Holding

A director who is in charge of and responsible for the affairs of the establishment is deemed an employer under Section 2(e) and can be prosecuted under Section 14A of the EPF Act.

Summary

The appellant, a director of Ideal Jawa (India) Ltd., was charged under Section 14A of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 for failing to deposit EPF contributions for October‑December 1990. He contended that, as merely a director and not the occupier or manager, he was not an "employer" within the meaning of the Act and therefore could not be prosecuted. The High Court rejected his petition to quash the complaint. On appeal, the Supreme Court examined the definition of "employer" in Section 2(e) and held that it is an inclusive definition that covers any person who has ultimate control over the affairs of the establishment, including directors. The Court noted that the Form SA filed by the company listed the appellant as one of the persons in charge and responsible for the business, satisfying the complaint’s averments. Consequently, the magistrate was justified in taking cognizance and the appellant could be prosecuted under Section 14A. The appeals were dismissed.

Issues considered

Whether a director of a private company, who is neither occupier nor manager, can be prosecuted under Section 14A of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 for violation of the Provident Fund Scheme.
Interpretation and scope of the term "employer" under Section 2(e) of the EPF Act.
Whether the complaint contained the requisite averments to attract liability under Section 14A.

Legislation cited

Employees Deposit Linked Insurance Scheme, 1976
Employees Family Pension Scheme, 1971
Employees' Provident Funds and Miscellaneous Provisions Act, 1952s. 14, s. 14A, s. 2(e), s. 2(k), s. 6
Employees Provident Funds Scheme, 1952s. para 30, s. para 36A, s. para 38, s. para 76
Factories Act, 1948

Subjects

Employees' Provident FundSection 14AEmployer definitionDirector liabilityCorporate criminal liabilityProvident fund contributionFactories Act

Judgment

A SRIKANTA DATTA NARASIMHARAJA WODIYAR

v.

ENFORCEMENT OFFICER, MYSORE

MAY 4,1993
B
[K. RAMASWAMY AND R.M. SABAi, JJ.]

Employees Provident Funds and Miscellaneous Provisions Act 1952:
Sections 2 (e), (k), 14A.
Employees Provident Funds Scheme 1952: Para 76.
c
Employees Family Pension Scheme 1971.
Employees Deposit linked Insurance Scheme 1976.
Director of private company-Neither occupier nor manager- Whether
D liable for prosecution under Section 14A of 1952 Act for violation of Provident
Fund Scheme.

The appellant was one of the Directors of a Company r~istered under
the Companies Act. This company was also registered under the Factories
Act and its object was to manufacture Motorcycles and its accessories. It had
E a Managing Director, Joint Managing Director and Directors including the
appellant for managing the establishment.

The respondent- an Enforcement Officer, Regional Provident Fund
Commissioner's Office laid 18 complaints against six accused including the
appellant (A-6) and the Company-employer, for the failure to deposit the
F contribution for the period October to December 1990 to the Provident Fund
Account under the Employees Provident Fund and Miscellaneous Provisions
Act, 1952, Employees Provident Fund Scheme 1952, Employees Family
Pension Scheme, 1971 and Employees Deposit Linked Insurance Scheme
1976, offences punishable under Section 14A of the 1952 Act read with para
76 of the 1952 Scheme.
G
On the Magistrate taking cognizance of the complaint, the appellant
filed Criminal Miscellaneous Petitions in the High Court for quashilig the
complaint as they did not contain the relevantaverments constituting offences
against the appellant. It was contended that the appellant was a mere Director
H · of the Company, that he was neither incharge of the company nor was

508
S. D. NARSIMHARAJA v. ENFORCEMENT OFFICER 509

responsible to comply with the provisions of the aforesaid Act and the A
Schemes thereunder. Reliance was placed on the definition of'empfoyer' in
Section 2 (e) of the Act and the liability that bad been fastened on the .
Managing Director or the Manager or occupier of the establishment to abide
by the Act and the Schemes. The High Court dismissed the applications.

B
The appellant appealed to this Court and contended thatthe reading the
definition of' employer' in section 2(e) of the Act with Sectioni; 30, 14(1a) and
para 31 of the Scheme, demonstrate that the employer in relation to the
establishment means the owner or occupier of the factory which includes the
Agent or the Manager of the factory under the Factories Act, that there was
an occupier and Manager recorded for the instant company, and that they C
were Incharge of and were solely responsible to comply with the Act and the
Schemes thereunder and that no specific averments have been made in the
complaint making the appellant responsible for the management of the
factory or the liability to comply with the Act and the Schemes. The complaint
laid against the appellant was therefore illegal and the cognizance taken by
the Magistrate was vitiated by manifest error of law. D

On the question: whether a Director of a Private Company, who is·
neither an occupier nor a manager can be prosecuted under Section 14(A) of
the Employees' Provident Fund and Miscellaneous Provisions Act, 1952 for
violation of the Provident Fund Scheme.
E
Dismissing the appeals, this Court,

HELD: (By the Court K. Ramaswamy & R.M. Sahai, JJ.)

1. The Employees' Provident Fund and Miscellaneous Provisions Act F
1952 by Section 2(e) defines 'employer'. It is an inclusive· definition and
consists of two clauses which are vide in their sweep. In Clause (i) are
included not only owner or occupier but even the agent or manager. When
it comes to establishments other than factory it is not confined to owner or
occupier but to all these who have central or are responsible for the affairs
of the company. It includes even director. Therefore, every such person who G
has the ultimate control of the affairs of the company becomes employer
Section 2(k) defines 'occupier' which means the person who has the ultimate
control of the factory, and where the said affairs are entrusted to a Managing
Agent, such agent shall be deemed to be the occupier of the factory. There-

- fore, by its extended definition its sweep is enlarged bringing within its scope
the person who is incharge of or responsible for, the management or H
SUPREME COURT REPORTS. [1993] 3 S.C.R.
510

A ultimate control over the affairs of the factory or establishment. In the event
of entrustment to a Managing Agent, such Managing Agent shall also be
dee~ed 'to be the occupier of the factory'. (514-GH,)

2. In the instant case, the appellant having been declared himself as one
of the person Incharge of and was responsible for conduct of the business of
B the establishment or the factory in Form SA the complaint and non-compli·
ance thereof having been enumerated in para 3 of the complaint, it was validly
made against the appellant along with other accused for the alleged contra·
vention. Necessary allegations bringing out the ingredient of offence have
been made out in the complaint. Therefore, the Magistrate has rightly taken
cognizance of the offence alleged against ~e appellant. (518-A-B)
c
(Per K. Ramaswamy, ].)

1. The Act and the Schemes are self-contained code for deduction from
the salary of the employees and the responsibility to contribute in equi·
D proportion of the employer's share and deposit thereofin the account within
the specified time under the Act and the Schemes into the account. It is a
welfare legislation to provide benefits to the employees as per.the schemes.
·They need mandatory compliance and violation thereof visits with penal
action. (514-E)

E
2. Section 6 fastens the obligation on the employer. It postulates that the
contribution to the fund shall be made by the employer. (515-A)

3. Under para 30 of the Employees' Provident Fund Scheme, 1952 and
the other Schemes, the employer shall deposit.the contribution to the Fund.
F (515-B)

4. The employer shall, in the first instance, pay both the contributions
payable by himself(in the Scheme referred to as employer's contribution) and
also on behalf of the members employed by him directly or through a
Contractor, the contribution payable by such member (in the Scheme re-
G
ferred to as member's contribution). (515-G)

5. Para 38 provides that the employer shall send. to the CommiSsioner
within 15 days of the close of every month, pay the same to the Fund by
separate Bank Drafts or cheques and the administrative c.harges within 25
days of close of the month, the employer shall submit a monthly consolidated
H
S. D. NARSIMHARAJA 1•. ENFORCEMENT OFFICER 511

statement as per form 5 with partic~lars mentioned therein. (515-H, 516-A) A

6. Para 76 also fastens criminal offence for non-compliance of the
provisions of the schemes on the persons incharge of and responsible for the
management or control of the establishment

B
7. Every person, who at the time the offence was committed, was
Incharge of and was responsible to the establishment for conduct of it~
business as well as the company shall be liable to be proceeded against and
punished accordingly. (517 ·C)

8. Form 5-A read with para 36A give an option to the employer to furnish C
particulars of ~wncrship and the branches of the department, owners,
occupiers, directors, partners, manager or other person or persons who have
ultimate control over the affairs of such factory or establish11tent incharge of
and responsible for the conduct of the business of the conipany and compli·
ance of the statutory obligation fastened under the Act and the 1.-elevant
schemes. It is made mandatory to the employer to abide by the same and non· D
compliance thereof is liable for prosecution under Section 14A of the Act.
(517-D)

- Municipal Corpn. of Delhi''· Ram Kishan Rohtagi & Ors.; [1983] 1SCC1
and Employees' State Insurance Corpn. , .• Gurdial Singh & Ors.; [1991] Supp.
I SCC 204, referred to.
E

Employees' State Insurance Corporation v. Gurdial Singh & Ors. [1991)
Supp. 1 SCC 20.t, and Municipal Corporationof Delhi v. Ram Kishan Rohtagi &
Ors., [1983) 1SCC1,_distinguiShed.
F
(Per R.M. Sahai, ].)

1. The Act is a welfare legislation enacted for the benefit of he
employees engaged in the factorie.s and establishments and is directed
towards achieving this objective by enacting provisions requiring the G
employer to contribute towards Provident Fund, Family Pension and
1.nsu ranee and keep the Commissioner informed ofit by filing regular
returns and submitting details in forms prescribed for that purpose.
(518-G)

. H
SUPREME COURT REPORU: .. [1993) 3 S.C.R. -
512

A 2. Paragraph 36A of the Provident Fund Scheme framed by Central
Government under Section 5 of the Act requires the employer in relation to
a factory or other establishment to furnish Form SA mentioning details ofits
branches and-departments, owners, occupiers, directors, partners, managers
or any other person or persons who have ultimate control over the affairs of
the factory or establishment. The purpose of giving details of the owners,
B occupiers and directors etc, is not an empty formality but a deliberate intent
to widen the net ofresponsibility on any and every one for any act or omission.
It is necessary as well as in absence ofsuch responsibility the entire benevolent
scheme may stand frustrated. (519-A-8)

C 3. The anxiety of the Legislature to ensure that the employees are not put
to any hardship in respect of Provident Fund is manifest from sections 10 and
11 of tJie Act. The farmer grants immunity to provident fund from being
attached for any debt outstanding against the employee. And the latter
provides for priority of provident fund contribution over other debts if the
employer is adjudged insolvent or the company is winded up. Such being t~e
D nature of provident fund any violation or breach in this regard has to be
construed strictly and against the employer. (519-C)

4. Sections 14 and 14A provides for penalties. The one applies to
. whosoever is guilty of avoiding payment of provident fund and to employer
ifhe commits breach of provisions m~;1tioned in its various clauses where as
E Section 14A fastens liability on certain person ifthe persons committing the
offence is <;ompany. The scope of the two sections is same. Latter is wider in
its sweep and reach. The former applies to anyone who is an employer or
owner or is himself responsible for making payment whereas latter fastens
the liability on all those who are responsible or are in charge of the company
for the offence committed by it. (519-D-E)
.-
.F

5. Sub-sections (1) and (2) of Section 14A extend the liability for any
offence by any person including a partner by virtue of explanation if he was
incharge or was responsible to the company at the time of committing the
offence. The expression, 'was in charge of and was responsible to the company
G for the conduct of the business' are very wide in their import. It could not,
therefore, be confined to employer only. (520-D)

6. To say therefore that since para~raph 36A requires an employer to

H
do certain acts the responsibility for any violation of the provis!on should be
confined to such employer or owner would be ignoring the purpose and
-
NARSIMHARAJA v. ENFORCEMENT OFFICER [K. RAMASWAMY, J] 513

objective of the Act and the extended meaning of 'employer' in relation to A
establishments other than the factory. The d'lCiaration therefore in Form SA
in the instant case including appellant as one of the persons in charge and
responsible fur affairs of the company was in accordance with law, therefore,
his prosecution for violation of the scheme does not suffer from any error of
jurisdiction or law. (521-8-C)
B

CRIMINAL APPELLATE JURISDICTION: Criminal Appeal Nos. 402 to
419of1993.

From the Judgment and Order dated 3 .3 .1992 of the Karnataka High Court
in Crl. Petitions Nos. 1574 to 1584 of 1991and1588 to 1594 of 1991.

M.S. Nes.a,rgi, R.C. Mishra and Dr. (Mrs.) Meera Aggarwal (For Aggarwal
& Mishra & Co.,) for the Appellant.

V. Gauri Shankar, Anil Srivastava and Mrs. Anil Katiyar (NP)" for the D
Respondent.

The Judgments of the Court were delivered by

K. RAMASWAMY .J. Special Leave granted.
E
Since common question of law arises in these 18 appeals for decision, they
are disposed of by a ~ommon judgment. The appellant is o_l}e of the Directors of
M/s Ideal Jawa (India) Ltd. Yadavagiri, Mysore, a Private Ltd. Company estab-
lished under the Companies Act. It was also registered under the Factories Act,
1948. Its object is to manufacture Motor-Cycles and its accessories. It has its F.
Managing Directot:Joint Managing Director and Directors including the appel-
lant to manage the establishment. The respondent laid 18 complaints against six
a~CJ!Sed including the appellant (A-6) and tire Company, employer, for their failure
to deposit the contribution for the periods of October to December, 1990 to the
Provident Fund Account No. NK 2260 under the Employees' Provident Funds and
Miscellaneous Provisions Act, 1952, for short 'the Act', Employees' Provident G
Funds Scheme, 1952, Employees' Family Pension Scheme, 1971 and Employees'
Deposit- Linked Insurance Scheme, 1976, for short 'the Schemes' punishable
under S. 14A of the Act read with para 76 of 1952 scheme. On the Magistrate's
taking cognizance thereof, the appellant laid Crl. M.Ps. in the High Court to quash
the complaints as they do not contain the relevant averments constituting the
offences against the appellant. It is his case that he is a mere Director of the H
514 SUPREME COURT REPORTS (1993) 3 S.C.R.

A Company. He was neither Incharge of the Company, nor is responsible to comply
with the provisions of the Act and the Scheme. In support thereof he placed
reliance on the definition 'employer' and the liability has been fastened on the
Managing Director or theManager or occupier of the establishment to abide by the
Act and the Schemes. The High Court by its order dated March 3, 1992, dismissed
the applications. Thus these appeals.
B
Sri Nesargi, leamed Sr. counsel for the appellant contended that a reading of
the definition 'employer' in s.2(e) read with ss. 30, 14 (1-A) and paras 30 and 38
of the Schemes demonstrates that the employer in relation to an establishment
means the owner or occupier of the factory which includes the Agent or the
C Manager of the Factory under the Factories Act. One Sri N.K. Khudamurad was
recorded as occupier and one Sri D .K. Daras ha was recorded as the Manager. They
are Incharge of and were responsible to comply with the Act and the Schemes. No
specific averments were made in the complaint making the ~ppellant responsible
for the management of the factory or the liability to comply with the Act and the
Schemes. The complaint, therefore, laid against him is illegal and the cognizance
D taken by the Magistrate is vitiated by manifest error of law. In support thereof he
pl.aced reliance on the decisions of this court in Municipal.Corpn. ofDelhi v. Ram
· -Kishan Rolztagi & Ors. [1983] 1 SCC 1 and Employees' State Insurance Corpn.
v. 9urdial Singh & Ors. [1991] Supp. 1SCC204.

The Act and the Schemes are self-contained code for deduction from the
E salary of the employees and the responsibility to contribute in equi-proportion the
employer's share and deposit thereof in the account within the specific time under
Act and the Schemes into the account. It is a welfare legislation to provide benefits
to the employees as per the schemes. They need mandatary compliance and
violation thereof visits with penal action. Section 2(e) of the Act defines
'employer' which means -in relation to an establishment which is a factory, the
F
owner or occupier of the factory, including the Agent of such owner or occupier,
the legal representative of deceased owner or occupier and, where a person has
been named as a Manager of the factory under clause (f) of sub-s. (1) of s. 7 of the
Factories Act, 1948, the person so named .............. ..

G The definition is an inclusive definition bringing within its ambit the owner
or occupier as well as its Manager. Section 2(k) defines 'occupier' which means
- the person who bas ultimate c,ontrol over the affairs of the factory. and, where the
said affairs are entnisted io a Managing Agent, such Agent shall be deemed to be
the occupier of the factory. Therefore. by its extended definition its sweep is --
enlarged bringing within its scope the person who is incharge or responsible for
H in management or ultimate control over the affairs of the factory or establishment.
NARSIMHARAJA v. ENFORCEMENT OFFICER [K. RAMASWAMY, J] 515

In the event of entrustment to a Managing Agent, such Managing Agent shall also A
be deemed 'to be the occupier of the factory'. Section 6 fastens the obligation on
the employer in this behalf. It postulates that the contribution shall be made by the
employer to the Fund and shall be 8-.1/3% of the basic wages, dearness allowances
and retaining allowances, if any, for the payment being payable to each of the
employees, whether employed by him directly or through a Contractor. The
employee's contribution shall be equal to the contribution payable by the em- B
ployer in respect of him, etc. in its application to any establishment or class of
establishments. Other provisions are not relevant, hence they are omitted. Under
para 30 of the Employees· Provident Fund Scheme, 1952 and the other Schemes,
the employer shall deposit the contribution to the Fund.
c
Underpara36A of the Scheme the employer is enjoined to furnish particulars
of the ownership of the factory which provides thus:

"36-A Employer to furnish particulars of ownership:- Every
employer in relation to a factory or other establishment to which the
Act applies on the date of coming into force of the Employees' D
Provident Funds Scheme, 1961, or is applied after that date, shall
furnish in duplicate to the Regional Commissioner in Form No. 5-
A annexed hereto particulars of all the branches and departments,
owners, occupiers, directors, partners, manager or any other person
or persons who have the ultimate control over the affairs of such
factory or establishment and also sent intimation of any change in E
such particulars, within fifteen days of such change, to the Regional
Commissioner by registered post and in such other manner as may
be specified by the Regional Commissioner.

Provided that in the case of any employer of a factory or other F
establishment to which the Act and the Family Pension Scheme,
1971, shall apply the aforesaid Form may be deemed to satisfy the
requirements of the Employees' Family Pension Scheme, 1971, for
the purpose specified above."

The employer shall, in the first instance, pay both the contributions payable G
by himself (in the Scheme referred to as employer's contribution) and also on
behalf of the members employed by him directly or through a Contractor, the
contribution payable by such member (in the Scheme referred to as member's
contribution). Para 38 provides that the employer shall send to the Commissioner
within 15 days of the close of every month, pay the same to the Fund by separate H
Sank Drafts or cheques and the administrative charges. Within 25 days of close
516 SUPREME COURT REPORTS (1993) 3 S.C.R.

A of the month, the employer shall submit a monthly consolidated statement as per
form 5 with particulars mentioned ~herein.

Form 5-A envisages to give particulars in Columns I to 7 thereof, i.e.
particulars of owner, etc. The appellant's establishment stated the name of the
establishment as Ideal Jawa (India) Ltd., Code No. of the estab°lishment, its
B address, nature of business, period of its commencement and manufacturing
status, have been given. In Column 8 the establishment is .to furnish the names of
the owner-company, Directors. It was mentfoned therein as Mr. N.K. Irani as
Managing Director; the appellant as one oftht; Directors and others. In column IO
the names of occupier and Manager as registered under the Factories Act were
given. In Column 11 which specifies particulars thus: 'particulars of the persons
c
mentioned above, who are Incharge of, and responsible for the conduct of the
business of the establishment'. Therein it was stated that "as per the details
mentioned in item 8". As stated earlier in column 8 the names of the Managing
Director, the Joint Managing Director and two Directors including the appellant
have been mentioned.
D
Section 14A which is penal states thus:

"14A. Offences by Companies:-

(I) If the person committing an Offence under this Act, the Scheme
E or the Family Pension Scheme or the Insurance Scheme in a
company, every person who at the time the offence was committed
was lncltarge of, and was responsible to the company for ihe
conduct oftlte business ofthe company, as well as the company shall
be deemed to be guilty of the offences and shall be liable to be
proceeded against and punished accordingly.
F
Provided that nothing contained in this sub-section shall
render any such person liable to any punishment, if he proves that
the offence was committed without his knowledge or that he
exercised all due diligence to prevent the commission of such
G offence.

(2) Notwithstanding anything contained in sub-s. (l), where an
offence under this Act, the scheme or the Family Pension Scheme
or the Insurance Scheme has been committed by a company and it
is proved that the offence has been committed with the consent or
H connivance of, or is attributable to, any neglect on the part of any
NARSIMHARAJA \'.ENFORCEMENT OFFICER [K. RAMASWAMY, J) 517

director or manager, secretary or other officer shall be deemed to be A
guilty of that offence and shall be liable to be proceeded against and
punished accordingly.

Explanation: For the purposes of this Section-
B
(a) "Company" means any body corporate and includes a firm and
other association of individuals; and

(b) "director" in relation to a firm, means a partner in the firm."

Para 7 6 also fastens criminal offence for non-compliance of the provisions C
of the schemes on the persons incharge of and responsible for the management or.
control of the establishment. It could thus be seen that every person, who at the time
of the offence was committed, was Incharge of and was responsible to the
establishment for conduct of its business as well as the company shall be liable to
· be proceeded against and punished accordingly. It is seen that Form 5-A read with
D .
para 36A give an option to the employer to furnish particulars of ownership and
the branches of the department, owners, occupiers, directors, partners, manager or
other person or persons who have ultimate contrc,J over the affairs of such factory
or establishment incharge of and responsible for the conduct of the business of the
company and compliance of the statutory obligation fastened under the Act and the
relevant schemes. Particulars in column 8 as regards owners and column 10 relates E
to Manageroroccupier and thi;irnames, addresses etc. and column 11 refers to the
persons Incharge of, and are responsible to the management of the establishment
or factory are specified. In form 5-A, as seen earlier in columns 8 and 11, it was
specifically stated that the Managing Director, Joint Managing Director and
Directors including the appellant as ,not only owners of the factory, but are
Incharge of and responsible for the management of the factory and the establish- F
ment. In paragraph 3 of the complaint, it was specifically stated, "that accused 2
to 6 (appellant) are the persons Incharge of the said establishment and are
responsible for conduct of its business. They ~e thus required to comply with all
· the provisions of the Act and the Schemes in respect of the said establishment".
It is made mandatory to the employer to abide by the same and non-compliance
/ thereof is liable for prosecution under s. 14A of the Act. Section 14(1-A) relied on G
by Sri Nesargi relates to only liability for punishment for contravention or making
default to comply with s. 6 or s. 17 (3-A) in so far as it relates to the payment of
inspection charges and para 38 of the Scheme in so far as it relates to payment of
administrative charges. That has no application as regards the offence covered
under s.14A by the companies are concerned. Accordingly, we hold that the
,
H
'
518 SUPREME COURT REPORTS [1993) 3 S.C.R.

A appellant having been declared himself as one of the person lncharge of and
responsible for conduct of the business of the establishment or the factory, the
complaint and non-compliance thereof having been enumerated in subsequent
paras of the complaint, it was validly made against the appellant along with other
accused for the alleged contravention. Necessary allegations bringing out the

B
ingredient of offence have been made out in the complaint. Therefore, the learned
Magistrate has rightly been taken cognizance of the offence alleged against the
appellant.
--
Employees' Seate Insurance Corporation v. Gurdial Singh & Ors. [1991)
Supp. l SCC 204 is the case relating to an admission made by the prosecution that
C the Directors were not Incharge nor are responsible for compliance of the
provisions of the Employees' State Insurance Act, 1948. "Admittedly the com-
pany had a factof¥ and it is not in dispute that the occupier of the factory had been
duly named. It is also not in dispute that it has a Manager too". In view of this
admission the Directors were held not responsible for non-compliance with the
provi~ions of the Employees' State Insurance Act, 1948. The ratio therein,
D therefore, does not assist the appellant. Equally in Municipal Corporation ofDelhi
v.Ram Kishan Rohtagi & Ors. [1983] l SCC l for an offence under Prevention of
Food Adulteration Act specific provision of Food Adulteration Rules provide to
nominate occupier or Manager responsible for the production or manufacture of '
articles of food, etc. by the company and were nominated. Under those circum-
stances, this court upheld the quashing of the proceedings against the Directors as
E the complaint did not contain necessary alleg_ations constituting the offence
against the Directors. The appeals are thus dismissed.

R.M. SAHAI, J. Can a director of a private company, who is neither an
occupier nor a manager be prosecuted under Section 14(A) of the Employees'
F Provident Fund and Miscellaneous Provisions Ai:t, 1952 (in brief 'the Act') for
violation of the Provident Fund Scheme.

That depends, obviously, on the scheme of the Act the liability it fastens on
the director of the Company and applicability of the penal provisions to the
statutory violation or breach of the scheme framed under it. But before doing so
G it may not be out of place to mention that the Act is a welfare legislation enacted
for the benefit of the employees engaged in the factories and establishments. The
entire Act is directed towards achieving this objective by enacting provisions
requiring the employer to contribute towards Provident Fund, Family Pension and
Insurance and keep the Commissioner informed of it by fiiing regular returns and
H submitting details in forms prescribed for that purpose. Paragraph 36A of the
NARSIMHARAJA , .. ENFORCEMENT OFFICER [SAHA! J.)
-519

Provident Fund Scheme framed by Central Government under Section 5 of the Act A
requires the employer in relation to a factory orother establishment to furnish Form
SA mentioning detaHs of its branches and departments, owners, occupiers,
directors, partners, managers or any other person or persons who have ultimate
control over the affairs of the factory or establishment. The purpose of giving
details of the owners, occupiers and directors etc. is not an empty formality but a
deliberate intent to widen the net ofresponsibility on any and every one for any act B
or omission. It is _necessary as well as in absence of such responsibility the entire
benevolent scheme may stand frustrated. The anxiety of the Legislature to ensure
that the employees are not put to any hardship in respect of Provident Fund is
manifest from Sections IO and 11 of the Act. The former grants immunity to
provident fund from being attached for any debt outstanding against the employee.
And the latter provides for priority of provident fund contribution over other debts
c
ifthe employer is adjudged insolvent or the company is winded up. Such being the
nature of provident fund any violation or breach in this regard as to be construed
strictly and against the employer.

Reverting to the statutory provision Sections 14 and 14A provide for D
pcnalities. The one applies to whosoever is guilty of avoiding payment of
provident fund and to employer if he commits breach of provisions mentioned in
its various clauses where as Section 14A fastens liability on certain p·ersons if the
person committing the offenee is a company. The scope of the two sections is
same. Latter is wider in its sweep and reach. The former applies to anyone who is
an employeror owner or is himself responsible for making payment whereas latter E
fastens the liability on all those who are responsible or are in charge of the company
for the offence committed by it. Section 14A reads as under:

"14-A. Offences by companies-(!) If the person committing an
offence under this Act, the Scheme or [the Family Pension Scheme F
or the Insurance Scheme] is a company, every person, who at the
time the offence was committed was in charge of, and was respon-
sible to, the company for the conduct of the business of the
company, as well as the company, shall be deemed to be guilty of
the offence and shall be liable to be proceeded against and punished
accordingly: G

Provided that nothing contained in this sub-section shall render any
such person liable to any punishment, if he proves that the offence
was committed without his knowledge or that he exercised all due
diligence to prevent the commission of such offence. H
•
520 SUPREME COURT REPORTS. [I 993) 3 S.C.R.

A (2) Notwithstanding anything contained in sub-section(!), where
an offence under this Act, the Scheme or [the Family Pension
Scheme or the Insurance Scheme] has been committed by a com-
pany and it is proved that the offence has been committed with the
consent or connivance of, or is attributable to, any neglect on the part
of, any director or manager, secretary or other officer of the
B company, such director, manager, secretary or otherofficer shall be
deemed to be guilty of that offence and shall be liable to be
proceeded against and punished accordingly.

Explanation- For the purposes of this section,-
c
(i) ·~company" means any body corporate and includes a firm and
other association of individuals; and

(ii) "director", in relation to a firm means a partner in the firm."

D Sub-sections (I) and (2) extend the liability for any offence by any person
including a partner by virtue of explanation if he was incharge or was responsible
to the company at the time of committing the offence. The expression, 'was in
charge of and was responsible to the company for the conduct of the business' are
very wide in their import. It could not, therefore, be confined to employer on! y. The
E employer is defined by Section 2(e) to mean,

"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
F 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, the person so named; and

(ii) in relation to any other establishment, the person who, or the
G
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;"

H Both clauses (i) and (ii) again are wide in their sweep. In clause (i) are
NARSIMHARAJA v. ENFORCEMENT OFFICER SAllAI J.I 521

- __,.
included not only owneroroccupier but even the agent or manager. When it comes A
to establishments other than factory it is not confined to owner or occupier but to
all those who have control or are responsible for the affairs of the company. It
includes even director. Therefore, every such person who has the ultimate control
over the affairs of company becomes employer." To say therefore that since
paragraph 36 A requires an employer to do certain acts the responsibility for any
violation of the provision should be confined to such employer orowner would be B
ignoring the purpose and objective .of the Act and the extended meaning of
employer in relation to establishments other than the factory. The declaration
therefore in Form SA including appellant as one of the persons in charge and
responsible for affairs of the company was in accordance with l(!.w therefore his
. prosecution for violation of the scheme does not suffer from any error of C
jurisdiction or law.

ORDER

For reasons given by us in our concurring but separate orders the appeals fail
and are dismissed.

NVK. Appeals dismissed.

-