In that connection, the learned counsel for the respondents have referr vs The Bombay

On the above allegations, the Insurance Inspector Shri.P.Sutradh 6. ar on behalf of the Corporation has filed a complaint against Shri.Mahendra Agar wal and his firm M/S Bharat Metal under Section 85 (a), 85 (c) & 85 (g) of the Act of 1948 in the Court of the learned Chief Judicial Magistrate, Kamrup, Guwah ati. 7. Learned Additional Chief Judicial Magistrate, Kamrup, Guwahati ultimately transferred to the file of the learned Additional Chief Judicial Magistrate, Kam rup, Guwahati for disposal in accordance with law. Shri.Mahendra Agarwal and hi s firm M/s Bharat Metal would be referred hereto as accused No.1 and 2 while the Insurance Inspector would be referred to as a complainant.

8. The learned Magistrate on receipt of the complaint as aforesaid took cognizance of the offence under Section 85 (a), 85 (c) & 85 (g) of the Act of 1948 and issued summons to the accused persons. Accused Mahendra Agarwal ente red appearance on his behalf and on behalf of M/s Bharat Metal. On the appearanc e of accused persons, the prosecution has examined only one witness before the f raming of charge. 9. On the basis of materials, placed before the Court, learned Magistrate f ramed charge under Section 85 (a), 85 (e) & 85 (g) of the E.S.I. Act of 1948 an d the charges, so framed, on being read over and explained to the accused person s, they pleaded not guilty and claimed to be tried. After framing the charge, the said witness was recalled and was thoroughly cross examined by the defence.

10. In due course, the statements of accused persons were also recor ded under Section 313 Cr.P.C. Their plea was that they were not aware of their l iability under the Act of 1948. But on coming to know that they were liable to p ay contribution under the said Act, they had paid the Corporation their contribu tion as well as contribution in respect of the workers of their firm up to March , 2004.

11. However, they did not adduce any evidence of their own. On the conclusio n of trial and after hearing the parties, the learned trial court come to the co nclusion that prosecution could not make out the charges, brought against accuse d persons and as such, it passed the judgment of acquittal aforesaid in favour o f accused persons therein. It is that judgment which has been assailed herein th is appeal. 12. Opening up the arguments on behalf of the appellant, it has been contend ed that it is an admitted position that the respondents did not pay the E.S.I. c ontribution within the time specified in 31 of 1950 Regulation and that they did not submit the return with necessary documents in time. But while acquitting accused persons, the learned trial who laid enormous stress on delayed payment o f the contribution did not give any importance to those admissions on very vital aspects of the prosecution case.

13. It has been contended offences in question stood committed, the moment a ccused persons committed default in depositing the E.S.I. contribution within ti me. The delayed payment instead of absolving accused persons of the offences whi ch they were charged with doubly confirms the fact that they have committed afor esaid offences. Such being the situation, it was highly illegal on the part of t he learned trial court to acquit accused /respondents of offences which they wer e charged with. The learned trial court also fails to appreciate the fact that the Inspe 14. ctor of E.S.I. had duly served the demand notice and/or show cause notice on acc used /respondents requiring them to comply with the demands made therein and tha t on being so required, those respondents/ accused persons without assigning any reason, whatsoever, refused to carry out directions/ demands made therein.

15. Unfortunately, the Court below on wrong appreciation of facts on record, come to a findings that on accused /respondents did not commit any offence and recorded the verdict as aforesaid which is clearly unsustainable in law for not being inconformity with the facts and law hold the fields in question and he, th erefore, urges this Court to set aside the judgment of the trial court. 16. On the other hand, learned counsel appearing for the respondents has con tended that at no point of time, accused /respondents were served with demand no tice or show cause notice as required under the law. In fact, it has never been established that the firm in question is a factory within the meaning of Sectio n 2(12) in order to require accused /respondents to carry out the liability unde r the Act of 1948 and the rules framed there-under. However, the moment, they came to know that they were to pay the contrib 17. ution under the Act, aforesaid, they had paid the amount to the Corporation and still contending that they have paid such contribution with objection only. In t he face of above, the respondents cannot be said to have committed the offences which they were charged with and as such, one cannot find fault with the judgmen t rendered by the trial court. 18. In that connection, the learned counsel for the respondents have referr ed me to the decision, rendered by the Hon’ble Supreme Court reported in 1977 LA B I.C. 884 in the case of The Employees’ State Insurance Corporation, Bhopal Vs. The Central Press and Another, 1975 LAB I.C. 1025, decision of Allahabad High C ourt in the case of Employees’ State Insurance Corporation Vs. M/s U.P. Hotel an d Restaurant Ltd. and Another and the decision of Bombay High Court in the case of Asian Paints (India) Ltd. Vs. Employees’ State Insurance Corporation and Anot her reported in 1981 LAB I.C. 514. 19. ) Ltd. (Supra) held as follows:- (cid:28)27. & & & & & & In my view, the judgment of the Division Bench is clear on the point The Bombay High Court in its decision in the case of Asian Paints (India that the employer will have to be given an opportunity of being heard before th e amount is determined by the Corporation under Section 45-A. It is obligatory o n the Corporation to hear a defaulting employer who might be affected by the Cor poration’s decision under Section 45-A. Under that section the Corporation acts as a quasi-judicial authority and, therefore, having regard to the object and sc ope of Section 45-A, the principles of natural justice would apply to these proc eedings. (cid:29)

20. Similar view has been rendered by Hon’ble Supreme Court in the c ase of The Employees’ State Insurance Corporation, Bhopal (Supra) as well as by Bombay High Court in its decision in the case of Asian Paints (India) Ltd. (Supr a) . In the Employees’ State Insurance Corporation, Bhopal (Supra), Hon’ble Supr eme Court held as follows:- (cid:28)3. The powers of the Corporation are given in S. 45A of the Act, introduced by Act 44 of 1966, whereby the Corporation may, on the basis of the information ava ilable to it, determine that amount of contributions payable and make necessary demands. Apparently, the scheme of the Act, after the amendment is that the Corp oration itself should, in a case where there is omission on the part of the empl oyer to maintain records in accordance with S. 44 of the Act, determine the amou nt of contributions on the strength of such information as it may collect. It ca n then make the demand if they employer refuses to comply with the demand so mad e the matter can come up before the Employees’ Insurance Court under S. 75 of th e Act. The Court should give the Corporation a direction to perform its duty whe re it considers that this should be performed by the Corporation. It cannot decl ine to perform its own duty because the Corporation has failed to discharge its function. (cid:29)

21. On the matter under consideration, similar view has been rendere d by Allahabad High Court in its decision in the case of Employees’ State Insura nce Corporation (Supra). In that case, Allahabad High Court held as follows:- (cid:28)5. It was contended by the learned counsel for the appellant that since the Act sets in Employees’ Insurance Court for decision of certain disputes where the e mployer get a hearing, it is not necessary to give a hearing at the stage of the decision by the Corporation. We are unable to agree with his contention. Whethe r the function of the Corporation in deciding the question whether the Act appli es or not to a particular employer quasi-judicial or not, does not depend upon w hether there is any further remedy open to the employer or not. Learned counsel for the appellant relied upon a decision of the Supreme Court in Chandra Bhawan Boarding and Lodging, Banglore v. State of Mysore, AIR 1970 SC 2042. In our opin ion, this case supports the view that we have taken rather than the view which t he learned counsel has contended for. It was held in this case the dividing line between administrative and quasi-judicial power is quite thin and is being gra dually obliterated, that the principles of natural justice apply to the & & of t he administrative power as well. It would follow from this decision that the pri nciples of natural justice would apply even were held that Corporation was only & & & an administrative power in deciding whether the Act applied or not to a part icular employer. (cid:29) The above decisions when read in conjunction with the relevant provision 22. s in the Act-- Section 44(2) of the Act in particular, it would appear clear tha t the Corporation is duty bound to ascertain if a particular factory/establishme nt is a factory within meaning of the Section 2(12) the of E.S.I. Act of 1948. Proviso to Section 45(1) of the Act 1948 further requires that in certai 23. n cases, the corporation must hear the principal employer / immediate employer / any other person in the charge of the factory /establishment before determining the contribution to be made by the employer to the Corporation under the Act.

24. In our case, it has been argued on behalf of the appellant/ complainant tha t private respondents herein never furnish any returns/particulars/registers/rec ords to the concerned authority on times stipulated in the Act and the rules fra med there-under and it left the Corporation with no other option but to determin e the liability of the Pvt. respondents in the form of the contribution to be ma de under the Act of 1948 on invoking the power conferred on it by Act --the Prov iso to Section 45(1) of the Act 1948 in particular. 25. But those contentions were denied tooth and nail by the Pvt. respondents who contend that the private respondents never knew that their liability under the Act, as being the employers, was ever determined, much less same being commu nicated to them requiring them to pay his liability arising out of the various p rovisions in the Act and rules framed there-under. 26. More important, they were even not sure that they are employers within t he meaning of employer as defined in Section of the Act of 1948. However, once t hey come to know that they were considered as employers as contemplated in the A ct of 1948, they paid the contribution assessed, off course under protest. Situ ations being such, they cannot be held liable for any of the offences, they were charged with.

27. For ready reference, the above aforesaid provisions of law are reproduce Now, let us see whose contention, in view of materials on record, stands to reason. However, before I could do that, I find it necessary to have glance through the provisions of law which were allegedly violated by the Pvt. responde nts. I have already found that accused persons have been charged with having com mitted the offences under Section 85 (a), 85 (e) & 85 (g). 28. d herein below:- (cid:28)85. Punishment for failure to pay contributions, etc. ›- if any person - (a) fails to pay any contribution which under this Act he is liable to pay, or (e) fails or refuses to submit any return required by the regulations, or makes a false return, or (g) is guilty of any contravention of or non-compliance with any of the requirem ents of this Act or the rules or the regulations in respect of which no special penalty is provided. (cid:29)

29. As stated above, prosecution has tendered the evidence of one PW to make out allegations, leveled against the accused persons. He was Inspector Shri.Cha kra and was examined as PW 1. According to him, the instant case was filed by hi s predecessor Shri.P.Sutradhar against accused persons on the basis of the Ext. 2, Inspection Report, submitted by another Inspector Shri.R Deka.He however, fra nkly admitted that he has no personal knowledge about those allegations. 30. On the perusal of the Inspection Report, I have found that one Inspector Shri.R. Deka visited the premises in question on 04.02.00 and found that as man y as 12 employees in such an establishment. In that connection, he examined the attendance register of the employees from August, 1998 and having found the same in existence since August 1998, vide Ext.3 (the coverage letter dated 09.03.00) , he brought the said factory under the coverage of E.S.I. Act of 1948 w.e.f. 01 .08.98. Relying on Ext, 2, PW1 further says that the Corporation filed the afore 31. said case against accused persons for not paying the former within the stipulate d period the outstanding sum amounting to Rs.1, 17,443/- being the amount accrue d for the period between 01.08.98 to 3/2002 and also for not submitting the Corp oration receipted copies of return of contribution for the aforesaid period. It also did not show the Inspector of E.S.I the periodic ledger, cash bo 32. ok, vouchers etc. for the period aforesaid. According to him, before filing this instant case, a demand notice/show cause notice were sent to accused persons by registered post with A/D. But accused persons did not respond the same for whic h on obtaining sanction from the competent authority, the case aforesaid has bee n lodged against accused persons. 33. However, in his cross examination, PW 1 candidly admitted that he could not produce any postal receipt before the court to show that the Corporation di d send to accused/ respondents the demand notice dated 25.06.2002 and dated 25.0 6.2002 as well as the show cause notice dated 30.04.01 and dated 18.12.01 which were proved as Ext.4 , Ext.5 Ext.6 & Ext.7 respectively. 34. In his cross examination, he again admitted that the letter dated 29.11. 04 which was marked as Ext.-A was issued from his office and it shows the receip t of contribution in respect of the employees working under accused persons up t o March, 2004. According to him, Ext A further shows the submission of return by accused persons to the Corporation aforesaid for the period concerned. However, when one considers the above evidence from the side of the comp 35. lainant/ appellant in the light of argument, advanced from the side of responden ts/ accused persons , he would find that prosecution is duty bound to prove that the demand notice at Ext.4 & 5 as well as show cause notice at 6 & 7 were duly sent to the postal department for being served on accused / respondents and that having received the same, they refused to comply with the directions rendered t herein .Unfortunately, materials on record bely such expectations. 36. The very frank admission on the part of the PW 1 to the effect that the postal receipts are not there on the record to show the sending of aforesaid not ices to respondents is the clear testimony to the fact that services of said not ices on the respondents not having been made. Once it is held that notices, afo resaid, were not served on the defendants, as required under the law, there cann ot be any escape from the conclusion that the Corporation, failed to comply with the various directions in the Act 1948-Section 44(2) as well as the Proviso to Section 45(1) in particular. 37. These are also the testimonies to the fact that the allegations that (i) the respondents failed to pay any contribution despite they are found liable to pay such contribution or (ii) they refused to submit any return, as required by the regulations or (iii) the respondents are guilty of contravention of or non- compliance of any of the requirements of the Act of 1948 or the rules framed the re-under regulations in respect of which no special penalty remain far from bein g established. 38. Referring to the Ext. 2, it has again been contended that in the course of discharge of his duty, the Inspector Shri R. Deka visited the premises in que stion which was run with aid of power and found that as many as 12 persons worki ng in the said premises meaning thereby that the establishment aforesaid is a fa ctory within the meaning of Section 2(12) of the Act, 1948 and the basis of such a finding is the report of Inspector Shri. D. Deka at Ext.2.

39. Ext.2, according to the appellant, is the appropriate answer to contenti on of the respondents that they were not sure about their status under the Act. However, such an argument could hardly impress this Court. On the perusal of Ext .2, it is found that the establishment in question is owned by as many as 4 pers ons and they are 1) Shri. Mahendra Agarwal, 2) Shri Dilip Todi, 3) Shri Sandeep Garodia and 4) Shri Shusil Kr. Sharma, all are said to be partners of the said f irm. On further perusal of Ext.2, I have again found that at the time of the 40. alleged visit, one of the partners of the aforesaid firm, namely Shri Dilip Todi was alone present there. However, in spite of as many as four persons, being th e partners of the said firm and despite Shri Dilip Todi alone being found presen t at the said establishment, the Corporation chose to single out only Shri Mahen dra Agarwal to prosecute him for the alleged violation of various provisions of the Act of 1948. 41. In my considered opinion, all those do not augur well to advance the cau se of the prosecution case, more so, when there is nothing on record to show tha t Shri. Mahendra Agarwal alone was prosecuted for his occupying special position in relation to the firm aforesaid. Thus, the claims of the appellant that the r espondents were aware of their status under the Act and despite being aware of t heir liability under the Act, they did not pay their contribution to the Corpora tion or submit return are found to be without much substance. 42. Here, it is worthwhile to note , what Hon’ble Madras High Court has obse rved on the status of report of an Inspector under the Act of 1948 in the case of Free India (Private) Ltd. Vs. The Regional Director, Employees’ State Insuran ce Corporation, Madras reported in 1973 LAB I.C. 1540. 43. Madras High Court in its decision in the case Free India (Private) Ltd. (Sup ra) held as follows:- (cid:28).3. An employer is liable to contribute under the Employees’ State Insurance Co rporation Act only if he comes within the various yardsticks prescribed and deal t with by the Act. One of the fundamental aspects which touch on this issue is t hat the strength or the working force of a factory should not be beyond 18 and i f it exceeds such limit then only such an employer would be liable to contribute or specially contribute, as the case may be, under the provisions of the Act. T herefore it should be established beyond reasonable doubt after a fair enquiry, whether the working strength of a factory is beyond the prescribed minimum. The reports of the inspectors of the Corporation no doubt have great weight. But tho se reports cannot be an equation for acceptable proof on which action could be t aken against the employer without a further reasonable or fair opportunity being given to the employer to prove to the contrary. & & & & & & & & & & & & It appears to me t hat no attempt has been made to call upon the petitioner to prove what exactly i s the working strength inside his factory or to test the veracity of the petitio ner’s statement with reference to the record of the limited company, whether the strength was 18 or 26 or 27 as claimed by the inspector and the company. I am n ot satisfied that in the instant case, there was a fair enquiry on the material question as to what is the working strength of the company. & & & & & & & & & & (cid:29) I respectfully concur with the aforesaid finding of the Hon’ble Madrass 44. High Court. Above decision when read in the light of what we have discussed her e-in-before on the inspection report, Ext. 2, it would appear more than clear th at the Ext. 2 cannot be regarded as final document on the status of establishmen t in question or for that matter, it on its own cannot lay the foundation for th e presumption that the establishment in question is a factory within the meaning of Section 2 (12) of the Act 1948 and that the respondents had notice of the sa me. 45. In view of what I have been discussed herein before and what have emerge d there-from, I am of the opinion that the prosecution could not prove the charg e leveled against accused persons and consequently, it is held that judgment of the trial court in acquitting the accused persons of offence aforesaid is withou t any infirmity whatsoever. 46. 47. No costs. 48. LCR be returned forthwith.