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TMI Blog1991 (3) TMI 389X X X X Extracts X X X X X X X X Extracts X X X X ..... 17 of the Act granted exemption to the said Company subject to the conditions specified in Schedule 2 annexed to the said Notification. As a result of the said exemption the provisions of the employees' Provident Fund Scheme 1952 framed under Section 5 of the Act did not apply to the said Company which created a Trust and the management made contributions of provident fund to the said trust and admittedly the exemption continued to be in operation at all material times. In or about September/October, 1975 the Inspector of Provident Fund filed criminal complaints in the Court of the Judicial Magistrate Cambay against the appellant on the allegation that they being incharge of the management failed to pay the contributions to the provident fund trust and thereby committed offences punishable under Sections 14(1A), 14(2), 14(2A), 14A(1), 14A(2) and Paragraph 76 of the Employees' Provident Fund Scheme, 1952. The appellants also received notice dated 15th September, 1975 from the Inspector threatening to cancel the exemption granted under Section 17 of the Act. However, some time in September, 1975 the said Company's Mill had to be closed down and liquidation proceedings we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... establishment in question was governed by the provisions of the Act and it was exempted under Section 17 of the Act and it had its own trust in respect of the provident fund contributions but failed to pay the provident fund contributions to the trust for some period during 1974 and thus there was a default. The controversy therefore is whether such failure attracts the prosecution or only warrants the cancellation of the exemption granted. This Act (No. 19 of 1952) was enacted to provide for institution of provident fund for employees in factories and other establishments and is made applicable to every establishment which comes within the meaning of 'factory'. The Act underwent major amendments by Act No. 16 of 1971 and also by some amendments thereafter. We are mainly concerned with the provisions of the Act that were in force at the relevant time i.e. in 1974. Section 2 contains various definitions and commences with the words In this Act, unless the context otherwise requires, and thereafter the definitions are enumerated. Contribution is defined in Section 2(c) which means a contribution payable in respect of a member under the Scheme. The words Contribution , ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xx xx We may mention here that the Employees' Provident Fund Scheme 1952 was duly framed as provided under Section 5 and the relevant provisions of the Scheme shall be referred to at the appropriate stages. Section 6 is an important provision which deals with the contribution and allied matters and reads thus: 6. The contribution which shall be paid by the employer to the Fund shall be six and a quarter per cent of the basic wages, dearness allowance and retaining allowance (if any) for the time being payable to each of the employees (whether employed by him directly or by or through a contractor), and the employees' contribution shall be equal to the contribution payable by the employer in respect of him and may, if any employee so desires and if the Scheme makes provision therefor, be an amount not exceeding eight and one third per cent, of his basic wages, dearness allowance and retaining allowance (if any); Provided that in its application to any establishment or class of establishments which the Central Government, after making such enquiry as it deems fit, may by notification in the Official Gazette specify this section shall be subject to the modification ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exemption was granted under Section 17 shall, if no other penalty is elsewhere provided by or under this Act for such contravention or non-compliance, be punishable with imprisonment which may extend to three months, or with fine which may extend to one thousand rupees, or with both. 14A(l) If the person committing an offence under this Act, the Scheme (the Family Pension Scheme or the Insurance Scheme) is a company, every person, who at the time the offence was committed was in charge of, and was responsible to, the company for the conduct of the business of the company, as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly; Provided that nothing contained in this sub- section shall render any such person liable to any punishment, if he proves that the offence was committed without his knowledge or that he exercised all due diligence to prevent the commission of such offence. 14A(2) Notwithstanding anything contained in sub-section (1), where an offence under this Act, the Scheme or the Family Pension Scheme or the Insurance Scheme has been committed by a company and it is proved that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce fund of the establishment in which he is employed shall be transferred within such time and in such manner as may be specified in the Scheme or the Family Pension Scheme or the insurance Scheme to the Credit of his account in the Fund or the Family Pension Fund or the Insurance Fund, as the case may be. The only other provision to be noted before we proceed further is paragraph 76 of the 1952 Scheme the contravention of which is also mentioned in the complaints. It reads thus: 76. Punishment for failure to pay contributions etc.-If any person- (a) deducts or attempts to deduct from the wages or other remuneration of a member the whole or any part of the employer's contribution, or (b) fails or refuses to submit any return, statement or other document required by this Scheme or submit a false return, statement or other document, or makes a false declaration, or (c) obstructs any Inspector or other official appointed under the Act or this Scheme in the discharge of his duties or fails to produce any record for inspection by such Inspector or other official, or (d) is guilty of contravention of or non- compliance with any other requirement of this Scheme, he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6. Accordingly the exempted establishment has to provide for its employees the benefits which are in no way less favourable than the ones provided under the Act and the Scheme. Now the question is whether failure to make the contribution by the exempted establishment to the provident fund as per its one rules could attract the penal provisions of Section 14? The learned Additional Sessions Judge, however, as hereinbefore mentioned, held that Section 6 covers and attracts all be establishments including the exempted establishment. Even otherwise according to him, Section 14(2A) which applies to an exempted establishment is clearly attracted inasmuch as the conditions subject to which exemption was granted under Section 17 have been violated in the instant case. The learned Additional Sessions Judge also gave a finding that Section 14(IA) also is attracted as in his view even an exempted establishment is not absolved from the liability of employer's contribution as also the employees' contribution to the provident fund and therefore by necessary implication the employer and the employees of an exempted establishment have to make full contribution to the provident fund as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on- exempted establishments. This aspect we will consider at a later stage while examining the applicability of Section 14(, IA). So far Section 14(2A) is concerned, the later part of it specifically is made applicable to the exempted establishments and if there is contravention of any of the conditions subject to which exemption was granted under Section 17 and if no other penalty is elsewhere provided by or under the Act then such contravention or non-compliance is punishable. The essentials of these provisions are; (i) there should be a contravention or default in complying with the provisions of the Act, or ('ii) there should be a contravention or default in complying with any of the conditions subject to which exemption was granted under Section 17, and (iii) there should be no other penalty elsewhere provided by or under the Act for such contravention or non-compliance. Only when these essentials are satisfied, the Section is attracted. The learned counsel for the appellants submitted that in the present case there is no such contravention or non-compliance of any of the conditions subject to which exemption was granted. His further submission in this context is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... factory should have a provident fund scheme in force the rules of which with respect to the rates of contribution shall not be less favourable than those specified in Section 6. This part of the condition is in conformity with the requirement under Section 17(1). The condition proceeds to lay down that these rules shall be followed in all respects. There is no dispute that as per the rules governing the provident fund scheme of the exempted establishment in question, the contributions have to be made regularly and condition No. I lays down that these rules should be followed in all respects. The default in making the contribution amounts to contravention of the rules and consequently the condition No. 1, subject to which the exemption was granted, is clearly violated. That there was a violation of this condition is also made clear by the notice issued by the Regional Provident Fund Commissioner on 15.9.75. The relevant portion of the notice reads thus: And thus it has violated the conditions governing grant of exemption for contravention of which the offenders are liable for the cancellation of the exemption granted under Section 17 of the Employees' Provident Fund Act, 195 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntemplated under Section 14. However, we shall proceed to consider some of the submissions made on this aspect. The learned counsel referred to certain standard books on words and phrases. In Butterworths' Words and Phrases, legally defined Third Edition page 343 the meaning of the word 'Penalty' is given as that the word penalty' is large enough to mean, is intended to mean, and does mean, any punishment whether by imprisonment or otherwise. Blackburn,J. in R. v. Smith, [ 1862] Le Ca 131 at 138, observed as under: I consider that the word penalty falls to be read in a wide popular sense, . . . and I select two definitions adequately conveying that sense. The late Mr. Roberton Christie The Encyclopedia, Vol. I 1, p 204) said: Penalty in the broad sense may be defined as any suffering in person or property by way of forfeiture, deprivation or disability, imposed as a punishment by law or judicial authority in respect of ... an act prohibited by statute. The Oxford Dictionary echoes the same wide conception by referring to a loss, disability or disadvantage of some kind ... fixed by law for some offence. The meaning of the word 'penalty' as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , which reads thus: In one sense every act of a body which is the creature of statute may be said to be done under or by virtue of the statute creating it. The author has extracted the observations made by O' Bryan, J. in R. D v. Clyne, ex p Harrap ( 194 1) VLR 200 at 20 1, as under: In another sense the acts of such a body may be said to be done .under or by virtue of some provision granting a general jurisdiction to act in relation to a variety of matters. But the expression is also quite commonly used in relation to a particular act, when the general jurisdiction to act is assumed, to designate the more particular power to do that particular act. It is rash to attempt to substitute a different expression for the more simple and usual one used, but in this connection under is perhaps more aptly translated by the expression pursuant to than by the phrase by virtue of. It is necessary to have regard to the context to determine in which sense the word is used. (emphasis supplied) It therefore cannot be gainsaid that the context in which these words are used is significant. At this juncture we may also note that the scheme or rules framed by a company in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... troduced in the year 1953 by Act No. 37 of 1953 whereas sub-section 4 of Section 17 was introduced in the year 1963 by the amendment Act No. 28 of 1963, nearly ten years later. This only shows that the cancellation is not meant to be treated as one of the penalties and the reasonable inference is, particularly having regard to the object underlying the Act, that the expression 'penalty' in the context in which it is used particularly in Section 14 including Section 14(2A) only connotes imposition of imprisonment or fine. The cancellation as provided under Section 17(4) is only consequential and also rather procedural meant to be applied to the exemption granted under Section 17( 1) in case of noncompliance of the conditions subject to which such exemption was granted. A close perusal of Section 17 and its various sub-sections would clearly indicate that it is a self-contained provision dealing with the power to grant exemption and the consequent obligations and the procedural aspects and Section 17(4) is a built-in provision providing for cancellation of such exemption in case of contravention or noncompliance of the conditions. By a cancellation of the exemption only the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt as well as by the English courts summed up the principles in the following manner: The content of the rule and its limits, in the sense now understood, may be summed up in the following propositions: (1) If the prohibitory words in their known signification cover only some class of persons or some well-defined activity, their import cannot be extended to cover other persons or other activity on considerations of policy or object of the statute. (2) If the prohibitory words are reasonably capable of having a wider as also a narrower meaning and if there is no clear indication in the statute or in its policy or object that the words were used in the wider sense, they would be given the narrower meaning. (3) When the prohibitory words are equally open to two constructions, one of which covers the subject and the other does not, the benefit of construction will be given to the subject. (4) If the prohibitory words in their known signification bear a wider meaning which also fits in with the object or policy of the statute, the words will receive that wider meaning and their import will not be restricted even if in some other context they can bear a narrower meaning ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of Parliament, and he must do this not only from the language of the statute, but also from a consideration of the social conditions which gave rise to it and of the mischief which it was passed to remedy, and then he must supplement the written word so as to give 'force and life' to the intention of legislature. A Judge should ask himself the question how, if the makers of the Act had themselves come across this ruck in the texture of it, they would have straightened it out? He must then do so as they would have done. A judge must not alter the material of which the Act is woven, but he can and should iron out the creases. (emphasis supplied) Therefore in a case of this nature, a purposive approach is necessary, However, in our view the interpretation of the word 'penalty' used in Section 14(2A) does not present any difficulty and cancellation is not a punishment amounting to penalty within the meaning of this Section. Shri P. Chidambram, however, submitted that unless the context otherwise requires, such a purposive or liberal approach need not be resorted to. He invited our attention to the opening words unless the context otherwise requires occurring ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere should be a punishment of either imprisonment or fine inasmuch as the cancellation also can be a penalty within the meaning of Section 14(2A). At any rate according to the learned counsel for the appellants there is an ambiguity and that this being a penal law, the provisions should be construed strictly and necessarily the benefit of doubt, if any, should go to the accused. In view of the discussion already made by us on this aspect, this contention does not merit acceptance. In our view, there is no ambiguity as suggested by the learned counsel for the appellants. Even assuming so, in view of the object underlying the Act the context does definitely require a reasonable interpretation of Section 14(2A) so as to make it applicable also to a case of failure to contribute to the fund as per the conditions under which the exemption was granted. Like-wise it must also be interpreted to mean that cancellation does not amount to a penalty. Therefore the submission that Section 14(2A) is not attracted does not merit acceptance. Shri Dholakia, learned counsel for the respondents, as already noted, submitted that in addition to Section 14(2A), Section 14(A) is also attracted and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the opening words of Section 2 namely In this Act, unless the context otherwise requires, and urged that these words can otherwise, than as mentioned in the definitions, also be interpreted keeping in view the object of the Act. He further urged that the duties under the scheme framed under Section 5 i.e. 1952 scheme and the private scheme followed by an employer because of an exemption granted are one and the same and that if viewed from this angle, the expressions contribution , fund and scheme can be understood to be wide enough to carry the same meanings in respect of the private scheme also and consequently failure to contribute to the fund under a private, scheme framed and operated by the employer attracts Section 14(IA). After a careful consideration we are inclined to agree with the learned counsel fOr the respondents. In this context we may note a passage in Knightsbridge Estates Trust Ltd. v. Byrne and Others, [1940] 2 All ER 401 which reads thus: It is perhaps worth pointing out that the words unless the context otherwise requires which we find in the consolidating Act of 1929 are not to be found in the amending Act of 1928. I attribute little weight ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e definition clauses which create them, such as unless the context otherwise requires ; or unless a contrary intention appears or if not inconsistent with the context or subject-matter. (emphasis supplied) In Bennett Coleman Co. (P) Ltd. v. Punya Priya Das Gupta, [1970]I SCR 181 this Court observed thus: But assuming that there is such a conflict as contended, we do not have to resolve that conflict for the purposes of the problem before us. The definition of s. 2 of the present Act commences with the words In this Act unless the context otherwise requires and provides that the definitions of the various expressions will be those that are given there. Similar qualifying expressions are also to be found in the Industrial Disputes Act, 1947, the Minimum Wages Act, 1948, the C.P. Berar Industrial Disputes Settlement Act, 1947 and certain other statutes dealing with industrial questions. It is, therefore, clear that the definitions of a newspaper employee and a working journalist have to be construed in the light of and subject to the context requiring otherwise. The above passages throw a flood of light on the scope of interpretation of these opening words ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , which is to suppress a mischief, the court can depart from the dictionary meaning or even the popular meaning of the word and instead give it a meaning which will advance the remedy and suppress the mischief. In State of Gujarat v. Chaturbhuj Maganlal and Another, [1976] 3 SCR 1076 it was observed as under: It is well recognised that where the language of a statutory provision is susceptible of two interpretations, the one which promotes the object of the provision, comports best with its purpose and preserves its smooth working, should be chosen in preference to the other which introduces inconvenience and uncertainty in the working of the system. This rule will apply in full force where the provision confers ample discretion on the Government for a specific purpose to enable it to bring about an effective result. In Vanguard Fire Gen. Ins. Co. v. Fraser Ross, AIR 1960 SC 1971 it was held that the Court has not only to look at the words but also at the context, the collocation and the object of such words and interpret the meaning intended to be conveyed by the use of the words under the circumstances We feel it may not be necessary to multiply the authoriti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Reasons and submitted that it is only by the introduction of Section 17(1A) that the exempted establishments also are brought within the purview of the penal provisions which hitherto were applicable to unexempted establishments, and therefore Sections 14(1a) and 14(2A) were hitherto inapplicable to exempted establishments. We are unable to agree that this part of the Statement of Objects and Reasons would necessarily lead to such an inference. As already discussed many aspects are common to both the types of provident fund. So far as unexempted establishments are concerned there are several other penal provisions like Sections 14(1), 14(2) and 14AA and also in particular Paragraph 76 of the 1952 Scheme. There are other legal provisions also which apply to unexempted establishments. Therefore under the Amendment Act No. 33 of 1988 the Legislature wanted to make as far as possible these existing legal and penal provisions which are applicable to unexempted establishments, applicable also to exempted establishments. That does not mean that there were no penal provisions earlier applicable to exempted establishments. Section 17(1A) is in the following terms: 17(1-A) Where an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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