Research › Search › Judgment

Madras High Court · body

2003 DIGILAW 2069 (MAD)

D. Jothinath v. Employees State Insurance Corporation

2003-12-16

M.THANIKACHALAM

body2003
Judgment :- Accused 3 to 5 in C.C.No.367/2002 on the file of the Judicial Magistrate No.II, Coimbatore, have moved this Court, for quashing the proceedings against them, in the above said case. 2. The respondent as complainant has filed a case before the Judicial Magistrate No.II, Coimbatore and summoned the petitioners and two others, to face the trial under Section 85-A and 85(i) & (ii) r/w 86-A of the E.S.I. Act, 1948, on the ground that they have failed to pay the share of contribution, in respect of their employees, at the rates prescribed under Rule 51 of the E.S.I. (Central Rules) 1950. 3. After the receipt of copy of the complaint, on going through the averments therein, these petitioners felt that they are not answerable to the claim made in the complaint and therefore, presuming that it is unnecessary for them, to face the ordeal of trial, have filed this petition, for quashing the proceedings against them. 4. Despite the fact, number of opportunities were given, there was no representation on behalf of the respondent. 5. The first accused namely M/s. Popco Garments, is a partnership firm, in which accused 2 to 5 are the partners. The second accused by name Shri Raghavendra is a partner, as well as the principal employer and accused 3 to 5 are the partners, having some interest in the firm. The first accused firm, comes within the purview of the Employees State Insurance Act, hereinafter called " the Act". The firm was also allotted a Registration Code No.56-16453. Under the rules framed under the Act, the Principal Employer of the factory should pay contribution, in respect of their employees, as per the rates prescribed under the rules. According to the respondent/complainant, the accused have failed to pay the contribution, which was payable in respect of the employees of the factory viz., M/s. Popco Garments, within the specified period, for the wage periods during 5/97 to 12/99. The total amount of contribution payable by the accused is Rs.2,45,388/-. Since as per the procedure, the accused have failed to pay the contribution at State Bank of India, by filing a complaint, the respondent had summoned the accused, as aforementioned, which is challenged only by these petitioners/accused 3 to 5, before me. 6. The total amount of contribution payable by the accused is Rs.2,45,388/-. Since as per the procedure, the accused have failed to pay the contribution at State Bank of India, by filing a complaint, the respondent had summoned the accused, as aforementioned, which is challenged only by these petitioners/accused 3 to 5, before me. 6. The learned counsel for the petitioners submits that even as per the averments in the complaint, the petitioners accused are not liable to be prosecuted and therefore, the trial Court has committed an error, in taking the case on file, against the petitioners also and in this view, it is prayed that the proceedings should be quashed against them. The submission of the learned counsel for the petitioners, appears to be well founded, as seen from the averments in the complaint, which is also supported by judicial precedent, for which we have to see the averments in the complaint. 7. Paragraph-2 of the complaint reads : "The above said accused No.1 is the firm and it is represented by Sri. S. Raghavendran who is the Partner as well as the Principal Employer and occupier of the No.1 Factory." (Emphasis supplied) It further reads: There is no Factory Manager appointed at the relevant time under the Factories Act." The latter portion of paragraph-2 says: "The accused No.2 to 5 are the persons who at the time the offence was committed was in charge of and responsible to the firm for the conduct of business of the firm." For the conduct of the business, nowhere it is stated, by virtue of their position in the first accused firm, as partners, the petitioners are also liable to pay the contribution, taking responsibility and their failure to do so, would amount an offence, under the relevant provisions. It is the specific case of the accused that only the principal employer and the occupier of the first accused firm alone is responsible, for the payment of contribution, in respect of its employees, and if at all, for non payment, the firm as well as the principal employer alone could be prosecuted and the provision could not be stretched to embarrass other partners of the firm also, under the presumption, they are vicariously liable. Under the above circumstances, we have to see whether all the partners of the first accused firm could be prosecuted, as a principal employer, bringing them under the fold of Section 2(17) of the Employees State Insurance Act. 8. This Court had an occasion to consider, whether a partner of a firm can be prosecuted as a principal employer under the E.S.I. Act in G. Ramasamy Moopanar vs. Employees State Insurance Corporation (1990 L.W. Crl. 414). In the said decision, it is well considered, regarding the role of partner, whether he will come within the meaning of principal employer, as contemplated under Section 2(17) of the Act and what are the responsibilities, whether he could be prosecuted under the Act or not. The learned Judge has elaborately dealt with the case, placing reliance on a number of rulings, and finally came to the conclusion, that the Director of Company or a partner of a firm, by virtue of being a Director or Partner is not a principal employer, which should follow, he cannot be held personally responsible, to pay the employees' contribution and it is held as follows: "The Director of a company or a partner of a firm, by virtue of being a Director or a partner, is not a principal employer, contemplated by S.2(17) of the Employees' State Insurance Act. He is not personally liable to pay the employer's contribution under the Act. The Act contemplates an 'immediate employer' and the 'principal employer' refers to the 'owner' or 'occupier' of a factory, it is apparent that the principal employer can either be the owner or the occupier, depending upon the facts of each case. The word 'or' must be read disjunctively and cannot be read as "and" because such a reading is bound to introduce an uncertainty, in fastening the obligation, to deduct and pay the employer's contribution as well as the employees' contribution. The concept appears to be that the person liable, is one, who has ultimate control over the affairs of the factory. "A reading of S.97 of the Act makes it apparent that the regulations made by the Corporation, with the prior approval of the Central Government and subject to the conditions of previous publication, should not be inconsistent with the provisions of the Act and the Rules made thereunder. "A reading of S.97 of the Act makes it apparent that the regulations made by the Corporation, with the prior approval of the Central Government and subject to the conditions of previous publication, should not be inconsistent with the provisions of the Act and the Rules made thereunder. The Regulations are intended for proper administration of the affairs of the Corporation for carrying into effect the provisions of the Act. When the Act has defined under S.2(17) the "principal employer', simply because Form 01 under column 8, asked for particulars of the Manager, Chairman, Partner and Director, it cannot be held, that all of them will be included as principal employer under S.2(17) of the Act. The scope of S.2(17) of the Act cannot be enlarged by S.10-B of the Regulations. It is quite possible that a Director can be a Manager of the factory and mere furnishing of addresses as called for in Form 10, will not make everyone in the Form, a principal employer under the Act. It is therefore not correct to state that the principal employer, in view of clauses (a) to (d) would include not only the Manager, but also the Managing Director, Managing Partner, Chairman, Directors and Partners." Following the above decision, once again this Court has held in M/s. T. Azeezar Rahman & Co. & 2 others v. Employees State Insurance Corporation (1993 L.W. Crl. 568) that the absence of specific allegation in the complaint, against one of the partners that he was in-charge of the factory during the material time, he cannot be prosecuted, only on the ground that he was the partner or the Director, as the case may be. As I have already mentioned, there are some allegations against these petitioners also in the complaint, which says that accused 3 to 5 were in-charge of the first accused firm and therefore, they are responsible to the firm, for the conduct of business of the firm. It is nowhere stated, that the ultimate control of the first accused firm was always with all the partners, including the petitioners, thereby making them personally liable. It is nowhere stated, that the ultimate control of the first accused firm was always with all the partners, including the petitioners, thereby making them personally liable. In a case of vicarious liability, if the petitioners are held to be responsible, that too in a criminal case, it is not only obligatory on the part of the complainant, but also mandatory that there should be unquestionable averment in the complaint, indicating that the partners were in charge of and responsible for the conduct of the business of the company, giving instances also. By reproducing the words contained in the Section, without further materials, as if all the partners are responsible for the conduct of the business of the firm alone is not sufficient, especially when a principal employer is nominated, who is described as the occupier of the firm also, thereby fixing the responsibility upon that person alone, for the over all control of the firm. Unless, it is pleaded and shown prima facie, that the petitioners, who are sought to be prosecuted, would fall within the definition of Section 2(17) of the Act, merely reproducing the words of Section and alleging in the complaint that all the partners will be liable, is not sufficient to fix the criminal liability upon them. It is also not the case of the complainant, as seen from the averments in the complaint, that these petitioners also will come within the meaning of 'principal employer'. In the absence of specific allegations to bring these petitioners, within the meaning of 'principal employer', prosecuting them only because of the fact ,they are the partners of the company, is not permissible under law, as held by this Court, elaborately discussing the provisions of law supported by judicial precedent in G. Ramasamy Moopanar's case. In the said decision, it is specifically held that the person liable to be prosecuted is one, who has ultimate control over the affairs of the factory and I respectfully agree with the observation of the learned judge, which was followed by this Court in the subsequent decisions also. To take contra view, by going through the complaint, I am unable to find any materials. To take contra view, by going through the complaint, I am unable to find any materials. Thus as rightly submitted by the learned counsel for the petitioners, even as per the allegations in the complaint, the irresistible conclusion that could be drawn is, that the complaint against the petitioners viz., accused 3 to 5 is not maintainable and therefore, the same is liable to be quashed. In the result, the petition is allowed and the proceedings against the petitioners alone, in C.C.No.367 of 2002 on the file of the Judicial Magistrate No.II, Coimbatore, are quashed.