Summary
The Supreme Court affirmed the conviction of the appellant under Section 85 of the Employees' State Insurance Act, 1948 for the company's failure to deposit ESI contributions deducted from employees' wages, holding on the concurrent findings that he was described as General Manager in the company's records and fell within the definition of 'principal employer' in Section 2(17) as a managing agent. The six-month sentence and fine of Rs. 5,000 were not reduced to imprisonment till the rising of the Court.
Issues
- Whether the appellant, who claimed to be only a Technical Coordinator, was the 'principal employer' of the company within Section 2(17) of the Employees' State Insurance Act, 1948 and liable for the non-deposit of deducted ESI contributions.
- Whether the decisions in ESIC v. Gurdial Singh and J K Industries Ltd. v. Chief Inspector of Factories and Boilers assisted the appellant.
- Whether the sentence of six months' imprisonment and fine of Rs. 5,000 should be reduced to imprisonment till the rising of the Court in view of the subsequent payment of the dues and the company's status as a sick industrial company.
Provisions considered
- Section 2(17), Employees' State Insurance Act, 1948'Principal employer' includes, for a factory, the managing agent of the owner or occupier or the person named as manager under the Factories Act, and for any other establishment any person responsible for its supervision and control; designation is immaterial if the person is otherwise an agent of the owner or occupier or supervises and controls the establishment. On the record the appellant was held to be a managing agent within the definition. (¶¶ 19, 20)
- Section 85(a) and 85(i), Employees' State Insurance Act, 1948Failure to pay any contribution is an offence; where the employee's contribution deducted from wages is not paid, Section 85(i)(a) prescribes imprisonment of not less than one year and a fine of Rs. 10,000, while Section 85(i)(b) prescribes not less than six months and Rs. 5,000 in other cases, the proviso allowing a lesser term of imprisonment for adequate and special reasons. The Trial Court had imposed only the lesser Section 85(i)(b) sentence although the deducted contributions were not deposited, and the Court saw no reason to interfere. (¶¶ 4, 5, 15, 23, 24, 25)
- Regulations 10-C and 31-C, Employees' State Insurance (General) Regulations, 1950The appellant relied on Regulation 10-C (intimation of change of particulars in Form 01) and Regulation 31-C (ESIC's power to levy and waive damages on delayed contributions, including for sick industrial companies) to argue that the ESIC should have adopted a liberal approach instead of prosecuting; the Court did not accept that this warranted interference with the conviction. (¶¶ 8, 11, 25)
- Sections 22(1) and 22A, Sick Industrial Companies (Special Provisions) Act, 1986The ESIC relied on the Madras High Court's decision in Pentafour Products that a declaration of sickness under the 1986 Act does not bar criminal proceedings against the company under Sections 22(1) or 22A. (¶ 14)
Held
- The Trial Court, First Appellate Court and High Court concurrently found that the appellant was described as General Manager in the company's records, which he could not controvert by his appointment letter, pay-slips or otherwise; he did not deny being in the company's employment and did not disclose who held the relevant positions, facts of which he could not have been ignorant. (¶¶ 18, 19)
- Under Section 2(17) of the Act the designation of a person is immaterial if he is otherwise a managing agent of the owner or occupier or is responsible for the supervision and control of the establishment; on the record the appellant fell within the definition as a managing agent. (¶ 20)
- Gurdial Singh, which held that directors cannot be roped in under the residuary clause of Section 2(17)(iii) where a factory has an occupier, and J K Industries, which concerned who is the occupier under the Factories Act, 1948, are distinguishable; the interpretation of liability under the Factories Act cannot be applied simpliciter to the Employees' State Insurance Act, which has its own specific provisions. (¶¶ 21, 22)
- Non-remittance to the ESIC of contributions deducted from employees' wages is an offence under Section 85(a) punishable under Section 85(i)(a) with a minimum of one year's imprisonment and a fine of Rs. 10,000; the Trial Court had imposed only the lesser sentence under Section 85(i)(b), and the conviction and sentence called for no interference. (¶ 23)
- Following A K Abdul Samad, the fine of Rs. 5,000 is fixed and the court's discretion under the proviso to Section 85(i) is confined to the term of imprisonment; the Court declined to substitute imprisonment till the rising of the Court, the subsequent payment of dues notwithstanding. (¶¶ 24, 25)
Result
Appeal dismissed; the appellant to undergo the sentence after set-off of any period already undergone and to pay the fine if not already paid; exemption from surrender withdrawn and the appellant to surrender before the Trial Court within two weeks; no order as to costs; I.A. No. 20317/2024 allowed and I.A. No. 20329/2024 disposed of.