S.L. Saraf @ S.L. Shroff and Others vs The State of Bihar and Others

S.C. Jha, J.—The order under challenge is dated 28.6.2003 passed by the learned Chief Judicial Magistrate, Patna, in Complaint Case No 1446(M) of 2003 when by and whereunder he has taken cognizance against the petitioners for the offence punishable u/s 85(a) of the Employees State Insurance Act (hereinafter to be referred to as ''the Act'') and thereby directed to secure for their appearance in the case.

Heard learned Counsel for the petitioners and the learned Additional Public Prosecutor appearing on behalf of the State

No body appears on behalf opposite party Nos. 2 and 3 in spite of the fact that notices have been duly served in the office of the Employees State Insurance, original office being at Panchadeep Bhavan, Patna.

The complainant seems to have filed a complaint in the csburt of the Chief Judicial Magistrate, Patna, by the State through the Inspector, Legal, Employees State Insurance against the petitioners S.L. Saraf @ S.L. Shooff, S.M. Sureka (not petitioner here and since dead), Rajjendra Kumar Saraf @ Rajendra Kumar Shroff and Sanjeev Saraf & Sanjeev Shroffs who have been shown as Directors of Modem Fibotex Indian Limited, opposite-J.J Ex porters, porters, Baunsi Road, P.S. Mojahidpur, Dt. Bhagalpur.

The aforesaid factory Mcdern Fibotex Indiaetft Limited is a factory as defined in Clause 17 of Section 2 of the Factories Act and the petitioners as well as S.M. Sureka (since dead) are the directors and as such principal employer of the aforesaid factory, they are required to pay the contribution within twenty-one days of the expiry of the calendar month and because of violation on their part, they are liable to be prosecuted under Action 85(a) of the Act.

Learned Counsel for the petitioners has submitted that very jurisdiction of Patna Chief Judicial Magistrate is barred in view of the fact that the factory concerned is situated in the town of Bhagalpur and all the directors who are petitioners here also shown to be residents of Bhagalpur itself. He his also submitted that the complaint petition would not disclose any transaction or any kind of violation having taken place within the district of Patna and as such the Chief Judicial Magistrate, Patna, has no jurisdiction to entertain such petition and thereby to pass any order of cognizance for trial of these petitioners.

In support of his contention, the learned Counsel for the petitioners has referred to relevant provisions of the Act so as to show that there is absence of any specific provision for constitution of any special court at Patna.

Learned Counsel for the petitioners has also referred to Section 86 of the Act in support of his contention that the directors of the Company can not be prosecuted without making the (Company a party itself for violation of any provision of law. Here the said Company which is a public limited has not been made a party in the complaint petition. He has further submitted that there is no averment in the entire complaint petition so as to infer any specific or any kind of violation by these directors for commission of any offence.

It has also been submitted that merely being the Directors of the Company, one can not be branded ''Principal Employer'' and for that more or less in similarly placed situation this Hon''ble High Court has held after due consideration of the relevant facts on rulings that-

by virtue of being Directors of the Company do not automatically fall within the purview of "Principal Employer" u/s 2(17) of the a core said Act. The Company being a separate entity from the Directors, can not be said to be the owners of the Company. The prosecution of tie present four petitioners in their personal capacity merely by reason of their being Directors is thus not sustainable in law. This Court, therefore, holds that the present four petitioners in their personal capacity as Directors would not fall within the definition of ''Principal Employer'' u/s 2(17) of the aforesaid Act and thereby cannot be held liable for the alleged non-compliance of Section 44 of the Act with regard to non-furnishing of return etc.

As a matter of fact, it is the contention of the learned Counsel for the petitioners that they have knocked the jurisdiction of this Court when they were required to he prosecuted for non-furnishing of return etc, and so far their status is concerned, it can safely be held that the Directors i.e., those petitioners can not be in the aforesaid situation, treated as "Principal Employer" Law prosecutes to "Principal Employers" in respect of violation of the Act. Vide Order dt. 16-9-04 in (sic) No. 32964/03.

It has also been submitted that M/S. Modem Fibotex Indian Limited has already filed a case u/s 75(g) of the Act challenging the applicability of the Act on the Company as well as the order of assessment dated 29.1.2002 through which the Company has been illegally and arbitrarily assessed to the tune of Rs. 2,10,448/- as ESI contribution allegedly payable for the period April, 1989 to October, 1995. Tine case bearing ESI Case No. 11 of 2002 is still pending in the appropriate court at Patna which is Labour court at Patna and the matter is sub-judice. So, unless this competent Court decides regarding the applicability of relevant provision of law under the Act, the company concerned in which these petitioners happen to be the Directors, can not be called upon to face the trial in a criminal court.

The learned Additional Public Prosecutor appearing for the State has submitted in all fairness that there is noting in the act so as to infer bar of the Chief Judicial Magistrate Bhagalpur, to take cognisance in the case. In that view of the matter, it can be said that the impugned order not within the territorial jurisdiction of the court of the Chief Judicial Magistrate, Patna. At the same time, for the aforesaid reason and the relevant discussion, it can also be held that the petitioners being the Directors of the company are not "Principal Employers" of the company. Moreover, these Directors can not be prosecuted without making the company itself liable for violation of law under the Act and admittedly, the company of the petitioners has not been made an accused in the case.

Last there also appears force so far as absence of any specific averment in respect of their specific role in violation of the Act is concerned.

In the facts and circumstances, the impugned order dated 28.6.2003 stands quashed as very continuance of the proceeding in the court below will amount to abuse of process of law. This application, thus, is allowed.