Employees State Insurance Corporation vs. A.K. Abdul Samad & Anr

Employees State Insurance Corporation vs. A.K. Abdul Samad & Anr

Employees State Insurance Corporation vs. A.K. Abdul Samad & Anr.

In The Supreme Court of India

Criminal Appellate Jurisdiction

Criminal Appeal Nos. 1065-1066 Of 2005


Shiva Kirti Singh, J.


The appellants initiated criminal proceedings for conviction & punishment of the respondents for failure to pay contributions according to the Sec. 85 of the Employees’ State Insurance Corporation Act (the Act). The respondents, however, faced the Special Court for the economic offences & were found guilty. They were inflicted with imprisonment till the rising of the court and fine of Rupees 1,000/- only. According to the appellant, the fine should have been Rupees 5,000/- & not 1,000/- according to the law. The appellant preferred revision petitions before the High Court to which the petitions ultimately were dismissed.


Has the Court been given judicial discretion only to reduce the sentence of imprisonment for any term lesser than 6 months or has it also the discretion to levy no fine or fine less than Rupees 5,000/-?

What does the provision of the Act states de facto?

Sec. 85-

“Punishment for failure to pay contributions, etc.- If any person-

  1. Fails to pay any contribution which under the Act he is liable to pay, or


He shall be punishable

(i)where he commits an offence under clause (a), with imprisonment for a term which may extend to three years but-

(a) which shall not be less than 1 year, in the case of failure to pay the employee’s contribution which has been deducted by him from the employee’s wages and shall also be liable to the fine of ten thousand rupees;

        (b) which shall not be less than 6 months, in any other case and also shall be liable to the fine of five thousand rupees:

   Provided that the court may, for any adequate and special reason to be recorded in the judgment, impose a sentence of imprisonment for a lesser term;

The Appellant’s side:

The Counsel for the appellant made reference to the judgment of the Patna High Court in the case of Tetar Gope vs. Ganauri Gope1 wherein the Supreme Court over-ruled its judgment as incorrect by holding that the language of the Section made the sentence of both, the imprisonment and the fine imperative only the extent of fine has been left to the discretion of the Court. Another reference was made to the Rajasthan Pharmaceutical Lab vs. the State of Karnataka2 wherein, the expression “shall also be liable to fine” was put to light and was analyzed under the Sec. 27 of the Drugs and Cosmetics Act, 1940 which shares the same tone with Sec. 85 of the Act. Therefore, in both the provisions, there is no discretion vested in the Court to do away with the fine. Also, under the act, a minimum fine is mandated by an explicit and specific provision.

The Respondent’s side:

The Counsel for the respondent no doubt supported the judgment which was passed in their favor. Referring to the several judgments dealing with the cases under Indian Penal Code the Counsel stated that the word “shall” has been interpreted as an equivalent of the word “may”. If the word “shall” is read as “may” then the clause “and shall also be liable to the fine of five thousand rupees” will evidently be a directory in nature and shall vest judicial discretion in the court to levy or not to levy fine. The Counsel further stated as to how the Court called upon to decide the propriety of a particular quantum of fine for compensation to the victim of crime in the case of Palaniappa Gounder vs. the State of Tamil Nadu3.

Approach of the Supreme Court:

The Supreme Court clearly stated that the clause “shall also be liable to fine” in the context of Indian Penal Code may be capable of being treated as a directory. But clearly no minimum fine is prescribed for the offences under the IPC. The act was enacted with the special purpose of preventing economic offences. The object of the offence and penalty under the Act is clearly to create deterrence against the violation of the provisions of the Act which are essential to the employees. Non-payment of the contributions is an economic offence and, therefore, the legislature has not only fixed a minimum term of imprisonment but also a fixed amount of fine of Rupees 5,000/- under Sec.85 of the Act. There is no such discretion of awarding less fine, under the main provision. It is only the provision which is in the nature of an exception where under the court is vested with discretion limited to imposition of imprisonment for a lesser term. However, there are no such words in the provision which actually states of fine less than Rupees 5,000/-. The words of law are clear hence attracting no other interpretations.


The Supreme Court held that the discretion according to the provision in the act is confined only to the term of imprisonment. Therefore, the amount of fine has to be Rupees 5,000/-. The court has no discretion, whatsoever, to reduce the fine once the offence has been established. The appeals are allowed & the respondents are required to pay the said amount within a span of 6 weeks and in default, the fine shall be realized expeditiously in accordance with law by taking recourse to all the available machinery.


1.AIR 1968 Pat 287

2.(1981) 1 SCC 645
3.(1977)2 SCC 634

Case Brief prepared by Maheshwari

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