The ESI Act contains adequate provisions to persons for violating its provisions. The relevant penal sections, so far as violations in the matter of coverage, are sections 84, 85, 85-A, 86 and 86-A. The prosecutions under these sections can be filled in the criminal courts and adjudication of the same matter by Employee’s Insurance Court is not a condition precedent.
The salient features of the aforesaid sections are given below:-
Section 84: This section inter alia states that whoever, for the purpose of avoiding any payment to be made by himself under the said Act or enabling any other person to avoid any such payment, knowingly makes or causes to be made any false statement or false representations, shall be punishable with imprisonment for a term which may extend to six months or with fine not exceeding two thousand rupees, or with both.
Thus, if any employer, whose factory or establishment is coverable, knowingly makes a false representation / statement about the coverage, he is liable to be punished under this section.
Section-85: Under this section, inter alia, any person who is guilty of any contravention of or non-compliance with any of the requirements of the Act/rules/regulations, shall be punishable with imprisonment for a term which may extend to one year or with fine which may extend to four thousand rupees, or with both.
Failure to cover a coverable entity is punishable under this provision. Pendency of the employer’s application for exemption under sections 87, 88 and 90 of the Act does not grant any immunity to the employer from this provision, as has been held by the Kerala High Court in P. Renuka Vs. ESIC
Section-85-A: This section lay down that if any person, already convicted for any offence punishable under the Act, commits the same offence, he shall be punished with imprisonment for a term which may extend to two years and with a fine of five thousand rupees.
Section-86: According to this section, the prosecution against employer or any other person shall be instituted with the previous sanction of the Insurance Commissioner or any other authorized officer of the Corporation. Under this provision, the power to sanction prosecution has been delegated to the Regional Directors and incharges of sub-regions.
A complaint for any offence under the Act has to be filed in writing in any court having jurisdiction but not inferior to that of Metropolitan Magistrate or First Class Judicial Magistrate.
The complaint should be filed against right person. In Ranjit Kumar Nandy Vs ESIC, a complaint was filed against a person, with appropriate sanction, but subsequently, the real name of the suspect was fond to be different. On this fact, the Calcutta High Court dismissed the case
Section-86-A: If the person committing an offence under the ESI Act is a company (i.e. body corporate including a firm and other association of individual), every person who was incharge of the company shall be liable to be proceeded against and punished, unless it is proved that the offence was committed without his knowledge or despite exercise of due diligence to prevent the same. Thus, any director, manager, secretary etc. Who has consented, connived or was negligent in the matter of commission of any such offence is guilty of that offence.
In vies of this section, the prosecution can be lodged only against individual responsible for the offence and, as has be held by the Supreme Court n Sheoratan Aagarwal Vs State of M.P, prosecution of the company is not a condition precedent. But the High Court of Calcutta in Vidyasagar Kejriwal Vs. ESIC and the High Cour of Karnataka in Sidharth Kejriwal Vs. Regional Director ESIC have held that for the prosecution to succeed, it is essential to prove the person complained against was incharge of, or responsible to, the conduct of business of the company.