Narendra Kumar Bajoria @ N.K. Bajoria v. The State of West Bengal & Anr.

director at the time of filing of the said complaint and FIR and now ex-director of the company cannot be said to have committed an offence under Section 405 (Explanation 1) punishable under Section 406/409 of Indian Penal Code.

The Learned Advocate representing the petitioner relied upon the following decisions:- i. It has been held by the Supreme Court in Employees State Insurance Corporation Vs. S.K. Agarwal & Ors. that in neither of the explanation 3 under Section 405 of the Indian Penal Code there is found anything to the effect that the Directors of the Company or an establishment may be prosecuted under Section 405 of Indian Penal Code for the alleged commission of Criminal Breach of trust. ii. This Hon'ble Court in the case of Satish Kumar Jhunjhunwala v. State of West Bengal reported in (2008) 3 CAL LT 484(HC) held that launching of the prosecution against the director of the establishment under 406 and 409 of the Indian Penal Code for nonpayment of Employees' Provident Fund Contribution is completely illegal and bad in law and the criminal proceeding was quashed. iii. This Hon'ble Court in the case of Jasoda Glass Silicate Vs. Regional Provident Fund Commissioner, reported in 2002(2) CHN 407 has in explicit terms laid down that where the provident fund dues has already been deposited with the authority and the same has been accepted by the authority, no purpose would be served by continuing the proceeding and as such the same should be dropped by the concerned Magistrate. This principle has been subsequently followed by this Hon'ble Court on a number of occasions. iv. The Hon'ble Apex Court has also in the case of a Adony Cotton Mils categorically laid down that when dues have been deposited with the authorities, no useful purpose would be served by continuation of the proceeding and the Hon'ble Apex. Court was pleased to quash the proceeding. 4 v. The aforesaid Criminal proceeding was initiated against the petitioner for nonpayment of Provident fund dues which was subsequently paid by the company which made default. In the premises the cause of action initiating the said Criminal Proceedings and/or continuation of the same is non est. It would be abuse of process of Court if the proceedings are allowed to proceed further against your petitioner. vi. The institution of the criminal case and its continuance is an abuse of the process of Court and for the ends of justice the same is liable to be quashed.

Considered the rival contentions of the Learned Advocates representing the opposite party no.2 as well as the State.

Pertinently the company had deposited the dues amounting to Rs.2,21,952/- duly accepted by the Provident Fund Authority.

The relevant portion of the complaint dated 26.04.2007, lodged by the Enforcement Officer, Provident Fund, Jalpaiguri to the Officer-in-Charge, Kalchini P.S., is reproduced herein below:- “2. Under paragraph 38(1) of the employees, Provident Funds Scheme, 1952 and paragraph 12 of the Employees Pension Scheme, 1995 framed under the Act, the employer in relation to an establishment covered under the act are required to deduct the members share of provident fund/provident fund contributions from the wages of member employees and remit the amount into the State Bank of India to the credit of E.P.F. Accounts within fifteen days from the close of the month for which the contributions were deducted.

Paragraph 32(3) of the Employees Provident Funds Scheme, 1952 and Paragraph 12(3) of the Employees Pension Scheme, 1995 stipulate that any sum deducted under the schemes by an employer from the 5 wages of an employee shall be deemed to have been entrusted to him for the purpose of paying the contributions in to the Fund in respect of which it was deducted.

By Central Act 40 of 1973 which received the assent of the President of India on 6th September, 1973 (Act came into force with effect from 01.11.1973, the following explanations have been added to Section 405 of the Indian Penal Code. Explanation: A person being an employer who deducted to Employees, contributions from the wages payable to the employees for credit to Employees Provident Funds/Employees Pension Funds established by law for the time being in force, shall be deemed to have been entrusted with the amount of the contributions. So deducted by him and if he makes default in the payment of such contributions to the said fund in violation of the said law shall be deemed to have dishonestly, used to amount of the said contribution in violation of law as aforesaid.

5. The employer has deducted the members share of Provident Fund Contributions from the wage of employees for the months of 03/07. The month wise total of each deduction are furnished below- Month Employees share of contributions towards Provident Fund Account No.1 Rs.221952.00/- Total Rs.221952.00/-

6. As the amount deducted from the employees have not been remitted to the E.P.F. Accounts maintained by the State Bank of India, they have committed the offence of Criminal Breach of Trust. Hence, action may please be taken to file complaints under Section 406/409 of the Indian Penal Code against the employer.

7. The establishment is situated within the jurisdiction of Kalchini P.S.

8. It is suggested that the relevant wages registers in possession of the establishment be searched and seized forthwith as they will be material evidence in support of the prosecution. 6

It may also be mentioned that conviction under the Employees Provident Funds and Miscellaneous Provisions Act, 1952 will not stand as an impediment to the Police proceedings against the establishment under the provisions of the Indian Penal Code.”

9. Section 406 of the Indian Penal Code states as follows:- “406. Punishment for criminal breach of trust.—Whoever commits criminal breach of trust shall be punished with imprisonment of either description for a term which may extend to three years, or with fine, or with both.”

Section 409 of the Indian Penal Code states as follows:-

409. Criminal breach of trust by public servant, or by banker, merchant or agent.—Whoever, being in any manner entrusted with property, or with any dominion over property in his capacity of a public servant or in the way of his business as a banker, merchant, factor, broker, attorney or agent, commits criminal breach of trust in respect of that property, shall be punished with imprisonment for life, or with imprisonment of either description for a term which may extend to ten years, and shall also be liable to fine.

Section 2(e) of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 stated as follows:- “2. Definitions. - In this Act, unless the context otherwise requires, (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 1 of section 7 of the Factories Act, 1948 (63 of 1948), the person so named; 7 (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;”

In S.K. Alagh v. State of U.P.1, the Hon’ble Supreme Court held the following:-

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.

17. A criminal breach of trust is an offence committed by a person to whom the property is entrusted.

18. Ingredients of the offence under Section 406 are: “(1) a person should have been entrusted with property, or entrusted with dominion over property; (2) that person should dishonestly misappropriate or convert to his own use that property, or dishonestly use or dispose of that property or wilfully suffer any other person to do so; (3) that such misappropriation, conversion, use or disposal should be in violation of any direction of law prescribing the mode in which such trust is to be discharged, or of any legal contract which the person has made, touching the discharge of such trust.”

In HDFC Securities Ltd. v. State of Maharashtra2, the following was held by the Hon’ble Supreme Court:-