REGIONAL DIRECTOR Vs. BHARATIYA VIDYA BHAVAN SCHOOL

JUDGEMENT

(1.) THIS appeal is preferred against the order of the Employees Insurance Court, Kozhikode in E.I.C.19/09. The E.S.I. Corporation has levied a penalty of Rs.26,784/- for delayed payment of contribution for the wage period from 8.10.07 to 30.9.08. The establishment is a school and they had raised a contention at the beginning that they are not liable to be covered under the E.S.I.Act. They had been litigating and ultimately lost the battle and paid the contribution. But the E.S.I. Corporation authorities were not prepared to spare them and therefore invoked S.85-B of the E.S.I.Act and levied a penalty. In defence to the same the establishment would contend that it is not a profit making concern but is a society intended to impart eduction to the children and on account of the reasons it had gone beyond their control and they were not able to pay it in time as well as the fact that a litigation was also pending. S.85-B of the E.S.I.Act refers to the power to be exercised by the Corporation as a discretionary one and the word used is 'may' and not 'shall'. The Division Bench of this Court in the decision reported in 2008 (3) KLT 336 Regional Director, ESI Corporation v. Managing Director, M/s Qetcos Ltd. considered the impact and held that in all cases it is not necessary to impose damages which will amount to penalty. The learned judges had referred to the decisions of the Hon'ble Supreme Court and also extracted a paragraph from the said decision, i.e. E.S.I. Corporation v. HMT Ltd. (AIR 2008 (SC) 1322). The Apex Court in that decision relying on an earlier decision held that,

(2.) THE Hon'ble Supreme Court also considered the discretionary jurisdiction and how it has to be exercised. From earlier time onwards this Court had taken a view that unless there is a contumacious conduct, as a routine, penalty cannot be imposed. Now here is a case where it is true that the establishment fought for getting exemption from the purview of the E.S.I.Act. It is also crystal clear that it fought on principles but turned out to be against them, later they had paid the contribution. So it is very clear that they did not have the mental block to pay the amount nor the element of mensrea was present in delaying the payment. THErefore I feel this is a case where the E.I.Court has properly exercised its jurisdiction but the Corporation has not exercised the discretion vested in it judiciously. I agree with the contention of the E.S.I. Corporation that mere financial stringency cannot be a ground. Here it is only one of the grounds and the main ground is that they were fighting for a case and they did not have the requisite mensrea to evade payment. THErefore I confirm the finding of the E.I.Court and dismiss the appeal without costs.