Provident Fund Inspector, Panipat vs Ram Kumar and others

J.V. Gupta, J.—This order will dispose of Criminal Appeals Nos. 214-DBA, 295 DBA and 296 DBA of 1980, as the common question of law and fact are involved therein.

The Provident Fund Inspector, Shri B.D. Sharma, P.W. 2, filed there complaints against the respondents under the Employees'' Provident Funds and Miscellaneous Provisions Act, 1952 (hereinafter called the Act), on the allegations that the provisions of the Act applied to the establishment known as M/S M.P. Dal Mills, Delhi Road, Hissar, that the accused were the employers within the meaning of Section 2 (e) of the Act and were responsible for complying with the provisions of the Act in relation to the above said establishment, that the accused failed to pay to the fund the employees'' and the employers'' shares of the contribution from February, 1977 to April, 1977 (relating to criminal Appeal No. 294-DBA of 1980), May, 1977 to July, 1977 (relating to Criminal Appeal No. 296-DBA of 1980) and from August, 1977 to. September, 1977 (relating to Criminal Appeal No. 295-DBA of 1980), and also the administrative charges for the aforesaid periods, under the Employees'' Provident Funds Scheme, 1952 (hereinafter called the Scheme) and, thus, committed the offences punishable u/s 14(1A) of the Act, and that the Regional Provident Fund Commissioner, Punjab, had granted the necessary sanction for the prosecution of the accused-respondents. The accused, on appearance, pleaded not guilty and claimed trial.

In order to prove the case against the accused, the complainant examined Ashok Kumar, P.W. 1, Upper Division Clerk, office of the Regional Provident Fund Commissioner, Chandigarh. He also gave his statement as P.W. 2.

In their statements u/s 313, Code of Criminal Procedure, both the accused denied the prosecution version and staled that they had never engaged more than 20 persons in their factory and Nirmal Kumar who was a minor, was not a partner of the above-said factory and that their factory was not covered under the Act on January 31, 1977. It was further stated that the department had, for the first time, written a letter to them in November, 1977, covering their factory under the Act and, therefore, there was no question of their paying the contributions under the Scheme, and the other administrative charges prior to November, 1977. They did not lead any evidence in defence.

The trial Court, after discussing the prosecution evidence came to the following conclusion :--

Hence, from the above facts, it is, clear that the accused had no intention to avoid the aforesaid contributions or their is no evidence that they had committed intentionally default in depositing the amount. Mens rea is an important factor in such type of cases and every crime involves an intention to commit it. In the present case, in my opinion, there was no intention on the part of the accused to commit default in the deposit of the contributions, but the accused could not deposit the contributions earlier as there was a genuine dispute as to whether their factory was covered under the aforesaid Act, or not, as envisaged u/s 19-A It is also in evidence that alter September, 1977, the accused have regularly deposited the aforesaid fund. It again shows that the accused had no intention to commit default. It is further in evidence of P.W. 2, that Code number to the accused was issued vide letter dated October 27, 1977. How could the accused deposit the contributions earlier for the period February to September, 1977 when the Code number was not allotted to them and there was no finding of the department about the coverage of the factory under the Act.

It further found that there was also no satisfactory evidence on the file that Nirmal Kumar was a partner of the respondent firm, as no copy of the partnership deed of the said firm was placed on the record. Consequently, the trial Court held that the'' accused had no knowledge from February, 1977 to September, 1977, that they were to deposit the contributions and the administrative charges for the above-said period under the Act and as such, they had committed no offence. As a result the accused were given the benefit of doubt and acquitted. These three appeals have been filed by the Provident Fund Inspector, Panipat against the said orders of acquittal of the accused.

The Learned Counsel for the appellant, contended that the Act and the Scheme were a self-contained code and it was the duty of the accused to deposit the amount within time, that no notice whatsoever, was necessary for that purpose, that mens rea was not the gist of the offence u/s 14(1A) of the Act and that even if the accused had deposited the amount after the expiry of the periods, even then they were liable for the offence punishable u/s 14(1A) of the Act, in order to appreciate the contentions raised by the Learned Counsel for the appellant, it is necessary to scan the provisions of the statute. The purpose of the Act is to constitute provident fund for the employees in factories and other establishments Section 6 requires the employer to contribute six and a quarter percent of the basic wages, dearness allowance and the re-latining allowance, if any, and the employee to contribute an amount equal to it. Section 8 provides for the mode of recovery of moneys due from the employers. Under paragraph 26 of the Scheme, every employee, except an excluded employee, has a right. Employer except an excluded employee, has a right to and can be compelled to become a member of the Fund from the beginning of the month succeeding that in winch the scheme is brought into force in regard to that establishment. Paragraph 30 casts an obligation on the employer to pay both the contributions, i.e., payable by him, and the employee under the scheme, and then recover the employee''s share from his wages. Under paragraph 33, the employer has to ask his employee to furnish particulars concerning himself and his nominee required for the declaration form, in Form 2 and the latter is bound to comply with the demand. Paragraph 36 makes it compulsory for the employer to send the Commissioner, within fifteen days of the commencement of the Scheme, a consolidated return in the form to be specified by the Commissioner and also to send the Commissioner, a return mentioning the names of the employees qualifying to become members of the Fund for the first time during the proceeding month together with the declarations in Form furnished by such qualifying employees as also the names of persons leaving the service of the employer during the proceeding month Further, it is his duty to maintain accounts in relation to the amounts contributed to the Fund by him and his employees and to assist the Central Board in making such payments from the fund to his employees as are sanctioned by or under the authority of, the Central Board. The mode of payment of contribution is dealt with by paragraph 38. It empowers the employer to deduct the employee''s contribution from his wages. Within fifteen days of the close of the month, he should pay to the Fund that amount together with his own contribution as well as administrative charges in the manner prescribed in the paragraph and furnish a monthly consolidated statement to the Commissioner in the form to be specified by him showing the recoveries made from the wages of each employee and the amount contributed by the employer in respect of each employee.

In view of the above-said provisions, it has been observed in paragraph 53 of the judgment in Nazeena Traders (P) Ltd. v. Regional Provident Fund Commissioner, Hyderabad AIR 1965 A.P. 100 as follows :--

It is abundantly clear from these provisions that the liability to contribute to the provident fund is created the moment the scheme is applied to a particular establishment. It does not depend upon the vigilance of the Provident Fund Department and the issue of notice. The relevant paragraphs of the scheme call upon the employer to obtain particulars from the workmen and submit a report to the Provident Fund Commissioner following the procedure prescribed there for as also to remit monthly, the contribution to the provident fund. These provisions also disclose that no option is left to the employee to become or not to become a member of the fund. He has a right to become a member and that he is bound to become one. It is a statutory mandate for the employer to require his employees to become members and for the employees to obey it.

In Radhakrishan Narayandas, a firm Vs. Regional Provident Fund Commissioner and Another, it has been held that the Act applies to the notified establishments with effect from the date from which the Notification states the Act applies and not from the point of time the competent authority holds the employer of such establishment liable and determines the amount payable by him. The Act comes in to operation by its own vigour. It applies if the conditions stated in the Act are satisfied. Its operation is not dependent on any decision being taken by the authorities under the Act.

From the evidence on the record, it is proved that the respondent factory is an establishment which is covered under the Act and the scheme. The complainant, Shri B.D. Sharma, Provident Fund Inspector, appeared as P.W. 2. He produced the coverage pro forma, Exhibit PA, and the list of the employees of the respondent factory as on January 31, 1977, duly signed by Nirmal Kumar, one of the partners of the factory. He also proved the signatures of the said Nirmal Kumar thereon as the latter had signed the above-said documents in his presence and who was known to the former personally. From the said two documents, it is clear that on January 31, 1977, the respondent factory had 25 employees, as is evident from, Exhibit P.B. In column No. 2 of Exhibit PA, the name of the occupier and the manager are given as Ram Kumar and Balwant Rai respectively. No defence evidence was produced to disprove these documents. In view of this clear evidence, it could not be held that the respondent''s factory was not covered under the Act and the Scheme.

In Kunhipaly v. Regional Provident Fund Commissioner, Trivandrum (1966) I L.L.J. 652 also it has been held by the Kerala High Court that the Act comes into operation by its own vigour. It applies if the conditions stated in the Act are satisfied. The contention raised in the said case that it is only on the communication from the authorities concerned that the provisions of the Act becomes operative, was not accepted and it was further held that the operation of the statute does riot depend upon any decision being taken by the authorities under the statute. It depends on its provisions. Reliance in this behalf has also been placed by the Kerala High Court on a Supreme Court decision in Associated Industries Pvt. Ltd. v. Regional Provident Fund, Commissioner, Kerala (1967) II L.L.J. 652, Under the circumstances, the respondents were under a legal obligation to deposit the employer''s shares of the contributions to the fund within the time prescribed, the moment the Act and the Scheme became applicable to them, as no intimation or notice of any kind in that respect was necessary to be issued by the authorities concerned.

As regards the other contention that mens rea was not the constituent part of the offence u/s 14((sic) A) of the Act, we are of the view that there is considerable force therein. It has been held in the The State Vs. S.P. Bhadani and Others, , that considering the entire scheme and the object of the Act and the different provisions made therein, the conclusion is clear that in all cases not covered by sub-section (1) of section 14, the criminal intention is not the essential element of the offence under the Act or the scheme Moreover, no decision taking a contrary view has been cited at the bar. We, therefore while accepting the argument raised by the Learned Counsel for the appellant hold that for an offence under lection 14(1A), which reads as follows, msns rea is not an essential element..

14 Penalties (1) ........................................................ (1-A). An employer who contravenes, or makes default in complying with the provisions of section 6 or clause (a) of sub-section (3) of Section 17 in so far as it relates to the payment of inspection charges, or paragraph 38 of the scheme insofar as it relates to the payment of administrative charges, shall be punishable with imprisonment for a term which may extend to six months, but--

(a) which shall not be less than three months in case of default in payment of the employees'' contribution which has been deducted by the employer from the employees'' wages ;

(b) which shall not be less than one month, in any other case ; and shall also be liable to fine which may extend to two thousand rupees ;

Provided that the Court may, for any adequate and special reasons to be recorded in the judgment impose a sentence of imprisonment for a lesser term or of fine only in lieu of imprisonment.

The Learned Counsel for the respondents, contended that the prosecution filed, after one year of the alleged commission of the offence by the respondents, was barred by time as the alleged offence was not a continuing one Reliance in support of this contention was placed on State v. M/s Prajaantra Prachar Samiti 1981 LIC 1367. However, in the present case, this question does not arise. The earlier period for which the default was committed is February, 1977. The contributions for the said period were to be deposited by March 15, 1977, where as the complaint was filed on March 6, 1978. Thus the prosecution, in the present case, was filed within one year from the date of the commission of the offence and was, therefore, within time. Thus taking into consideration all the facts and circumstances of the case, we are of the considered opinion that the accused have committed an offence punishable u/s 14(1A) of the Act, as they failed to deposit the employers'' shares of the contributions and also the administrative charge prescribed under the Act and the scheme, within time, and thus, they are convicted accordingly.

As regards the sentence, section 14(1 A) of the Act, inter alia provides that an employer who contravenes or makes default in complying with its provisions shall be liable to be punished with imprisonment for a term which may extend to six months, but the term of imprisonment, shall not be less than three months in the case of default in payment of the employees'' contribution which has been deducted by the employer from the employees'' wages and not less than one month in any other case, and shall also be liable to fine which may extend to two thousand rupees provided that the Court may, for any adequate and special reasons to be recorded in the judgment, impose a sentence or imprisonment for a lesser term or of fire only in lieu of imprisonment. The total amount which the accused were required to pay as the employers'' contribution from February, 1977 to September, 1977 was only Rs. 1,427/- which they paid on March 15, 1978, and also deposited the damages for the said period amounting to Rs. 266.85 on August 18, 1978. The complaint against them was also filed only in March, 1978. They are constantly undergoing the trauma of the protracted judicial proceedings since then Therefore, taking into consideration all the facts and circumstances of the present case, we are of the considered opinion that a fine of Rs. 500/- each on Respondents No. 1 & 2 in each of the three appeals i.e. total Rs. 3,000/- (Three thousand) will meet the ends of justice, in default of payment of fine, each accused shall undergo rigorous imprisonment for one month.

For the reasons recorded above, all the three appeals succeed and are allowed. The acquittal of the accused by the trial Court is set aside and they are convicted and sentenced as mentioned above. The fine to be paid within a period of 3 months. If realised, shall be paid to the provident fund established under the Scheme to the credit of the employees in respect of whom the defaults were committed by the employers.