The court established that prior sanction under the EPF Act is not required for prosecuting distinct offences under IPC related to criminal breach of trust.

ORDER :

K. Babu, J.

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.

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. 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 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.

(2) The National Commission on Labour has recommended that in ord