Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2012 Supreme(Online)(P&H) 112

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH
Yashvir Singh Rathor, J
Ajay Kumar – Appellant
Versus
State Of Haryana – Respondent
CRM-M-708-2012

Advocates:
For the Appellants/Petitioners: R.N. Lohan, J.S. Maanipur, Harpreet Kaur
For the Respondents: Vasundhara Dalal Anand

Default in paying deducted employees' contributions to social security funds constitutes criminal breach of trust under IPC independently of special labour statutes. Such proceedings are maintainable concurrently with, and without need for the sanctions required by, the specialized enactments due to distinct statutory ingredients.

Headnote:(A) Indian Penal Code, 1860 - Section 405, 406 - Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 - Sections 14, 14AA, 14AB, 14AC - Employees’ State Insurance Act, 1948 - Sections 39, 75, 76, 85, 86 - Criminal Breach of Trust - Prosecution for default in contribution - Whether separate criminal proceedings are maintainable when special statutes provide for penal consequences. (Paras 3-8, 17-21)

(B) Criminal Breach of Trust - Ingredients - Inclusion of Explanation 1 and 2 to Section 405 IPC by Act 40 of 1973 specifically covers the default in payment of employee contributions deducted from wages - This deems the default as 'dishonest use' of funds. (Paras 15, 17)

(C) Double Jeopardy - Applicability of Article 20(2) - Offences under the special statutes (ESI/EPF Act) and Section 406 IPC are distinct - Former do not require mens rea, while the latter is predicated on dishonest misappropriation - Hence, proceedings can concurrently continue without violating constitutional protection. (Paras 14, 15, 21)

(D) Procedural Exclusivity - Prosecution under Section 406 IPC for misappropriation of deducted contribution does not require prior sanction mandated by special labour statutes - Special law procedures do not exclude general criminal law where ingredients of distinct substantive offences are met. (Paras 18, 22-23)

Facts of the case:
A contractor engaged on an outsourcing basis was responsible for providing skilled manpower and depositing statutory contributions towards social security funds. Upon investigation into complaints of non-deposit of deducted employees' shares, an FIR was registered for criminal breach of trust. The petitioner challenged the FIR on the grounds that specialized labour statutes provide a complete code for such defaults and that separate criminal proceedings constitute an abuse of process and double jeopardy.

Findings of Court:
The court held that the legislature introduced specific explanations to the defining section of criminal breach of trust to treat the non-payment of deducted social security contributions as a distinct criminal offence. Consequently, prosecution under the general penal code is permissible alongside proceedings under special labour Acts.

Issues: Whether the registration of FIR under Section 406 IPC is maintainable for default in statutory contributions when special enactments prescribe specific modes of recovery and prosecution.

Ratio Decidendi: By inserting explanations to the criminal breach of trust provision, the legislature intended to make the default in paying deducted contributions an offence independent of the special labour statutes. Since the offences satisfy different ingredients—specifically the requirement of mens rea for criminal breach of trust—there is no conflict between the enactments, and constitutional protections against double jeopardy are not attracted.

Result: Petition dismissed.

Table of Content
1. factual basis for criminal breach of trust allegations regarding non-deposit of epf/esi. (Para 1 , 2 , 12)
2. statutory framework of epf and esi acts governing penalties and procedural requirements for prosecution. (Para 3 , 4 , 5 , 6 , 7 , 8)
3. counter-allegation of mala fide and prior police complaints filed by the petitioner. (Para 9 , 10)
4. arguments concerning the interplay between ipc section 406 and special statutes like the esi and epf acts. (Para 11 , 13 , 14 , 15)
5. explanation 1 and 2 to section 405 ipc make default in contribution payments a distinct, punishable breach of trust. (Para 16 , 17 , 18 , 19 , 20 , 21 , 22 , 23 , 24)
6. trial court must address the inconsistency between ipc sections 406 and 420 when framing charges. (Para 25 , 26)

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YASHVIR SINGH RATHOR, J. (Oral)

1. Prayer in this petition filed under Section 528 of Bharatiya Nagarik Suraksha Sanhita, 2023 is for quashing of F.I.R. No.647 dated 20.12.2011, registered under Sections 406 and 420 of IPC at Police Station Thanesar City, District Kurukshetra and all subsequent proceedings arising therefrom.

2. The present FIR has been registered on the basis of a complaint given to the police by the Executive Engineer, Sub Division, Vidyut Prasaran Nigam Limited (for short ‘HVPNL’), Karnal, with the allegation that M/s Sandhu Security Services, SCO No. 45-46, First Floor, Office No. 105 Sector-11, Panchkula, was an approved contractor for providing skilled manpower under this Division on outsourcing basis w.e.f. 01.06.2009 to 31.05.2010, and accordingly, work orders were placed on a monthly basis for the supply of requisite manpower at various substations. The payment is regulated by multiplying the number of manpower provided by the contractor with approved DC rates, applicable Employee Provident Fund (for short ‘EPF’) plus Employee State Insurance (for short ‘ESI’) plus service tax plus zero percent premium thereon. All the payments including EPF/ESI have been made to the contractor through account payee cheques but contractor has neither deposited the entire amount of EPF (both employer and employee share) and ESI (both employer and employee share) with the concerned authorities nor he has provided the contract labour with the mandatory EPF and ESI cards which was obligatory on the part of contract. The contractor has, thus, dishonestly misappropriated the EPF and ESI amounts paid to him and has also committed breach of trust. The contractor’s employees working under the proprietor have not been paid the EPF amounts even after the lapse of 18 months of termination of contract of this contractor. The embezzlement of EPF amount of Rs.8,84,338/- and ESI amount of Rs.2,24,657/- was made by the contractor which shows that contractor has not deposited the exact amount with the EPF/ESI authorities and has embezzled the same. Accordingly, a prayer was made to investigate the matter after lodging the FIR against Ajay Sandhu son of Kulbir Singh resident of village and post office Kaoth Kalan, District & Tehsil Narnaud, District Hisar under appropriate Sections of IPC and initiate proceedings against him. After registration of FIR, matter was investigated and after completion of investigation, final report has been presented in the Court for trial.

3. By way of present petition, petitioner is seeking the quashing of the FIR. It has been alleged that the FIR has been falsely registered against the petitioner with an ulterior motive to blackmail him. A bare perusal of the FIR shows that it is a case of violation of provisions of Section 39(5a) of the Employees’ State Insurance Act, 1948 (for short ‘ESI Act’) according to which if the contribution payable under this Act is not paid by the principal employer on the date on which such contribution was due, he shall be liable to pay simple interest at the rate of 12% per annum or at such higher rates as may be specified in the regulations till the date of actual payment as has been provided in Section 3

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2012 Supreme(Online)(P&H) 112

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARHYashvir Singh Rathor, JAjay Kumar – AppellantVersusState Of Haryana – RespondentCRM-M-708-2012

Cases Referred (1)

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH
Yashvir Singh Rathor, J
Ajay Kumar – Appellant
Versus
State Of Haryana – Respondent
CRM-M-708-2012