1997 (1) TMI 425 - HC - Companies Law

Summary

Issues Involved:
1. Applicability of Section 446 of the Companies Act.
2. Responsibility of the Managing Director under Section 14A of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952.
3. Burden of proof for establishing responsibility for the conduct of business.

Issue-wise Detailed Analysis:

1. Applicability of Section 446 of the Companies Act:
The judgment dated April 12, 1991, by the Additional Munsiff and JMFC, Bellary, acquitted the respondents/accused on the grounds that the respondent/accused No. 1-company was wound up and not in existence. The complaints were filed without the leave of the company court as required under Section 446 of the Companies Act, which mandates that no suit or legal proceedings shall commence or proceed against the company without the leave of the court when a winding-up order has been made or the official liquidator appointed. This legal requirement was not met, leading to the acquittal of the company.

2. Responsibility of the Managing Director under Section 14A of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952:
The court examined whether respondent/accused No. 2, the Managing Director, was responsible for the conduct of the business of respondent/accused No. 1-company. The learned AJMFC, Bellary, observed that the Enforcement Officer failed to prove that respondent/accused No. 2 was responsible for the conduct of the business. The provisions of Section 14A of the P.F. Act place the burden on the complainant to establish this responsibility. None of the documents produced (exhibits P-1 to P-8) disclosed that respondent/accused No. 2 was in charge of and responsible for the company's business.

3. Burden of Proof for Establishing Responsibility for the Conduct of Business:
The Central Government standing counsel argued that the statement recorded under Section 313 of the Criminal Procedure Code, where respondent/accused No. 2 admitted to being the Managing Director, should suffice to establish his responsibility. However, the court held that merely being the Managing Director does not automatically imply responsibility for the conduct of the business as per Section 14A(1) of the P.F. Act. The definition of "managing director" under Section 2(26) of the Companies Act was also discussed, but the court concluded that the liability under Section 14A(1) does not go with the designation but with the actual charge and responsibility for the business conduct. The court emphasized that the burden of proof lies heavily on the appellant to prove these conditions, which was not done satisfactorily.

Conclusion:
The court found no merit in the appeals and upheld the acquittal of respondent/accused No. 2 along with respondent/accused No. 1-company. The appeals were accordingly dismissed. The judgment reinforced the principle that in criminal cases, the guilt of the accused must be proved beyond all reasonable doubt, which the appellant failed to do in this case.