As the number of industries is increasing in the country, the risk of workers
and employers working for the same is also increasing rapidly. To protect the
interest of the workers from future health consequences, the Employee State
Insurance Act was enacted in 1948. This act includes a health insurance program
that gives financial assistance to factory workers in the event of illness,
maternity, or workplace injury.
The act applies to non-seasonal workplaces with 10 or more employees that use
electricity, as well as non-electrical factories with more than 20 employees.
This project analyses the case of Employee state insurance corporation vs A.K
Abdul Samad and relevant provisions of the Employee State Insurance Act, 1948.
Introduction
In the expanding concept of human security, social security is just as vital as
physical security. Because the right to social security is a human right,
everyone has the right to a quality of living that is suitable for his or her
own health and well-being and that of his or her family.
The Employee State
Insurance Act of 1948 (ESIC) is a piece of social security legislation enacted
primarily to provide certain benefits to employees in the event of sickness,
maternity, or employment accident, as well as to provide for some other items
ancillary thereto. This act has a broader scope than the factory act.
However, if the employment is incidental or in connection with the factory or
establishment, the benefits of this act apply to employees whether they work
inside or outside the factory or establishment and whether they are directly
employed by the principal employee or through an intermediary agency.
The case law,
Employee State Insurance Corporate vs A.K Abdul Samad is in
the context of the Employee State Insurance Act which raised a question
regarding section 85 of the Act that whether the penalty of fine can be
decreased according to the judge's discretion, which is analyzed in this
project.
Insight Into Employee State Insurance Act, 1948
The Employee State Insurance Act is enacted in 1948 to give various benefits to
employees in circumstances of sickness, workplace injury, or during maternity.
This act covers the whole of India and applies to all factories including
government factories employing 10 or more people and carrying on a manufacturing
system with or without the use of power, as well as any other companies that the
government may prescribe.
Even if the number of people employed there falls
below the stipulated limit or the industrial process therein ceases to be
carried out with the aid of power, a factory or other institution to which this
Act applies will continue to be controlled by its provisions[1].
Origin of Employee State Insurance Act, 1948:
It was decided in a conference of Labour Ministers in January 1940 to seek the
opinions of provincial governments, employers, and employees on the mandatory
contribution to the sickness insurance fund.
- The second conference, which took place in 1941, agreed that any such
legislation should be preceded by a thorough analysis of the situation in
specific industries.
- In 1942, a third meeting was convened to review a proposed sickness
policy presented by the Government of India's Labour Department. The
Conference agreed to adopt the system on a case-by-case basis and advised
that workers in the jute, cotton and heavy engineering industries be covered
by a sickness insurance scheme. Prof. B.P. Adarkar was assigned as a special
officer by the Indian government in 1943 to report on industrial workers'
health insurance.
- In 1944, he submitted a paper that included a complete social insurance
contributory scheme. Maurice Stack and Raghunath Rao, members of the
International Labour Organization (ILO), who evaluated the scheme at the
invitation of the Government of India, offered certain adjustments[2].
- In 1944 The Labour Conference and the Standing Labour Committee in March
1945 considered the Adarkar Report and the suggestions given by the two ILO
members. The following suggestions have been made:
- The central government should move on with the development of a health
insurance program that is applicable to all permanent factories and, if
possible, covers workplace injuries and maternity benefits.
- Before drafting a bill, the scheme should be disseminated to provincial
governments and businesses, and workers' organizations.
- In 1946, The Employees' State Insurance Bill, which mandates sickness,
maternity, and work-related injury benefits for workers in permanent
industries was introduced.
- In 1948, the Indian Parliament passed the Employee State Insurance Act.
Initially, the ESIC scheme was established on February 2, 1952.
Applicability Of ESI
Non-seasonal, power-using factories or manufacturing units employing ten or more
people, as well as non-power-using companies employing twenty or more people,
are covered by the ESIC Act. A factory or facility located in a geographical
area that has been notified of the scheme's implementation falls within the
act's enabling provisions.
Employees of the aforementioned factories or
enterprises who are paid less than Rs 6,500 per month are entitled to health
insurance coverage under the ESI act[3]. The pay cap for coverage purposes is
adjusted on a regular basis to keep up with rising costs of living and
subsequent wage increases.
The following cases show the applicability of ESIC:
- Cricket Club of India vs Employee State Insurance Corporation[5]: - It was held
that a club with a kitchen is classified as a factory, and its employees are
protected by the ESI Act.
- Employee State Insurance Corporation vs Tiecicon Pvt Ltd Bombay[6]: - The ESI
Act will apply to a company that provides air-cooling services to a building's
occupants and employs more than 10 people.
- Madonna textiles vs Employee State Insurance Corporation, 2000: - When there is
geographical unity and functional integrity, three concerns will be grouped
together for ESI reasons.
- Employee State Insurance Corporation, Bangalore vs Bhagatram & Sons[7]: - The
use of LPG in the production of sweets shall be considered a power for the
purposes of the ESI Act.
Following are some cases where ESI is applicable:
- Medical Benefit:
From the day a person starts insurable work, full medical treatment is
provided to all ESI participants and their family members. There is
no limit on how much an Insured Person or a family member can spend on
treatment.
- Maternity benefit:
For confinement/pregnancy, a three-month maternity
benefit is paid, which can be extended by one month on medical advice at the
rate of full wage, subject to contribution for 70 days in the previous year.
- Disablement Benefit:
So long as temporary incapacity continues, 90 % of the
wage is payable from the day of entry into insurable employment, regardless of
whether or not any contribution has been paid.
Case Analysis Of Employee State Insurance Corporation V.S A.K. Abdul Samad (2016) Llr 449 SC
A Brief of the Case:
In
Employees State Insurance Corporation vs. A.K. Abdul Samad & Anr[8]., the
Supreme Court held that:
"the purpose of creating an offense and a penalty under
the Employees' State Insurance Act, 1948 is to deter violations of the act's
provisions that benefit employees.
Non-payment of contributions is considered an
economic crime; hence the Legislature has imposed a minimum sentence of
imprisonment as well as a predetermined punishment of Rs. 5,000 under Section
85(a) I (b) of the Act. Under most provisions, there is no discretion in
awarding but the required fee.
Only the proviso, which is in the nature of an
exception, vests the court with discretion limited to the imposition of a
reduced period of imprisonment. As a result, the fine must be Rs. 5,000, and the
courts have no discretion to lessen it once the offense has been established."
The discretion granted by the proviso is limited to the period of imprisonment.
Facts:
The case originates from the criminal proceedings brought by the appellant under
Section 85 of the Employee State Insurance Corporation Act, 1948. The employer
failed to pay the contribution as required by the act which section 85 declares
as a punishment for the respondent. The case was tried in the Special Court for
Economic Offences, Bangalore for both the respondents and this court declared
both the respondent's guilty and sentenced them to imprisonment until the rising
of the court with a fine of Rs. 1000/-.
But according to the appellant, the
amount of the fine was decreased to Rs 1000 which could not have been decreased
below Rs. 5000 according to the Act. So, the Corporation filed Revision
Petitions at the Karnataka High Court in Bangalore. However:
"The High Court
dismissed Criminal Revision Petition by relying on judgments of the Kerala High
Court and the Patna High Court in the cases of
Sebastian Kunju v. State of
Kerala[9], 1992 and
Tetar Gope v. Ganauri Gope[10], 1968 as well as two Supreme
Court judgments in the cases of
Surinder Kumar v. State (1987) and
Palaniappa
Gounder v. State of Tamil Nadu[11]." Therefore, the appellant appealed in the
Supreme Court.
Issue Raised:
- Whether the court has judicial discretion simply to reduce a sentence of
imprisonment to less than six months, or whether it also has the discretion to
impose no fine or a fine of fewer than five thousand rupees under Section 85(a)
I (b) of the Employees' State Insurance Corporation Act?
Contention Of The Appellant
The Appellant's senior counsel has relied on this Court's decision in
Zunjarrao
Bhikaji Nagarkar v. Union of India, 1999. In this case, failing to impose the
necessary penalty as required by law was one of the costs levied against the
delinquent employee in a departmental procedure.
Also, "the judgment of a Single Judge of the Patna High Court in the case of
Tetra Gope, 1968 was noted in the context of the charge, along with its
conclusion that the expression shall even be susceptible to fine in Section 325
of the Indian legal code does not mean that a fine must be imposed in every case
of conviction for that offense."
The above opinion of the Patna High Court was noted, and this Court overturned
it as incorrect, finding that the language of the Section made both imprisonment
and fine mandatory, with only the amount of fine left to the Court's discretion.
The case of
Rajasthan Pharmaceutical Laboratory v. State of Karnataka[12], 1981
in which a similar wording - "must even be susceptible to fine" - used under
Section 34 of the Drugs & Cosmetics Act, 1940 was examined, provided support for
this viewpoint. Because of the phrasing of Section 27(a) (ii), it was decided
that a sentence of jail and a fine were both required.
The proviso to the
aforementioned Section 27 has a tone and tenor identical to the proviso to the
Act's Section 85(i) (b). There is no discretion given to the Court in either
proviso to waive the fine. A minimum fine is also remitted under the Act by a
specific and specific provision.
Contention Of The Respondent
In light of several judgments dealing with cases under the Indian legal code
where the word "shall" have been interpreted as the same as the word "may," the
respondent's counsel has supported the impugned judgments, which have held in
favor of the availability of judicial discretion to impose a fine of even less
than Rupees five thousand.
The argument is that if "shall" is read as "may," the
section, which could result in a fine of up to 5,000 rupees, will be clearly
directive in character, giving the court judicial discretion to levy or not
assess fines that are frequently in the thousands of rupees.
Two judgments of this Court arising out of convictions under Section 302 of the
IPC have been cited in support of this position. In Palaniappa Gounder vs state
of Tamil Nadu[13], 1977, the Court was asked to determine the appropriateness of
a specific fine amount in the context of Section 357(1)(c) of the Code of
Criminal Procedure, which provides for compensation to the victim of a criminal
offense.
This Court had another opportunity to evaluate the appropriateness of
imposing a fine in a case of conviction under Section 302 of the IPC in the
matter of Surinder Kumar in 1987. In that case, the Court upheld the conviction
and sentence of life imprisonment but dismissed the fine of Rs.500.
Judgement
The Supreme Court declared that the purpose of introducing an offense and a
penalty under the ESI, 1948 is to create deterrence against violations of the
act's provisions that benefit employees. Non-payment of contributions is an
economic offense; hence the Legislature has set a minimum sentence of
imprisonment as well as a predetermined fine of 5 thousand rupees under Section
85(a) I (b) of the Act. Under most provisions, there is no discretion in
awarding but the required fee.
Only the proviso, which is in the nature of an
exception, vests the court with discretion limited to the imposition of a
reduced period of imprisonment. There are no words in the proviso that allow for
a fine of fewer than 5 thousand rupees to be imposed.
Thus, the legislature's
intentions are plain and leave no room for interpretation, as it is
well-established law that if the statute's wordings are clear, no interpretation
is required unless there is a need to save the provisions from
unconstitutionality or absurdity. As a result, the Bench found in favor of the
Appellant and assessed an Rs. 5000 penalty.
Highlight Of This Judgment
- The Supreme Court pointed out the mistake in the interpretation by the
High Court of the simple provisions which were made complicated and wrong
from the supreme authority side.
- The Supreme Court highlighted that a minimum sentence of imprisonment
and fine is set for a reason for non-payment to employees and it cannot be
further decreased by any legislature.
Analysis Of Provision Of ESI, 1948
Section 85: Punishment for failure to pay the contribution
This section specifies the punishment to employers who fail to pay or deduct any
amount of wage to employers or any part of the employer's contribution or if
contravenes the provision of sections 72 and 73 for reducing the wages or
benefits given to an employee or any act done by the employer which cost the
employee his/her salary is punished as follows: -
In case if employer, fails to pay the employee contribution which has been
deducted from the employee wage, the employer may face imprisonment for a term
which may be extended to 3 years and shall not be less than 1 year and also be
liable to a fine of 10k Rs or
In any other case, the imprisonment shall not be less than 6 months, and also be
liable to pay a fine of 5k Rs for the offense committed by him in any of the
clauses from this section.
From this case, it can be analyzed that the employee criminal petition was
correct and the supreme court interpreted the section correctly[14].
Related Case Laws
Zunjarrao Bhikaji Nagarkar v. Union of India[15], 1999
In this case, the complaint against the defendant was that he ordered the
application of excise duty and the confiscation of items on things that had been
illegally taken, but that his Order-in-Original was silent on the imposition of
a punishment. The Supreme Court held that improper application/interpretation of
the law is not a form of misconduct because the faulty decision is susceptible
to judicial review in an appeal. It was also determined that treating every
legal error as an accusation of misconduct would jeopardize the independence of
quasi-judicial officers.
Tetar Gope v. Ganauri Gope[16], 1968
In this case, The Supreme Court rejected the position of a single judge of the
Patna High Court who claimed that the phrase "must also be liable to fine" in
Section 327 of the Indian Penal Code did not imply that a fine must be imposed
in every event of conviction under that section. "Such a word has only been used
in the Penal Code in connection with those offenses for which the legislature
has mandated a prison sentence." In circumstances when punishment is
appropriate, the legislation has given the Court power to impose a fine in
addition to the mandatory sentence of imprisonment[17].
Palaniappa Gounder v. State of Tamil Nadu[18], 1977
In this case, the supreme court observed: "the fine punishment must not be
unnecessarily severe, Further the court held that Though there is the power to
combine a sentence of death or life imprisonment with a sentence of fine, that
power should be exercised with caution because the sentence of death is a severe
penalty to impose, and adding a fine to that grave penalty is hardly calculated
to serve any social purpose."
The Supreme Court, in overturning the High Court's decision, stated that
punishment cannot be assessed on the basis of the compensation that the
deceased's family should get, but must be based on the accused's financial
situation as well as the type and degree of the offense.
Conclusion
The ESI Act is a necessary utility for working-class employees in India, as it
benefits them while also benefiting sectors outside of the working class.
The ESI Act is unique in that it benefits both employees and employers in
different ways. While employees are covered by the act and receive financial
assistance in the event of an injury, companies are shielded from being sued
twice if they do not provide compensation to their employees. ESIC has played a
critical role in providing social insurance to millions of organized-sector
workers. It is the country's only social security institution that provides
insurance coverage for health, maternity, disability, death, and
employment-related emergencies.
I can conclude from the case analyses that, the provisions given under the
Employee State Insurance Act proved to be beneficial to the employees for any
non-payment of their work and the legislation will provide justice to them given
under the Act like imposing proper imprisonment and fine.
End-Notes:
- Kartik K. Prakash, Awareness about benefits of ESI Act among Contract
Workers in JUSCO, SLIDESHARE (Nov. 10, 2021, 13:38 PM),
https://www.slideshare.net/
- Dezan & Shira Associates, Employee's State Insurance- A Social Security
Scheme in India, INDIA BRIEFING (May 27, 2019), https://www.india-briefing.com/
- SIMPLINOTES, https://www.simplinotes.com/, (last visited Nov. 10, 2021)
- (1998) IIILLJ 270 Bom
- 1995 (71) FLR 529
- (2001) IILLJ 973 Kant
- (2016) LLR 449 SC
- 1992 CriLJ 3642
- 1968 CriLJ 1108
- 1977 AIR 1323
- 1981 SCR (2) 604
- 1977 SCR (3) 132
- SIMPLINOTES, https://www.simplinotes.com/, (last visited Nov. 10, 2021)
- 2001 (6) SCC 491
- 1968 CriLJ 1108
- Mahboob Ali, Constitutional, Civil, Criminal & Revenue Laws, XLIV, JTRI,
10, (2016)
- 1977 SCR (3) 132
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