The power to levy damages under S.85B of the Employees State Insurance Act is discretionary and should be exercised objectively, taking into account the facts and circumstances of each case.

1. The Regional Director, E S.I. Corporation, Trichur, is the appellant in both these appeals. The appeals are preferred against the order passed by the Insurance Case No. 20 of 1986. dated 27-11-1987, and Insurance Case No. 42 of 1986, dated 30-10-1987 It appears that in both these cases, the employer failed to pay the amount due in respect of the contribution payable under the Employees State Insurance Act. The Corporation levied 19 per cent interest as damages on such arrears for the delayed payments. The assessment proceedings were attacked as illegal, unfair and improper before the Insurance Court. The Insurance Court in I, C. 42 of 1986 held that 10 per cent of the contribution may be levied as damages. In I.C. 20 of 1986 the same court held that the employer may be levied damages at the rate of 12 per cent. The Regional Director, E.S.I. Corporation has, in these appeals, questioned the jurisdiction and propriety of the Insurance Court in reducing the damages levied.

2. We heard counsel for the petitioner, Mr. C. S. Rajan. It was argued that, admittedly, in both these cases the employer failed to pay the amounts due in respect of contribution payable under the Act. It is for the Corporation to decide what amount will be recovered as damages and the only limitation placed on the Corporation is to be found in S.85(B) of the Act, to the effect that the damages shall not exceed the arrears and that before recovering the damages the employer shall be given a reasonable opportunity of being beard. It is not open to the Insurance Court to interfere with the quantum of damages levied on the employer.

3. An appeal from the decision of the Employees Insurance Court lies to this Court only when it involves a substantial question of law. This is so stated in S.82 of the Act. The Corporation is empowered to recover damages under S.85B of the Act. S.85B is in the following terms:

"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 such damages, not exceeding the amount of arrears as it may think fit to impose:

Provided that before recovering such damages; the employer shall be given a reasonable opportunity of being heard.

2. Any damages recoverable under sub-section (1) may be recovered as as arrear of land revenue."

It was not disputed that from any levy of damages it is open to the employer to take up the matter before the Insurance Court under S.75 read with S.78 of the Act. The only question focused was that the Insurance Court cannot interfere with the quantum of damages. A mere look at S.8SB will show that even where the employer fails to pay the amounts due in respect of any contribution payable under the Act, it is not obligatory on the Corporation to levy or recover damages. The power to levy damages is discretionary. The section has only stated, the maximum amount that can be so recovered. The power to levy and recover damages provided in S.85B of the Act is in the nature of a quasi-penal provision. An order, levying damages for failure to pay the amount due in respect of any contribution payable under the Act. is a quasi judicial proceeding. The proviso to S.85B itself indicates, that before recovering such damages, the employer should be given a reasonable opportunity of being heard. It postulates that there should be an adjudication in the matter. Since the failure to carry out the statutory obligation should be adjudicated by a quasi judicial enquiry, and the levy of damages is quasi penal in character, we are of the view that such damages will not ordinarily be imposed unless the party obliged to pay the amount due, acted either deliberately or in defiance of law. or was guilty of contumacious or dishonest conduct, or acted in conscious disregard of its obligation. The mere fact, that the Corporation is empowered to recover damages, does not mean that the Corporatio