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TMI Blog2025 (4) TMI 1178X X X X Extracts X X X X X X X X Extracts X X X X ..... 002 before the Appellate Authority for Industrial and Financial Reconstruction (hereinafter to referred to as the 'AAIFR'). Such appeal was dismissed vide AAIFR's Order dated 15.01.2003. Following this, Respondent No.2 filed Writ Petition No.20033/2003 before the High Court and it is relevant to note that the Employees' State Insurance Corporation (hereinafter referred to as 'ESIC') was also a party to the said writ petition, wherein the High Court on 03.03.2008 remanded the matter back to the BIFR to consider the matter expeditiously keeping in view the the interest of all the parties concerned and quashed the Orders of BIFR and AAIFR dated 24.09.2002 and 15.01.2003, respectively. 4. On 01.07.2010, BIFR directed the Company to negotiate with the secured creditors for settlement of their dues. On 01.02.2011, ESIC officials visited the factory premises of Respondent No.2 to ascertain and verify about its deductions towards the Employees' State Insurance (hereinafter to referred to as 'ESI') contribution for the period from 01.02.2010 to 31.12.2010. Pursuant thereto, a Report was prepared which disclosed that even though deductions of Rs.8,26,696/- (Rupees Eight Lakhs Twenty-Six ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pointment order was not given as the Company was sick and salary was also not paid. It was also contended that the burden is on the prosecution to show that the Appellant was appointed as General Manager, which they have only done by referring to the Report produced by the ESIC. The Report also cannot be relied upon as the official who prepared it was not brought before the Court for the Appellant to cross-examine him. 8. It was further submitted that the prosecution lodging case against the Appellant for contravening Section 85(a) of the Act is erroneous as there is no such averment, either in the complaint or in the evidence that it was the Appellant who had deducted the contribution from the wages of the employees and had failed to deposit the same with Respondent No.1. The other fact pointed out by the Appellant was that under Regulation 10-C2 of the Employees' State Insurance (General) Regulations, 1950 (hereinafter referred to as the 'Regulations'), the Principal Employer is required to submit Form 01(A) to the ESIC, but the same was not produced. 9. Learned senior counsel submitted that the Appellant paid the entire dues to the Respondent No.1 after the Impugned Order and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovisions) Act, 1986 did not prohibit criminal proceedings against such company, under Sections 22(1) or 22A thereof. 15. It was submitted by learned counsel that the High Court observed that despite there being sufficient evidence against the Appellant, he was convicted under Section 85(i)(b) of the Act and not under Section 85(i)(a) of the Act, thereby giving him a lesser sentence. In this backdrop, he sought dismissal of the appeal. SUBMISSIONS BY RESPONDENT NO.2: 16. Learned counsel for Respondent No.2 submitted that the Appellant after completing Engineering course without any industrial experience joined as 'Technical Coordinator' in the Company in July, 2009. He worked from July, 2009 to April, 2011 with the Company. He was only a Technical Coordinator and never acted as Principal Employer nor as General Manager. 17. Learned counsel also submitted that one of the promoters of the Company is the Principal Employer, namely Mr. Ajit Hegde. It was further submitted that the Appellant cleared the balance amount of Rs. 6,86,696/- (Rupees Six Lakhs Eighty-Six Thousand Six Hundred and Ninety-Six) of ESIC dues on 22.12.2023, though he was not the Principal Employer or General Man ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to as the "Factories Act") and for 'any other establishment', 'principal employer' would include 'any person responsible for the supervision and control of the establishment'. Therefore, designation of a person can be immaterial if such person otherwise is an agent of the Owner/Occupier or supervises and controls the establishment in question. From the materials available on record, we find that the Appellant falls within the ambit of Section 2(17) of the Act, being a 'managing agent'. 21. Before the High Court, two decisions were relied upon by the Appellant viz. Employees' State Insurance Corpn., Chandigarh v Gurdial Singh, AIR 1991 SC 1741 and J K Industries Limited v Chief Inspector of Factories and Boilers, (1996) 6 SCC 665. In our view, these are clearly distinguishable. In Gurdial Singh (supra), it was held that when a factory had an Occupier, who would fall within Section 2(17)(i) of the Act, the Directors of the company concerned could not be roped in by resorting to Section 2(17)(iii) of the Act, which was in the nature of a residuary clause. It was laid down that in the absence of factual proof and of actual position, Directors could not be treated as owners ipso fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Overall, the High Court did not feel the necessity to interfere in the lesser sentence awarded by the Trial Court. Thus, we find that the conviction and the sentence does not require any interference, much less in the present case, where despite contributions having been deducted from the employees' salaries, they were not deposited with the ESIC. 24. In A K Abdul Samad (supra), the question before the Court was as to whether discretion had been granted only to reduce the sentence of imprisonment for a term lesser than six months or whether it encompassed discretion to levy no fine or a fine of less than five thousand rupees. Answering the said question, the Court held: '9. In our considered view, the clause "shall also be liable to fine", in the context of the Penal Code may be capable of being treated as directory and thus, conferring on the court, a discretion to impose sentence of fine also in addition to imprisonment although such discretion stands somewhat impaired as per the view taken by this Court in Zunjarrao Bhikaji Nagarkar [Zunjarrao Bhikaji Nagarkar v. Union of India, (1999) 7 SCC 409: 1999 SCC (L&S) 1299]. But clearly no minimum fine is prescribed for the offence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 27. Registry is directed to send a copy of this order to the Trial Court. 28. No order as to costs. 29. I.A. No.20317/2024 is allowed. 30. I.A. No.20329/2024 is disposed of. FOOT NOTE 1 '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) xxx (c) xxx (d) xxx (e) xxx (f) xxx (g) xxx he 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 employee's 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder Section 25 relating to an industrial company is pending, then, notwithstanding anything contained in the Companies Act, 1956 (1 of 1956), or any other law or the memorandum and articles of association of the industrial company or any other instrument having effect under the said Act or other law, no proceedings for the winding up of the industrial company or for execution, distress or the like against any of the properties of the industrial company or for the appointment of a receiver in respect thereof and no suit for the recovery of money or for the enforcement of any security against the industrial company or of any guarantee in respect of any loans or advance granted to the industrial company shall lie or be proceeded with further, except with the consent of the Board or, as the case may be, the Appellate Authority. xxx' 5 '22-A. Direction not to dispose of assets.-The Board may, if it is of opinion that any direction is necessary in the interest of the sick industrial company or creditors or shareholders or in the public interest, by order in writing, direct the sick industrial company not to dispose of, except with the consent of the Board, any of its assets- (a) d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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