1973 (1) TMI 100 - HC - Indian Laws

Summary

Issues Involved:
1. Validity of the sanction for prosecution under Section 14(3) of the Employees' Provident Funds Act, 1952.
2. Responsibility and liability of the directors under Section 14-A(1) of the Act.
3. Applicability of penalties under Section 14(2-A) vis-`a-vis Section 17(4)(a) of the Act.

Detailed Analysis:

1. Validity of the Sanction for Prosecution:
The primary issue was whether the Labour Commissioner, U.P., Kanpur, was legally competent to accord sanction for the prosecution of the Respondents under Section 14(3) of the Employees' Provident Funds Act, 1952.

The prosecution was initiated based on a complaint filed by a Provident Fund Inspector, alleging non-compliance with the Act's provisions. The Sessions Judge had acquitted the Respondents on the grounds that the sanction for prosecution was not validly obtained, as required by Section 14(3) of the Act. The State contended that the Labour Commissioner, U.P., Kanpur, was indeed competent to accord such sanction.

The court examined the relevant statutory provisions and notifications. Section 14(3) of the Act stipulates that no court shall take cognizance of any offense under the Act without a report made with the previous sanction of an authority specified by the appropriate Government. The Central Government, being the appropriate Government for the Company, had delegated this power to the State Government via a notification dated 10th April 1957. Subsequently, the U.P. Government specified the Labour Commissioner as the competent authority through a notification dated 14th December 1960.

The Full Bench of the Court affirmed that the delegation of power by the Central Government to the State Government, and the subsequent specification of the Labour Commissioner as the authority, was valid. Thus, the Labour Commissioner, U.P., Kanpur, was legally competent to accord sanction for the prosecution.

2. Responsibility and Liability of the Directors:
The second issue concerned whether the Respondents, as directors, were liable under Section 14-A(1) of the Act, which holds every person in charge of and responsible to the company for its business guilty of the offense committed by the company.

The Respondents argued that there was no evidence to prove they were in charge of the conduct of the business at the time of the offense. However, the court noted that the complaint explicitly stated that the Respondents, being directors, were in charge of and responsible for the business. Evidence, including Form No. 5-A submitted by the Company, listed the Respondents as directors and persons having ultimate control over the Company's affairs. Testimonies corroborated that the Respondents were responsible for compliance with the Act's conditions.

The court concluded that the Respondents were indeed in charge of and responsible for the conduct of the Company's business, satisfying the requirements of Section 14-A(1).

3. Applicability of Penalties under Section 14(2-A) vis-`a-vis Section 17(4)(a):
The final issue was whether the Respondents could be punished under Section 14(2-A) of the Act, given that Section 17(4)(a) provides for the cancellation of exemption as a penalty for non-compliance.

Section 14(2-A) prescribes penalties for contravening any provision of the Act or conditions of exemption if no other penalty is provided elsewhere in the Act. The Respondents contended that Section 17(4)(a) provided an alternative penalty, thus precluding punishment under Section 14(2-A).

The court rejected this contention, clarifying that Section 17(4)(a) merely allows for the cancellation of the exemption, which is an executive action rather than a penalty. Section 14(2-A) provides for criminal penalties, which are distinct from the administrative action of canceling an exemption. Accepting the Respondents' interpretation would render Section 14(2-A) redundant, which was not the legislative intent.

Conclusion:
The court found no merit in the Respondents' submissions. The appeal was allowed, the judgment of the Sessions Judge was set aside, and the conviction and sentences imposed by the trial Magistrate were restored. The Respondents were to suffer the punishment as recorded by the learned Magistrate.