Regional Director, Employees' State Insurance Corporation, Regional Office, PanchaDeep Bhavan, Thrissur-20 v. M/S. Janmabhoomi Malayalam Daily, represented by Managing Director Kummanam Rajasekharan

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT:** **THE HONOURABLE MR. JUSTICE P.D.RAJAN** **WEDNESDAY, THE 16TH DAY OF AUGUST 2017/25TH SRAVANA, 1939** **INS.APP.NO. 51 OF 2013 () --------------------------** **AGAINST THE JUDGMENT IN I.C. NO.21/2011 OF EMPLOYEES' INSURANCE COURT, ALAPPUZHA DATED 25.01.2013** **-----------------------------** ## **APPELLANT(S)/RESPONDENT:** **-----------------------** **THE REGIONAL DIRECTOR, ESI CORPORATION, REGIONAL OFFICE, PANCHADEEP BHAVAN, THRISSUR-20.** ## **BY ADV. SRI.K.SANDESH RAJA** **RESPONDENT(S)/RESPONDENTS: --------------------------** **M/S. JANMABHOOMI MALAYALAM DAILY, REPRESENTED BY MANAGING DIRECTOR, KUMMANAM RAJASEKHARAN, PERANDOOR ROAD, ELAMAKKARA.P.O,KOCHI-26.** **R1 BY ADV. SRI.C.B.SREEKUMAR** **THIS INSURANCE APPEAL HAVING BEEN FINALLY HEARD ON 16-08-2017, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** **NS** ## **P.D. RAJAN, J.** **-----------------------I.N.A.P. No.51 of 2013 ---------------------------------Dated this the 16[th] day of August, 2017** ## **J U D G M E N T** This appeal is preferred against the order in I.C. No.21 of 2011 of the Employees Insurance Court (for short, E.I. Court), Alappuzha by the Regional Director, Employees State Insurance Corporation (for short, E.S.I. Corporation). The above application was filed under Sec.75 read with Sec.77 of the Employees' State Insurance Act (for short, E.S.I. Act), 1948 seeking for a declaration that Exts.P2 to P5 notice dated 21.10.2010 claiming damages by way of penalty for the delayed payment of contribution is unsustainable. The learned E.I. Court, declared Exts.D1, D2, D3 and D4 notices as unsustainable and consequently, Exts.P2 to P5 and D19 notices were declared as unsustainable. 2. The 1[st] respondent's case is that the Malayalam Daily newspaper is not a commercially oriented newspaper and therefore its circulation is very low and it is uneconomical. The establishment was ## I.N.A.P. No.51 of 2013 2 running in loss from 2003-2004 to 2008-2009 and hence there was delay in payment of wages to the employees and the delay in payment of statutory payments to the E.S.I. Corporation. They contended that since there was no intentional delay in payment of contribution, they approached the appellant to excuse the delay. In spite of the appeal, the appellant imposed damages by way of penalty as per Exts.D1, D2, D3 and D4. 3. Learned counsel appearing for the appellant contended that the respondent firm is functioning since 1977 and is covered under the E.S.I. Act. Respondent, being the principal employer of the establishment, has to pay all the benefits to the employees with the statutory direction. There was inordinate delay in paying contribution. After issuing proper notice under Sec.85B of the E.S.I. Act, the above penalty was imposed which was ignored by the Court below. 4. Now, the question is whether all formalities were completed before imposing the aforesaid penalty. In the lower court, both parties did not adduce any oral ## I.N.A.P. No.51 of 2013 3 evidence but the documents were marked as Exts.P1 to P7 & and Exts.D1 to D8. ## 5. Sec.85B of the E.S.I. Act reads as follows: 85B. Power to recover damages (1) Where an employer fails to pay the amount due in respect of any contribution or any other amount payable under this Act, the Corporation may recover from the employer by way of penalty such damages not exceeding the amount of arrears as may be specified in the regulations: Provided that before recovering such damages, the employer shall be given a reasonable opportunity of being heard: Provided further that the Corporation may reduce or waive the damages recoverable under this section in relation to an establishment which is a sick industrial company in respect of which a scheme for rehabilitation has been sanctioned by the Board for Industrial and Financial Reconstruction established under section 4 of the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986), subject to such terms and conditions as may be specified in regulations. (2) Any damages recoverable under sub-section (1) may be recovered as an arrear of land revenue or under section 45-C to section 45-I. ## I.N.A.P. No.51 of 2013 4 The above Section shows that the damages recoverable under Section 85(1) may be recovered as arrears of land revenue or under Section 45-C to Section 45-I. 6. Apex court in **Employees State Insurance Corporation** v. **HMT Limited and Another (2008) 3 SCC 35** 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. It is clear from the above argument of the appellant that they have issued a notice under Sec.85B of the E.S.I. Act, but that notice was not produced in the Court below. Without complying the statutory formalities provided under Sec.85B of the E.S.I. Act, the recovery officer issued Exts.D1, D2, D3 and D4 notices, that itself is not proper. When an employer fails to pay the amount in respect of the contribution or any other amount payable under the E.S.I. Act, the E.S.I. Corporation has the responsibility to recover it from the employer by way of penalty such damages not exceeding the amount of arrears as may be specified in the ## I.N.A.P. No.51 of 2013 5 Employees State Insurance (General) Regulations, 1950. Regulation 31C reads as follows. 31-C. Damages or contribution or any other amount due, but not paid in time.- If an employer who fails to pay contribution within the periods specified under regulation 31, or any other amount payable under the Act, the Corporation may recover damages, not exceeding the rates mentioned below, by way of penalty: __________________________________________________________ Period of delay Maximum rate of damages in percent per annum of the amount due ------------------------------------------------------------------------------------- (i) Less than 2 months 5% (ii) 2 months and above but less than 4 months 10% (iii) 4 months and above but less than 6 months 15% (iv) 6 months and above 25% __________________________________________________________ Provided that the Corporation, in relation to a factory or establishment which is declared as sick industrial company and in respect of which a rehabilitation scheme has been sanctioned by the Board for Industrial and Financial Reconstruction, may:- (a) in case of a change of management including transfer of undertaking(s) to worker's co-operative(s) or in case of merger or amalgamation of sick industrial company with I.N.A.P. No.51 of 2013 6 a healthy company, completely waive the damages levied or leviable; (b) in other cases, depending on its merits, waive upto 60 per cent damages levied or leviable; (c) in exceptional hard cases, waive either totally or partially the damages levied or leviable. ## 7. This Court in **E.S.I. Corporation v Premanandan 2007 (2) KLT 666** held that; “ The question as to whether the damages imposed under Sec.85B of the E.S.I. Act is justifiable or whether the quantum of damages imposed is in accordance with the principles of computing damages is certainly a dispute, which would fall within the ambit of Clause(g) of Sec.75(1). The Insurance Court has jurisdiction to decide the question as to whether damages imposed under Sec.85B of the Act is justifiable or not.” Moreover, the recovery officer also failed to comply with the provisions of Sec.85B of the E.S.I. Act. It is mandatory that the employer shall be given reasonable opportunity of being heard. If the 1[st] respondent give reasonable explanation for the delay and no mens rea exist to contravene the statutory provision, appellant shall drop I.N.A.P. No.51 of 2013 7 the proceedings to levy damages. On the other hand, if there is mens rea it shall proceed as per law. Hence, the order passed by the E.S.I. Court is set aside and the matter is remitted to the E.S.I. Corporation for fresh consideration with liberty to proceed against the respondent by issuing a notice as per Section 85B of the E.S.I. Act and proceed as per law. Respondent is at liberty to submit his explanation on receipt of the notice. This appeal is disposed of as above. Sd/- **P.D. RAJAN, JUDGE** NS / True Copy / P.A. To Judge