2010 (4) TMI 615 - HC - Companies Law

Whether petitioners would not fulfil the definition of the term employer as per section 2(e) of the Act ? Held that - In the instant case, it is the eighth accused, who alone has been named as the manager in clause 11 of Form No. 5A. Holding such manager alone liable would be in order, since he alone would fall within the meaning of the word employer . Section 2(e) of the Act specifically provides that where the affairs of the establishment are entrusted to a manager, such person would be the employer. The petitioners herein cannot be roped in as accused through section 14A of the Act, given the unambiguous assertion in clause 11 of Form No. 5A that the eighth accused was the manager of the establishment, who was in charge of and responsible for the conduct thereof. Such assertion leads to the necessary exclusion of all others from such capacity, at least in so far as the present Act is concerned. For the above reasons, the criminal original petition is allowed and the proceedings in C. C. No. 177 of 1999 on the file of the Judicial Magistrate, Gudalur, Nilgiris (District) are hereby quashed. Consequently, connected miscellaneous petitions are quashed.

Issues Involved:
1. Quashing of proceedings against the petitioners.
2. Definition and liability of "employer" under the Employees' Provident Funds and Miscellaneous Provisions Act, 1952.
3. Validity of the prosecution sanction by the Regional Provident Fund Commissioner.
4. Specificity required in the complaint regarding the responsibility of accused persons.

Detailed Analysis:

Quashing of Proceedings Against the Petitioners:
The petitioners, accused Nos. 1, 2, 3, 5, and 6, sought the quashing of proceedings in C.C. No. 177 of 1999, where they were charged under sections 14(1A)/14A and 14AA of the Employees' Provident Funds and Family Pension Fund and Miscellaneous Provisions Act, 1952. The complaint alleged that M/s. Mahavir Plantations had failed to remit employees' and employer's contributions to the provident fund account for the period from July 1995 to September 1995, amounting to Rs. 91,922.

Definition and Liability of "Employer":
The petitioners argued that they, being directors of M/s. Mahavir Plantations Ltd., did not fall within the definition of "employer" as per section 2(e) of the Act. According to section 2(e), "employer" is defined as:
- (i) In relation to a factory, the owner or occupier, including the agent, legal representative, or manager named under section 7 of the Factories Act, 1948.
- (ii) In other establishments, the person or authority with ultimate control, or the manager, managing director, or managing agent.

Section 14A states that if an offence is committed by a company, every person responsible for the conduct of the business at the time shall be deemed guilty unless they prove the offence was committed without their knowledge or despite due diligence.

Validity of the Prosecution Sanction:
The petitioners contended that the prosecution sanction dated February 8, 1996, was invalid as it ignored the definition of "employer." They relied on the Bombay High Court's judgment in Suresh Tulsidas Kilachand v. Collector of Bombay, which emphasized that directors cannot automatically be deemed to have ultimate control over the company's affairs.

Specificity Required in the Complaint:
The petitioners argued that the complaint lacked specific averments on how each accused was involved in the day-to-day business. They referenced the Calcutta High Court's decision, which required detailed allegations showing the accused's involvement in the company's operations.

Court's Findings:
The court noted that Form No. 5A of the Employment Provident Funds Scheme, 1952, specifically named the eighth accused as the person responsible for the establishment's conduct. Clauses 8, 10, and 11 of Form No. 5A were crucial:
- Clause 8: Details of owners/directors.
- Clause 10: Details of the manager/occupier.
- Clause 11: Details of the person responsible for the conduct of the establishment.

The court found that the eighth accused was explicitly named in Clause 11, making him solely responsible under section 2(e) of the Act. The court distinguished the present case from the apex court's decision in Srikanta Datta Narasimharaja Wodiyar v. Enforcement Officer, where directors were held liable due to their specific mention in Form No. 5A.

Conclusion:
The court concluded that the petitioners could not be held liable under section 14A, as the eighth accused was the designated manager responsible for the establishment. Consequently, the proceedings in C.C. No. 177 of 1999 were quashed, and the criminal original petition was allowed.

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