JUDGMENT
1. This is an appeal filed by the Employees’ State Insurance Corporation Corporation assailing an order passed by the Court for Economic Offences on 30-9-1994 in C.C. No. 1279 of 1993. It was alleged that the three accused, namely the Company and its two partners were liable to be convicted of the offences punishable under Sections 85(e) and 85-A of the E.S.I. Act on the ground that for the period ending 30-9-1992, they had failed to file the relevant returns and pay the contribution for the period in question. The Trial Court upheld the defence canvassed on behalf of the accused persons which was to the effect that even though they had been convicted in C.C. No. 1679 of 1989 on 31-1-1990 for offences of a similar type, that there was no independent evidence to indicate that the accused had committed offences for the present period and that the material possessed by the Department, namely the inspection reports etc., with regard to the number of employees and the use of power for the earlier period whereby it was held to be a covered establishment would not hold good for the present period. This view is clearly erroneous because the law was amended as early as in the year 1979 and under Section 1(6) of the Act, it is very clear that once a unit is held to be a covered establishment, that this position whereby the obligations and legal liabilities devolve on the Company or the firm as the case may be and the persons responsible for the conduct of its business, continues regardless of any change of circumstances. It follows therefore that if the liability has in fact ceased, that it is very necessary for the persons in charge of the business to bring this fact to the notice of the authorities of the Corporation and to ensure that appropriate steps are taken to verify the correctness of what is pointed out and that an order be passed to the effect that the liability no longer continues. In the absence of this procedure being followed, Section 1(6) would clearly fasten a liability and a covered establishment would continue as such. The ground on which the Trial Court acquitted the accused is therefore erroneous.
2. Another technical objection which was raised before the Trial Court pertains to the question of sanction. In my considered view, the Trial Court was too technical in its approach and was wrong in law in having held that merely because the Authority did not make a distinction between one partner and the second one, that the entire sanction was bad. The learned Counsel who represents the Corporation points out to me that in C.C. No. 1679 of 1989, only the Company and one partner were accused persons and that on this occasion, both the partners have been held liable and that therefore the distinction is really academic insofar as only A-3 would be absolved from the enhanced punishment under Section 85-A of the Act. She has further pointed out that in the complaint, the Corporation has very clearly specified that the enhanced punishment under Section 85-A has been sought only as
against accused Nos. 1 and 2 who were earlier convicted for a similar offence and that the Trial Court was therefore wrong in having virtually dismissed the complaint on the ground that the sanction order was invalid. She has also relied on a decision of the Supreme Court in the case of Superintendent of Police (CBI) v Deepak Chowdhary and Others and Kalpnath Rai v State (through CBI), wherein, while considering similar situations the Supreme Court has virtually deprecated a hyper-technical approach and has held that insofar as in form and substance, the sanction order does not result in any manifest illegality, that it would still hold good. In my considered view, the second ground on which the Trial Court has acquitted the accused is also erroneous and is required to be set aside.
3. It has been pointed out to me by the respondents’ learned Counsel that this is a small unit and it is his submission that after the initial lapse, that the accused have not committed any further defaults and that all payments are uptodate. The Corporation’s learned Counsel is not in a position to verify the correctness of these statements but I am prepared to accept what has been indicated on behalf of the accused at the Bar and on this ground, to take a lenient view particularly since there have been no subsequent defaults.
4. Having regard to the aforesaid position, the order of acquittal passed in favour of the accused is set aside. A-1 and 2 are convicted of the offence punishable under Section 85-A of the E.S.I. Act and it is directed that they shall be liable to pay fine of Rs. 5,000/- each in default, to suffer simple imprisonment for one month, and that as far as A-2 is concerned, he shall also be liable for imprisonment till the rising of the Court.
5. As far as A-3 is concerned, he is convicted of the offence punishable under Section 85(e) of the Act and it is directed that he shall pay a fine of Rs. 2,000/- in default, to suffer simple imprisonment for fifteen days. The fines to be deposited in the Trial Court within a period of twelve weeks from today.
6. The appeal accordingly succeeds and stands disposed of.
7. It is clarified, that since A-2 has been directed to undergo sentence tilt the rising of the Court, that he shall remain present before the Trial Court on 3-7-2000 and the Court shall ensure that the sentence of one day is imposed on him.
