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Criminal · Reportable judgment

Ajay Raj Shetty vs Director & Anr.

Court
Supreme Court of India
Date
17 April 2025
Case No.
Criminal Appeal No. 2036 of 2025
Result
Dismissed
Bench
Sudhanshu Dhulia, Ahsanuddin Amanullah
Citation
[2025] 4 S.C.R. 1299 : 2025 INSC 500
Acts & Sections
Employees’ State Insurance Act, 1948 Factories Act, 1948 Sick Industrial Companies (Special… Employees’ State Insurance (General)…
Supreme Court Reports [2025] 4 S.C.R. 1299 : 2025 INSC 500
Issue for consideration
Whether the conviction of the appellant u/s.85(i)(b), Employees’ State Insurance Act, 1948 and the sentence awarded is justified.
Headnote

Employees’ State Insurance Act, 1948 – ss.85, 2(17) – Punishment for failure to pay contributions, etc. – “Principal employer” – Though deductions towards Employees’ State Insurance contribution were made from the wages of the respondent no.2-Company’s employees but they were not deposited with Employees’ State Insurance Corporation (ESIC) – Appellant-General Manager of the respondent no.2 convicted u/s.85(i)(b) – Appellant, if covered u/s.2(17): Held: Appellant falls within the ambit of s.2(17) being a ‘managing agent’ – Despite contributions having been deducted from the employees’ salaries, they were not deposited with the ESIC – High Court rightly indicated that non-remittance of the contribution deducted from the salary of an employee to the ESIC is an offence u/s.85(a) and punishable u/s.85(i)(a) but the Trial Court had imposed a lesser sentence as provided u/s.85(i)(b) – This is borne out by s.85(i)(a) which provides for a sentence of not less than one year imprisonment and fine of Rs.10,000/-, since the amount had been deducted from the salaries of the employees and not paid, which is the fact in the present case, whereas u/s.85(i)(b), sentence of imprisonment is not less than six months and with fine of Rs.5,000/- in other cases – Trial Court could have given a lesser sentence even for an offence u/s.85(i)(a) under the proviso to s.85(i) – High Court did not feel the necessity to interfere in the lesser sentence awarded by the Trial Court – Conviction and sentence not interfered with, fine awarded upheld. [Paras 20, 23] Employees’ State Insurance Act, 1948 – s.2(17) – “Principal employer” – Interpretation:

Held: The definition of s.2(17) also includes a ‘managing agent’ of the Owner/Occupier in the case of a factory or ‘named as the manager of the factory under the Factories Act, 1948 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 is immaterial if such person otherwise is an agent of the Owner/Occupier or supervises and controls the establishment in question. [Para 20]

Keywords: Employees’ State Insurance Corporation (ESIC) · Deduction towards Employees’ State Insurance (ESI) contribution · Contribution from the wages of the employees · Non-remittance of the contribution deducted · General manager · Principal employer · Managing agent · Owner/occupier · Manager · Technical coordinator · Lesser sentence · Sick industry · Board for Industrial and Financial Reconstruction (BIFR)

As published in the Supreme Court Reports, Supreme Court of India. Headnotes prepared by: Divya Pandey. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.

Full Judgment Text

Judgment Ahsanuddin Amanullah, J. Leave granted. 2. This appeal has been preferred by the Appellant against the Final Judgment and Order dated 08.12.2023 (hereinafter referred to as the ‘Impugned Order’) passed by the High Court of Karnataka at Bengaluru (hereinafter referred to as the ‘High Court’), by which Criminal Revision Petition No.164 of 2015 filed by the Appellant and Respondent No.2 has been dismissed. BRIEF FACTS: 3. M/s Electriex (India) Limited (hereinafter referred to as ‘Respondent No.2’ or ‘Company’) was declared as a sick industry by the Board for Industrial and Financial
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