The Supreme Court has ruled that Employees State Insurance Corporation
(ESIC) cannot levy damages for employersâ€™ failure to deposit
contributions of employees and establishments. Existence of mens rea
(guilt mind) to contravene a statutory provision must also be held to
be a necessary ingredient for levy of damages and/or the quantum upon
the employer, said the apex court.
A bench comprising Justice S B Sinha and Justice J M Panchal rejected the plea of ESIC, Karnataka, that it was empowered to impose damages upon the employer under Regulation 31C of the ESI (General) Regulations, 1950.
â€œA penal provision should be construed strictly. Only because a provision has been made for levy of penalty, the same by itself would not lead to the conclusion that penalty must be levied in all situations. Such an intention on the part of the legislature is not decipherable from Section 85B of the ESI Actâ€, said Justice Sinha writing the verdict.
The court said, â€œan employee being required to be compulsorily insured, the employer is bound to make his part of the contribution. An employee is also bound to make his contribution under the Act. But the same does not mean that levy of damages in all situations would be imperativeâ€.
The court further said that existence of mens rea or actus reas to contravene a statutory provision must also be held to be a necessary ingredient for levy of damages and/or the quantum thereof.
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