Allahabad High Court
Uma Shankar Soni And Another vs State Of U.P. Thru. Secy. Dept. Of Home ... on 25 March, 2022
HIGH COURT OF JUDICATURE AT ALLAHABAD, LUCKNOW BENCH ? A.F.R. Court No. - 27 Case :- APPLICATION U/S 482 No. - 1312 of 2022 Applicant :- Uma Shankar Soni And Another Opposite Party :- State Of U.P. Thru. Secy. Dept. Of Home And Another Counsel for Applicant :- Manish Bajpai Counsel for Opposite Party :- G.A. Hon'ble Shree Prakash Singh,J.
1. Heard Sri Syed Imran Ibrahim and Sri Manish Bajpai, learned counsel for the applicants, Sri Anirudh Kumar Singh, AGA-I and Sri Sushil Pandey, learned AGA for the State and perused the record.
2. The notice to the respondent no.2 is hereby dispensed with.
3. By means of instant application under Section 482 Cr.P.C. has been filed assailing the order dated 29th September, 2021 passed by 9th Additional District and Sessions Judge, Rae Bareilly in Criminal Revision No.54 of 2019 as well as order dated 19th May, 2017 passed by ACJM, Court no.15, Rae Bareilly in Compliant Case No. 3074 of 2016, under Sections 419, 420 IPC, Police Station- Mill Area, District- Rae Bareilly.
4. The factual matrix of the case is that an application under Section 156(3) Cr.P.C. was filed by the opposite party no.2 against the applicants alleging therein that the applicants are under obligation to deposit the shares of the employees towards Employee Provident Fund (EPF) and the Employee State Insurance (ESI) .
5. After filing of the aforesaid application under Section 156(3) Cr.P.C., the court below registered the case as a complaint case vide its order dated 3rd of June, 2015. In compliance of the order, the court below examined the opposite party no.2 under Section 200 Cr.P.C. There is specific provision for punishment in the Act itself as such punishment under Section of I.P.C. would not be invoked.
6. After the aforesaid statement of the opposite party no.2, three witnesses namely Ramchandra Singh, Krishna Kumar Yadav and Prakhat Singh were recorded under Section 202 Cr.P.C. and were named as PWs 1, 2 and 3 respectively. After recording the aforesaid statement and examining the strength of the evidence, the lower court vide order dated 19th May, 2017 summoned the applicants under Sections 419 and 420 IPC.
7. Against the summoning order dated 19th May, 2017, the applicants filed a revision before the learned Sessions Judge. After filing of the aforesaid revision, it was finally heard and decided by the trial court on dated 29th September, 2021. Vide the order dated 29th September, 2021, the revision filed by the applicants, was dismissed and the summoning order dated 19th May, 2017 was affirmed.
8. The crux, on the basis of which the applicants were summoned, is that the applicants did not comply with the provision of Employee Provident Fund Act as well as Employee State Insurance Act. In fact, both the Acts specifically envisage provision of penalties.
9. He submits that Section 86 of Employee State Insurance Act, 1948 (hereinafter referred to as the 'Act, 1948') clearly states that prosecution for the violation of the Act can be done when a complaint is been filed with the prior permission of Insurance Commissioner by an officer who has been authorised to do so meaning thereby a complaint by an individual without compliance of the mandate of Act, 1948, cannot be entertained. The Section 86 of Act, 1948 is quoted hereinunder;
Section 86- (1) No prosecution under this Act shall be instituted except by or with the previous sanction of the Insurance Commissioner 1[or of such other officer of the Corporation as may be authorised in this behalf by the 2[Director General of the Corporation]].
(2) No court inferior to that of a Metropolitan Magistrate or Judicial Magistrate of the First Class shall try any offence under this Act.] (3) No Court shall take cognizance of any offence under this Act except on a complaint made in writing in respect thereof.
10. More importantly, Section 86(A) of Act, 1948 deals with the provision that if any offence has been committed, the company shall be deemed to be guilty. Section 86(A) of the Act, 1948 is quoted hereinbelow;
86A. Offences by companies.-
(1) If the person committing an offence under this Act is a company, every person, who at the time the offence was committed was incharge of, and was responsible to, the company for the conduct of the business of the company, as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly: Provided that nothing contained in this sub-section shall render any 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.
(2) Notwithstanding anything contained in sub-section (1), where an offence under this Act has been committed with the consent or connivance of, or is attributable to, any neglect on the part of, any director or manager, secretary or other officer of the company, such director, manager, secretary or other officer shall be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly. Explanation : -For the purposes of this section,-
(i) "company" means any body corporate and includes a firm and other associations of individuals; and
(ii) "director" in relation to-
(a) a company, other than a firm, means the managing director or a whole-time director;
(b) a firm means a partner in the firm.]
11. Learned counsel appearing for the applicants submits that the court below has failed to consider the fact that without arraying the company as party in criminal proceeding, no case can proceed. He added that even assuming the complaint in its true value then at best it is constituting offence under Section 85 of the Act, 1948. Sections 419 and 420 IPC would not attract in such matter. Section 85 of Act, 1948 is quoted hereinbelow;
85. Punishment for failure to pay contributions, etc.-If any person-
(a) fails to pay any contribution which under this Act he is liable to pay, or
(b) deducts or attempts to deduct from the wages of an employee the whole or any part of the employer's contribution, or
(c) in contravention of section 72 reduces the wages or any privileges or benefits admissible to an employee, or
(d) in contravention of section 73 or any regulation dismisses, discharges, reduces or otherwise punishes an employee, or
(e) fails or refuses to submit any return required by the regulations, or makes a false return, or
(f) obstructs any Inspector or other official of the Corporation in the discharge of his duties, or
(g) is guilty of any contravention of or non-compliance with any of the requirements of this Act or the rules or the regulations in respect of which no special penalty is provided, [he shall be punishable-
(i) where he commits an offence under clause (a), with imprisonment for a term which may extend to three years but
(a) which shall not be less than one year, in case of failure to pay the employee's contribution which has been deducted by him from the employee's wages and shall also be liable to fine of ten thousand rupees;
(b) which shall not be less than six months, in any other case and shall also be liable to fine of five thousand rupees:
Provided that the Court may, for any adequate and special reasons to be recorded in the judgement, impose a sentence of imprisonment for a lesser term;
(ii) where he commits an offence under any of the clauses (b) to (g) (both inclusive), with imprisonment for a term which may extend to one year or with fine which may extend to four thousand rupees, or with both.]
12. He further referred Section 14, 14A and 14AC of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 (hereinafter referred to as the 'EPFMP Act, 1952') which provides the procedure with regard to the penalties in case of violation of the provision of the Act and further Section 14A envisaged the offence committed by the company and Section 14AC speaks about cognizance and trial of the offence. The Sections 14, 14A and 14AC of EPFMP Act, 1952 are quoted hereinbelow;
14 Penalties. -
(1) Whoever, for the purpose of avoiding any payment to be made by himself under this Act ,the Scheme the [Pension] Scheme or the Insurance Scheme]] or of enabling any other person to avoid such payment, knowingly makes or causes to be made any false statement or false representation shall be punishable with imprisonment for a term which may extend to 19 [one year, or with fine of five thousand rupees, or with both].
(1A) An employer who contravenes, or makes default in complying with, the provisions of section 6 or clause (a) of sub-section (3) of section 17 in so far as it relates to the payment of inspection charges, or paragraph 38 of the Scheme in so far as it relates to the payment of administrative charges, shall be punishable with imprisonment for a term which may extend to three years), but
(a) which shall not be less than 22 [one year and fine of ten thousand rupees] in case of default in payment of the employees' contribution which has been deducted by the employer from the employees' wages;
[(b) which shall not be less than six months and a fine of five thousand rupees, in any other case]: [***] Provided that the court may, for any adequate and special reasons to be recorded in the judgment, impose a sentence of imprisonment for a lesser term [***].] (B) An employer who contravenes, or makes default in complying with, the provisions of section 6C, or clause (a) of sub-section (3A) of section 17 in so far as it relates to the payment of inspection charges, shall be punishable with imprisonment for a term which may extend to Jone year] but which shall not be less than [six months and shall also be liable to fine which may extend to [five thousand rupees]: Provided that the court may, for any adequate and special reasons to be recorded in the judgment, impose a sentence of imprisonment for a lesser term [***]. (2) (Subject to the provisions of this Act, the Scheme, the [Pension] Scheme or the Insurance Scheme] may provide that any person who contravenes, or makes default in complying with, any of the provisions thereof shall be punishable with imprisonment for a term which may extend to [one year, or with fine which may extend to four thousand rupees, or with both).
(2A) Whoever, contravenes or makes default in complying with any provision of this Act or of any condition subject to which exemption was granted under section 17 shall, if no other penalty is elsewhere provided by or under this Act for such contravention or non-compliance, be punishable with imprisonment which may extend to [six months, but which shall not be less than one month, and shall be liable to fine which may extend to five thousand rupees.
14A Offences by companies.
(1) If the person committing an offence under this Act the Scheme or the [Pension] Scheme or the Insurance Schemell is a company, every person, who at the time the offence was committed was in charge of, and was responsible to, the company for the conduct of the business of the company, as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly: Provided that nothing contained in this sub-section shall render any such person liable to any punishment, if he proves that the offence was committed without his knowledge or that he exercised all due diligence to prevent the commission of such offence.
(2) Notwithstanding anything contained in sub-section (1), where an offence under the Act, the Scheme or [the [Pension Scheme or the Insurance Scheme] has been committed by a company and it is proved that the offence has been committed with the consent or connivance of, or is attributable to, any neglect on the part of, any director or manager, secretary or other officer of the company, such director, manager, secretary or other officer shall be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly. Explanation-For the purposes of this section, (a) "company" means any body corporate and includes a firm and other association of individuals; and (b) "director", in relation to a firm, means a partner in the firm.
Section 14AC: Cognizance and trial of offences. No court shall take cognizance of any offence punishable under this Act, the Scheme or 2/the 3/Pension] Scheme or the Insurance Scheme] except on a report in writing of the facts constituting such offence made with the previous sanction of the Central Provident Fund Commissioner or such other officer as may be authorised by the Central Government, by notification in the Official Gazette, in this behalf, by an Inspector appointed under section 13. (2) No court inferior to that of a Presidency Magistrate or a Magistrate of the first class shall try any offence under this Act or Scheme or 2[the 3[Pension] Scheme or the Insurance Scheme.
13. He has also referred the Section 94 of the Employees State Insurance Act, 1948, wherein the payment of priorities of dues have been mentioned. He submits that if a company is corporation and declares insolvency then distribution of property of the insolvent is required to be paid on priority basis to the employees which has contributed and covered under Section 94 of the Act, 1948, which reads as under;
94. Contributions, etc., due to Corporation to have priority over other debts.? There shall be deemed to be included among the debts which, under section 49 of the Presidency-towns Insolvency Act, 1909 (3 of 1909) or under section 61 of the Provincial Insolvency Act, 1920 (5 of 1920), 1[or under any law relating to insolvency in force 2[in the territories which, immediately before the 1st November, 1956, were comprised in a Part B State]], 3[or under section 530 of the Companies Act, 1956 (1 of 1956)], are, in the distribution of the property of the insolvent or in the distribution of the assets of a company being wound up, to be paid in priority to all other debts, the amount due in respect of any contribution or any other amount payable under this Act the liability where for accrued before the date of the order of adjudication of the insolvent or the date of the winding up, as the case may be.
14. In view of the aforesaid, there would be no any financial loss to the applicants so far as the payment of the provident fund or any insurance benefit are concerned.
15. Quoting the aforesaid, he submits that since under the clause 86A in the Act, 1948, there is deeming clause and he has drawn attention that this deeming clause shows the intent of the legislature while enactment of the aforesaid provision without holding the body corporate guilty the purpose of the Act would be frustrated.
16. He further argued that, in fact, the company namely Shree Bhawani Paper Mills Limited is under liquidation at present. Further it is not a case where the company or its Director has intentionally committed any cheat or forgery but it is due to unavoidable financial crisis as the Bank's account of the company declared as Non-Performing Assets (NPA) in the month of December, 2012. It is admitted fact on behalf of the complainants that they are not getting the benefit of EPF and ESI since 2012.
17. He has also added that company was declared as sick unit under the Sick Industrial Companies (Special Provisions) Act, 1985, on 26th September, 2013 and once the company has been declared as sick unit, the Board of Directors of the company ceased to exercise any constructive control over the management and affairs of the company.
18. He further added that while the matter was pending before Board of Industrial Financial Reconstruction (BIFR), the Government of India promulgated the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as the 'Code, 2016') and as soon as the aforesaid Code, 2016 was promulgated, the company moved an application under Section 10 of the Code, 2016, which was admitted by the Tribunal on 13th February, 2018. After the aforesaid application, the resolution professional was appointed and moratorium as mentioned under Section 14 of the Code, 2016 was enforced.
19. He further submits that after the aforesaid, the company could not be revived and learned National Company Law Tribunal vide order dated 17th July, 2021 directed that assets of the company be liquidated so as to recover the loss of the debtor and thus the company went into liquidation proceedings. After the aforesaid order, the moratorium under Section 14 of the Code, 2016 was lifted and moratorium under Section 33(5) was enforced.
20. He also argued that after appointment of resolution professional, the notices were published in leading newspapers with regard to the fact that the company has gone into liquidation proceedings. Thereafter e-auction was successfully done on 25th October, 2021 and letter of intent was issued in favour of R.K. Chaudhary and new company i.e. M/s Inter Weaved Polytex Pvt. Ltd. He submits that there is specific provision in both the Acts that if such a company goes under liquidation and the matter is settled, the payment is to be meet/ released/ disbursed to the claimants particularly as per provisions envisaged under ESI Act and EPF Act.
21. He submits that the proceeding against the applicants cannot be continued since the company has not been arrayed as party. He added that hearing of proceeding of the complaint as well as issuance of summon in the complaint case vitiates in the eyes of law as the authority of the Apex Court as well as other High Courts are very clear that company is an essential party in such cases.
22. It is an admitted fact that the company has not been arrayed as party. He further says that nothing has been concealed or no cheat, fraud or forgery has ever been committed by the applicants and due to the financial hardship the company could not be allowed to run as per law and the same went into liquidation proceedings and every disbursement is to be done as per law. He further added that the applicants are law abiding citizen and commanding respect in the society and they had no criminal intent to make any fraud or forgery with the complainants. He has further drawn attention towards the list of the complainants-employees annexed as Annexure-14 with instant application wherein the name of the complainant/respondent no.2 finds place at serial no.3.
23. He submits that the intent of the legislature would frustrate if the applicants are been prosecuted in furtherance to the criminal proceeding of the Complaint Case No.3074 of 2016.
24. He also argued that, in fact, it is a matter of civil liability and it is not a criminal act. He has forcibly argued that since the company has not been arrayed as party in the complaint and as such the whole proceedings of the complaint case is vitiated and is not sustainable in the eyes of law. Further the order passed by the revisional court is also not sustainable and same has passed on the similar premises and without arraying company as party.
25. Learned counsel appearing for the applicants, in support of his contention, has placed reliance on the case of Aneeta Hada vs Godfather Travels and Tours Private Limited; 2012(5) SCC 661. It has been upheld by the Hon'ble Apex Court that company is a juristic person and can be fastened with criminal liability. Extract of the aforesaid judgment are as follows:-
"We have referred to the aforesaid authorities to highlight that the company can have criminal liability and further, if a group of persons that guide the business of the companies have the criminal intent, that would be imputed to the body corporate. In this backdrop, Section 141 of the Act has to be understood. The said provision clearly stipulates that when a person which is a company commits an offence, then certain categories of persons in charge as well as the company would be deemed to be liable for the offences under Section 138. Thus, the statutory intendment is absolutely plain. As is perceptible, the provision makes the functionaries and the companies to be liable and that is by deeming fiction. A deeming fiction has its own signification."
26. He has further placed reliance on the case of Sharad Kumar Sanghi vs. Sangita Rane reported in (2015) 12 SCC 781. It has been held in para 11 to 13 that where there is allegation against the Director and company has not been arrayed as a party, no proceedings can be initiated against it even where the vicarious liability is fastened in certain statutes.
"11. In the case at hand as the complainant's initial statement would reflect, the allegations are against the company, but the company has not been made arrayed as a party. Therefore, the allegations have to be restricted to the Managing Director. As we have noted earlier, allegations are vague and in fact, principally the allegations are against the company. There is no specific allegation against the Managing Director. When a company has not been arrayed as a party, no proceeding can be initiated against it even where vicarious liability is fastened on certain statutes. It has been so held by a three-Judge Bench in Aneeta Hada v. Godfather Travels and Tours Private Limited in the context of Negotiable Instruments Act, 1881.
12. At this juncture, it is interesting to note, as we have stated earlier, that the learned Magistrate while passing the order dated 22.10.2001, had opined, thus:-
"It appears prima-facie from the complaint filed by the complainant, documents, evidence and arguments that accused company has committed cheating with the complaint by delivering old and accidented vehicle to her at the cost of a new truck. Accordingly, prima-facie sufficient grounds exist for registration of a complaint against the accused U/s. 420 of I.P.C. and is accordingly registered."
13. When the company has not been arraigned as an accused, such an order could not have been passed. We have said so for the sake of completeness. In the ultimate analysis, we are of the considered opinion that the High Court should have been well advised to quash the criminal proceedings initiated against the appellant and that having not been done, the order is sensitively vulnerable and accordingly we set aside the same and quash the criminal proceedings initiated by the respondent against the appellant."
27. It has also been reiterated in case of Sushil Sethi and another vs. State of Arunachal Pradesh and others reported in (2020) 3 SCC 240 wherein the Hon'ble Apex Court in para 8.2 of this judgment held that if the allegations are against the company and the company has not been made a party then it is obligatory on the part of the complainant to make requisite allegations which would attract the provisions constituting vicarious liability against the companies. Para 8.2 is extracted hereasunder:-
8.2. It is also required to be noted that the main allegations can be said to be against the company. The company has not been made a party. The allegations are restricted to the Managing Director and the Director of the company respectively. There are no specific allegations against the Managing Director or even the Director. There are no allegations to constitute the vicarious liability. In the case of Maksud Saiyed v. State of Gujarat (2008) 5 SCC 668, it is observed and held by this Court that the penal code does not contain any provision for attaching vicarious liability on the part of the Managing Director or the Directors of the company when the accused is the company. It is further observed and held that the vicarious liability of the Managing Director and Director would arise provided any provision exists in that behalf in the statute. It is further observed that statute indisputably must contain provision fixing such vicarious liabilities. It is further observed that even for the said purpose, it is obligatory on the part of the complainant to make requisite allegations which would attract the provisions constituting vicarious liability. In the present case, there are no such specific allegations against the appellants being Managing Director or the Director of the company respectively. Under the circumstances also, the impugned criminal proceedings are required to be quashed and set aside.
28. Further Hon'ble Apex Court in the case of S.K. Alagh vs. State of Uttar Pradesh and others reported in (2008) 5 SCC 662, has held in para 14 to 19 that even at drafts were drawn in the name of the company, the appellant was its Managing Director, he cannot be said to have committed an offence under Section 406 of the Penal Code. In absence of any provision laid down under the statute, a Director of a company or an employee cannot be held to be vicariously liable for any offence committed by the company itself. The following para is extracted below:-
14. Appellant No.1 is the Managing Director of the Company. Respondent No.3 was its General Manager. Indisputably, the company is a juristic person. The demand drafts were issued in the name of the company. The company was not made an accused. The dealership agreement was by and between M/s. Akash Traders and the company.
15. Mr. Pramod Swarup, learned counsel appearing on behalf of Responent No.2, in support of the order passed by the learned Chief Judicial Magistrate as also the High Court, submitted that as, prima facie, the appellant was in charge of and was in control of the business of the company, he would be deemed to be liable for the offence committed by the company.
16. The Penal Code, save and except some provisions specifically providing therefor, does not contemplate any vicarious liability on the part of a party who is not charged directly for commission of an offence.
17. A criminal breach of trust is an offence committed by a person to whom the property is entrusted.
18. Ingredients of the offence under Section 406 are :
"(1) a person should have been entrusted with property, or entrusted with dominion over property;
(2) that person should dishonestly misappropriate or convert to his own use that property, or dishonestly use or dispose of that property or willfully suffer any other person to do so;
(3) that such misappropriation, conversion, use or disposal should be in violation of any direction of law prescribing the mode in which such trust is to be discharged, or of any legal contract which the person has made, touching the discharge of such trust."
19. As, admittedly, drafts were drawn in the name of the company, even if appellant was its Managing Director, he cannot be said to have committed an offence under Section 406 of the Indian Penal Code. If and when a statute contemplates creation of such a legal fiction, it provides specifically therefor. In absence of any provision laid down under the statute, a Director of a company or an employee cannot be held to be vicariously liable for any offence committed by the company itself. {See Sabitha Ramamurthy and Anr. v. R.B.S. Channabasavaradhya.
29. He has further placed reliance on the case of Roop Mani Pandey vs State of U.P. and Anr. along with other connected applications, on 16.02.2016 which has held ratio as under;
"After having given my anxious thought to the rival submissions made on behalf of the parties and considering the material on record, I find that it is not disputed between the parties that the opposite party No.2 has supplied the material to the company and the company was liable to pay its price to the opposite party No.2, but it is not disputed between the parties that by order passed by B.I.F.R. dated 08.10.2013 the company has been declared as sick unit and unless the company stands rehabilitated, the petitioners, who are sought to be prosecuted, cannot do anything. It has also not been disputed that the opposite party No.2 has also initiated the proceedings of civil case for recovery of the amount due. The company has not been impleaded as an accused in the complaint. It has also not been shown as to how the petitioners are liable for payment of dues to the opposite party No.2 while the material was supplied in the name of the company. The opposite party No.2 has failed to show as to how the petitioners are vicariously liable for the company. The learned Magistrate while passing the summoning order and taking cognizance, has failed to disclose as to how the petitioners are liable to be prosecuted for the offence under Sections 418 and 506 IPC. Since, the opposite party No.2 had supplied the material in the name of the company and admittedly company has not been arrayed as an accused, the learned Magistrate ought not to have passed the impugned order summoning the petitioners, specially when the opposite party No.2 had failed to show as to how the petitioners are liable for the wrong committed by the company."
30. He further referred a case in Standard Chartered Bank vs Director of Enforcement reported in 2005(4) SCC 530 has referred para 6. The para 6 of the aforesaid judgment is quoted hereinbelow;
"6. There is no dispute that a company is liable to be prosecuted and punished for criminal offences. Although there earlier authorities to the effect that corporations cannot commit a crime, the generally accepted modern rule is that except for such crimes as a corporation is held incapable of committing by reason of the fact that they involve personal malicious intent, a corporation may be subject to indictment or other criminal process, although the criminal act [may be] committed through its agents."
It has also been observed that there is no immunity to the companies from prosecution merely because the prosecution is in respect of offences for which the punishment is mandatory imprisonment and fine."
31. Referring the aforesaid, he submits that now it has been settled that the company is liable to be prosecuted and punished for criminal offence. Company is not immuned from the prosecution. He added that locus to prima facie satisfy the court upon the complainant that intent of the company was missing in a particular case.
32. He also added that in the instant matter, the punishment for violation is itself provided in the Employee State Insurance Act, 1948 as well as Employee Provident Fund and Miscellaneous Act, 1952 and being the special law the prosecution can only be done under the provision of the aforesaid Act. It is admitted fact that the violation has been done which comes under the preview of Section 86A of the Act, 1948 as well as Sections 14 and 14A of the Act, 1952 and as such the learned Magistrate could have invoked his jurisdiction in the aforesaid provision but it is evident from the impugned order dated 29th September, 2021 that Magistrate has issued the process by issuing a summon vide order dated 19th May, 2017 under Sections 419 and 420 of the IPC. He submits that the Magistrate could not have issued the summons under the aforesaid provision of IPC and as such the whole proceeding of the complaint case vitiates in the eyes of law.
33. Learned counsel appearing for the petitioner has argued that it is a bullet point since the company has not been arrayed as party in the complaint case and there is settled proposition of law that the company being a juristic person is liable to be prosecuted and is to be punished as such the order passed by the learned Magistrate in Complaint Case No.3074 of 2016 is liable to be set aside.
34. On the other hand, learned AGA appearing for the State has very vehemently opposed the contention aforesaid and submits that the learned Magistrate has very well recorded the statement of the complainant and witnesses under Sections 200 and 202 Cr.P.C. He submits that there is no any deviation or unlawfulness in recording the statement of the complainant or the witnesses. He also added that there is no proclavity or contradiction in the statement under Sections 200 and 202 Cr.P.C. and there are ample material facts on the basis on which, the complaint case can proceed against the present applicants.
35. While countering the contention of learned counsel for the applicant, on the issue that the company is under liquidation proceedings, he submits that in fact the liquidation proceeding is civil proceeding, which can go on simultaneously with the criminal proceedings and as such this set of argument of the applicants have no force.
36. He also added that since so far as the contention regarding non-impleadment of the company as party is concerned, it is technicality and that will not affect the fate of the case or that will not vitiate of complaint proceedings.
37. He further argued that in fact the applicants have committed breach of trust as well as cheated the complainant, and as such, they can be prosecuted. There are material facts as per statement of witnesses and complainant.
38. Having heard the learned counsel for the parties and after perusal of record, I find that the present applicants are said to be Directors of the Company. The Company was already declared sick unit on 26th September, 2013 and it is an admitted fact that the bank accounts of the company were declared as Non-Performing Assets (NPA) in way back December 2012. Further the Company is under liquidation proceedings invoking the provisions of Section 33 of Insolvency and Bankruptcy Code, 2016 and after calling the objections the applicants have already forwarded their objections through a list (annexed as annexure 14, page 122 of this writ petition), wherein the name of the complainant no.2 find place at serial no.3 and as such no error or illegality or criminal intent is prima face seems to be committed/seen in the aforesaid matter.
39. Further from perusal of the complaint, it is evident that the same has been filed for deliberately non-payment of 12% of contribution of EPF and ESI 17% to the complainant. Penalty as well as the punishment has been prescribed under the Employees Provident Fund as well as Employee State Insurance Act, 1948.
40.It has also been noticed that after 2012 due to financial hardship the Bank account of the company has become NPA and later on under the Insolvency and Bankruptcy Code, 2016, the proceedings were initiated. The resolution professional was appointed and the matter further proceeded. It has also been noticed that the list, which was produced before the resolution professional, finds place the name of the complainant at serial no.3. Section 94 of the Act, 1948 envisaged the provision that in such eventuality, the payment under Act, 1948 shall have priority over the other debts of the company. Meaning thereby as soon as liquidation procedure would be concluded, as per Act, 1948, the dues shall be paid firstly to such employees, naturally the applicants are also covered under the same. At this stage, this Court restraining itself to comment on the issue regarding deliberate intent of the Directors and the Company for not payment of the dues under the Act, 1948 and EPF Act.
41. Coming to the issue with regard to the fact that whether the company is juristic person and further company can have any criminal liability and can be punished, it has been settled that the company is juristic person and the doctrine of vicarious liability also touch to the company as well as the Directors vise versa. The liability is penal and in such situation, the strict interpretation of law shall be done. In the Act, 1952, the penalty and punishment both have been provided for non-payment of dues with respect to contribution of the employees. Non payment of such dues comes under the purview of offence and as such the same is punishable also.
42. It is also noticeable that there is deeming clause while providing the punishment clause under Section 86A of the Act, 1948. Having at glance of proviso of Section 86A in sub-clause (i) it is very much clear that if any offence is been committed by the company including every person incharge of the company shall be held guilty of the offence and are attributable of punishment for such act. In this sub-clause, the word 'deemed to be guilty' has been mentioned which connotes the very clear intent of the legislature to fasten the criminal liability on the functionaries and the company by this deeming fiction. In such view of the matter the word 'deemed' must have profound context in which it is used.
43. In the instant matter, indeed, there is allegation against the company and until the company which is juristic entity is arrayed as accused, such proceeding shall vitiate.
44. It has been settled in all jurisdiction across the world by the role procedure established by law that the Companies, Corporate Houses and Corporations are not immuned from criminal prosecution, on the premises that they are not possessing the necessary mens rea for commission of offence. The doctrine of contribution and imputation are needed for interpretation, in case the company or the corporation which guides business of the company if at all have a criminal intent would always be imputed to the company.
45. Considering the aforesaid facts and rival submission of learned counsel for the parties as well as settled laws, the order dated 29th September, 2021 passed by 9th Additional District and Sessions Judge, Rae Bareilly in Criminal Revision No.54 of 2019 as well as order dated 19.05.2017 passed by ACJM, Court no.15, Rae Bareilly in Compliant Case No. 3074 of 2016, under Sections 419, 420 IPC, Police Station Mill Area, District Rae Bareilly are hereby set aside.
46. It is made clear that this court has passed the order only on the issue of non-impleadment/ arraying the company as party in the complaint case.
Order Date :- 25.3.2022 A.Kr*