IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 04.02.2010 CORAM: THE HONOURABLE MS.JUSTICE R.MALA Crl.A.No.1170 of 2001 Employees State Insurance Corporation Ltd., 143, Sterling Road, Chennai, rep. by its Inspector, 270, Barathiar Road, P.N.Palayam, Coimbatore. .. Appellant Vs. 1. G.Srihari, S/o K.Govindarajulu, Managing Director, Sri Hari Mills Pvt. Ltd., 12/92, Kamatchipuram, Coimbatore. 2. K.Duraisamy, Manager, Sri Hari Mills Pvt. Ltd., 12/92, Kamatchipuram, Coimbatore. .. Respondents Criminal Appeal against the judgment dated 1.10.2001 in S.T.C.No.2809 of 1995 on the file of the Court of Judicial Magistrate-III, Coimbatore. For appellant : Mr.K.C.Ramalingam For respondents: Mr.K.Elango JUDGMENT
The Criminal Appeal arises out of the judgment of acquittal passed by the learned Judicial Magistrate-III, Coimbatore, in S.T.C.No.2809 of 1995, exonerating the respondents from the charges levelled against them under Sections 44(1) and 85(a) of the Employees’ State Insurance Act, 1948 (hereinafter referred to as the ‘ESI Act’).
2. The case of the appellant-complainant-ESI is that a complaint was filed by it, stating that the Company, Sri Hari Mills has not paid the ESI contribution of the employees for the month of May 1983. However, they collected from the employees Rs.9,058.25 and employer’s share is Rs.18,116.50, totalling they have to pay Rs.27,174.75, in accordance with the provisions of Section 44(1) of the ESI Act read with Regulation 31 of the ESI (General) Regulations, 1950. Since the Company failed to pay the amount, the complaint has been filed.
3. P.W.1 Unnikrishnan is Inspector in the appellant-ESI and during the relevant period, he inspected the records of Sri Hari Mills. He gave a communication to the Regional Director of ESI, in respect of the amount due from Sri Hari Mills as per Ex.P-1. Through P.W.3 Seshathiri, Ex.P-2 application was filed to reopen the case for letting in evidence. The respondents-accused filed Ex.D-1, which is the order passed in Crl.M.P.No.10276 of 2000 in C.C.No.590 of 1995, discharging the respondents herein and one Sridevi Venkatasami from the offences under Sections 406 and 409 read with 405 IPC.
4. The trial Court, after considering the evidence of P.Ws.1 to 3, Exs.P-1 and P-2 and Ex.D-1, came to the conclusion that as per Section 2(17) of the ESI Act, the respondents are not the “principal employer” and acquitted the respondents from the charges levelled against them. Against that, the present Criminal Appeal has been preferred by the complainant-ESI.
5. Learned counsel for the appellant-complainant-ESI argued that as per Section 2(17) of the ESI Act, which deals with the “principal employer”, since Sri Hari Mills has been owned by the first respondent and the second respondent is the Manager, they are covered under Section 2(17) and the same has not been considered by the trial Court while exonerating the respondents from the charges levelled against them. Hence, the trial Court has committed error in acquitting the respondents. Merely because the respondents paid the amount subsequently, it will not exonerate the charges levelled against them. Therefore, the learned counsel for the appellant-complainant prayed for setting aside the judgment of acquittal and to convict the respondents under Sections 44(1) and 85(a) of the ESI Act.
6. Learned counsel appearing for the respondents would contend that it is true that the contribution was to be paid by Sri Hari Mills for May 1983, but subsequently, the amount has been paid. The respondents are not the persons mentioned as “principal employer” and the factory/Mills is a necessary party, but the authorities have impleaded the respondents in their personal capacity and hence, the trial Court has considered this aspect in proper perspective and came to the correct conclusion. Learned counsel for the respondents further submitted that earlier, the respondents and one Sridevi Venkatasamy also were charged for the offences under Sections 406 and 409 read with 405 IPC and the said case was taken on file in C.C.No.590 of 1995, in which the respondents herein as well as the said Sridevi Venkatasamy filed an application to discharge them from the charges and they were discharged in that case. In the present case, the trial Court has considered the arguments of both sides and came to the conclusion that the respondents/Director and Manager, are not the “principal employers” and only the owner or the occupier of the factory/Mills alone is the “principal employer”. There is no evidence to show that the Mills is a proprietary concern and so, the trial Court has discharged the respondents from the charges. The trial Court has considered the decision of the Supreme Court reported in 1991 (II) LLJ 425 (SC) (E.S.I.C., Chandigarh Vs. Gurdial Singh and others) relied upon by the respondents and came to the correct conclusion. Hence, learned counsel for the respondents prayed for dismissal of the Criminal Appeal.
7. It is true that P.W.1 as Inspector of the appellant-ESI, made an inspection of the records of Sri Hari Mills and came to the conclusion that Sri Hari Mills defaulted in payment of ESI contribution, even though it collected ESI contribution made by the employees of Rs.9,058.25 and employer’s contribution of Rs.18,116.50, totalling Rs.27,174.75. As per the evidence, subsequently the amount has been paid.
8. The only point to be decided in this appeal is whether the respondents are “principal employers” as defined under Section 2(17) of the ESI Act.
9. Section 2(17) of the ESI Act reads as follows:
“Section 2. Definitions.–In this Act, unless there is anything repugnant in the subject or context,–
….
(17) “principal employer” means–
(i) in a 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 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.”
10. At this juncture, it is appropriate to consider the decision relied on by the learned counsel for the respondents, which was dealt with by the trial Court, reported in 1991 (II) LLJ 425 (SC) (E.S.I.C. Chandigarh Vs. Gurdial Singh and others), wherein, it was held by the Supreme Court as follows:
“2. There is no dispute that clause (ii) does not apply. What is relevant to consider is whether the liability of Directors is covered under clause (i) and if it is, clause (iii) being residuary would not apply and in case it is not covered by clause (i), the matter would be regulated by clause (iii). Admittedly the company had a factory and it is not in dispute that the occupier of the factory had been duly named. It is also not in dispute that it had a manager too. In view of the clear terms in the definition, we are of the view that Directors did not come within clause (i), but the occupier being there, clause (i) applied and in that view of the matter, clause (iii) could have no application.
3. Learned Counsel for the appellant relied upon two decisions as precedents. In the case of the Bombay High Court in Suresh Tulsidas Kalichand v. Collector of Bombay (1980-II-LLJ-81), the Court found liability by relying upon clause (ii) of the definition without first ascertaining whether the matter was covered by clause (i). Now on our finding in the instant case that clause (i) applied, we do not have to go to clause (iii), where the liability is of the person who is responsible for the supervision and control of the establishment. The other decision on which reliance has been placed is in the case of B.M.Chatterjee v. State of West Bengal (AIR) 1970 Cal. 290. That was a case where a learned single Judge proceeded on the footing that the Directors were owners of the company. We called upon the learned counsel for the appellant to substantiate the proposition that Directors in the absence of anything more would have to be treated as owners of the company and he has candidly accepted the position that in the absence of facts and proof of actual position, Directors cannot be treated ipso facto as owners. Thus no support is available from the precedents. We are of the view that the High Court was right in its conclusion that the liability was of the company and in the event of there being an occupier, he was liable to meet the demand.”
11. It is true that Sri Hari Mills has to be impleaded as a party to the proceedings. But there is no evidence to show that Sri Hari Mills is owned by G.Srihari, the first respondent (Managing Director/Proprietor) and K.Duraisamy, the second respondent (Manager). The factory/Mills alone was liable to pay the amount. In the complaint, the designation of the first respondent-Srihari has been mentioned as Proprietor of Sri Hari Mills, whereas, in the grounds of Criminal Appeal, in the cause title, his designation has been shown as the Managing Director. This shows that the appellant-complainant-ESI was not sure about the status of the first respondent-Srihari in the Company. Moreover, the appellant-complainant has not filed any document to show that the first and second respondents alone are liable to pay the contribution amount. As the Managing Director/Proprietor and the Manager of Sri Hari Mills Pvt. Ltd., the respondents are not liable to pay the amount.
12. It is also pertinent to note that the appellant-complainant-ESI has filed application in C.C.No.590 of 1995 and after that, the respondents have paid the amount. Learned counsel for the respondents fairly conceded that for the same year 1982-83, pertaining to October, since the Mills has not paid the contribution, C.C.No.590 of 1995 was filed and in the said proceedings, the respondents herein and one Sridevi Venkatasami filed application to discharge them and they were discharged from the charges, which is evidenced by Ex.D-1. So, the first respondent-Managing Director-Proprietor of the Mills and the second respondent-Manager of the Mills are not liable for prosecution.
13. Furthermore, there is no evidence to show that the ESI Corporation has issued any show cause notice to the respondents to pay the amount.
14. Hence, for the reasons stated above, I am of the opinion that the trial Court has considered all the aspects in proper perspective in paragraphs 6 to 8 of its judgment and came to the correct conclusion. I concur with the findings of the trial Court. I do not find any infirmity or irregularity in the judgment passed by the trial Court.
15. In fine,
(a) the Criminal Appeal is dismissed.
(b) the judgment of acquittal passed by the trial Court is confirmed. The respondents herein are exonerated of the charges and they are acquitted.
04.02.2010
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cs
To
1. Judicial Magistrate-III, Coimbatore.
2. Employees State Insurance Corporation Ltd.,
143, Sterling Road, Chennai,
rep. by its Inspector,
270, Barathiar Road,
P.N.Palayam, Coimbatore.
R.MALA,J
cs
Judgment in
Crl.A.No.1170 of 2001
04.02.2010