Jharkhand High Court
Ashish Jajodia @ Aashish Jajodia vs The State Of Jharkhand on 29 August, 2023
1
IN THE HIGH COURT OF JHARKHAND AT RANCHI
Cr. M. P. No. 2173 of 2021
Ashish Jajodia @ Aashish Jajodia .... .. ... Petitioner(s)
Versus
1.The State of Jharkhand.
2.Ritu Raj Kumar .. ... ...Opp. Party(s)
...........
CORAM :HON'BLE MR. JUSTICE GAUTAM KUMAR CHOUDHARY
.........
For the Petitioner(s) : Mr. Indrajit Sinha, Advocate
Mr. Nagendra Pathak, Advocate
For the State : Ms. Nehala Sharmin, APP
For the O.P. No.2 : Mr. Yogendra Prasad, Advocate
......
14/ 29.08.2023. Heard, learned counsel for the parties.
2. The instant Cr. M. P. has been filed for quashing the entire criminal proceeding
including the order taking cognizance dated 03.06.2019 passed by SDJM, Seraikella
under Sections 406/ 409 IPC in connection with Kandra P.S. Case No.60 of 2018
(G.R. No.283 of 2019).
3. The case has been registered on the basis of written report lodged by Provident
Fund Inspector, EPFO and the petitioner is Director of M/s Nilanchal Iron and
Power Limited, Ratanpur, Kandra Chandil Road, Seraikella Kharsawan-832110.
The main allegation against the petitioner is that he deducted the employees
provident fund to the tune of Rs.3,66,968/- of the employees for the period of
October, 2015 to February, 2016, but the same was not remitted/ deposited with the
Employees Provident Fund Organization.
4. Order taking cognizance has been assailed on the following grounds
I. After investigation, charge-sheet has been submitted only against the
petitioner and not against the Company.
II. Aggrieved by the order taking cognizance, the instant Cr. M. P. has been
filed.
III. The deductions were deposited with EPFO before the FIR was lodged.
The reason for delay in depositing the amount was not intentional, but
because of some financial hardship of the company which resulted in delay.
CASE OF THE PETITIONER
5. It is argued that the petitioner has been made accused in the instant case for being
the 'occupier' of the factory and the same has been stated in the FIR.
6. As far as vicarious liability is concerned, unless the statute provides , a person
cannot be made accused under any provisions of law. The petitioner is not sought to
be prosecuted for offence under the Employees Provident Fund Act, by virtue of
being occupier/employer. Although the company was made an accused, but charge-
sheet has not been filed and no cognizance has been taken against the Company.
Further, it has also not been stated that he was personally responsible for deducting
and remitting the amount of EPFO. Reliance is placed on the judgment reported in
Maksud Saiyed v. State of Gujarat, (2008) 5 SCC 668 wherein it has been held that
Vicarious liability of the Managing Director and Director would arise provided any
provision exists in that behalf in the statute. Statutes indisputably must contain provision
fixing such vicarious liabilities. 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.
7. It is argued that chargesheet has not been filed against the Company and
therefore the Petitioner cannot be prosecuted in view of the ratio laid down in Sharad
Kumar Sanghi v. Sangita Rane, (2015) 12 SCC 781, where it has been held
In the case at hand as the complainant's initial statement would reflect,
the allegations are against the Company, the Company has not been made a
party and, therefore, the allegations are 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 under certain statutes. It has been so held by a three-Judge Bench
in Aneeta Hada v. Godfather Travels and Tours (P) Ltd. [Aneeta
Hada v. Godfather Travels and Tours (P) Ltd., (2012) 5 SCC 661 : (2012) 3
SCC (Civ) 350 : (2012) 3 SCC (Cri) 241] in the context of the Negotiable
Instruments Act, 1881.
8. The employer was not actuated with criminal intent will be apparent from
the very fact that there is no charge that the employer's contribution was not
remitted and the allegation is confined to the extent of employees'
contribution.
9. It is submitted that the definition of EPFO Act will have no application as the
EPF Act has not been invoked in the present case and under the provisions of IPC,
no offence under Section 409 IPC will be made out in view of the fact that he was
neither a public servant nor the person as stated under the provision of Section 409
IPC. Reliance is placed on the judgment of the High Court of Karnataka at
Bengaluru in Criminal Petition No.195 of 2020 (Mr. CH. K. S. Prasad @ K. S.
Prasad vs. State of Karnatka & Anr.) wherein the prosecution under Section 406/
409 IPC was quashed.
10. It is submitted that the petitioner was an employee of the establishment and
without impleading the establishment as party, he was made an accused, as such,
the proceeding cannot be permitted to be continued. The principles of vicarious
liability can be invoked to impute criminality against an accused if the statute
specifically provides for the same. Law is settled that an employee/ Director/
occupier of a company will not be liable for the criminal offence unless he was in
control of the management of the affairs and was responsible for the laches of the
company. After investigation, the charge-sheet has been submitted against the
petitioner, but not against the Company.
ARGUMENT ON BEHALF OF EPFO
11. Mr. Yogendra Prasad, learned counsel for the O. P. No.2 has opposed the prayer.
It is submitted that the petitioner was the Director, as such, he will come within the
definition of an employee as provided under Section 2 (e) of the Employees'
Provident Funds & Miscellaneous Provisions Act, 1952, which reads as under :-
2(e) "employer" means -
(i) in relation to an establishment which is a factory, the owner or occupier of
the factory, including the agent of such owner or occupier, the legal
representative of a deceased owner or occupier and, where a person has been
named as a manager of the factory under clause (f) of sub-section (I) of
Section 7 of the Factories Act, 1948 (63 of 1948), the person so named; and
(ii) in relation to any other establishment, 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;]
As such, by deducting the employees' contribution and not remitting it within
the stipulated time, the offence was committed.
12. It is submitted that there is violation of Clause 38 of the Employees Provident
Fund Scheme, 1952 which may be quoted hereunder :-
"38. Mode of payment of contribution - (1) The employer shall,
before paying the member his wages in respect of any period or part of period
for which contributions are payable, deduct the employee's contribution
from his wages which together with his own contribution as well as in
administrative charge of such percentage of the pay (basic wages, dearness
allowance, retaining allowance, if any, and cash value of food concessions
admissible thereon) for the time being payable to the employees other than
an excluded employee, and in respect of which Provident Fund contributions
are payable as the Central Government may fix, he shall within fifteen days
of the close of every month pay the same to the Fund through internet
banking, on account of contributions and administrative charge."
13. Having heard rival submissions advanced on behalf of both the sides, it is not in
dispute that there was delay in remitting the employees' contribution by 1 years 9
months. The matter for consideration is whether on these materials, a prima facie
case is made out under Section 406/ 409 IPC or not against the petitioner who was
the Director of the said Company?
14. No doubt, a corporate entity is an artificial person which acts through its officers,
directors, managing director/chairman etc. It is the cardinal principle of criminal
jurisprudence that where there are allegations of vicarious liability, then there has to be
sufficient evidence of the active role of each director. There has to be a specific act
attributed to a director or the person allegedly in control of management of the company,
to the effect that such a person was responsible for the acts committed by or on behalf of
the company. It has been held in HDFC Securities Ltd Vs State of Maharashtra (2017)
1 SCC 640 The Penal Code, 1860, does not provide for vicarious liability for any offence
alleged to be committed by a company. If and when a statute contemplates creation of such
a legal fiction, it provides specifically therefor e.g. the Negotiable Instruments Act, 1881.
Further, reliance was made on S.K. Alagh v. State of U.P. [S.K. Alagh v. State of U.P.,
(2008) 5 SCC 662 : (2008) 2 SCC (Cri) 686] , wherein at para 16, this Court observed that
: (SCC p. 666)
"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."
15. This court is of the view that order of taking cognizance is not sustainable
in view of the fact that the materials do not disclose criminal intent on the part
of this petitioner for the acts of the company in the delay to deposit the
employee's contribution. It has not been disclosed in what manner the
petitioner was responsible in the said delay in remittance of the amount. The
necessary ingredients to make out an offence by invoking the principles of
vicarious liability has not been made out. The petitioner is not a public servant
or the persons as detailed in section 409 of the IPC for prosecution under the
said section. Chargesheet has not been submitted against the company. Without
the establishment being made an accused prosecution cannot be permitted to be
continued against the petitioner.
The order of cognizance is quashed along with the criminal proceedings
arising therefrom.
Criminal Miscellaneous Petition is allowed.
(Gautam Kumar Choudhary, J.)
Sandeep/
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