IN THE HIGH COURT OF KERALA AT ERNAKULAM
Ins.APP.No. 26 of 2009()
1. THE REGIONAL DIRECTOR,
... Petitioner
Vs
1. U. MOHANAN, MANAGING PARTNER,
... Respondent
For Petitioner :SMT.T.D.RAJALAKSHMI
For Respondent :SRI.K.M.FIROZ
The Hon'ble MR. Justice M.N.KRISHNAN
Dated :17/11/2009
O R D E R
M.N. KRISHNAN, J.
= = = = = = = = = = = = = =
INS.APPEAL NO. 26 OF 2009
= = = = = = = = = = = = = = =
Dated this the 17th day of November, 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.34/06. in
E.I.C.34/06 the E.S.I.Corporation has imposed a damage of
Rs.47,287/- by way of penalty for the delayed payment of
contribution. It was to set aside that order the E.I.C. was
filed. The establishment would contend that though it had a
very steady growth due to the change of the political
scenario and the belligerent stand of the trade unions
coupled with general problems like economic deprivation,
non availability of market for the products, scarcity of
materials and unhealthy business competition had adversely
affected the industry and the industry started to sustain loss
every year. Large amounts became due to financial
institutions, E.S.I Corporation, Employees Provident Fund,
INS.APPEAL NO. 26 OF 2009
-:2:-
Sales Tax Department, Income Tax Department etc. It was
only on account of the absolute financial stringency the
situation arose.
2. Now let me consider about S.85B of the E.S.I.Act.
It is the provision under which power is granted to the
Corporation to impose damages by way of penalty. The word
used under 85B is ‘may’ and not ‘shall’. There had been
decisions of the Apex Court wherein it is held that imposition
of damages being of a plenary nature the judicial discretion
has to be exercised properly and therefore it is always not
mandatory to impose damages for delayed payment of
contribution. The matter again came up before various
Benches of this court as well as the Apex Court and right
from 1988 onwards the stand is to the effect that there must
be a willful evadement of payment or contumacious conduct.
In the recent decision of the Division Bench of this court
reported in Regional Director, ESI Corporation v.
Managing Director, M/s Qetcos Ltd. (ILR 2008 (3)
Kerala Series 132) the Division Bench held that it is not
INS.APPEAL NO. 26 OF 2009
-:3:-
always mandatory to impose damages and further financial
stringency can be taken as a ground to waive the entire
damages. The Division Bench also considered the decision of
the Supreme Court reported in E.S.I. Corporation v. HMT
Ltd. (AIR 2008 (SC) 1322) and quoted paragraph 21
which reads as follows.
“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.”
3. So from the enunciated principles one has to
establish that there has been a contumacious conduct or
deliberate intention to evade payment or the mensrea not to
comply with the statutory mandate. As far as applying the
said principles to the facts of this case it can be seen that it
was on account of the growing labour problem coupled with
the acute financial stringency the establishment was not in a
position to make the payment. Therefore there is no
deliberate evadement or contumacious conduct or mensrea
INS.APPEAL NO. 26 OF 2009
-:4:-
and so the imposition of damages by the E.S.I.Corporation
was not done judiciously and that has been correctly
interfered by the E.I.Court. Therefore the order of the
E.I.Court does not call for any interference and the appeal is
dismissed.
M.N. KRISHNAN, JUDGE.
ul/-