Karnataka High Court
Employees State Insurance Corporation vs K. Uttam Chand Jain And Ors. on 3 August, 2004
Equivalent citations: ILR2005KAR66, 2004(7)KARLJ627, (2005)ILLJ767KANT, 2004 LAB IC 3537, 2004 AIR - KANT. H. C. R. 2859, (2005) 104 FACLR 635, (2005) 1 LABLJ 767, 2005 LABLR 528, (2005) 1 SCT 250, (2005) 7 SERVLR 103
Author: N.S. Veerabhadraiah
Bench: N.S. Veerabhadraiah
JUDGMENT N.S. Veerabhadraiah, J.
1. This appeal is filed by the ESI Corporation assailing the Judgment of Acquittal of the Accused for the offence punishable under Section 85(a) of the Employees State Insurance Act, 1948 by the Special Court for Economic Offences, Bangalore in C.C.No. 608/1994 dated 29.6.1998. The brief fact are as follows:
The respondents are carrying on the business of printing under the name and style of M/s. Vaishali Printers' situated at No. D-8-10, Sri Balaji Complex, Sultanpet Bangalore - 560053. The said Printers is covered under the provisions of the ESI Act by giving a Code no. 53-4525/83. The respondent Nos. 1 to 3 are partners of the said M/s. Vaishali Printers. On the allegation of non-payment of contribution of Rs. 2,722.50/- for the wage periods ending 31.10.1992, 30.11.1992 and 31.12.1992, the Corporation filed a Complaint under Section 200 Cr.P.C. before the Special Court for Economic offences, Bangalore, alleging that the respondents have committed an offence punishable under Section 85(a) of the Act and hence the Complaint.
2. Learned Judge of the Economic Offences took cognizance for the offence punishable under Section 85(a) and secured the presence of the respondents. Upon hearing both sides, the charges came to be framed for the offence punishable under Section 85(a) of the Act. The respondents pleaded not guilty and claimed to be tried. The Corporation examined P.W. Nos. 1 to 3, produced Exhibits No. P1 to P16. The statement of the Accused was recorded under Section 313 Cr.P.C. The defence is one of total denial. The Presiding Officer for Economic Offences for the reasons recorded in his Judgment acquitted the Accused of the charges framed. It is this Judgment of Acquittal which is questioned in the present appeal.
3. Learned Counsel Smt. Geetha Papanna appearing for the Corporation contended that on the form submitted by the respondents, Code number was allotted covering the respondent -Printers within the purview of the ESI Act. She submitted that the Corporation had also inspected the business premises of the respondent - Printers and have also made inspection of the ledger for the period ending 1989, 1990 and 1991 and submitted that when once the Accused is covered under the ESI Act, it is the duty of the partners to pay the liability which is liable to be paid under the Act. She further submitted that once the respondents failed to pay the contribution whether the amount could be more or less it is only incidental and liable under Section 85(a) of the Act. She further submitted that when once it is established that the coverage of the respondents - Printers under the act, nothing is required to be proved and that the ESI Act is self - implementing Act and self-legislation. Therefore the question of determining amount under the Act does not arise. Further, she submitted that Section 2A of the act provides for registration of factories and establishment under the Act. Section 39 provides for payment of contribution payable by the employer and Section 40 deals with the liability of the employer to pay the contribution. She further submitted that Regulation-26 prescribes to file the returns by the employer and Regulation-31 provides for payment of contribution within the period of 21 days. She further submitted that when once the principal employer fails to pay the amount under the Act, it attracts Section 85(a) of the Act. In support of her contention, she relied on the decisions rendered in EMPLOYEES STATE INSURANCE CORPORATION v. SRI T.V. NANJUNDASWAMY, Crl.A.No. 154/1995 ESI CORPORATION v. SUBBARAYA ADIGA, ILR 1998 KAR 1805 ESI CORPORATION, BANGALORE v. VEERABHADRAPPA, 2001 (2) KLJ 84 and also relied on the decision of the Apex Court in 'ESI CORPORATION v. F.FIBRE BANGALORE (P) LTD., , and lastly on the decision of Kerala High Court in 'P. RENUKA v. THE EMPLOYEES STATE INSURANCE CORPORATION, TRISSUR AND ANR., 1992 Lab.I.C. 2310. She submitted that the employer is duty bound to pay the contribution, in the absence of it liable to be prosecuted in accordance with Section 85(a) of the Act and accordingly prayed to allow the appeal by convicting the accused and set aside the Judgment of acquittal passed by the Trial Court.
4. Learned Counsel Sri Kiran S. Javali appearing for the respondents submitted that when a prosecution is launched against the accused persons, unless the charges are proved in accordance with law, no person can be convicted even though the Accused admits the civil liability. He further submitted that absolutely there is no evidence regarding previous payments of any contribution so as to apply the Judgments relied upon by learned Counsel for the ESI Corporation. It is only when it is established that the respondent has paid any contribution for the previous wage period, then automatically it can be held that the employer has failed to pay the contribution payable under the act and submitted that unless the liability is proved regarding the amount payable, the Accused or respondents cannot be held guilty for the charges. The civil and criminal law are quite distinct and separate. Section 85 provides for prosecution in case of non-payment of contribution and that there cannot be any dispute, but unless the charges are proved beyond reasonable doubt that a person cannot be convicted. In this regard, the learned Counsel relies on the decision of the Apex Court in P. JAYAPPAN v. S.K. PERUMAL, FIRST INCOME-TAX OFFICER, and submitted that the Criminal Court has to judge the materials on record entirely and merely because of the reason that an order is passed under Section 45(A) itself does not make the employer liable for penal action and therefore prayed to dismiss the appeal by confirming the Judgment of acquittal.
5. In the light of the above submissions, the points that arises for consideration are:
(i) Whether the Presiding Officer of the Special Court for Economic Offences is justified for acquitting the accused for the offence punishable under Section 85(a) of the Act?
(ii) What Orders?
6. It is the case of the ESI Corporation that the respondents failed to pay contribution of Rs. 2,722.50/- for the wage period ending 31.10. 1992, 30.11.1992 and 31.12.1992 within a period of 21 days as per the Act and Regulations. The evidence of PW-1 Sri M.S. Sripada Rao shows that the respondent - M/s. Vaishali Printers was covered under the ESI Act and Code No. 53-4525/83 was given and that the respondent Nos. 1 to 3 are partners and principal employers of M/s. Vaishali Printers. His evidence shows that he visited the factory, inspected it for the period 1989, 1990 and 1991 in the presence of Accused No. 3. The ledgers and books producers were written in Marwadi language and that he took the extracts of it which is at Ex.P.1. The evidence also shows that as on 5.12.1989 there were 10 employees and wages amounting to Rs. 7,049.05/- were paid to the employees and that he also collected the list of partners from A-3 as per Ex.P3 and thereafter he submitted a report to the Regional Office as per Ex.P.4. In the cross examination, PW - 1 Sri M.S. Sripada Rao has admitted that at the time of inspection he saw nine employees and that he did not take the signature of the employees to the statement. He also stated that he has not obtained copy of the coverage intimation from the employer. Further, he stated that since the attendance register discloses that ten employees were working as on 5.12.1989, he did not take the extract of the attendance register. He denied the suggestion that Accused No. 1 to 3 are not the principal employers and further denied the suggestion that Exhibit Nos. P1 to P4 are fabricated in his office.
7. Coming to the evidence of P.W. 2 Sri B.N. Subbaramaiah, he has stated that the respondents have not paid the contribution within 21 days as per regulation and that an order was passed under Section 45-A of the Act as per Ex.P.10 determining the contribution of Rs. 10,890/- for the period April-1992 to March-1993 on ad-hoc basis. In the cross examination, he has admitted that they have not mentioned in Ex.P5 the amount payable by the Accused towards contribution. However, he stated that the notice was served on A-4 as per Ex.P.12. It is also in his evidence, before passing the order under Section 45-A, they have served notice C-18.
8. PW.3 Mahaboob Sheriff has stated that the 'Accused submitted Form No. 01 as per Ex.P.13 and later on Form No. C-11 was issued as per Ex. P14 and the notice sent through registered post which has been duly served as per Ex.P15. He has categorically denied the suggestions that have been made.
9. From the evidence of PW.1 to P.W -3, it clearly establishes the fact that the respondents - M/s. Vaishali Printers has been duly covered under the Act and Code Number is given. But, the question that has to be considered is whether the Corporation has placed material evidence to prove the charges levelled or was there any liability so as to pay the contribution amount. If the Corporation were to establish the fact that there is liability on the employer to pay the contribution as per the charges framed for the said period i.e., for the periods ending 31.10.1992, 30.11.1992 and 31.12.1992, then the Judgment of acquittal is liable to be interfered with. The Kerala High Court in the case of P. RENUKA v. THE EMPLOYEES STATE INSURANCE CORPORATION, TRISSUR AND ANOTHER (Supra) while considering Section 85(a)(e), 86-A and 87 at Para -16 it is observed thus:
"16. The petitioner in Crl. M.C. 1185 of 1991 is the Proprietor of A.K. Industries, Sooranadu South. He is the accused in C.C. 92 of 1991 and S.T. 271 of 1991 for offences under Section 85 (a) and (e) of the Act. He has stated that the first case is with respect to his alleged failure to pay the contributions due for the period 1.10.1989 to 31.3.1990 which had already been paid by him in the course of the revenue recovery proceedings taken by the Collector, Kollam. Such payment alone will not absolve him from penal liability. C.C. 271 of 1991 is with respect to his failure to furnish the returns within the prescribed time."
Even though the contribution amount has been paid, it is held that it does not absolve the penal action which can be initiated by the Corporation as long as the contribution amount remains unpaid. The penal action subsists and it is a recurring cause of action for recovering such amount. Likewise, in the present case also the Corporation has initiated penal action in accordance with Section 85(a) of the Act. But, what the Court has to see is whether the ingredients of Section 85(a) have been proved or not.
10. In the unreported Judgment of this Court in EMPLOYEES STATE INSURANCE CORPORATION v. SRI T.V. NANJUNDASWAMY (Supra) at para 11 it is observed :
"11. The Trial Court was clearly in error in holding that the appellant has failed to prove the offence alleged against the respondent/accused. Another reason given by the Trial Court is that the contribution which is now demanded by the appellant is not quantified. When once it is proved that the accused who had been paying the contribution from July 1988 has not been paying the contribution for certain periods, it may not be possible for the appellant to quantify the same at once and it is for the accused to account for it and pay the contribution."
In the decision supra, this Court has found that the employer has paid contribution for the previous periods. In that view of the matter held that the employer cannot avoid payment of contribution on the ground that no determination is made and also no notice is served on him. This is a matter purely to be considered on the basis of the evidence let in. If the Corporation were to establish any previous payment/contributions, then the question of the decision supra to the facts of this case does arise.
11. In the case of ESI CORPORATION, BANGALORE v. VEERABHADRAPPA (supra) while considering the provisions of Section 85(a) and 45-A at Para -9 and 10 it is observed thus:
"9. The respondent's learned Counsel disputed Exhibits P.1 which is a Xerox copy of the factory licence and which clearly indicates that the unit was using power. His submission is that either the original ought to have been produced or that the witness from the K.E.B. or the office of the factory Inspector ought to have been summoned in order to establish that the unit was using power and in the absence thereof, that it was impermissible for the Court to have relied on a Xerox copy. I do not see much substance in this defence because the correctness of the Xerox copy was never disputed before the Trial Court and it is a Xerox copy of the licence which was possessed by the accused and furthermore, that on the overall facts and circumstances of the case, it can never be disputed that the unit was a power operated one. Moreover, the overall contention with regard to whether the unit is covered by the scheme or not was really the subject matter of the order passed under Section 45-A and in my considered view, if that order has become final, then it is not open to the accused to seek to go behind the order or to question the validity thereof in the present prosecution.
10. Coming to the second aspect of the case, the Corporation's learned Counsel has submitted that no appeal was filed against the order passed under Section 45-A which has become final and that the various questions put to P.W.2 with regard to the procedure adopted in that proceeding out not to have been even permitted by the Trial Court. It is her submission that even assuming that the accused desired to find fault with that order, that the only forum for doing so was through the filing of an appeal and this not having been done, that the accused is totally bound by the order in question."
This Court has expressed its opinion that when once order under Section 45-A is passed that the employer cannot go beyond it when it has become final, there cannot be any dispute in this regard. It is only in case if the order under Section 45-A is questioned before the appropriate Court regarding determination of the contribution payable and then it is open for the employer to say that he is not liable for penal action under Section 85(a).
12. In the case of 'ESI CORPORATION v. F. FIBRE BANGALORE (P) LTD., (supra), the Apex Court while considering Section 75 of the ESI Act, it is clearly observed that when an order is passed under Section 45-A of the Act and has become final, there is no need for the Corporation to seek adjudication before the Insurance Court. It is for the employer to approach the ESI Court in case of any dispute regarding the claim of contribution or as the case may be. The learned Counsel Smt. Geetha Papanna has relied on the decision supra that when once an order under Section 45-A has become final, in the present case, the nonpayment of the contribution amount results in penal action against the employer therefore the Judgment of acquittal is not proper.
13. On examining the documents produced in the present case, Ex. P1 Attendance and Wage Register Extract for the year ending 1989, 1990 and 1991, Ex.P2 is the Head count lists showing the details of persons which shows that there are only nine persons as on the date of inspection. Ex.P3 shows that the Accused No. 1 to 3 are the partners and there is no dispute about the said fact. Ex.P4 is the Inspection Report submitted to the Regional Director based on the report Ex.P.l and P2. Ex.P5 is the show cause notice issued to the respondents dated 31.1.1994. On a careful reading of Ex.P.5, Column No. 1 does not show the amount of contribution payable for the period from 1.10.1992 to 31.3.1993. It is no doubt true that Ex.P.10 is an order passed under Section 45-A of the ESI Act. In the present case, the amount of contribution claimed is for the period ending 31.10.1992, 30.11.1992 and 31.12.1992. Section 2A reads thus:
"2A. Registration of factories and establishments - Every factory or establishment to which this Act applies shall be registered within such time and in such manner as may be specified in the regulations made in this behalf."
It provides for registration of any factory or establishment which comes within the purview of the ESI Act.
14. Section 39(4) reads thus:
"39(4). The contributions payable in respect of which on the last day of the [wage period], and where an employee is employed for part of the [wage period], or is employed under two or more employers during the same [wage period], the contributions shall fall due on such days as may be specified in the regulations."
The relevant Clause (4) of Section 39 makes clear wherein contribution payable becomes due shall be paid in accordance with the regulations.
15. Section 40 of the ESI Act casts duty on the employer to pay contribution at the first instance whether employees' contribution is deducted or not.
16. Regulations 26 reads thus"
"26. Return of contributions to be sent to appropriate office - (1) Every employer shall send a return of contributions in quadruplicate in Form 6 along with receipted copies of challans for the amounts deposited in the Bank, to the appropriate Office by registered post or messenger, in respect of all the employees for whom contributions were payable in a contribution period, so as to reach that office -
(a) within 42 days of the termination of the contribution period to which it relates;
(b) within 21 days of the date of permanent closure of the factory or establishment, as the case may be;
(c) within 7 days of the date of receipt of requisition in that behalf from the appropriate office.
(2) For the purposes of Section 77 of the Act, the due date by which the evidence of contributions having been paid must reach the Corporation shall be the last of the days respectively specified in Clauses (a), (b) and (c) of sub-regulation (1)."
On payment of such contribution to submit returns in the prescribed form and intimate the same to the Corporation.
17. Regulation 31 reads thus:
"31. Time for payment of contribution - An employer who is liable to pay contributions in respect of any employee shall pay these contributions within 21 days of the last day of the calendar month in which the contributions fall due."
The duty cast on the employer to pay contribution due within a period of 21 days of each calendar month.
18. Section 45-A reads thus:
" 45A. Determination of contributions in certain cases -
(1)Wherein respect of a factory or establishment no returns, particulars, registers or records are submitted, furnished or maintained in accordance with the provisions of Section 44 or any Inspector or other official of the Corporation referred to in sub-section (2) of Section 45 is (prevented in any manner) by the principal or immediate employer or any other person, in exercising his functions or discharging his duties under Section 45, the Corporation may, on the basis of information available to it, by order, determine the amount of contributions payable in respect of the employees of that factory or establishment.
[Provided that no such order shall be passed by the Corporation unless the principal or immediate employer or the person in charge of the factory or establishment has been given a reasonable opportunity of being heard'].
(2) An order made by the Corporation under sub-section (1) shall be sufficient proof of the claim of the Corporation under Section 75 for recovery of the amount determined by such order as an arrear of land revenue under Section 45B [or the recovery under Sections 45C to 45 I]"
Upon inspection of the establishment and the records and also on the basis of the information available where the employer fails to furnish the particulars that the ESI Corporation can determine contribution amount payable as the case may be. The subsequent provisions enables the ESI Corporation for recovery of the amount. Where the employer disputes the claim determined under Section 45(A), his remedy is only under Section 75 of the Act by approaching the Employees Insurance Court.
19. In the present case, the proceedings are initiated for penal action. Section 85 thus reads:
"85. Punishment for failure to pay contributions, etc. - If any person -
a) fails to pay any contribution which under this Act he is liable to pay, or
b) deducts or attempts to deduct from the wages of an employee the whole or any part of the employer's contribution, or
c) in contravention of Section 72 reduces the wages or any privileges or benefits admissible to an employee, or
d) in contravention of Section 73 or any regulation dismisses, discharges, reduces or otherwise punishes an employee, or
e) fails or refuses to submit any return required by the regulations, or makes a false return, or
f) obstructs any Inspector or other official of the Corporation in the discharge of his duties, or
g) is guilty of any contravention of or non-compliance with any of the requirements of this Act or the rules or the regulations in respect of which no special penalty is provided, the shall be punishable -
[(i)] where he commits an offence under Clause (a), with imprisonment for a term which may extend to three years but -
a) Which shall not be less than one year, in case of failure to pay the employee's contribution which has been deducted by him from the employees' wages and shall also be liable to fine of ten thousand rupees;
b) Which shall not be less than six months, in any other case and shall also be liable to fine of five thousand rupees; Provided that the Court may, for any adequate and special reasons to be recorded in the judgment, impose a sentence of imprisonment for a lesser term;
(ii) Where he commits an offence under any of the Clauses (b) to (g) (both inclusive), with imprisonment for a term which may extend to one year or with fine which may extend to four thousand rupees, or with both]"
20. Section 85(a) makes clear on failure to pay contribution under the Act is liable for punishment. The words used 'under this Act' emphasizes that the amount due in respect of the contribution has to be made specific, in my opinion by issuing a show cause notice specifying the amount payable for the relevant period of contribution. Unless the ESI Corporation proves the fact of non-payment and the amount payable in accordance with the Act, no one can be punished without a fair trial. The said fact has to be examined on the basis of the materials available before the Court.
21. Thus, on overall reading of the provisions of the ESI Act where the contribution amount is not paid, it enables the Corporation to pass appropriate orders under Section 45(A) and proceed to recover the amount payable by the employer and also enable the Corporation to take penal action against the employer. In the present case, absolutely, there is no evidence to show whether the employer has paid any contribution for the period ending 1989, 1990 and 1991 so as to hold that the liability still subsists. Unless the liability is established, no person can be convicted irrespective of the civil proceedings that has been taken place. The similar question came up for consideration arising under the Income Tax Act reported in case of 'P. JAYAPPAN v. S.K. PERUMAL, FIRST INCOME - TAX OFFICER' (Supra). While considering the criminal liability at the middle of Para-5 it is observed as under:
"xxx xxxx It does not, however, mean that the result of a proceeding under the Act would be binding on the Criminal Court. The Criminal Court has to judge the case independently on the evidence placed before it. Otherwise there is a danger of a contention being advanced that whenever the assessee or any other person liable under the Act has failed to convince the authorities in the proceedings under the Act that he has not deliberately made any false statement or that he has not fabricated any material evidence, the conviction of such person should invariably follow in the criminal Court."
22. The present case on hand also stands on identical situation. Unless the charges are independently proved against the Accused regarding previous payment of the contribution for the relevant wage period, it cannot be assumed or presumed that the establishment is still covered for the purpose of payment of contribution. It is no doubt true from the records it reveals that the establishment is covered under the ESI Act. But, for purpose of payment of contribution there must be evidence to show firstly that the number of employees are ten or more and then only liability can be fastened on the employer. In the absence of those materials on record, it is rather difficult to accept the contention of Smt. Geetha Papanna that the "ESI Corporation is not liable to prove anything except, if it is proved that the establishment is covered under the Act and that it has failed to pay the contribution" is without any merits in the light of the decision supra. For the foregoing reasons, I do not find any merits in this appeal so as to interfere with the finding of acquittal as the criminal charges are not proved.
23. Accordingly, the appeal is dismissed.