JUDGMENT : Prayer: Memorandum of Grounds of Civil Miscellaneous Appeal filed under Section 82(2) of the Employees State Insurance Act, 1948, against the order dated 14.09.2015 passed in E.I.O.P.No.12 of 2004 by the Employees Insurance Court (Principal Labour Court), Chennai. 1. The Employees State Insurance Corporation represented by its Regional Director, Chennai has brought this civil miscellaneous appeal against the order dated 14.09.2015 passed by the Employees Insurance Court (Principal Labour Court), Chennai in E.I.O.P.No.12 of 2004. 2. When the appeal was taken up for admission, Mr.S.Ravindran, learned Senior Counsel taking notice on behalf of the respondent, urging this Court to dismiss the appeal on the ground that the appellant has not raised any substantial question of law as mandated under Section 82 of the ESI Act, further pleaded that Section 82 makes it mandatory that no appeal shall lie against the order of the ESI Court, unless it involves a substantial question of law. Hence, this Court cannot proceed with the matter. 3. The substantial questions of law raised by the appellant in this appeal, read thus: “(a) Whether the ESI Court is correct in setting aside the order dated 23.07.2003 by holding that the respondent had not acted in mala fide manner or with bad intention to pay damages for the belated payment of contribution when the respondent is jointly and severally liable to pay the same with the transferor of the establishment as per Section 93-A of the Act? (b) Whether the respondent is not liable to pay the damages as contemplated under Regulation 31-C of the ESI (General) Regulations, 1950?” However, after hearing the parties, this Court framed the following substantial questions of law: “(a) Whether the authority under ESI Act while passing order under Section 85-B dealing with levy of damages has got any power or jurisdiction to consider as to whether the non-compliance of any of the statutory provisions including the non-payment of the contribution by the Management is a civil liability or a quasi criminal liability or a criminal liability? (b) Whether the transferee of a Management Company under Section 93-A of the Employees State Insurance Act, has got any locus standi to question and avoid the liability to pay penalty by way of damages by raising a plea of mens rea on the part of the management, prior to the date of transfer in his favour? (b) Whether the transferee of a Management Company under Section 93-A of the Employees State Insurance Act, has got any locus standi to question and avoid the liability to pay penalty by way of damages by raising a plea of mens rea on the part of the management, prior to the date of transfer in his favour? (c) When there was no explanation for the delay offered in making the contribution under the Employees State Insurance Act, whether the authorities passing an order of penalty under Section 85-B of the Employees State Insurance Act is bound to consider the question of mens rea, even without any explanation offered for any such delay? (d) Whether the authority passing an order under Section 85-B of the Employees State Insurance Act, levying penalty by way of damages has got any discretionary power to reduce the percentage of penalty, below the percentage as fixed under Regulation 31-C of the Employees State Insurance (General) Regulations, 1950? (e) When there is no power vested with the authority while passing an order under Section 85-B of the Employees State Insurance Act, to grant any remission, other than the proviso made thereto, whether the authority could be legally directed to do an act of consideration of reducing the percentage?” 3. Mr. S. Subbiah, learned Senior Counsel appearing for the appellant-ESI Corporation pleaded that the respondent took charge of the present establishment from the previous owner one Mrs. Nirmal Mirza, operated under the name M/s Wooltop Weavers, from 19.7.2000 and renamed it as M/s Wooltop Designs Private Limited. Since there were arrears of contribution of Rs.1,76,286/- for the period from January, 1997 to September, 1998, the said arrears were demanded from both the transferor and the respondent transferee, for the simple reason that both are jointly and severally liable to pay the said amount, as per Section 93-A of the Employees State Insurance Act, 1948 (for short, “the ESI Act”). Thereupon C-18 notice dated 29.05.2000 demanding a sum of Rs.1,76,285.34p for the period from January, 1997 to September, 1998 was issued to pay the contribution within 15 days, failing which the Corporation would be constrained to recover the same under Sections 45-C to 45-I. As there was no response, recovery notice in C-19 dated 11.5.2001 was issued for Rs.2,35,085.34p, namely, contribution of Rs.1,76,286/- and interest of Rs.58,799.34p. However, the respondent conveniently paid only Rs.1,76,286/- towards contribution on 13.9.2002. However, the respondent conveniently paid only Rs.1,76,286/- towards contribution on 13.9.2002. As the contribution was paid after more than two years from the date of issuance of C-18 notice, the appellant issued a show cause notice in Form D18 dated 27.1.2003 to the respondent proposing to levy damages for the belated payment of contribution. Later on, personal hearing was also given on 18.6.2003, in which the respondent appeared and submitted that he was unaware of the liability to make contribution for the said period and that he also incurred heavy losses in purchase of the said business. Considering the above explanation offered by the respondent, the appellate authority disagreed to waive the damages and consequently passed an order under Section 85B of the ESI Act on 23.7.2003 levying damages of Rs.1,76,066/-. Aggrieved thereby, the respondent had challenged the same before the Employees Insurance Court (Principal Labour Court), Chennai (for short, “the ESI Court”) in E.I.O.P.No.12 of 2004. The ESI Court, applying the ratio laid down by the Apex Court in ESI Corporation v HMT Limited and another, (2008) 3 SCC 35 holding therein that when there was no mala fide intention or fault on the part of the employer, imposition of damages on the employer for the delayed payment of contribution was unreasonable. But the said judgment of the Apex Court in HMT Limited case ought not to be applied in the present case, since there was no proof of mitigating factor by the employer to pay the contribution within time, he pleaded. 4. Learned Senior Counsel appearing for the appellant, arguing further, pleaded that the ESI Court had committed an error in holding that since the respondent was only a transferee, the mens rea as envisaged in HMT case was not present, therefore, the respondent was not liable to pay damages under Section 85-B of the ESI Act. Since the Corporation has been given the power to recover the dues as arrears of land revenue, it is not open to the respondent to claim that he was not aware of the said liabilities while taking over his business. Moreover, it is the bounden duty of the employer to ensure that the liabilities under the ESI Act are made within the stipulated time. Failure on the part of the employer to pay the contribution and consequential damages, if there is default, cannot be overlooked. Moreover, it is the bounden duty of the employer to ensure that the liabilities under the ESI Act are made within the stipulated time. Failure on the part of the employer to pay the contribution and consequential damages, if there is default, cannot be overlooked. When it is an admitted case that the erstwhile employer had committed default in payment of contribution to the ESI Corporation, the respondent-transferee has no locus standi to attribute the delay caused by the erstwhile employer as a bona fide excuse. When the respondent had taken over the operation of the said company on 19.7.2000 including the assets, it goes without saying that he had taken over the liability to pay the contribution and the damages in view of the delay. By virtue of Section 94 of the ESI Act, which says that the contribution and any other amounts due under the Act including interest and damages are to be paid on priority over other debts, even when the establishment is under financial crisis, the dues under the ESI Act shall be recoverable on any means as far as feasible. In support of his submissions, referring to the judgment of the Apex Court in Maharashtra State Cooperative Bank v. Assistant Provident Fund Commissioner, (2009) 10 SCC 123 , he pleaded that the Apex Court, while interpreting an identical provision under the EPF Act, which is a sister legislation of the ESI Act, has held that interest and damages due under the Act are recoverable under Section 11 of the EPF Act. 5. Again going back to the judgment in HMT Limited case mentioned supra, Mr. Subbiah pleaded that while rendering the judgment in the said case, the Apex Court had followed the ratio laid down in Dilip N.Shroff v. Commissioner of Income Tax, (2007) 6 SCC 329 . But the subsequent judgment of the Apex Court in Union of India and others v. Dharamendra Textile Processors and others, (2008) 13 SCC 369 has reversed the judgment in Dilip N.Shroff's case holding that the reasoning given in Chairman, SEBI v. Shriram Mutual Fund and another, (2006) 5 SCC 361 was held to be a good law. But the subsequent judgment of the Apex Court in Union of India and others v. Dharamendra Textile Processors and others, (2008) 13 SCC 369 has reversed the judgment in Dilip N.Shroff's case holding that the reasoning given in Chairman, SEBI v. Shriram Mutual Fund and another, (2006) 5 SCC 361 was held to be a good law. When the Apex Court in the HMT Limited case has held that when there was no mala fide intention or fault on the part of the employer, damages cannot be collected, in the earlier judgment in Chairman, SEBI v. Shriram Mutual Fund and another, (2006) 5 SCC 361 , it has been held that the straitjacket formula of mens rea cannot be blindly followed in each and every case, because mens rea is an essential and sine qua non for criminal offence. By holding so, it has been held categorically that mens rea is not an essential element for imposing penalty for breach of civil obligation or liabilities. 6. In yet another judgment in Union of India and others v. Dharamendra Textile Processors and others, (2008) 13 SCC 369 , it has been held that the reasoning in Dilip N.Shroff's case was not a good law and the reasoning given in Chairman, SEBI v. Shriram Mutual Fund and another, (2006) 5 SCC 361 was held to be a good law. Therefore, when the ratio in Chairman, SEBI v. Shriram Mutual Fund and another, (2006) 5 SCC 361 has been holding the field, the impugned order passed by the ESI Court, allowing the E.I.O.P.No.12 of 2004, following the ratio laid down by the Apex Court in HMT Limited case, is liable to be set aside. Concluding his arguments, learned Senior Counsel appearing for the appellant stated that the interest on belated payment of contribution under the ESI Act is a statutory liability and the ESI Corporation has no power to grant waiver, merely on the ground that the respondent has taken over the establishment from 19.7.2000, and therefore, from the date of transfer of establishment, since there were arrears of contribution for the period from January, 1997 to September, 1998 payable by the previous owner, for which the present transferee had paid the contribution, waiver of damages on the ground that there was no mens rea is unacceptable, he pleaded. 7. Mr. 7. Mr. S. Ravindran, learned Senior Counsel appearing for the respondent, objecting to the argument advanced by Mr. S. Subbiah, learned Senior Counsel appearing for the appellant that the ESI Court ought not to have applied the ratio laid down by the Apex Court in HMT Limited case reported in (2008) 3 SCC 35 holding therein that an element of mens rea is needed before imposition of penalty, placing heavy reliance on the judgment of the Apex Court in Union of India and others v. Bahadur Singh, (2006) 1 SCC 368 for the proposition that the Courts should not place reliance on decisions without discussing as to how the factual situation fits in with the fact situation of the decision on which reliance is placed, further argued that the observations of Courts must be read in the context in which they appear to have been stated. In the present case also, the respondent has come to this Court with the sole plea that there was no mens rea to evade the payment of contribution. It is their case that the respondent took over the establishment only from 19.7.2000 and without knowing the arrears of contribution not paid by the previous employer. However, after coming to know about the arrears of contribution, the respondent also paid the same on 13.9.2002. Therefore, the justification given by the respondent that there was no mens rea on the date of committing arrears needs to be accepted. Referring to the judgment in HMT Limited case, he has further argued that the levy of penalty under Section 85-B of the ESI Act was held not mandatory, because the ESI Corporation has got power to waive the damages recoverable under the said Section in relation to an establishment, which is a sick industrial company. 8. Continuing his arguments, learned Senior Counsel appearing for the respondent also referred to yet another judgment of our High Court in Employees State Insurance Corporation and others v. Chthranjandas Agencies, Manu/TN/2504/2017 holding that the levy of damages is not automatic, unless there is an element of mala fide that could be attributed to the respondent-employer, and the damages could not be levied. Moving to the judgment in Chairman, SEBI v. Shriram Mutual Fund and another, (2006) 5 SCC 361 , he stated that the question arose before the Supreme Court in the said case was whether once it is conclusively established that a mutual fund has violated the terms of the certificate of registration and the statutory regulations, namely, the SEBI (Mutual Funds) Regulations, 1996, the imposition of penalty becomes a sine qua non of the violation. The Supreme Court, answering the said issue in the affirmative, held that mens rea is not an essential ingredient for contravention of the provisions of a civil Act. The facts, circumstances and the situation contemplated in that case are entirely different. The reason being that the transactions with the associated brokers were related to thinly traded securities for which there were no security markets available during the normal stock exchange, because the violation of existing permissible limit of 5% of aggregate purchases and sale of securities made by the mutual funds in all its Schemes, was prohibited under Regulation 25(7)(a) of the SEBI (Mutual Funds) Regulations, 1996. But in the present case, a simple issue is involved, namely, whether the respondent was responsible for not making the ESI contribution on the date it was due and payable. Admittedly, the respondent was not in picture when the previous owner had committed the default. However, to show the bona fides, the respondent paid the contribution, therefore, there was no mens rea. This was rightly appreciated by the ESI Court on the application of the various rulings of the Apex Court as mentioned above. 9. I also find merits on the submissions made by the learned Senior Counsel for the respondent. The issues dealt with and decided by the Apex Court in HMT Limited case and in Shriram Mutual Fund case were on different situations and under different enactments. When the judgment in HMT Limited case deals directly with Section 85-B of the ESI Act and Regulation 31-C of the Employees State Insurance (General) Regulations, 1950, while dealing with the statutory liability of the employer to make the contribution, it has been found that the employer is bound to make his part of the contribution under the Act, but the same does not mean that levy of damages in all situations would be imperative. While dealing with the situation, the Court made a distinction between the cases involving recovery of money from the employer who had withheld the contribution made by the employees interested and other cases. In the judgment in Shriram Mutual Fund case, the respondent-Mutual Fund floated five schemes and had conducted business through brokers associated with its sponsors in excess of the permissible limits prescribed under Regulation 25(7)(a) of the 1996 Regulations on 12 occasions, it was found that the mutual fund company failed to comply with the terms and conditions attached to the certificate of registration, which is statutory in nature as prescribed by Section 15-D(b) of SEBI Act. When Shriram Mutual Fund had conducted business through brokers associated with its sponsors in excess of the permissible limits prescribed under Regulation 25(7)(a) of the 1996 Regulations on 12 occasions, it was held that the question of mens rea does not arise. But in the present case, as highlighted above, when the respondent was not in picture on the date of making the ESI contribution and admittedly came and purchased the establishment from the previous owner; that after coming to know about the arrears of contribution, the respondent has paid the contribution belatedly, the question of mens rea decided by the Apex Court in HMT Limited case being different and distinct from that made in Shriram Mutual Fund case, both factually and legally under different Acts, the same cannot be applied. At the risk of repetition, it may be mentioned herein that in the said judgments, the facts are different, the Acts are different and the subject matters are different. Therefore, following the ratio laid down by the Apex Court in Union of India and others v. Bahadur Singh, (2006) 1 SCC 368 holding that in each case, the ratio has to be applied depending upon the factual situation, I am unable to subscribe to the arguments advanced by the learned Senior Counsel appearing for the appellant. 10. Moving to the factual aspects involved in this case, it has been the case of both sides that the respondent herein took charge of the establishment in question from 19.7.2000 from the previous owner, Mrs. Nirmal Mirza, operated under the name M/s Wooltop Weavers and thereupon named it as M/s Wooltop Designs Private Limited. 10. Moving to the factual aspects involved in this case, it has been the case of both sides that the respondent herein took charge of the establishment in question from 19.7.2000 from the previous owner, Mrs. Nirmal Mirza, operated under the name M/s Wooltop Weavers and thereupon named it as M/s Wooltop Designs Private Limited. However, on the date of transfer of the establishment, finding that there were arrears of contribution at Rs.1,76,286/- for the period commencing from January, 1997 to September, 1998, the respondent transferee of the company was called upon to pay the said sum under C-18 notice dated 29.05.2000. Admittedly, there was no response from the respondent. Therefore, recovery notice in form C-19 dated 11.5.2001 was issued claiming Rs.2,35,085.34p, namely, contribution of Rs.1,76,286/- and interest of Rs.58,799.34p. On receipt of the recovery notice, the respondent paid the contribution amount of Rs.1,76,286/- alone on 13.9.2002. Now the question is as there was a delay of two years from the date of issuance of C-18 notice dated 29.5.2000 till the date of making the contribution on 13.9.2002, the appellant Corporation issued a show cause notice in Form D18 dated 27.1.2003 to the respondent proposing to levy damages for the belated payment of contribution and after personal hearing was held on 18.6.2003, the respondent, taking part in the personal hearing, explained that he was unaware of the liability to pay the contribution on the date of taking over the company. This explanation was turned down and an order under Section 85-B of the ESI Act was passed on 23.7.2003 levying damages of Rs.1,76,066/-. This was questioned before the ESI Court in E.I.O.P.No.12 of 2004. This explanation was turned down and an order under Section 85-B of the ESI Act was passed on 23.7.2003 levying damages of Rs.1,76,066/-. This was questioned before the ESI Court in E.I.O.P.No.12 of 2004. The ESI Court, taking note of the fact that the respondent herein had purchased the company on 19.7.2000 and renamed it as M/s Wooltop Designs Private Limited, applying the ratio laid down by the Apex Court in ESI Corporation v HMT Limited and another, (2008) 3 SCC 35 holding that if there is no mala fide intention or fault on the part of the employer, imposition of damages upon the employer for the delayed payment of contribution was unreasonable, allowed the E.I.O.P.No.12 of 2004 holding that there was no mens rea on the part of the respondent, for the twin reason that he admittedly took over the establishment from 19.7.2000 and that he had also paid the contribution arrears of Rs.1,76,286/- on 13.9.2002, on receipt of the recovery notice dated 11.5.2001. 11. In this context, Section 85-B of the ESI Act is extracted hereunder: “85B. Power to recover damages. (1) Where an employer fails to pay the amount due in respect of any contribution or any other amount payable under this Act, the Corporation may recover from the employer by way of penalty such damages not exceeding the amount of arrears as may be specified in the regulations: Provided that before recovering such damages, the employer shall be given a reasonable opportunity of being heard: Provided further that the Corporation may reduce or waive the damages recoverable under this section in relation to an establishment which is a sick industrial company in respect of which a scheme for rehabilitation has been sanctioned by the Board for Industrial and Financial Reconstruction established under section 4 of the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986), subject to such terms and conditions as may be specified in regulations. (2) Any damages recoverable under sub-section (1) may be recovered as an arrear of land revenue or under Section 45C to Section 45-I.” 12. A mere reading of Section 85-B of the ESI Act shows that when the employer fails to pay the amount due in respect of any contribution, the Corporation may recover damages by way of penalty not exceeding the amount of arrears, provided that the employer shall be given a reasonable opportunity of hearing. A mere reading of Section 85-B of the ESI Act shows that when the employer fails to pay the amount due in respect of any contribution, the Corporation may recover damages by way of penalty not exceeding the amount of arrears, provided that the employer shall be given a reasonable opportunity of hearing. In the present case, opportunity was given. Making use of the opportunity, the respondent employer appeared and explained that he took over the establishment on 19.7.2000, therefore, he was unaware of the arrears of contribution. However, the respondent agreed to clear the arrears and accordingly paid the contribution amount of Rs.1,76,286/-. Therefore, when Section 85-B does not envisage mandatory levy of damages, in my considered opinion, as there was no mens rea, for the simple reason that the respondent came into the picture only on 19.7.2000 and took over the company, the levy of damages for the good reason that he already paid the contribution, cannot be accepted. Accordingly, the substantial question of law-(b) is answered. 13. So far as the substantial question of law-(a) is concerned, as it is found that the respondent has come into the picture only on 19.7.2000, prior to that, there were arrears of contribution from the previous owner Mrs.Nirmal Mirza, admittedly, on the date of transfer of establishment, although there were arrears of contribution to the value of Rs.1,76,286/-, there was no mens rea on the part of the respondent for not making the contribution. However, when the recovery notice was received on 11.5.2001, the respondent also made the contribution of Rs.1,76,276/- pleading that he was unaware of the arrears of contribution on the date of take over. Although under Section 85-B, the authority under the Act can levy damages for the belated payment of contribution, in the present case, when the respondent has not committed any default, because he came into the picture only after the default was committed by the previous owner, neither civil liability or quasi criminal liability or criminal liability can be fastened on the subsequent transferee who took over the charge. Accordingly, it is answered. 14. Coming to the substantial question of law-(c), as discussed already, C-18 notice dated 29.5.2000 was issued by the appellant claiming a sum of Rs.1,76,286/- for the period from January, 1997 to September, 1998. Accordingly, it is answered. 14. Coming to the substantial question of law-(c), as discussed already, C-18 notice dated 29.5.2000 was issued by the appellant claiming a sum of Rs.1,76,286/- for the period from January, 1997 to September, 1998. Followed by the same, recovery notice in form C-19 dated 11.5.2001 was issued for Rs.2,35,085.34p, namely, Rs.1,76,286/- towards contribution and Rs.58,799.34p towards interest. The respondent, as mentioned above, had made the contribution of Rs.1,76,286/- on 13.9.2002. Since there was a delay of more than two years, one another notice in form D-18 dated 27.1.2003 was issued proposing to levy damages for the belated payment of contribution. When the personal hearing was held on 18.6.2003, the respondent appeared and submitted that he was not aware of the liability to pay the contribution for the said period, for the admitted reason that he took over the company only on 19.7.2000 and there was yet another reason produced that he incurred heavy losses on the purchase of the said company. Now the conduct of the respondent should be seen whether there was deliberate and willful negligence constituting mens rea or there is a bona fide reason for claiming that he is not liable to pay damages. 15. The Apex Court in ESI Corporation v. HMT Limited and another, (2008) 3 SCC 35 , following the ratio laid down in Dilip N.Shroff v. Commissioner of Income Tax, (2007) 6 SCC 329 , has held that if there is no mala fide intention or deliberate fault on the part of the employer, imposition of damages upon the employer for belated payment of contribution was unreasonable. Here again the conduct of the respondent assumes importance. When the erstwhile company M/s Wooltop Weavers owned by Mrs.Nirmal Mirza had committed the default in making the contribution till 18.7.2000 and on 19.7.2000, the respondent took over the company, therefore, in law, the subsequent transferee is liable to make the contribution with interest. Accordingly, after taking over the company on 19.7.2000, the respondent had paid the contribution on 13.9.2002 on receipt of the recovery notice and also explained that he had no knowledge of the arrears of contribution on the date of taking over the company and that the subsequent transferee also had incurred heavy losses in the purchase of the said business. Accordingly, after taking over the company on 19.7.2000, the respondent had paid the contribution on 13.9.2002 on receipt of the recovery notice and also explained that he had no knowledge of the arrears of contribution on the date of taking over the company and that the subsequent transferee also had incurred heavy losses in the purchase of the said business. Therefore, in view of the ratio laid down by the Apex Court in Bahadur Singh case, (2006) 1 SCC 368 and that when there was no mala fide intention or deliberate fault on the part of the employer, imposition of damages upon the employer for the belated payment of contribution was unreasonable, accordingly, the substantial question of law-(c) is also answered. 16. For all the aforementioned reasons and discussions, finding the substantial questions of law-(d) & (e) as superfluous in the present case, I do not find any infirmity in the impugned order passed by the ESI Court. Accordingly, the civil miscellaneous appeal fails and it is dismissed. Consequently, C.M.P.Nos.9954 & 9955 of 2020 are closed. No costs.