Kerala High Court
S. Mohammed Nowfal vs State Of Kerala on 22 October, 2024
Author: K.Babu
Bench: K. Babu
Crl RP No.790 of 2024
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"C.R."
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR.JUSTICE K. BABU
TUESDAY, THE 22ND DAY OF OCTOBER 2024 / 30TH ASWINA, 1946
CRL.REV.PET NO. 790 OF 2024
CRIME NO.49/2010 OF Yeroor Police Station, Kollam
AGAINST THE ORDER/JUDGMENT DATED 06.07.2024 CMP NO.
88 OF 2024 IN ST NO.5650 OF 2013 OF JUDICIAL MAGISTRATE
OF FIRST CLASS -I, PUNALUR
REVISION PETITIONER/S:
S. MOHAMMED NOWFAL
AGED 47 YEARS
PATTATHIL VEEDU, AYATHIL, VADAKKEVILA VILLAGE,
KOLLAM, PIN - 691010
BY ADV G.KEERTHIVAS
RESPONDENT/S:
STATE OF KERALA
REPRESENTED BY PUBLIC PROSECUTOR,
HIGH COURT OF KERALA, PIN - 682031
BY PUBLIC PROSECUTOR SRI G SUDHEER
THIS CRIMINAL REVISION PETITION HAVING COME
UP FOR ADMISSION ON 22.10.2024, THE COURT ON THE
SAME DAY DELIVERED THE FOLLOWING:
Crl RP No.790 of 2024
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"C.R."
K.BABU, J.
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Crl.R.P.No.790 of 2024
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Dated this 22nd day of October, 2024
ORDER
The challenge in the Crl.R.P. is to the order dated
06.07.2024 in CMP No.885/2024 in ST No.5650 of 2013
on the file of the Judicial First Class Magistrate Court-I,
Punalur. The accused preferred the afore petition under
Section 239 Cr.PC seeking discharge. The learned
Magistrate dismissed the application.
Prosecution Case
2. The accused is the Proprietor of Tasty Nuts
Factory, Manali. He deducted the employees'
contribution to the Provident Fund from their salary
from 01.01.2006 to 01.01.2008 but did not deposit the
same with the authority concerned. Therefore, he
committed a breach of trust as provided under Section
406 IPC.
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3. I have heard the learned counsel for the
revision petitioner and the learned Public Prosecutor.
4. The learned counsel for the revision petitioner
submitted that even in a case of prosecution under
Section 406 IPC, a prior sanction of the Central
Provident Fund Commissioner as provided under Section
14-AC of the Employees' Provident Funds and
Miscellaneous Provisions Act, 1952 ('EPF Act' for short)
is necessary because the prosecution is sought to be
launched on account of the failure or default of the
employer in complying with his obligation in terms of the
EPF Act. The learned counsel relied on Deepak
Maneklal Patel Vs. Natwarbhai Somabhai Patel and
others [MANU/GJ/0376/2005] and Yeshwantrao
Dattaji Chowgule Vs. State [MANU/MH/1070/1992] in
support of his contentions.
5. The learned Public Prosecutor submitted that
the prior sanction, as provided under Section 14-AC of
the EPF Act, is required only when the Court takes
cognizance of an offence punishable under the EPF Act.
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The learned Public Prosecutor submitted that
prosecution under both the Statutes is not barred and it
is the option of the prosecution to proceed against the
employer under either of the enactments.
6. The EPF Act was enacted with the intention to
make some provisions for the future of the employees
after they retire, or for their dependents in case of their
early death. The Act stipulates compulsory contributions
to the Provident Fund by employers and employees.
7. Section 6 of the Act provides the contribution
which the employer shall pay to the fund. Section 14 of
the Principal Act, under the head Penalties, made the
acts of knowingly making false statements or false
representations to avoid any payment under the Act and
the scheme made thereunder punishable with
imprisonment for six months or with fine (enhanced to
one year or with fine by way of the Act 33 of 1988).
8. The working of the EPF Act and the schemes
thereunder was subjected to study by the National
Commission on Labour (the NCL) and the Estimates
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Committee of the Parliament. The study revealed that
the provisions of the Act and the Scheme were not
effective in preventing defaults in the payment of
contributions to the EPF. The NCL and the Estimates
Committee made a series of recommendations that paved
the way for enacting the Employees' Provident Funds
and Family Pension Fund (Amendment ) Act, 1973 (the
Act 40 of 1973). The intention of the Parliament while
enacting the Act 40 of 1973 is contained in the
Statement of Objects and Reasons, which reads thus:-
Amendment Act 40 of 1973-Statement of
Objects and Reasons.-(1) The working of the
Employees' Provident Funds and Family Pension Fund
Act, 1952 and the Employees' Provident Fund Scheme
has revealed that the present provisions of the Act and
the Scheme are not effective in preventing defaults in
payment of contributions to the Employees' Provident
Fund or in recovery of the dues on that account. The
result is that the amount of Provident Fund arrears
recoverable from the employers has been steadily
increasing. In 1959-60, the arrears which amounted to
Rs. 3.65 crores, rose to Rs. 5.96 crores as on the 31st
March, 1967. The arrears stood at Rs. 14.6 crores on
31st March, 1970 and they have risen to Rs. 20.65 crores
as on the 31st March, 1972.
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(2) The National Commission on Labour has
recommended that in order to check the growth of
arrears, penalties for defaults in payment of Provident
Fund dues should be made more stringent and that the
defaults should be made cognizable. In its 116th Report
presented to Parliament in April, 1970 the Estimates
Committee has endorsed the recommendation made by
the National Commission on Labour and has further
suggested that Government should consider the
feasibility of providing compulsory imprisonment for
certain offences under the Act. Accordingly, it is
proposed to amend the Act so as to render the penal
provisions more stringent and to make defaults
cognizable offences. Provision is also being made for
compulsory imprisonment in cases of non-payment of
contributions and administration or inspection charges.
As recommended by the Estimates Committee, a further
provision is being made to enable levy of damages equal
to the amount of arrears from a defaulting employer.
(3) The National Commission on Labour has also
recommended that arrears of Provident Fund should be
made the first charge on the assets of an establishment
at the time it is wound up. It is, therefore, proposed to
amend section 11 of the Act to provide that any amount
due from an employer in respect of the employees'
contribution (deducted from the wages of an employee)
for a period of more than six months shall be deemed to
be the first charge on the assets of the establishment
and shall be paid in priority to all other dues.
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(4) Further, in pursuance of the recommendations made
by the National Commission on Labour and the
Estimates Committee, it is proposed to empower the
Employees' Provident Fund Organisation to issue
recovery certificates and to sanction prosecutions under
the Act.
(5) Opportunity is also being taken to clarify that any
contributions deducted from the employees' wages by
the employer under the Act shall be deemed to be
entrusted to the employer within the meaning of section
405 of the Indian Penal Code. Hence the Bill.
9. Various penal sections were inserted in the
Principal Act by way of the Amendment Act 40 of 1973..
10. Sub-section (1A) was inserted in Section 14 of
the Principal Act, making defaults in complying with the
provisions of Section 6 punishable with imprisonment for
a term which may extend to six months but which shall
not be less than three months in case of default of
payment of the employees' contribution deducted by the
employer from their wages (enhanced to three years and
one year respectively by way of the Amendment Act 33 of
1988). The amendment further provided provision
(Section 14-AA) for imprisonment, which may extend to
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one year, which shall not be less than three months in
case of repeated offences (enhanced to five years and
two years, respectively by way of the Amendment Act 33
of 1988). Section 14-AB was inserted, making the
offence relating to default in payment of contribution by
the employer cognizable.
11. The Act 40 of 1973, inserted an explanation to
Section 405 of the Indian Penal Code, which defines the
offence of criminal breach of trust punishable under
Section 406 IPC, so as to specifically include the
deductions from the employees' contribution from the
wages and default in payment of such contribution to the
fund as ingredients to the offence, imposing the required
mens rea for the offence by way of a deeming fiction.
12. By way of Act 40 of 1973, the Parliament also
inserted Section 14-AC by which sanction of the Central
Provident Fund Commissioner was made mandatory for
taking cognizance of any offence punishable under the
EPF Act and the schemes thereunder.
13. Section 14-AC reads thus:-
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14-AC - Cognizance and trial of offences;-(1) No
court shall take cognizance of any offence punishable
under this Act, the Scheme or the 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 the Scheme or the Pension Scheme or
the Insurance Scheme.
14. As per Section 14-AC, the cognizance of any
offence punishable under the EPF Act shall be on a
report in writing made with the previous sanction of the
Central Provident Fund Commissioner.
15. I have discussed above the objects and reasons
for enacting Act 40 of 1973. The legislature had taken
note of the vast arrears due to the Provident Fund due to
the defaults in payment of contributions. The legislature
provided stringent punishment for the offence related to
default in the contributions to the EPF. Section 14-AC
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was inserted as protection from frivolous prosecution of
the offences under the Act with the enhancement of
punishment for various offences.
16. It is pertinent to note that Explanation 1 was
inserted into Section 405 of the IPC by way of Act 40 of
1973 itself.
17. Section 405 reads thus:-
"405 - Criminal breach of trust:-Whoever, being in
any manner entrusted with property, or with any
dominion over property, dishonestly misappropriates
or converts to his own use that property, or
dishonestly uses or disposes of that property in
violation of any direction of law prescribing the mode
in which such trust is to be discharged, or of any
legal contract, express or implied, which he has
made touching the discharge of such trust, or wilfully
suffers any other person so to do, commits "criminal
breach of trust".
Explanation 1.--A person, being an employer of an
establishment whether exempted under section 17 of
the Employees' Provident Funds and Miscellaneous
Provisions Act, 1952 (19 of 1952), or not who deducts
the employee's contribution from the wages payable
to the employee for credit to a Provident Fund or
Family Pension Fund established by any law for the
time being in force, shall be deemed to have been
entrusted with the amount for the contribution so
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deducted by him and if he makes default in the
payment of such contribution to the said Fund in
violation of the said law, shall be deemed to have
dishonestly used the amount of the said contribution
in violation of a direction of law as aforesaid.
18. Mens rea is a sine qua non for attracting the
offence under Section 406 r/w 405 of IPC. To attract this
offence, the offender has to dishonestly misappropriate
or convert the property involved for his own use or
dispose of the same in violation of the trust reposed on
him.
19. To attract the offences under Sections 14 and
14-AA mens rea is not a necessary ingredient. Therefore,
the offence under Section 406 r/w 405 IPC and the
offences under Sections 14 and 14-AA of the EPF Act are
distinct and different. When ingredients are not
identical, and the offences are distinct, there is no
question of the rule as to double jeopardy as embodied in
Article 20(2) of the Constitution being applicable. [vide:
State of Bombay v. S.L. Apte and Another (AIR 1961 SC
578)].
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20. With the insertion of the Explanation, the
required mens rea for the offence of criminal breach of
trust, as I mentioned above, has been imposed by way of
deeming fiction to the effect that an employer who
deducts the employees' contribution from the wages
payable to the employees for credit to a Provident Fund
or Family Pension Fund shall be deemed to have been
entrusted with the amount and if he makes default in the
payment of such contribution to the fund, shall be
deemed to have dishonestly used the amount of the said
contribution in violation of the direction of law.
Therefore, deduction of the contribution from the wages
of the employees for credit to a Provident Fund shall be
deemed to have been entrusted within the meaning of
the term 'entrustment', and when he commits default in
the payment of such contribution to the fund, he shall be
deemed to have 'dishonestly' used the amount as
required to constitute the offence of criminal breach of
trust under Section 406 IPC.
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21. The Parliament had taken note of the fact that
the scheme under the Act was not effective in preventing
the defaults in payment of contribution to the Employees'
Provident Fund even after the deduction of the same
from the wages of the employees. The Parliament
considered the fact that in 1959-60, the arrears, which
amounted to Rs.3.65 crores, rose to Rs.5.96 crores on
31.03.1967. The arrears stood at Rs.14.6 crores on
31.03.1970, and it has risen to Rs.20.65 crores on
31.03.1972.
22. The intention of the legislature to make the act
of default on the part of the employers in contributing
the amounts deducted from the wages of the employees
a separate and distinct offence from the offences under
the EPF Act is vivid with the insertion of the Explanation
1 to Section 405 IPC. The legislature consciously wanted
to permit prosecution of this offence without the sanction
as provided in Section 14-AC of the Act.
23. The Parliament inserted Explanation 1 to
Section 405 to make the act of default in paying
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contributions by the employers after deducting the same
from the wages of the employees an offence cognizable
and non-bailable. The legislature wanted to dilute the
procedural rigours like the report of the competent
officer and previous sanction from the Central Provident
Fund Commissioner in the prosecution of that offence.
The Parliament wanted that the offence of default in
contributions to the Employees' Provident Fund by the
employers after deducting the same from their wages is
to be taken out of the rigour of Section 14-AC of the Act.
A literal interpretation of Section 14-AC of the EPF Act
makes it clear that sanction is contemplated only for
prosecuting the offences under the EPF Act, and no
sanction is required for prosecuting the offence under
Section 406 r/w 405 IPC.
24. The learned counsel for the revision petitioner
relied on Deepak Maneklal Patel v. Natwarbhai
Somabhai Patel and others (supra), wherein the High
Court of Gujarat held that prior permission of the
Provident Fund Commissioner is required for the
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Provident Fund Inspector to lodge prosecution against
the employer for the offence under Section 406 IPC. This
view was followed by the Bombay High Court in
Yeshwantrao Dattaji Chowgule V. State (supra)
holding that as the prosecution is sought to be launched
on account of the failure of the employer in relation to
the obligation in terms of the Act sanction is required.
25. I do not to agree with the views expressed by
the learned Judges of the Gujarat High Court and
Bombay High Court.
26. The view that previous sanction as provided
under Section 14-AC of the EPF Act is not required in a
prosecution for the offence under Section 406 IPC is
supported by the decision of this Court in DR. K.S.
Subhash v. State of Kerala [Crl.M.C. No.3389 of 2009 :
2009:KER:43708] wherein this Court held that when the
case is registered and being investigated only for the
offence under Section 406 IPC and not an offence under
the EPF Act, Section 14-AC has no application.
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27. The Calcutta High Court in Sushil Kumar
Bagla v. State [2003 SCC Online Cal 62] held that for
the prosecution of the offence under Section 406/409
IPC, no sanction under Section 14-AC is required. The
Calcutta High Court held that if an act or omission
amounts to offences under two enactments and under
one such enactment, sanction is required for prosecution
of the offender, it is the option of the prosecution to
prosecute him under either of the enactments. The Court
or the accused cannot insist that the prosecution must be
under the enactment which requires sanction. The view
expressed by the Calcutta High Court was followed by
the Punjab and Haryana High Court in Dhirendra
Kumar Rajak v. State of Haryana and Another
[2023:PHHC:027300] and the Karnataka High Court in
Shri Shashikant C Madanna V. State of Karnataka
[MANU/KA/4628/2019]. Therefore, the challenge of the
revision petitioner that the prosecution will not sustain in
the absence of sanction has not merit.
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28. The prosecution alleges that the establishment
of the petitioner/accused comes under the statutory
scheme. It is specifically alleged that the petitioner/
accused, the proprietor of Tasty Nuts Factory, Manali,
deducted the employees' contribution to the Provident
Fund of the employees concerned out of their salary from
01.01.2006 to 01.01.2008 but failed to deposit with the
competent authority. Prima facie, the ingredients of the
offence under Section 406 are revealed.
29. The obligation to discharge the accused under
Section 239 Cr.PC arises when the Magistrate considers
the charge against the accused to be groundless. The
primary consideration at the stage of framing charge is
the test of existence of a prima facie case.
30. While framing charges, the Court is required to
evaluate the materials and documents on record to
decide whether the facts emerging therefrom taken at
their face value would disclose existence of ingredients
constituting the alleged offence. The Court cannot
speculate into the truthfulness or falsity of the
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allegations, contradictions and inconsistencies in the
statement of witnesses at the stage of discharge. [Vide:
Sheoraj Singh Ahlawat and others v. State of Uttar
Pradesh and another [(2013) 11 SCC 476],
31. I have gone through the records made
available. The learned Magistrate has carefully
considered the relevant materials and contentions.
32. Unless the order passed by the Magistrate is
perverse or the view taken by the court is wholly
unreasonable, or there is non-consideration of any
relevant material, or there is palpable misreading of
records, the revisional Court is not justified in setting
aside the order, merely because another view is possible.
The revisional Court is not meant to act as an appellate
court. The whole purpose of the revisional jurisdiction is to
preserve the power in the court to do justice in accordance
with the principles of criminal jurisprudence. The
revisional power of the court under Sections 397 to 401
Cr.P.C is not to be equated with that of an appeal. Unless
the finding of the court, whose decision is sought to be
revised, is shown to be perverse or untenable in law or is
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grossly erroneous or glaringly unreasonable or where the
decision is based on no material or where the material
facts are wholly ignored or where the judicial discretion is
exercised arbitrarily or capriciously, the courts may not
interfere with the decision in exercise of their revisional
jurisdiction. {Vide: Sanjaysinh Ramrao Chavan v.
Dattatray Gulabrao Phalke [(2015) 3 SCC 123] and
Munna Devi v. State of Rajasthan & Anr [(2001) 9 SCC
631) and Asian Resurfacing of Road Agency Pvt. Ltd.
v. Central Bureau of Investigation [(2018) 16 SCC
299)]}.
33. In Asian Resurfacing of Road Agency Pvt.
Ltd. v. Central Bureau of Investigation [(2018) 16 SCC
299)], the Apex Court held that interference in the order
framing charges or refusing to discharge is called for in
the rarest of rare cases only to correct a patent error of
jurisdiction.
34. The finding of the Court below, therefore,
requires no interference in the revisional jurisdiction. The
order impugned is not affected by any patent error of
jurisdiction. All the challenges in this revision petition fail.
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This Court fails to find that the impugned order is
untenable, grossly erroneous or unreasonable. The
revision petition stands dismissed.
The trial Court shall proceed with the trial of the case
and dispose of the same as expeditiously as possible at any
rate within two months from this day. The Registry shall
forward the copy of the order forthwith to the Chief
Judicial Magistrate concerned for necessary action.
Sd/-
K.BABU,
JUDGE
Kkj
