Karnataka High Court
Employees' State Insurance ... vs Bangalore Engineer'S Industry, ... on 20 March, 2000
Equivalent citations: 2000(6)KARLJ179
ORDER
1. This group of appeals seeks to assail the correctness of a series of more or less identical orders passed by the Trial Courts in prosecutions instituted by the Department under the provisions of the Employees' State Insurance Act, 1948 (as amended up-to-date). Briefly stated, the defence pleaded in these cases was to the effect that the Department had alleged breaches on the part of the employers insofar as they had not paid within the prescribed period the employer's contributions and the employees contributions and had not filed the requisite returns evidencing such payments. The defence that was pleaded was to the effect that it was obligatory on tbe part of the Department to have quantified the exact amount that was the subject-matter of the charge and I may mention here that the line of cross-examination proceeded along the line of questioning the Department's Inspectors and other representatives asking them as to whether they have physically checked certain records and whether they have physically verified whether the persons whose names were mentioned in the attendance register were physically present, and whether in fact power was used and the like. To my mind, this entire line of defence was erroneous and ought not to have been permitted for the reasons that will be clarified. The Trial Court in every one of these cases finally upheld the view that since there was no precise quantification of the amount that was the subject-matter of the charge, that the prosecution was liable to fail and acquitted the accused. The Department has challenged the correctness of these acquittal orders. I need to add here that different learned Judges of this Court had occasion to take slightly varying views of the point involved. Whereas two of my brother Judges laid down very firmly that the liability that arises under the Act imposes an obligation on the employer and that it is therefore not essential that specific quantification has to be done in respect of each breach, one of the other learned Judges took a slightly different view which was perhaps on the basis of the provisions of Section 45A and held that since, in the case of a dispute with regard to the liability it was open to the employer to get the determination done by the Court, that ipso facto means that it was obligatory on the part of the Department to quantify in every case.
2. The learned Counsels who represent the Department have raised a series of grievances before this Court wherein they pointed out that as a result of the Trial Courts following a rather lengthy procedure in these cases, that a very heavy burden is cast on the Department because on every occasion the proceeding gets protracted for months and even several years. The Inspectors and other employees are required to repeatedly attend the Court and give evidence and face cross-examination in areas that appear to be totally and completely unnecessary. It was therefore pointed out to this Court that from the point of view of proper enforcement of the provisions of the Act which is essentially and effectively a welfare legislation, that this Court must lay down certain broad procedural guidelines. On the other hand, the learned Advocates representing the employers submitted that if the Department has committed errors insofar as a wrong or excess amount has been demanded or if a liability has been foisted where none exists, that the remedy of correcting these errors should not be denied to the employer.
3. It is very necessary to point out that under the scheme of the Act, the Trial Courts need to bear in mind the fact that the legislature has now made it abundantly clear that an institution that is covered shall continue to be covered until an order to the contrary has been passed by the Department. After the amendment and the introduction of Section 1(6) it is now beyond the scope of anybody to contend that an institution that has been covered will require a fresh order or fresh determination on each subsequent occasion when a breach has been observed or pointed out. The Trial Court would therefore have to brush aside any challenges that were hitherto permitted under this head insofar as if an institution has closed down or if within the framework of the Act the liability has legally ceased, then it is the duty of the employer to place this material before the Department and ensure that an appropriate order is passed and in the absence of this having been done, it shall not be open, particularly having regard to the provisions of Section 1(6) to question the basis of liability and to insist that fresh determination and fresh orders are necessary on each occasion.
4. The second aspect of the case which again requires to be clarified emanates from the fact that the scheme of the Act casts the legal obligation on the employer and this presupposes the fact that the employer is required to pay the contribution both on behalf of the employer and the employee, after having done the right computation within the prescribed period of time. Any failure as far as these obligations are concerned is actionable and if a notice has been issued to the defaulter, it will be obligatory on the part of the defaulter to either make amends or at that point of time to point out in writing within the prescribed period, that the amount has either been paid or if there is any inaccuracy or error to bring this to the notice of the Department. I need to clarify here that the facts and figures in relation to employees, such as the exact total emoluments for purposes of computing the percentage of contribution is something within the special knowledge of the employer and is a variable figure. Under these circumstances, the mathematical calculations are required to be done by the employer and it is only when the return is filed, that it is for the Department to do a verification or possibly crosscheck as to whether the contents of the return are correct and if not, to take appropriate action. Suffice it to say therefore, that if the Department points out that there has been a default for a prescribed period, then the obligation of setting out in actual terms i.e., in terms of rupees and paise as to what precisely is, the quantum of default, will not be necessary insofar as for the reasons indicated by me earlier, these are figures within the special knowledge of the employer. Again, the Trial Court will take note of the fact that once a default has been committed, or a notice has been issued to the defaulting party to rectify or remedy the default and if the party has not disputed the contents of the notice, the Court will take note of the fact that a presumption would arise against the employer and that the Court will be justified in drawing the requisite adverse inference. This would to a very large extent obviate the host of frivolous objections that are sought to be canvassed at a later stage when the trial commences. In this regard, it was also pointed out to me that it is often pleaded before the Trial Courts that sanction to prosecute if it is issued without due application of mind insofar as if for instance the requisite or exact quantum has not been determined, that this should be treated as bad in law. This would be a hyper-technical approach. These are cases where sanction to prosecute is really a formal sanction and all that the sanctioning authority has got to ascertain as to (a) whether the accused was covered, (b) whether the contribution has been made, and (c) whether the returns have been filed and lastly as to whether there is compliance if notice has been served. If on the basis of the aforesaid determination it is found that the default subsists, the sanction to prosecute would certainly be a valid one even if detailed computations having not been done.
5. A reference has been made with regard to the aspect of service of notice which undoubtedly has not been strictly provided for under the scheme of the Act or the rules, but the advisability for it is two-fold, firstly in order to specifically confront the defaulter with the fact that a default has taken place so that the party can make amends instead of inviting a prosecution and secondly in order to bring it to the notice of the defaulter that a breach has taken place and if this is not rectified it is for a Court at a subsequent point of time to draw the appropriate adverse inferences. The department's learned Counsel pointed out that all sorts of frivolous technicalities are pleaded when it comes to the question of notice, the most familiar one being that the notice was received by an employee in the office on behalf of the company and not by the accused who may be a Director or Manager, personally. To my mind, there is no substance in any of these pleas because the obligation of the Department ends when the notice is duly served on the institution and it is the duty of whosoever receives it in the office of the institution to communicate it to the concerned persons. In this regard, what has been demonstrated to me is that invariably there are several Directors or partners who ipso facto may have to be cited as accused persons and that merely because one or the other of these cannot be served for obvious reasons, that the entire proceeding gets held up or split up. The Department's learned Counsel pointed out a very important aspect of the case namely that the liability arises by virtue of the ex officio position and that consequently, the service on the institution must be held to be good service because that is the official address. This is an important aspect of the matter which the Courts must bear in mind because the Department's obligation at all stages of service and for that matter the obligation of the Courts or the officers in these class of cases will be fully discharged if the service is effected on the institution because it is the duty of the institution to transmit the same to the person concerned.
6. It was also brought to the notice of this Court that earlier the position held good whereunder the redetermination of the liability became necessary on each occasion and in the absence of this having been done, there was a tendency to uphold the objection that a fresh determination of liability is necessary. The Trial Courts had even adopted such an extreme position that even in cases where a conviction has resulted, that on the subsequent occasion when a second or further offence has been committed that the Courts were insisting on a fresh establishment of liability. The law has now been more than settled by the Supreme Court in the decision in the case of Employees' State Insurance Corporation v M/s. F. Fibre Bangalore (Private) Limited, and it is very necessary that the correct position in law be taken note of by the Trial Courts namely that once the liability has been determined, that this liability will hold good and does not have to be re-established. I have already referred to the correct position namely that if a situation has arisen whereby the employer contends that the liability has ceased, then it is necessary for the employer to either establish that position before the Court or more importantly to bring those cases to the notice of the Department and get an order whereunder it has been clearly accepted that the liability has ceased.
7. Another procedural aspect that has come to the notice of this Court is the fact that the defences in this class of cases are essentially very very restricted and in this background, it is equally necessary for both the parties before the Court to realise that there is no scope for going outside the strictly limited ambit. The Department is required to place before the Court just the bare facts and the cross-examination will have to be limited to only relevant issues or if there is a dispute with regard to the correctness of those facts, only to the extent of establishing this. It will be necessary for the Trial Courts to prune the various measures that are now being adopted for purposes of elongating these trials which are really in the nature of summary proceedings, in order to ensure that a degree of safety and professionalism is injected into the disposal of these class of cases. The Trial Courts shall fix an outer limit of six months from the date of filing, for disposal of these cases.
8. Having regard to the aforesaid position that emerges, is that this Court with the assistance of the learned Advocates appearing on both sides has been required to examine the case made out by the Department individually in each instance and the validity of the order passed by the Trial Court acquitting the accused. On such an examination being done, the order passed by the Trial Court acquitting the accused is held to be unsustainable and the same is accordingly set aside.
9. The next question that arises is as to whether as a necessary consequence, the Trial Court should be directed to restore the original case to file and to proceed with the same and dispose it off according to law. After hearing the learned Advocates on both sides, this Court is of the view that in those of the cases where the accused have made amends by paying the amounts that were due, that it would not be necessary to direct the Trial Court to revive the proceedings and dispose of the same according to law. It shall however be necessary in all those cases where the due payments have been made for the parties to bring the same specifically to the notice of the Department. In those of the cases where the payments have not been made, a further period of eight weeks from today is granted to the accused to pay up the amounts and to bring it to the notice of the Department that this has been done. It shall be open to the Department if it so desires, since the legal position has now been clarified, to issue either a public notice or bring it to the notice of the various parties through the media, that in these cases of default, that the Court has extended the time for compliance for a period of eight weeks from today. On the expiry of this period, the Department shall ascertain from the records as to in which cases the defaults persist and in respect of only continuing defaults, they shall bring it to the notice of the Trial Court and the Trial Court shall revive those cases and issue bailable warrants against the accused returnable within a period of two or three weeks and if the accused do not appear, this shall be followed by non-bailable warrants. If the accused have not availed of the facility extended by this Court to pay up the amounts, the Trial Court shall, on the basis of the earlier record afford the parties if they so desire to supplement the evidence and then hear them and pass orders according to law. It is made clear that there shall be no fresh trial and even with regard to any additional evidence by way of examination-in-chief or cross-examination, that the Court shall permit it only if it is strictly relevant and only if the Court considers it necessary. The Court shall then proceed to pass orders on merits.
10. As indicated earlier, though the points of law are common in these appeals, they have had to be individually examined and decided on merits because the parties are different, the periods are different and the learned Advocates are also different and the facts and circumstances also vary. The Trial Courts shall take special notice of the fact that these are old proceedings, that this Court has now circumscribed the scope and has also pointed out that they have got to be disposed of with utmost expediency and consequently, the Court shall ensure that being old cases they are taken up and disposed of on a top priority basis. In the course of the arguments, the Division Bench decision in the case of Employees' State Insurance Corporation, Bangalore v Subbaraya Adiga, was brought to my attention and what was pointed out was that the Trial Courts have been construing this judgment to mean that on each occasion when a prosecution is launched on the basis of non-compliance, that the Inspector who represents the Department is required to lead elaborate evidence of the nature as set out in the judgment and that in the absence of doing so, the Trial Courts have been taking the view that there is non-compliance with the requirements of the judgment and acquitting the accused. First of all, what needs to be clarified is that the judgment was delivered in January 1988 prior to Section 1(6) being incorporated on the Statute Book which was on 20-10-1989. There has been a radical change of position as regards the requirements of law itself, thereafter insofar as once an institution is covered, the deeming provision would become applicable and it is only necessary for the Inspectors to lead their evidence pointing out that the institution is covered and that there has been non-compliance and the onus of establishing anything else which the defence desires the Court to take into consideration, would shift to the accused. It would not be necessary for the prosecution to lead any elaborate evidence because the law is very clear insofar as unless and until the authorities accept the position that the institution is not covered, the obligation continues. It is necessary to clarify this because it was brought to the notice of this Court that the Trial Courts have often times misconstrued the ambit and scope of the Division Bench judgment and its applicability after 20-10-1989.
11. This Court has, in view of the fact that the law has now been clarified held out a one time indulgence to the defaulters insofar as if the outstanding payments are tendered within the prescribed period of time, this Court has directed that the orders of acquittal in favour of these persons will not be disturbed. It is clarified that if there is a default, then the order of acquittal shall be deemed to have been complied with and the complaint shall stand revived and the Court shall proceed according to law. In that event, the normal consequences of the default shall follow. The further clarification that needs to be issued is that merely because, having regard to the pendency of the appeals the legal position having been settled, this Court has on a one-time concession permitted the tendering of the defaulted amount within a prescribed period of time, that this shall not be misconstrued to mean that if there are defaults in the future and the party agrees to make good the payment, that this will be treated as condonation because the Supreme Court made it very clear that a late payment shall not purge the offence. In view of this position, the Trial Court shall take note of the fact that once a default has taken place, even if the accused in the course of the proceeding before the Trial Court agrees to make good the outstanding amount, that this shall not be treated as condonation of the offence.
12. In the result, having regard to the directions that have been issued and in the view taken by this Court, the appeal succeeds on merits and stands disposed of.
The office to forthwith retransmit the records to the Trial Court along with a copy of this judgment.