Bobby Jose v. State of Kerala & Others

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** **PRESENT :** **THE HONOURABLE MR. JUSTICE THOMAS P.JOSEPH** **MONDAY, THE 14TH MARCH 2011 / 23RD PHALGUNA 1932** **Crl.MC.No. 112 of 2011()** **------------------------** **CC.893/2007 of JUDL.MAGISTRATE OF FIRST CLASS-II, CHERTHALA** **....................** **PETITIONER(S): 2ND ACCUSED:** **------------------------------------------------** **BOBBY JOSE, RESIDING AT G245, PANAMPILLY NAGAR, KOCHI-682 036.** **BY ADVS. SRI.G.HARIHARAN, SRI.PRAVEEN.H.** **RESPONDENT(S): STATE:** **---------------------------------------** **1. STATE OF KERALA, REPRESENTED BY ITS PUBLIC PROSECUTOR, HIGH COURT OF KERALA, ERNAKULAM, COCHIN - 31.** **2. EMPLOYEES PROVIDENT FUND ENFORCEMENT OFFICER, OFFICE OF THE EMPLOYEES PROVIDENT FUND ENFORCEMENT, DISTRICT OFFICE, ALAPPUZHA - 688 001.** **3. THE SUB INSPECTOR OF POLICE, AROOR POLICE STATION, AROOR - 688 534.** **R1 & R3 BY PUBLIC PROSECUTOR SMT. M.K.PUSHPALATHA R2 BY DR.S.GOPAKUMARAN NAIR, SENIOR ADVOCATE, BY ADV. SRI.M.CHANDRA BOSE.** **THIS CRIMINAL MISC. CASE HAVING COME UP FOR ADMISSION ON 14/03/2011 ALONG WITH CRMC NO. 113 OF 2011 ANDCONNECTED CASES,THE COURT ON THE SAME DAY PASSED THE FOLLOWING:** **Kss** ## **THOMAS P. JOSEPH, J.** **-------------------------------------Crl.M.C. No.112, 113, 525, 526, 527, 531 and 532 of 2011 -------------------------------------Dated this the 14[th] day of March, 2011.** ## **ORDER** These cases concern alleged non-payment of contribution payable by the employer and the employees towards provident fund of the employees under the Employees' Provident Fund and Miscellaneous Provisions Act, 1952 (for short, “the Act”) and prosecution launched against the employer, M/s.Southern Electro Mago Pvt. Ltd., Aroor (for short, “the company”), its Managing Director and a Director. Petitioner is the Director of the said company. Crl.M.C.No.112 of 2011 arises from the final report submitted by the Aroor Police in Crime No.310 of 2005 before learned Judicial First Class Magistrate-II, Cherthala for offence punishable under Section 406 read with Section 34 of the Indian Penal Code (for short, “the Code”), cognizance taken thereon and proceeding in C.C.No.893 of 2007 of that court. All other Criminal Miscellaneous Cases relate to the cognizance taken by the same court for offences punishable under the Act based on private complaints preferred by the Enforcement Officer under the provisions of the said Act. In the complaint cases allegations are that contribution of the employer and employee towards provident fund for the respective periods mentioned therein were not paid by the accused (including petitioner, a Director of the company) and thereby committed offence punishable under the said Act. In the Police case it is alleged that the share of contribution of the employees in the provident fund was misappropriated **Crl.MC Nos.112,113,525,526,527,531 & 532/2011** 2 by the accused therein including petitioner and thereby committed offence punishable under Section 406 read with Section 34 of the Code. Petitioner seeks to quash proceedings against him in all the cases on the contentions that the company is a sick industrial unit, the matter was taken up with BIFR which passed an order rejecting the request of the company for its financial reconstruction, the company filed appeal before the appellate authority as Appeal No. 249 of 2008 and appeal was allowed on 29.06.2010 and the matter was remitted to the BIFR for fresh consideration and hence a prosecution of this nature as involved in the complaint cases and Police case is not maintainable. Another contention is that petitioner being a Director and not in charge of and responsible for the affairs and management of the company is not liable to be prosecuted in view of definition under Section 2(e)(ii) of the Act. Reliance is placed on the decision in **Dr.Vellayani Arjunan v. Employees** **Provident Fund Organization (2010 (2) KLT 335)** . Yet another contention is that as seen from Annexures-V and VI and the counter statement filed by respondent No.2 in Crl.M.C.No.112 of 2011 though a little belatedly entire arrears have been paid and in the circumstances, prosecution may be quashed. Learned counsel for respondent No.2 has contended that none of these contentions would stand. According to the learned counsel, even on the showing of petitioner he is in charge and liable for the conduct of management of the company and hence is an employer as defined under Section 2(e)(ii) of the Act, it is contended that whatever proceedings initiated before the BIFR is not in any way helpful to the petitioner since under Section 22 of the Sick **Crl.MC Nos.112,113,525,526,527,531 & 532/2011** 3 Industrial Companies (Special Provisions) Act, 1985 (for short, “the Sick Companies Act”) a proceeding of this nature is not liable to be quashed even if the company is declared a sick company. Reliance is placed on the decision of the Supreme Court in **Kusum Ingots & Alloys Ltd. v. Pennar Peterson Securities Ltd. (2000 (1) KLT 846)** and in particular, observations in paragraph 15. It is argued that the mere payment of some amount after the due date does not absolve petitioner from criminal liability under the Act and the Scheme. The employee is entitled to get interest on the defaulted payments. It is pointed out by the learned counsel that in relation to Crl.M.C.No.112 of 2011 accused No.1 had approached this Court with Crl.M.C.No.3219 of 2010 to quash the complaint case on the ground of subsequent payment of the amount which was not accepted by this Court. 2. I shall first advert to the argument advanced by learned counsel based on Section 22 of the Sick Companies Act. The said provision says that no proceeding for winding up of the industrial company or for execution, distress or the like against any of the properties of the industrial company or for the appointment of a receiver in respect thereof and no suit for the recovery of money or for the enforcement of any security against the industrial company or of any guarantee in respect of any loans could lie when the company is declared as a sick unit. Though in relation to a prosecution under Section 138 of the Negotiable Instruments Act, the Supreme Court in the decision cited by learned counsel for respondent No.2, in paragraph 15 observed that Section 22(1) of the **Crl.MC Nos.112,113,525,526,527,531 & 532/2011** 4 Sick Companies Act is against maintainability of following legal actions: (1) proceeding for winding up of the company, (2) for execution, distress or the like against any of the properties of the company (3) for appointment of a receiver in respect of such properties and (4) suits for recovery of money or for enforcement of any security against the company or of any guarantee in respect of any loans or advance granted to the company. Proceedings initiated against petitioner and others either in the complaint cases or Police case do not come within the scope of any of the said clauses. For, it relates to prosecution for offences allegedly committed by petitioner and others under the Act and the Code for non-payment of the contribution and alleged misappropriation of the amount. Mere fact that the request of the company for financial reconstruction is pending before the BIFR and at any rate in the light of Section 22 of the Sick Companies Act as explained by the Supreme Court in the decision cited supra cannot justifiably lead to the conclusion that prosecution against petitioner and others, be it in complaint cases or Police case is liable to be quashed. 3. More important and serious contention learned counsel advanced is regarding liability of a Director in the matter of payment of provident fund in the light of the definition of employer under Section 2(e)(ii) of the Act. Particular reference is made to clause (ii) of the said Sub-section. Sub-section (e) defines ‘employer’ and clause (ii) reads as under: “in relation to any other establishment, the person who, or the authority which, has the ultimate control over the affairs of the establishment, and where the said affairs are entrusted to a manager, **Crl.MC Nos.112,113,525,526,527,531 & 532/2011** 5 managing director or managing agent, such manager, managing director or managing agent;” Learned counsel has invited my attention to the decision in **Dr.Vellayani** ## **Arjunan v. Employees Provident Fund Organization** referred supra. There, the amplitude of Section 2(e)(ii) was considered and in paragraph 15 it is held that having regard to the allegations in the complaint in that case first accused was the establishment and petitioner is its chairman and it appeared from paragraph 3 of the complaint that petitioner was arrayed as accused on the ground of vicarious liability for alleged non-compliance of the relevant provisions of the Act by the establishment. In paragraph 16 of the decision reference is made to Section 14 (1A) and Section 6 of the Act and paragraph 38 of the scheme. It is stated therein that no person could be prosecuted under Section 14(1A) of the Act as a person in charge of and responsible for the business of the establishment. In paragraph 17 it is stated that there must be specific allegation in the complaint that the person who is sought to be prosecuted under Section 14(1A) of the Act is the employer who has ultimate control over the affairs of the establishment, etc. In such circumstances, petitioner in that case who was the chairman was found not liable to be prosecuted under Section 14 (1A) of the Act either as employer or .as a person in charge of and/or responsible for the conduct of business of the establishment. 4. I have extracted the relevant clause in Section 2(e) of the Act with which these case are concerned. Going by the said definition, the person who or the authority which has the ultimate control over the affairs of the establishment **Crl.MC Nos.112,113,525,526,527,531 & 532/2011** 6 and where the said affairs are entrusted to a manager, managing director or managing agent, such manager, managing director or managing agent can be treated as employer for the purpose of prosecution under Section 14(1A) of the Act. 5. It is relevant to note whether there is any manager, managing director or managing agent for the company to whom the said affairs are entrusted. Learned counsel for respondent No.2 has invited my attention to Annexure-R2(a) produced along with the counter statement in Crl.M.C.No.112 of 2011. That is the photocopy of an ownership certificate allegedly given by petitioner and others concerning the company. In column 8 the particulars of owners (of the company) are given and the persons mentioned therein include petitioner in his capacity as the director. Column 10 of Annexure-R2(a) deals with the manager/occupier of the company and petitioner is named as the manager. Clause (II) of column 10 deals with persons who are in charge of and responsible for the conduct of the business of the establishment and the said column also contains the name and address of petitioner. In otherwords, going by Annexure-R2(a), it would appear that petitioner is also an owner, manager/occupier and, a person who is in charge and responsible for the conduct of the business of the company. It is not shown that any particular authorisation has been given by the company stating that any other person will be responsible for such affairs of the company as stated in Section 2(e)(ii) of the Act. In the circumstances prima facie it is difficult to accept the contention of petitioner that he is not responsible for the conduct of the business of company **Crl.MC Nos.112,113,525,526,527,531 & 532/2011** 7 so far as prosecution for non-payment of provident fund contribution from the side of employer and employee is concerned. In the decision of this Court cited supra there was no specific allegation in the complaint that chairman of the company in that case was in charge of and responsible for the affairs of the company. I find from Annexure-I, complaint (in the complaint cases) that there is a specific allegation in paragraph 2 that petitioner along with first accused are the persons in charge of the establishment and responsible for the conduct of its business and that they were required to comply with the provisions of the Act and the Scheme in respect of the said establishment. In paragraph 7 of the complaint it is stated that petitioner and first accused were, during the relevant period in charge of the company and responsible for the conduct of its business and as the offences were committed by the company with their consent or connivance, etc. Thus the contention that petitioner being only a director is not an owner or other person responsible for the conduct and management of the company cannot be accepted. 6. It is also argued by learned counsel that so far as the Police case is concerned, Police submitted a final report against the first accused and one Jose aged about 68 years on 19.09.2007, petitioner did not figure as an accused in that final report and, Annexure-VI, report (in Crl.M.C.No.112 of 2011) was filed by the Police only on 28.08.2008 as if petitioner is involved in commission of the offence. Learned counsel submitted that assuming so, petitioner could be treated as implicated in the Police case only on 28.08.2008 whereas payments were made even before that in the year 2007. **Crl.MC Nos.112,113,525,526,527,531 & 532/2011** 8 7. I have gone through Annexure-VI, report in Crl.M.C.No.112 of 2011. Prima facie it is difficult to accept the argument that petitioner is made an accused only on 28.08.2008. That is not a report impleading petitioner as an accused. Instead, what is stated by the Investigating Officer is that he is giving the correct name, address and age of the second accused in the case (as that of petitioner) instead of the name, address and age given in the final report submitted earlier. That report is only a report to correct the name, address and age of the accused. In otherwords the mis- description in the final report regarding the name, address and age of the second accused is sought to be corrected. 8. According to the petitioner the entire payment has been made by the company. I must bear in mind that though at the instance of the first accused a challenge was made to the cases in this Court in Crl.M.C.No.3219 of 2010 on the ground of subsequent payments. That was not accepted or acted upon by this Court in order to quash proceeding and this Court directed that it is open to the petitioners therein (first accused and the second accused as originally mentioned in the final report before Annexure-VI, report dated 28.08.2008 in Crl.M.C.No.112 of 2011) could take up all their defence before the trial court. 9. Having heard learned counsel for petitioner and the learned Public Prosecutor and gone through the relevant records and considered the respective arguments advanced, I find myself unable to quash proceedings against petitioner. It is pointed out that trial of the cases has already **Crl.MC Nos.112,113,525,526,527,531 & 532/2011** 9 commenced. I make it clear that the learned Magistrate shall dispose of all the cases untrammelled by any observation or finding contained in this order. I also make it clear that it is open to the petitioner to raise all his defence in the trial court at the appropriate stage. These Criminal Miscellaneous Cases are dismissed with the above observation. **THOMAS P.JOSEPH, Judge.** ## **cks**