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IN THE HIGH COURT OF BOMBAY
T.K. Chandrashekhara Das, J.
C.K. Gupta and another ..... Petitioners.
Versus
Employees State Insurance Corporation and others..... Respondents.
Criminal Writ Petition No. 1464 of 1991, decided on 24-11-1998.
Advocates appeared :
M.P. Wamorkar, for the petitioners.
H.V. Mehta, for the respondent Nos. 1 to 3.
Mrs. Usha Kejriwal, A.P.P., for State.
Violation of provisions of M-Failure to pay contribution under Act within time-No allegation in complaint that Director of company petitioner was responsible for violation-Manager being in charge of factory was responsible to pay contribution-Director cannot be implicated in offence.-In the absence of anything more, Director cannot be treated as owner of the factory in order to attract the penal provisions under the ESI. Act. In short, if the manager is appointed for carrying out provisions of the Act, no Director can be implicated for the violation of the provisions of the Act.
Section 86-A-Factories Act, 1948, Section 2(n)-Violation of provisions of ESI Act-Failure to pay contribution under Act-Owner of factory-Who can be-Whether director of factory can be treated as owner when manager already appointed for carrying out provisions of Act-Held, no-Only Manager liable for violation.- In view of the definition clauses the aforesaid decision has clearly laid down that in the absence of anything more. Director cannot be treated as owner of the factory in order to attract the penal provisions under the ESI Act. In short, if the Manager is appointed for carrying out provisions of the Act, no Director can be implicated for the violation of the provisions of the Act.
Sections 2(17)(i), 2(i) and Employees State Insurance Act (34 of 1948), Section 2(17)-Company appointing manager for looking after day to day affairs of its factory and carrying out provisions of ESI-In the circumstances director could not be prosecuted for alleged violation of provisions of ESI Act-More so, when all the amount due to ESI Corporation had already been remitted by company.- The Petitioner No. 1 Director of the Petitioner No.2, a company incorporated under the Companies Act. The company had since 7.11.1981 appointed a manager for looking after day to day affairs of the factory. He was also a manager within the meaning of Section 2(n) of the Factories Act and his name was registered with the office of Registrar of the Factories under the said provisions of the said Act. A complaint was filed on 22.6.1983 for violation of the provisions of ESI Act for failure to pay the contribution under the Act within 21 days of the last date of the wage period for the period ended on 27.11.1982 and 8.1.1983. The Magistrate issued summons against petitioners on the basis of the aforesaid complaint. The petitioners filed application on 6th July, 1990 for discharge on the groundo that the complaint did not disclose an offence. The said application was rejected by the Magistrate.
Held, that in view of the decision of the Supreme Court in AIR 1991 SC 1741, wherein it is clearly laid down that in the absence of anything more, director cannot be treated as owner of the factory in order to attract the penal provisions under the ESI Act. In short, if the manager is appointed for carrying out provisions of the Act, no director can be implicated for the violation of the provisions of the Act. Where a manager is appointed for carrying out provisions of the Act, a director of the company will be excluded from the definition clause. In view of the proposition of law, as laid down by the Supreme Court the prosecution of the first petitioner for the violation of the provisions of ESI Act was untenable, moreover when all the amount due to ESI Corporation had already been remitted by the petitioner company. This was an added circumstance in favour of the petition to avoid prosecution.
Section 2-See Employees State Insurance Act, 1948, Section 86-A.
2. The learned Magistrate has issued summons against petitioners on the basis of the aforesaid complaint. The petitioners then filed application on 6th July, 1990 for discharge on the ground that the complaint does not disclose an offence. The said application was rejected by the Magistrate as per Exh. "G". Aggrieved by this order, the petitioner filed this writ petition.
3. Heard Counsel for the petitioner, Shri H.V. Mehta appearing for respondent Nos. 1, 2 and 3 and Mrs. Usha Kejriwal appearing for the State of Maharashtra.
4. The main contention of the petitioner is that even though there is violation of the provisions of E.S.I. Act, the petitioners are not liable to be prosecuted particularly when the Manager has been appointed for carrying out the provisions of E.S.I. Act.
5. I have examined the complaint. There is no allegation in the complaint that the first petitioner was responsible for the violation of the Act except the presumption drawn that reasonable inference can be drawn that he can also be liable being the Director of the Company. There is no allegation in the complaint that the first petitioner has committed any offence. It has been held by the Supreme Court in (Employees State Insurance Corporation v. Gurdial Singh)1, A.I.R. 1991 S.C. 1741 based the definition under section 2(17) of the Act as follows :
"Principal employer" means :
(i) in a factory, the owner or occupier 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 of 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."
6. In view of the definition Clause the aforesaid decision has clearly laid down that in the absence of anything more, Director cannot be treated as owner of the factory in order to attract the penal provisions under the E.S.I. Act. In short, if the Manager is appointed for carrying out provisions of the Act, no Director can be implicated for the violation of the provisions of the Act, the Supreme Court in Para 2 has observed thus :
"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 Director did not come within Clause (i) but the occupier being there, Clause (i) applied and
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