Provident fund defaults as continuing offences: retention of deducted employee contributions can also amount to prima facie breach of trust.

Retention of employees' deducted provident fund contributions could prima facie amount to criminal breach of trust under Section 406 IPC, because the sums were collected for deposit and the duty attached to them was breached on the allegations. Defaults in paying contributions and filing returns under the Employees' Provident Fund Scheme were continuing breaches of a continuing duty, so they remained punishable under Paragraph 76(a) and Paragraph 76(c) read with Section 14(2). Application of those penal provisions to continuing defaults did not offend Article 20(1), since the constitutional bar does not protect an ongoing wrong after the penal provision has come into force.

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Issues: (i) whether the alleged misappropriation of employees' deducted contributions disclosed a prima facie offence of criminal breach of trust under Section 406 of the Indian Penal Code, 1860, independently of the scheme; (ii) whether the defaults in payment of contributions and submission of returns under the Employees' Provident Fund Scheme, 1952 were continuing offences punishable under Paragraph 76(a) and Paragraph 76(c) read with Section 14(2) of the Employees' Provident Funds Act, 1952; and (iii) whether the retrospective operation of the scheme's penal provisions offended Article 20(1) of the Constitution of India.

Issue (i): whether the alleged misappropriation of employees' deducted contributions disclosed a prima facie offence of criminal breach of trust under Section 406 of the Indian Penal Code, 1860, independently of the scheme.

Analysis: The deducted sums were treated as funds collected from employees for deposit into the provident fund. Retention of such amounts after deducting them from wages and representing them as employees' contributions amounted, on the face of the allegations, to breach of the duty attached to the money so recovered. The existence of a statutory scheme was not necessary to make out the basic ingredients of criminal breach of trust on those facts.

Conclusion: A prima facie case under Section 406 of the Indian Penal Code, 1860 was made out.

Issue (ii): whether the defaults in payment of contributions and submission of returns under the Employees' Provident Fund Scheme, 1952 were continuing offences punishable under Paragraph 76(a) and Paragraph 76(c) read with Section 14(2) of the Employees' Provident Funds Act, 1952.

Analysis: The duty imposed by Paragraph 38 was not exhausted by the lapse of the monthly due date. The object of the scheme was the welfare of employees, and the obligation to pay the contributions and file the returns continued until performance. A failure to comply was therefore a continuing breach of a continuing duty, and the penal provisions became applicable once the scheme operated in its penal form.

Conclusion: The defaults constituted continuing offences punishable under Paragraph 76(a) and Paragraph 76(c) read with Section 14(2) of the Employees' Provident Funds Act, 1952.

Issue (iii): whether the retrospective operation of the scheme's penal provisions offended Article 20(1) of the Constitution of India.

Analysis: Article 20(1) bars retrospective punishment for completed offences, but it does not protect a continuing wrong after the penal provision has come into force. Since the defaults complained of were continuing in nature, their punishment after the relevant notification did not amount to unconstitutional ex post facto penalisation.

Conclusion: The retrospective operation of the scheme's penal provisions did not violate Article 20(1) of the Constitution of India.

Final Conclusion: The complaints disclosed a triable case, and the matter required further enquiry on the merits in respect of both the criminal breach of trust count and the provident fund defaults.

Ratio Decidendi: A statutory default that creates a continuing duty remains punishable so long as the duty is unperformed, and application of a penal provision to such a continuing breach does not offend Article 20(1); independently, retention of employees' deducted contributions can prima facie constitute criminal breach of trust.

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