Employees'' State Insurance Corporation vs Ramalingeswara Pulvarising Mills and Others

Narasimha Reddy, J.—In all these cases the facts are the same and the question of law is identical. Hence, they are disposed of through a common order. The Employees'' State Insurance Corporation is the petitioner. The respondents are industrial establishments (for short "the respondents"). They are under obligation to make contributions for the Employees'' State Insurance Fund constituted under the Employees'' State Insurance Act, 1948 (hereinafter referred to as "the Act"). For the default committed by them in making the contributions to the fund, the petitioner had initiated prosecution u/s 85 of the Act and the Rules and Regulations made thereunder, before the Court of Judicial Magistrate of First Class to try offences under ESI and Chairman, Industrial Tribunal-1, Hyderabad. The trial Court, through its various Orders in the respective cases found the respondents guilty of the offence, and imposed the sentence of fine. The petitioner filed these applications seeking leave to challenge the orders of the trial Court, so far as they relate to the quantum of punishment.

Smt. Pushpender Kaur, learned counsel for the petitioner submits that though the trial Court found that the respondents failed to make contributions for themselves and on behalf of their employees, it had not inflicted the punishment, provided for u/s 85(a) of the Act. According to her, once it is established that the respondents have failed to make contributions, the minimum punishment prescribed therefore ought to have been inflicted, as a matter of course.

Section 85 of the Act contains a list of seven violations, viz. (a) to (g), which if established would entail various kinds of punishments. The violation u/s 85(a), viz., failure of the employer to pay contribution, which it is liable to pay under the Act, attracts the punishment of imprisonment, which may extend to three years. It is further stipulated that m case the employer deducts the contribution from the wages of the employee and fails to pay the same to the fund, he shall be liable to be inflicted a minimum punishment of imprisonment of one year and a fine of Rs. 10,000.

In the case on hand, as on the date of initiation of prosecution, the respondents were due to pay the contributions. The order does not disclose as to whether, the respondents have deducted the contributions from the wages of the respective employees. Be that as it may, during the course of the trial they have paid the arrears. It was in this context, the trial Court had inflicted punishment of fine upon them.

Learned counsel for the petitioner submits that the ESI Act is a legislation enacted with an avowed object of protecting the interests of the employees and any violation thereof should be viewed very seriously. She further contends that the purpose of the Act prescribing minimum punishment is to ensure that it acts as a deterrent for other employers.

There is absolutely no doubt, about the purpose underlying the Act. It, however, needs to be seen that whenever a provision of law contemplates minimum punishment, it needs a strict interpretation and such punishment can be inflicted, if only, the necessary facts are proved beyond doubt. As observed earlier, it was not established before the trial Court that the respondents have deducted the contributions from the wages of the employees, and have withheld the same from being contributed to the fund. The provision as regards the minimum punishment, presupposes the existence of such a factual background. At any rate, whatever be the justification, or the lack of it in not paying the contribution of the fund, the respondents paid the same during the pendency of the cases. Under these circumstances, it cannot be said that the provision as regards minimum punishment is attracted.

The Legislature was conscious of the recurrence of defaults by the industrial establishments. It is for this reason that Section 85-A was introduced through an amendment in the year 1985. It provides for infliction of minimum punishment, in case, a person who is already convicted for the offence u/s 85, commits the offence once again. Through the amendments made in 1989 and 1992 the punishment has been enhanced to five years, which, in no case, be less than two years. It is impermissible for any Court to inflict the punishment without there being any factual basis. Learned counsel for the petitioner has relied upon the judgment of the Bombay High Court in E.S.I.C. Vs. S.K. Agarwal and others, . That is a case wherein the trial Court did not apply the provisions of Section 85-A of the Act even though it was established that the respondent therein committed a series of violations. As observed earlier, Section 85-A gets attracted where the violation complained of is the second or a further one. Section 85-A does not get attracted for the offence, which is alleged for the first time against any industrial establishment. In all the cases on hand, it is not even the version of the petitioners that they have been convicted for the offence u/s 85-A on earlier occasions.

It has also come in evidence that some of the establishments are closed. Under these circumstances, this Court is of the view that no useful purpose would be served, by granting leave to appeal to the corporation and thereby subject the respondents to further rejection. Accordingly, the applications are rejected.