1. All these criminal appeals are filed under Section 278(3) of Criminal Procedure Code by the Central Government Standing Counsel appearing for the appellant/Central Government with special leave to file the appeals against the judgment dated 12-4-1991 passed by the Additional Munsiff and JMFC, Bellary in CC Nos. 3178/86 to 3187/86 acquitting the respondents/accused of the offences under para 76(d) of the Employees Provident Fund Scheme, 1952 read with S. 14(1A) and 14-A(a) of Employees Provident Fund and Misc. Provisions Act, 1952.
2. As the common points of law and facts are involved in all these criminal-appeals, all the matters are heard together and disposed of with this common order.
3. I heard Sri Ashok Haranahalli, learned Central Government Standing Counsel for the appellants in all the appeals and Sri C. M. Desai, Advocate appearing for the respondent/accused No. 2 in all the appeals. The respondent No. 1 is served with notices in all the appeals and it remained absent.
4. The brief facts of the case are that the respondents/accused were charge sheeted by the Enforcement Officer appointed under the Employees' Provident Funds and Miscellaneous. Provisions Act, 1952 (hereinafter referred to as the P.F. Act) for the offences punishable under Sections 14(1A) and 14-A(I) of the P.F. Act read with para 76(d) of the Employees Provident Fund Scheme, 1952 (hereinafter referred to as the P.F. Scheme). That the respondent/accused No. 1 M/s. Bellary Spinning and Weaving Co. Ltd. was an Establishment within the meaning of the P.F. Act and the P.F. Scheme were applicable to the respondent/ accused No. 1 having been allotted with Code No. KN/3852. The respondent/accused No. 2-B Manickya Reddy is none other than the person in charge of the said Spinning and Weaving Co. Ltd. and was responsible to it for the conduct of its business. He and the respondent/accused No. 2 were therefore required to comply with all the provisions of the said P.F. Act and P.F. Scheme in respect of the respondent/accused No. 1 Company. In paras 30 and 38 of the P.F. Scheme, the respondent/accused were required to pay the employees contributions to Provident Fund in respect of the employees of their establishment together with the administrative charges for every month within 15 days of the close of that month. Further, under Sub-section (6) of Section 17 of the P.F. Act read with paras 9(1)(c) and 39 of the said P.F. Scheme, 1971 and para 38 of the P.F. Scheme, the respondents/accused were required to pay the family pension fund, the members as well as the employees share of contributions to the Family Pension Fund every month within 15 days of completion of that month. That in spite of several requests, the respondents/accused failed to pay in the manner mentioned above the following contributions :
(See table below)
5. That the respondents/accused did not pay the above sums due for the months from Sept. 1984 to Oct. 1985 as and when the same had fallen due as set out above and under the said circumstances, the Enforcement Officer under the P.F. Act had filed 10 independent complaints as against the respondents/accused which were registered in CC Nos. 3178-3178/86 before the Court of the Additional Munsiff and JMFC, Bellary (hereinafter referred to for convenience as the AJMFC, Bellary). In the said complaints it was complained that the respondents/accused had committed an offence under para 76(d) of the P.F. Scheme of 1952 read with Section 14(1A) and 14-A(I) of the P.F. Act on or about 16-10-1984 to October, 1985. It was further contended that the respondent/accused No. 2 during the relevant period was in charge of the Establishment of the respondent/accused No. 1 and was responsible to it for the conduct of its business and having not paid the P.F. contributions (employees' share with employer's share) as and when the same had fallen due, more fully set out in the table aforementioned, the aforesaid offences were committed by the respondent/accused No. 1 Company due to the negligence thereto of the respondent/accused No. 2 and therefore, both the respondents/accused were liable to be prosecuted for the offences. It was further stated in the complaint that therefore the respondents/accused persons were in the normal circumstances punishable with both imprisonment and fine and accordingly a prayer was made by the Enforcement Officer in his complaint that a direction to the respondents/accused be made to pay within one month the above sums of contribution in respect of which the complaints were lodged and also to pass orders for payment of the amounts under Section 357 of Cr.P.C. and further for punishing the respondents/accused as provided under law.
------------------------------------------------------------------------ SI. Employees Employers Month for C.C. Cr. A. No.share share which due Nos. Nos. ------------------------------------------------------------------------ 1 . 8,184/- 8,184/- September, 84 3178/86 in the instant appeal i.e. 586/91 2. 7,829/- 7,829/- November, 84 3179/86 587/91 3. 7,830/- 7,830/- December, 84 3180/86 588/91 4. 14,846/- 14,846/- February, 84 3181/86 589/91 5. 15,077/- 15,077/- March, 84 3182/86 590/91 6. 16,026/- 16,026/- April, 84 3183/86 591/91 7. 16,078/- 16,078/- May, 84 3184/86 592/91 8. 11,350/- 11,350/- July, 84 3185/86 593/91 9. 12,930/- 12,930/- August, 84 3186/86 594/91 10. 8,289/- 8,289/- October, 85 3187/86 595/91------------------------------------------------------------------------
6. After taking cognizance of the cases, the summons were issued to the respondents/accused and subsequently their plea was also recorded by the AJMFC, Bellary and the respondents/accused pleaded not guilty and claimed to be tried. That the Enforcement Officer had examined himself as PW 1 and marked as many as 8 documents as Exs. P.1 to P.8. They are Ex. P.1 - true copy of Form No. 5A with three annexures, Ex. P.2 - Form No. 12A, Ex. P.3 - Inspection report, Ex. P.4 - Sanction Order, Ex. P.5 complaint, Ex. P.6 - letter (original), Ex. P.7 - original form of 5A (with enclosures) and Ex. P.8 - the Inspection report (original). After the evidence was adduced, the statement of the respondents-accused No. 2 for and on behalf of the respondent/accused No. 1 - Company and on his own behalf under Section 313 of Cr.P.C. was recorded by the AJMFC, Bellary, wherein the respondent/accused No. 2 had denied the cases in its entirety and on hearing the arguments of both sides and on appreciation of the evidence on record, the learned AJMFC, Bellary had acquitted the accused/respondents of all the charges levelled against them and therefore the instant appeals were filed by the appellant/Central Government with the special leave as contemplated under Section 378(3) of Cr.P.C.
7. While acquitting the respondent/accused, the learned AJMFC, Bellary had observed that the respondent/accused No. 1 - Company since wound up and not in existence and the complaints in question were filed without the leave of the Company Court as contemplated under Section 466 of the Companies Act, wherein it was provided that when a winding up order had been made or the official liquidator had been appointed as the provisional liquidator, no suit or other legal proceedings shall be commenced or if pending on the date of winding up order, shall be proceeded with against the Company except by leave of the Court and subject to such terms as the Court may impose.
8. With regard to the recording of the acquittal order as against the respondent/accused No. 2 herein, the learned AJMFC, Bellary observed that the Enforcement Officer failed to prove that the respondent/accused No. 2 was responsible for the conduct of the business of the respondent/accused No. 1 - Company and that the provisions of Section 14-A of the P.F. Act clearly show that the burden was on the complainant to establish that the respondent/accused No. 2 was responsible for the conduct of the business of the respondent/accused No. 1 - Company and further that none of the documents produced by the complainant PW 1 marked as Exs. P.1 to P.8 did disclosed that the respondent/accused No. 2 was in charge of and was responsible for the respondent/accused No. 1 - Company.
9. Sri Ashok Haranahalli, the learned Central Government Standing Counsel at the outset fairly conceded that the appellants have got no quarrel as to the acquittal order passed therein as against the respondent/accused No. 1 - Company. But, he submitted that the appellants have got grievance as against the acquittal of the respondent/accused No. 2, for it is his argument that even if the respondent/accused No. 1 could be absolved of the charge, in view of the provision under Section 446 of the Companies Act that when a winding up order has been made or the official liquidator has been appointed as the provisional liquidator, no suit or other legal proceedings shall commence or if pending on the date of the winding up order shall proceed with as against the Company except with the leave of the Company Court, the respondent/accused No. 2 could not have been absolved of the charge. According to Sri Haranahalli, the complaint as against the respondent/accused No. 2 was definitely maintainable and be proceeded against him in view of no bar thereto under Section 466 of the Companies Act. He had drawn my attention particularly to the statement recorded by the learned AJMFC, Bellary under Section 313, Cr.P.C. wherein the respondent/accused No. 2 had stated that he was the Managing Director of the respondent/accused No. 1 - Company. According to him, when the respondent/accused No. 2 admittedly the Managing Director, he was presumed to be in charge of and was responsible for the conduct of the business of the respondent/ accused No. 1 - Company during the relevant period and he having contravened the above provisions of law under which he was charged, he was guilty of the offences and therefore he was liable to be punished under para 76 of the P.F. Scheme.
10. Sri Haranahalli in his argument referred to Section 2(26) of the Companies Act as to the definition of the term 'Managing Director'. Referring to the said definition, he submitted that according to the said provision of law in the Companies Act, the 'Managing Director' means, a Director who by virtue of an agreement with the Company or of a resolution passed by the Company in its General Body Meeting or by its Board of Directors, he was in charge and was responsible for the conduct of the business of the respondent/accused No. 1 - Company. He further submitted that from the very designation of the respondent/accused No. 2, there is a presumption under law that he was in charge of the affairs of his Company. That being the position, Sri Haranahalli pointed out that under para 38(2) of the Employees Provident Fund Scheme, the respondent/accused No. 2 would have forwarded to the Commissioner within 15 days of the close of the month, the monthly consolidated statement in the form as the Commissioner specified showing therein the recoveries made from the wages of each employee and the amount contributed by the employer i.e. the respondent/accused No. 1 - Company in respect of each of such employee and further remitted the said contributions as and when the same had fallen due. Having not done, Sri Haranahalli argued that the respondent/accused No. 2 was guilty of the offence and therefore, the learned AJMFC, Bellary would have definitely punished him in consonance with para 78 of the P.F. Scheme.
11. Sri Haranahalli had also cited before me the decision of the Supreme Court reported in : 1988CriLJ1095 , wherein in a case under Section 200 of Cr.P.C. for an offence under Section 5 of Imports and Exports (Control) Act, the Supreme Court held that the Managing Director could not be discharged on the ground that there were no allegations against him and that the offence was committed by the Company as a licencee since the Company by itself could not act. The other case Sri Haranahalli cited before me is : 1983CriLJ159 wherein the Supreme Court in a case under the Prevention of Food Adulteration Act held that the proceedings against an accused can be quashed only if on the face of the complaint or the papers accompanying the same, no offence is constituted, the test being that the allegations and the complaint as they are to be taken without adding or substracting anything.
12. Sri Haranahalli next cited before me the decision of this Court in (1995) 1 Kant LJ 194.
13. In the above said decision a similar provision as that of Section 14A(I) of P.F. Act in Section 85(A)(2) of Employees' State Insurance Act, 1948 came for consideration vis-a-vis offence by a Company to make a Director liable. This Court in the said decision held that the averments in the complaint or the documents produced along with the complaint must prima facie indicate that such a Director was in charge of and responsible for the conduct of the business of the Company and if nothing in records indicate that the Director was in charge of and responsible for the conduct of the business of the Company it amounts to non-disclosure of any offence against such a Director and the process cannot therefore be issued on the ground that the accused was a Director of the Company.
14. The learned counsel, Sri C. V. Desai, appearing for the respondent/accused No. 2, in all the above cases while supporting the impugned judgments passed by the learned AJMFC, Bellary, argued that when the appellant make out a case for the offences charged as above as against the respondent/accused No. 2, it was incumbent on the appellant to prove two conditions as set out in Section 14A(I) of P.F. Act. The said two conditions, according to him, are that the respondent/accused No. 2 was incharge of the conduct of the business of the Company and at the second that he was responsible to the Company for the conduct of its business. He further argued that the appellant had miserably failed before the learned AJMFC, Bellary by producing material evidence to prove that the respondent/accused No. 2 was in fact in charge of and was responsible to the Company for the conduct of business of the Company. It is also in his argument that when the appellant failed to prove the said two ingredients as contemplated under Section 14A(I) of the P.F. Act, they wanted to fall back upon what the respondent/accused No. 2 had stated in his statement recorded by the AJMFC, Bellary under Section 313 of Cr.P.C. and that even if the appellant wanted to go, the said statement of the respondent/accused No. 2 is of no assistance to them for in his said statement, the respondent/accused No. 2 had clearly stated that he was no doubt the Managing Director of the respondent/accused No. 1-Company, but he was not responsible for the conduct of the business of the Company. Therefore, the submission of Sri Desai is that even the said statement cannot now be based to argue before this Court to say that the respondent/accused No. 2 was incharge of and was responsible for the conduct of the business of the respondent/ accused No. I-Company and therefore he was guilty of the offences. With regard to the argument advanced by the Central Government Standing Counsel that Section 2(26) of the Companies Act has to be taken assistance to hold that by admitting in the statement recorded under Section 313 of Cr.P.C. that the respondent/accused No. 2 was the Managing Director, it had to be presumed in law that he was incharge of and was responsible for the conduct of the business of the Company, Sri Desai counter argued that it is nothing but far fetching an argument to presume in law that the respondent/accused No. 2 was guilty of the offence within the meaning of Section 14-A(I) of the P.F. Act. According to Sri Desai such an argument cannot be accepted by this Court.
15. For the aforesaid reasons, Sri Desai submitted that there is no good ground to interfere with a well reasoned judgment passed by the learned AJMFC, Bellary in acquitting the respondent/ accused No. 2 too along with the respondent/accused No. 1-Company. Therefore, he prayed that the appeal be dismissed.
16. Now the point for my consideration is whether the respondent/accused No. 2 was in any way guilty of the offence charged against him under para 78(d) of the ESI scheme read with Section 14(1A) and 14-A(I) of the P.F. Act as charged by the appellant before the AJMFC, Bellary. In this context, it is relevant to refer to Section 14-A of the P.F. Act. The same reads as follows :
'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 incharge 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, -
(i) 'Company' means anybody corporate and includes a firm and other association of individuals; and
(ii) 'Director', in relation to a firm means a partner in the firm.)'
17. From the above provision of law in S. 14A(I), it is clear that if the person committing an offence under the P.F. 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 incharge of and was responsible to for the Company for the conduct of its business shall be deemed to be guilty of the offence along with the Company. It is further clear from the above provision that every person who at the time of the offence who was incharge of and was responsible to the Company for the conduct of the Company is primarily responsible whereas the Company he represents secondarily is responsible. Hence to prove the guilt of the respondent/accused No. 2 in the instant case, it is incumbent on the appellant to prove before the AJMFC, Bellary that it is the respondent/accused No. 2 who at the time of the committal of the alleged offence was incharge of at the first instance and in the second was responsible to the Company for the conduct of the business of the Company. By producing Exs. P-1 to P-8 by the appellant before the AJMFC, Bellary, the appellant tried to connect the respondent/accused No. 2. But unfortunately none of the said documents in any way connected the respondent/accused No. 2 to say in any way that it is he who was incharge of and was responsible to the accused No. 1-Company for the conduct of its business. It therefore appears to me that the learned AJMFC, Bellary had recorded the acquittal as against the respondent-accused No. 2 also. The learned Central Government Standing Counsel vehemently argued that in the statement of the respondent/accused No. 2 recorded under Section 313 of Cr.P.C. by the AJMFC, Bellary, he did state that he was the Managing Director and therefore, according to him it is to be presumed under law that he was incharge of and was responsible to the respondent No. 1-Company for the conduct of its business but unfortunately for him the respondent/accused No. 2 had qualified that statement of his to say further that he was not responsible for the conduct of the business of the Company. He wanted to sustain such an argument by further relying upon the definition under Section 2(26) of the Companies Act to say that it is the respondent/accused No. 2 being the Managing Director had to be presumed in law that he was incharge of and was responsible to the Company in the matter of conduct of its business. To quote Section 2(26) of the Companies Act which defines the term 'Managing Director' the same reads as hereunder :
'Section 2(26) : 'managing director' means a director who, by virtue of an agreement with the company or of a resolution passed by the Company in general meeting or by its Board of Directors or, by virtue of its memorandum or articles of association, is entrusted with (substantial powers of management) which would not otherwise be exercisable by him, and includes a director occupying the position of a managing director, by whatever name called :
(Provided that the power to do administrative acts of a routine nature when so authorised by the Board such as the power to affix the common seal of the Company to any document or to draw and endorse any cheque on the account of the Company in any bank or to draw and endorse any negotiable instrument or to sign any certificate of share or to direct registration of transfer of any share, shall not be deemed to be included within substantial powers of management :
Provided further that a managing director of a Company shall exercise his powers subject to the superintendence, control and direction of its Board of directors :)'
18. If we read with the above definition, in my considered view, it cannot be said that the same can be read into Section 14-A of the P.F. Act to say that it is the 'Managing Director' who is incharge and is responsible to the Company for the conduct of the business of the Company, for under Section 14-A of the P.F. Act, the liability thereto does not go with the designation, but it goes with the charge of and responsibility to the Company in the person in the matter of the conduct of business of the Company and nothing beyond. It appears to me that Sub-section (2) of Section 14-A lends support for such a view I have taken, for in the said Sub-section when the offence is 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. Therefore, it is difficult for me to accept the argument of the learned Central Government Standing Counsel that when the respondent/accused No. 2 had admitted in his statement under Section 313 of Cr.P.C. that he was the Managing Director, there arose a presumption that it is he who was incharge of and was responsible to the Company in the matter of the conduct of its business.
19. Further, when the provision of law in Section 14-A(I) of the P.F. Act makes it abundantly clear that it is the person who at the time the offence was committed was incharge of and was responsible to the Company for the conduct of the business of the Company is responsible, the burden lies heavily on the appellant to prove that two situations as set out therein in the said provision, before the learned AJMFC, Bellary and in the instant case they have failed to prove the same, obviously, the learned AJMFC, Bellary had acquitted the respondent/accused No. 2 along with the respondent/accused No. 1-Company. To accept the above argument of the learned Standing Counsel, it is as good as accepting that for the purpose of the criminal liability under Section 14A, the preponderance of the probabilities that matters, of course that may be a situation in a civil case and unfortunately, that is not so in a criminal case. It is well known that in a criminal case, the guilt of the accused to be proved beyond all reasonable doubt and that is the position equally in the given case of respondent/accused No. 2. As a matter of fact, it is that guilt the appellant failed to prove before the learned AJMFC, Bellary and that being the position, I do not find any error in the impugned judgments passed by the learned AJMFC, Bellary in all the above matters in CC Nos. 3178 to 3187/86. In that view of the matter, I do not find any merit in the above appeals and therefore, the same are liable to be dismissed.
20. The above appeals accordingly stand dismissed.
21. Appeal dismissed.