The Supreme Court has affirmed that a person holding a supervisory or controlling position in a company can be considered a 'principal employer' under the Employees' State Insurance Act, 1948, regardless of their official title.
The bench of Justices Sudhanshu Dhulia and Ahsanuddin Amanullah delivered this ruling while dismissing an appeal filed by Ajay Raj Shetty, who was convicted for failing to remit ESI contributions deducted from employees’ wages.
“Designation of a person can be immaterial if such person otherwise is an agent of the owner/occupier or supervises and controls the establishment in question,” the Court said.
Read Also:- SC Recommends Filing Civil Suit for Compensation Over Alleged Disability from Covishield Vaccine
Ajay Raj Shetty challenged his conviction, arguing that he was only a Technical Coordinator, not a General Manager or Principal Employer. He stated that the company was already declared a sick unit and no formal appointment letter or salary was issued to him. He also claimed that ESIC failed to present evidence proving he was in a managerial position.
However, the Court rejected these claims, noting that he was listed as the General Manager and Principal Employer in official records, and he failed to disprove or provide contrary documents.
“From the materials available on record, we find that the Appellant falls within the ambit of Section 2(17) of the Act, being a ‘managing agent’,” the Court stated.
Read Also:- Chhattisgarh High Court Upholds Mark Deduction for Typing Undictated Words in Stenographer Test
The case involved Electriex (India) Ltd., where deductions of Rs. 8,26,696 were made from employee wages between February and December 2010 but were not deposited with the Employees' State Insurance Corporation (ESIC). A private complaint was filed under Section 85 of the ESI Act, leading to Ajay Raj Shetty’s conviction.
The Supreme Court upheld the findings of the trial court, appellate court, and High Court, all of which found that Shetty had supervisory control and was, therefore, liable.
“We find 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,” the Court emphasized.
Read Also:- Liking a Social Media Post Not an Offence Under IT Act: Allahabad High Court Clarifies
The Court further observed that non-payment of deducted contributions is a serious violation and carries a minimum punishment of six months' imprisonment and a fine under the Act. Despite arguments for leniency, the Court refused to alter the sentence.
The appeal was dismissed, and the appellant was directed to surrender within two weeks to serve the sentence.
Case Title: Ajay Raj Shetty vs. Director and Anr.
Case Title: AJAY RAJ SHETTY VERSUS DIRECTOR AND ANR.
Appearance:
For Petitioner(s) Mr. P Vishwanath Shetty, Sr. Adv. Mr. Shankar Divate, AOR Mr. Vaibhav, Adv.
For Respondent(s) Mr. Manish Kumar Saran, AOR Ms. Ananya Tyagi, Adv. Mr. Rohit Sharma, Adv. Mr. Vipin Kumar, AOR Mr. Jitendra Kumar, Adv.
