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Ajay Raj Shetty v. Director

Criminal Appeal · 2025 INSC 500Decided 17 Apr 2025
Criminal Appeal (arising out of SLP (Crl.) No. 3743 of 2024)
Justice Sudhanshu Dhulia · Justice Ahsanuddin Amanullah

Background

M/s Electriex (India) Ltd, a company declared "sick," deducted ESI contributions of about Rs. 8.26 lakh from its employees' wages between February and December 2010 but never deposited the money with the Employees' State Insurance Corporation (ESIC). Based on an ESIC inspection report naming the appellant as the company's "General Manager" and "Principal Employer," a criminal complaint was filed against him, and the trial court convicted him under the ESI Act, sentencing him to six months' imprisonment plus a fine: a conviction upheld on appeal and in revision by the Karnataka High Court. The appellant argued he was only a "Technical Coordinator," not the Principal Employer, and that he had since paid off the outstanding dues.

Decision Breakdown

The Supreme Court upheld the conviction, holding that all three lower courts had returned concurrent findings that the appellant was described as General Manager in the company's own records and had failed to produce his appointment letter, pay-slips, or other evidence to prove he held only the lesser "Technical Coordinator" role. Under Section 2(17) of the ESI Act, "Principal Employer" includes any person responsible for supervising and controlling the establishment, regardless of formal designation, so the appellant qualified as a "managing agent" liable under the Act. The Court also noted the High Court had correctly observed that the offence actually attracted a harsher provision (Section 85(i)(a), for failing to deposit money already deducted from wages) than the lesser one under which he was convicted (Section 85(i)(b)), so there was no unfairness to the appellant. The appeal was dismissed, and he was directed to surrender to serve his sentence (after set-off for time already undergone).

Lesson Learnt

A person cannot escape liability for statutory dues owed to employees simply by claiming a lesser job title. Courts look at who actually supervised and controlled the establishment, based on real evidence like appointment letters and pay-slips, not just a person's own say-so after the fact.

Official source (sci.gov.in)View Judgment (PDF)

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