84. Punishment for false statements
Whoever, for the purpose of causing any increase in payment or benefit under this Act, or for the purpose of causing any payment or benefit to be made where no payment or benefit is authorised by or under this Act, or for the purpose of avoiding any payment to be made by himself under this Act or enabling any other person to avoid any such payment, knowingly makes or causes to be made any false statement or false representation, shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding two thousand rupees, or with both :
PROVIDED that where an insured person is convicted under this section, he shall not be entitled for any cash benefit under this Act for such period as may be prescribed by the Central Government.
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
(b) deducts or attempts to deduct from the wages of an employee the whole or any part of the employer's contribution, or
(c) in contravention of section 72 reduces the wages or any privileges or benefits admissible to an employee, or
(d) in contravention of section 73 or any regulation dismisses, discharges, reduces or otherwise punishes an employee, or
(e) fails or refuses to submit any return required by the regulations, or makes a false return, or
(f) obstructs any Inspector or other official of the Corporation in the discharge of his duties, or
(g) is guilty of any contravention of or non-compliance with any of the requirements of this Act or the rules or the regulations in respect of which no special penalty is provided,
he shall be punishable--
(i) where he commits an offence under clause (a), with imprisonment for a term which may extend to three years but--
(a) which shall not be less than one year, in case of failure to pay the employee's contribution which has been deducted by him from the employee's wages and shall also be liable to fine of ten thousand rupees;
(b) which shall not be less than six months, in any other case and shall also be liable to fine of five thousand rupees:
PROVIDED that the Court may, for any adequate and special reasons to be recorded in the judgment, impose a sentence of imprisonment for a lesser term;
(ii) where he commits an offence under any of the clauses (b) to (g) (both inclusive), with imprisonment for a term which may extend to one year or with fine which may extend to four thousand rupees, or with both.
The principle is that where the discretion to apply the provision of a particular statute is left with the government or with one of the highest officers it will be presumed that the discretion vested in such authority will not be abused. The government or such authority is in a position to have all the relevant and necessary information in relation to each kind of establishment, the nature of defaults made by the employer and the necessity to decide whether the damages to be imposed should be exemplary or not. The object of ss. 85A and 85B of the ESI Act is to authorise the Regional Director of ESI Corporation to impose exemplary or punitive damages and thereby prevent the employees from making default.-- ESI Corporation v. M/s Venkatachalam Condiments 1995 (2) LLJ 1144.
85A. Enhanced punishment in certain cases after previous conviction
Whoever, having been convicted by a court of an offence punishable under this Act, commits the same offence shall, for every such subsequent offence, be punishable with imprisonment for a term which may extend to two years and with fine of five thousand rupees :
PROVIDED that where such subsequent offence is for failure by the employer to pay any contribution which under this Act he is liable to pay, he shall, for every such subsequent offence, be punishable with imprisonment for a term which may extend to five years but which shall not be less than two years and shall also be liable to fine of twenty-five thousand rupees.
85B. Power to recover damages
(1) Where an employer fails to pay the amount due in respect of any contribution or any other amount payable under this Act, the Corporation may recover from the employer by way of penalty such damages not exceeding the amount of arrears as may be specified in the regulations:
PROVIDED that before recovering such damages, the employer shall be given a reasonable opportunity of being heard :
PROVIDED FURTHER that the Corporation may reduce or waive the damages recoverable under this section in relation to an establishment which is a sick industrial company in respect of which a scheme for rehabilitation has been sanctioned by the Board for Industrial and Financial Reconstruction established under section 4 of the Sick Industrial Companies (Special Provisions) Act, 1985, subject to such terms and conditions as may be specified in regulations.
(2) Any damages recoverable under sub-section (1) may be recovered as an arrear of land revenue or under sections 45C to 45-I.
It is wrong to assume that there cannot be levied any damages or penalty from the defaulting employer unless the Corporation suffers an actual loss for the default committed by the employer. No loss except the loss of interest is suffered by the Corporation where there is a default committed by the establishment that is covered by the Act. Section 85(B) of the Act enables the Corporation to levy damages in the nature of penalty subject to ceiling prescribed under the said section.-- Joint Regional Director, ESI Corporation v. Ganesh Foundry (P) Ltd. 1995 (1) LLJ 180 .
Sec. 85B of the Act conferring discretion in the Regional Director as regards imposition of penalty calls for objective exercise within the limit pointed out in that section and such exercise must be apparent in the order. It is very much essential to find out what is the guilty conduct on the part of the party so that there is justification behind the imposition of damages.-- Regional Director, ESI Corporation v. Shakthi Tiles 1989(58) FLR 17.
Sec. 85B being penal in nature, it is obligatory for the authority to act in a judicious manner to determine the question after assessment of all the relevant factors and not in a cursory manner. Where the employer does not offer any explanation to the show cause it would not mean that the authority is absolved from the obligation of assessment that is cast upon it.-- Beema Manufacturers (P) Ltd. v. Regional Director ESI Corporation 1991 (62) FLR 743 .
The levy of damages as per s. 85(B)(1) is a levy in the nature of penalty to teach a lesson to the defaulter. Though the expression "damages" is used in the said section, the said expression could not be restricted to mean damages as understood in a contractual or tortious action.-- National Jute Manufacturers Corporation Ltd. v. ESI Corporation 1992 Lab. IC 2217 .
85C. Power of Court to make orders
(1) Where an employer is convicted of an offence for failure to pay any contribution payable under this Act, the Court may, in addition to awarding any punishment by order, in writing require him within a period specified in the order (which the Court may if it thinks fit and on application in that behalf, from time to time, extend), to pay the amount of contribution in respect of which the offence was committed, and to furnish the return relating to such contributions.
(2) Where an order is made under sub-section (1), the employer shall not be liable under this Act in respect of the continuation of the offence during the period or extended period, if any, allowed by the Court, but if, on the expiry of such period or extended period, as the case may be, the order of the Court has not been fully complied with, the employer shall be deemed to have committed a further offence and shall be punishable with imprisonment in respect thereof under section 85 and shall also be liable to pay fine which may extend to one thousand rupees for every day after such expiry on which the order has not been complied with.
(1) No prosecution under this Act shall be instituted except by or with the previous sanction of the Insurance Commissioner or of such other officer of the Corporation as may be authorised in this behalf by the Director-General of the Corporation.
(2) No court inferior to that of a Metropolitan Magistrate or Judicial Magistrate of the First Class shall try any offence under this Act.
(3) No court shall take cognisance of any offence under this Act except on a complaint made in writing in respect thereof.
Employers deducting the contribution of the employees are deemed to be entrusted with the amount of contribution so deducted. In case the amount of contribution is not deposited by the employer, he would be deemed to have dishonestly misappropriated the said amount within the meaning of explanation to section 405 of the Indian Penal Code.-- Shambhu Nath Agarwal v. ESI Corporation 1990(2) LLJ 100.
86A. Offences by companies
(1) If the person committing an offence under this Act is a company, every person, who at the time the offence was committed was incharge of, and was responsible to, the company for the conduct of the business of the company, as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly:
PROVIDED that nothing contained in this sub-section shall render any person liable to any punishment, if he proves that the offence was committed without his knowledge or that he exercised all due diligence to prevent the commission of such offence.
(2) Notwithstanding anything contained in sub-section (1), where an offence under this Act has been committed with the consent or connivance of, or is attributable to, any neglect on the part of, any director or manager, secretary or other officer of the company, such director, manager, secretary or other officer shall be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly.
Explanation : For the purposes of this section,
(i) "company" means any body corporate and includes a firm and other associations of individuals; and
(ii) "director" in relation to--
(a) a company, other than a firm, means the managing director or a whole-time director;
(b) a firm means a partner in the firm.