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Judgment
K. Narayana Kurup, J.—The respondent-employer was in default of payment of contribution for the period from May 14, 1978 to
November 30, 1979. The appellant-Corporation passed an order marked Ex. A-1 to pay the aforesaid contribution only on March 26, 1984 and
on receipt of Ex.A-1, the respondent-employer paid the amount with interest on five dates starting from June 18, 1985 and ending with June 19,
1987. Thus the entire amount of contribution along with interest pertaining to the period from May 14, 1978 to November 30, 1979 was paid by
the respondent-employer.
In spite of the payment of the contribution as aforesaid with interest, the appellant-Corporation by the impugned order dated October 17, 1988
demanded damages from the respondent-employer u/s 85-B of the Employees'' State Insurance Act, 1948 (hereinafter referred to as ''the Act'')
totalling to Rs. 3,868.15.
The respondent-employer repudiated, his liability to pay the aforesaid amount and raised a dispute before the Employees'' State Insurance
Court u/s 75 of the Act, to set aside the impugned order. The Employees'' State Insurance Court as per order dated April 30, 1993 allowed the
petition and declared the impugned order passed by the respondent-employer as null and void.
On appeal, a learned single Judge of this Court by judgment dated July 28, 2000 confirmed the judgment and decree of the Employees'' State
Insurance Court and dismissed the appeal and hence this Letters Patent Appeal.
Having heard the counsel for appellant at length, we are not persuaded to interfere with the judgment impugned before us.
Admittedly, the respondent-employer has cleared the contribution with interest. Of course, there was some delay in making the payment. But
then, we take note of the fact that the order demanding contribution from the respondent-employer was passed by the appellant-Corporation only
on March 26, 1984 and immediately on receipt of the said order the respondent has paid the amount with interest on five dates, starting from June
18, 1985 and ending with June 19, 1987, as already noticed.
Under such a situation, whether the appellant-Corporation can invoke Section 85-B of the Act is a moot point. The object of insertion of
Section 85-B of the Act as stated in the objects and reasons is to provide for more deterrent penalties for defaults in payment of contributions. It
is, in fact, a penalty by way of damages. It is not as if the appellant- Corporation can invoke Section 85-B of the Act as a matter of course without
application of mind. Before invoking Section 85-B of the Act, the appellant-Corporation will have to apply its mind to various relevant factors.
Since the damages u/s 85-B of the Act is in substance a penalty imposed on the employer for breach of statutory obligation, it should not be
imposed merely because it is lawful to do so. The authority concerned will have to apply its mind to the various relevant factors such as the number
of defaults, the extent of delay, the frequency of default and the amount involved.
Merely because in a given case the employer failed to pay the contribution in time will not by itself give rise to a cause of action to the appellant
to impose damages u/s 85-B of the Act. That apart, we take note of the fact that the order passed by the appellant-Corporation imposing
damages u/s 85-B of the Act has not been produced before us nor is it seen produced before the Employees'' State Insurance Court and the
learned single Judge. There is no material to prove that the appellant has applied its mind before passing the impugned order u/s 85-B of the Act.
Besides, the appellant-Corporation while acting u/s 85-B will be justified in not imposing damages even if there is failure to pay the contribution in
time provided there are materials to satisfy that there was reasonable cause for such failure. It is not as if the order imposing damages can be
passed mechanically and in a casual manner without application of mind. The amount involved is also not large enough to warrant imposition of
damages.
At any rate, we are of the opinion that the order passed by the learned single Judge upholding the order passed by the Employees'' State
Insurance Court docs not suffer from any infirmity. Accordingly, this Letters Patent Appeal is dismissed. No costs.