contumacious conduct on the part of the employer.
Recently a Division Bench of this court had considered the matter in
depth in Regional Director, ESI Corporation v. Managing
Director, M/S Qetcos Ltd. [2008 (3) ILR 132]. The Division Bench
had also extracted various dictum laid down by the Supreme Court
and also the object behind section 85(b) of the Act. The Apex court
also held that “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 and/or the quantum thereof”. Here the
establishment was running at a huge loss of more than Rs. 37
crores. It approached the BIFR for getting their establishment
declared as a sick unit and seeking approval of a rehabilitation
scheme. Unfortunately, on account of the limitation prescribed, it
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was not accepted and further proceedings are still pending. So we
are concerned with a unit which is unable to stand by itself. There is
noting to show that there has been any deliberate or contumacious
conduct which warrants imposition of penalty. So it is in that respect
I am inclined to hold that the extreme measure of imposition of
penalty by way of damages need not be done in this case. The point
discussed by the EI Court that the decision reported in 1998 will not
be applicable to the facts of the present case is not correct. But
altogether on the broader concept of imposition of damages, I am
inclined to agree with the decision.
With these observations, the appeal is dismissed.
M.N.KRISHNAN, JUDGE
vps
Ins. Appeal No.43/08 4