TaxTMI 
TaxTMI 
1998 (7) TMI 516
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....f 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 immediate employer, both the employer's contribution and the employee's contribution. Under sub-section (2) of section 40 of the principal employer, in the case of an employee directly employed by him, is entitled to recover from the employee the employees' contribution by deduction from his wages. Under sub-section (4) any sum deducted by the principal employer from wages under this Act shall be deemed to have been entrusted to him by the employee for the purpose of paying the contribution in respect of which it was deducted. The complainant who is the appe....
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...., 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 direction of law prescribing the mode in which such trust is to be discharged, or of any legal contract, express or implied, which he has made touching the discharge of such trust, or wilfully suffers any other person so to do, commits 'criminal breach of trust' . . . Explanation 2.-A person, being an employer, who deducts the employees' contribution from the wages payable to the employee for credit to the Employees' State Insurance Fund held and administered by the Employees' State Insurance Corporation established under the Employees' State Insurance Act, 1948, ....
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....elevant 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 every employee, whether directly employed by him or by or through an immediate employer, both the employer's contribution and the employee's contribution. (2) Notwithstanding anything contained in any other enactment but subject to the provisions of this Act and the regulations, if any, made thereunder, the principal employer shall, in the case of an employee directly employed by him (not being an exempted employee), be entitled to recover from the employee the employees' contribution by deduction from his wages and not otherwise : Provided that no such deduction sh....
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.... 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 occupier was liable. Section 2(17) of the Employees' State Insurance Act, however, defines the principal employer as either owner or occupier-taking care of all eventualities. When the owner of the factory is the principal employer, there is no need to examine who is the occupier. The owner will be the principal employer under section 40. The Employees' State Insurance Act does not define the term "employer" although under sections 85B and 85C of that Act the term "employer" is used. The provisions of section 40 in the light of these definitions have been conside....
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....er 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 Pradesh High Court in the case of Employees' State Insurance Corporation v. Kailashchandra [1989] 22 Lab IC 760. The Madhya Pradesh High Court also said that when there is a default in payment of contribution by the company, the managing director, or other directors cannot be made personally liable. The contribution can be recovered from the company as the principal employer. In the case of Employees' State Insurance Corporation v. Gurdial Singh [1991] 24 Lab IC 52, this court held that the directors of a private limited company were not personally liable to pay ....