M/s. Western Engineering Corporation, Hyderabad & Ors. v. Employees State Insurance Corp., Hyderabad & Ors.

2. The parties will be referred to as ‘the complainant and the accused’.

3. The appellants/accused filed the appeal against the judgment of conviction passed by learned Magistrate convicting them for the offence under Section 85(g) of the E.S.I. Act and sentencing them to pay fine of Rs.4,000/-, in default to suffer simple imprisonment for one month.

4. I have heard Sri A.K. Jayaprakash Rao, learned counsel appearing for the appellants, Sri B.Vijaysen Reddy, learned counsel appearing for the first respondent and the learned Additional Public Prosecutor representing the State.

5. The brief facts of the case are as follows: Appellant No.1/A-1 i.e. the company in the name and style of M/s. Western Engineering Corporation, Hyderabad was brought under coverage of the E.S.I. Act under Section 2(12) with effect from 01.08.1997 following inspection conducted by Inspector of the complainant-Corporation on 10.08.1998. During the course of his inspection, the Inspector found that the accused company employed 18 persons on 01.08.1997 for wages. The accused company was also found to be carrying on the Mico dealers and sales and service of fuel injection pumps with the aid of power. A Code No.52-16190-66 has been allotted to it for compliance. As per the amended Act, 1989, notwithstanding any depletion in employment strength below, the requirement of coverage or on account of stoppage of manufacturing activity, with the aid of power, the employer once covered under the Act shall continue to be covered by the provisions of the Act. The appellant No.2/A-2 is the Managing Partner of the said company and at all material times, he was the person-in-charge of, and was responsible to the accused No.1. A-1 and A-2 are the principal employers in respect of the said company within the meaning of Section 2(17) of the ESI Act, 1948. A-1 and A-2 who are the principal employers of the said factory in terms of Section 2(17) have failed to comply with the provisions of the Act, the complainant corporation issued a show cause notice dated

24.02.2003 calling upon them to show cause as to why they should not be prosecuted for non-compliance with the provisions of the Act. In spite of the show cause notice, the accused have failed to respond to the show cause notice by way of compliance nor did they furnish any reason as to why they could not comply with the provisions of the Act. Under Section 45(2) of the ESI Act, 1948, every principal employer shall produce such accounts, books and other documents relating to the employment of persons and payment of wages as considered necessary to ascertain whether any of the provisions of the ESI Act has been properly complied with. The accused have failed to produce the cash books/ledgers and other connected records for the period from 10.01.2003 to

31.03.2003 as required under Section 45(2) of the ESI Act before the Insurance Inspector on visit to the factory on 04.09.2002,

09.05.2003 and 21.05.2003 with prior notice. The Joint Director who has been authorized by the E.S.I. Corporation, after going through the case papers has accorded sanction for prosecution of the accused on 19.09.2003. By the said failure of the principal employer to comply with the provisions of the Act and regulations, the principal employer has committed offence punishable under Section 85(g) of the ESI Act, 1948.

6. In the course of the trial before the learned Magistrate, on behalf of the prosecution, PWs.1 to 3 were examined and Exs.P-1 to P-14 were marked. On behalf of the accused, Exs.D-1 and D-2 were marked. The learned trial Court after going through the evidence on record found the accused guilty of the offence punishable under Section 85(g) of the ESI Act, convicted thereunder and sentenced them to punishment as mentioned above.

7. Aggrieved by the said conviction, the appellants preferred the present appeal.

8. The point for determination in this criminal appeal is as to whether the judgment passed by the learned trial Court requires any interference in this appeal.

9. The contention of the accused-M/s.Western Engineering Corporation is that it has only less than 10 employees and therefore, it need not pay any contribution and comply with the provisions of Section 45(2) of the ESI Act, 1948.

10. On the other hand, it is the contention of the complainant that the officials of the complainant Corporation made inspection and found that the first accused comes within the purview of the ESI Act and it has to comply with the provisions of ESI Act by paying contribution. The learned counsel appearing for the accused relied upon a decision reported in REGIONAL DIRECTOR, ESI CORPORATION v. KARNATAKA ASBESTOS CEMENT PRODUCTS AND ANOTHER [1] wherein it was held that “if the demand made under Section 45-A of the ESI Act, 1948 is based on inspector’s report not containing the required details the decision of the ESI Court that the respondent was not required to be covered by the Act is not correct. The learned counsel for the appellant-accused also relied on another decision of the learned single Judge of this Court in SITAMAHALAKSHMI ENTERPRISES v. REGIONAL DIRECTOR, EMPLOYEES’ STATE INSURANCE CORPORATION, HYDERABAD AND ANOTHER [2] wherein it is held that when there is no evidence to show that more than 20 persons were employed for establishment which is cinema theatre under the coverage of the Act and the order passed on the basis of preliminary enquiry report and where the coolies engaged for work of sporadic nature, held, cannot be equated with casual workers and the establishment cannot be brought under Section 45-A of the Act. The judgments relied upon by the learned counsel are not applicable to the facts of the present case and the accused cannot take rescue under the said decisions because the accused in the present case never approached the ESI Court at all and questioned the inspection report bringing the establishment under the coverage of the Act. Exs:P-3, P-4, P-7 and P-9 letters revealed that the accused in those letters requested to produce the records but failed to produce the same even though the insurance inspector according to the complainant visited the company of the accused on four occasions. The complainant got marked Ex.P-1 which is the enquiry report along with Ex.P-2 Annexture-A which contains the signatures of the second accused. Ex.P-3 is the enquiry report dated 21.05.2003 fixing another date for producing the record. Ex.P-4 is the letter written by the second accused on 25.01.2003 stating that they are unable to show any other records. PW-1 deposed that he again visited on 21.05.2003 as per Ex.P-5 Annexture-B which contains the signature of the appellant. Ex.P-6 is enquiry report for his visit dated

26.02.2003. Ex.P-7, according to PW-1 is the letter given by the accused on 26.02.2003. Therefore, there were earlier visits of PW-1 to the establishment and during the course of the said visits the second accused was making request to produce the records but ultimately failed to produce the records. Similarly PW-2 insurance inspector deposed that he visited the factory of the accused on 04.09.2002 and the accused failed to produce the record before them. He further stated that on failure by the accused to produce the record, he prepared enquiry report under Ex.P-8 and on the said date the second accused gave Ex.P-1 letter to him stating that he would take a decision whether he has to produce the record or not before him on 12.09.2002. He further stated that on 12.09.2002 he again went to the factory of the accused, on that day also, the second accused failed to produce any record before him.

11. PW-3, the Insurance Inspector stated in his evidence before the lower court that the complainant issued Ex.P-11 show cause notice to the accused and the accused failed to send any reply to the said notice and after obtaining sanction from the Joint Director under Ex.P-12, Ex.P-13 the present case is filed.

12. Therefore, from the evidence on record it is obvious that the officials of the Corporation visited the factory of the accused several times and there was no protest by the accused on the ground that the establishment does not come within the purview of the Act. Moreover, as rightly contended by the learned counsel appearing for the complainant, in view of the above oral and documentary evidence and more particularly, in view of the fact that the accused did not approach the ESI Court contending that the establishment does not come under the purview of the Act, cannot contend at the stage of execution that the provisions of the Act will not apply to the establishment of the accused. The learned counsel appearing for the first respondent submitted all the relevant documents at the time of hearing of the appeal which clearly show that the appellant had knowledge about the inspection of the officials of the complainant and they were seeking time to produce the records but ultimately failed to produce them. The documents produced by the complainant clearly show that an order was made that the factory of the accused comes under Section 2A of the Act and is required to register itself under the Act and to ensure payment of contribution as required under the Act. Therefore, it is not open for the accused now to contend that their establishment does not come under the purview of the Act. The learned counsel appearing for the complainant also relied on a decision in ASHOK LEYLAND LIMITED, DUCTRON, CASTINGS LIMITED, R.R. DISTRICT v. DEPUTY TAHSILDAR/SPECIAL REVENUE INSPECTOR (ESI) RECOVERY CELL, COLLECTORATE, R.R. DISTRICT, HYDERABAD [3] wherein the division bench of this Court held that all questions including the question of applicability of the ESI Act to the petitioners can be raised before the ESI Court and that the petitioners have to avail the remedy before the said Court.

13. In another decision of the single Judge relied upon by the learned counsel appearing for the complainant in Appeal Against the Order No.3284 of 2001 dated 05.03.2004, the learned single Judge held that if really the contention of the accused is that it is not liable to pay contribution under the Act and any order is passed by the Corporation directing to deposit the contribution amount the remedy open for the accused is to question the same before the ESI Court and that the accused cannot raise the said question in the execution i.e. in the recovery proceedings as to whether actually the accused/employer is liable to pay the contribution or not, in view of the above decisions relied upon by the learned counsel appearing for the complainant and also the evidence brought on record by the complainant showing that the order brining the establishment under the purview of the Act was made and communicated to the accused-appellant, the said question cannot be re-agitated either before the learned Magistrate or before this Court in the present appeal. The appeal therefore is devoid of any merit and is liable to be dismissed.

14. Consequently, the appeal is dismissed confirming the order passed by the trial Court. _______________ R.KANTH RAO,J Date:23-01-2012 CCM HON’BLE SRI JUSTICE R.KANTHA RAO Crl.A.No.1244 of 2006 Date:23-01-2012 [1] [2] [3] (1999 LLJ (supp) 235 2006(2) LLN 929 2001 (4) ALD 96 (DB)