IN THE HIGH COURT OF KARNATAKA
CIRCUIT BENCH AT DHARWAD
DATED THIS THE 8TH DAY OF sEPTEMB'=t,«;§:ié'2{$:j3--I:9__j'. .
Before
THE HON'BLE MR JUSTICE I5I2I.TLlIVT{11)'i"TC C 7
Cr}. 13.2430/2006 C /W Cr1.P.1826/'2oo6, C.r,1.P,244-,5'/2006, Cirl.P.
1828/2006, Cr1.P.2428/2006, Crl.P'..243\1/2006, 'C.r1;-2:>.2'~43"2'/2006, '
Cr1.P.2433/ 2006, Crl.P.2434'/2006, Cr1.1%24.35/2o'e6, C'r1.P;;2436/2006,
Cr1.P.2437/2006, Cr1.P.2438/2006, C14.-;~P..24--39-;/2006,' Cr1.P;2440/2006,
Cr1.P.2441/2006, C;-1.13.2442/2qo_@ Crl.P:2'44_3./V2{)O6, Crl.P.2444/2006,
Cr1.P; 12§_2:r_;:g_i';g,;§
Between:
Sri.Srikant D. Mankikaf,' '*-I;,_ _
S/C late Dattatfeya; " w. _
Aged 71 years, Managi:igVI32'Te'Ct[Oi=,__
M/ 3 Karnataka State VeneCr':'L.td;,_
Kavachur, North Kanara Distriét; .-- COMMON PETITIONER
(By Svri.Ven1;a;tesh. R. Bnagat; Adv.)
Anciii,
I _ The Enf0tCC.rnCf1vtvV'C'}ff1c
Employees .Pf0viden*t. f_FLinc£ Organisation,
IV 'Floor, Shrinatha Ccjmplex,
New Cotton Marke.t,
'Hub"1'i',--__Disnt:j Dharvéad. COMMON RESPONDENT
_ AV '"'~.:"-{§yxS'ri:Pfai'*ikT§;Shna S. Holla, Adv. 82;
_ A"S'Ti,Veefresff1 B. Budihal, Adv.)
1??/4
These Criminal Petitions are filed under 8.482 Cr.PC, praying to
quash the proceedings in C.C.Nos.352/05, 569/05, 367/05, 571/05,
351/05, 353/05, 354/05, 355/05, 356/05, 357/05, 358/05, 359/05,
360/05, 361/05, 362/05, 363/05, 364/05, 365/05, 366/05 and CC
No.570/05 respectively, in the court of the JMFC, Siddapura, Uttara
Kannada Dist, and etc.
The petitions coming on for orders this day, the "the
following common order: ' ~ ' "
ORDER
In all these petitions, the petitionei-.v”is–i.i_seeking -to
proceedings in CC.Nos.351 to 367 and 57153″
2005 on the file of the JIVIFC,
2. According to the isLt:h’e:,l\/ianaging Director of
M / s Karnataka State Veneers i’Head Office at Dandeli,
Uttara Kannada’ at/Vikavachur, Siddapura, Uttara
Kannada. Theiiiéarnatahai Ltd is a joint venture company
with the Go\(ernm”en_t iiiiariiataka and M/s Indian Plywood
Man1i1’a_cturviin§g xLtd’;’,”‘Bombay. On behalf of the Government of
Karnataka ilVi,’,,s”v-Karneataka State Forest Industries Corporation Ltd is
of the company and M/ s The indian Plywood
, . 1\/I&an1;facturing..Cio«rI1pany is holding 49% of shares. As per the promoters’
lozated 16.8.1974, the Company shall have a Board of
it ~,,:ii’Dijrecto’rsconsisting of 9 Directors including a Chairman who shall be
XX/_
the nominee of the Government [i.e. M/ s KSFIC LTD) and a Managing
Director who shall be nominated by M / s Indian Plywood Mfg.”—-.Co. Ltd.
That is to say, there were 5 Directors nominated by “Ltd
including the Chairman and there were 4 Directors nomiriatediibyi.i’M/s_V
The Indian Plywood Manufacturing Company’
Managing Director.
As already stated, the petitioner Director of M / s
Karnataka State Veneers Ltd,’ day affairs of the
Karnataka State Veneers Ltd controlled by the
General Manager or vati:iKavachur and he was
responsible for the Company, including
payment of contractors bills and other expenses
of the Company}. it One was appointed as Manager in-
charge of thenestablishment–. 5.10.1996 and 30.6.1999. On his
retirement Beiera””l’v€’oiideen was appointed by the (Chairman)
Government’ ‘i.e.”-Kiarnataka State Forest Industries Corporation Ltd. as
.i:(}.3_p,eral Manager effect from 16.6.99 and 29.6.2000.
.. According to the petitioner, he was only an Executive of the
the Companies Act and not a full time employee of the
\
comp’any..ar1d no remuneration 32% paid to the petitioner from the
company. The liability of the Company was upon the person who was
responsible for the management of day to day affairs of the company. As
per Companies Act, Directors of the company could not be considered as
employees of the company and they are not liable either
for the alleged offences.
4. The complainant’s allegation against. the petitirgnerfislthat’.
though the establishment is required if theypernployelesivivland
employers share of provident fund ‘c:o’I1tribution’ of
employees of the establishrnent”within”152days the close of that
month, they have failed to months between
December 1997 and aznllact is violation of
Sec.14(1)A and llll Provident Funds and
Miscellaneous h
5. The that section 14AC(1) of the Act
inhiblits.the”i:court: from taléingcognizance of any offence under the Act,
the sche__me,_ pension ‘scheme or insurance scheme, except on a report in
:i.vv1?iil.I1g of factsli’e_o’nstituting such offences made with the previous
.–sa”nc«tion. of the Central Provident Fund Commissioner or such other
.’«V_vojffi”cer be authorised by the Central Government by notification
3%”
in the official gazette in that behalf, by an Inspector appointed under
section 13 of the Act.
6. The petitioner in all these petitions has been prosecuted on
obtaining sanction orders from the Regional Prov’ide’nt’–.s..l’Fund
Commissioner, Sub–Regional Office, I-Iubli. According thejVpetitio_i1e1*,__
so far as State of Karnataka is concerned.:o’n»lygonl_e Regional»O&ffii’ce is if
established at Bangalore and five Sub–Region.a1
various places in the State including one”~at Htibli__. objection
raised by the petitioner is, that sancgtiolrrgjocs nolt”emAan.ate from the
Office of Regional Office at _Sub-«Regional Office
at Hubli, though the _sig_nat0rjf”tol’: Fiegiioinal Provident Fund
Commissioner. obtained in all these cases
cannot be treated as a as per Sec.14AC of the Act.
Referring to ap gazette ~notificatic_ndated 16.10.1973 he submits, that it is
the ,Regionalt_ji5ro§iident Fiind’*'”Commissioner of State of Mysore in whose
regionhthe’ leStab’1i»sf1irr1ent-ppis covered or has its Head Office and not the
1:iS–tiVb5Regional’llOffice; at Hubli. Therefore, according to the learned
_ Counsef, the sanlctiori orders accorded in all these cases to prosecute the
Cor12pa’n_j’ are “bad in law.
W/..
The petitioner further submits that he cannot be held to be in-
charge and responsible for the conduct of day to day business of the
company. The petitioner being the Managing Director does’u._not fall
within the definition of the term ’employer’ u/ s 2(e) of the he
in–charge and control of the day to day business of the
proceed against him. The Form No.5A :’state.d.v to be
submitted by the establishment in each are:’go:t’:.L;p
documents, wherein in Col.11 the par,t_iculars.”of_ thelipers:o’n”‘in–charge
and responsible for the conduct the the ‘company are to be
furnished. The name of the petiti:oner– b.ee.nA.l,:mentioned in the said
column, which is factually vincorrlect’ being a Managing
Director could not conduct of the day-
to–day business’ of to the learned Counsel
neither the so–cal’le:d said document is having any
authority lL0″‘.’.”§:’1′.’£bl”i’.1llZ the nor ‘said Form No.5(A) is produced from a
proper ?TheV.petitioner submits that the proceedings initiated
against hirn-T’_is.lAnoth.i,ngAl.l’Vbtit abuse of process of court. In the absence of
Vang/atrerment: to..__’the. effect that petitioner was in charge and responsible
day to day business of the company, the learned
“f”Magistrate’l:s.s erred in taking cognizance.
According to the learned Counsel for the petitioner, the Karnataka
State Veneers Ltd was registered as sick industry as on 2.7.99. The
respondent authority has to obey the order dated by
the Board for Industrial and Financial Reconstruction,
in Case No.602 / 99, in regard to windingpof’ the cé_omp’a1~i.y vv’h’i:C¢hVi’vwasj
accepted by the Provident Fund Commissiolnperiivvho
proceedings dated 25.3.2003. these’ the
complaints filed by the respondent are not:maiI1tainable.._”
Then learned Counsel submitted that
pursuant to the order .vo.f::BlFR dated 25.3.2003 this
court in Co.P.102 ‘..’1§;9_2005 permitted to initiate
winding L113 Official Liquidator. The
respondent hasllosltl. and proceeded to file
complaints. ‘–.rlelcoimmendation of the BIFR to wind up
the._vj”Ka.rnatal§a;p_A..i$ta.te Ltd, the Government of Karnataka,
Department “of “D_isi:nivestments and State Public Enterprises Reforms,
.3TBangalore’,A its dated 23.9.2004 has informed respondent to
_ ajpproacph the Official Liquidator to be appointed by the I-iighCourt for
recovery’ of dues. The same fact was communicated to the Recovery
‘(l)f.fic_er”ofl’r§heirespondent organization by its letter dated 24.12005.
35*’
7. Stating that petitioner is neither a signatory to the Form SA
nor was he looking after the day to day affairs of the Company, has
contended that the so called Form SA produced by the respondent is a
xerox copy not signed by the authorised signatory of The
petitioner was the Honorary Managing Director of the
cannot be automatically presumed to be injcharge ‘or responsiblefforjthei’.
affairs of the company. He has resigned blifrorni the of Managing
Director with effect from 20.7.1999 andrthe saVid__resig’n__ationi’letter was
addressed to the Chairman of the Comp*any; Cli?eferring–to.-section 22 of
Sick Industrial Companies (Special;Prov_is’ions.)”E985, he submitted,
that during the pendency:cf_ the:’schen;1e.jof.i:rehabilitation no proceedings
shall be initiated against company ‘eitherfor recovery of monies or
otherwise. is ‘s1.1b”rni’tted the act of learned Magistrate in
proceeding to takecognizianclepiofthe complaint against the petitioner is
nothing but abuse of process of law.
Kin suppo:rt~,of the above contentions, learned Counsel for
.petitioneir.placed”reliar1r;.e on the following decisions:
“in a deici..siViV)r1 reported in 1999(4) Kar.L.J. 471, K.M. Shivarama
Fur-uushothama, wherein this Court has held as follows:
“(A) Employees’ Provident Funds and Miscellaneous Provisions
Act, 1952, Section 14(l–A)–Prosecution — Complaint of offence of
non-payment of contributions due from establishment — Where
complainant has failed to establish that person sought to be
prosecuted is either occupier, or manager or person” of
establishment, and that establishment in questiori entitlevd
to exemption from operation of provisions of..A:(‘:t,vVdismissal–.of’V.__
complaint, held, does not suffer from ‘any”‘err,_o’r,” .3 . «
Referring to a decision renderedloy Court.
518, Employees’ State Insurance Coirphoratiori hgarwal V85
Others, he submitted that it is istheflemployer and
not its Directors either singly or as employers
under Explanation 2 to oi:=__lPC;3,
He reliedlon ano,tVhieI*=de’cis’ioii’-reported in 2007(2) DCR 36, Suresh
K. Jasani Vs. Mrinal Dyeing Eoiillfnariufacturing Co. Ltd. And others,
wherein the_I=;3ompay High”Court referring to provisions of Sec.446(1) of
theiflomipa held that complaint filed after passing of order of
z.,winding'”ups/appoin.tiI15éht'”of liquidator is not maintainable.
V This Course’ case of Rajagopalachari S. Vs. Bellary Spinning
A iVeav*iog Co; “Ltd. And another, reported in 1998 I.L.L.J 131, has
iii’Ai..’V_i1eld i_ithat.,i1iabi1ity under section l4–A(1) of the Provident Fund Act did
$6,,
1.0
not go with the designation and no presumption could arise that, by
bearing the designation of a Managing Director, it was the second
respondent who was in–charge of and was responsible to the company in
the matter of the conduct of its business.
9. I have heard the learned Counsel for the petitioner’ ‘at”ilength_
and perused the papers placed on record…~It._is ‘that.l_jfori’v_thee.
recovery of PP’ dues proceedings were initiated onithe by
the Enforcement Officer, Employees’ Piioyvi’d.ent
alleging non–payment of the provident ‘coz’it_rib1.1.tio’nl.liA1f1 respect of the
employees of the said establis~hmen.t.’ it months between
December 1997 to Februa.ryv200:O;” — if’ V
I0. Whibfil the icioirnpanylfilgeC1—-__the-C reference u/s 15(1) of the Sick
Industrial Companies {Spe’cial.l3roifisiiolns) Act, 1985, the BIFR declared it
as sick and directed the -Syndicate Bank to coordinate the finalisation of
the ilrehabililtation the scheme for the company after the
: findings f’recom1mendiatifon’s of Technical Consultancy Services
iOrrganisatiori<«of Kai nataka. In the said proceedings, since the Company
fldlidkjctgi"submit its rehabilitation proposal / package to the company as
all'e.lfind'icated..by the bank and since the company promoters did not show
in revival of the company, on 25.3.2003 the Board
33%"
11
recommended for closure of the Company and ordered winding up of the
company.
Pursuant to the order of 131?? recommending for windingujup. of the
company} on reference to the High Court for appointme~nt_juo__fi”Official
Liquidator, the Government of Karnataka by its
directed the respondent authority to approach to’,
be appointed by the High Court, forgre4a1isa’tioiin.. of
dues and other dues. This court by ordeerdated
Petition No.102/200-3 ordered. and
directed to take possession of Company M/s
Karnataka State Venee}:s’£._td–. ifisirelevant to note that
petitioner was of Company when the company
was declared on 2.7.1999. Therefore, the
petitioner being theMana,gingiIiireetor was not an employer u/s 2(e) of
the ——– «Nothing has been demonstrated in the
complaintathatg was in-charge of the affairs of the company and
iivibecause of his mismanagement of affairs of the company, the dues
_towards the PB’ contributions were not paid from time to time. Even
with:_re:s~pect”«–to getting sanction from competent authority to prosecute
9 p”et’itior1er there is some discrepancy.
:,:>e’/
12
11. it is relevant to note that the Government as well as the
petitionepcompany, had informed the respondent Recovery Officer about
the pendency of appointment of official liquidator before the High Court.
The Company Petition 102 / 2003 was filed in the year By
virtue of order dated 19.9.2005 in the said companygpetitiionili’
Liquidator was appointed directing him to__tAa1<:_e
company. Therefore, since already winding p'_roceedings_.lwerei'i"initiated
through the Official Liquidator, the respondenvt
against the petitioner could have Agplarticipatedhi liquidation
proceedings for recovery of iitsmiegally dues out of the
liquidation proceeds. Butvthe of approaching the
official liquidator to Court, has resorted to file
the impugned petitioner.
12. In thisiiviewvoifi and also having regard to the ratio
laidfioivn decisionspireferred to supra, impugned proceedings
initiated» t_he_fiieg i-earned Magistrate against the petitioner would be
abuse. o’f,’pro’cle_vs_s”_of the court. In the circumstances, all these
petitions are al-lovved. Registration of complaints and issuance of
by learned Magistrate in the impugned proceedings
i”».’i_in,iitia.te_d in ‘tail: these cases are quashed.
W
13
However liberty is reserved to the respondent–aut_hority to
participate in the liquidation proceedings before the Officia1r_iLi._c1u_idat0r
and to make necessary application before him towards recovc-rébvle
dues of provident fund contributions and other contrib’utiojn = _ it
i ~7″e-?39’e
Sub /