LexAJAY RAJ SHETTY versus DIRECTOR & ANR.
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[2025] 4 S.C.R. 1299 : 2025 INSC 500 Ajay Raj Shetty v. Director & Anr. R1: Director R2: M/s Electriex (I) Ltd. (Criminal Appeal No. 2036 of 2025) 17 April 2025 [Sudhanshu Dhulia and Ahsanuddin Amanullah,* JJ.] Issue for Consideration Whether the conviction of the appellant u/s.85(i)(b), Employees’ State Insurance Act, 1948 and the sentence awarded is justified. Headnotes† Employees’ State Insurance Act, 1948 – ss.85, 2(17) – Punishment for failure to pay contributions, etc. – “Principal employer” – Though deductions towards Employees’ State Insurance contribution were made from the wages of the respondent no.2-Company’s employees but they were not deposited with Employees’ State Insurance Corporation (ESIC) – Appellant-General Manager of the respondent no.2 convicted u/s.85(i)(b) – Appellant, if covered u/s.2(17): Held: Appellant falls within the ambit of s.2(17) being a ‘managing agent’ – Despite contributions having been deducted from the employees’ salaries, they were not deposited with the ESIC – High Court rightly indicated that non-remittance of the contribution deducted from the salary of an employee to the ESIC is an offence u/s.85(a) and punishable u/s.85(i)(a) but the Trial Court had imposed a lesser sentence as provided u/s.85(i)(b) – This is borne out by s.85(i)(a) which provides for a sentence of not less than one year imprisonment and fine of Rs.10,000/-, since the amount had been deducted from the salaries of the employees and not paid, which is the fact in the present case, whereas u/s.85(i)(b), sentence of imprisonment is not less than six months and with fine of Rs.5,000/- in other cases – Trial Court could have given a lesser sentence even for an offence u/s.85(i)(a) under the proviso * Author 1300 [2025] 4 S.C.R. Supreme Court Reports to s.85(i) – High Court did not feel the necessity to interfere in the lesser sentence awarded by the Trial Court – Conviction and sentence not interfered with, fine awarded upheld. [Paras 20, 23] Employees’ State Insurance Act, 1948 – s.2(17) – “Principal employer” – Interpretation: Held: The definition of s.2(17) also includes a ‘managing agent’ of the Owner/Occupier in the case of a factory or ‘named as the manager of the factory under the Factories Act, 1948 and for ‘any other establishment’, ‘principal employer’ would include ‘any person responsible for the supervision and control of the establishment’ – Therefore, designation of a person is immaterial if such person otherwise is an agent of the Owner/Occupier or supervises and controls the establishment in question. [Para 20] Case Law Cited Employees’ State Insurance Corpn., Chandigarh v. Gurdial Singh AIR 1991 SC 1741 : (1991) Supp. 1 SCC 204; J K Industries Limited v. Chief Inspector of Factories and Boilers [1996] Supp. 6 SCR 798 : (1996) 6 SCC 665 – distinguished. ESI Corpn. v. A K Abdul Samad [2016] 2 SCR 150 : (2016) 4 SCC 785 – held inapplicable. Pentafour Products Ltd. v. Union of India, 2005 SCC Online Mad 841 – referred to. List of Acts Employees’ State Insurance Act, 1948; Factories Act, 1948; Sick Industrial Companies (Special Provisions) Act, 1986; Employees’ State Insurance (General) Regulations, 1950. List of Keywords Employees’ State Insurance Corporation (ESIC); Deduction towards Employees’ State Insurance (ESI) contribution; Contribution from the wages of the employees; Non-remittance of the contribution deducted; General manager; Principal employer; Managing agent; Owner/occupier; Manager; Technical coordinator; Lesser sentence; Sick industry; Board for Industrial and Financial Reconstruction (BIFR). [2025] 4 S.C.R. 1301 Ajay Raj Shetty v. Director & Anr. Case Arising From CRIMINAL APPELLATE JURISDICTION: Criminal Appeal No. 2036 of 2025 From the Judgment and Order dated 08.12.2023 of the High Court of Karnataka at Bengaluru in CRRP No. 164 of 2015 Appearances for Parties Advs. for the Appellant: P Vishwanath Shetty, Sr. Adv., Shankar Divate, Vaibhav. Advs. for the Respondents: Manish Kumar Saran, Ms. Ananya Tyagi, Rohit Sharma, Vipin Kumar, Jitendra Kumar. Judgment / Order of the Supreme Court Judgment Ahsanuddin Amanullah, J. Leave granted. 2. This appeal has been preferred by the Appellant against the Final Judgment and Order dated 08.12.2023 (hereinafter referred to as the ‘Impugned Order’) passed by the High Court of Karnataka at Bengaluru (hereinafter referred to as the ‘High Court’), by which Criminal Revision Petition No.1
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