Bangalore District Court
M/S Design Apparels Pvt Ltd vs The Enforcement Officer Epfo on 20 December, 2025
1 Crl.Apl.No.1711/2024 JUDGMENT
KABC010271032024
IN THE COURT OF LXIX ADDITIONAL CITY CIVIL
AND SESSIONS JUDGE (CCH 70)
Present:
Smt. Shirin Javeed Ansari, B.A.,LL.B (Hon`s) LL.M.,
LXIX Additional City Civil and Sessions Judge,
Bengaluru. (CCH70)
Dated this the 20th day of December, 2025
Crl.A.No.1711/2024
Appellants: 1. M/s. Design Apparels Pvt. Ltd,
#180/4, 1st Floor,
Govindappa Complex,
Whitefield Road,
B Narayanapura,
Bengaluru- 560 016.
2. Sri. Prabhakara V Shetty
S/o Vittal Shetty,
Aged about 49 years
Director,
R/at. #156, Ramamurthy Nagar,
Ambedkar Nagar,
1st Main Road, 5th Cross,
Bengaluru East,
Bengaluru -560016.
(AccusedNo.2)
3. Smt. Rekha Prabhakar Shetty
Wife of Prabhakar Shetty,
Age about 44 years
Additional Director,
2 Crl.Apl.No.1711/2024 JUDGMENT
#156, Ramamurthy Nagar,
Ambedkar Nagar,
1st Main Road,
5th Cross, Bengaluru East,
Bengaluru -560016
(Accused No.5)
(Sri Lokesha.A., Advocate for
appellants)
-V/s-
Respondent: The Enforcement Officer
Employees Provident Fund Organisation,
Regional Office,
Koramangala
Bhavishyanidhi Bhavan,
Annapurneshwari Complex,
Survey No. 37/1,
6th Main, Singasandra,
Bengaluru- 560068.
(Sri Harsha.V., Advocate for
respondent)
JUDGMENT
This is an appeal preferred under Section 374(3) of the Code of Criminal Procedure by Accused Nos.1, 2 and 5, calling in question the legality, correctness and propriety of the judgment of conviction and order of sentence dated 26.09.2024 passed by the learned Presiding Officer, Special Court for Economic Offences, Bengaluru, in C.C. No.97/2024, whereby Accused Nos.1 3 Crl.Apl.No.1711/2024 JUDGMENT to 5 were held guilty for the offences punishable under Section 14(1A) read with Section 14A of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 (hereinafter referred to as "the EPF Act"), and were sentenced accordingly. The present appeal is restricted to Accused Nos.2 and 5.
2. Being aggrieved by the impugned judgment and conviction, the accused has preferred the present appeal under Section 374(3) of the Code of Criminal Procedure seeking to set aside the same.
3. The accused No.2 and 5 in CC No.97/2024 before the trial court have preferred the instant appeal against the complainant. The appellant and respondent are hereby assigned with their original ranks before the trial court i.e., the appellants as accused No.2 and 5 and respondent as complainant in CC No.97/2024 in the instant discussion for the purpose of brevity and convenience to avoid the confusion and perplexity.
4. The factual matrix out of which the appeal arises, in brief, is as follows. The complainant, namely the 4 Crl.Apl.No.1711/2024 JUDGMENT Enforcement Officer of the Employees' Provident Funds Organisation, alleged that Accused No.1, M/s. Design Apparels Pvt. Ltd., is an establishment covered under the provisions of the EPF Act, the Employees' Provident Fund Scheme, 1952, the Employees' Pension Scheme, 1995 and the Employees' Deposit Linked Insurance Scheme, 1976, and has been allotted establishment Code No. PY/BOM/34197. It was alleged that Accused Nos.2 to 4 being Directors, and Accused No.5 being the Additional Director of Accused No.1, were persons in charge of and responsible for the conduct of the business of the establishment within the meaning of Section 14A of the EPF Act.
5. It was the specific allegation of the complainant that, for the months of March 2013, April 2013 and May 2013, the accused failed to remit the statutory employees' contribution, the employers' contribution and the administrative charges towards Provident Fund within the period stipulated in Paragraphs 30 and 38 of the Employees' Provident Fund Scheme, 5 Crl.Apl.No.1711/2024 JUDGMENT 1952, i.e., within 15 days from the close of the month to which such contributions relate.
6. The amounts alleged as default were tabulated as follows:
Month & Employees Employers Adm. Due Date Year share Share Charges Rs. Rs.
Rs.
March 1,57,134/- 48,056/- 14,404/- 15.4.2013 2013 Apr 2013 1,55,689/- 47,615/- 14,272/- 15.5.2013 May-2013 1,20,539/- 36,864/- 11,049/- 15.6.2013 TOTAL 4,33,362/- 1,32,535/- 39,725/-
7. The complainant alleged that the total due for the said period was ₹6,05,622/- towards contributions and administrative charges, and despite repeated demand and opportunity, including proceedings under Section 7A of the Act and issuance of show cause notice, the said dues remained unpaid, thereby constituting an offence under Section 14(1A) read with Section 14A of the EPF Act.
8. Upon presentation of complaint by a public 6 Crl.Apl.No.1711/2024 JUDGMENT servant, cognizance was taken by the learned Trial Court for the aforesaid offences. Accused Nos.2 to 5 appeared and were enlarged on bail. Evidence before charge under Section 244 Cr.P.C. was recorded. Charge was framed against Accused Nos.2 to 5 who pleaded not guilty and claimed to be tried.
9. During trial, PW-1, namely the Enforcement Officer (the complainant himself), entered the witness box and reiterated the allegations in his complaint on oath. Nine documents were marked as Ex.P-1 to Ex.P-9. Among these, Ex.P-2 was the sanction order dated 14.02.2024 said to have been accorded by the Regional PF Commissioner-I; Ex.P-3 was the certified true copy of Form No.5A (Return of Ownership) submitted by the establishment; Ex.P-4 was stated to be the certified true copy of the assessment order dated 31.10.2017 passed in proceedings under Section 7A of the EPF Act; Ex.P-6 was a show cause notice dated 18.01.2024, and Ex.P-7 contained the certified true copies of track reports alleged to evidence service of Ex.P-6. Ex.P-5 and Ex.P-8 were e- 7 Crl.Apl.No.1711/2024 JUDGMENT mails addressed to Accused No.2, and Ex.P-9 was a certificate under Section 65B of the Indian Evidence Act pertaining to the electronic records.
10. The accused were examined under Section 313 Cr.P.C. The Accused No.3 and Accused No.4 filed written statements under Section 313(5) Cr.P.C. The record reflects that no defence evidence was let in by any of the accused. The learned Trial Court, on appreciation of the oral and documentary evidence, held that Accused No.1 establishment, being a juristic person, and Accused Nos.2 to 5, being the Directors / Additional Director responsible for the affairs of the establishment, had failed to remit the statutory dues for the months of March 2013 to May 2013, thereby committing an offence punishable under Sections 14(1A) and 14A of the EPF Act. Consequently, the learned Trial Court answered Point No.1 in the affirmative and convicted all Accused Nos.1 to 5.
11. As regards sentence, the learned Trial Court, acting under Section 248(2) of Cr.P.C., sentenced Accused No.1 (the Company) to pay fine of ₹5,000/- for the offence 8 Crl.Apl.No.1711/2024 JUDGMENT punishable under Section 14(1A) of the Act, and sentenced Accused Nos.2 to 5 to undergo Simple Imprisonment for a period of six months and to pay fine of ₹5,000/- each for the offence punishable under Section 14A read with Section 14(1A) of the Act, with a default sentence of Simple Imprisonment for one month in case of non-payment of fine. The learned Trial Court further directed that, since Accused No.1 establishment is managed by Accused Nos.2 to 5, they shall jointly pay the fine of ₹5,000/- imposed on Accused No.1, and in default thereof, they shall undergo further Simple Imprisonment for 10 days.
12. The Trial Court also invoked Section 14C(1) of the EPF Act, directing Accused Nos.2 to 5 to pay the employees' and employers' contribution and administrative charges towards Provident Fund pertaining to March 2013 to May 2013, quantified at ₹6,05,622/-, within three months to the complainant authority. The court further ordered compensation of ₹1,000/- to the complainant under Section 357 Cr.P.C. and held that the 9 Crl.Apl.No.1711/2024 JUDGMENT sentence shall run concurrently. An order on an application under Section 389(3) Cr.P.C. was also passed suspending sentence and enlarging the accused on bail pending appeal.
13. Being aggrieved by the findings of guilt, the conviction and the sentence, Accused Nos.2 and 5 have preferred the instant appeal against the respondent who was the complainant before the trial court on the following:
GROUNDS OF APPLEAL
a) It is most respectfully submitted that the impugned Judgment, Order of Conviction, and Sentence passed by the Special Court for Economic Offences are wholly opposed to law, facts, circumstances, and probabilities of the case.
b) It is submitted that the Trial Court has committed a serious error in recording conviction against the accused on the basis of conjectures and surmises, despite the fact that the complainant failed to adduce any reliable, cogent, and 10 Crl.Apl.No.1711/2024 JUDGMENT acceptable evidence in proof of the alleged offence.
c) It is further submitted that the complainant has instituted the present complaint without producing sufficient and necessary documents, and the same appears to have been filed with an ulterior motive and with the intention to harass the accused persons.
d) It is submitted that Exhibit P-4 pertains to proceedings initiated under Section 7A of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952. A plain reading of Section 7A of the Act would reveal that before issuance of an order under the said provision, the employer concerned must be afforded a reasonable opportunity of being heard and of representing his case. In the instant case, the complainant has not produced a single document to show that a notice contemplated under Section 7A(3) of the Act was ever served upon Accused Nos.2 and 5 to enable them to represent their case prior to the passing of the said proceedings.11 Crl.Apl.No.1711/2024 JUDGMENT
e) It is further submitted that the complaint was filed with the sole objective of recovering the Employees' Provident Fund contributions allegedly due from the employer, yet the complainant failed to produce even a single document relating to the employees such as (i) the list showing the number of employees employed during the relevant period; (ii) the individual P.F. account details of such employees; and (iii) the particulars of amounts deducted from the wages of each employee towards their respective contributions.
f) It is further submitted that, with regard to the details of the employees as mentioned above, the complainant, when confronted during cross-examination, categorically admitted that no employee details were produced, nor was any further or corroborative evidence adduced in that regard.
g) It is submitted that Accused Nos.2 and 5 have been wrongfully convicted under Section 14A of the Employees' Provident Funds and Miscellaneous Provisions Act, 12 Crl.Apl.No.1711/2024 JUDGMENT 1952 as being persons responsible for the conduct of the business of Accused No.1.
The conviction is contrary to the settled ratio laid down in T.A. Varghese v. Ram Bahadur Thakur Limited, Criminal Appeal No.356 of 2006, High Court of Kerala, wherein it has been held that:
"A reading of Section 14A Sub-clause (i) makes it clear that only the person responsible to the company for the conduct of the business of the company, as well as the company itself, are liable to be prosecuted, and not all directors. In other words, the appellants who are directors cannot be prosecuted unless there are pleadings and evidence to show that they were in charge of and responsible for the conduct of the business of the company."
h) It is, therefore, submitted that Form No.5A (Ex.P-3) merely lists Accused No.5 as an Additional Director, and there is no mention whatsoever in Ex.P-3 that Accused No.5 was in charge of or responsible for the conduct of the business of Accused No.1 establishment 13 Crl.Apl.No.1711/2024 JUDGMENT during the relevant period.
I) It is further submitted that Appellant No.3 (Accused No.5) is a lady, a mother of two children, and is single-handedly taking care of her entire family. The Trial Court, while imposing the sentence, failed to take into account these mitigating and humanitarian circumstances.
j) It is submitted that the Trial Court failed to appreciate the evidence in its proper perspective, and instead, has mechanically relied upon the narrative of the complainant as conclusive proof, without independent evaluation of the admissibility and reliability of the documents. This mechanical approach adopted by the Trial Court has resulted in serious miscarriage of justice to the appellants.
k) It is further submitted that, in the instant case, several circumstances point towards the innocence of the appellants, and some of these circumstances are capable of alternative hypotheses susceptible to rational explanation, none of which lead 14 Crl.Apl.No.1711/2024 JUDGMENT to the inference of guilt. Therefore, the appellants are entitled to acquittal. The Trial Court has committed a grave error in recording conviction on mere surmises and conjectures, thereby causing manifest injustice to the appellants, which now warrants interference by this Hon'ble Court.
Hence, under the said facts and circumstances, the appellant/accused pray before this court to call for records from the trial court, set aside the impugned judgment conviction and sentence passed by Trial Court in CC No.97/2024 dated 26.09.2024 and acquit the accused in the interest of justice.
14. This Court has heard the learned counsel appearing for the appellants/Accused Nos.2 and 5 and the learned counsel appearing for the respondent/complainant. The entire original records of the learned Trial Court have been summoned and examined.
15 Crl.Apl.No.1711/2024 JUDGMENT
15. On the basis of the rival submissions and the record, the following points arise for consideration of this appellate Court:
1) Whether the conviction of Accused Nos.2 and 5 for the offences punishable under Section 14(1A) read with Section 14A of the EPF Act, 1952, as recorded by the learned Trial Court in C.C. No.97/2024, suffers from such illegality, perversity or misappreciation of evidence that warrants interference by this appellate Court?
2) Whether, in the facts and circumstances of the case, the sentence imposed upon Accused Nos.2 and 5 requires interference, modification or annulment?
3) What order?
16. My findings to the above points are as under:
Point No.1 & 2: In the Negative Point No.3: As per final order for the following:
REASONS
17. Points 1 and 2:-- Before adverting to the rival contentions, it is necessary to notice the gravamen of 16 Crl.Apl.No.1711/2024 JUDGMENT accusation and the statutory complexion of the alleged offence. The allegation in essence is that the statutory contributions under the EPF Act for the relevant wage months were deducted or became due, and the employer establishment failed to remit the same within time. The offence under Section 14(1A) of the EPF Act is a statutory offence which penalises such default. Section 14A of the EPF Act then extends criminal liability to every person who, at the time the offence was committed, was in charge of, and responsible to, the company for the conduct of its business. The settled position is that, once there is a proved default within the meaning of Paragraphs 30 and 38 of the Employees' Provident Fund Scheme, 1952, then such default constitutes an offence, and the persons in charge of and responsible for the conduct of the business of the establishment are vicariously liable unless they establish want of knowledge or due diligence despite reasonable care. This principle is consistently reiterated by the Hon'ble Supreme Court in the context of social welfare legislations where contributions deducted from 17 Crl.Apl.No.1711/2024 JUDGMENT wages of employees are statutorily required to be deposited for their long-term social security, and non- remittance is treated as a serious socio-economic wrong affecting the class of workmen.
18. The core contention of the appellants is two- fold. First, that the complainant failed to produce primary records such as muster rolls, wage registers, salary statements, and individual PF account particulars, so as to demonstrate how many employees existed during March-May 2013, what wages were paid, and what sums were in fact deducted from their wages. It is urged that, absent this foundational material, mere reliance on Ex.P-4 (the Section 7A order) and Ex.P-3 (Form 5A) is insufficient to fasten criminal liability, in particular against Accused Nos.2 and 5. Secondly, the appellants contend that Accused No.5 has been roped in merely because she is described as "Additional Director" and that there is absolutely no pleading or evidence that she was "in charge of and responsible for the conduct of the business of Accused No.1" during the relevant period. In aid of this 18 Crl.Apl.No.1711/2024 JUDGMENT second contention, they place reliance on the judgment of the Hon'ble High Court of Kerala in T.A. Varghese v. Ram Bahadur Thakur Ltd., Crl.A. No.356/2006, which held that all Directors cannot be prosecuted mechanically and that the prosecution must plead and prove that the particular Director was in charge of and responsible for the conduct of the business of the Company at the relevant time.
19. The respondent, however, rests his case substantially on Ex.P-2, Ex.P-3, Ex.P-4, Ex.P-6 and Ex.P- 7, and more importantly on the oral testimony of PW-1. It is his submission that Ex.P-4 is an order validly passed in an inquiry under Section 7A of the EPF Act determining the dues payable by the establishment for the relevant period, that such order has attained finality because the accused have not challenged it in any forum, and that such an unchallenged adjudication of liability by the competent authority is sufficient, in a prosecution under Section 14(1A), to prove the subsisting default and its quantum. The respondent further contends that Form 5A, 19 Crl.Apl.No.1711/2024 JUDGMENT Ex.P-3, itself discloses Accused Nos.2 to 4 as "owners" and names Accused No.2 in column No.11 as the person in charge of, and responsible for, the conduct of the business of Accused No.1 establishment. It is argued that this constitutes an express statutory declaration and that the accused, having furnished Form 5A to the Department, are estopped from turning around and contending that they were not responsible for day-to-day affairs. It is finally contended that non-remittance of provident fund dues is a continuing offence within the meaning of Section 472 Cr.P.C., and therefore the plea of limitation under Section 468 Cr.P.C. cannot avail the appellants.
20. The first task of this Court is to evaluate the evidentiary worth of Ex.P-4, i.e., the Section 7A order, in criminal prosecution. The appellants argue that no material is produced to show that Accused Nos.2 and 5 were actually served with notice under Section 7A(3) of the EPF Act prior to the passing of the assessment order, and therefore the very foundation of Ex.P-4 is vitiated, and 20 Crl.Apl.No.1711/2024 JUDGMENT that the learned Trial Court erred in treating Ex.P-4 as conclusive proof of default. It is to be noted that, during cross-examination, PW-1 admitted that Ex.P-4 is an ex parte order and admitted that he "needs to verify" whether the reports referred in Ex.P-4 were served on the employer, and further admitted that the inspection report which formed the basis of Ex.P-4 is not produced before the Court. The appellants urge that these admissions demolish the prosecution case.
21. This Court is, however, unable to accept that submission in full breadth for the following reasons. The proceeding under Section 7A of the EPF Act is not an internal memo or a unilateral note; it is a quasi-judicial order of determination passed by a competent authority exercising statutory jurisdiction. The Act itself provides a mechanism to challenge such an order, including recourse to appellate or revisional remedies within the statutory framework. The material placed before the Trial Court shows that Ex.P-4, an assessment order dated 31.10.2017, quantified the dues for March to May 2013. 21 Crl.Apl.No.1711/2024 JUDGMENT There is not even a suggestion, much less proof, that Accused Nos.2 or 5 availed the statutory appellate remedy, got the order stayed, got it set aside, or even sought recall of the ex parte order by approaching the same authority. When a statutory determination of liability under a social welfare legislation, made in 2017, remains unquestioned until 2024 and beyond, and the establishment continues in default, the accused cannot, for the first time in a criminal prosecution, seek to collaterally impeach that order on mere assertions of want of service, without having pursued the statutory remedy or placing any material to show efforts made in that direction. The presumption that official acts have been regularly performed, recognised under Section 114 of the Indian Evidence Act, 1872, is not a mere ornament. Where a public authority empowered under Section 7A certifies and quantifies dues, and that certification has stood unchallenged for years, the Trial Court is entitled to draw an adverse inference against the accused under Section 114 Illustration (g) of the Indian Evidence Act that, had 22 Crl.Apl.No.1711/2024 JUDGMENT they truly been strangers to the default or victims of ex parte adjudication without notice, they would have immediately challenged the assessment, sought setting aside of the ex parte order, or otherwise repudiated liability. The silence of the appellants on this count is eloquent.
22. The second plank of challenge is that the complainant has not produced wage registers, PF deduction sheets, etc., and therefore the very existence of employees and the computation of dues is speculative. This argument, in my considered view, cannot defeat the conviction in the facts of the present case, for more than one reason.
23. Firstly, the EPF Act is a piece of socio- beneficial legislation, intended to protect the hard-earned statutory social security benefit of the employee. The Hon'ble Supreme Court has consistently held that failure to remit statutory contributions deducted from employees' wages is a grave social and economic wrong, and courts must approach such defaults not as a mere private 23 Crl.Apl.No.1711/2024 JUDGMENT accounting dispute but as an erosion of social security rights of workmen, which the statute elevates to a matter of public concern. The learned Trial Court was correct in observing that non-remittance "jeopardises the employees"
and defeats the very object of the enactment. This articulation of principle aligns with the long line of decisions in which the Supreme Court has emphasised strict compliance with labour welfare statutes and refusal to treat defaults as minor lapses, having regard to the beneficial character of such enactments and the need to secure the dignity and futurity of the employee class through compulsory social security contributions. This Court, sitting in appeal, is not persuaded to dilute that principle.
24. Secondly, Section 7A of the EPF Act itself empowers the competent authority to determine, inter alia, the amount due from any employer under any provision of the Act, after conducting such inquiry as may be deemed necessary. Once such determination has been made, and not challenged, and becomes the basis for 24 Crl.Apl.No.1711/2024 JUDGMENT prosecution under Section 14(1A), it is not open to the employer to insist that, in addition to the 7A order, the complainant must once again, in a criminal trial, reconstruct in minute detail each payslip, each muster roll, each attendance sheet, and each ledger entry for each employee for each wage month. To insist upon that level of repetition would render Section 7A nugatory and allow an establishment to perpetuate default merely by abstaining from producing its own records. The records of employment, wages, attendance and deductions are statutorily required to be maintained by the employer; it is not the workman's burden to enter the employer's premises and photocopy incriminating registers so as to be able to later prove them in a criminal court. The practical and legal burden to maintain and produce those registers lies primarily on the establishment. The appellants cannot now be heard to complain that the complainant did not produce what the appellants themselves were under statutory obligation to maintain and disclose.
25 Crl.Apl.No.1711/2024 JUDGMENT
25. Thirdly, PW-1 was cross-examined at length. The defence asked him: how many employees? what were the wages? did you examine muster rolls? etc. He answered that the specific details of number of employees and their salary particulars are not set out in Ex.P-1 to Ex.P-9. But crucially, even after such cross-examination, the appellants did not confront PW-1 with any positive case: namely that there were no employees, or that no deductions were made, or that the establishment was shut during March-May 2013, or that the sums quantified in Ex.P-4 are inflated or incorrect. A mere suggestion that "you have not produced" does not amount to evidence rebutting default. The law on evidentiary burden is well- settled: once the complainant produced the 7A order and the statutory Form 5A naming the responsible persons in control of the establishment, and once PW-1 explained the nature of default, the evidentiary burden shifted to the accused, particularly because those are facts specially within their knowledge. They alone can say, with documentary backing, "we had no employees during 26 Crl.Apl.No.1711/2024 JUDGMENT March to May 2013," or "we had duly remitted all contributions," or "the amount quantified is already paid." They chose not to. The learned Trial Court was justified in drawing adverse inference under Section 114 Illustration
(g) of the Evidence Act, and this Court finds no perversity in that approach.
26. The appellants then contend that Accused No.5 is only shown as "Additional Director" and is not shown in Ex.P-3, i.e., Form No.5A, column No.11 as "person in charge of and responsible for conduct of business," and therefore her conviction under Section 14A is unsustainable. The appellants have placed reliance on T.A. Varghese (Crl.A. No.356/2006, High Court of Kerala), where it has been held that all Directors cannot be prosecuted mechanically and that there must be material to indicate that the particular Director was in charge of and responsible for the conduct of the business of the company during the relevant time. The proposition in Varghese is, in fairness, unexceptionable in principle:
vicarious criminal liability is penal in character and 27 Crl.Apl.No.1711/2024 JUDGMENT therefore must be specifically pleaded and proved.
However, upon anxiously scanning the impugned judgment and the material on record, this Court is constrained to note that, unlike a prosecution under Section 138 of the Negotiable Instruments Act where the statutory scheme links liability to the person in charge at the time of commission of offence, the scheme of the EPF Act is wider in its design.
27. Section 2(e) of the EPF Act defines "employer,"
in relation to an establishment which is not a factory, to mean "the person who, or the authority which, has the ultimate control over the affairs of the establishment." The Hon'ble Supreme Court in Srikantadatta Narasimharaja Wodiyar v. Enforcement Officer, Mysore, reported in (1993) 3 SCC 217, has held that, in the case of an establishment which is not a factory, "employer" is not confined narrowly to a single named Manager or Occupier, but extends to "all those who have control or are responsible for the affairs of the company," including Directors. The Supreme Court in that case observed that 28 Crl.Apl.No.1711/2024 JUDGMENT every such person who has the ultimate control over the affairs of the company becomes the "employer," and that a declaration in Form 5A including such persons as being in charge and responsible for the affairs of the establishment is in accordance with law. The Court went further to hold that prosecution of such persons for violation does not suffer from jurisdictional infirmity merely because they are Directors and not day-to-day wage clerks. The learned Trial Court has explicitly relied upon this dictum. This appellate Court finds that reliance both apposite and compelling.
28. Once the law declared by the Supreme Court recognises that Directors and those exercising ultimate control fall within the extended conception of "employer,"
and once Accused Nos.2 to 4 were in fact declared in Ex.P-3 (Form 5A) as "owners," and Accused No.2 was specifically declared responsible for conduct, and Accused No.5 is reflected in the corporate information as Additional Director of the same establishment, the burden decisively shifts to each of them to place convincing material to 29 Crl.Apl.No.1711/2024 JUDGMENT demonstrate that, notwithstanding their titular control, they had neither any role in the affairs of the establishment during March-May 2013 nor any knowledge of the default, and that they exercised due diligence to prevent such default. Section 14A itself contemplates that a person so liable may avoid conviction by establishing that the offence was committed without his knowledge or that he exercised all due diligence to prevent the commission of such offence. That statutory avenue was very much available to the appellants. They did not invoke it through evidence. It is not the law that the complainant must, in every case, descend to the operational minutiae of which Director signed which voucher on which date. The statute, read with the law declared by the Supreme Court, casts a rebuttable presumption on persons who publicly held themselves out as those in control of and responsible for the establishment, particularly where they have themselves filed statutory documents (Form 5A) before the Provident Fund authority naming the very cadre of persons who now 30 Crl.Apl.No.1711/2024 JUDGMENT claim distance. The appellants, having enjoyed and exercised the authority of Directors/Additional Director, cannot, in a criminal prosecution under a welfare statute, escape liability by a bare ipse dixit that they were only "on paper" and not actually responsible. The burden to substantiate such a plea lies squarely on them.
29. The appellants have further pleaded that Accused No.5 is a lady and a mother of two children and that she is a homemaker who is only nominally shown as an Additional Director, and hence she ought to have been extended leniency or acquitted. This Court is not unmindful of the personal circumstances placed before it. The criminal law, even within a welfare statute, is not unfeeling. But sympathy cannot be a substitute for statutory compliance. The Provident Fund contributions, both of the employee and the employer, are not a gratuitous charity. They constitute deferred wages, a form of social insurance, a statutorily ring-fenced corpus meant for the financial security of employees in contingencies of age, retirement, disablement and premature death. The 31 Crl.Apl.No.1711/2024 JUDGMENT burden cast upon Directors and controlling persons of a company to ensure that such deductions are promptly deposited is not ornamental. An Additional Director who chooses to lend her name, authority, and signature to an establishment, enabling that establishment to function, avail credit, employ labour and project statutory compliance, also undertakes the correlative responsibility to ensure that statutory obligations under social welfare legislation are honoured. The EPF Act does not create a safe harbour for a Director solely on the ground of gender or familial obligations. The only exculpation available in Section 14A is proof of absence of knowledge or proof of due diligence to prevent commission of the offence. No such proof was tendered here. Therefore, the learned Trial Court cannot be faulted for declining to accept a mere plea of hardship in the teeth of a proved long-standing default.
30. The appellants have also urged that the prosecution is vitiated by limitation under Section 468 Cr.P.C., because the alleged default pertains to March- 32 Crl.Apl.No.1711/2024 JUDGMENT May 2013 whereas the complaint and cognizance are of 2024. The Trial Court has rejected this contention by holding that the offence is a continuing one within the meaning of Section 472 Cr.P.C. This Court finds no infirmity in that reasoning. The default complained of is not an instantaneous completed act like a single utterance; it is the continuous non-remittance of sums statutorily required to be held in trust for employees. The liability continues to run and the injury to the employees continues day after day so long as the employer fails to deposit the sums due. The Supreme Court has, in multiple contexts involving statutory non-compliance that endures over a period of time, construed such defaults as continuing offences, thereby attracting Section 472 Cr.P.C., under which a fresh period of limitation begins to run at every moment of continuance of the offence. The direction given by the learned Trial Court under Section 14C(1) of the EPF Act, requiring payment of ₹6,05,622/- within three months, itself underscores that, as on the date of judgment (26.09.2024), the default had not been 33 Crl.Apl.No.1711/2024 JUDGMENT cured. Thus, the continuance of non-payment was very much subsisting on the date of complaint and on the date of cognizance. The plea of limitation is, therefore, wholly untenable.
31. The appellants contend that the sanction order marked as Ex.P-2 does not disclose application of mind by the Regional PF Commissioner and, therefore, the entire prosecution is vitiated. The Trial Court has considered this argument and has rejected it. On careful scrutiny, this Court finds no reason to differ. Ex.P-2 discloses that the competent authority, after perusing the inspection report and the material placed by the Enforcement Officer, accorded sanction to prosecute the accused persons for violation of the provisions of the EPF Act for the relevant period. The learned counsel for the appellants argued that the sanction order does not separately narrate in detail the role of each individual Director, and hence reflects non-application of mind. It is true that sanction is not to be granted mechanically; however, equally, the law does not require that a sanction order read like a full-fledged 34 Crl.Apl.No.1711/2024 JUDGMENT judgment. The underlying principle, as crystallised in several decisions of the Hon'ble Supreme Court in the context of sanction under comparable statutes, is that the sanctioning authority must demonstrate awareness of the material facts constituting the offence and satisfaction that they warrant prosecution. Ex.P-2, in the considered view of this Court, satisfies that threshold. More significantly, the appellants did not challenge the sanction order before the appropriate forum nor did they examine the sanctioning authority to elicit that the sanction was granted in a routine, mechanical or uninformed manner. In the absence of such challenge, and in the presence of a facially valid sanction order reciting consideration of material, the contention that the prosecution is vitiated by want of sanction fails.
32. The appellants have urged that the Trial Court convicted them "on surmises and conjectures". This Court cannot accede to that description. Far from being conjectural, the Trial Court's reasoning is rooted in: (i) the admitted coverage of Accused No.1 establishment under 35 Crl.Apl.No.1711/2024 JUDGMENT the EPF Act; (ii) the admitted fact that Accused Nos.2 to 5 are (and held themselves out to the Authorities as) persons in control of Accused No.1; (iii) the subsisting and unchallenged determination of dues under Section 7A for March-May 2013; (iv) the persistent non-remittance of the said dues to the tune of ₹6,05,622/- even as on the date of judgment; (v) the statutory presumption flowing from Form 5A and Section 2(e) of the EPF Act read with the dictum of the Hon'ble Supreme Court in Srikantadatta Narasimharaja Wodiyar (1993) 3 SCC 217; and (vi) the conspicuous absence of any rebuttal evidence from the accused establishing want of knowledge or due diligence. The Trial Court has also, rightly in the opinion of this Court, emphasised the socio-economic character of the default and the continuing prejudice to the workmen. This is not conjecture. This is a methodical application of a welfare statute to established non-compliance.
33. Much emphasis was placed by learned counsel for the appellants on the reasoning of the Hon'ble High Court of Kerala in T.A. Varghese. This Court has 36 Crl.Apl.No.1711/2024 JUDGMENT considered that judgment with care and with respect. The ultimate ratio therein is that, for fastening criminal liability upon Directors, there must be material to show that the particular Director was in charge of, and responsible for, the conduct of the business of the company. That principle, as a matter of criminal jurisprudence, is sound. Where this Court respectfully parts company with the appellants' reliance is in their assumption that the complainant in the present case has not produced any such material. Ex.P-3 (Form 5A) is not an outsider's guess. It is a statutory declaration by the very establishment, disclosing who are the owners and who is responsible for the conduct of the business. Accused No.2 is expressly shown as the person responsible. Accused No.5 is disclosed as an Additional Director in the corporate disclosures. The record discloses that notices, e-mails and show cause notices (Ex.P-5, Ex.P-6, Ex.P-8) were addressed to the very same controlling minds. These materials, taken cumulatively, distinguish the present factual matrix from a bare-bones, 37 Crl.Apl.No.1711/2024 JUDGMENT no-particulars complaint of the type deprecated in Varghese. In other words, this is not a case where the complainant simply wrote "all Directors are liable" with no material. It is a case where the complainant produced statutory filings of the company itself, reflecting its own admission of control and responsibility, and thereafter led evidence that statutory dues quantified long ago had remained unpaid. The burden thus unmistakably shifted to Accused Nos.2 and 5 to establish lack of knowledge or exercise of due diligence. They did not discharge it.
34. The learned counsel for the appellants has lastly urged that even if liability is made out, the sentence of six months' Simple Imprisonment and fine of ₹5,000/- each is harsh, and that at any rate Accused No.5, being a woman and the sole caretaker of children and aged family members, ought to have been extended a lenient view. The learned Trial Court has addressed this plea in the "Hearing on Sentence" portion of the impugned judgment. The Trial Court observed that the offence in question is a socio-economic offence in which the victims are the 38 Crl.Apl.No.1711/2024 JUDGMENT employees whose deferred wages were unlawfully withheld, and that the accused, being in charge of the establishment, owed a duty to safeguard those statutory contributions. The Trial Court also explicitly considered and rejected the argument for leniency on the ground that the offence is not punishable with death or life imprisonment, by noting that the gravity of the wrong lies not in the quantum of sentence provided in the statute but in the nature of the breach and the class of persons affected. This Court finds that reasoning to be correct and in consonance with first principles of sentencing policy in welfare legislations: deterrence, protection of vulnerable beneficiaries of the statute, and affirmation of statutory compliance, rather than mere retribution.
35. It must also be observed that the sentence imposed is not draconian. Section 14(1A) of the EPF Act prescribes the punishment in cases of default. The Trial Court has imposed six months' Simple Imprisonment -- not Rigorous Imprisonment -- and a modest fine of ₹5,000/-, coupled with a direction to deposit the actual 39 Crl.Apl.No.1711/2024 JUDGMENT arrears within three months. The learned Trial Court has also permitted suspension of sentence under Section 389(3) Cr.P.C. and enlarged the accused on bail pending appeal. In these circumstances, the sentence cannot be characterised either as shocking the conscience of this Court or as disproportionate so as to warrant interference in appellate jurisdiction. On the contrary, to dilute the sentence in the present factual matrix would amount to a judicial endorsement of prolonged non-payment of statutory social security dues of employees, and would send an unfortunate message that Directors and controlling persons of establishments may treat provident fund remittances as negotiable commercial liabilities rather than mandatory trust obligations.
36. This Court is, therefore, driven to the considered conclusion that the impugned judgment of conviction is not vitiated by perversity, misreading of evidence, misdirection in law, or violation of settled principles of criminal jurisprudence. The Trial Court has, with meticulous reference to Ex.P-1 to Ex.P-9, the oral 40 Crl.Apl.No.1711/2024 JUDGMENT evidence of PW-1, the statutory scheme of the EPF Act, the continuing nature of the default, the binding effect of Section 7A determination which remained unquestioned, and the ratio of the Hon'ble Supreme Court in Srikantadatta Narasimharaja Wodiyar (1993) 3 SCC 217, recorded findings which are firmly rooted both in fact and in law. The defences pleaded in appeal -- want of muster rolls, plea of limitation, plea of non-application of mind in sanction, plea of "only a lady Director," plea of lack of specific role -- all stood available to the appellants at trial, but none of them were translated into cogent rebuttal evidence demonstrating either absence of knowledge or exercise of due diligence. The burden that statutorily shifted to the appellants remained undischarged. In such a situation, the learned Trial Court was fully justified in holding them guilty and imposing the sentence complained of.
37. Thus, on Point No.1, this Court finds no ground to interfere with the finding of guilt recorded by the learned Trial Court against Accused Nos.2 and 5 for 41 Crl.Apl.No.1711/2024 JUDGMENT the offences punishable under Section 14(1A) read with Section 14A of the EPF Act, 1952.
38. Consequently, in view of the answer on Point No.1, Point No.2 also does not merit interference. The sentence, being within the bounds of statutory prescription, reasoned, and proportionate to the nature of default, is affirmed. Accordingly, I answer Point No.1 and 2 in the Negative.
39. Point No.3: In view of the reasons mentioned above and the findings arrived at on Point No.1 and 2, I proceed to pass the following:
ORDER The Criminal Appeal filed by Accused Nos.2 and 5 under Section 374(3) of the Code of Criminal Procedure, 1973, challenging the judgment of conviction and order of sentence dated 26.09.2024 passed by the Presiding Officer, Special Court for Economic Offences, Bengaluru, in C.C. No.97/2024, is hereby DISMISSED.
The finding of guilt recorded by the Trial Court holding Accused Nos.2 and 5 guilty of the offences punishable under Section 14(1A) read with Section 14A of 42 Crl.Apl.No.1711/2024 JUDGMENT the Employees' Provident Funds and Miscellaneous Provisions Act, 1952, is hereby CONFIRMED.
The sentence imposed upon Accused Nos.2 and 5, namely, to undergo Simple Imprisonment for a period of six months and to pay fine of ₹5,000/- each, with default Simple Imprisonment for a period of one month, is hereby CONFIRMED.
The direction of the Trial Court that Accused Nos.2 to 5 shall jointly pay the fine of ₹5,000/- imposed on Accused No.1 establishment, and in default shall undergo further Simple Imprisonment for a period of 10 days, is CONFIRMED.
The direction of the Trial Court passed under Section 14C(1) of the EPF Act requiring payment of ₹6,05,622/-
(Rupees Six Lakhs Five Thousand Six Hundred and Twenty Two only), being the employees' and employers' contributions and administrative charges towards Provident Fund for the period March 2013 to May 2013, within three months to the complainant Authority, is also CONFIRMED.
The award of compensation of ₹1,000/- (Rupees One Thousand only) to the complainant Authority under Section 357 Cr.P.C. is MAINTAINED.
The direction of the learned Trial Court that the substantive sentences 43 Crl.Apl.No.1711/2024 JUDGMENT shall run concurrently is left undisturbed.
The benefit extended by the learned Trial Court under Section 389(3) Cr.P.C. shall continue subject to the appellants complying with the conditions imposed therein, until expiry of the period for preferring further appeal/revision in accordance with law.
Send back the Trial Court records forthwith along with a copy of this judgment.
(Dictated to Stenographer Grade-I directly on computer, typed by him, revised and corrected by me and then pronounced in open court on this the 20th day of December, 2025) SHIRIN JAVEED Digitally signed by SHIRIN JAVEED ANSARI ANSARI Date: 2026.01.03 18:20:59 +0530 (Shirin Javeed Ansari) LXIX Addl.C.C. & Sessions Judge, Bengaluru.