Supreme Court judgment reinforces employer obligations under ESIC Act.
SC UPHOLDS CONVICTION FOR FAILURE TO REMIT EMPLOYEE CONTRIBUTIONS UNDER ESIC ACT
| ASPECTS | DETAILS |
| Case Title | AJAY RAJ SHETTY vs. DIRECTOR AND ANR. |
| Introduction | The appeal arose from a conviction under the Employees’ State Insurance Act, 1948 for non-remittance of ESI contributions by the employer. |
| Factual Background | M/s Electriex (India) Ltd., a sick industrial company, deducted ₹8.26 lakh from employees’ wages but failed to remit it to ESIC. |
| Legal Issues |
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| Applicable Law |
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| Analysis | Courts below held the appellant liable as he acted in managerial capacity. Designation didn’t absolve him. Criminal liability upheld. |
| Conclusion | Appeal dismissed. Conviction and sentence of 6 months’ imprisonment and ₹5,000 fine upheld. Surrender ordered within 2 weeks. |
| Current Scenario | The appellant has paid the dues; however, the Supreme Court upheld his conviction. Company has cleared other liabilities post-BIFR closure. |
CASE SUMMARY – In this case, Supreme Court of India dismissed the appeal of Ajay Raj Shetty, who was convicted for failing to deposit deducted ESI contributions from employees’ salaries. Though Shetty claimed to be merely a Technical Coordinator, the Court upheld findings that he functioned as the ‘Principal Employer’ under the ESIC Act. The Court emphasized that designation is irrelevant if the individual exercises control over operations. Reiterating employer accountability, it concluded that criminal prosecution was valid despite the company’s ‘sick’ status. The conviction under Section 85(i)(b) of the Act, with six months’ imprisonment and ₹5,000 fine, was upheld.
SC UPHOLDS CONVICTION FOR FAILURE TO REMIT EMPLOYEE CONTRIBUTIONS UNDER ESIC ACT
SOURCE – SUPREME COURT OF INDIA
