Select Your Location
Table of Contents
The Employees State Insurance Act, 1948, contains provisions regarding the social security of the employees across India. It is also the first legislation for social security and health insurance scheme for the employees in India. The Employees State Insurance Act (ESI) led to the incorporation of the Employees State Insurance Corporation, which manages the funds in accordance with the ESI Act. Various provisions of medical benefits, insurance, and other social protection are incorporated in the ESI Act. It also sets out punishments and penalties under ESI Act, 1948. This article highlights the provisions of penalties under ESI Act, but before that, let us understand the basics of this Act.
The Employees State Insurance Act, 1948, provides financial providence to the employees across India for unforeseen situations like sickness, maternity leave, mental or physical disorders, any disability or death of an employee. It is a self-financed scheme intended to facilitate social security in order to prevent any financial loss with respect to medical issues for an employee.
The main objective of the ESI Act is
to provide benefits to the employees in the event of sickness, maternity, and
employment injuries. Penalties under ESI Act, 1948, aims to provide for the
smooth and proper functioning of the terms of this Act.
Employees and State Insurance Act contains penalties for certain offences. The
penalties under the Act were enhanced considerably by the Employees State
Insurance Amendment Act in 1975. Sections 85-A, 85-B, 85-C were added through
this amendment. The penalties under ESI Act
have been specified in a detailed manner below:
1) Section 84 of the ESI Act contains
penalties for making false or wrong statements. In case an insured person gives
any false information with an intention to take benefits which is not
admissible to him under the Act, such persons shall be punished with
imprisonment for a term that may extend to six months or a fine that may extend
to two thousand rupees or both imprisonment and fine.
an insured person gets convicted under this section, then he or she will not be
eligible for any cash benefit under ESI Act for a period that may be prescribed
by the Central Government.
2) Section 85 deals with penalties
under ESI Act with respect to non-compliance of provisions and regulations
mentioned in the Act. If a person doesn’t pay the contribution which he is
liable to pay, then he shall be punished with imprisonment for a term which may
extend for a period of three years or if he deducts or makes any attempt to
deduct from the wages of an employee either wholly or a part of employer’s
contribution, he shall be held guilty and may be punished with imprisonment for
a term that may extend to one year and/or with a fine that may extend to four
section further provides that if any person reduces the wages, privileges or
any benefits that an employee is entitled to or in contravention to section 73
or any regulation reduces, dismisses or punishes an employee, such a person
shall be punished with imprisonment for a term that may extend to a period of
one year and/or with a fine that may extend to Rs. Four thousand.
If a person fails or intentionally refuses to submit a return or makes a false return required by the regulation; or obstructs any officer of the corporation in discharge of his duties or is guilty of a non-compliance with any of the provisions of this Act or the regulations where no special penalty is provided, he shall be punished with imprisonment for a term that may extend to one year and/or with fine up to four thousand rupees.
3) Section 85A provides enhanced
penalties under ESI Act. This section says that in certain cases, after a
previous conviction, if a person commits the same offence punishable under this
Act will be punished with imprisonment for a term that may extend to two years
and with a fine of Rs. Five thousand for every such subsequent offence. In case
such subsequent offence is for non-payment of contribution by the employer,
which he is liable to pay, he shall be, for every subsequent offence, punished
with imprisonment for a term that may extend to five years but not less than
two years and with fine of Rs. Twenty-five thousand.
4) Section 85B contains the provision of
recovering damages by the corporation from the employer through penalty under
this section in case an employer fails to pay contribution that is payable
under this Act within the prescribed time or pays contribution after the expiry
of the time period provided that the employer shall be given a good opportunity
of being heard before the recovery of such damages.
Also, Read: Employee State Insurance: Its Concept and Process for Registration.
recovery of the said damages amount should not exceed the amount of
contribution payable or paid. A provision to reduce or waive damages
recoverable is also provided under this section with respect to a factory or
establishment that is a Sick Industrial Unit and for which rehabilitation
scheme has been sanctioned by BIFR under ESI (General) Regulations, 1950. These
5) Section 85C provides that in case of conviction of an employer for an offence of non-payment of contribution under ESI Act, the court, along with the punishment prescribed, has the right to direct him to pay the amount of contribution within a time period for which he was convicted. The court can, as per its discretion, extend the time given to pay periodically. In case the employer still does not pay the contribution and submit returns within the prescribed time given by the court or in the extended time, then the employer shall deemed to have committed a further offence. He shall be punishable under Section 85 of this Act and shall also be liable to pay fine up to Rs. One thousand for every day of default.
6) Section 86 of the Act provides that under this Act no prosecution shall be instituted without a previous sanction of the Insurance Commissioner or of any other such officer of the Corporation as may be authorised primarily on this behalf by the Director-General of the Corporation.
section further provides that a court inferior to that of a Metropolitan
Magistrate or Judicial Magistrate of the first class shall not try an offence
under the ESI Act.
also specifies that no court will take cognizance of any offence under the ESI
Act except in case a complaint is made in writing in respect of an offence.
7) Section 86A provides that in case the
person committing an offence under the ESI Act is a company, every person who
at the time of the commission of the offence was in charge and responsible for
the management and the conduct of the business of the company will be guilty of
the offence and will be liable for punishments and penalties under ESI Act. An
exception to this rule is that if the person liable to any punishment proves
that the offence was committed without his knowledge or if he proves that he
used all his diligence to prevent the commission of the offence, then that
person shall not be liable to any punishment.
8) Section 75 contains the provisions
for adjudication of disputes and claims. It specifies that if an employer or
employee under the Act has any dispute that can be settled by the Employees
Insurance Court after adjudicating the dispute if made before it, with the
condition that 50% of the security deposit should be made under section 75 (2B)
unless it is reduced/waived for the reasons recorded by the learned court.
Punishments under section 138 of Negotiable Instrument Act-
an employer provides a cheque to the corporation for payment of contribution,
interest or damages or any other amount that is due, which subsequently gets
bounced by the bank due to insufficient funds, he, therefore, commits an
offence under this section and will be punished with imprisonment for a term
that may extend to one year or fine that may extend to twice the amount of
cheque or both imprisonment and fine.
Punishments under sections 405, 406 and 409 of IPC-
employer who deducts employee’s share of contribution from their wages,
however, does not pay the contribution, he, therefore, commits the offence of
Criminal Breach of Trust that may be punishable with imprisonment either for a
term that may extend to three years or with fine or both fine and imprisonment.
Section 74 of the ESI Act provides for the constitution of an employee’s insurance court. The state government shall constitute it for dispute adjudication and claims adjudication. The ESI court shall have the authority to adjudicate the disputes, rate of wages, principal employer, and whether or not any person is an employee. The ESI court shall also have the authority to claim for recovery of any benefit under the ESI Act and shall have the right to take action against failure to pay contribution or against negligence. Further, no civil court shall have the authority to decide matters within the jurisdiction of the ESI court.
More Info: Change in ESI Contribution Rates.
Ashish M. Shaji has done his graduation in law (BA. LLB) from CCS University. He has keen interests in doing extensive research and writing on legal subjects especially on corporate law. He is a creative thinker and has a great interest in exploring legal subjects.
Every assessee in India is obligated to file an income tax return and make the timely payment o...
In the recent past, India has seen burgeoning demand for internet and smartphones. The rapid ri...
The Securities and Exchange Board of India (SEBI), the capital markets regulator, has recommend...
The objective of the enactment of the Prevention of Money-laundering Act, 2002, i.e. PMLA (the...
Tax planning is a continuing effort and a management strategy for ensuring the minimization of...
On 18th May 2023, the Securities Exchange Board of India (SEBI) released a Consultation Paper o...
Infrastructure and real estate have been regarded as India's "sunshine sector" since the turn o...
On 22nd May 2023, the Central Board of Direct Taxes (CBDT) issued a new circular under secti...
Anyone can have different sources of income. With globalization and the opening up of economies...
The Reserve Bank of India (RBI) is crucial in regulating NBFC, including branch openings and cl...
Are you human?: 9 + 7 =
Easy Payment Options Available No Spam. No Sharing. 100% Confidentiality
International Traffic in Arms Regulations (ITAR certification) regulates and controls the export and import of defe...
07 Sep, 2018
Electronics and electrical waste items are generally referred to as E-wastes. It is also known as E-scrap. These ar...
30 Aug, 2019
Red Herring Top 100 Asia enlists outstanding entrepreneurs and promising companies. It selects the award winners from approximately 2000 privately financed companies each year in the Asia. Since 1996, Red Herring has kept tabs on these up-and-comers. Red Herring editors were among the first to recognize that companies such as Google, Facebook, Kakao, Alibaba, Twitter, Rakuten, Salesforce.com, Xiaomi and YouTube would change the way we live and work.
Researchers have found out that organization using new technologies in their accounting and tax have better productivity as compared to those using the traditional methods. Complying with the recent technological trends in the accounting industry, Enterslice was formed to focus on the emerging start up companies and bring innovation in their traditional Chartered Accountants & Legal profession services, disrupt traditional Chartered Accountants practice mechanism & Lawyers.
Stay updated with all the latest legal updates. Just enter your email address and subscribe for free!
Chat on Whatsapp
Hey I'm Suman. Let's Talk!