IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 27.04.2010 CORAM: THE HONOURABLE MR.JUSTICE C.T.SELVAM Crl.O.P.No. 1095 of 2007 & & M.P. No.1 of 2007 and M.P. No.1 of 2009 1. T.A. Bhansali 2. Sailesh T. Bhansali 3. Amresh T. Bhansali 4. Lalu T. Bhansali 5. Manish T. Bhansali .. Petitioners/Accused 1 to 3 & 5, 6 Versus 1. The Inspector of Police District Crime Branch The Nilgiris, Udhagamandalam 2. Sadagopa Ramanujam The Provident Fund Inspector Spencer's Buildings Udhagamandalam .. Respondents. Prayer: Petition filed under Section 482 Cr.P.C seeking to call for the records in C.C. No. 177 of 1999 on the file of the Judicial Magistrate, Gudalur, Nilgiris (Dt.) and quash the same. For Petitioners : Mr.P. Sukumar For R1 : Mr.J.C. Durairaj Govt. Advocate (Crl.Side) For R2 : Mr. T.R. Sundaram ***** O R D E R The petitioners are accused 1, 2, 3, 5 & 6 in case pending in C.C. No. 177 of 1999 on the file of the learned Judicial Magistrate, Gudalur, Nilgiris (Dt.). The petitioners seek quash of proceedings in such case as against them. The case in C.C. No. 177 of 1999 is a complaint case wherein the Provident Fund Inspector alleges commission of offences under Section 14(IA)/14A and 14AA of the Employees' Provident Funds and Family Pension Fund Act, 1952. The https://hcservices.ecourts.gov.in/hcservices/ accusation is that the establishment by name M/s. Mahavir Plantations having collected employees' contribution of provident fund and family pension funds had failed to remit such amount as also the Employer's contribution to the provident fund account, as it is required to do under Sections 6 & 6A r/w Paragraphs 30 & 33 of the Employees Provident Funds and Family Pension Funds Scheme. The default was of the period July 1995 to September 1995 and to the tune of Rs.91,922/-. The complaint alleges that all the eight accused in the case were in-charge of the said establishment and responsible for the conduct of its business. As such, the petitioners are required to comply with all the provisions of the Said Act and the Scheme in conducting the said establishment. 2. Heard learned counsel on either side and also perused the materials available on record. 3. Mr. P. Sukumar, learned counsel for the petitioners submitted that owing to circumstances beyond control, sums payable to the EPF Authorities from several establishments under the same management had fallen due and that sizeable sums including sums involved in the present case stood paid. A request was made to the Authorities to drop action. The Authorities had failed to withdraw the complaint. Learned counsel informed that the Tea Industry had undergone a turbulent phase and owing to measures initiated by the Government of India, the same was under revival and in due course, all the amounts payable by way of EPF contribution would be paid. Learned counsel for the petitioners would submit that the order of the Regional Provident Fund Commissioner dated 08.02.1996 sanctioning prosecution of the accused was bad in law, as the sanctioning authority had totally ignored the definition of the word 'employer' in the Employees' Provident Funds and Miscellaneous Petitions Act 1952 (hereinafter referred to as Act). Learned counsel would submit that the accused / petitioners herein, who were Directors of the company M/s. Mahavir Plantations Limited would not fall within the definition of the term 'employer' as defined in the Act and as such would not be liable for prosecution for offences thereunder. Section 2(e) of the Act defines "employer" as follows: "i) in relation to an establishment which is a factory, the owner or occupier of the factory, including the agent of such owner or occupier, the legal representative of a deceased owner or occupier and, where a person has been named as a manager of the factory under clause (f) of sub-section (1) of Section 7 of the Factories Act, 1948 (63 of 1948), the person so named; and ii) 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, managing director or managing agent, such manager, managing director or managing agent." https://hcservices.ecourts.gov.in/hcservices/ Section 14(A) of the Act reads as follows: "If the person committing an offence under this Act, the Scheme or pension Scheme or the Insurance Scheme is a company, every person, who at the time the offence 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 according: 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." Section 14(1-A) of the Act inter alia provides punishment for offences of non compliance by the employer with the provisions of Section 6 of the Act. Section 6 is the provision for contributions payable by the employer to the provident fund account. Section 14(AA) provides for enhanced punishment for subsequent offences after previous conviction. 4. The contention is that when under Form 5(A), Employment Provident Funds Scheme, 1952, it specifically had been informed that the eighth accused is the person responsible for the conduct of the establishment, then these petitioners, who are the Managing Director and Directors of the Company could not be arrayed as accused for commission of offences by virtue of Section 14(A). Learned counsel placed strong reliance on the judgment of the Division Bench of Bombay High Court reported in 1984 Mh.L.J. Pg. 117 (Suresh Tulsidas Kilachand Vs. Collector of Bombay), wherein it is observed as follows: "13. We have referred earlier to the obligation of the principal employer to pay the employer's and the employee's contributions and his right to deduct the employees contribution from the wages payable to the employee. Though on the well-known principles of construction of statutes singular includes plural, it is difficult for us to appreciate how there can be two principal employers in respect of the same employee. It is not contemplated by any of the provisions of the Act that there can be two principal employers at the same time. Undoubtedly, there is a concept of "immediate employer" and the "principal employer" contemplated by the Act, but when the definitions of "principal employer" refers to the owner or occupier of a factory, it is obvious that the principal employer can either be the owner or the occupier depending upon the facts of each case. It is not difficult to contemplate a case where the owner of a factory may be a person different from the one who is actually running the factory, for example, a factory in a running condition or merely the factory itself may be let out by the owner in which case, the owner will have nothing to do with the employment of the https://hcservices.ecourts.gov.in/hcservices/ employees, because the person required to appoint the employees and the actual person woo is running the factory will then be the person who will be the principal employer. The definition of "principal employer", therefore, is obviously intended to provide for all contingencies and any possible contingency will be covered by designating the owner as the principal employer where the owner himself is running the factory or in the case where the owner himself is not the owner of the factory, the person who runs the factory in whatever capacity, becomes the principal employer by virtue of being the occupier of the factory. The word "or" must, therefore, be read disjunctively and cannot be read as "and", because reading of the word "or" as "and" is bound to introduce an uncertainty in fastening the obligation to deduct and pay the employer's contribution as well as the employee's contribution. 14. The concept that a limited company could be an occupier of a factory is recognised in the Factories Act itself. Indeed, the concept that a partnership firm or a body of individuals is also recognised in section 100 of the Factories Act. Sub-section (1) of Section 100 begins with the words "where the occupier of a factory is a firm or other association of individuals". Similarly, sub-section (2) begins with the words "where the occupier of a factory is a company". Section 2(n) of the Factories Act defines "occupier" to mean the person who has ultimate control over the affairs of the factory. If we read this definition along with the provisions of Section 100, it is obvious that the Legislature has clearly contemplated that the person referred to in the definition of "occupier" cannot only be a natural person as argued by Mr. Tulzapurkar, but the person contemplated by the definition will include a body of individuals or a firm consisting of partners or an incorporated company. The definition of "occupier" in the Act expressly refers to "the meaning assigned to it in the Factories Act, 1948". Therefore, the word "occupier" for the purposes of the Act must have the same meaning as assigned to it in the Factories Act. It would be perfectly permissible to read Section 2(n) and Section 100 of the Factories Act to understand the concept of "occupier" and the sense in which the Legislature has used that term when "occupier" as included in the definition of "principal employer". The provisions of Section 100 of the Factories Act leave no room for doubt and make it clear that the legislature has clearly contemplated that in the case of a factory a company can be the "occupier" and can be the person who has the ultimate control over the affairs of the factory. Not only that, the Legislature has clearly contemplated that a firm consisting of partners can be an occupier and that the firm could have ultimate control over the affairs of the factory and even an association of individuals can be an occupier. https://hcservices.ecourts.gov.in/hcservices/ 15. The provisions of Sections 100(1) and 100(2) of the Factories Act and especially of Section 100(2) are clearly intended to enable individual partners or individual members of a body of individuals, association of individuals or directors of a company to be prosecuted or punished for an offence for which the occupier of the factory is punishable". The words "for any offence for which the occupier of the factory is punishable" occurring in Sub-Sections(1) and (2) of Section 100 clearly imply that a partner or a member of association of individuals or a director can be prosecuted for an offence for which an "occupier" of the factory is punishable, which "occupier" in the respective cases, would be a partnership firm, as association of individuals or a company. But for these enabling provisions specially made in sub-sections(1) and (2) of Section 100 the "occupier", as defined alone would have been punishable and not the different persons whose punishability is specifically provided for by the specific and independent provisions in sub-section (1) and (2) of section 100 of the Factories Act. It is, therefore, clear that where the owner or occupier of a factory is a company, the directors of a company cannot automatically be called "occupier" merely by virtue of being directors of the company which owns or runs the factory within the meaning of section 2(n) of the Factories Act. 16. It may be pointed out that the definition of "occupier" in section 2(n) of the Factories Act refers to the person "who has ultimate control over the affairs of the factory" and not "affairs of the company". But even under the Companies Act so far as the affairs of the company are concerned, the ultimate control of the company will not lie with any particular director at all. The directors act collectively and they function collectively as a Board of Directors. We may refer to a passage from Gower's Principles of Modern Company Law, Fourth Edition, Page 152, where the learned author has observed: "Where powers are conferred on the directors under clauses such as those considered above, they are conferred upon the directors collectively as a board. Prima facie, therefore, they can be exercised only at a board meeting of which due notice has been given and at which a quorum is present." (Emphasis supplied.) Mr. Tulzapurkar has referred us to a passage, from Pennington's Company Law, Fourth Edition, at page 523, which in our view, says nothing different from the passage we have quoted above. The passage relied upon by Mr. Tulzapurkar is at page 523, which reads as follows: "The board of Directors and meetings of members of a company can between them exercise all of the company's powers. Subject to the provisions of the Companies Act, 1948, which require certain powers to be exercised by the members in https://hcservices.ecourts.gov.in/hcservices/ general meetings, the division of powers between the board and the members is determined entirely by the articles of association, but the distribution can, of course, be varied from time to time by an alternation of the articles." The above passage does not refer to the powers of any individual Director, but it refers to the division of powers between the members of the Company and the "Board of Directors" as such, and indeed, in the same Chapter, the learned author has further pointed out at page 525 as follows: "Directors can only exercise their powers collectively by passing resolutions at board meetings, unless the articles otherwise provide." The proposition that each individual Director must be held to be in control of a factory belonging to a company is, therefore, wholly inconsistent with the general provisions of the Company law where the Directors function as a board or body and not as individuals. We may make it clear that we are not dealing with a case where a Director is specifically notified to the authorities as an occupier for the purpose of the Factories Act. If that is done, such a Director becomes an occupier not on account of the fact that he is a Director, but because he has been nominated as an occupier for the purpose of the Factories Act." Placing reliance on the above, learned counsel would submit that these petitioners would not fulfil the definition of the term "employer" as per Section 2(E) of the Act. Learned counsel also relied on the decision of the Calcutta High Court 1982 LAB.I.C. 1777 to impress that a mere statement in the complaint that all the accused were the persons in-charge of the Establishment and were responsible to it for the conduct of its business would not suffice. It would have to be shown how the accused were concerned in carrying out the day to-day business of the company before process could have issued against them. Learned counsel submitted that necessary averments, when contained in the complaint alone can lead to prosecution of the petitioners, was woefully lacking. 5. Learned counsel for the respondent would state that the first accused company had as many as 13 Establishments and huge sums were owed by it. Even the employees contributions were not credited to the concerned provident fund account. The first accused company and these petitioners had had the benefit of the funds and misused them. Learned counsel would submit that all persons whose names are mentioned in Form 5(A) would fulfil the description of the word 'Employer'. The names of the petitioners were found in Form 5(A) and they had been shown to be the owners / Directors of the first accused company. Learned counsel placed reliance on the decision of the Hon'ble Apex Court in Srikanta Datta Narasimharaja Wodiyar Vs. Enforcement Officer, Mysore (AIR (SC) 1993 Pg. 1656). https://hcservices.ecourts.gov.in/hcservices/ 6. In the instant case, we find that the 8th accused specifically has been named as the Manager in Form 5(A). The contention of the learned counsel for the respondent that all those whose names find mention in Form-5(A) either as owners / Directors or Managers could be made liable would not hold water for the following reasons: Clause-8 of such Form calls for the particulars of the owners / Directors. Clause – 10 calls for the particulars of the Manager / Occupier and clause - 11 calls for the particulars of the persons mentioned above who are in charge of and responsible for the conduct of the establishment. 7. Now, we find that the reference to the 'persons mentioned above' in Clause – 11 would be to the person/s, who is/are found mentioned in Clause 1 to 10 of such form. Clause – 11 requires that out of the said persons, the person in charge of and responsible for the conduct of the establishment is to be specifically informed. In the instant case, it is the 8th accused, who is specifically named in Clause-11 as the person responsible for the conduct of the establishment. The decision of the Apex Court relied upon by the counsel for the respondent really does not support his contention. In such case, the names of the Directors of the company stood mentioned in Col.8 of Form-5(A). In Col.11 of such form, it was stated "as per the details mentioned in Item-8". Thus, Form-5(A) in the said case had informed that the persons namely the Directors mentioned in Col.8 were the persons in charge of and responsible for conduct of the business establishment. In such circumstance, the Director was held to be liable for prosecution. In the instant case, it is the 8th accused, who alone has been named as the Manager in Clause 11 of Form 5(A). 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 14(A) of the Act, given the unambiguous assertion in Clause-11 of Form 5(a) that the 8th 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. In this regard, I find myself in respectful agreement with the reasoning contained in judgment of the Division Bench of Bombay High Court reported in 1984 Mh.L.J. Pg. 117 (Suresh Tulsidas Kilachand Vs. Collector of Bombay). 8. 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 (Dt.) are hereby quashed. https://hcservices.ecourts.gov.in/hcservices/ Consequently, connected miscellaneous petitions are quashed. Sd/ Asst.Registrar /true copy/ Sub Asst.Registrar ar To 1. The Inspector of Police District Crime Branch The Nilgiris, Udhagamandalam 2. Sadagopa Ramanujam The Provident Fund Inspector Spencer's Buildings Udhagamandalam 3. The Public Prosecutor, High Court, Madras 4. The Judicial Magistrate Gudalur Nilgiris District. 1 cc To Mr.P.Sukumar, Advocate, SR.28628 Crl.O.P.No.1095 of 2007 & & M.P. No.1 of 2007 and M.P. No.1 of 2009 TS(CO) sra 9/6/2010 https://hcservices.ecourts.gov.in/hcservices/