P. Vasantha, Provident Fund Insepector, Madurai IV. Division vs K.R. Muthiah and S. Solayappan

Mr. Arunachalam, J.—All these appeals are disposed of together by a common judgment, since the Appellant as well as the Respondents

are the same and further the question involved is also the same.

The Appellant in all these appeals is the Provident Fund Inspector, Madurai IV Division. The Appellant challenges the acquittal of the

Respondents, who were A-2 and A-3 in S.T.C. Nos. 286 to 291 of 1985, on the file of the Judicial First Class Magistrate, No. 1 Madurai, of

offences punishable under Sections 14(1A) and 14-A of the Employees'' Provident Funds and Family Pension Fund Act, 1952, hereinafter

referred to as the Act.

The Respondents were tried in these summary trial cases along with two others arrayed as A-1 and A-4. A-1 was the Adhilakshmi Mills,

Pasumalai, Madurai, while A-4 was shown in the complaint, as the manager of A-1. The prosecution, case was that for various periods between

March, 1984 and September 1984, the Respondents and the other accused had failed to pay the administrative charges, which they were bound

to pay, under paragraphs 30 and 38 of the Employees'' Provident Funds Scheme, 1952, within fifteen days of the close of every month.

The trial Magistrate acquitted the Respondents, holding that the prosecution had not established that they were in charge of and responsible for

the conduct of the business of the company at the relevant time. However, the trial Magistrate convicted A-1 and A-4 and sentenced them to pay

a fine of Rs. 50/- in each one of the summary trial cases.

Mr. V. Vibhishanan, the learned Counsel appearing on behalf of the Appellant in each one of those appeals contended, that the oral evidence of

the Appellant examined as P.W.1 taken along with Ex.P-2 (Form 5-A, would clinchingly establish, complicity of the Respondents, in the violation

alleged. He also brought to my notice, that in paragraphs 3 and 7 of the complaint, specific allegations had been made, that Respondents and A4,

were the persons in charge of the establishment of A-1 and were responsible for the conduct of business and that the offences had been committed

by the establishment, with their consent and connivance, apart from, being attributable to their neglect.

I have heard Mr. A. Chidambaram, the learned Counsel appearing on behalf of the Respondents, in each one of these appeals. He contended,

that the Appellant had not established, that the Respondents were in charge of, and were responsible to, the company for the conduct of the

business of the company, as provided u/s Section of the Act. Even otherwise, according to the learned Counsel, in the case of a partner of a firm,

the prosecution was bound to establish, that the offences had been committed with the consent or connivance of, or was attributable to, any

neglect on the part of the said partner; as contemplated u/s 14-A (2) of the Act. He pointed out that A-4 had examined himself as D.W.1 and had

affirmed that at the relevant time, when the offences were committed, he was in charge of, and responsible for the conduct of the business of the

company, which included not only the day-to-day administration, but also the Cash dealings. He has also categorically stated, that the case of the

prosecution, that the Respondents were in charge of, and were responsible to, the company for the conduct of the business of the company at the

relevant time, was not correct. Therefore, he would submit, that the acquittal of the Respondents, recorded by the trial Magistrate, will have to be

necessarily sustained.

I have carefully considered the rival contentions of the opposing Counsel.

It is no doubt true, as pointed by Mr. V. Vibhishanan, that in paragraphs 3 and 7, the wordings found in Sections 14-A(1) and (2) have been

extracted. Mere extraction of words in the complaint, will not be sufficient and the prosecution will have to establish by substantive evidence, all

that has been contemplated u/s 14-A of the Act. Section 14-A is in two parts. The first part is referable to Section 14-A(1). Which makes a

person, who was in charge of, and responsible to the company for the conduct of its business, vicariously liable for an offence committed by the

company. There cannot be any dispute, that this provision, in accordance with well-settled principles, should be construed strictly.

This expression ""a person in-charge and responsible for the conduct of the affairs of a company"" must mean, that the person should be in overall

control of the day to day business of the Company or firm. The second part is referable to Section 14-A(2) of the Act. This Sub-section would

make it manifest, that all the officers of the company, not in direct charge of the management and conduct of the company and its business, would

be immune from liability for the offence, unless they had contributed to its commission by consent, connivance or neglect.

The distinction sought to be made between Sub-clause (1) and Sub-clause (2) of Section 14-A, is not far to seek, for there can be directors

who merely lay down the policy and are not concerned with the day to day working of the company. Consequently, the mere fact that the accused

person was a partner or director of the company, shall not make him criminally liable for the offences committed by the company unless the other

ingredients are established, which make him criminally liable.

In other words, the officer of the company envisaged in Sub-section (1) is the one, who is in direct management of the affairs of the company.

Where ever an offence had been committed by the company under the Act or the Scheme, such officer will also be deemed to be guilty of the

offence and in this case it will not be necessary for the prosecution to prove consent, connivance or neglect on his part, for he is directly in charge

of the management and, therefore, responsible for the remittance of the contribution to the Fund. Under this Sub-clause, he and the company have

been made liable without proof of consent, connivance or neglect on the former''s part. The other officer covered by Sub-section (2) cannot be

deemed to be guilty of the offence committed by the company, unless the prosecution further establishes that the offence was committed with the

consent or connivance of such officer, he be a Director, Manager, Secretary or other officer of the Company. The word ""Director"" in terms or the

explanation to Section 14-A in relation to a firm, means a partner in the firm. Therefore, in cases falling under Sub-section (2), the prosecution

must fail, if it is not proved that the commission of the offence was due to consent, connivance or neglect of the officer concerned. This legal

position is abundantly clear from the law laid down by the Apex Court in Girdhari Lal Gupta Vs. D.H. Mehta and Another, and the Patna High

Court in State v. P. Bhadani AIR 1959 Pan 9. The Patna case has been referred to by the Apex Court in Girdhari Lal Gupta Vs. D.H. Mehta and

Another,

Keeping in view the law laid down by the Apex Court, let us scrutinise the facts in this prosecution. The Appellant as P.W.1 in her evidence

has stated as hereunder: ""A-2 to A-4 were responsible for that organisation. A-4 was the Manager"". Nothing more has been stated in her

substantive evidence before Court. Except the allegations made in the complaint, by extracting the words mentioned in Section 14-A of the Act, it

can safely be held, that no substantive evidence had been brought on record, to even remotely indicate, that the Respondents were, at the time

when the offence was committed, in charge of and responsible to the company for the conduct of the business of the company. Mr. V.

Vibhishanan did refer to Ex.P-2 (Form 5-A) in which column 11 shows, that the Respondents also, were owners- cum-occupiers. That is an usual

form provided under the Act, and that will not be sufficient to find the Respondents guilty, for the duty cast on the prosecution was to establish that

at the time when the offence was committed, they were in charge of and responsible to, the company for the conduct of the business of the

company. The oral evidence of the Appellant is absolutely silent and the scope of Section 14-A(1) of the Act, had been totally overlooked. It is

only in this context, the evidence of A-4 as D.W.1, assumes significance. Almost in a similar pattern, referable to the facts in Girdhari Lal Gupta

Vs. D.H. Mehta and Another, had stated, that he was responsible for the day to-day activities and financial transactions of A-1 and that the case

of the prosecution, that the Respondents were in such charge was not correct. He had further stated, that if any letters were addressed to the

Respondents regarding financial transactions, they would forward such letters to him for taking action.

The totality of the evidence on record shows, the prosecution had not established that the Respondents were in charge of and responsible for

the conduct of the business of the company, but the defence, which was not at all called upon to seek recourse to the proviso to Section 14-A(1)

of the Act, had shown that the offence committed by the company, was in spite of the exercise of all due diligence by them, to prevent the

commission of such offence. As stated earlier, even that stage of operation of the proviso had not reached, for the initial onus cast on the

prosecution, had not been discharged.

Though I have discussed in detail, in the earlier part of this judgment, the scope of Sections 14-A(1) and (2) of the Act and the different fields

in which they operate, detailed consideration of Section 14-A(2) of the Act, does not arise on facts unfurled in this prosecution. If the prosecution

has to succeed, on the basis of Section 14-A(2) , certainly an onus is cast on it, to prove, that the offence had been committed, with the consent,

or connivance of, or was attributable to any neglect on the part of the partners.

I am unable to hold that the judgments of the trial Court, in all these summary trial cases, are not sustainable. These appeals, which do not have

any merit, shall stand dismissed.