Calcutta High Court
Sanatan Ghosh And Ors. vs Regional Provident Funds Commissioner ... on 15 February, 1990
Equivalent citations: 95CWN115, [1991(62)FLR97], (1991)IILLJ466CAL
JUDGMENT Kalyanmoy Ganguli, J.
1. In this application under Article 226 of the Constitution of India, the petitioners, inter alia pray for quashing of the cases being Cases Nos. 2152-2181 and 2197-2205, all of 1987, pending in the Court of the learned Chief Metropolitan Magistrate, Calcutta, under Section 14(IA) read with Section 14A(1) of the Employees Provident Funds and Miscellaneous Provisions Act, 1952.
2. In spite of service no one appears to oppose this application. The statements and allegations made in the writ petition go unchallenged and have to be accepted on their face value on the basis of the doctrine of non-traverse.
3. The short case of the petitioner is that one of the petitioners is the Managing Director of Mechanical Engineering Company (Private) Ltd., and the other two petitioners are Directors of the Company. It is the uncontroverted case of the petitioner that all provident fund dues relating to all the employees of the Company have been paid in full and nothing is due and payable in respect of any other employees. Criminal cases relate to the non-payment of the provident fund amounts in respect of the Managing Director and the two Directors of the Company. Sri Base contends that neither a Director nor the Managing Director of a Company is an employee within the meaning of either the Companies Act, 1956, or the Employees Provident Funds Act, 1952, and, as such, no amount is either payable or deductible from any amount paid to such Directors or Managing Director.
4. Sri Bose, first of all, referred to Sub-section (13) of Section 2 of the Companies Act, 1956, which defines a Director in the following way:
"(13) 'Director,' includes any person occupying the position of Director by whatever name called."
Sub-section (26) of Section 2 defines a Managing Director in the following terms:
"(26) 'Managing Director/ means a Director, who by virtue of an agreement with the Company or of a resolution passed by the Company in general meeting or by its Board of Directors or by virtue of its Memorandum of Articles of Association, is entrusted with 'substantial powers of management, which would not otherwise be exercisable by him and includes a Director occupying the position of Managing Director by whatever name called."
The proviso to the sub-section is not material for the purpose of a decision raised in this case.
5. Section 5 of the Companies Act gives the meaning of "Officer who is in default."
6. Sri Bose also referred to Section 309 of the Companies Act dealing with the remuneration of Directors.
7. Next Sri Bose referred to Sub-Clause (ii) of Clause(e) of Section 2 of the Employees' Provident Funds etc, Act. 1952, where the word "employer" has been defined inter alia to mean in relation to any other establishment, the person who, or the authority which, has the ultimate control over the affairs of the establishments and where the said affairs are entrusted to a Manager, Managing Director or Managing Agent, as such Manager, Managing Director or Managing Agent.
8. Clause (f) of Section 2 of the above Act of 1952 defines an "employee" in the following terms:
"(f) 'Employee' means any person who is employed for wages in any kind of work, manual or otherwise in or in connection with the work of establishment and who get his wages directly or indirectly from the Employer, and includes any person employed by or through a contractor in or in connection with the work of the establishment."
9. Sri Bose contends that on an overall assessment of all these provisions of the two Acts cited above, it will become a very anomalous position if either the Directors or the Managing Director of a Company be deemed to be employees of the Company inter alia inasmuch as these very persons are deemed to be employers in the various provisions referred to above. It will also be a peculiar position if the same person is treated as both employer and an employee and for the non-deduction and nonpayment of provident fund amounts from the remuneration payable to such a Managing Director, the very same Managing Director should be prosecuted. I think, there is considerable substance in the submission of Sri Bose.
10. In the circumstances, this application succeeds, and the rule is made absolute. Let a writ in the nature of mandamus issue accordingly. I make it clear that the provident fund authorities will be at liberty to initiate any fresh prosecution but they can do so only after deciding the points raised by the petitioners in this case after giving the petitioners an opportunity of hearing and by disposing of such petition by a reasoned and speaking order.
11. There will, however, be no order as to costs.
12. All parties to act on a signed copy of the operative part of this order on usual undertaking.