Since the Petitioners, Respondent and the issue involved in all these Criminal Original Petitions are one and the same, these Criminal Original Petitions are disposed of by this common order.
2. The Petitioners in all these Criminal Original Petitions are facing trial for the alleged offences under
Sections 14(1A) and 14A of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 in CC.Nos.CC.Nos.133 to 138/1994 and STC.Nos.1987 to 1989/1994 on the file of the learned Judicial Magistrate II, Coimbatore.
2. The case of the Prosecution is as follows:-
The Petitioners are said to have failed to pay contributions towards the Provident Fund dues. The 2nd Petitioner is the Managing Director in charge of the establishment and responsible for the conduct of the business of the 1st Petitioner Mill and as the Petitioners committed offences under
Sections 14(1A) and 14A of the Employees Provident Fund and Miscellaneous Provisions Act, 1951, the complaints have been filed in different calendar cases as stated supra for the default committed by them for different periods.
3. It is submitted by the Petitioners that the 1st Petitioner Mill has been duly declared as a sick Company by the Board For Industries and Financial Reconstruction (herein after referred to as the BIFR) and after due enquiry under
Section 16 of the Sick Industrial Companies (Special Provisions) Act, 1985 [Act 1 of 1986] (herein after referred to as the Act), the scheme for rehabilitation had been sanctioned. In the BIFR proceedings the Respondent was also a party and the 1st Petitioner Mill was restrained by the BIFR under Section 22A of the Act from disposing of the assets. Hence, according to the Petitioners, non remittance of the dues to the Provident Fund Authorities was neither willful nor wanton, but due to the restraint order passed by the BIFR on 31.3.1994.
4. The Petitioners would further submit that they filed Writ Petitions in WP.Nos.14397 and 14398/1994 to quash the criminal prosecution, but the said Writ Petitions were dismissed stating that Section 22 of the Act did not operate as bar against launching of criminal prosecution. In the writ appeal filed against the said order in WA.No.183/2001, the Division Bench of this court by order dated 2.11.2001 observed that the Respondent is obliged to take prior consent from the BIFR relating to the amounts payable under the Employees Provident Fund and Miscellaneous Provisions Act, 1951.
5. In view of the said observation made by the Division Bench of this court, the Petitioners again filed Writ Petitions in WP.Nos.22193 to 22198/2001 to quash the criminal proceedings. The said Writ Petitions were admitted and interim stay was granted and the Petitioners withdrew those Writ Petitions on 2.2.2006. Though the scheme for rehabilitation was sanctioned by BIFR, due to some intervening difficulties, the said scheme could not be implemented and despite best efforts to make the scheme viable, it all ended in vein. However, the BIFR has ordered to wind up the Mill and being aggrieved against the said order, an appeal in Appeal No.188/2001 was preferred to the Appellate Authority for Industrial and Financial Construction, New Delhi and the said appeal was disposed of without affording an opportunity to the 1st Petitioner. At present, the Petitioners have challenged the orders of the BIFR as well as AAFIR in WP.No.19907/2001 and the same is under adjudication by this court.
6. Mr.C.S.Dhanasekaran, the learned counsel for the Petitioners would submit that since the Mill was restrained from disposing of its assets by the BIFR under Section 22A of the Act, no payment could be made by the 1st Petitioner Mill towards the statutory dues and therefore, non payment was neither willful nor wanton. He would further submit that in view of the challenge made by the Petitioners in WP.No.19907/2001 before this court, no coercive proceedings or the criminal Prosecution can be proceeded with against the Petitioners, as no consent has been obtained by the Respondent before initiation of criminal proceedings. Therefore, he would submit that the present complaint is not maintainable and unsustainable.
7. Per contra, Mr.Vibhishanan, the learned counsel for the Respondent placed reliance on the judgement of the Honourable Supreme Court rendered in the case of M/s.Kusum Ingots and Alloys Limited Vs. Pennar Peterson Securities Limited and others [AIR-2000-SC-954], wherein the Honourable Supreme Court has held that Section 22 of the Act creates an embargo against disposal of assets of the Company only for recovery of its debts and the said Section does not bar payment of money by the Company or its Directors to other persons for satisfaction of their legally enforceable dues. The issue in the said decision arose in relation to commission of offence under Section 138 of the Negotiable Instruments Act by the Company and when it was contended that when the Company was declared sick by BIFR under the Act, no steps could be taken by the complainant for realization of the amounts said to be due to them and therefore, the criminal proceedings initiated against the drawer Company and its Directors on the allegation that the cheques drawn in favour of the complainant were dishonoured by the Bank is misconceived and should be quashed, the Honourable Supreme Court held in paragraph 15 thus:-
"15. The next question for consideration is whether under the provisions of SICA there was any legal impediment for payment of the amount for which the cheques were drawn and for that reason the appellants cannot be taken to have committed an offence under Section 138 of the NI Act. A bare reading of
Section 22 of SICA makes the position clear that during pendency of an inquiry under Section 16 or during the preparation of a scheme referred to under Section 17 or during implementation of a sanctioned scheme or pendency of an appeal under Section 25, no proceedings for winding up of the industrial company or for execution, distress or the like against any of the properties of the industrial company or for the appointment of a receiver in respect thereof and no suit for the recovery of money or for enforcement of any security against the industrial company or of any guarantee in respect of any loans or advance granted to the industrial company, shall lie or be proceeded with further, except with the consent of the Board or the appellate authority, as the case may be. The section only deals with proceedings for recovery of money or for enforcement of any security or a guarantee in respect of any loans or advance granted to the company and a proceedings for winding up of the company. The section does not refer to any criminal proceedings."
8. The Honourable Supreme Court has made it clear that Section 22 of the Act does not create any legal impediment for instituting and proceeding with a criminal case. Though it relates to an offence under Section 138 of the Negotiable Instruments Act, the principle laid down by the Honourable Supreme Court applies to any criminal proceedings launched against the Company for committing breach of the duty statutorily imposed upon it under the Act by not remitting its contribution to the Employees provident fund in terms of the prescription made in the Act and the scheme framed thereunder. Therefore, it cannot be said that initiation of the Prosecution against the Petitioners is one without authority of law nor can it be said that the necessary condition precedent to launch the Prosecution did not exist, when the Prosecution was launched.
9. A careful reading of Section 22 clearly shows that in cases of Industrial Companies, where an enquiry under Section 16 is pending or any scheme referred to under Section 17 is under consideration and preparation, the Companies are entitled to certain benefits.
10. It is crystal clear from the language of Section 22 that only specified matters which are specifically mentioned in the different sub Sections are matters for which the protection is extended. There is no suspension of prosecutions launched against the Company. In the case on hand, the liability to pay provident fund contributions is the personal obligation of the petitioners and dues are not paid within the stipulated period. Admittedly, default in payment of such dues has been committed by the petitioner and only in respect of such personal obligation of the petitioner, prosecution of the petitioner had been launched in various Calendar Cases.
11. In the case of Orr Cee Electronics Limited, Mysore and others Vs. Judicial Magistrate, First Class, II Court, Mysore [2000-1-LLJ-843], the Karnataka High Court has held as follows:
"....... The question then is whether the prosecution proceedings launched against a Company for offences committed by it can also be said to be forbidden within the meaning of Section 22(supra). A closer reading of the provision however would show that it is not all kinds of proceedings initiated against the Company, in respect of which an enquiry is pending or a scheme is under preparation, consideration or implementation, but only proceedings of the kind described in the provision. These proceedings must in order to fall within the mischief of Section 22 be the proceedings in the nature of winding up of the Industrial Company or for execution, distress or the like against any of the properties of the Industrial Company or for the appointment of a receiver in respect thereof. Prosecution proceedings do not answer the description set out in Section 22 of proceedings which are forbidden. They are not in the nature of winding up of the proceedings nor can such proceedings be said to be proceedings for execution or distress of the properties of the Industrial Company or for appointment of a receiver in respect thereof. Such proceedings are also not meant for recovery for any money or for enforcement of any security against the Industrial Company or for any guarantee in respect of any loans or advances granted to it. In the absence of a specific bar contained in Section 22 forbidding prosecution for offences already committed by the Company or its offices, it is difficult to extend the prohibition contained in Section 22 to prosecutions validly launched against it. I have therefore no difficulty in repelling the first limb of the argument advanced on behalf of the petitioners."
12. However, as regards the submission made by the learned counsel for the Petitioners that Section 22 of the Act affects a criminal case, as in the said section provision is made enabling the Board to make an order in writing to direct the Sick Industries not to dispose of, except with the consent of the Board, which has been reiterated by this court in A.No.1831/2001 by dated 2.11.2001, it depends upon the facts and circumstances of the case and evidence has to be adduced to show for which period the restraint order became operative and whether it can be reasonably said that the non payment was beyond the control of the Company. So it is a matter of evidence and hence, on the said ground, without any evidence to that effect, the criminal proceedings cannot be quashed at the threshold.
13. At this juncture, it is brought to the notice of this court that the entire provident fund dues in respect of all calendar cases have been remitted by the Petitioners and the copies of the remittances by the Bankers of the Petitioners of the entire dues and the receipt issued by the Respondent coupled with the statement of amount by the Bank have been submitted by the Petitioners before this court.
14. Though the fact that the obligation and liability for payment of the Provident Fund contribution and other dues have been entirely discharged by the Petitioners, it may not by itself exonerate them from the penal consequences flowing from tentacles of Section 14A and
14(1A) of the Employees Provident Fund and Miscellaneous Provisions Act, 1951 and yet it cannot be stated that such a circumstance cannot at all be construed as a mitigating circumstance to take into consideration by the court concerned.
15. It is open to the Petitioners to place relevant materials before the learned Magistrate in this regard and the learned Magistrate will examine the submissions made by the Petitioners in the light of the discussions made above and decide in the light of the evidence adduced whether on the facts and circumstances of this case Prosecution is sustainable.
16. It is not out of place to mention that in case if the Petitioners are found guilty, no doubt true that there is a minimum punishment provided under Section 14 of the Employees Provident Fund and Miscellaneous Provisions Act, 1951, but there is also proviso appended thereunder giving power to the court for special reasons to be recorded in the judgement for imposition of sentence of imprisonment for a lesser term or of fine only in lieu of imprisonment.
17. There cannot be a better case than the one on hand providing for plethora of special reasons to be considered as mitigating circumstances to consider the case of the Petitioners very leniently in the matter of award of punishment. If the learned Magistrate is impelled to consider that the circumstances as indicated supra will serve as special and adequate reasons for imposing of a nominal fine, it is perfectly upon to him to do so.
18. With the above observations, these Criminal Original Petitions are disposed of. Consequently, the connected MPs are closed.
Srcm To:
1. The Judicial Magistrate II, Coimbatore
2. The Public Prosecutor, High Court, Madras