Employees’ State Insurance Act, 1948
Section 85(a)
Sick Industrial Companies (Special Provisions) Act, 1986
Sections 22(1) or 22A
Negotiable Instruments Act, 1881
Section 138
The Madras High Court ruled that an order declaring a company sick under the Sick Industrial Companies (Special Provisions) Act, 1986 did not prohibit criminal proceedings against such company, under Sections 22(1) or 22A thereof— The Trial Court on 28.09.2013 convicted the Appellant under Section 85(i)(b) of the Act and sentenced him to undergo imprisonment for six months along with a fine of Rs.5000/- (Rupees Five Thousand). Aggrieved, the Appellant and Respondent No.2 filed Criminal Appeal No.553/2013, before the Principal City Civil and Sessions Judge, Bangalore which was subsequently transferred to the Fast Track Court VI, Bangalore (hereinafter referred to as the ‘First Appellate Court’). The First Appellate Court on 14.11.2014 upheld the order of conviction and sentence passed by the Trial Court and dismissed Criminal Appeal No.553/2013. Aggrieved by such Order of the First Appellate Court, the Appellant and Respondent No.2 filed Criminal Revision Petition No.164 of 2015 before the High Court. The High Court by the Impugned Order dated 08.12.2023 dismissed the Revision Petition of the Appellant and Respondent No.2 on the ground that the evidence on record clearly established that the Appellant was General Manager and Principal Employer of Respondent No.2 and it was also established that a contribution of Rs.8,26,696/- (Rupees Eight Lakhs Twenty-Six Thousand Six Hundred and Ninety-Six) was deducted during the period 01.02.2010 to 31.12.2010 from the employees of Respondent No.2, but not remitted to the ESIC.
The High Court rightly indicated that non-remittance of the contribution deducted from the salary of an employee to the ESIC is a offence under Section 85(a) of the Act and punishable under Section 85(i)(a) of the Act but the Trial Court had imposed a lesser sentence as provided under Section 85(i)(b) of the Act. This is clearly borne out by Section 85(i)(a) of the Act which provides for a sentence of not less than one year imprisonment and fine of Rs.10,000/- (Rupees Ten Thousand), since the amount had been deducted from the salaries of the employees and not paid, which is the fact in the present case, whereas under Section 85(i)(b) of the Act, sentence of imprisonment is not less than six months and with fine of Rs.5,000/- (Rupees Five Thousand) in other cases. Of course, the Trial Court could have given a lesser sentence even for an offence under Section 85(i)(a) of the Act under the proviso to Section 85(i) of the Act. Overall, the High Court did not feel the necessity to interfere in the lesser sentence awarded by the Trial Court. Thus, Supreme Court finds that the conviction and the sentence does not require any interference, much less in the present case, where despite contributions having been deducted from the employees’ salaries, they were not deposited with the ESIC. Accordingly, the appeal, being devoid of merit, stands dismissed. The Appellant is directed to undergo the sentence after setting off the period already undergone, if any and pay the fine, if not already paid, as awarded by the Trial Court. The exemption from surrendering granted by order dated 18.03.2024 stands withdrawn. The appellant shall surrender before the Trial Court within two weeks from today. .....Ajay Raj Shetty =VS= Director, (Criminal), 2025(2) [19 LM (SC) 80] ....View Full Judgment