{"id":231313,"date":"2007-01-25T00:00:00","date_gmt":"2007-01-24T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/the-employees-state-insurance-vs-k-n-premanandan-on-25-january-2007"},"modified":"2016-12-16T06:57:43","modified_gmt":"2016-12-16T01:27:43","slug":"the-employees-state-insurance-vs-k-n-premanandan-on-25-january-2007","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/the-employees-state-insurance-vs-k-n-premanandan-on-25-january-2007","title":{"rendered":"The Employees State Insurance vs K.N.Premanandan on 25 January, 2007"},"content":{"rendered":"
Kerala High Court<\/div>\n
The Employees State Insurance vs K.N.Premanandan on 25 January, 2007<\/div>\n
       \n\n  \n\n  \n\n \n \n  IN THE HIGH COURT OF KERALA AT ERNAKULAM\n\nMFA No. 1007 of 2002()\n\n\n1. THE EMPLOYEES STATE INSURANCE\n                      ...  Petitioner\n2. THE RECOVERY OFFICER, REGIONAL OFFICE,\n\n                        Vs\n\n\n\n1. K.N.PREMANANDAN, KURATHUPARAMBIL HOUSE,\n                       ...       Respondent\n\n2. K.N.VIDYANANDAN, KURATHUPARAMBIL HOUSE,\n\n                For Petitioner  :SRI.T.P.M.IBRAHIM KHAN,SR.SC, RAILWAYS\n\n                For Respondent  :SRIR.AZAD BABU\n\nThe Hon'ble MR. Justice M.RAMACHANDRAN\nThe Hon'ble MR. Justice S.SIRI JAGAN\n\n Dated :25\/01\/2007\n\n O R D E R\n                    M. Ramachandran & S. Siri Jagan,  JJ.\n\n                     =-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=\n\n                              M.F.A No.  1007 of 2002\n\n                     =-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=\n\n                      Dated this, the 25th  January, 2007.\n\n\n                                  J U D G M E N T\n<\/pre>\n
Siri Jagan, J.\n<\/p>\n<\/p>\n
       This   appeal   is   filed   at   the   instance   of   the   Employees   State<\/p>\n
Insurance Corporation against the order of the Employees Insurance<\/p>\n
Court, Alappuzha in I.C.No. 104\/1999 raising the following substantial<\/p>\n
questions of law:\n<\/p>\n<\/p>\n
                     (1)  Whether the Financial difficulties or the pendency<\/p>\n
             of  litigation  will   absolve  the  Employer   from   the  payment  of<\/p>\n
             damages by way of Penalty.<\/p>\n
<\/blockquote>\n
                     (2)    Whether  Sakthi Tiles’  case  (Supra) will empower<\/p>\n
             the E.I. Court to reduce the quantum of damages imposed on<\/p>\n
             the   ground   of   pendency   of   litigation   and   the   financial<\/p>\n
             difficulties.\n<\/p><\/blockquote>\n
<\/blockquote>\n
                     (3)     Whether   Section   85-B   of   the   Employees   State<\/p>\n
             Insurance   Act   and   the   Regulation   given   unfettered   right   to<\/p>\n
             the Corporation to impose damages by way of penalty for the<\/p>\n
             belated payment of Contribution upto 100 percent.”<\/p>\n<\/blockquote>\n
The basic facts from which the above questions of law  are sought to<\/p>\n
be raised are as detailed under.\n<\/p>\n<\/p>\n
       2.  The respondents herein were the employers who filed the I.C<\/p>\n
challenging the order of the appellants imposing on them  damages to<\/p>\n
the   tune   of   Rs.79,969\/-   under   Section     85B   of   the   Employees   State<\/p>\n
Insurance   Act,   1948   for   delayed   payment   of   contributions   for   the<\/p>\n
period   from   October,   1986   to   March,1987,   October,   1987   to   March,<\/p>\n
1988, April, 1988 to March, 1989 and May, 1990 to March, 1991.   In<\/p>\n
the I.C, the employers, after admitting that there was, in fact, delay in<\/p>\n
payment of contributions, contended that for that  delay,  no damages<\/p>\n
could have been imposed under Section 85B, since the delay  was on<\/p>\n
account of the pendency of litigations in respect of the liability to pay<\/p>\n
contributions themselves as also financial difficulties.   The appellants<\/p>\n
herein   contended   before   the   Insurance   Court   that   once   delay   is<\/p>\n
admitted,   the   fact   that   there   were   litigations   pending   and   the<\/p>\n
M.F.A. No. 1007\/2002.                         -:  2  :-<\/span><\/p>\n
employers were in financial difficulties are not factors which could be<\/p>\n
taken into account to reduce the damages payable under Section 85B<\/p>\n
of  the   Act,  imposition  of  which  is  at   the  discretion  of   the   authorised<\/p>\n
officer   under   Section   85B.   Repelling   these   contentions,   based   on   a<\/p>\n
Division   Bench   decision   of   this   Court     in  Regional   Director,   E.S.I<\/p>\n
Corporation  v.   Sakthi Tiles,<\/a> [1988 (2) KLT 280], the Insurance Court<\/p>\n
reduced   the   damages   leviable   to   Rs.   27,500\/-.     This   decision   of   the<\/p>\n
Insurance Court,  is under challenge in this appeal.<\/p>\n
       3.   First we shall consider the second question of law raised as<\/p>\n
above as to whether the  Insurance Court  has  jurisdiction to consider<\/p>\n
the   question   of   waiver   or   reduction   of   damages   imposed   under<\/p>\n
Section 85B in exercise of its jurisdiction under Section 75 of the Act.<\/p>\n
       4.  Of course, Section 75 which is the provision under which the<\/p>\n
I.C has been filed, does not specifically refer to damages as such.  But,<\/p>\n
clause   (g)   of   sub-section   (i)   of   Section   75   would   be   relevant   for   our<\/p>\n
purpose in deciding this question, which reads as under:<\/p>\n
                “75.     Matters   to   be   decided   by   Employees’   Insurance<\/p>\n
       Court:-  (1)  any question or dispute arises as to–<\/p>\n<\/blockquote>\n
                                xx                         xx                      xx\n\n\n                (g)     any   other   matter   which   is   in   dispute   between   a   principal\n\n<\/pre>\n
       employer   and   the   Corporation,   or   between   a   principal   employer   and<\/p>\n
       an   immediate   employer   or   between   a   person   and   the   Corporation   or<\/p>\n
       between   an   employee   and   a   principal   or   immediate   employer,   in<\/p>\n
       respect   of   any   contribution   or   benefit   or   other   dues   payable   or<\/p>\n
       recoverable   under   this   Act,   or   any   other   matter   required   to   be   or<\/p>\n
       which may be decided by the Employees’   Insurance Court under this<\/p>\n
       Act,<\/p>\n
       such question or dispute, subject to the provisions of sub-section (2A)<\/p>\n
       shall be decided by the Employees Insurance Court in accordance with<\/p>\n
       the provisions of this Act.”\n<\/p><\/blockquote>\n
Although,   this clause does not specifically refer to damages as such,<\/p>\n
it   specifically   refers   to  other   dues   payable   or   recoverable  under   the<\/p>\n
Act.   We are of opinion that the question as to whether the damages<\/p>\n
M.F.A. No. 1007\/2002.                          -:  3  :-<\/span><\/p>\n
imposed   under   Section   85B   is   justifiable   or   whether   the   quantum   of<\/p>\n
damages imposed is in accordance with principles for computing the<\/p>\n
damages   is  certainly   a   dispute,   which   would   fall   within   the   ambit   of<\/p>\n
clause   (g)   of   Section   75(1).     We   are   supported   in   this   view   by   two<\/p>\n
Division Bench decisions of this Court.   First is   the case referred to<\/p>\n
by   the   Insurance   Court   itself,   namely,  Sakthi   Tiles’s   case,   wherein,<\/p>\n
this Court  has categorically held as follows:\n<\/p>\n
       ” . . . . . In this perspective, we hold that the Insurance Court which is a<\/p>\n
       proper   forum   prescribed   by   the   Act   to   adjudicate   as   to   whether   the<\/p>\n
       order or proceeding initiated by the Corporation to recover damages is<\/p>\n
       justified can evaluate the entire  matter, and if it is satisfied  that there<\/p>\n
       are   extenuating   circumstances,   it   can   dispense   with     the   recovery   of<\/p>\n
       damages, or delete or reduce the quantum of damages levied or afford<\/p>\n
       such other relief, which in its opinion, is deserved in the circumstances.<\/p>\n<\/blockquote>\n
Following the said decision,  another Division Bench  of this Court   in<\/p>\n
E.S.I.   Corporation  v.  Hindustan   Tile   Works,<\/a>   1999   (2)   KLT   851,<\/p>\n
specifically answered this question with reference to Section 75(1)(g)<\/p>\n
as follows:\n<\/p>\n<\/p>\n
               “On   detailed   consideration   of   the   arguments   raised   by   both<\/p>\n
       sides,   we   are   not   convinced   that   there   is   any   merit   in   the   aforesaid<\/p>\n
       contention of the appellant.   The first contention that the E.S.I. Court<\/p>\n
       had   no   jurisdiction     to  adjudicate   the   matter   has   no   merit   in   view   of<\/p>\n
       the   specific   provisions   in   S.   75(1)(g)   of   the   Act   which   empowers   the<\/p>\n
       court to   adjudicate on any dispute on any matter which is in dispute<\/p>\n
       between  a   principal   employer   and  the   Corporation,   in   respect   of   any<\/p>\n
       contribution or benefit or other dues payable or recoverable under the<\/p>\n
       Act or any other matter required to be or which may be decided by the<\/p>\n
       Employees’ Insurance Court under the Act.  The penalty contemplated<\/p>\n
       in   S.   85-B   definitely   falls   under   ‘other   dues’   contemplated   in   the<\/p>\n
       aforesaid provision and as such the Employees’ State Insurance Court<\/p>\n
       had full jurisdiction to decide the issue.”<\/p><\/blockquote>\n
       5.      In  view   of  the  above  findings of  the  two Division  Benches,<\/p>\n
with which we respectfully agree, we have absolutely no doubt in our<\/p>\n
mind that  the Insurance Court has jurisdiction to decide the question<\/p>\n
as   to   whether   damages   imposed   under   Section   85-B   of   the   Act   is<\/p>\n
justifiable or not.\n<\/p>\n<\/p>\n
       6.     The   other   questions   of   law   raised   by   the   appellants   in   this<\/p>\n
M.F.A. No. 1007\/2002.                         -:  4  :-<\/span><\/p>\n
appeal   essentially   relate   to   the   various   aspects     of   imposition   of<\/p>\n
damages   under   Section   85-B   and   therefore   can   be   considered<\/p>\n
together.\n<\/p>\n<\/p>\n
        7.     Before   going   into   these   aspects,   we   may   observe   that   the<\/p>\n
wording of Section 85-B was not the same as sit stood in the statute<\/p>\n
book at the time of Sakthi Tiles’s case.    Therefore, we shall first note<\/p>\n
Section   85-B   as   it   stood   prior   to   1989.       At   that   time,   Section   85-B<\/p>\n
read thus:\n<\/p>\n<\/p>\n
                         “85B:     Power   to   recover   damages:-   (1)     Where   an<\/p>\n
               employer   fails   to   pay   the   amount   due   in   respect   of   any<\/p>\n
               contribution  or  any   other  amount  payable  under  this  Act,  the<\/p>\n
               Corporation  may  recover  from the  employer        such  damages<\/p>\n
               not   exceeding   the   amount   of   arrears   as   may   think   fit   to<\/p>\n
               impose:\n<\/p>\n<\/p>\n
                         Provided   that   before   recovering   such   damages,   the<\/p>\n
               employer   shall   be   given   a   reasonable   opportunity   of   being<\/p>\n
               heard.”\n<\/p>\n<\/p>\n
                                                                          (Emphasis supplied)<\/p>\n
Thereafter,   amendments  were  introduced  to  Section  85-B,  by  Act 29<\/p>\n
of  1989  with effect from 1-1-1992  and thereafter Section 85-B reads<\/p>\n
as follows:\n<\/p>\n<\/p>\n
                         “85-B.  Power to recover damages:-  Where an employer<\/p>\n
               fails   to   pay   the   amount   due   in   respect   of   any   contribution   or<\/p>\n
               any other amount payable under this Act, the Corporation may<\/p>\n
               recover   from   the   employer  by   way   of   penalty   such   damages<\/p>\n
               not exceeding the amount of arrears as may be specified in the<\/p>\n
               regulations:\n<\/p><\/blockquote>\n
<\/blockquote>\n
                         Provided   that   before   recovering   such   damages,   the<\/p>\n
               employer   shall   be   given   a   reasonable   opportunity   of   being<\/p>\n
               heard:\n<\/p><\/blockquote>\n
<\/blockquote>\n
                         Provided   further   that   the   Corporation   may   reduce   or<\/p>\n
               waive   the   damages   recoverable   under   this   section   in   relation<\/p>\n
               to   an   establishment   which   is   a   sick   industrial   company   in<\/p>\n
               respect   of   which   a   scheme   for   rehabilitation   has   been<\/p>\n
               sanctioned   by   the   Board   for   Industrial   and   Financial<\/p>\n
               Reconstruction   established   under   Section   4   of   the   Sick<\/p>\n
               Industrial   Companies   (Special   Provisions)   Act,   1985   (1   of<\/p>\n
               1986),   subject   to   such   terms   and   conditions   as   may   be<\/p>\n
M.F.A. No. 1007\/2002.                        -:  5  :-<\/span><\/p>\n
               specified in regulations.\n<\/p><\/blockquote>\n
<\/blockquote>\n
                       (2)  Any damages recoverable under sub-section (1) may<\/p>\n
               be   recovered   as   an   arrear   of   land   revenue   or   under   section<\/p>\n
               45C to section 45-I.”\n<\/p><\/blockquote>\n
<\/blockquote>\n
                                                                    (Emphasis supplied)<\/p>\n
We are   not unaware of the fact that the periods of delay in payment<\/p>\n
of contribution in this case are between October, 1986 to March, 1991<\/p>\n
and in fact except for three months, damages imposed related to the<\/p>\n
pre-amendment period of Section 85-B. But, we are of opinion that in<\/p>\n
the  view   we   are   inclined   to   take,   the   same   is   not   material   at   all   for<\/p>\n
deciding this case.<\/p><\/blockquote>\n
        8.     Before   amendment,   the     wording   used   was   different   in   the<\/p>\n
section.     At   that   time,   the   words   used   were   “the   Corporation   may<\/p>\n
recover  from the employer  such damages, not exceeding the arrears<\/p>\n
as   it   may   think   fit   to   impose.”     This   wording   was   changed   as   “the<\/p>\n
Corporation   may   recover   from   the   employer  by   way   of   penalty  such<\/p>\n
damages not exceeding the amount  of arrears as may be specified in<\/p>\n
the   regulations.”       As   such,   by   the   amendment,   the   legislature   had<\/p>\n
made   it   abundantly   clear   that   the   imposition   of   damages   by   way   of<\/p>\n
Section 85-B is in the nature of penalty.   But, even without the word<\/p>\n
‘penalty’   in   that   section   prior   to   the   amendment,   in   the   decision   of<\/p>\n
Shakti   Tiles’s   case,   a   Division   Bench   of   this   Court   came   to   the<\/p>\n
conclusion   that     the   imposition   of   damages   under   Section   85-B  is   in<\/p>\n
the nature of penalty which only has been subsequently made clear by<\/p>\n
the legislature by amending the section, by expressly stating that the<\/p>\n
power   to   recover   damages   under   Section   85-B  is   by   way   of   penalty.<\/p>\n
If imposition of damages is by way of penalty, then such damages can<\/p>\n
be   imposed   only   in   accordance   with   the   principles   applicable   for<\/p>\n
imposing penalty for failure to carry out a statutory obligation.<\/p>\n
        9.   The Supreme Court had, as early as in 1970, in the decision<\/p>\n
of  M\/s.     Hindustan   Steel   Ltd.   v.  The   State   of   Orissa,   AIR<\/a>   1970   S.C.<\/p>\n
M.F.A. No. 1007\/2002.                           -:  6  :-<\/span><\/p>\n
253,   laid   down   guidelines   in   the   matter   of   imposition   of   penalty   for<\/p>\n
failure to carry out a statutory obligation in the following words:<\/p>\n
                        ”  .   .  .  .  .   An   order   imposing   penalty   for   failure   to  carry<\/p>\n
                out   a   statutory   obligation   is   the   result   of   a   quasi-criminal<\/p>\n
                proceeding,   and  penalty   will  not  ordinarily   be  imposed   unless<\/p>\n
                the party obliged either acted deliberately in defiance of law or<\/p>\n
                was   guilty   of   conduct   contumacious   or   dishonest,   or   acted   in<\/p>\n
                conscious  disregard  of   its  obligation.   Penalty   will  not  also be<\/p>\n
                imposed merely because it is lawful to do so.  Whether penalty<\/p>\n
                should be imposed for failure to perform a statutory obligation<\/p>\n
                is   a   matter   of   discretion   of   the   authority   to   be   exercised<\/p>\n
                judicially   and   on   a   consideration   of   all   the   relevant<\/p>\n
                circumstances.     Even   if   a  minimum   penalty   is   prescribed,   the<\/p>\n
                authority   competent   to   impose   the   penalty   will   be   justified   in<\/p>\n
                refusing to impose penalty,  when there is a technical or venial<\/p>\n
                breach  of the provisions  of the Act  or where  the breach flows<\/p>\n
                from a bona fide belief  that the offender  is not liable to act in<\/p>\n
                the manner prescribed by the statute. . . . .”\n<\/p><\/blockquote>\n
<\/blockquote>\n
                                                                         (Emphasis supplied)<\/p>\n
Although,  Shakthi Tiles’s case does not specifically refer to the above<\/p>\n
Supreme   Court   decision,     the   Division   Bench   had,   in   fact,   borrowed<\/p>\n
the words of  the Supreme Court in  the above decision   in coming  to<\/p>\n
the following  conclusion:\n<\/p><\/blockquote>\n
<\/blockquote>\n
                “It   was   not   disputed   that   from   any   levy   of   damages   it   is<\/p>\n
                open   to   the   employer   to   take   up   the   matter   before   the<\/p>\n
                Insurance Court under S. 75 read with S.78 of the Act.  The<\/p>\n
                only question focussed was that the Insurance Court cannot<\/p>\n
                interfere   with   the   quantum   of   damages.   A   mere   look   at   S.<\/p>\n
                85B will show that even where the employer fails to pay the<\/p>\n
                amounts   due   in   respect   of   any   contribution   payable   under<\/p>\n
                the   Act,   it   is   not   obligatory   o   the   Corporation   to   levy   or<\/p>\n
                recover   damages.   The   power   to   levy   damages   is<\/p>\n
                discretionary.     The  section   has only stated, the maximum<\/p>\n
                amount   that   can   be   so   recovered.   The   power   to   levy   and<\/p>\n
                recover   damages   provided   in   S.   85B   of   the   Act   is   in   the<\/p>\n
                nature   of   a   quasi-penal   provision.     An   order,   levying<\/p>\n
                damages for failure to pay the amount due in respect of any<\/p>\n
                contribution   payable   under   the   Act,   is   a   quasi   judicial<\/p>\n
                proceeding.     The   proviso   to   S.   85B   itself   indicates   that<\/p>\n
                before   recovering   such   damages,   the   employer   should   be<\/p>\n
                given   a   reasonable     opportunity   of   being   heard.     It<\/p>\n
                postulates   that   there   should   be   an   adjudication   in   the<\/p>\n
                matter.     Since   the   failure   to   carry   out   the   statutory<\/p>\n
                obligation should be adjudicated by a quasi judicial enquiry,<\/p>\n
                and the levy of damages is quasi penal in character, we are<\/p>\n
M.F.A. No. 1007\/2002.                        -:  7  :-<\/span><\/p>\n
             of   the   view   that  such   damages   will   not   ordinarily   be<\/p>\n
             imposed   unless   the   party   obliged   to   pay   the   amount   due,<\/p>\n
             acted either deliberately or in defiance of law, or was guilty<\/p>\n
             of contumacious or dishonest conduct, or acted in conscious<\/p>\n
             disregard   of   its   obligation.     The   mere   fact   that   the<\/p>\n
             Corporation   is   empowered   to   recover   damages   does   not<\/p>\n
             mean   that   the     Corporation   can   act   mechanically   and<\/p>\n
             without  taking  into account the facts and  circumstances  of<\/p>\n
             each   case.     It   is   to   be   noted   that   the   statutory   provision<\/p>\n
             does   not   prescribe   any   minimum   to   be   recovered   as<\/p>\n
             damages.     What   is   provided   is   the   maximum   that   can   be<\/p>\n
             recovered.     We   are  of   the  view,   that   since   the  opportunity<\/p>\n
             that   is   provided   before   recovering   the   damages   should   be<\/p>\n
             effective  and   meaningful,   the   authority   empowered  to   levy<\/p>\n
             damages   should     have   the   discretion   either   to   levy   the<\/p>\n
             damages or to dispense with the levy of the damages.   The<\/p>\n
             Corporation   will   not   be  justified   in   levying   the   damages   in<\/p>\n
             case   where     the   employer,   or   the   person,who   is   bound   to<\/p>\n
             pay   the   amount   in   respect   of   the   contribution   payable   in<\/p>\n
             this regard, is able to offer sufficient or cogent explanation<\/p>\n
             for   non-remittance,   or   in   case   where   there   is   only   a<\/p>\n
             technical   or   venial   breach   of   the   provision   of   the   Act,   or<\/p>\n
             there   exists   bona   fide   circumstances,   which   will   point   out<\/p>\n
             that   there   was   no   deliberate   omission   on   the   part   of   the<\/p>\n
             employer.   In   this   perspective,   we   hold   that   the   Insurance<\/p>\n
             Court,   which   is   a   proper   forum   prescribed   b   the   Act   to<\/p>\n
             adjudicate   as   to   whether   the   order   or   proceeding   initiated<\/p>\n
             by   the   Corporation   to   recover   damages   is   justified,   can<\/p>\n
             evaluate   the   entire   matter,   and   if   it   is   satisfied   that   there<\/p>\n
             are   extenuating   circumstances,   it   can   dispense   with   the<\/p>\n
             recovery   of   damages,   or   delete   or   reduce   the   quantum   of<\/p>\n
             damages   levied   or   afford   such   other   relief,   which   in   its<\/p>\n
             opinion,   is   deserved   in   the   circumstances.     Delivering   the<\/p>\n
             judgment of the Bench, Subramonian  Poti, J. in C.L. Anand<\/p>\n
             v.   Regional   Director,   (1980   KLT   139   :   1980   Lab   I.C.   90)<\/p>\n
             stated thus:\n<\/p><\/blockquote>\n
<\/blockquote>\n
                          “Being   a   provision   which   confers   a   power   to<\/p>\n
                 impose   penalty,   S.   85(B)   of   the   Employees’   State<\/p>\n
                 Insurance Act must be taken to confer a discretion on the<\/p>\n
                 Regional   Director   in   the   matter   of   determining   the<\/p>\n
                 quantum. But, that discretion calls for objective exercise<\/p>\n
                 within   the   limit   pointed   out   in   that   Section   and   such<\/p>\n
                 exercise   must   be   apparent   in   the   order.     We   have   also<\/p>\n
                 indicated that it is necessary to find guilty conduct on the<\/p>\n
                 part of a parity to justify the imposition of damages and<\/p>\n
                 the quantum of guilt or the gravity of misconduct should<\/p>\n
                 naturally   determine   the   gravity   of   the   punishment.<\/p>\n
                 Therefore   while   one   would   not   expect   the   order   of   the<\/p>\n
                 Regional director to state with precision  how exactly the<\/p>\n
                 damages have been assessed, it must be possible to see<\/p>\n
M.F.A. No. 1007\/2002.                         -:  8  :-<\/span><\/p>\n
                    from   the   order   the   presence   of   punitive   circumstance<\/p>\n
                    justifying  the  imposition  of   damages and   the  gravity  of<\/p>\n
                    the   punitive   element.     That   would   be   necessary   to<\/p>\n
                    appreciate  whether  the  damages   imposed   could   be  said<\/p>\n
                    to be reasonable. . . . . . .   If the damages is imposed as<\/p>\n
                    merely   related   to   the   delay   without   reference   to   the<\/p>\n
                    punitive element, that may not be justifiable.”<\/p>\n
               We fully   concur  with  the  above  statement  of  the  law.    In  I.C.<\/p>\n
               20 of 1986 the Insurance Court held that the period of delay in<\/p>\n
               remitting   the   amount   varies   from   11   days   to   473   days   and<\/p>\n
               mechanical  levy  of  19  per cent damages  for all the  periods is<\/p>\n
               irrational and unfair.  So holding, the Insurance Court directed<\/p>\n
               the Corporation to fix damages at the rate of 10 per cent for all<\/p>\n
               periods involved  in  the  case.    Similarly,  in  I.C.42 of   1986  the<\/p>\n
               Insurance   Court   adverted   to   the   fact   that   the   employer<\/p>\n
               (applicant)  is a Co-operative  Society registered under  the Co-<\/p>\n
               operative Societies Act and the Government has register it as a<\/p>\n
               sick unit.    In view of the matter, interests  of justice  require  a<\/p>\n
               reduction  of   damages   and   directed   the   Society   to  pay   10   per<\/p>\n
               cent of the contribution as damages.   We are of the view that<\/p>\n
               the   direction   given   by   the   Insurance   Court   to   limit   the<\/p>\n
               percentage of damages in both the cases at 10 per cent is well<\/p>\n
               justified   and   do   not   call   for   any   interference.     The   Insurance<\/p>\n
               Court has acted in accordance with law.  At any rate we are of<\/p>\n
               the   view,   that     no   substantial   question   of   law   is   involved   in<\/p>\n
               both these appeals.”<\/p><\/blockquote>\n
\n<\/blockquote>\n
                                                                   (Emphasis supplied)<\/p>\n
This   decision   was   followed   by   another   Division   Bench   in  Hindustan<\/p>\n
Tile Works’s case and quoting the first  of the  passages quoted above,<\/p>\n
the Division Bench followed the said   decision   and  held that unless,<\/p>\n
by not paying the contributions in time, employers have acted either<\/p>\n
deliberately   or   in   defiance   of   law   or   are   guilty   of   contumacious   or<\/p>\n
dishonest   conducts   and   acted   in   disregard   of   its   obligation,   penalty<\/p>\n
cannot be imposed by  way of damages under Section 85-B.   We also<\/p>\n
note that in  a still later Division Bench decision of this Court in E.S.I<\/p>\n
Corporation  v.  Bhaskaran,<\/a> reported in 1998  (1) KLT  S.N.  24  at page<\/p>\n
28,   it   was   held   that  since   the   failure   to   carry   out   the   statutory<\/p>\n
obligation   should   be   adjudicated   by   a   quasi   judicial   enquiry   and   the<\/p>\n
levy   of   damages   is   quasi   penal   in   character,   such   damages   will   not<\/p>\n
ordinarily be imposed unless the party obliged to pay the amount due<\/p>\n
M.F.A. No. 1007\/2002.                    -:  9  :-<\/span><\/p>\n
acted   either     deliberately   or   in   defiance   of   law,   or   was   guilty   of<\/p>\n
contumacious or dishonest conduct, or acted in conscious disregard of<\/p>\n
its   obligation.     Since   all   these   decisions   categorically   use   the   very<\/p>\n
same   words   used   by   the   Supreme   Court   in  Hindustan     Steel   Ltd.’s<\/p>\n
case,     it   is   apparent   that   all   the   Division   Benches   were   of   the<\/p>\n
unanimous opinion that the imposition of damages under Section 85-B<\/p>\n
regardless   of   the   change   in     wording   before   and   after   amendments<\/p>\n
was  in the nature of penalty  and therefore the principles enunciated<\/p>\n
by   the   Supreme   Court   in   that   decision   regarding   imposition   of<\/p>\n
penalty, squarely apply to  recovery of damages under Section 85-B.<\/p><\/blockquote>\n
       10.    Of course,  the appellants have  another case that by virtue<\/p>\n
of   the   introduction   of   the   said   second   proviso   to   Section   85-B,   the<\/p>\n
interference   with   the   discretion   exercised   by   the   Corporation   to<\/p>\n
impose damages can only be in cases covered by the said proviso, ie,<\/p>\n
only in cases were the establishment on which the damages are to be<\/p>\n
imposed is a  sick industrial  company in respect of which a  claim  for<\/p>\n
rehabilitation   has   been   sanctioned   by   the   BIFR   under   the   Sick<\/p>\n
Industries Companies (Special  Provisions) Act, 1985.    We are unable<\/p>\n
to   agree.     That   proviso   was   introduced   in   tune   with   the   object   and<\/p>\n
purpose   of   the   Sick   Industries   Companies   (Special   Provisions)   Act,<\/p>\n
1985 and does not exclude the necessity to consider the question as to<\/p>\n
whether damages are to be imposed or  how much damages are to be<\/p>\n
recovered taking into account the circumstances which compelled the<\/p>\n
employer   to   commit   default   in     payment   of   contributions.     Right   of<\/p>\n
hearing was  always a precondition before imposition of damages and<\/p>\n
if   we     accept   the   contentions   as   raised   by   the   Corporation,   we   may<\/p>\n
have   to   totally     ignore   the   first   proviso,   which,   of   course,   would<\/p>\n
amount   to   going   against   the   express   words   of   the   Statute,   and   is<\/p>\n
uncalled for.   Therefore, even in cases where the establishment is not<\/p>\n
a sick industrial company, the principles enunciated in the above said<\/p>\n
M.F.A. No. 1007\/2002.                            -:  10  :-<\/span><\/p>\n
decisions  would squarely    apply   notwithstanding  the introduction    of<\/p>\n
second proviso to Section 85-B.\n<\/p>\n<\/p>\n
      11.  In this connection, an argument has also been raised by the<\/p>\n
appellants   on   the   basis   of   Regulation   31C   of   the   Employees   State<\/p>\n
Insurance (General) Regulations, 1950 which reads as under:<\/p>\n
                      “3C.     Damages   or   contributions   or   any   other   amount   due,<\/p>\n
             but   not   paid   in   time:-     If   an   employer   fails   to   pay   contributions<\/p>\n
             within   the   periods   specified   under   regulation   31,   or   any   other<\/p>\n
             amount   payable   under   the   Act,   the   corporation   may   recover<\/p>\n
             damages,   not   exceeding   the   rates   mentioned   below,   by   way   of<\/p>\n
             penalty:\n<\/p><\/blockquote>\n
<\/blockquote>\n
             —————————————————————————————————<\/p>\n
             Period of delay                        Maximum rate of damages in per cent<\/p>\n
                                                               per annum of the amount due.\n<\/p><\/blockquote>\n
             —————————————————————————————————<\/p>\n<\/blockquote>\n
             (i)  Less than 2 months                                                                  5%\n\n\n             (ii)  2 months and above But less than 4 months                                         10%\n\n\n             (iii)  4 months and above but less than 6 months                                        15%\n\n\n             (iv)  6 months and above                                                                25%\n\n<\/pre>\n
             —————————————————————————————————<\/p>\n<\/blockquote>\n
                      Provided   that   the   Corporation,   in   relation   to   a   factory   or<\/p>\n
             establishment which is declared as sick industrial company and in<\/p>\n
             respect  of which  a  rehabilitation  scheme  has been  sanctioned   by<\/p>\n
             the Board for Industrial and Financial Reconstruction, may:-<\/p>\n<\/blockquote>\n
                      (a)    in case of  a change  of  management  including  transfer<\/p>\n
             of undertaking(s) to workers’ Co-operative(s) or in case of merger<\/p>\n
             of     amalgamation   of   sick   industrial   company   with   a   healthy<\/p>\n
             company, completely waive the damages levied or leviable;<\/p>\n<\/blockquote>\n
                      (b)   in other cases, depending  on its merits, waive upto 50<\/p>\n
             per cent damages levied or leviable;\n<\/p><\/blockquote>\n
<\/blockquote>\n
                      (c)     in   exceptional   hard   cases,   waive   either   totally   or<\/p>\n
             partially the damages levied or leviable.”\n<\/p><\/blockquote>\n
<\/blockquote>\n
Counsel for the appellants would submit that since under Section 85-<\/p>\n
B,   the   penalty   to   be   imposed   as   damages   for   delayed   payment   of<\/p>\n
contribution   is   as   specified   in   the   regulations,   and   Regulation   31C<\/p>\n
M.F.A. No. 1007\/2002.                     -:  11  :-<\/span><\/p>\n
specifically   lays   down   the   percentage   of   damages   to   be   imposed   on<\/p>\n
the basis of the period of delay, all what the Corporation is bound to<\/p>\n
take   into   account   is   the   extent   of   delay   for   deciding   the   damages<\/p>\n
imposed.     That   also   may   not   be   the   correct   interpretation   of   the<\/p>\n
provisions.    At the most, Regulation 31C would only be guidelines in<\/p>\n
the   matter   of   imposition   of   damages.     Further,   Regulation   31C   also<\/p>\n
specifically   states  not   exceeding   the   rates   mentioned   below,   which<\/p>\n
shows   that   the   percentage   fixed   there   is   not   absolute.     This   is<\/p>\n
exemplified  by  the fact  that   in the  proviso to Regulation  31C  in  the<\/p>\n
case   of   a   sick   industrial   company,   separate   guidelines   have   been<\/p>\n
prescribed   for   imposition   of   damages,   which   also   would   go   to   show<\/p>\n
that the discretion vested in the Corporation under Section 85-B read<\/p>\n
with Regulation 31C has to be exercised judicially.  The same being by<\/p>\n
way  of  penalty,  the  Corporation  is  bound to adhere  to  the  principles<\/p>\n
for imposition of penalty as laid down in Hindustan Steel Ltd.’s  case.<\/p>\n
       12.     Viewed   thus,   the   fact   that   there   were   three   litigations<\/p>\n
pending before the Insurance Court, namely, I.C.Nos. 23\/1988 and 63<\/p>\n
and 64 of 1993 in respect of the liability of the respondents herein to<\/p>\n
pay contributions itself and the financial difficulties projected by them<\/p>\n
are   certainly   matters   which   should   have  been  taken   into  account   by<\/p>\n
the   Corporation   while   imposing   damages   under   Section   85-B   for<\/p>\n
delayed   payment   of   contribution   for   the   periods   in   question   under<\/p>\n
Section 85-B.\n<\/p>\n<\/p>\n
       13.   In this connection, we may note with approval the decision<\/p>\n
rendered   by   one   of   us   (S.   Siri   Jagan,   J.)   in   the   decision   of  Indian<\/p>\n
Telephone   Industries   Ltd.   v.  Asst.   P.F.   Commissioner   &   others,<\/p>\n
reported   in   2006   (3)   KLJ   698,   albeit     in   the   context   of   imposition  of<\/p>\n
damages   under   Section   14-B   of   the   Employees   Provident   Funds   and<\/p>\n
Miscellaneous   Provisions   Act     (‘Provident   Fund   Act’   for   short).     We<\/p>\n
note that the provisions relating to imposition of damages for delayed<\/p>\n
M.F.A. No. 1007\/2002.                      -:  12  :-<\/span><\/p>\n
payment   of   contribution   under   both   these   enactments   are   in   pari<\/p>\n
materia. The amendment brought out in the section are also identical.<\/p>\n
Prior   to   the   amendment   of   Section   14-B   in   1988,   in   the   Provident<\/p>\n
Fund Act, the Section read thus:\n<\/p>\n<\/p>\n
             “Power   to   recover   damages:-     Where   an   employer   makes<\/p>\n
             defaults   in   the   payment   of   any   contribution   to   the   Fund   (the<\/p>\n
             Family   Fund   or   the   Insurance   Fund)   or   in   the   transfer   of<\/p>\n
             accumulations   required   to   be   transferred   by   him   under   sub-<\/p>\n
             section   (2)   of   Section   15   (for     sub-section   17)   or   in   the<\/p>\n
             payment of  any  charges payable under any  other  provision  of<\/p>\n
             this Act or of  (any scheme or Insurance Scheme) or under any<\/p>\n
             of   the   conditions   specified   under   Section   17,   (the   Central<\/p>\n
             Provident Fund Commissioner, or such other office as may be<\/p>\n
             authorised   by   the   Central   Government,   by   notification   in   the<\/p>\n
             official  gazette in this behalf)  may recover from the employer<\/p>\n
             such  damages, not exceeding the amount of  arrear, as it may<\/p>\n
             think fit to impose:\n<\/p><\/blockquote>\n
<\/blockquote>\n
                     Provided   that   before   levying   and   recovering   such<\/p>\n
             damages,   the   employer   shall   be   given   a   reasonable<\/p>\n
             opportunity of being heard.:  (Emphasis supplied).”<\/p>\n<\/blockquote>\n
Later on, the said Section was amended by Act 33\/1988,  after which<\/p>\n
the Section reads as follows:\n<\/p>\n<\/p>\n
             “14-B.  Power to recover damages:-  Where an employer makes<\/p>\n
             default   in   the   payment   of   any   contribution   to   the   Fund   (the<\/p>\n
             Family Pension Fund of the Insurance Fund) or in the transfer<\/p>\n
             of accumulations required to be transferred  by him under sub-<\/p>\n
             section (2) of Section 15 (or sub-section (5) of Section 17) or in<\/p>\n
             the payment of any charges payable under any other provision<\/p>\n
             of this Act or of any Scheme or Insurance Scheme or under any<\/p>\n
             of the conditions specified under Section 17, officer  as may be<\/p>\n
             authorised   by   the   Central   Government     by   notification   in   the<\/p>\n
             official   Gazette,   in   this   behalf  may   recover   from   the   employer<\/p>\n
             by way of penalty  such  damages, not exceeding the amount of<\/p>\n
             arrears as may be specified in the Scheme:\n<\/p><\/blockquote>\n
<\/blockquote>\n
                     Provided   that   before   levying   and   recovering   such<\/p>\n
             damages, the employer shall be given a reasonable opportunity<\/p>\n
             of being heard:\n<\/p><\/blockquote>\n
<\/blockquote>\n
                     Provided   further   that   the   Central   Board   may   reduce   or<\/p>\n
             waive   the   damages   levied   under   this   section   in   relation   to   an<\/p>\n
             establishment which is a sick industrial company and in respect<\/p>\n
             of which a scheme for rehabilitation has been sanctioned by the<\/p>\n
M.F.A. No. 1007\/2002.                           -:  13  :-<\/span><\/p>\n
               Board for Industrial Financial Reconstruction established under<\/p>\n
               Section 4 of the Sick Industrial Companies (Special Provisions)<\/p>\n
               Act, 1985 (1 of 1986), subject to such  terms and conditions  as<\/p>\n
               may be specified in the Scheme. ” (Emphasis supplied).<\/p>\n<\/blockquote>\n
Clause 32A in Employees Provident Fund Scheme is somewhat similar<\/p>\n
to Regulation 31C of the ESI Act, which reads thus:<\/p>\n
                “32A.  Recovery  of  damages  for   default  in  payment   of  any<\/p>\n
       contribution:- (1)   Where an employer  makes default in the payment<\/p>\n
       of   any   contribution   to     the   fund,   or   in   the   transfer   of   accumulations<\/p>\n
       required to  be transferred  by him  under  sub-section  (2)  of  section  15<\/p>\n
       or   sub-section   (5)   of   section   17   of   the   Act   or     in   the   payment   of   any<\/p>\n
       charges   payable   under   any   other   provisions   of   the   Act   or   Scheme   or<\/p>\n
       under any of the conditions specified under Section 17 of the Act, the<\/p>\n
       Central   Provident   Fund   Commissioner   or   such   officer   as   may   be<\/p>\n
       authorised   by   the   Central   Government,   by   notification   in   the   Official<\/p>\n
       Gazette   in   this   behalf,   may   recover   from   the   employer   by   way   of<\/p>\n
       penalty, damages at the rates given below:-\n<\/p><\/blockquote>\n
\n<\/blockquote>\n
      Period of Default                                                       Rates of damages (% of\n\n                                                                                       arrears per annum.\n\n\n      (a)  Less than two months                                                           17<\/span>\n\n\n      (b)  Two months and above But less than\n\n             four months.                                                                 22<\/span>\n\n\n      (c)  Four months and above But less than\n\n             six months.                                                                  27<\/span>\n\n\n      (d)  Six months and above                                                           37\"\n\n\n<\/pre>\n
Considering the above said provisions, in the above said decision, the<\/p>\n
learned Judge held as follows:\n<\/p><\/blockquote>\n
<\/blockquote>\n
                                  “16.     I   am   of   opinion   that   merely   because   there   is<\/p>\n
               belated payment of contributions, liability to pay damages does<\/p>\n
               not   automatically   arise,   but   the   same   shall   be   decided   by<\/p>\n
               applying mind to the merits of each case  and not by  resorting<\/p>\n
               to   mere   arithmetic   calculation   of   damages.     Even   though<\/p>\n
               liability   to   pay   contributions   is   statutory,   to   hold   that   delay<\/p>\n
               automatically   attracts   damages   would   be   too   rigid   a   way   of<\/p>\n
               construing   the   Section,   especially   since   the   imposition   of<\/p>\n
               damages   is   punitive   in   nature.     There   must   be   application   of<\/p>\n
               mind taking into account the reasons for delay and whether the<\/p>\n
               delay   could   have   been   avoided   by   ordinary   diligence   by   the<\/p>\n
M.F.A. No. 1007\/2002.                         -:  14  :-<\/span><\/p>\n
              employer.     For   this,   one   cannot   with   any   amount   of   certainty<\/p>\n
              say   what   are   the   circumstances   which   would   mitigate   the<\/p>\n
              damages   and   which   would   not.     The   same   would   differ   from<\/p>\n
              case   to   case,   which   requires   exercise   of   judicial   discretion   by<\/p>\n
              the  authority   imposing   damages  by  application   of  mind   to  the<\/p>\n
              circumstances   pleaded   and   proved   by   the   defaulting<\/p>\n
              employer.”\n<\/p><\/blockquote>\n
<\/blockquote>\n
We   are  in   complete  agreement   with   the  principles   laid   down   in   that<\/p>\n
decision  and  are     of   opinion   that   those  principles     squarely   apply   to<\/p>\n
the   interpretation   of   Section   85-B   of   the   ESI   Act   since   the   relevant<\/p>\n
provisions   in   the   two   beneficial   legislations   are   in   pari   materia   with<\/p>\n
each other.<\/p><\/blockquote>\n
       14. While at it,  we may also note a contention of the appellants<\/p>\n
to   the   effect   that   the   damages   leviable   under   Section   85-B   is<\/p>\n
compensatory in nature and therefore damages cannot be decided by<\/p>\n
applying   the   principles   applicable   for   imposing   penalty   alone.     This<\/p>\n
question   was   answered   in   the   negative   as   early   as   in   1980   by   a<\/p>\n
Division Bench of this Court in E.S.I Corporation v. Meecos Ltd., 1980<\/p>\n
KLT 179.  The Division Bench in that decision described the character<\/p>\n
of the imposition as follows:\n<\/p>\n<\/p>\n
                       “The   Employees’   State   Insurance   Act   is   intended   to<\/p>\n
               provide   certain   benefits   to   employees   in   case   of   sickness,<\/p>\n
               maternity   and   employment   injury   and   to   make   provision   for<\/p>\n
               certain other matters relating to benefit to the employees.   The<\/p>\n
               scheme   cannot   be   worked   out   without   making   effective<\/p>\n
               provisions   for   levying   contributions   under   the   Act.     The<\/p>\n
               employer   as   well   as   the   employees   contributes   which<\/p>\n
               contribution  is  ploughed   back  for  the   benefit   of  the employees<\/p>\n
               by   working   out   various   schemes   intended   to   serve   the<\/p>\n
               employees   covered   by   the   Act.     The   time   within   which<\/p>\n
               contributions   are  to   be   made   is   provided  by   the   Act   read  with<\/p>\n
               the   Regulations   made   thereunder.     S.   84   of   the   Act   enables<\/p>\n
               prosecution  for   false   representations   or   false   statements  made<\/p>\n
               with   a   view   to   avoid   payment   under   the   Act.     Defaults   to   pay<\/p>\n
               contribution   under   the   Act   or   failure   to   furnish     return   under<\/p>\n
               the Act and similar matters which would necessarily hamper the<\/p>\n
               proper implementation of the Act are made punishable by S. 85<\/p>\n
               of   the   Act.     Provision   for   enhanced   punishment   in   cases   of<\/p>\n
               previous   conviction   is   made   under   S.   85A   of   the   Act.     It   is   in<\/p>\n
               that  context  that     S.   85B  appears  in  the  Act   and   that  provides<\/p>\n
               for   recovery   of   ‘damages’   where   the   employer   defaults   to   pay<\/p>\n
M.F.A. No. 1007\/2002.                           -:  15  :-<\/span><\/p>\n
                contribution   payable   under   the   Act.     But   the   Section   provides<\/p>\n
                that the recovery of such ‘damages’ shall not be in excess of the<\/p>\n
                arrears   and   the   amount   of   such   damages   is   to   be   such   as   the<\/p>\n
                Corporation may think fit to impose.    Sub-section (2) of S. 85B<\/p>\n
                enables recovery of such damages as an arrear of land revenue.<\/p>\n
                It  may  also   be   pertinent   to   note   that   despite   the   provision   for<\/p>\n
                imposition of damages, there is an independent provision under<\/p>\n
                S.   97(2)(iii-a)   of   the   Act   enabling   regulations   to   be   made   in<\/p>\n
                regard to levy of interest at a rate not exceeding 6 per cent per<\/p>\n
                annum   on   contributions   due,   but   not   paid.     That   such<\/p>\n
                Regulations have been made enabling interest to be levied at 6<\/p>\n
                per cent is admitted.   The  levy  of interest at 6 per cent on the<\/p>\n
                defaulted   amount   is   therefore   not   as   damages   but   as   interest<\/p>\n
                recoverable   pursuant   to   the   said   Regulation.     The   power   to<\/p>\n
                impose   damages   is   conferred   on   the   Corporation<\/p>\n
                notwithstanding   the   right   to   levy   interest   independently   and<\/p>\n
                evidently   therefore   ‘damages’   for   delayed   payment   cannot   be<\/p>\n
                equated   with   interest   on   the   defaulted   payments.     The   statute<\/p>\n
                contemplates   liability   for   such   damages   when   once   failure   to<\/p>\n
                pay   is   established.     What   such   damages   should   be   in   any<\/p>\n
                specific case is another mater. The use of the term ‘imposed’ in<\/p>\n
                S.   85B   suggests   that   the   ‘damages’   as   contemplated   in   that<\/p>\n
                section is different from the concept envisaged  by that term in<\/p>\n
                relation   to   contracts   or   torts.       ‘Imposition’   is   normally<\/p>\n
                associated with the authority to create an obligation.  Taxes are<\/p>\n
                imposed, duties are imposed and penalties are imposed whereas<\/p>\n
                damages   in   torts   and   contracts   ‘arise’.                     The   damages<\/p>\n
                contemplated   in   S.   85B   is   therefore   not   compensation   for   loss<\/p>\n
                on   account   of   the   default   of   a   party,   but   is   in   the   nature   of   a<\/p>\n
                penalty   that   could   be   imposed   for   non-compliance   with   the<\/p>\n
                statute to the extent indicated.”\n<\/p><\/blockquote>\n
<\/blockquote>\n
                                                                       (Emphasis supplied)<\/p>\n
This decision is in keeping with the statutory provisions as obtaining<\/p>\n
now.   The compensatory   part is taken care of by other provisions in<\/p>\n
the   Act   for   realisation   of   interest   on   the   delayed   payment.     Even<\/p>\n
before   a   specific   provision   under   the   Act   was   introduced   by   way   of<\/p>\n
sub-section (5) of Section 39 by Act 29 of 1989, the Employees State<\/p>\n
Insurance (General) Regulations contained a provision for recovery of<\/p>\n
interest on delayed payments, which was substituted by a notification<\/p>\n
dated 9-3-1983 reads as follows:\n<\/p><\/blockquote>\n
<\/blockquote>\n
                        “31A. Interest on contribution due, but not paid in<\/p>\n
                time:-   An employer    who fails to pay contribution within the<\/p>\n
                periods specified in regulation 31, shall be liable to pay simple<\/p>\n
M.F.A. No. 1007\/2002.                     -:  16  :-<\/span><\/p>\n
              interest at the rate of fifteen per cent per annum in respect of<\/p>\n
              each day of default or delay in payment of contribution.”<\/p>\n<\/blockquote>\n
In  fact,  that  regulation  is  referred  to  in   the       Meecos’s  case  in the<\/p>\n
portion  extracted   above.     The   Parliament   gave   statutory   backing     to<\/p>\n
the power to levy interest by introducing sub-section (5) to Section 39<\/p>\n
of the ESI Act itself which reads thus:\n<\/p><\/blockquote>\n
<\/blockquote>\n
                     39.  Contributions:-\n<\/p><\/blockquote>\n
<\/blockquote>\n
                                              xx                       xx\n\n                     xx\n\n\n<\/pre>\n
                     (5) (a)   If any contribution payable under  this Act is not<\/p>\n
             paid   by   the   principal   employer   on   the   date   on   which   such<\/p>\n
             contribution  has  become  due,   he   shall   be  liable  to  pay   simple<\/p>\n
             interest at the rate of twelve   per cent   per annum  or at such<\/p>\n
             higher rate as may be specified in the regulations till the date<\/p>\n
             of its actual payment:\n<\/p><\/blockquote>\n
<\/blockquote>\n
                     Provided that higher interest specified in the regulations<\/p>\n
             shall   not   exceed   the   lending   rate   of   interest   charged   by   any<\/p>\n
             scheduled bank.\n<\/p><\/blockquote>\n
<\/blockquote>\n
                     (b)     Any   interest   recoverable   under   clause   (a)   may   be<\/p>\n
             recovered as an arrear of land revenue or under section 45C to<\/p>\n
             section 45I.\n<\/p><\/blockquote>\n
<\/blockquote>\n
                     Explanation:-     In   this   sub-section,   “scheduled   bank”<\/p>\n
             means   a   bank   for   the   time   being   included   in   the   Second<\/p>\n
             Schedule to the Reserve Bank of India Act, 1934 (2 of 1934).”<\/p>\n<\/blockquote>\n<\/blockquote>\n
In fact, in Indian Telephone Industries case also, after noting similar<\/p>\n
provisions   in   the   EPF   &   MP   Act   and   the   Scheme   thereunder,   the<\/p>\n
learned   Single   Judge     had   also   come   to   the   same   conclusion,   which<\/p>\n
also we approve  of.   As such, the compensatory  part has been taken<\/p>\n
care of by stipulating payment of interest for delayed   payments and<\/p>\n
therefore   it   is   abundantly   clear   that   imposition   of   damages   under<\/p>\n
Section 85B is purely penal in character and therefore the principles<\/p>\n
to   be   applied   while   computing   the   damages     payable   would   be   as<\/p>\n
applicable   for   imposition   of   penalties   as   elucidated   by   the   Supreme<\/p>\n
Court in Hindustan Steel’s case.<\/p><\/blockquote>\n
M.F.A. No. 1007\/2002.                              -:  17  :-<\/span><\/p>\n
         In   view   of   our   above   findings,   we   are   of   opinion   that   applying<\/p>\n
the   said   principles   to   the   present   case,   the   fact   that   there   were<\/p>\n
litigations pending between the parties in respect of the very liability<\/p>\n
of the respondents  to pay contributions under the Act   which   led to<\/p>\n
delay in paying contribution were certainly matters which should have<\/p>\n
been   taken   into   account   by   the   appellants   while   determining   the<\/p>\n
amount   of   damages   under   Section   85B.     Likewise,     the   paucity   of<\/p>\n
liquid   cash     which   is   not   very   uncommon     cannot   also   result   in   a<\/p>\n
penalty   without   an     appropriate   probe   into   the   causes   thereof.<\/p>\n
Evidently,   the   Insurance   Court   has   taken   into   account   all   those<\/p>\n
circumstances     to   come   to   the   conclusion   that   the   amount   of   Rs.<\/p>\n
27,500\/-   would   be   the   appropriate   damages   to   be   imposed   on<\/p>\n
respondents in this case.       When a fact finding authority has arrived<\/p>\n
at   that   conclusion   taking   into   account   all   the   facts,   evidence   and<\/p>\n
circumstances proved before it, we do not think that it is for us to hold<\/p>\n
otherwise,   in   exercise   of     our   limited   jurisdiction   which   can   be<\/p>\n
exercised only to decide substantial questions of law under Section 82<\/p>\n
of   the   E.S.I   Act.     Therefore,   we   do   not   find   any   merit   in   the<\/p>\n
contentions in this appeal and accordingly, the same is dismissed.<\/p>\n
                                                             Sd\/- M. Ramachandran, Judge.\n<\/p>\n<\/p>\n
                                                              Sd\/-        S. Siri Jagan,  Judge.\n\n\nTds\/\n\n\n\n\n\n         [True copy]\n\n\n\n\n                                    P.S to Judge.\n\n\n<\/pre>\n","protected":false},"excerpt":{"rendered":"
Kerala High Court The Employees State Insurance vs K.N.Premanandan on 25 January, 2007 IN THE HIGH COURT OF KERALA AT ERNAKULAM MFA No. 1007 of 2002() 1. THE EMPLOYEES STATE INSURANCE … Petitioner 2. THE RECOVERY OFFICER, REGIONAL OFFICE, Vs 1. K.N.PREMANANDAN, KURATHUPARAMBIL HOUSE, … Respondent 2. K.N.VIDYANANDAN, KURATHUPARAMBIL HOUSE, For Petitioner :SRI.T.P.M.IBRAHIM KHAN,SR.SC, RAILWAYS […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[8,21],"tags":[],"class_list":["post-231313","post","type-post","status-publish","format-standard","hentry","category-high-court","category-kerala-high-court"],"yoast_head":"\nThe Employees State Insurance vs K.N.Premanandan on 25 January, 2007 - Free Judgements of Supreme Court & High Court | Legal India<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.legalindia.com\/judgments\/the-employees-state-insurance-vs-k-n-premanandan-on-25-january-2007\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"The Employees State Insurance vs K.N.Premanandan on 25 January, 2007 - 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