IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 15TH DAY OF MARCH, 2019 BEFORE THE HON'BLE MR. JUSTICE JOHN MICHAEL CUNHA CRIMINAL PETITION No.3057 OF 2013 BETWEEN:
S.V. Ramaswamy, S/o A.R. Sevagan Chettiyar, Aged about 69 years, Managing Director, Vishnu Textiles Limited, Kampalapura, Periyapatna Taluk–571 107, Mysore District. …Petitioner (By Sri. A. Lourdu Mariyappa, Advocate) AND:
1. The State of Karnataka, Represented by Sub–Inspector, State by SHO, Periyapatna Police Station – 571 107, Represented by S.P.P., High Court Building, Bengaluru – 01.
2. C. Thimmaiah, S/o Chinnagiriyappa, Enforcement Officer, Provident Fund Office, Gayathri Puram, II Stage, Mysuru Taluk – 570 016, Mysore District. ...Respondents (By Sri. Vijaya Kumar Majage, Addl. SPP for R1; Vide order dated 15.12.2014 petition against R2 abated) This Criminal Petition is filed under Section 482 of Cr.P.C. praying to quash the proceedings in C.C.No.241/2006 vide Annexure – A which is pending on the file of the Civil Judge (Jr.Dn.) and JMFC, Periyapatna, under Sections 406 and 409 of IPC, against the petitioner at final report at Annexure – C.
This Criminal petition coming on for Admission, this day, the Court made the following:
O R D E R Petitioner is prosecuted for the offences punishable under Sections 406 and 409 of IPC on the accusations that the petitioner being the Managing Director of the Vishnu Textiles Limited, Kampalapura, deducted the Employees Provident Fund amount of Rs.2,10,665/- during the period from August 2003 to July 2004 and failed to deposit the same to the Provident Fund and Family Pension Fund as required under Section 6 of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 (hereinafter referred to as the ‘Act’, for short).
2. The learned counsel for the petitioner submits that the alleged offences were committed by the Company namely Vishnu Textiles Limited, Kampalapura. The said company is not arrayed as accused; instead the petitioner is being prosecuted in his capacity as the Managing Director, which is not tenable under law. Secondly, he contends that the provident fund amount collected by the company is deposited with the Provident Fund Authority subsequent to 2010 and therefore, there is no violation of the provisions of the Act. Further placing reliance on the decision of the Hon’ble Supreme Court in the case of S.K. Alagh Vs. State of Uttar Pradesh and others reported in (2008) 5 SCC 662, the learned counsel would submit that in terms of the explanations appended to Section 405 of the Penal Code, a legal fiction has been created whereby the employer is deemed to have committed an offence of criminal breach of trust and a person in charge of the affairs of the company and in control thereof has been made vicariously liable for the offence committed by the company along with the company. But, in a case falling under Section 406 of the Penal Code vicarious liability has been held to be not extendable to the Directors or officers of the company and hence the prosecution of the petitioner for the alleged offence under Section 406 of IPC is liable to be quashed.
3. Disputing the submission, the learned Addl.
SPP has placed reliance on the decision passed by this Court in Crl.P.No.5480/2013 and connected matters dated 22.04.2014 and would submit that the question whether the amount deducted by the petitioner was not misappropriated by him, could be decided only during the trial. Since the facts alleged in the charge sheet prima- facie disclose temporary misappropriation of the funds, there is no case for quashing of the proceedings.
4. Considered the submissions and perused the records.
5. A reading of the charge sheet indicates that the alleged offences have been committed by Vishnu Textiles Limited, Kampalapura, which is a company registered under the Companies Act. The said company is not made as an accused. The petitioner herein is prosecuted in his capacity as the Managing Director of the said company. The specific allegation in the charge sheet are that the company has deducted the Employees contribution amounting to Rs.2,10,665/- and failed to deposit the same in Provident Fund and Family Pension Fund. There is no allegation that the petitioner herein collected the said amount and failed to deposit the said amount. In this context, the exposition of law made by the Hon’ble Supreme Court in the case of S.K. Alagh Vs. State of Uttar Pradesh and others reported in (2008) 5 SCC 662, referred to supra would in my view could be squarely applies to the facts of the case. Dealing with Sections 405 and 406 of IPC, in the context of the provisions of the Act, in para 20 of the above judgment, the Hon’ble Supreme Court has held as under:
“20. We may, in this regard, notice that the provisions of the Essential Commodities Act, the Negotiable Instruments Act, the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952, etc. have created such vicarious liability. It is interesting to note that Section 14-A of the 1952 Act specifically creates an offence of criminal breach of trust in respect of the amount deducted from the employees by the company. In terms of the Explanations appended to Section 405 of the Penal Code, a legal fiction has been created to the effect that the employer shall be deemed to have committed an offence of criminal breach of trust. Whereas a person in charge of the affairs of the company and in control thereof has been made vicariously liable for the offence committed by the company along with the company but even in a case falling under Section 406 of the Penal Code vicarious liability has been held to be not extendable to the Directors or officers of the company.”
As the prosecution is launched only against the petitioner in his capacity as the Managing Director of the said company, in my view, the facts alleged in the charge sheet do not make out the offences under Sections 406 and 409 of IPC. Consequently, the prosecution initiated against the petitioner cannot be sustained.
Accordingly, the petition is allowed. Proceedings initiated against the petitioner in C.C.No.241/2006 pending on the file of the Civil Judge (Jr.Dn.) and JMFC, Periyapatna, are quashed.
Sd/- JUDGE SV