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Ajay Jalan and Ors. Vs. The State of West Bengal and Ors. - (High Court of Calcutta) (27 Apr 2018)

Mere payment of contributions after filing of case will not absolve employer from his liability

MANU/WB/0272/2018

Criminal

In facts of present case, on November 19, 2014, Enforcement Officer, Employees Provident Fund Organization (Opposite party No. 2) inspected the establishment, Ultimo Logistics Private Limited. During inspection, he noticed that, the Petitioners being employers/Managing Director/Directors and the persons responsible for the conduct of the business of the said company though deducted a sum of Rs. 2,33,742 from the salary/wages of the employees as employees share of Provident Fund contribution for the period from March 2012 to October 2014 but not deposited the amount with the statutory fund in violation of Section 6 Employees'' Provident Funds And Miscellaneous Provisions Act, 1952 read with Para 38 of Employees Provident Fund Scheme. Accordingly, he lodged a complaint against the Petitioners. The instant revision has been preferred by the accused persons/Petitioners praying for quashing of the proceeding arising out of Case registered under Section 406/409/34 of the Indian Penal Code, 1860 (IPC).

Under the Employees'' State Insurance Act, 1948 (ESI Act), a duty has been cast upon the "principal employer" to pay the employee's share of contribution whereas Explanation 2 referred to the term 'employer' only and there was no definition of 'employer' either in the ESI Act or in the Indian Penal Code and as such the definition of word "principal employer" defined in Section 2(17) of the ESI Act was taken into account to consider as to whether the directors can be held liable for failure to pay the employee's share of contribution.

Admittedly, the company in question was not impleaded as an accused in the instant case. I find no reason to differ with the conclusion arrived at by present Court in Sajjan Kumar Jhunjhunwala and Ors. That non-inclusion of the company does not affect the case in anyway. Furthermore, Explanation 1 of Section 405 of IPC clearly speaks that, an employer of an establishment who deducts the employee's contribution from the wages payable to the employee for credit to a Provident Fund shall be deemed to have been entrusted with the amount of the contribution so 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. Once, it is found employer deducted the amount from the wages of the employees for contribution of the provident fund and retaining the same without depositing it with the fund, an automatic presumption is available against the employer that he dishonestly used the amount of said contribution in violation of a direction of law. It has already been observed that, it was the Petitioners who are the employers and persons responsible for the conduct of the business of the establishment. Under the circumstances absence of the company/establishment being made a party to the proceeding, the said proceeding cannot be become infructuous.

In the instant case, admittedly, there was a default in deposit of employees share of Provident Fund contribution for the period in question which was deposited subsequently after initiation of the instant proceeding. But mere payment of the contributions after filing of the case will not absolve the employer from his liability. Moreover, there is also neither any law nor any decision that in case of subsequent payment of employees share of Provident Fund contribution would result in quashing of the proceeding though it can be a mitigating circumstances to be taken into consideration in the event of the employer/accused found guilty by the trial court. In the matters of Sajjan Kumar Jhunjhunwala and Ors. and Anjuman Tea Company Ltd. and Ors. Court held that, subsequent deposit will not absolve the defaulter nor lead to quashing of the proceeding. Accordingly, the instant criminal revision is dismissed.

Relevant : Sajjan Kumar Jhunjhunwala & Ors. Vs. The State of West Bengal & Anr., Anjuman Tea Company Ltd. & Ors. Vs. State of West Bengal & Ors. MANU/WB/0548/2007: 2008 (1) CHN 1061

Tags : PROVIDENT FUND   DEPOSIT   DEFAULT   PROCEEDINGS   QUASHING  

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