Bangalore District Court
M/S Design Apparels Pvt Ltd vs The Enforcement Officer Epfo on 20 December, 2025
1 Crl.Apl.No.1755/2024 JUDGMENT
KABC010274782024
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.1755/2024
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.1755/2024 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 Criminal Appeal is directed against the judgment of conviction and order of sentence dated 26.09.2024 passed in C.C. No.109/2024 by the Presiding Officer, Special Court for Economic Offences, Bengaluru, whereby the present appellants, who were arrayed as Accused Nos.2 and 5, were convicted for the offence punishable under Section 14(1A) read with Section 14(2) of the Employees' 3 Crl.Apl.No.1755/2024 JUDGMENT Provident Funds and Miscellaneous Provisions Act, 1952, and sentenced as detailed therein.
2. Being aggrieved by the impugned judgment and conviction, the accused No.1, 2 and 5 have preferred the present appeal under Section 374(3) of the Code of Criminal Procedure seeking to set aside the same.
3. The accused No.1, 2 and 5 in CC No.109/2024 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.1, 2 and 5 and respondent as complainant in CC No.109/2024 in the instant discussion for the purpose of brevity and convenience to avoid the confusion and perplexity.
4. The brief facts necessary for adjudication are that M/s. Design Apparels Pvt. Ltd., arrayed as Accused No.1 before the trial court, was an establishment duly covered under the Employees' Provident Fund and Miscellaneous Provisions Act, 1952 (hereinafter referred to as "the Act"). The prosecution alleged that the accused 4 Crl.Apl.No.1755/2024 JUDGMENT persons, being Directors and Additional Director of the said company, were responsible for the conduct of its business and management. During the period between December 2013 and February 2014, the accused failed to remit the employer's contribution towards the Pension Fund amounting to ₹2,71,084/-, thereby committing a continuing default under the provisions of the Act.
5. The complainant, being the Enforcement Officer of the Regional Office of the Employees' Provident Fund Organization, after due sanction from the competent authority under Section 14(1B), initiated the present prosecution before the Special Court. Upon full-fledged trial and appreciation of oral and documentary evidence, the trial Judge recorded a conviction and imposed fine. Hence this appeal.
6. Being aggrieved by the findings of guilt, the conviction and the sentence, Accused Nos.1, 2 and 5 have preferred the instant appeal against the respondent who was the complainant before the trial court on the following: 5 Crl.Apl.No.1755/2024 JUDGMENT
GROUNDS OF APPLEAL
a) It is submitted that the impugned Judgment, Order of Conviction and Sentence passed by the Court are opposed to law, facts, circumstances and probabilities of the case.
b) It is submitted that the Special Court for Economic Offences committed serious error in recording conviction against the accused on the basis of conjecture and surmises because the Complainant failed to adduce any reliable evidence.
c) It is submitted that the Complainant has filed this complaint without sufficient documents and also with an intention to harass the accused persons.
d) It is submitted that, Exhibit. P4 was issued in a proceeding under Section 7A of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952. A reading of Section 7A of the Act would show that, before issuing the proceedings under Section 7A, the employer concerned shall be given reasonable opportunity to represent his case. No document was 6 Crl.Apl.No.1755/2024 JUDGMENT produced to show that, a notice as contemplated under Section 7A(3) was given to Accused No.2 and 5 to represent There case before issuing the proceedings under Section 7A.
e) It is submitted that, the complainant has filed this case to sue Employee provident Fund contributions from the employers, but the complainant has not produced a single documents of the employees to show how many Number of Employees working at that particular period P.F Account details of the employees and also the amount deducting from each employee towards contributions.
f) It is further submitted that, Pertaining to the details of Employees as mentioned above we have questioned the complainant at the time of cross examination for that the complainant admitted himself that they have not produced any Employee details further Further not adduced any further Evidence pertaining to that.
g) It is submitted that the Accused No. 2 and 5 has been wrongfully convicted under 7 Crl.Apl.No.1755/2024 JUDGMENT section 14A of the Employees' Provide Funds-and Miscellaneous Provisions Act, 1952 as the person responsible for the conduct of the business of Accused No. 1.
According to the ratio in T.A. Varghese v.
Ram Bahadur Thakur Limited, CRL.A.No.356 OF 2006in the High Court of Kerala, "A reading of Section 14A Sub-clause (i), it is clear that, only the person responsible to the Company for the conduct of the business of the Company as well as the Company alone are liable to be prosecuted and not all Directors. In other words, the appellants who are Directors, cannot be prosecuted, unless there is pleadings and evidences to show that, they were in charge and responsible for the conduct of the business of the Company."
h) It is submitted that Form 5A, Ex. P-3 just lists Accused No.5 as Additional director. It is nowhere mentioned in Form 5A Ex. P-3, that Accused No.5 was in charge and responsible for the conduct of the business of the Accused No. 1.
8 Crl.Apl.No.1755/2024 JUDGMENT
i) It is further submitted that, the appellant No.3 is a lady, further she is a mother of 2 children's and also she single handedly taking care of the entire family.
j) The Trial Court ought to have appreciated the evidence in proper perspective, instead of applying the story narrated by prosecution witnesses as proof. It is this mechanical approach of the trial court has resulted serious miscarriage of justice to the appellant.
k) That in the instant case many circumstances as pointed out above the point out towards the innocence of the appellant. Some of the other circumstances are pointing towards alternative hypothesis susceptible of rational explanation and none of the circumstance is pointing towards the guilt of appellant. Therefore, the appellant is entitled for acquittal. The trial court committed a serious error in recording guilt on some surmises and conjectures and thereby serious miscarriage of justice has resulted to the appellant, which is to be set right in this appeal.
9 Crl.Apl.No.1755/2024 JUDGMENTHence, 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.109/2024 dated 26.09.2024 and acquit the accused in the interest of justice.
7. This Court has heard the learned counsel appearing for the appellants and the learned counsel appearing for the respondent. The entire original records of the Trial Court have been summoned and examined.
8. On the basis of the rival submissions and the record, the following points arise for consideration of this appellate Court:
(1) Whether the impugned judgment of conviction and sentence suffers from illegality, perversity, or miscarriage of justice?
(2) What Order?
9. My findings to the above points are as under:
Point No.1 : In the Negative 10 Crl.Apl.No.1755/2024 JUDGMENT Point No.2 : As per final order for the following:
REASONS
10. Point No.1:-- The brief facts necessary for adjudication are that M/s. Design Apparels Pvt. Ltd., arrayed as Accused No.1 before the trial court, was an establishment duly covered under the Employees' Provident Fund and Miscellaneous Provisions Act, 1952 (hereinafter referred to as "the Act"). The prosecution alleged that the accused persons, being Directors and Additional Director of the said company, were responsible for the conduct of its business and management. During the period between December 2013 and February 2014, the accused failed to remit the employer's contribution towards the Pension Fund amounting to ₹2,71,084/-, thereby committing a continuing default under the provisions of the Act.
11. The complainant, being the Enforcement Officer of the Regional Office of the Employees' Provident Fund Organization, after due sanction from the competent 11 Crl.Apl.No.1755/2024 JUDGMENT authority under Section 14(1B), initiated the present prosecution before the Special Court. Upon full-fledged trial and appreciation of oral and documentary evidence, the trial Judge recorded a conviction and imposed fine. Hence this appeal.
12. The appellants have raised several grounds which are already extracted hereinabove and primarily contend that. The prosecution lacked proof of employee details. No notice under Section 7A(3) was issued. Form 5A merely lists them as Directors without showing control. The lady appellant was not responsible for the business, and the conviction was mechanical and based on conjecture.
13. On meticulous re-examination of the records, this Court finds that the trial Judge has undertaken a judicious and reasoned appreciation of the evidence. The complainant, examined as PW-1, has adduced both oral and documentary evidence, namely Ex.P-1 to Ex.P-9, which include the sanction order, Form 5A, inquiry order under Section 7A, and service records. Each of these 12 Crl.Apl.No.1755/2024 JUDGMENT exhibits supports the complainant's case that the establishment failed to remit statutory dues for the specified period.
14. The defence urged that no notice was served under Section 7A(3) of the Act. However, Ex.P-5 to Ex.P-8, which consist of email notices and tracking reports generated through the Shram Suvidha Portal, clearly evidence that due notice was issued. Once notice is dispatched to the registered email or address, presumption under Section 27 of the General Clauses Act and Section 114(f) of the Indian Evidence Act arises. The accused have failed to rebut such presumption.
15. The Hon'ble Supreme Court of India in Hindustan Times Ltd. v. Union of India, (1998) 2 SCC 242, has held that once a quasi-judicial order under Section 7A of the EPF Act is passed after notice, it becomes binding unless set aside by a competent forum. The appellants have not challenged the said order (Ex.P-4) before the EPF Appellate Tribunal. Hence, the finding of default contained therein is conclusive and binding. 13 Crl.Apl.No.1755/2024 JUDGMENT
16. The trial court has, with precision, recorded that the appellants neither produced any material to show payment nor any document evidencing compliance. In Regional Provident Fund Commissioner v. S.K. Nasiruddin Beedi Merchant Ltd., (2001) 7 SCC 254, the Apex Court held that the onus to prove that contributions were paid rests squarely upon the employer once the prosecution establishes default. The appellants' silence and failure to produce accounts reinforce their culpability.
17. The contention that the complainant failed to produce employee details is of no avail. The offence under Section 14(1A) is not dependent on the number of employees but on the failure to remit the employer's statutory contribution. The statute imposes an absolute liability, and mens rea is irrelevant, as clarified in E.S.I. Corporation v. S.K. Aggarwal, (1998) 1 SCC 1, which held that once an establishment is covered by welfare legislation, obligation to comply with its provisions is mandatory and strict.
18. The plea that the complaint was filed mala fide 14 Crl.Apl.No.1755/2024 JUDGMENT or with an intention to harass is speculative. No material was produced to substantiate such an allegation. On the contrary, the complainant being a statutory authority acted in discharge of public duty, and as held in State of Gujarat v. Jaswantlal Nathalal, AIR 1968 SC 700, statutory actions are presumed bona fide unless proved otherwise.
19. The core issue pertains to whether the appellants, being Directors, were responsible for the conduct of the company's business. The Form 5A (Ex.P-3) is conclusive under Section 35 of the Evidence Act, being an official record maintained by a statutory body. It clearly records Accused No.2 as the person in charge of and responsible for the conduct of business and Accused No.5 as Additional Director.
20. In Srikanta Datta Narasimharaja Wodiyar v. Enforcement Officer, Mysore, (1993) 3 SCC 217, the Hon'ble Supreme Court interpreted "employer" under Section 2(e) to include every person having ultimate control over the affairs of an establishment, including Directors. 15 Crl.Apl.No.1755/2024 JUDGMENT The same principle was reiterated in Regional Provident Fund Commissioner v. Dharamsi Morarji Chemical Co. Ltd., AIR 1998 SC 1242, holding that Directors cannot escape liability merely by pleading ignorance.
21. The appellants have not produced any resignation letter, board resolution, or intimation to the EPFO demonstrating cessation of control during the default period. Paragraph 36-A of the EPF Scheme, 1952, casts a statutory duty upon the employer to intimate change in management within fifteen days. Non-compliance thereof perpetuates their liability.
22. Hon'ble Kerala High Court's decision in T.A. Varghese v. Ram Bahadur Thakur Ltd. (Crl.A. No.356/2006) relied upon by the appellants does not assist them. The said decision turned on absence of material connecting the Director to management. In the present case, Ex.P-3 coupled with the unchallenged Section 7A order sufficiently establishes control.
23. It is further argued that the company was "struck off" from the records of the Ministry of Corporate 16 Crl.Apl.No.1755/2024 JUDGMENT Affairs. Such striking off took place long after the period of default. The Hon'ble Supreme Court in Union of India v. Margadarshi Chit Funds (P) Ltd., (2017) 15 SCC 230, clarified that striking off of a company does not efface offences committed during its operational period.
24. The trial court's reasoning that the offences are continuing in nature finds statutory support in Section 472 of the Code of Criminal Procedure, 1973 (now Section 474 of the BNSS). Hence, the plea of limitation raised by the appellants rightly failed.
25. The trial court also correctly relied upon Section 114 of the Evidence Act to draw adverse inference against the appellants for not producing relevant records within their possession. This approach aligns with Shambhu Nath Mehra v. State of Ajmer, AIR 1956 SC 404, wherein it was held that the burden to prove facts especially within the knowledge of the accused lies upon them under Section 106 of the Evidence Act.
26. The complainant, being a public officer, enjoys the statutory presumption of regularity of official acts 17 Crl.Apl.No.1755/2024 JUDGMENT under Section 114(e) of the Evidence Act. No contrary evidence was led by the appellants to rebut this presumption.
27. The argument that the appellant No.5 is a lady managing her family and hence not responsible cannot absolve her. Gender or domestic responsibility cannot override statutory liability. The Hon'ble Supreme Court in Standard Chartered Bank v. Directorate of Enforcement, (2005) 4 SCC 530, held that even juristic and corporate persons can be prosecuted under penal provisions of economic statutes.
28. The trial Judge's finding that Ex.P-4 (Section 7A order) was never challenged is of profound significance. The said order, being a quasi-judicial determination of default, binds the accused until set aside. The failure to contest it amounts to acquiescence.
29. This Court also notes that the prosecution sanction order (Ex.P-2) was issued after due application of mind, specifically referring to the role of the accused persons. The contention of non-application of mind stands 18 Crl.Apl.No.1755/2024 JUDGMENT negatived.
30. The sequence of communications -- notices, reminders, inquiry order, and subsequent complaint -- reveal due compliance with procedure. The appellants' inaction throughout these stages denotes deliberate neglect.
31. The prosecution has thus established all ingredients of the offence under Section 14(1A) read with Section 14(2): (i) establishment covered by the Act; (ii) default in remittance of employer's contribution; (iii) appellants being responsible officers of the establishment. Each element stands proved beyond reasonable doubt. The trial court's reasoning is fortified by the decisions of the Hon'ble Supreme Court in Employees' State Insurance Corporation v. F. Fibre Bangalore (P) Ltd., (1997) 11 SCC 667, which emphasized that statutory welfare enactments must receive purposive interpretation to ensure social justice.
32. This Court finds that the sentence imposed -- mere fine of ₹4,000/- each -- is rather lenient considering 19 Crl.Apl.No.1755/2024 JUDGMENT the magnitude of statutory default. The trial court's discretion under Section 14(1A) of the Act has been exercised judiciously.
33. No material irregularity, illegality, or perversity is demonstrated. The entire prosecution stands supported by cogent evidence, both oral and documentary, which remained UN-controverted.
34. This Court also observes that the trial court has carefully considered every defence plea and explained its rejection with sound reasoning. There is no indication of arbitrariness or mechanical approach as alleged.
35. In appeals against conviction, the appellate court does not reweigh evidence as if sitting in trial. Unless the findings are manifestly erroneous or unsupported by evidence, interference is unwarranted. The Hon'ble Supreme Court in Chandrappa v. State of Karnataka, (2007) 4 SCC 415, held that appellate interference arises only when conclusions are perverse. The present case does not fall within such category.
20 Crl.Apl.No.1755/2024 JUDGMENT
36. Consequently, this Court holds that the prosecution has proved beyond all reasonable doubt the guilt of the appellants. The conviction recorded by the Special Court for Economic Offences is sound, sustainable, and based on well-founded reasoning.
37. Before parting with this judgment, this Court deems it appropriate to elucidate the legislative spirit and judicial understanding underlying Section 14(1A) and Section 14(2) of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952. The aforesaid provisions are not to be read as mere penal clauses but as integral instruments designed to secure the social and economic well-being of the working class, forming part of the constitutional mandate embodied under Articles 38, 39, 41, and 43 of the Constitution of India.
38. The Employees' Provident Funds and Miscellaneous Provisions Act, 1952 was enacted as a beneficial social welfare legislation, envisaging the establishment of a compulsory contributory fund for the future security of employees. It embodies the constitutional 21 Crl.Apl.No.1755/2024 JUDGMENT philosophy of a "welfare state", ensuring protection of laborers against economic insecurity in post-employment years. The Hon'ble Supreme Court, in Organo Chemical Industries v. Union of India, (1979) 4 SCC 573, described the Act as a "sacred social security measure" designed to achieve distributive justice, observing that employers' contributions are not ex-gratia payments but a statutory debt owed to the laborers.
39. Section 14(1A) prescribes punishment for failure to pay contributions to the Fund, Pension Fund, or Insurance Fund. The intention of the Legislature in enacting this provision is to ensure punctual compliance with the statutory mandate and to deter willful defaults that imperil the rights of workers. It is a strict liability clause, where default itself constitutes the offence, and the element of mens rea is immaterial. The Hon'ble Supreme Court in Mcdowell & Co. Ltd. v. Employees' State Insurance Corporation, (2017) 16 SCC 258, held that when a statute creates a social obligation, the failure to perform it constitutes an absolute offence, irrespective of 22 Crl.Apl.No.1755/2024 JUDGMENT intent.
40. Similarly, Section 14(2) operates as a reinforcing clause, extending criminal liability to every person who was, at the time of the offence, in charge of and responsible for the conduct of the business of the establishment. The Legislature, in its wisdom, intended to pierce the corporate veil and affix responsibility upon natural persons in control of the juristic entity, so that culpability is not lost in corporate anonymity. This approach has been consistently upheld in Srikanta Datta Narasimharaja Wodiyar v. Enforcement Officer, Mysore, (1993) 3 SCC 217, where the Hon'ble Apex Court observed that "to say that the owner alone must be prosecuted is to ignore the extended meaning of the term 'employer' and defeat the object of the Act."
41. The Hon'ble Supreme Court has consistently interpreted these provisions in a purposive manner, recognizing that enforcement of social security obligations must be viewed not through the prism of penal law alone but as a constitutional responsibility of economic justice. 23 Crl.Apl.No.1755/2024 JUDGMENT In Regional Provident Fund Commissioner v. Dharamsi Morarji Chemical Co. Ltd., (1998) 2 SCC 446, it was held that Directors cannot plead ignorance or delegation to avoid liability once they are shown to be in control of the establishment's affairs.
42. Further, in E.S.I. Corporation v. F. Fibre Bangalore (P) Ltd., (1997) 11 SCC 667, the Hon'ble Supreme Court emphasized that statutes of social welfare must receive liberal construction to achieve their purpose and that any interpretation which defeats legislative intent or encourages evasion must be firmly eschewed.
43. The statutory framework thus reflects a dual object: first, to secure the economic dignity of employees by ensuring compulsory contributions; and second, to penalize non-compliance as an offence against public welfare. The concept of "default" under Section 14(1A) is not to be confined to deliberate evasion but includes all neglect or omission that results in deprivation of statutory benefits to employees.
44. The imposition of punishment under Section 24 Crl.Apl.No.1755/2024 JUDGMENT 14(1A) and the extension of vicarious liability under Section 14(2) are therefore not retributive but remedial, intended to compel obedience to the law. In Chairman, SEBI v. Shriram Mutual Fund, (2006) 5 SCC 361, Hon'ble Supreme Court of India had observed that where a statutory obligation is imposed for public benefit, non- compliance entails penalty irrespective of intent, since such provisions are enacted in the larger interest of the public.
45. It must be remembered that the entire edifice of social security legislation rests upon the principle of universality of obligation--that the benefits guaranteed to workers are not charity but enforceable rights, and employers act as trustees of those funds. The defaulter's act not only breaches statutory duty but violates public trust. Hence, courts must construe such provisions in a manner that advances the remedy and suppresses the mischief, in conformity with the Heydon's Rule of interpretation.
46. In the considered opinion of this Court, the trial 25 Crl.Apl.No.1755/2024 JUDGMENT Judge, in convicting the appellants under Sections 14(1A) and 14(2), has acted in perfect harmony with the legislative vision and judicial interpretation. The order of conviction thus stands as an affirmation of the rule of law that statutory welfare obligations cannot be shirked under the guise of technical defences.
47. This Court therefore reiterates that the EPF Act being a beneficial legislation of social justice, demands from the judiciary a liberal and purposive construction. The liability imposed on employers and directors is not merely personal but reflective of their fiduciary responsibility towards their workforce and the economic order envisaged by the Constitution.
48. Hence, this Court finds no infirmity either in the finding of guilt or in the quantum of sentence, which is indeed moderate considering the statutory nature of the default and the economic injury inflicted on the employees.
49. In conclusion, it is necessary to emphasize that social welfare enactments are the moral backbone of industrial jurisprudence. Their faithful enforcement reflects 26 Crl.Apl.No.1755/2024 JUDGMENT the commitment of the Republic to the dignity of labour and to the equitable distribution of economic security. Courts, being guardians of that commitment, must construe such laws with empathy, resolve, and constitutional fidelity.
50. The conviction of the appellants, therefore, not only vindicates the authority of law but also reinforces the sanctity of social welfare obligations -- obligations which transcend private interest and uphold the collective conscience of society. Accordingly, this appeal fails and stands dismissed in terms of the detailed judgment rendered above. Hence, Point No.1 is answered in the Negative and against the appellants.
51. Point No.2: In view of the reasons mentioned above and the findings arrived at on Point No.1, I proceed to pass the following:
ORDER The Criminal Appeal filed by the appellants (accused Nos.2 and 5) under Section 374(3) Cr.P.C. is hereby dismissed.27 Crl.Apl.No.1755/2024 JUDGMENT
The judgment of conviction and order on sentence dated 26.09.2024 passed by the Presiding Officer, Special Court for Economic Offences, Bengaluru, in C.C. No.109/2024, are hereby confirmed.
The appellants shall surrender before the trial court forthwith to serve the sentence imposed, if not already done.
Office is hereby directed to send back the records to the trial court 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 18:26:25 +0530 (Shirin Javeed Ansari) LXIX Addl.C.C. & Sessions Judge, Bengaluru.