1991 ALLMR ONLINE 395

B.N. SRIKRISHNA, J.

TRANSPORT CORPORATION OF INDIA LTD. Vs. R. M. GANDHI, REGIONAL PROVIDENT FUND COMMISSIONER OF MAHARASHTRA AND GOA

Cri. W. P. No. 27 of 1987

12th June, 1991

Petitioner Counsel: Ashok Bhogani, Ashok Bhogani and Co.
Respondent Counsel: B. R. Patil

Headnote not Available

JUDGMENT

JUDGMENT :- By this writ petition under the provision of Article 227 of the Constitution of India, read with the provision of section 482 of the Code of Criminal Procedure, 1973, the petitioners have impugned the issue of process against them by the Metropolitan Magistrate, 23rd Court, Esplanade, in the criminal complaint filed against them for contravention of the provisions of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952, and the Employees' Provident Fund Scheme, 1952 (hereinafter referred to as "the Act" and "the Scheme", respectively).

2. The first petitioner is a limited company, which owns a textile mill known as Mukesh Textile Mills covered by the provisions of the Act. Petitioners 2 to 8 and 10 to 13 are the directors of the first petitioner, while petitioner No. 9 is said to be an ex-director. Petitioner No. 14 is the President of the Textile Division of the first petitioner. Respondent No. 1 is the Regional Director appointed under the Act who is in charge of administration and implementation of, the Act in the appropriate region.

3. A complaint, being Case No. 1189/PF/1983, was filed by one G. R. Waze, Provident Fund Inspector, against all the petitioners. It was alleged therein that accused No. 1 (the first respondent herein) was a company/firm and accused No. 2 (petitioner No. 3 herein) was its Chairman. Accused No. 3 (petitioner No. 4 herein) was its Managing Director and accused Nos. 4 to 13 (petitioners 2, 5, 6, 7, 12, 8, 13, 11, 10 and 9, respectively, herein) were the directors and accused No. 14 (petitioner No. 14 herein) its President. After having described the various offices alleged to have been held by the different accused, the complainant stated in paragraph 4 as under :

"Accused Nos. 2 to 14 are the persons in charge of the said establishment and are responsible to it for the conduct of its business. They are thus required to comply with all the provisions of the said Act and said Scheme framed thereunder in respect of the said establishment."

It was further alleged in the said complaint that the accused had failed to submit to the Regional Provident Fund Commissioner a monthly consolidated statement in Form 12 -A every month within 25 days of the close of that month, as required under paragraph 38(2) of the Employees' Provident Fund Scheme, 1952, and the contribution cards in Form No. 3-A and Form No. 6-A, as required under paragraph 43 of the Scheme, within the prescribed period. Thus, it was alleged that the accused had committed offences under section 14(2) and 14A of the Act, read with paragraph 76(b) of the Scheme, on or after 30th April 1982 and 30th April 1983. On this complaint, the learned Metropolitan Magistrate issued process and summonses came to be issued to the present petitioners. By the present petition, the petitioners have challenged the legality and validity of the process issued against them and prayed for quashing and/or setting aside .the initiation of criminal proceedings against them.

3A. Shri Bhogani, learned counsel for the petitioners, raised two contentions in support of his case. He contended, firstly, that the process issued against the petitioners is liable to be quashed, as the complaint itself does not disclose any offence against the petitioners. Referring to the provisions of the Act, he pointed out that, under section 14A(1), if the person committing an offence under the Act or the Scheme is a company, every person, who was, at the time of the offence, in charge of and was responsible to the company for the conduct of the business of the company, as well as the company, was liable to be proceeded against and punished. Under the said section, all or any director of a company cannot be prosecuted unless it is at least shown, prima facie, that the director was in charge of and was responsible to the company for the conduct of the business of the company. His further contention is that the averments in the beginning portion of paragraph 4 of the complaint before the learned Magistrate were made baldly, without indicating in what manner the accused persons were in charge of the establishment and how they were responsible for the conduct of its business. Upon such bald averments, he contended, process could not and ought not to have been issued against the directors.

4. Shri Bhogani's second contention was that there was non-application of mind at the time of issuing the process. Though, in paragraph 8 of the complaint, the complainant himself had averred that the offences were alleged to have been committed on 30th April 1982 and 30th April 1983, the complaint was filed only on 1st December 1983. Shri Bhogani contended that, under section 468(2)(b) of the Code of Criminal Procedure, 1973, the limitation for such a complaint was one year and that the complaint was time-barred, at least insofar as the offence alleged to have been committed on 30th April 1982 is concerned.

5. In support of his first contention, Shri Bhogani relied on the judgment of our High Court in Sharadchandra Shripad Marathe vs. Gurushant Gangadhar Kamble and others, 1986 Mh.LJ. 738. In my view, this judgment is not of much assistance since, on the facts before the Court, the question considered was whether one of the directors, who had joined the company as a director few days before the excise raid took place on the company and had not participated in any of the earlier proceedings leading to the conspiracy of evasion of excise duty during the period 1981 to 1984, could be prosecuted for the offence under the Central Excise Act. This Court took the view that, under the peculiar circumstances of the case, it would be an abuse of the process of the Court and gross injustice to permit such a director to be prosecuted, and, in this view of the matter, the proceedings were quashed.

6. Shri Bhogani next referred to the judgment of the Supreme Court in State of Karnataka vs. Pratap Chand and others, (1981) 51 Comp. Cas. 198. Though this judgment is also not directly on the point, it does lay down that a person "in charge" of an establishment must mean that the person must be in overall control of the day-to-day business of the establishment. The judgment turns on the peculiar phraseology used in the Drugs and Cosmetics Act, 1940, as to whether a partner of the firm was the person "in charge", and the Supreme Court on the evidence in the case, came to the conclusion that the partner was not in overall control of the day-to-day business of the firm and, hence, upheld his acquittal.

7. The next case relied upon by Shri Bhogani is Anantharamaiah Woollen Factory and others vs. The State, (1980) 57 FJR 407. This case supports the contention of the petitioners. This was also a case where the Provident Fund Authorities had prosecuted the partners of an establishment for offences, inter alia, of non-submission of the relevant forms. The Karnataka High Court considered the provisions of section 14A and section 2(e) of the Act and came to the conclusion that, though, in the complaint, it had been alleged that all the partners, arrayed as accused 2 to 5, were in charge of the affairs of the establishment and responsible for the conduct of the business, yet the fact that, as required under paragraph 36A of the Employees' Provident Fund Scheme, a declaration in Form No. 5 had been submitted showing one Anantharamaiah as the manager and person in the ultimate control of the affairs of the factory and establishment made it manifestly clear that the prosecution against the partners for the offence in question was not proper.

8. Since the prayer in the petition is for quashing the process issued, by exercising powers of this Court under section 482 of the Code of Criminal Procedure, it will be necessary to examine the complaint and to see whether the offences as alleged therein are prima facie made out on the basis of the uncontroverted allegations in the complaint.

9. The complaint alleges that the accused have committed offences under section 14(2) and 14-A of the Act, read with paragraph 76(b) of the Scheme. The only allegation so far as accused 2 to 14 (present petitioners 2 to 14) are concerned, is in paragraph 4 of the complaint, wherein it is stated that the said accused "are the persons in charge of the said establishment and are responsible to it for the conduct of its business. They are thus required to comply with all the provisions of the said Act and the said Scheme framed thereunder in respect of the said establishment."

10. In order to appreciate the contentions advanced on behalf of the petitioners, it would be necessary to reproduce the relevant provisions of law.

11. Section 14(2) of the Act reads as under :

"14. Penalties. (1)........

(2) Subject to the provisions of this Act, the Scheme, the Family Pension Scheme or the Insurance Scheme may provide that any person who contravenes, or makes default in complying with, any of the provisions thereof shall be punishable with imprisonment for a term which may extend to one year, or with fine which may extend to four thousand rupees, or with both."

12. Paragraph 76(b) of the Scheme reads as under :

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

(a)....

(b) fails or refuses to submit any return, statement or other documents required by this Scheme or submits a false return, statement or other document, or makes a false declaration, or

(c) ....

(d)....

he shall be punishable with imprisonment which may extend to six months or with fine which may extend to one thousand rupees, or with both."

13. It will thus, be seen that any 'person' who fails to submit the return required by the Scheme or submits a false return is punishable with imprisonment which may extend to six months or with fine which may extend to one thousand rupees, or with both.

14. Section 14-A makes special provisions in case of offences by companies, and reads as under :-

"14-A. Offences by Companies. (1) If the person committing an offence under this Act, the Scheme or the Family Pension Scheme or the Insurance Scheme is a company, every person who at the time the offence was committed was in charge of, and was responsible to the company for the conduct of the 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 that nothing contained in this sub-section shall render any such person liable to any punishment, if he proves that the offence was committed without his knowledge or that he exercised all due diligence to prevent the commission of such offence.

(2) Notwithstanding anything contained in sub-section (1), where an offence under this Act, the Scheme or the Family Pension Scheme or the Insurance Scheme has been committed by a company and it is proved that the offence has been committed with the consent or connivance of, or is attributable to, any neglect on the part of, any director or manager, secretary or other officer of the company, such director, manager, secretary or other officer shall be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly.

Explanation -For the purposes of this section, -

(a) "company" means any body corporate and includes a firm and other association of individuals; and

(b) "director" in relation to a firm, means a partner in the firm."

15. In order that an offence under section 76(b) of the Scheme is made out against any person, it must be shown that he is required by the Scheme to submit return. The relevant paragraph of the Scheme under which the monthly consolidated statements in Form 12-A are required to be submitted is paragraph 38(2), which reads as under :-

"38. Mode of payment of contribution. -

(1)........

(2) The employer shall forward to the Commissioner, within twenty-five days of the close of the month, a monthly consolidated statement, in such form as the Commissioner may specify, showing recoveries made from the wages of each employee and the amount contributed by the employer in respect of each such employee :

Provided that an employer shall send a 'NIL' return, if no such recoveries have been made from the employees :

Provided that in the case of any such employee who has become a member of the Family Pension Fund under the Employees' Family Pension Scheme, 1971, the aforesaid Form shall also contain such particulars as are necessary to comply with the requirements of that Scheme.

(3)........"

16. Similarly, under paragraph 43, there is a requirement of forwarding the contribution cards in Form 3-A and Form 6-A. Paragraph 43 of the Scheme reads as under :-

"43. Submission of contribution cards to the Commissioner. - Every employer shall within one month from the date of expiration of the period of currency of the contribution cards in respect of members employed by him, send the contribution cards to the Commissioner together with a statement in Form 6 :

Provided that where a member leaves service, the employer shall send the contribution card in respect of such member before the twentieth day of the month following that in which the member left the service :

Provided further that in the case of any such employee who has become a member of the Family Pension Scheme Fund under the Employees' Family Pension Scheme, 1971, the aforesaid Form shall also contain such particulars as are necessary to comply with the requirements of the Scheme."

17. It would be seen from paragraphs 38(2) and 43 that the obligation to submit the necessary forms and the contribution cards is cast upon the employer. It is the employer alone who can be held responsible for failure to discharge his legal obligation under paragraph 38(2) or paragraph 43 of the Scheme.

18. Section 2(e) of the Act defines the term 'employer' as under :-

"2. Definitions. -In this Act, unless the context otherwise requires,

(a) to (d) ................

(e) 'employer' means

(i) in relation to an establishment which is a factory, the owner or occupier of the factory, including the agent of such owner or occupier, the legal representative of a deceased owner or occupier and, where a person has been named as a manager of the factory under clause (f) of sub-section (1) of section 7 of the Factories Act, 1948,63 of 1948, the person so named; and

(ii) in relation to any other establishment, the person who, or the authority which, has the ultimate control over the affairs of the establishment, and where the said affairs are entrusted to a manager, managing director or managing agent; such manager, managing director or managing agent;"

Since the establishment concerned is a textile mill, a factory to which the provisions of the Factories Act, 1948, would apply, only clause (i) of section 2(e) would be relevant for our purpose. Reading the aforesaid provision, it is clear that the obligation to submit the contribution cards and the concerned forms was, therefore, cast upon the person who would fall within the definition of 'employer' as defined in section 2(e)(i). It is that person who would be liable for the offence of failure to comply with this legal obligation.

19. Section 2(e)(i) categorises an employer into these three categories :

(i) the owner of the factory, including his agent;

(ii) occupier of the factory, including his agent; and

(iii) where a person has been named as a manager of the factory under section 7(1)(f) of the Factories Act, the person so named.

20. The expression "occupier of a factory" is defined in section 2(k) as under :-

"2. Definitions. - In this Act, unless the context otherwise requires,

(k) "occupier of a factory" means the person who has ultimate control over the affairs of the factory and, where the said affairs are entrusted to a managing agent, such agent shall be deemed to be the occupier of the factory;"

21. The provision of paragraph 36-A of the Scheme requires the employer to give in Form 5-A particulars, inter alia, of owners, occupier, director, partner, manager or any other person or persons who have the ultimate control over the affairs of the factory or establishment and also to send intimation of any change in such particulars within 15 days of such change to the Regional Commissioner. A perusal of Form 5-A, particularly Items 10 and 11 thereof, makes it clear that the employer is required to name the occupier and manager and give particulars of the persons named who are in charge of and responsible for the conduct of the business of the establishment.

22. In the face of these elaborate provisions, it is difficult to accept that the Provident Fund Authorities can, in a complaint filed under the provisions of the Act, make a bald averment that some person is in charge of the establishment and that would satisfy the requirements of law. The judgment of the Karnataka High Court in Anantharamaiah Woollen Factory's case (supra) relied upon by Shri Bhogani in this connection is very apposite. The intention of the Legislature in making the elaborate provisions, reproduced hereinabove, is to ensure that, at all given times, there is readily available a person or persons who is/are directly responsible for implementation of the provisions of the Act in the establishment and, conversely, answerable for breach of the provisions thereof. In the face of these provisions, it would be futile to vaguely aver in the complaint that all the directors named in the complaint are in charge of the establishment and responsible for the conduct of its business. I am, therefore, in respectful agreement with the view taken by the Karnataka High Court in Anantharamaiah Woollen Factory's case (supra) that it is not enough to make a bald allegation in the complaint by reproducing the language of the section to attract the provision of section 14-A(2) of the Act. The facts essential to constitute the offence falling under section 14-A(2) have to be alleged and in the absence of such necessary factual allegations attracting the provision of section 14-A(2), it cannot be said that the prosecution launched and the cognizance taken thereof by the Magistrate against the accused is proper. I am, therefore, of the view that the process issued against accused 2 to 14 (present petitioners 2 to 14) is the result of total non-application of mind on the part of the learned Magistrate in disregard of the settled law on the subject, which is liable to be quashed by this Court in the exercise of its power under section 482 of the Code of Criminal Procedure, 1973.

23. So far as the process issued against accused No. 1 (petitioner No. 1 herein) is concerned, the same arguments would not enure to its benefit. The establishment known as Mukesh Textile Mills was owned by the first petitioner-company, which is the 'employer' within the meaning of that term as used under the provisions of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952, and the Scheme thereunder. However, it would be relevant, in this connection, to examine the second contention of Shri Bhogani with regard to limitation.

24. Section 468(2)(b) of the Code of Criminal Procedure, 1973, provides that no Court shall take cognizance of an offence of the category specified in subsection (2), after the expiry of the period of limitation. Sub-section (2)(b) of this section provides one year as the period of limitation if the offence is punishable with imprisonment for a term not exceeding one year. It is common ground that the offence in the instant case was punishable with imprisonment for a term not exceeding one year and, therefore, the period of limitation would be one year. The complaint itself alleges, vide paragraph 8, that there are two distinct dates on which the offences are allegedly committed. In respect of offence pertaining to year 1981-82, it is alleged that the offence was committed on 30th April 1982, and in respect of the offence pertaining to the year 1982-83, the offence is alleged to have been committed on 30th April 1983. Obviously, the complaint filed on 1st December 1983 is barred by limitation under section 468(2)(b) as far as the offence pertaining to the year 1981-82, alleged to have been committed on 30th April 1982, is concerned.

25. Shri Patil, learned Additional Public Prosecutor for the State, contended that the offence of failure to furnish relevant returns would be a continuing offence which would fall within the provisions of section 472, as the limitation would begin to run every moment of time during which the offence continues. He relied upon the judgment of the Supreme Court in Bhagirath Kanoria and others vs. State of M. P., AIR 1984 SC 1688 in support of his contention that the offence was a continuing offence. In my view, the Supreme Court has laid down no such proposition in this case. All that the Supreme Court has laid down in this case is that the question whether a particular offence is a continuing offence must necessarily depend upon the provisions of the statute which create the offence, the nature of the offence and, above all, the purpose which is intended to be achieved by constituting the particular act as an offence. Applying this test, the Supreme Court took the view that the failure to pay Employer's contribution under the Employees' Provident Funds and Miscellaneous Provisions Act, 1952, before the due date must be held to be a continuing offence, in view of the paramount welfare nature of the object and purpose of the provisions. Failure to pay the contributions is altogether a different kettle of fish. There is vital distinction between an offence of failure to pay the contributions and an offence of failure to file the statutory returns by the due date.

In State of Bihar vs. Deokaran Nenshi and another, AIR 1973 SC 908, the Supreme Court considered such a situation and pointed out that the failure to file statutory returns would be a breach or an offence which occurs once for all and would not be a continuing offence. In my judgment, the aforesaid judgment aptly applies to the petitioners' case. I am, therefore, of the viewthat the complaint is bad and prima facie barred by time so far as the offence pertaining to the year 1981-82, alleged to have been committed on 30th April 1982, is concerned, and to that extent there was non-application of mind by the learned Magistrate at the time of issuing the process.

26. In the result, I make the following order :-

The complaint as against petitioners 2 to 14 is quashed. The complaint against petitioner No. 1 is quashed in sofaras the offence pertaining to the year 1981-82, alleged to have been committed on 30th April 1982, is concerned. The complaint to proceed against accused No. 1 only with regard to the other offence alleged, viz., the offence pertaining to the year 1982-83, alleged to have been committed on 30th April 1983.

Rule made absolute accordingly.

No order as to costs.

Order accordingly.