IN THE HIGH COURT OF KERALA AT ERNAKULAM
Ins APP No. 35 of 2006()
1. THE REGIONAL DIRECTOR,
... Petitioner
2. THE RECOVERY OFFICER, ESI CORPORATION,
Vs
1. SANJAY KUMAR AGARWAL, DIRECTOR,
... Respondent
For Petitioner :SMT.T.D.RAJALAKSHMY, SC, ESI CORPN.
For Respondent :SRI.ASOK M.CHERIAN
The Hon'ble MR. Justice K.T.SANKARAN
Dated :10/01/2007
O R D E R
K.T. SANKARAN, J.
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INS. APPEAL NO. 35 OF 2006
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Dated this the 10th day of January,2007
JUDGMENT
The respondent herein filed I.C.No.41 of 2003
before the Employees’ Insurance Court, Alappuzha under
Section 75 of the Employees’ State Insurance Act,
challenging Exts.P1 and P2 orders issued by the
Corporation under Section 85B of the Act. Ext.P1 order
was issued by the Corporation demanding damages for the
default in payment of contribution for the period from
May 1988 to August 2001. Ext.P2 order was issued
demanding damages for the omitted contribution amount.
In the application filed by the respondent before the
Insurance Court, it is stated thus:
“The applicant is the Director of the Periyar
Steel Pvt. Ltd., a small scale steel rolling mill.
Though the establishment commenced its production
from December 1996, the work was not regular.
From June 1997 to March 1998 the establishment
remained closed due to power cut. In fact the
establishment started its full fledged operation
from January 2001 only. Hence the Applicant
submitted the registration form of employees only
in December 2000. Since the workers were not
fully engaged in the establishment till January
2001, the applicant did not collect the
INS.APPEAL NO. 35 OF 2006
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contributions from the employees and from January
2001 onwards the Appellant is deducting the
employees contribution and depositing the
contributions to the Corporation along with
employer’s contribution without any default.”
It is also stated that the respondent herein was under
the belief that the Corporation has waived damages.
The facts leading to such a contention are also stated
in the application filed by the respondent herein.
2. No evidence was adduced before the Employees’
Insurance Court by any of the parties. The Employees’
Insurance Court held that there was no contumacious
conduct on the part of the respondent herein. The
application filed by the respondent was thus allowed
and Exts.P1 and P2 orders imposing damages were set
aside. The learned counsel for the appellants
submitted that the contentions put forward by the
applicant before the Employees’ Insurance Court have
not been established by any acceptable evidence and,
therefore, the Employees’ Insurance Court was not
justified in waiving the damages. The appellants also
submitted that financial difficulty is not a valid
INS.APPEAL NO. 35 OF 2006
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justification for waiver of damages. Learned counsel
for the respondent, on the other hand, contended that
the Employees’ Insurance Court has considered the
contentions put forward by the respondent herein and
came to the conclusion that there was no contumacious
conduct on the part of the respondent/employer. He
submitted that there are no grounds to interfere with
the well considered judgment passed by the court below.
3. Since the respondent having approached the
Employees’ Insurance Court challenging Exts.P1 and P2
orders, it is for him to establish the grounds raised
in the application. The facts leading to the
conclusion as to whether there was contumacious conduct
on the part of the employer, shall be proved by the
person who sets up the same. Here there is no evidence
to indicate as to whether the contentions put forward
by the respondent herein are justifiable and whether
there was any contumacious conduct or willful default
on his part. The learned counsel for the respondent
relied on the decision in M/s.Prestolite of India Ltd.
INS.APPEAL NO. 35 OF 2006
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v. The Regional Director and another (AIR 1994 SC 521)
wherein it is held thus:
“Even if the Regulations have prescribed
general guidelines and the upper limits at which
the imposition of damages can be made, it cannot
be contended that in no case, the mitigating
circumstances can be taken into consideration by
the adjudicating authority in finally deciding the
matter and it is bound to act mechanically in
applying the upper most limit of the table.”
The learned counsel also relied on the decisions in
Regional Director, E.S.I.Corporation v. Sakthi Tiles
(1988(2) KLT 280); E.S.I.Corporation v. Meecos Ltd.
(1980 KLT 179); E.S.I.Corporation v. Hindustan Tile
Works (1999(2) KLT 851) and E.S.I. Corporation v.
Naduvattam G.M.V.S.Sangham Ltd. (2000 (2) KLT 254) and
contended that unlike interest, penalty is not payable
in all cases where there is default. He submits that
when there is no contumacious conduct or deliberate or
willful default in payment of the contribution and if
there are circumstances which would indicate that a
penalty should not be imposed, it cannot be said that
the Employees’ Insurance Court has no jurisdiction to
waive the penalty. It is also pointed out that it is
INS.APPEAL NO. 35 OF 2006
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not only the financial stringency that is pointed out
by the respondent herein, but there are other
circumstances warranting an inference that the
respondent herein was not guilty of any contumacious
conduct.
4. Apart from producing some documents, no
evidence was adduced by the respondent herein before
the Employees’ Insurance Court. All the facts and
circumstances were not made available before the
Employees Insurance Court to arrive at a proper finding
as to whether the respondent herein is entitled to
waiver of penalty. The finding that there was no
contumacious conduct on the part of the respondent
herein is based on no evidence. Therefore, I am of the
view that the judgment passed by the court below is
liable to be set aside and the matter is liable to be
remanded for fresh disposal.
In the result, the Insurance Appeal is allowed,
the judgment passed by the court below is set aside and
INS.APPEAL NO. 35 OF 2006
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the matter is remanded for fresh consideration. Both
parties shall have reasonable opportunity to adduce
evidence and to produce documents. The Employees’
Insurance Court shall consider all the facts and
circumstances of the case and dispose of the matter in
accordance with law.
(K.T.SANKARAN)
Judge
ahz/
