THE HON’BLE SRI JUSTICE K.SURENDER CRIMINAL PETITION No.2888 of 2021

ORDER:

1. This Criminal Petition is filed to quash the proceedings against the petitioner/A1 in CC No.703 of 2016 on the file of XVII Additional Chief Metropolitan Magistrate, Hyderabad for the offences under Sections 406 and 420 of IPC.

2. The Enforcement Officer and Assistant Public Prosecutor of Bhavishyanidhi Bhavan, Bharkatpura filed complaint alleging that the petitioner herein, is the Managing Director of M/s. Image Broadcasting Private Limited, Jubilee Hills, Hyderabad, which is an establishment covered under the employees of Provident Funds Miscellaneous Provisions Act, 1952. Petitioner falls within the definition of ‘employer’. An employer of an establishment shall make payment of the deducted contribution for Provident Fund (PF) from the salaries of the employees as the Central Government may fix and the employer shall forward to the Commissioner within 25 days of the close of the month, the details such as monthly extract showing the aggregating amounts recoveries from the wages of the members and the aggregate amount of contribution by the employer in respect of such members. However, the petitioner falling within the definition of an employer under the Act has deducted the employee share of provident fund from the salary/wages and has not deposited in the statutory fund as required by law. On the basis of the said complaint, crime was registered and charge sheet filed under Sections 406 and 420 of IPC.

3. Learned counsel appearing for the petitioner would submit that the petitioner cannot be prosecuted in his personal capacity unless the company is made as an accused. In fact, the said amount of employee provident fund that has to be paid is in dispute and it is not stated by the department regarding he quantum that has to be paid. He relied on the judgment of the Hon’ble Supreme Court in the case of S.K.Alagh v. State of U.P and others, [Appeal (Crl.) No.317 of 2008, dated 15.02.2008] and argued that Section 406 of IPC would not be attracted. He relied on the relevant observations:

“20. As, admittedly, drafts were drawn in the name of the company, even if appellant was its Managing Director, he cannot be said to have committed an offence under Section 406 of the Indian Penal Code. If and when a statute contemplates creation of such a legal fiction, it provides specifically therefor. In absence of any provision laid down under the statute, a Director of a company or an employee cannot be held to be vicariously liable for any offence committed by the company itself. {See Sabitha Ramamurthy and another v.

R.B.S.Channabasavaradhya [(2006) 10 SCC 581]}.

21. We may, in this regard, notice that the provisions of the Essential Commodities Act, Negotiable Instruments Act, Employees' Provident Fund (Miscellaneous Provision) Act, 1952 etc. have created such vicarious liability. It is interesting to note that Section 14A of the 1952 Act specifically creates an offence of criminal breach of trust in respect of the amount deducted from the employees by the company. In terms of the explanations appended to 405 of the Indian Penal Code, a legal fiction has been created to the effect that the employer shall be deemed to have committed an offence of criminal breach of trust. Whereas a person in charge of the affairs of the company and in control thereof has been made vicariously liable for the offence committed by the company along with the company but even in a case falling under Section 406 of the Indian Penal Code vicarious liability has been held to be not extendable to the Directors or officers of the company. {See Maksud Saiyed v.

State of Gujarat and others [2007 (11) SCALE 318]}.”

4. Learned counsel also relied on the judgment of Hon’ble Supreme Court in Employees’ State Insurance Corporation v. S.K.Aggarwal and others, [(1998) 6 Supreme Court Cases 288], the Hon’ble Supreme Court held as follows:

“9. In the case of ESI Corpn. v. Gurdial Singh [1991 Supp (1) SCC