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1991 Supreme(Cal) 177
High Court of Calcutta
A.K. Nayak, J.
Gouri Adhikary – Appellant
Versus
Employees State Insurance Corporation, West Bengal – Respondent
Cri. Rev. 1386 of 1985
Decided On : Apr 02, 1991
Anjan Mukherji, Monoranjan Daw, Subol Moitra
A director of a company is not necessarily the principal employer under section 2(17) of the E.S.I. Act; only a director who has ultimate control over the affairs of the factory can be considered the principal employer.
Headnote:
E.S.I. ACT - PRINCIPAL EMPLOYER - SECTION 2(17), 40, 85(A), 85(G) - PRINCIPAL EMPLOYER DEFINED - DIRECTOR OF COMPANY NOT NECESSARILY PRINCIPAL EMPLOYER - ONLY DIRECTOR WITH ULTIMATE CONTROL OVER AFFAIRS OF FACTORY IS PRINCIPAL EMPLOYER - PROCEEDING AGAINST DIRECTOR NOT IN ULTIMATE CONTROL QUASHED.
Fact of the Case:
Petitioner, a director of M/s. Metro Engineering Works (P) Ltd., challenged a complaint case filed against her under sections 85(a) and (g) of the E.S.I. Act for failure to submit contribution cards as required under section 40 and Regulation 26 of the E.S.I. Regulations, 1950. The petitioner contended that she was not the principal employer as defined in section 2(17) of the E.S.I. Act and had no ultimate control over the affairs of the factory at the relevant time.
Finding of the Court:
The court held that the petitioner, being a director of the factory, was not necessarily the principal employer as defined in section 2(17) of the E.S.I. Act. It further held that only a director who had ultimate control over the affairs of the factory could be considered the principal employer for the purpose of the Act.
Issues: Whether a director of a company can be considered the principal employer under section 2(17) of the E.S.I. Act?
Ratio Decidendi: The court relied on the definition of 'principal employer' in section 2(17) of the E.S.I. Act, which includes the owner or occupier of the factory, the managing agent, the legal representative of a deceased owner or occupier, and the person named as the manager under the Factories Act, 1948. It also referred to the definition of 'occupier' in section 2(n) of the Factories Act, which includes any director who has ultimate control over the affairs of the factory.
Final Decision: The court quashed the proceeding against the petitioner, holding that she was not the principal employer as she was not in ultimate control over the affairs of the factory at the relevant time.
A.K. Nayak, J.
1. THIS revision application under sections 397 and 401 read with section 482 Cr. P.C. is directed against an order dated 10.7.81, passed by learned Chief Metropolitan Magistrate, Calcutta, in case No. C/2088/81 taking cognizance of the offence under sections 8 5 (a) and (g) of the E.S.I. Act against the accused-opposite party no. 3 and also under the said section read with section 85A of the said Act, against the present petitioner and accused-opposite party no. 4, thereon issuing process against them.
2. UNDISPUTEDLY, a complaint case as appearing from the petition of complaint Annexure 'A' was filed before the learned Chief Metropolitan Magistrate, Calcutta, by the complaint-opposite party no. 1, Employees State Insurance Corporation, against accused persons, being described as the Managing Director and Directors of M/s. Metro Engineering Works (P) Ltd., which is factory, alleging that these accused-persons, being the principal employers as defined in Clause 17 of section 2 of the E.S.I, failed to submit contribution cards for the period expiring 29.11.80, which should have been submitted within the grace period on or before 10.1.81 as required under section 40 regulation 26 of the E.S.I. Regulation, 1950. As already stated the learned Chief Metropolitan Magistrate issued process on taking cognizance against the petitioner and accused-opposite party nos. 2 and 3.
It has been contended on behalf of the petitioner Smt. Adhikary described as a director of the said factory in the petition of complaint that such proceeding is not maintainable against the petitioner as she is not the principal employer as defined in section 2(17) of the E.S.I. Act and further that being a lady, she was not in ultimate control over the affairs of the factory at the relevant time and had no knowledge about the alleged offence As such, it has been contended that the pending proceeding is liable to be quashed against her.
3. IT has not been seriously disputed on behalf of the petitioner that she was a director of the factory, M/s. Metro Engineering Works (P) Ltd. at the material time. What has been seriously disputed is that she, being not the principal employer, cannot be said to have committed the offence alleged. The question is whether the petitioner simply because of her position as a director of the factory can be said to have committed the offence alleged.
4. IT is the undisputed position of law that under section 85 (g) read with section 40 of the E.S.I. Act, a person who can be prosecuted for failure to submit the contribution cards as required under section 40 read with. Regulation 26 is the principal employer as defined in section 2(17) of the Act under regulation 2(g), Employer means the principal employer as defined in the Act. A reference to the definition will show that in a factory the "principal employer" means 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, the person so named. An 'occupier' of a factory as defined in section 2(15) of the E.S.I. Act is to have the same meaning assigned to it in the Factories Act, 1948. Occupier of a factory under section 2(n) of the Factories Act means the person who has the ultimate control over the affairs of the factory and where the said affairs are entrusted to managing agent, such agent shall be deemed to be the occupier of the factory. The proviso (ii) to Clause (n) Of section 2 of the Factories Act lays down that in case of a company any one of the directors shall be deemed to be the occupier, particularly that director who has ultimate control over the affairs of the factory.
In the instant case, accused-opposite party no. 3 Ashutosh Adhikary has been described in the petition of complaint itself annexure 'A' as the Managing Director and the other accused namely the accuse
