Recently proposed Capsule Network is a brain inspired architecture that brings a new paradigm to deep learning by modelling input domain variations through vector based representations. Despite being a seminal contribution, CapsNet does not explicitly model structured relationships between the detected entities and among the capsule features for related inputs. Motivated by the working of cortical network in human visual system, we seek to resolve CapsNet limitations by proposing several intuitive modifications to the CapsNet architecture. We introduce, (1) a novel routing weight initialization technique, (2) an improved CapsNet design that exploits semantic relationships between the primary capsule activations using a densely connected Conditional Random Field and (3) a Cholesky transformation based correlation module to learn a general priority scheme. Our proposed design allows CapsNet to scale better to more complex problems, such as the multi-label classification task, where semantically related categories co-exist with various interdependencies. We present theoretical bases for our extensions and demonstrate significant improvements on ADE20K scene dataset.