Bangalore District Court
E.S.I. Corporation vs M/S.Suvik Industries on 30 April, 2015
1 CC.No.162-2010
BEFORE THE SPECIAL COURT FOR ECONOMIC OFFENCES: AT
BANGALORE.
Dated this the 30th day of April 2015.
Present: Smt.PUSHPAVATHI V., B.A.L., LL.B.,
Presiding Officer, Special Court
for Economic Offences, Bangalore.
CC.NO.162-2010.
Complainant: E.S.I. Corporation,
SRO Bommasandra,
No.23, 9th B" & 10 "C" Main, B.T.M.,
Ring Road, Opp. I.O.C. Petrol Bunk,
Rept., by Inspector ESI Corporation.
. vs .
Accused: 1.M/s.Suvik Industries,
No.67/6, Rupene Agrahara, Madiwala,
Hosur Main Road, Bangalore.
2.Vikram C., Managing Partner,
No.83, 16th Main, 4th Cross, 4th Block,
Koramangala, Bangalore.
JUDGEMENT
1. This is the complaint filed u/s.200 of the Cr.P.C., by complainant/ESI Corporation represented by the Inspector, ESIC, Bangalore against the accused persons with a prayer to punish the accused for the offence u/s.85(a) which is punishable u/s.85(i)(b) of ESI Act, 1948.
2. The brief facts of the complainant's case is that the Employees' State Insurance Corporation is a Statutory Body, established u/s.3(1) of the Employees' State Insurance Act, 1948 as amended from time to time, the Regional Director is the Chief Executive of its Karnataka Region. The Regional Director & the Joint Regional Director of the ESI Corporation are authorized by the Corporation to sanction 2 CC.No.162-2010 prosecution in terms of Sec.86(1) of the Act, as per Notification dated:28.2.1968 published in Part.III.Sec.4 of the Gazette of India dated:9.3.1968 as per O.O.No.T.11.14.31.77. INS.(DESK.1) Dated:
7.4.77 published in Part III, Sec.4 of the Gazette of India dated:
30.4.1977 respectively.
3. The Insurance Inspector of the Corporation is a public servant in terms of Sec.21 of the Indian Penal Code r/w Sec.93 of the ESI Act, duly authorized to act, appear, to make application and to institute criminal proceedings on behalf of the Corporation and to represent it in all the courts by resolution of the corporation in No.A.38/ 80/INS.IV dated: 26.7.1991 which is duly published in the Gazette of India, Part III, dated:17.8.1991.
4. The factory M/s.Suvik Industries is covered under ESI Act having Code No.53-7287-67. A communication regarding its coverage under the Act with request to comply with the provisions of the Act was also sent in Form No.C-11 dated:9/28.2.88.
5. Sri-Vikram C. i.e., accused No.2 is the Managing Partner and Prl. employer of said Factory in terms of Sec.2(17) of the said Act was in charge of the factory during the period of default and was responsible for the conduct of business document viz., details of ownership dated:20.10.2005.
6. Accused No.2 who is the Managing Director & Prl.employer of the said factory which has been failed to pay any contribution in accordance with Sec.39 of the ESI Act for the wage period from 3 CC.No.162-2010 10/2006 to 9/2007 as required u/s.40 of the ESI Act R/w.Regulations 29 & 31 of ESI (General) Regulations 1950.
7. Since accused No.2 has not paid the contribution a notice was issued in Form No.C-18 dated:02.04.2008 through registered post asking the accused No.2 to show cause to why the contribution for the above said period should not be determined and an opportunity was also provided for a personal hearing on 26/4, 28/4 & 06.06.2008, the said notice was served on him.
8. Accused neither availed the opportunity of personal hearing nor replied to the said notice. Therefore, the ESI Corporation proceeded to pass orders u/s.45A of the said Act and determined the contributions as Rs.64,350-00 for the wage period from 10/2006 to 09/2007, the said order dated:23.05.2008 passed in terms of Sec.45-A of the Act was sent to the said Prl.employer i.e., accused No.2 and A-1-M/s.Suvik Industries by registered post acknowledgement and advised to pay the contributions within 15 days, the said orders has been served on him on 23.5.2008 as per acknowledgments received. But accused No.2 did not comply orders. So show cause notice dated:02.04.2009 was issued, asking him to show cause why they should not be prosecuted u/s.85 for non payment of contribution for the period from 10/2006 to 08/2007 till the issuance of show cause notice. The said show cause notice has been served and acknowledgements received. The said prl.employer/accused No.2 has neither shown any cause for the non-payment of contribution nor paid the contributions so far, he has failed to pay the amount of 4 CC.No.162-2010 Rs.64,350-00 towards contribution for the wage period 10/2006 to 09/2007 in accordance with S.39 & 40 of the Act with Regulations 29 & 31 of the said Act and ESI (General) Regulations 1950 respectively, he has also violated Regulation 31 R/w.S.39 & 40 of the General Regulation 1950 & ESI Act 1948 respectively and thus committed offence under clause(a) of S.85 punishable u/s.85(i)(b) of the ESI Act, 1948. With these grounds prays to direct the accused to pay contributions which are due to the Corporation and submit the return within the time which may be granted to the accused. The Joint Director In charge, ESI Corporation, SRO, Bommasandra, Karnataka Region, Bangalore, had accorded sanction to prosecute the accused, the cause of action arose within the jurisdiction of this court and complaint is within time. With these grounds prays to punish the accused for the offence said above.
9. On this complaint, the case has been registered, cognizance taken, accused secured, enlarged on bail, copies of the complaint and other documents were furnished to him. Thereafter, the charge has been framed against A.2 by readover and explained to him in the language known to him, he on behalf of him & representing A.1 pleaded not guilty & claimed to be tired. Hence, the matter was posted for EBC, where complainant has given his evidence as P.W.1 and got marked Ex.P.1 to 18, he has been cross examined by the learned counsel for accused. On the complainant's closed their evidence, statement of accused u/s.313 of Cr.P.C., has been recorded, the accused has denied the incriminatory evidence 5 CC.No.162-2010 readover to him and submitted he has got evidence. Therefore, an opportunity was given and posted the matter for defence evidence where A.2-Vikram C., has given his evidence as D.w.1 & got marked Ex.D.1 to 4, he has been cross examined by the complainant's counsel.
10. Thereafter, heard the arguments. Perused the entire records, the points that arise for my consideration are :
Point No.1: Whether the complainant proves beyond all reasonable doubt that accused No.2 being the Managing Partner and prl.emloyer of A.1-M/s.Suvik Industries, Bangalore, covered under ESI Act, having Code No.53-7287-679, has failed to pay contribution for the period from 10/2006 to 09/2007 in a sum of Rs.64,350- 00 in time. Thereby committed the offence u/s.85(a) of ESI Act, which is punishable u/s.85(i)(b) of ESI Act.
Point No.2: What order.?
11. My findings on the above said points are as under:
Point No.1: In the Affirmative, Point No.2: As per the Final orders for the following:
REASONS
12. Point No.1: P.w.1 Sri.N.S.Nagaraj Social Security Officer, ESIC (Legal), Bangalore has stated that A.1-M/s.Suvik Industries, Bangalore, covered under ESI Act, with Code No.53-7287-67, accused No.2-Vikram C., is the Managing Partner and Prl.Employer of A.1, he is in charge and responsible for conduct of business of 6 CC.No.162-2010 A.1 establishment, he has got ultimate control over the day to day affairs of the establishment.
13. He has also deposed that A.1 establishment was covered, on the establishment submitted Form No.01 on 12.1.1988 as per Ex.p.1, the coverage was intimated to A.2 in Form No.C-11 dated:23.2.1988 as per Ex.p.2, Form No.C-11 was served on A.1 through RPAD, A.2 was regularly made contributions on behalf of A.1 along with attested copy of returns in Form No.6 as per Ex.p.3 for the months Oct-2003 to March-2004, Ex.p.4 to 6 are the attested copies of three challans for having paid contributions for the period Oct-2003 to March-2004, A.2 had also submitted ownership details on 20.10.2005 in which he has shown that A.2 is Managing Partner of A.1 establishment who is responsible for day to day affairs of the establishment as per Ex.p.7.
14. P.W.1 has also deposed that accused No.2 did not file returns and not paid contributions for the period from Oct-2006 to Sept-2007, so they issued opportunity notice on adhoc basis in Form-C-18 on 2/4/2008 calling accused No.2 to appear before Dy.Director, ESIC to say whether he has paid contributions and filed returns fixing the date of hearing on 20.4.2008 as per Ex.p.8, the same is served through RPAD both to A.1 & 2 on 4.4.2008 as per the postal acknowledgements Ex.p.9 & 10, inspite of it, accused No.2 did not appear to sent a letter on 20.4.2008 seeking adjournment till 6.5.2008 as per Ex.p.11, the matter was adjourned till 6.5.2008 & intimation was given to A.2 as per Ex.p.12, the acknowledgement for having served intimation is at Ex.p.12(a).
7 CC.No.162-2010
15. P.w.1 has further stated that on 6.5.2008 accused No.2 did not appear, hence matter posted for orders on 29.5.2008, on that day, orders U/s.45A of ESI Act as per Ex.p.13 is passed fixing contributions at Rs.64,350/- for the period from Oct-2006 to Sept- 2007, the orders has been sent to accused No.1 & 2 through RPAD on the same day which is served on accused No.1 & 2 as per the Postal Acknowledgements Ex.p.14 &15.
16. P.w.1 has further stated that before issuance of orders as per Ex.p.13, a show cause notice dated:02.4.2008 was issued to A.1 & 2 through RPAD along with Ex.p.8 as per Ex.p.16, the said notice is served to A.1 & 2 as per the postal acknowledgements Ex.p.9 & 10, in spite of the show cause notice & orders served on the accused No.2, he did not pay contributions. As such obtained sanction as per Ex.p.17 on 18.3.2010 & filed complaint as per Ex.p.18.
17. Ex.p.1 is the Form No.01 appears to be submitted by M/s.Suvik Industries, Bangalore on 12.01.1988, Ex.p.2 is the Form No.C-11 which shows A.1- M/s.Suvik Industries, Bangalore is covered under ESIC Code.No.53-7287-67 on 9.2.1988, Ex.p.3 is the returns submitted by A.1 establishment, according to which A.2 is the Managing Partner, 22 employees were working, the returns from 01.10.2003 to 31.03.2004 assessing contributions at Rs.20,065/- filed. Ex.p.5 to 6 are the challans for having paid the contributions by A.1 establishment, Ex.p.7 is the details of ownership furnished by A-1 M/s.Suvik Industries, Bangalore which shows A.2 is the Managing Partner, Smt.Parvathi & Smt.Suchitra are the Partners of 8 CC.No.162-2010 A.1 establishment, Ex.p.8 is the opportunity notice according to which it is issued to A.1-M/s.Suvik Industries, Bangalore on 02.11.08, Ex.p.9 & 10 are the postal acknowledgements according to which Ex.p.8 is served on A.1 & 2, Ex.p.11 is the letter by M/s.Suvik Industries, Bangalore singed by A.2 Managing Partner seeking time to appear before the Assistant Director, ESI Corporation, Bangalore, Ex.p.12 is the intimation as to adjournment of case till 6.5.2008. Ex.p.13 is the orders u/s.45A of ESI Act, 1948 dated:23.5.2008, Ex.p.14 & 15 are the postal acknowledgements for having served orders to A.1 & 2, Ex.p.16 is the show cause notice dated:2.4.2008 issued by complainant to A.2 seeking his explanation as to why A.2 should not be prosecuted, Ex.p.17 is the sanction order dated:18.03.2010 for prosecution against A.1 & 2.
18. The accused do not dispute the fact that he has not paid contributions complying the orders u/s.45A of ESI Act at Rs.64,350/- But the case is that A.1 establishment was declared as NPA under SARFAESI Act, 2002, the possession of the factory was taken over by State Bank of India on 14.5.2007 and auction notice was given on 24.8.2007, A.1 establishment was not working between Oct-2006 to Sept-2007. There is a delay of 2 years in filing the complaint.
19. During the cross-examination of P.w.1, these suggestions are denied by P.w.1 specifically.
20. The accused No.2 has also given his evidence as D.w.1 where he has stated that A.1 company was started by his father Mr.Chandrashekar who expired on 3.4.1999, after his death he was 9 CC.No.162-2010 depressed and addicted to alcohol, he was admitted to Sakthi De- addiction and Rehabilitation Center as per Ex.D.1, he was in and out of De-addiction center for next 10 years, during that period factory was running by Mr.Singarayar, he did not manage the factory at all after his father's death, the factory is closed in the month of Oct- 2004 completely, there were no required employees since April- 2004, he was not responsible for conduct of business, he was informed to complainant during Sept-2004 itself, the complainant has not produced any document showing he was responsible for conduct of business. On 14.5.2007 factory was taken over by State Bank of India, possession notice & letter are at Ex.D.2 & 3, the sale notice was published in the Newspaper, the publication in the Hindu Newspaper dated:24.8.2007 is at Ex.D.4, he has not signed to Ex.p.7 on 20.10.2005, he do not know who has signed to that document A.1's employees have not signed to the said document, A.1 company was not working during Oct-2006 to Sept-2007, Ex.p.8 & 16 were not served on him, Ex.p.9 to 12 have not been singed by him, sanction order Ex.p.17 is bad in law.
21. During the cross examination of D.w.1, he admits M/s.Suvik Industries, Bangalore is covered under ESI Act, hence, his mother & sister are partners of A.1-M/s.Suvik Industries, Bangalore, that he has filed returns for the period from Oct-2003 to March-2004 on 28.05.2004, copy of which is at Ex.p.3, that he has paid contributions as per the challans Ex.p.4 to 6, that Ex.p.7 is filed by their company and contents of which are true, that according to 10 CC.No.162-2010 Ex.p.3, he is the Managing Partner of the company, that the address of residence and factory shown in Ex.p.8 are correct, that Ex.p.11 is the reply given by him to Ex.p.8, that Ex.p.13 is served on him and postal acknowledgement is at Ex.p.14, he has further admitted that Ex.p.13 contains factory and residential address, Ex.p.15 is the acknowledgement for having original of Ex.p.13 is served on him. He has further admitted that in Ex.p.16 the show cause notice both residential and factory address is mentioned, the show cause notice is served on him. He has further stated that he has not received show cause notice, however admitted that there is their factory seal in Ex.p.9 & the show cause notice is received by his mother. He has further stated that the orders u/s.45-A of the ESI Act is not challenged by him. This shows his evidence in chief examination that he has not signed on Ex.p.7 on 20.10.2005, his employees have not singed on it, Ex.p.8 was not served on him, Ex.p.9 to 12 have not been signed by him, they are forged, Ex.p.14 & 15 do not contain his signature, Ex.p.16 is not served to him are all false. According to those documents, it is the accused No.2 who is Managing Partner, responsible for day to day affairs of the company, opportunity notice was issued fixing adjournment on 20.4.2008 to A.2 to appear before ESIC, same was served, Ex.p.8 show cause notice was also issued for prosecution, accused had prayed for adjournments till 6.5.2008, it was granted, on 23.5.08 orders u/s.45-A of ESI Act is passed that accused should pay contributions at Rs.64,350/-. 11 CC.No.162-2010
22. As I have already said above, he has not paid the contribution in compliance of the orders u/s.45-A of ESI Act, but his say is that the company was closed between Oct-2006 to Sept-2007 it was informed to complainant during Sept-2007. But he has not produced any document to prove the same, but produced Ex.D.2 possession certificate, Ex.D.3 Notice u/Rule.8(6) of the Security Interest Rules, 2002, Ex.D.4 the sale notice was published in Hindu Newspaper on Friday August-24, according to which the property/plot bearing House List No.14 & 15, Khata No.5/14 situated at NGR Layout, Rupena Agrahara, Madiwala, Hosur Road, Bangalore measuring 80' x 60' standing jointly in the names of Mrs.Parvathi Chadrasekharan, Vikram C & Mrs. Suchitra Chandrasekharan, bounded on the North by: Mr.Naik's property, South by: Mr.Raju's property, East by: Road & West by Mr.C.Reddy's property is taken over by SBI on 14.5.2007 the sale notice is also issued for the purpose of sale of said property. However, Ex.p.3 shows the office is situated at No.83, 16th C Main, 4th Cross, 4th Block, Koramangala, Bangalore which is not the property taken over by the SBI. In addition to which during the cross-examination has admitted that he has not closed factory officially, he has not intimated to ESI about closure of factory.
23. A.2 has also taken a contention that he was not responsible for the day to day affairs of the company as he was depressed & addicted to alcohol, he was admitted to Sakthi De-addiction Center for next 10 years from 3.4.1999 after death the of his father, one Mr.Singarayar was running the establishment. In order to prove the 12 CC.No.162-2010 same he has produced Ex.D.1 which is from 04.09.2009 to 12.12.2009. Further there is no proof to show Mr.Singarayar was looking after the business affairs of A.1 establishment or that he was responsible in any way to pay contributions and comply orders u/s.45A of ESI Act. Actually it is against A.2, the orders is passed u/s.45A of ESI Act, the said order is neither complied nor challenged. Thus accused No.1 the company & A.2 being the responsible for the day to day affairs, both are liable to be prosecuted for the offence u/s.85(a) which is punishable u/s.85(i)(b) of the ESI Act, 1948.
24. The learned counsel for the accused has relied upon the case law reported in 2006 on line Kar. 746: (2008) 6 Kant LJ 266: (2008) 1 AIR Kant R 544: (2008) 119 FLR 1003: 2008 Cri.L.J. (NOC323) 91 in a case between ESIC, Bangalore Vs. Rakesh Kulkarni & Another.
Held:
" Labour Laws - Employees' State Insurance Act, 1948 - Ss.2(17), 25, 39, 85(1)(a) and 93 - Charge that conurbation collected from employer and own contribution not deposited - Levelling of, against the Manager - Punishment therefore - Held, when the Manager was not the principal employer and no prior notice had been served on him to file a private complaint u/s.200 of Cr.P.C., for an offence punishable u/s.85(1)(a), order of trial court acquitting the said Manager, upheld - Employees' State Insurance (General) Regulations, 1950, Regn.31,39 & 40 - Criminal Procedure Code, 1973, S.200. (Para.13 & 14).
and argues that the prosecution has failed to prove that accused was the prl.employer of the company as on the date of offence. The accused was not looking after the day to day affairs of the company.
In the above-referred case, the prosecution had contended that 13 CC.No.162-2010 respondent No.1 was working as a Manager and he was responsible for the day to day affairs of the company. But with the reasons that in the inspection report one R.S.Khanas was shown as the occupier of the respondent No.2 and one Irshad Ahmed Khan was shown as the Manager, in the Ex.p.6 the Employees Registration Form issued by the Director of ESI, the name of the respondent is shown as Manager & as notice was not issued to respondent No.1, but it was issued to one Rudolph Mascarenhas, it was held that as on the date of the inspection, respondent No.1 was not an occupier and he was a paid servant." But in the present case, the facts and circumstances are different.
25. During the cross-examination, accused admits that he was the Managing Partner of the company, his mother & sisters were partners. Of course, he has also says that one Mr.Singarayar was looking after the day to day affairs of the company. No documents placed to show that Mr.Singarayar was person looking after the day to day affairs of the company. Moreover, S.2(17) of ESI Act, which reads as follows:
"S.2(17) "principal employer" means:-
i) in any factory, the owner or occupier of the factory and includes the managing agent of such owner or occupier, the legal representative of a deceased owner or occupier, and where a person has been named as the manager of the factory under the Factories Act, 1948(63 of 1948), the person so named:
ii) in any establishment under the control of any department of any Government in India, the authority appointed by such Government in this 14 CC.No.162-2010 behalf or where no authority is so appointed, the head of the department;
iii) in any other establishment, any person responsible for the supervision and control of the establishment. "
26. So the 'principal employer' means in any factory, the owner or occupier of the factory and includes the managing agent of such owner or occupier, the legal representative of a deceased owner or occupier, and where a person has been named as the manager of the factory under the Factories Act, 1948. Here in this case, according to the case of the accused himself, his father is owner of the factory, after his death he became the Managing Partner, his mother & sister became the partners of the company. The accused being the Managing Partner is obviously the prl.employer as said in Sec.2(17) of the ESI Act. Further it is not the case of accused that any other was principal employer. Thus the above referred case law is not applicable to the case on hand.
27. The learned counsel for the accused has also further relied upon the case law reported in ILR 2005 Kar. 66 in a case between ESIC, Bangalore Vs.Uttam Chand Jain & Others.
Held:
"Employees State Insurance Act, 1948 - Section 85(a) - Criminal Procedure Code, 1973 (Central Act No.2 of 1974) - Section 378(4) - Criminal Proceedings for penal action under - Held - Unless the charges are independently proved against the accused in accordance with law, in respect of non- payment of the contributions for the relevant wage periods, no one can be punished under section.85(a) of the Act. - The ESI Corporation must prove the fact of non-payment of contribution and the amount payable, in accordance with the Act - But unless the charges are proved beyond 15 CC.No.162-2010 reasonable doubt, conviction u/s.85(a) of the Act is not sustainable "
and argues that charges have to be proved independently in this case. As the prosecution has failed to prove charges independently without relying on orders u/s.45-A of ESI Act, the accused is liable to be acquitted.
28. I have perused, in the above referred case, it is also held as follows:
"S.85(a) makes clear on failure to pay contribution under the Act the guilty is liable for punishment. The word 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.
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 u/s.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 & 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.
29. The Hon'ble High Court referring a judgement reported in case of P.Jayappan Vs. S.K.Perumal, First Income - Tax Officer has also held as follows:
16 CC.No.162-2010
"In the 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 the 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 contribution is without any merits in the light of the discussion 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."
30. But here in this case, the orders u/s.45A of the ESI Act, is passed where it is proved the accused has failed to pay contributions for the period from Oct-2006 to Sept-2007 in a sum of Rs.64,250/-, the said order is not challenged & accused failed to pay contribution as per the orders. Ex.P.3 is the document submitted by accused, according to which 22 workers were working in the company. On the basis of information provided by the complainant as per Ex.p.1, company was covered under ESI Act & code number was allotted. Thus the above said judgement is not applicable to the case on hand.
31. The learned counsel for the accused has also further relied upon the case law reported in 2003(2) L.L.N., 479 in a case between Moinoddin, Son of Khodboddin Vs. State of Maharashtra. 17 CC.No.162-2010
Held:
Employees' State Insurance Act, 1948, Ss.2(12), 2(17), 45(2)(a) and 85(g) - Factories Act, 1948, S.2(m) - This revision petition is against the judgement of lower Courts holding the petitioner guilty of contravention of S.45(2)(a) of Employees' State Insurance Act punishable under residuary clause contained in S.85(g) of the Act - Held, the establishment concerned in this case, namely, Ajanta Hotel is not a factory as defined under S.2(12) of the Employees' State Insurance Act as the number of workers employed is less than 10 - Further it has not been proved that accused is principal employer under S.2(17) of the Employees' State Insurance Act - Hence accused is not guilty of the offence.
and argues that accused is not proved as prl.employer. But in the referred case, the complainant had not produced any document to show that accused is the proprietor of Ajanta Hotel. But in the present case, as I have already said above, it is admitted that accused is the Managing Partner, it is proved he is the principal employer. Thus, the above said judgement is not applicable to the case of accused.
32. The learned counsel for the accused has also further relied upon the case law reported in 2001 SCC on Line Bom, 28: 2001 Supp(1) Bom CR 606 in a case between ESIC represented by its Manager - Appellant Vs. Famous Steel Doors Mfg. Co., & Another.
Held:
2.The Criminal appeal is directed against the judgment and order dated 9th of November, 1998, whereby the Judicial Magistrate, First Class, Margao, acquitted the respondents accused for the offences punishable u/s.85(i)(a) of ESI Act, 1948.
The case of the prosecution in a nutsheel is that the complainant is a Local Office Manager of E.S.I. Corporation.
3. Accused No.2 is the proprietor and occupier of the factory in question and the establishment has been allotted Code No.32-1014-92. Accused is required to pay contribution in accordance with 18 CC.No.162-2010 sections.39 & 40 of the said Act at the rate specified in Rule 51 of E.S.I. Rules, 1950 read with Regulation 31 of the E.S.I. Regulations, 1950. The contributions required, is to be paid within 21 days of the wage period in which the contributions fall due. The accused have failed to pay the necessary contributions within the specified period i.e., from December."
and argues that the company was not working as on the date of offence alleged, the complainant has not visited the factory & has not verified how many workers were working in the factory. Thus the allegation made against the accused is unsustainable. I have perused the above said judgement where P.w.1 has stated that the accused have not paid contribution from December-1994 to June- 1996 at the rate of 5.25% of the employees wages, he was allotted Code.No.32-1014-92, though defaulters from December-1994, accused were to pay contributions within 21 days from the wage period in which the contributions falls, The accused are required to pay contribution under Regulation 31 of E.S.I. Act. Form No.6. In the above said judgement, the accused were acquitted on the grounds that P.w.1 has specifically admitted that she has not visited any factory of accused, she does not know how many workers were working in the factory of the accused at the relevant time. The officer who visited the factory is not examined. Thus the version given by the prosecution witness P.W.1 to the extent that there were ten or more persons working in the factory at the relevant time when her predecessor had visited the factory is considered as hearsay evidence and not admissible in law. No document produced to show on what basis the code number was given to the 19 CC.No.162-2010 accused, the statement recorded u/s.313 of Cr.P.C., discloses that ESI People never visited the factory. They did not even study the situation. The labourers engaged were only for a period of three months, the evidence adduced by the prosecution is totally inadequate to prove the case of the prosecution against the accused for the offences charged, the bare statement made by P.w.1 in her examination in chief that the accused did not pay contribution from December-1994 to June-1996 in absence of any documentary or other evidence brought on record by the prosecution will be unsafe to accept in order to hold that the accused has committed an offence u/s.85 of the Act. The veracity of the testimony of P.w.1 has been completely shaken due to above referred admission given by the witness in her cross-examination. But in the present case, it is not so, the accused company has submitted the details of 22 workers working and the company is covered on the details furnished by accused. The facts and circumstances of the above-referred case and the present case are different.
33. The learned counsel for the accused has also further relied upon the case law reported in ILR 1992 KAR. 3380 in a case between ESIC, Vs. B.S.Narayana Rao.
Held:
"Employees' State Insurance Act, 1948 (central Act No.34 of 1948) - Sections.2 (17) 85(e): Factories Act, 1948 (Central Act No.63 of 1948)- Section 2(n):
Read with E.S.I (General) Regulations, 1950 - Regulations 2(g) & 26 - "Occupier" under Factories Act, 1948, person having ultimate control over affairs of the Factory - Necessary to allege & prove 20 CC.No.162-2010 : person in control over affairs, to be made liable as Occupier - Necessary to specify in complaint in which accused prosecuted - Concept of Judicial activism cannot be invoked to fill in material lacunae in prosecution evidence & to clothe accused with capacity not disclosed in complaint or evidence, hold him guilty to punish him - Proof of offence under Act cannot be sidetracked on ground of Judicial activism, though object of enactment laudable & beneficial, if prosecution half hearted.
HELD:
i) Going back to the definition of the term 'Occupier' under the Factories Act, as it stood before insertion of the Proviso in the year 1987, the person who had ultimate control over the affairs of the factory was the Occupier. Therefore, it is necessary for the complainant to allege and prove who exactly was in ultimate control over the affairs of the factory, if at all one is sought to be made liable as an Occupier. From the definition of 'Principal Employer", there may be Managing Agent appointed by the Occupier or the Owner, there may be legal representatives of a deceased owner or occupier and where a person has been named as the Manager of the Factory the person so named. Therefore the complainant cannot ask the Court to fit the accused into any one of the categories and say that he was responsible for obeying any of the requirements under the Statute .... There may be cases in which the Managing Agents may be appointed by the owner or occupier. It is necessary in a complaint of this nature where there is inclusive definition to specify what exactly is the capacity in which the accused is sought to be prosecuted. (Paras.7 & 8)
ii) In the name of Judicial activism, he Prosecutor cannot ask the Court to clothe the accused with any capacity which he himself did not disclose either in the complaint or during evidence, and hold him guilty to punish him. In other words, the complainant, however laudable and beneficial the object of a Statute be, cannot take shelter under it and abdicate his primary responsibility of proving all the ingredients of an offence to hold him guilty.
The concept of judicial activism cannot be invoked to fill in the martial lacunae in prosecution evidence to the prejudice of an accused person forgetting that it is the duty of the complainant to prove the guilt of an accused person beyond reasonable doubt whatever be the nature of the complaint. Howsoever laudable and beneficial an 21 CC.No.162-2010 enactment may be, if there is halfhearted and unchecked perfunctory handing of the prosecution the Judicial activism assertively canvassed before this Court by the appellant, cannot compel to sidetrack the basic requirements towards proof of an offence under the Act. (Paras.9 & 10)
34. The learned counsel for accused argues that this judgement has been produced in support of his argument that the case against accused is not proved beyond reasonable doubt. It is his case that the company was not working from Oct-2006 to Sept-2007, the complainant has not proved that the company was working in this period. Other side submits that the company is covered under ESI Act on the details furnished by him as per Ex.p.1. If the company was closed, it was the duty of the accused to inform the complainant. In support of his argument, the learned counsel for the complainant/prosecutor has relied upon the case law reported in 2001-I LLJ 70, in a case between ESIC Bangalore Vs. Bangalore Engineer's Industry, Bangalore & Another.
Held:
In declaring the present group of appeals as having succeeded on merits, the High Court observed that after the amendment of Section.1(6) of the ESI Act, 1948, it was beyond the scope of anybody to contend that an institution that had been covered would require a fresh order or fresh determination on each subsequent occasion when a breach had been observed or pointed out. The Trial Court's impugned order acquitting the respondent accused on the ground that there was no precise quantification of the amount that was the subject matter of the charge was therefore held by the Hon'ble High Court. "
The Department has raised a series of grievances before this court wherein they pointed out that as a result of the Trial Court's following a rather lengthy procedure in these cases, that a very heavy burden in cast on the Department because on every occasion the proceedings get protracted for 22 CC.No.162-2010 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.
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 S.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 challenge that were hitherto permitted under this head insofar as if an institution has closed down or if within the frame work 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 S.1(6) to question the basis of liability and to insist that fresh determination and fresh orders are necessary on each occasion.
35. I have perused, the accused do not dispute that the company is covered on the details furnished by him. Admittedly he has also filed returns and paid contributions for previous years i.e., Oct-2003 to March-2004. As per the principles laid down in the judgement referred by the counsel for complainant it was beyond the scope of anybody to contend that an institution that had been covered would 23 CC.No.162-2010 required a fresh order or fresh determination of each subsequent occasions when a breach had been observed or pointed out. In the present case also, the accused admitted during the cross examination that he has not intimated about closure of the company to the complainant. In fact during the cross examination of D.W.1, he has admitted that company is not closed officially. Moreover he has not challenged the orders u/s.45-A of ESI Act. Thus he cannot escape from his liability under the shelter of the judgement referred by i.e., Judgement reported in ILR 1992 KAR 3380.
36. The learned counsel for the accused has also further relied upon the case law reported in (2007) 1 Supreme Court Cases 584 in a case between ESI Corpn., Vs. C.C.Santhakumar.
Held:
K. Labour Law- Employees" State Insurance Act, 1948 - Approach of ESI Court and authorities under the Act - Held, the same should be that of a watchdog and not of a bloodhound."
37. The learned counsel for the accused argues that It was the duty of complainant to visit the factory before initiating prosecution. Even if the orders u/s.45A of ESI Act is not challenged, the option available to the complainant to take steps is under S.45.B of the Act for recovery of contributions. Other side submitted that Sec.45B of the Act is for recovery of contributions & S.85(a) of the Act is for launching prosecution for non payment of contributions. I have perused Sec.45B of the Act which provides for recovery of contributions whereas S.85(a) of the Act is for launching the penal proceedings. Admittedly, the accused has not paid contributions. 24 CC.No.162-2010 Thus the argument of learned counsel cannot be accepted and judgement said above is not applicable to the case hand.
38. The learned counsel for accused has further relied upon the case law reported in (1978) 4 Supreme Court Cases 204 in a case between Royal Talkies, Hyderbad & Others Vs. Employees State Insurance Corporation.
Held:
'On the strength of S.45A, the contribution has been determined by the Corporation without bearing, because, the appliances merely pleaded non-liability. In the Circumstances of the case, it is right to direct the Corporation authorities to give a fresh hearing to the Principal employers concerned. Moreover, the definition in S.2(9) is too cumbersome and must be simplified. In drafting it is not enough to gain a degree of precious which a person reading in good faith can under stand, but it is necessary to attain if possible, a degree of previous which a person reading in bad faith cannot misunderstand." (Paras.22 & 23) and argues that the accused was not provided an opportunity while passing the orders U/s.45A of ESI Act. Admittedly, order u/s.45A of the Act is exparty. However, the argument of the learned counsel that the accused was not given an opportunity cannot be considered in this court unless orders u/s.45A of the ESI Act is challenged. Here admittedly, orders u/s.45A of the Act is not challenged. Thus, the above said judgement do not supports the case of accused.
39. The learned counsel for the accused has also further relied upon the case law reported in 1974 ILR kar. 804 in a case between M/s.Ambassador & Others Vs. ESIC.
Held:
25 CC.No.162-2010
"The E.S.I. Corporation filed an application before the E.S.I Court. The E.S.I. Court held that the respondents before the E.S.I. Court were liable to pay contribution. In appeal to the High Court, it was contended that the E.S.I. application was barred by time under Art.19 of the Limitation Act, 1963, and under Rule 17 of Mysore Rules framed under E.S.I. Act.
and argues that this case is bared by limitation as complaint is filed after 2 years of incident. I have perused the above referred case in connection to recovery proceedings. But the present case is in connection to penal offence.
40. The learned counsel for the complainant/prosecutor has relied upon the case law reported in AIR 1984 S.C 1688 in a case between Raja Bahadur Singh Vs. Provident Fund Inspector & Others.
Held:
Criminal P.C., (2 of 1974) Ss.468, 472, 473 - Offence of non-payment of contribution by employer to provident fund - It is a continuing offence - Limitation under S.468 does not apply - Controversy raised as to offence being not continuing offence - Cognizance should be taken by applying provisions of S.472, 1978 Lab IC 868 (Bom). Overruled. (Employees' Provident Fund and Family Pension Fund Act (19 of 1952). S.14(2-A).
Non payment of the employer's contribution to the Provident Fund before the due date, is a continuing offence and, therefore, the period of limitation prescribed by Section.468 cannot have any application. The offence will be governed by S.472 according to which, a fresh period of limitation begins to run at every moment of the time during which the offence continues. Case law discussed. 1978 Lab IC 868 (Bom). Overruled. (Para.21).
This shows S.468 is not applicable to the offence of non-
payment of contributions by employers to P.F as it is continues 26 CC.No.162-2010 offence. Of course, this is in connection to EPF Act and present case is ESI Act, but principle laid down is applicable to this case as in both the cases on similar circumstances of failure to pay contributions penal proceedings will be launched.
41. Thus, the accused is liable to be punished for the offence u/s.85(a) which is punishable u/s.85(i)(b) of ESI Act, 1948. At the out set, I hold that the complainant has proved beyond all reasonable doubt the allegations against the accused & hence, I answer points No.1 in affirmative.
42. Point No.2: The complainant has also prays for direction to the A.1 & 2 to pay contribution due U/s.85-C of the ESI Act. S.85-C of the ESI Act provides for such directions. Admittedly the accused has not paid contributions. Hence it is fit to direct him to pay contributions within specific period in view of this and in view of my findings on Point No.1, I proceed to pass the following order.
ORDER Acting u/s.248(2) of Cr.P.C., the accused No.1 & 2 are convicted for the offence u/s.85(a) which is punishable u/s.85(i)(b) of ESI Act, 1948.
To hear regarding sentence (Dictated to the Stenographer directly on computer typed by her corrected and then th pronounced by me, in open court on this the 30 day of April 2015) (PUSHPAVATHI .V) PRESIDING OFFICER, SPL. COURT FOR ECONOMIC OFFENCES, BANGALORE.
27 CC.No.162-2010ORDERS REGARDING SENTENCE Heard on sentence, counsel for accused and accused submitted they need to challenge judgement of this court, they have not placed any grounds for relaxing the punishment u/s.85(i)(b) accused can be punished with imprisonment of 3 years but which shall not be less than 6 months and also with fine of Rs.5000/-.
It is pertinent to note here that A-1 is company, though it is legal entity made liable for punishment cannot commit offence personally. A-2 who was the Prl. Officer responsible for day to day affairs of the company is before the court and facing charge. Taking into consideration these aspects, I proceed to pass the following:
ORDERS A-1 is sentenced to pay fine of Rs.5000/-. A.2 is directed to pay fine on behalf of A.1.
A-2 is sentenced to under go imprisonment for a period of 6 months and shall pay fine of Rs.5000/- I/d S.I. for a period of one month 15 days for the offence punishable u/s.85(i)(b) of ESI Act, 1948.
A.2 is directed to pay contributions due within 3 months from the date of this Judgement.
The complainant is entitled to 50% out of fine amount as compensation.
The bail bond stands cancelled.
Dictated to the Stenographer, directly on computer typed by her corrected and then th pronounced by me, in open court on this the 30 day of April 2015.
PRESIDING OFFICER.28 CC.No.162-2010
ANNEXURE:
ON BEHALF OF THE COMPLAINANT:
Witnesses: P.w.1 N.S.Nagaraj.
Documents:
Ex.p.1 A/c of Form-01, Ex.p.2 A/c of Form C-11, Ex.p.3 A/c of Returns, Ex.p.4 to 6 A/c of Three Challans, Ex.p.7 Ownership Details, Ex.p.8 A/c of Form-C-18, Ex.p.9 & 10 Postal Acknowledgements, Ex.p.11 Letter dt:20.4.2006, Ex.p.12 O/c of Letter, Ex.p.12(a) Acknowledgement, Ex.p.13 O/c of Order u/s.45-A of ESI Act, Ex.p.14 & 15 Postal Acknowledgements, Ex.p.16 O/c of Show cause Notice, Ex.p.17 Sanction order, Ex.p.18 Complaint.
ON BEHALF OF THE ACCUSED:
Witnesses: D.W.1 Vikram Chandrashekar.
Documents:
Ex.D.1 Certificate of Sakthi De-Addiction & Rehabilitation Center, Ex.D.2 Possession Notice, Ex.D.3 Letter, Ex.D.4 Publication in Hindu Newspaper Dt:24.8.2007.
(PUSHPAVATHI V) PRESIDING OFFICER, SPL. COURT FOR ECONOMIC OFFENCES, BANGALORE.