TMI Blog1998 (7) TMI 516X X X X Extracts X X X X X X X X Extracts X X X X ..... ance it is the company which is the employer and not its directors either singly or collectively. - CRIMINAL APPEAL NO. 222 OF 1990 - - - Dated:- 31-7-1998 - M.M. PUNCHHI AND MRS. SUJATA V. MANOHAR, JJ. N.N. Goswamy, Y.P. Mahajan and Ms. Sushma Suri for the Appellant. Ms. Manjeet Chawla for the Respondent. JUDGMENT Mrs. Sujata V. Manohar, J . ‑‑ The respondents were, at the material time, directors of a company, Indo Japan Steel Ltd. The company has a factory and head office at Calcutta. Under the provisions of section 40 of the Employees State Insurance Act, 1948, the "principal employer" is required to pay, in respect of every employee, whether directly employed by him or by or through an imme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quashing the proceedings in the said case. The High Court by its impugned judgment has quashed the proceedings on the ground that the respondents cannot be considered as "employers" within the meaning of Explanation 2 to section 405 read with section 406 of the Indian Penal Code. Hence, they were not liable for prosecution under section 406. From this judgment the present appeal has been filed by the original complainant. Section 405, Explanation 2, is as follows : "405. Criminal breach of trust. Whoever, being in any manner entrusted with property, or with any dominion over property, dishonestly misappropriates or converts to his own use that property, or dishonestly uses or disposes of that property in violation of any directio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Indian Penal Code can refer only to the company who had employed the employees in question. The directors of that company could not be considered as employers under Explanation 2 to section 405 of the Indian Penal Code. The complainant, however, contends that Explanation 2 to section 405 of the Indian Penal Code should be read in the light of the Employees State Insurance Act, 1948. Under section 40 of the Employees State Insurance Act, the obligation to pay contributions in the Employees State Insurance Fund has been cast on the principal employer. The relevant provisions of section 40 are as follows : "40. Principal employer to pay contributions in the first instance.- (1) The principal employer shall pay in respect of eve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i ) in any other establishment, any person responsible for the supervision and control of the establishment." Section 2(17) defines the "principal employer" in a factory as the owner or occupier of the factory. "Occupier" of a factory is defined in section 2(15) as having the same meaning assigned to it in the Factories Act, 1948. Section 2( n ) of the Factories Act, 1948, as it stood at the relevant time, defined an "occupier" to mean the person who has ultimate control over the affairs of the factory. Section 100 of the Factories Act, dealt with the determination of occupier in certain cases. Under sub-section (2) where the occupier was a company, any directors thereof could be prosecuted and punished for any offence for which the occup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r or the occupier depending upon the facts of each case. When there is an owner of the factory that owner must be considered as the principal employer liable for contribution. Under section 40, the words "owner" and "occupier" have been used disjunctively. The court also referred to section 100 of the Factories Act and said that even under the Factories Act, 1948, the Legislature has clearly contemplated that in the case of a factory, a company can be the "occupier". Therefore, when the owner of a factory is a company it is the company which is the principal employer and not its directors. The Bombay High Court overruled the judgment of the single judge of the Bombay High Court in so deciding. The same view has been taken by the Madhya ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... finition of "principal employer" when the company itself owns the factory and is also the employer of its employees at the head office. In any event, in the absence of any express provision in the Indian Penal Code incorporating the definition of "principal employer" in Explanation 2 to section 405, this definition cannot be held to apply to the term "employer" in Explanation 2. As the High Court has observed, the term "employer" in Explanation 2 must be understood as in ordinary parlance. In ordinary parlance it is the company which is the employer and not its directors either singly or collectively. In the premises we do not see any reason to interfere with the impugned judgment of the Calcutta High Court. The appeal is, therefo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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