IMPORTANT POINT
Mens rea is not required for imposing penalties under the Employees State Insurance Act for breach of civil obligations.

JUDGMENT :

The prime question that comes up for consideration in this appeal is whether the breach of civil obligations or liabilities by the employer is the sine qua non for imposition of penalty/damages under a welfare statute or whether the presence of mens rea or actus reus is an essential element in the said respect.

2. This appeal is filed challenging the judgment dated 14.02.2013 of the Employees Insurance Court, Alappuzha, in I.C.No.76 of 2012. The appellant herein was the respondent (hereinafter referred to as “the Corporation”) and the respondent herein was the applicant (hereinafter referred to as “the applicant”) in the said case.

3. Applicant’s establishment, Indira Motors is situated at Nagampadam, Kottayam. It is covered by the Employees State Insurance Act, 1948 (hereinafter referred to as “the ESI Act”). The applicant had earlier challenged the coverage of his establishment under the ESI Act, which was turned down by the E.I.Court. The said finding of the E.I.Court was later affirmed by this Court. During the period when the said litigation challenging coverage was pending, no demands were made and the applicant did not pay the contributions under the ESI Act. However, once the coverage was upheld, the Corporation demanded from the applicant payment of the statutory contributions due for the relevant period. He challenged the said demand before the E.I.Court. Though the demand was set aside by the said Court, Corporation preferred an appeal and this Court reversed the finding of the E.I.Court, inter alia holding that the claim by the Corporation is not barred by limitation and further directing the Corporation to determine the contribution payable by the applicant for the period from 01.01.1987 to 31.12.1988 and 01.01.1994 to 30.06.2002 after affording the applicant an opportunity of being heard. Pursuant thereto, the amount of contribution payable was duly computed at Rs.1,21,588/- and applicant was called upon to pay the same. Applicant had earlier deposited Rs.60,000/- before the E.I. Court as part of the former proceedings and the balance amount of Rs. 61,588/- was paid by him belatedly on 29.06.2009. The contribution payable to the Corporation was thus paid by the applicant, albeit with considerable delay. In view of the delay that had occasioned in paying the contribution, the Corporation invoking Section 85 B of the ESI Act, imposed on the applicant as penalty, damages for an amount of Rs.83,573/-. Vide order dated 13.09.2011, he was called upon to remit the same. The applicant challenged the said order before the E.I.Court by filing I.C.No.76 of 2012, which led to the order impugned herein.

Proceedings before the E.I.Court :

4. The Corporation entered appearance and filed a detailed written objection. The E.I. Court drew up the point for consideration and the parties proceeded to tender evidence. Exts.P1 to P6 were marked from the applicant's side, and the Corporation marked Exts.D1 to D10. No witnesses were examined by either side. The E.I.Court, after hearing both sides vide its judgment dated 14.02.2013, set aside the order dated 13.09.2011 which imposed penalty on the applicant inter alia holding that the non payment of contribution lacked any ‘willful omission or any contumacious conduct’ on the part of the applicant, there was ‘no mens rea to commit default and thereby defeat the provisions of law’ and hence penalty would not lie. Reliance was placed inter alia on the decision of the Supreme Court in Employees State Insurance Corporation v. HMT Ltd. and another [2008 (1) LLJ 814]. Aggrieved by the said judgment of the E.I.Court, the Corporation has filed this appeal.

5. Heard Sri.T.V.Ajaya Kumar, learned counsel appearing on behalf of the appellant-Corporation and Sri.P.S.Gireesh, learned counsel appearing on behalf of the respondent-applicant.

Contentions in brief:

6. On behalf of the Corporation, the learned counsel submitted that the judgment of the E.I.Court setting aside the order imposing penalty d