JUDGMENT
Anoop V. Mohta, J.
1. The petitioner, a Director of the Company, M/s Deve Paints Limited, formerly known as M/s Garware Paints Limited, (hereinafter referred as Company) has invoked the provision of Section 482 of the Code of Criminal Procedure and basically prays to quash and et aside the proceeding of Criminal Case No. 18 of 1996, pending before the Judicial Magistrate F.C., 2nd Court, Thane, Maharashtra.
2. The proceeding arose in pursuance to the complaint dated 18/8/1995 / 30/8/1995, filed by the Provident Fund, Assist. Commissioner, Regional P.F. Commissioner, Maharashtra and Goa.
3. It has been alleged that the company and its officers have committed offence punishable under Section 405 and 406 of Indian Penal Code by committing the criminal breach of trust as defaulted in the payment of the contribution of the family pension fund, even though deducted from the salary of the employees of the said Company. Criminal breach of trust – Section 405 (extract) is as under :-
“Whoever, being in any manner entrusted with property, or with any dominion over property, own use that property, or dishonestly uses or disposes of that property in violation of any direction of law prescribing the mode in which such trust is to be discharged, which he has made touching the discharge of such trust, or willfully suffers any other person so to do, commits “Criminal breach of trust.”
“Explanation 1. – A person, being an employer (of an establishment whether exempted under Section 17 of the Employees Provident Funds and Miscellaneous Provisions Act, 1952 (19 of 1952) or not,) who deducts the employee’s contribution from the wages payable to the employee for credit to a Provident Fund or Family Pension fund established by any law for the time being in force, shall be deemed to have contribution so deducted by him and if he makes default in the payment of such contribution to the said fund in violation of the said law, shall be deemed to have dishonestly used the amount of the said contribution in violation of a direction of law as aforesaid.”
The person or company is liable to be prosecuted if, defaulted, in making payment of collected contribution under the family pension fund under the Employees Provident Funds an Miscellaneous Provisions Act, 1952 (for short Act), is the relevant Act under which, the proceedings has been initiated. The basic provision is Section 14A of the Act.
“14A. Offences by Companies .- (1) If the person committing an offence under this Act, (the scheme or the pension Scheme or the Insurance Scheme) is a company, every person, who at the time of the offence was committed as 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 noting 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 (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 or, 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.
4. The basic requirement, therefore, to hold the company liable and or to proceed against or punish accordingly, is the persons liable to be prosecuted those who are in-charge of the company and responsible to he company for the conduct of its business. The proviso further provides that the person who wants to claim immunity must establish that the offence had been committed without his knowledge and or in spite of their due diligence, to prevent the offence complained of.
5. Sub-section (2) further provides that the proceeding can be initiated against any director, manager or secretary or other officer of the company, if the said offence has been committed with the consent or connivance or its attributable to, any neglect on the part of such officers. The prosecution, in view of Sub-section (2) must discharge initial burden before punishing any officers of the company as contemplated above. The respondents must allege and prove that person charged this committed the offence. Therefore, if respondents has named the persons, others may jot be proceeded and prosecuted. This being beneficial Legislation, means rea is not necessary or essential.
6. The question remains to be decided on facts of each case, that who are the persons liable to be prosecuted and punished. There is no doubt that the scheme of the Act and section contemplate the necessary facts and proof, before proceeding against any officer or against Company. Any director or manager, secretary or all the officers of the company, unless they fall within the ambit of Section 14 Sub-section (2) of the Act cannot be prosecuted by the respondent department.
7. On the face of the complaint s well as show cause notice itself, if it is a positive case of the department, that particular person or officer or director or manager is responsible as he in in-charge of and responsible to the company for the conduct of its business, in such case, the only named officer or such person should be proceeded and punished accordingly. Therefore, the person or the director or the officer who is not in charge and who is not responsible to the company for the conduct of its business at the relevant time need not be prosecuted.
8. The Supreme Court has laid down in Girdhari Lal Gupta v. D.N. Mehta and Anr. , while considering the similar provisions under the Foreign Exchange Regulations Act and held that the person who was in charge of the conduct of the business at the time of contravention is responsible under the said Act. In Municipal Corporation of Delhi v. Ram Kishan Rohtagi and Ors., Delhi, by invoking the provisions of Section 482 r/w/ Section 397 of Code of Criminal Procedure, the Apex Court, while dealing with the provisions of prevention of Food Adulteration Act, of similar in nature, quashed and set aside the proceeding against the Directors, but not against the Manager, as the Manager of the company was directly in-charge of the affairs of the company.
9. From the notice in question respondent made it clear as referred in para 6, 7,8 that Mr. P.T. Kulkarni was the person in-charge of the establishment and responsible for the conduct of the business of the aforesaid company/establishment. There is no doubt that these proceedings are initiated against the Company also.
10. The statement in the notice dated 18-30/8/1995 in paras 6, 7 and 8 are reproduced as under;
Request were made to the responsible person vide Provident Fund Inspection remark book on 13.7.1995 to pay the said amount, but they have failed to do so.
I state that person mentioned in para 2 Shri P.T. Kulkarni is the person in-charge of the establishment and is responsible for the conduct of the business of the aforesaid company/establishment.
I state that by not paying the employees share as mentioned above, the above stated person has committed offence under Section 406 of Indian Penal Code read with explanation I added to the Section 405 of Indian Penal Code.
11. It is clear, as per about contents, without going into further details of the matter, that the petitioner, ever though, was Director of the Company at the relevant time was not a person in-charge of the establishment and or responsible for conducting the business and affairs of the establishment.
12. Mr. Shah has also relied on the Judgment of , Adalat Prasad v. Rooplal Jindal and Ors. This recent decision of the Apex Court has considered the earlier view of K.M. Mathew v. State of Kerala, and held that the parties can invoke the provisions of Section 482 of Cr.P.C., even after issuance of the summons by the Magistrate, instead of applying for recalling of the said summons. Therefore, to approach the Magistrate for recalling of the summons under Sections 202, 203, 204 may not be the only procedure, and it may not adapted in each and every case.
13. In view of this position, and as there is no point in sending this matter back at this stage of final hearing, as the present petition itself has been pending since 18th September, 1998, with interim relief in terms of prayer Clause (b).
14. In view of the provision of the Act, which is reproduced above, the basic principle of invoking the prosecution is not only against the company, or against all the officers or Manager or Directors of the Company, but basically against the person who is/are in-charge at the relevant time or who is or are conducting the affairs of the company. In view of the averment made in the complaint itself, this proceeding initiated against the present Director cannot be continued. The initiation o the proceeding against the petitioner is liable to be quashed and set aside. No offence, as contemplated under Section 405 of I.P.C. explanation (1), has been made out against the petitioner. This is therefore, fit case to grant relief under Section 482 of Cr.P.C., as prayed.
15. For the reasons recorded above, the present petition is allowed in terms of the prayer Clause (a) in respect of and restricted to the petitioner only. Rest of the criminal case/proceeding No. 18/1996 be continued in accordance with the law. Interim order as granted is also vacated. There is no order as to costs.
