The Regional Director must exercise discretion within the limits of the law and provide a clear indication of the punitive circumstances justifying the imposition of damages.

Subramonian Poti, J

The only point urged at the hearing by the counsel for the appellant is that the Employees' Insurance Court, Calicut in dismissing an application of the appellant to set aside an order of damages passed by the Regional Director of the Employees State Insurance Corporation, Trichur has failed to notice that in imposing damages no indication has been given about the factors which weighed with the Regional Director in determining the quantum. We need not elaborate our discussion on the question in view of what we have said about the nature of imposition of damages in MFA. No. 438/78 and, how damages should be imposed as a penalty, in MFA. No. 202 of 1979. Being a provision which confers a power to impose penalty, S.85 (B) of the Employees' State Insurance Act must be taken to confer a discretion on the Regional Director in the matter of determining the quantum. But, that discretion calls for objective exercise within the limit pointed out in that Section and such exercise must be apparent in the order. We have also indicated that it is necessary to find guilty conduct on the part of a party to justify the imposition of damages and the quantum of guilt or the gravity of misconduct should naturally determine the gravity of the punishment. Therefore while one would not expect the order of the Regional Director to state with precision how exactly the damages have been assessed, it must be possible to see from the order the presence of punitive circumstance justifying the imposition of damages and the gravity of the punitive element. That would be necessary to appreciate whether the damages imposed could be said to be reasonable. Where a reasonable approach has been made on this question by the Regional Director a Court would not substitute its discretion for that of the Regional Director and would not sit in appeal over the exercise of such discretion. But, where indications of such an exercise are absent in the order, the Court may be obliged to interfere with such order.

2. In the case before us, damages has been imposed for delayed payment of contribution. In respect of contribution delayed by 4 months and 5 days, 50% has been levied as damages and in respect of contribution delayed by 2 months and 3 days, 45% has been levied. If the damages is imposed as merely related to the delay without reference to the punitive element, that may not be justifiable. The party has in the petition offered an explanation for the delay. If a person is unable to pay despite his best efforts, may be that is a circumstance which may go a long way to mitigate the gravity of guilty conduct. Having indicated the guidelines and having satisfied ourselves that the order of the Regional Director does not speak in the manner it should, we set aside that order leaving it to the Regional Director to take such appropriate steps afresh as he may feel necessary. But that shall be in accordance with law. No costs.

Allowed.