The court ruled that the ESI Court erred in reducing damages for delayed contributions, emphasizing that mens rea is not required for imposing penalties under the ESI Act.

ORAL JUDGMENT

Heard learned ASG for the appellant and learned counsel for the respondent.

2. MFA No.3185/2017 is filed against the order of the ESI Court dated 31st January 2017 allowing the E.S.I. Application No.27/2014 in part and setting aside the order dated 13.6.2014 passed under Section 85-B of the Employees' State Insurance Act, 1948 ('the ESI Act' for short) claiming the contribution of Rs.26,34,569/- and directing the applicant to pay the damages to an extent of Rs.6 lakhs only by modifying the order passed under Section 85-B of the ESI Act to that extent.

3. MFA No.3186/2017 is filed against the order of the ESI Court dated 31st January 2017 allowing the E.S.I. Application No.28/2014 in part and setting aside the order passed under Section 45-A of the ESI Act claiming the interest of Rs.13,04,074/- for the disputed period of 01/2009 to 06/2013 and directing to pay Rs.3 lakhs only to the ESI Corporation by modifying the order passed under Section 45-A to that extent.

4. For the sake of convenience, these appeals are taken up together for common disposal.

5. The factual matrix of the case in MFA No.3186/2017 is that respondent paid ESI contributions belatedly for the period from January 2009 to June 2013, in all amounting to Rs.40,30,086/-, warranting action to levy interest, as a statutory mandate and hence the respondent was issued a notice claiming Rs.13,04,074/- as interest on account of delay in payment of contributions invoking Section 39(5) of the ESI Act. The respondent filed ESI application No.28/2014 before the ESI Court and the same was allowed in part reducing the claim to Rs.3,00,000/-. Hence, the appellant/ESI Corporation approached this Court contending that respondent did not remit the contributions on due dates as envisaged under Section 40 of the ESI Act r/w Regulation 31 of the Employees' State Insurance (General) Regulations, 1950 ('the Regulations' for short) and the contributions were paid belatedly and delay ranged from 212 days to 1813 days and the delay in payment of contributions warranted levy of interest under Section 39(5) of the ESI Act.

6. The factual matrix of the case in MFA No.3185/2017 is that respondent paid ESI contributions belatedly for the period from January 2009 to June 2013, in all amounting to Rs.40,30,086/-, warranting action to levy damages, as a statutory mandate and hence the respondent was issued a notice claiming Rs.26,34,569/- as damages on account of delay in payment of contributions invoking Section 85B of the ESI Act. The respondent filed ESI application No.27/2014 before the ESI Court and the same was allowed in part reducing the claim to Rs.6,00,000/-. Hence, the appellant/ESI Corporation approached this Court contending that respondent did not remit the contributions on due dates as envisaged under Section 40 of the ESI Act r/w Regulation 31 of the Regulations and the contributions were paid belatedly and delay ranged from 212 days to 1479 days and the delay in payment of contributions warranted levy of damages under Section 85B of the ESI Act.

7. Learned ASG appearing for the appellant vehemently contended that the ESI Court committed an error in reducing the damages to Rs.6,00,000/-. He brought to the notice of this Court Section 85B of the ESI Act and also Regulation 31C of the Regulations and contends that the ESI Court is not justified in arbitrarily reducing the amount of damages claimed under Section 85B of the ESI Act.

8. Learned ASG in support of his arguments also relied upon judgments of the Apex Court as well as this Court.

9. Firstly, learned ASG relied upon judgment of this Court in the case of The Director, ESI Corporation -vs- M/s Vikram Hospital Pvt. Limited in MFA No.5144/2017 (ESI) dated 2nd June 2023, wherein this Co