The court affirmed that under the Employees’ State Insurance Act, employers are strictly liable for non-remittance of deducted contributions, with the Appellant's designation as General Manager establishing his culpability.

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 Reconstruction (hereinafter referred to as the ‘BIFR’) on 31.10.2001 in Case No.49/2000. On 24.09.2002, the BIFR ordered for a change in the management of Respondent No.2. Aggrieved by this Order, Respondent No.2 preferred Appeal No.340/2002 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 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 Thousand Six Hundred and Ninety-Six) from the wages of Respondent No.2’s employees were made for the above-mentioned period, the same was not deposited with the ESIC. In the Report, the authorized signatory of Respondent No.2 had mentioned the Appellant’s name as the ‘General Manager’ and ‘Principal Employer’ of the Company. On the basis of the Report, a private complaint was filed by the Respondent No.1 for offence(s) under Section 85(a),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 fine which may extend to four thousand rupees, or with both.’] of the Employees’ State Insurance Act, 1948 (hereinafter to referred to as the ‘Act’) against the Appellant and Respondent No.2 before the Special Court for Economic Offences, Bangalore (hereinafter referred to as the “Trial Court”) namely, CC No.326/2011 on 11.10.2011.

5. The Trial Court on 28.09.2013 convicted the Appellant under Section 85(i)(b) of the Act and sentenced him to undergo imprisonment for six months along with a fine of Rs.5000/- (Rupees Five Thousand). Aggrieved, the Appellant and Responde