Calcutta High Court
Umesh Khemka vs The Victoria Jute Co.Ltd on 24 February, 2023
OD-2
IN THE HIGH COURT AT CALCUTTA
Constitutional Writ Jurisdiction
ORIGINAL SIDE
WPO/3082/1993
UMESH KHEMKA
VS
THE VICTORIA JUTE CO.LTD.
BEFORE:
The Hon'ble JUSTICE SABYASACHI BHATTACHARYYA
Date : 24th February, 2023.
Appearance :
Mr. Shantanu Mishra, Adv.
Mr. Arun Kumar Mishra, Adv.
...for the petitioner
Mr. Mainak Bose, Adv.
Mr. R. Karnani, Adv.
..for respondent no.1.
Mr. Sakya Sen, Adv.
..for Special Officer
Mr. Debjit Mukherjee, Adv.
Ms. Susmita Chatterjee, Adv.
..for the State
Mr. Shiv Chandra Prasad, Adv.
..for the PF authority
The Court : Learned counsel for the petitioner argues that the petitioner
was merely an accountant of the company against which allegations have been
levelled by the respondent authorities under the Employees Provident Fund and
Miscellaneous Provisions Act, 1952 (in short „1952 Act‟).
It is contended, by placing reliance on the averments made in paragraph
20 of the petition, that the petitioner, even at the time of joining the company as
an accountant and being given the designation „Manager (Finance)‟, such
nomenclature was a misnomer according to the job entrusted. He was thereafter
re-designated as „Chief Accounts & Audit Officer‟. The petitioner was allegedly
given to understand that the service of the petitioner is in the nature of
accountant only and/or its allied works to be done as per direction of the Board
of Directors and the petitioner is only an employee of the company as such
accountant who is entitled to wages/ salaries from the company, it being his
master.
By placing reliance of the provisions of Section 2(e) and Section 7A of the
1952 Act, learned counsel submits that the petitioner, being a Chartered
Accountant of the company, is not liable to be indicted in any allegation under
the 1952 Act levelled against the company.
Learned counsel places reliance on a judgment of Supreme Court reported
at (2008) 5 Supreme Court Case 662 (S.K. Alagh versus State of Uttar
Pradesh And Others) and argues that in the said case, it was observed that as
admittedly drafts were drawn in the name of the Company, even if the Appellant
was its Managing Director, he cannot be said to have committed an offence under
Section 406 of an 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.
Learned counsel for the petitioner next places its reliance on a Co-ordinate
Bench judgment reported in (2019) 4 Cal LT 481 (Malhati Tea & Industries
Ltd. and Others versus State of West Bengal and Another), wherein it was
held, inter alia, by placing reliance on a judgment of the Supreme Court as
indicated above, that the question which was required to be considered was that
whether the directors of a company can be termed as the owners of a company
and /or fastened with criminal liability for non-deposit of provident fund dues of
the authorities. In paragraph 25 thereof, the decision of S. K. Alagh (Supra) was
also considered and followed by the Co-ordinate Bench.
Learned counsel next cites another Co-ordinate Bench Judgment of this
High Court delivered in (K.V.Kamath and Labour Enforcement Officer
(Central), Kolkata, and another), wherein a similar proposition had been
reiterated. It was observed in paragraph 13 thereof that Sub-clause (iii) of
Section 2 of the Payment of Gratuity Act, which regulated the said case, speaks
that in relation to any other establishment, the person who or the authority
which has the ultimate control over the affairs of the establishment shall be
treated as the employer, and further where the said affairs are entrusted to any
other person, whether Manager, Managing Director or called by any other name,
such Manager, Managing Director or such designated person shall be treated as
the employer. In other words, in the absence of any entrustment to other person
called Manager or Managing Director, etc., the person who or authority which
has ultimate control over the affairs of the establishment will be treated as
employer.
Drawing an analogy with the language of Section 7A of the 1952 Act,
learned counsel submits that in the present case as well, since the petitioner was
merely an accountant in the company and never discharged any duty which
could tantamount to having ultimate control of the company, the notice under
Section 7A of the Act to him was misconceived.
Lastly, learned counsel places reliance on several correspondences
authored by the Chairman, President and other senior Officials of the company-
in-question, whereby liability of the accountants, including the petitioner, in the
issue were sought to be mitigated.
As such, it is argued that the notice under Section 7A of the 1952 Act
ought to be set aside insofar as it pertains to the petitioner.
Learned counsel appearing for the respondent authorities submits that the
exact role of the petitioner in the alleged non-payment of the Provident Fund
dues cannot be ascertained at this stage.
Learned senior counsel appearing for the private respondents/company
contends that in view of the scope of Section 2(e) and Section 7A of the 1952 Act,
the notice issued to the petitioner, who was merely an accountant of the
company, was without prejudice. It is further submitted that there were
subsequent proceedings wherein a scheme was approved and affirmed up to the
Supreme Court, despite being challenged by the respondent authorities. As such,
it is submitted that the notice ought to be quashed.
Apparently, Section 2(e)(ii) of 1952 Act indicates that the definition of
"employer" includes in relation to any other establishment than a factory, the
person who, or the authority which, has the ultimate control over the affairs of
the establishment, and where the said affairs are entrusted to a Manager,
Managing Director or Managing Agent, such Manager, Managing Director or
Managing Agent.
On the other hand, Section 7A (2) indicates that the officer conducting the
inquiry under sub-section (l) shall, for the purpose of such inquiry, have the
same powers as are vested in a court under the Code of Civil Procedure, 1908(5
of 1908), with regard to the manager as situated therein and any such inquiry
shall be deemed to be a judicial proceeding within the meaning of Sections 193
and 228, and for the purpose of Section 196 of the Indian Penal Code.
It is further provided in sub-Section (3A) of Section 7A that where the
employer, employee or any other person required to attend the inquiry under
sub-section (l) fails to attend such inquiry without assigning any valid reason or
fails to produce any document or to file any report or return when called upon to
do so, the officer conducting the inquiry may decide the applicability of the Act or
determine the amount due from any employer, as the case may be, on the basis
of the evidence adduced during such inquiry and other documents available on
record.
It is clear from the definition provided in Section 2(e)(ii) of 1952 Act that
the term "employer" with regard to the 1952 Act is not merely restricted to any
person or authority which has ultimate control over the affairs of the
establishment but is also extended, where the said affairs are entrusted to a
Manager, Managing Director or managing agent, to such Manager, Managing
Director or managing agent as well.
In the present case, although it has been pleaded by the petitioner in
paragraph 20 of the writ petition that the petitioner was acting merely in the
capacity of an ordinary accountant in the company despite being designated as
Manager Finance essentially and then re-designated as Chief Accounts & Audit
Officer, such averment prima facie does not establish the fact that the petitioner
was, in fact, not a manager or a managing director or managing agent within the
contemplation of Section 2(e)(ii) of 1952 Act.
In fact, since the petitioner has virtually admitted in paragraph 20 of the
writ petition that his initial designation was that of a Manager (Finance) and
subsequently Chief Accounts & Audit Officer of the company, there is sufficient
prima facie presumption to the effect that the petitioner fell within the category of
employer as described under Section 2(e)(ii) of the 1952 Act.
In such view of the matter, there cannot be any doubt that the notice
under Section 7A of the 1952 Act, which contemplates notice to an employer, was
validly given to the petitioner.
Inasmuch as the judgments cited by the petitioner are concerned, S. K.
Alagh (supra) merely specifies that the provisions of Section 406 of the Penal
Code may not apply to an employee merely because he was the Managing
Director of the company.
However, it was observed in the said case that admittedly drafts were
drawn in the name of the company, even if the Appellant was its Managing
Director. Hence, it was held that he could not be said to have committed an
offence under Section 406 of the Penal Code.
There are certain points to ponder here. First, the present case is not an
adjudication under Section 406 of the Penal Code, which is different in scope of
operation than Section 7A of the 1952 Act and secondly, the factual
circumstances of the present case are not yet clear, since it would be pre-mature
at the notice stage to observe as to the exact extent and contour of the liabilities
of the present petitioner with regard to non-payment of Provident Fund as
alleged.
Inasmuch as the judgments of the learned Co-ordinate Benches of this
Court are concerned, those merely follow the proposition laid down in S. K. Alagh
(supra). However, the facts and circumstances of the said cases, as reflected from
the orders themselves, do not tally exactly with the present case. Inasmuch as
K.V. Kamath (supra) is concerned, in the said case, the learned Single Judge was
dealing with the provisions of sub-section (iii) of Section 2 of the Payment of
Gratuity Act and the definitions given therein, although there is parity between
definition of the „employer‟ in the said Act and the present Act.
In view of the above discussions, it cannot be said that the expression
„employer‟ in the 1952 Act merely envisages a person or authority who has
ultimate control over the affairs of the establishment, where the entrustment was
with a Manager or Managing Director, called by whatever name.
In view of the designations enjoyed by the petitioner in the hierarchy of the
accused company, there was sufficient justification for the respondent authorities
to issue the impugned notices in the name of the petitioner in the capacity of
Manager (Finance) of the accused company. Hence, there is no scope of
interference in the present writ petition.
Accordingly WPO/3082/1993 is dismissed on contest without any order as
to costs.
However, it is made clear that the merits of the allegations sought to be
levelled against the petitioner have not been gone into by this Court and nothing
in this order shall prejudice the rights and contentions of any of the parties
herein in any of the pending proceedings before any Court of Law/Forum in any
manner whatsoever.
(SABYASACHI BHATTACHARYYA, J.)
D.Ghosh
