Managing directors can be held liable as principal employers under the Employees' State Insurance Act for failure to submit contribution cards.

( 1 ) THE Insurance inspector has filed a petition of complaint alleging that the three accused are the managing directors of M/s. International Remedies Private Ltd. , having its factory at 66/40, Parui Kutcha Road, Calcutta. The accused are principal employers within the meaning of Section 2 (17) of the E. S. I. Act. The accused failed to submit the contribution cards. They were, therefore, prosecuted under Section 85 (a) and (g) of the Employees' State Insurance Act, 1948, read with Section 4 (i) (b) of the Employees' State Insurance (Amendment) Act, 1975, and for violation of Regulation 26 of the Employees' State Insurance (General) Regulations, 1950. Hence this rule.

( 2 ) THE learned advocate, appearing on behalf of the petitioner, has stated that the petition of complaint shows that M/s. International Remedies Private Ltd. is a factory. There is no averment that the directors were responsible for the supervision and control of the factory or that they are in actual possession of the contribution cards. Moreover, the petitioner who is one of the accused, tendered his resignation as director in March, 1973. After such resignation he is no more liable for any offence. The case of Mahalderam Tea Estate [1979] 49 Camp Cas 529 (Cal) has been cited to show that since there are no materials in the petition of complaint from which the Magistrate could be satisfied that the accused took part in the running of of the business of the factory, the prosecution should be quashed.

( 3 ) THE learned advocate, appearing on behalf of the complainant, opposite party, has stated that the prosecution was rightly initiated.

( 4 ) THE learned advocate, appearing on behalf of the opposite parties Nos. 2 and 3, supported the petitioner's contention. But the learned advocate, appearing on behalf of the State, has stated that the prosecution was rightly initiated.

( 5 ) THE question of tender of resignation cannot be considered, because in the affidavit-in-opposition it has been clearly stated that no information regarding the alleged resignation was received prior to the filing of the petition of complaint.

( 6 ) SECTION 2 (17) (i) of the E. S. I. Act shows that the principal employer of the factory means the owner or occupier of the factory and includes the manager and the managing agent as well. The expression is wide enough to make the director, a principal employer within the meaning of Section 2 (17) (f) (i) of the E. S. I. Act. Of course, in this case, a manager has been appointed. Such expression is not disjunctive in respect of a manager or director. So, if the managing agent and a manager have been appointed, then all of them will simultaneously be the principal employer within the meaning of Section 2 (17) of the Act.

( 7 ) REFERENCE may be made to the case of Bidyut Kumar Sett v. Satyesh Chandra Bagchi [1979] 49 Comp Cas 274 (Cal), at page 277, to show that there is distinction between the E. S. I. Act and the Regulations and the Employees' Provident Funds and Family Pension Fund Act, Prevention of Food Adulteration Act and the Essential Commodities Act. Under the E. S. I. Act the company has not been made primarily liable, but under the Essential Commodities Act and similar other Acts the company has been made primarily liable and the vicarious liability has been extended to the directors and others who are concerned with the day to day running of the company's business.

( 8 ) IN that case, it has been stated that the failure to submit necessary contribution cards will not enable a director to apply for quashing the proceedings as it is within his special knowledge and an averment is not necessary in the petition of complaint that the director is in actual possession of the same.

( 9 ) REGULATION 26 (c) of the Act deals with the case of an employer being in possession of the contribution card. The term "employer" has been defined in Regulation 2 (g) by saying that the employer means the principal employer, as