Penal Provisions under Section 84 to 86 of ESI Act, 1948 (as amended)
Section -84: This section deals with penalties for making wrong / false statements made by the Insured Persons with a view to take any benefit which is not admissible to him under the Act. Such Act is an offence punishable under Act with imprisonment for a term which may extent to six months or with fine which may extend to Two thousand rupees or with both.
It is also provided under this section that if an Insured Person is convicted by the Court for an offence committed by him under this section, he shall not be entitled to any cash benefits available under the Act for such a period as may be prescribed by the Central Government.
Section -85:This section deals with penalties for non – compliance with the various provisions of the ESI Act and Regulations made there under, such as non-payment of contribution, non-submission of Returns, non-Production of records, non-submission of Declaration Forms in respect of their employees, obstruction of Inspector or any other official of the corporation in discharging his duties etc. Such non-compliance with any of the provisions of the Act constitutes an offence committed by the employer of a covered Factory / Establishment which is punishable under Section 85(a) to 85(g) of the Act.
Section -85(a):Envisages that if an employer fails to pay any contribution payable under the Act within the prescribed time-limit, he thus commit an offence u/s 85(a) of the Act, which is punishable with imprisonment for a term which may extent to three years u/s 85(i) of the Act, provided it shall not be less than One year and fine of Ten thousand rupees u/s 85(i) (a) of the Act where employees’ share of contribution is deducted by the employer from their wages but not paid. In other case where term of imprisonment shall not be less than 6 months and fine of Five thousand rupees u/s 85(i) (b).
Section 85(b) to 85(g):Says that if an employer commits an offence under this section for non-compliance with any other provisions of the Act, which is punishable with imprisonment for a term which may extends to One year or with fine up to Four thousand rupees or with both.
Section 85A:This section deals with enhanced punishment in certain cases after previous conviction. If any employer convicted by a Court for an offence punishable under the Act, committing the same offence, shall, for every such subsequent offence, be punished with imprisonment for a term which may extend to Two years and with fine of Five thousand rupees.
It is provided that if such subsequent offence is for failure to pay contribution payable under the Act, the employer shall, for every such subsequent offence, be punished with imprisonment for a term which may extend to Five years but which shall not be less than Two years and shall be liable to pay fine of Twenty five thousand rupees.
Section 85-B:Provides that the corporation may recover damages from the employer by way of penalty under this section if any employer fails to pay contribution payable under the Act within the specified time-limit or pays contribution belatedly provided that before recovering such damages, the employer shall be given a reasonable opportunity of being heard.
The amount of damages may not exceed the amount of contribution paid / payable.
The percentage of Damages leviable are as under:
| i) If delay is less than 2 months
|| @ 5% per annum
|ii) If delay is for 2 months & above
but less than 4 months
|@ 10% per annum
|iii) If delay is for 4 months & above
but less than 6 months
| @ 15% per annum
|iv) If delay is more than 6 months
||@ 25% per annum
There is also a provision to reduce or waive damages recoverable under this section in respect of a Factory / Establishment which is a Sick industrial Unit and in respect of which Rehabilitation Scheme has been sanctioned by BIFR, under Regulation 31-C. of ESI (General) Regulations, 1950.
- In case of change of Management including transfer of undertaking to worker’s Co-operative or in case of merger or amalgamation of Sick Industrial Unit with a healthy company, Damages levied / leviable can be waived completely.
- In other cases, depending on merits, damages levied / leviable can be waived up to 50 %.
- In exceptional hard cases, the damages levied / leviable can be waived either partially / totally.
It is further provided that any damages recoverable may be recovered as an arrear of Land Revenue under section 45-C to 45-I of the Act.
Section-85-C:Provides that where an employer is convicted for an offence of non-payment of contribution under this Act, the Court in addition to giving any punishment by order, direct him to pay the amount of contribution for which he was convicted within a time period. The Court can also extend the time given periodically.
If the employer still fails to pay the contribution and submit returns within the time given by the court or within the extended time period given, the employer is deemed to have committed a further offence and shall be punishable with imprisonment under Section-85 and is also liable to pay a fine which may extend to one thousand rupees for every day of default.
Section-86: Provides that no prosecution under this Act shall be instituted without previous sanction of the Insurance Commissioner or of such other officer of the corporation as may be authorized in this behalf by the Director General of the Corporation.
It is also provided that No Court inferior to that of a Metropolitan Magistrate or Judicial Magistrate of the First Class shall try any offence under this Act.
And No Court shall take cognizance of any offence under this Act except on a complaint made in writing in respect thereof.
Section-86-A (Offences by Companies):
- If the person being a company committing an offence, every person, who at the time the offence was committed was in-charge of, and was responsible to, the company for the conduct of business of the company, as well as the company shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly.
Provided further that the person proceeded against proves that the offence was committed without his knowledge or that he exercised all due diligence to prevent the commissions of such offence.
- Not with standing anything contained in Sub-Section (1) where an offence under the Act is committed with the consent or connivance or neglect on the part of any Director, Manager, and Secretary or any officer of the company, they are deemed to be guilty of that offence and can be punished accordingly.
Section-75:Deals with provisions for Adjudication of Disputes & claims: If any employer or employee under the Act has any disputes / questions that may be settled by E.I. Court after adjudicating the matter if made before it, subject to the condition that 50 % security deposit is required to be made u/s 75 (2B) (unless it is waived/reduced for the reasons recorded by the Ld. Court)
Penal Action u/s 138 of N.I. Act:
If employer submits a cheque to the corporation towards payment of contribution, interest, damages or any other amount due, which is bounced subsequently by the Bank for the reasons of Insufficient Fund he thereby commits an offence under this section and shall be punished with imprisonment for a term upto One year or with fine which may extend to twice the amount of cheque or with both.
Penal Action u/s 405/406/409 of I.P.C:
If an employer deducts employees’ share of contribution from their wages but does not pay the said contribution, he thereby commits an offence of criminal Breach of Trust which is punishable under this section with imprisonment which may extend to 3 years or with fine or with both.