Employees' State Insurance Corporation vs Alagusundaram Chettiar and others

Karpagavinayagam, J.—These two appeals arise out of the two inspections made by the prosecuting officer on April 29, 1986, and May

30, 1986. The appellant and respondents herein are the respective complainant and accused in S.T.C. Nos. 335 and 336 of 1986 on the file of the

Judicial First Class Magistrate No. 1, Madurai. As the respondents have not remitted the employees'' contribution within the stipulated time, the

above two summary trial cases have been filed against them. S.T.C. No. 335 of 1986 relates to the period from January, 1986, to March, 1986,

and the contribution of employees as well as the company being Rs. 65,309.20 and Rs. 1,45,564.10, respectively. S.T.C. No. 336 of 1986

relates to the month of April, 1986, and the contribution of the employees and the company being Rs. 20,708.80 and Rs. 45,977.20, respectively.

Both the cases ended in acquittal in respect of the charge u/s 85A of the Employees'' State Insurance Act, 1948, by two different judgments dated

December 30, 1986. Aggrieved over the same, the Employees'' State Insurance Corporation has preferred these two appeals.

The facts leading to the summary trial cases are as follows :

PW-1, Ramanathan, is the manager in the local office of the Employees'' State Insurance Corporation at Palanganatham. The respondents are the

managing director and directors of the subject mill, viz., Mahalakshmi Mill at Pasumalai. The said mill was inspected by PW-1, Ramanathan, on

April 29, 1986, and it was found that the employees'' contribution towards insurance for the period from January, 1986, to March, 1986, have not

been paid within the stipulated period of 21 days, which is in contravention of section 40 read with regulation 31 of the Employees'' State

Insurance (General) Regulations, 1950. After inspection, PW-1 sent the report, exhibit P-1 (S.T.C. No. 335 of 1986), stating that though a sum of

Rs. 65,309.20 has been recovered from the employees as contribution towards insurance, the company/mill did not pay the same together with the

company''s contribution of Rs. 1,45,564.10 in time and filed a complaint for the offence u/s 85A of the said Act. PW-2, Jainulladeen, working as

head clerk in the State office, was examined to show that a total sum of Rs. 2,10,872.30 has to be paid by the accused/company for the period

from January, 1986, to March, 1986, towards the contribution of the employees. This complaint was taken on file in S.T.C. No. 335 of 1986 by

the Judicial First Class Magistrate No. 1, Madurai.

Again, on May 30, 1986, PW-1, Ramanathan, went to the same mill and found that the employees'' contribution towards insurance for the

month of April, 1986, has not been paid within the statutory period, which is in contravention of section 40 and regulation 31 of the Employees''

State Insurance (General) Regulations, 1950. With reference to this also, a complaint was filed u/s 85A of the said Act, which was taken on file in

S.T.C. No. 336 of 1996 by the same Judicial Magistrate.

After examination of the witnesses, the accused were questioned u/s 313 of the Criminal Procedure Code, 1973. They denied their complicity in

the crime. On termination of the trial, the learned Judicial First Class Magistrate No. 1, Madurai, dismissed both the cases and acquitted the

respondents of the charge u/s 85A of the Employees'' State Insurance Act. Aggrieved over these two judgments, the present action has been

resorted to by the Employees'' State Insurance Corporation, represented by the Insurance Inspector (Legal), Madurai.

Learned counsel for the appellant contends that the learned Judicial Magistrate was wrong in acquitting the respondents/accused. On the reason

that the evidence of PWs-1 and 2 is contradictory as PW-1 says that contributions by the employees towards insurance have not been paid, while

PW-2 says that contributions have been paid after the stipulated time. Learned counsel contends that belated payment cannot absolve the accused

of the charge, as the said payment has not been made within the stipulated time of 21 days, which is punishable under the Act. He has further

submitted that the evidence of PW-1 can be believed, but, on the other hand, the trial court disbelieved his version on the simple ground that he did

not know the result made in Criminal Appeal No. 125 of 1983 by this court. I have heard learned counsel for the respondents also.

I am entirely in agreement with the submissions made by learned counsel appearing for the appellant. The ground on which the accused/

respondents were acquitted cannot be said to be valid in law, in view of the decision rendered in the case of Rukmini v. Employees'' State

Insurance Corporation [1990] 2 MWN (Cri.) 10. In that decision, a similar argument was advanced, stating that there cannot be any prosecution,

in view of the subsequent payment of the employees'' contributions towards insurance. This point has been elaborately considered, and it has been

held that the Act imposed an obligation on the employer to make the stipulated payment within the stipulated time and that failure to make the

payment, within the time stipulated, results in default of payment of the contribution in terms of the provisions of the Act and Regulations. From the

above observation, it is clear that failure to make payment of the contributions of employees towards insurance, within the specified period can give

rise to a prosecution, irrespective of the fact that the amount has been subsequently paid. In that view, I feel that the orders of acquittal were quite

wrong. On a perusal of the judgments, it is seen that the evidence of PW-1 was disbelieved, merely because PW-1 was not able to say the result

of Criminal Appeal No. 125 of 1983. This has no relevance to the point raised before the court below. The reasoning given by the trial court for

throwing out the case of prosecution is not convincing.

At this stage, it was brought to my notice that Justice Arunachalam of this court had an occasion to consider in a batch of cases, Crl. M.P. No.

12781 of 1986, etc., as to whether the directors of a company or a partner of a firm by virtue of being a director or partner alone could be

considered to be the principal employer as contemplated u/s 2(17) of the Act and in that decision, it has been held that such director or partner will

not be personally liable to pay the contribution under the Act, for, the principal employer u/s 2(17) of the Act, would take in either the owner or

the occupier or the manager of the factory, if one had been so appointed, depending upon the facts of each case. Applying the above principles

laid down, the prosecution against respondents Nos. 1 to 7, who are merely shown as directors cannot be sustained. In such circumstances, I am

not able to set aside the orders of acquittal and convict the respondents, in the absence of evidence, as to who is the principal employer or

manager of the mill in question. Moreover, the offences relate to the periods from January, 1986, to March, 1986, and April, 1986, respectively,

and the appeals have been filed in 1987. It is at this stage, nearly nine years have lapsed. In view of the long lapse of time also, I do not propose to

interfere with the judgments of the trial court in S.T.C. Nos. 335 and 336 of 1986 except to point out the illegality committed by the learned trial

Magistrate, as submitted by learned counsel for the appellant. With these observations, the above two appeals are dismissed.