1. The petitioner herein is a statutory body established under the State Insurance Act, 1948. Opposite Party no. 1 is Managing Director and others are directors of Metro Engineering Pvt. Ltd. They are principal employers of the said factory to which ESI Code No. 413548 was allotted. Under the provisions of Ss. 39 and 40 of the said Act opposite parties are required to deduct from the wages of each employee for each contribution period an amount of money in terms of the said Act and are required to purchase the contribution stamps from the State Bank of India with the said money and make the payment in the manner laid down by the Regulations under the said Act. On inspection of records of the said factory the Insurance found that during the period from August 1980 to January 1981 the accused/opposite parties deducted from the wages of the monthly paid employees a sum of Rs. 316.20 as the employees share of the said contribution from July 1980 to December 1980, but did not deposit the said amount to the ESI fund as required by the said Act and Regulations and thereby committed criminal breach of trust in respect of the said money within the meaning of Explanation 2 of S. 405 of the Indian Penal Cede. The harried Chief Metropolitan Magistrate, Calcutta took cognizance of the offence and the case was registered as C/2942 of 1981. The case was transferred to the learned Metropolitan Magistrate, 11th Court, Calcutta for trial. The opposite parties filed an application for dropping the proceedings. On the said petition the learned Magistrate relying on a Single Bench decision by my learned brother Mr. Justice Monoj Kumar Mukherjee in Criminal Revision No. 1271 of 1982 S.K Agarwal v. ESI Corporation subsequently reported in 1985 Calcutta High Court Notes page 113 dropped the said proceedings and discharged them from their bail bonds. Being aggrieved this revision application has been filed by the ESI Corporation. By the decision relied on by the learned Magistrate the court held that from Explanation 2 to S. 405 of the IPC which was brought into the statute book by the Employees State Insurance (Amendment) Act, 1975 it is abundantly clear that the employer who deducts the employees contribution shall be deemed to have been entrusted with the amount of contribution so deducted and he shall be deemed to have dishonestly misappropriated the said amount if not deposited in the fund. According to the court in other words the deeming provisions applies to an employer as the term employer has not been defined by the Indian Penal Code the ordinary meaning to the term employer has to be given and that necessarily means the person who employs. Accordingly, the company will be the employer and the provision of Explanation 2 will apply only against the company and not against its directors.
2. Mr. Moitra appearing for the Corporation has urged, relying on a decision reported in 1978 Calcutta High Court Notes page 444, Bidyut Kumar Sett v. Satyesh Chandra Bagchi The Court held the director of a company can be brought within the meaning of the word occupier as mentioned in S. 2(17) of the Act as according to S. 2(n) of the Factories Act occupier is a person who like a director has ultimate control over the affairs of the factory. It further held that occupier is wide enough to bring any director within the definition of S. 2(17) of the Act Mr. Moitra, therefore, contended that the directors of the company are principal employers as defined under S. 2(17) of the ESI Act. The expression ‘Employer’ used in Explanation 2 to S. 405 of the IPC is wide enough to include principal employers as defined in the ESI Act. For convenience I quote below Explanation 2 to S. 405 IPC “A person, being an employer, who deducts the employees contribution from the wages payable to the employer for credit to the Employees State Insurance fund hold and administered by the Employees State Insurance Corporation established under the Employees State Insurance Act 1948, shall be deemed to have been entrusted with the amount of contribution so deducted by him and if he makes default in the payment of such contribution to the said fund in violation of the said Act shall be deemed to have dishonestly used the amount of the said contribution in violation of a direction of law as aforesaid.” In S.K Agarwal's case referred to above the entire stress has been given on the expression ‘employer’ used in Explanation 2 as the court did not find any material to refer to the definition of principal employer of the ESI Act. The court has held that this Explanation can only be used against an employer which generally means the person who employs and in the case of a company it is the company who is the employer. On a close perusal of this Explanation it appears that a person who is liable under Explanation 2 has been amply described by 2 following clauses namely “being an employer” and “who deducts the employees contribution from the wages payable to the employees for credit to the Employees State Insurance Fund held and administered by the Employees State Insurance Corporation established under the Employees State Insurance Act.” The second clause takes us to the provision of ESI Act Section 40 of the Act in sub-s. (2) provides “notwithstanding anything contained in any other enactment but subject to the provisions of this Act and the Regulations if any made thereunder the principal employer shall in the case of an employee directly employed by him (not being, an exempted employee), be entitled to recover from the employee the employees contribution by deduction from his wages and not otherwise.” It is, therefore clear that only the principal employer as defined in sub-s. 2(17) of the Act can recover the amount of employees contribution to the fund from its employees. Therefore, the person referred to in Explanation 2 is an employer who under the authority of S. 40(2) can deduct the employees share of contribution from their wages. As a result expression ‘person’ appearing in Explanation 2 clearly refers to the principal employer defined in the ESI Act. In the decision of Agarwal's case the second clause which clearly qualifies the expression person in the said Explanation was not considered by my learned brother in its entirety. With great respect I am unable to share the views of my learned brother in the aforesaid decision.
3. Under these circumstances, judicial propriety demands that the matter be referred to a Larger Bench. But since in a subsequent decision reported in 1985 Cr. L.J 1967, Shankar Bhattacharya v. Manabendranath Dey, a Division Bench of this court consisting of Hon'ble Mr. Justice N.G Chowdhuri and Mr. Justice G.C Chatterjee held on 28.5.85 that where there are sufficient allegations against the principal employer of the factory, they can be prosecuted under S. 406 on the strength of Explanation 2 to S. 405 IPC. In this decision the question now under consideration was not directly raised. The question which was raised before the Division Bench was that there were no sufficient allegation made in the petition of complaint against the petitioners who were directors of the offending company. In that context the Division Bench considered Explanation 2 to S. 405 and in fact has also quoted the same in the decision. Thereafter it noted that the petitioners were principal employers of the offending factory and sufficient allegations have been made against them. Therefore, a prosecution under S. 406 lies. The necessary implication of this decision is that the expression employer appearing in Explanation 2 to S. 405 IPE refers to the principal employer as defined in ESI Act.
4. Accordingly, this application succeeds. The impugned order is set aside. The case will now go back to the learned trying Magistrate who is directed to proceed in the case in accordance with law from the stage which was reached. This application is accordingly disposed of.
Application allowed; direction given.