ESI Act | Person In Supervisory Role Liable For Non-Remittance Of Contributions Regardless Of Designation : Supreme Court

The Supreme Court observed that a person, irrespective of their official designation, may be deemed a 'principal employer' under the Employees' State Insurance Act, 1948 (“ESI Act”), if they act as an agent of the owner or occupier of a factory, or if they supervise and control the establishment in question.

Holding thus, the bench comprising Justices Sudhanshu Dhulia and Ahsanuddin Amanullah upheld the conviction of the General Manager of a company, who was accused of not remitting the Employees' State Insurance contribution to ESIC. He was sentenced to undergo imprisonment for six months along with a fine of Rs.5000/-

The Appellant challenged his conviction, arguing that he neither held the post of General Manager nor was he the 'Principal Employer' during the relevant period. He urged that the liability was on the Company for making payments to the ESIC, therefore, he could not be charged for default in remitting the employees' ESI contribution.

Rejecting such an argument, the judgment authored by Justice Amanullah observed that the designation of the person is not relevant when the person exercises supervision/control.

Since the Appellant, who was holding the General Manager position in the company, failed to disprove his position, he can't be excused for the liability arising under the ESI Act for non-remittances of employees' contribution to ESI, the court said.

The Court found the Appellant to be as 'principal employer' of the company under Section 2(17) of the ESI Act, which states the definition of 'principal employer'. The Court held that he came under the definition of "managing agent" as per S.2(17)

“Therefore, designation of a person can be immaterial if such person otherwise is an agent of the Owner/Occupier or supervises and controls the establishment in question. From the materials available on record, we find that the Appellant falls within the ambit of Section 2(17) of the Act, being a 'managing agent'”, the Court noted.

“Thus, we find that the conviction and the sentence does not require any interference, much less in the present case, where despite contributions having been deducted from the employees' salaries, they were not deposited with the ESIC.”, the court held.

Accordingly, the appeal stands dismissed.

Case Title: AJAY RAJ SHETTY VERSUS DIRECTOR AND ANR.

Citation : 2025 LiveLaw (SC) 442

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Appearance:

For Petitioner(s) Mr. P Vishwanath Shetty, Sr. Adv. Mr. Shankar Divate, AOR Mr. Vaibhav, Adv.

For Respondent(s) Mr. Manish Kumar Saran, AOR Ms. Ananya Tyagi, Adv. Mr. Rohit Sharma, Adv. Mr. Vipin Kumar, AOR Mr. Jitendra Kumar, Adv.