1993 (5) TMI 190 - SC - Indian Laws

Court upholds Director liability under Section 14A of Provident Funds Act

Srikanta Datta Narasimharaja Wodiyar Versus Enforcement Officer, Mysore

The court dismissed the appeals, affirming the validity of prosecuting a Director under Section 14A of the Employees' Provident Funds and Miscellaneous ... - Issues Involved:1. Liability of a Director under Section 14A of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952.2. Definition and scope of the term 'employer' under the Act.3. Compliance requirements under the Act and the Schemes.4. Validity of the prosecution against the Director based on the allegations in the complaint.Issue-Wise Detailed Analysis:1. Liability of a Director under Section 14A of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952:The primary issue in these appeals is whether a Director, who is neither an occupier nor a manager, can be prosecuted under Section 14A of the Act. The court held that Section 14A extends liability to 'every person who at the time the offence was committed was in charge of, and was responsible to the company for the conduct of the business of the company.' This includes Directors who are declared as responsible for the conduct of the business in the statutory forms and documents submitted by the company.2. Definition and Scope of the Term 'Employer' under the Act:Section 2(e) of the Act defines 'employer' in relation to a factory as 'the owner or occupier of the factory, including the Agent of such owner or 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.' The court noted that the definition is inclusive and extends to anyone who has ultimate control over the affairs of the factory. This broad definition is intended to ensure compliance with the welfare objectives of the Act.3. Compliance Requirements under the Act and the Schemes:The Act and the Schemes mandate the employer to deduct contributions from employees' salaries and deposit them into the provident fund account. Specific provisions such as Section 6, para 30, and para 36A of the Schemes outline the responsibilities of the employer. Para 36A requires the employer to furnish particulars of ownership, including details of directors and other persons in charge of the factory. The court emphasized that these compliance requirements are mandatory and non-compliance attracts penal action under Section 14A.4. Validity of the Prosecution against the Director Based on the Allegations in the Complaint:The appellant argued that the complaints did not contain specific averments making him responsible for the management of the factory. However, the court found that the complaints specifically stated that the appellant, along with other Directors, was in charge of and responsible for the conduct of the business of the establishment. The court held that necessary allegations constituting the offence were made out in the complaint, and therefore, the prosecution against the appellant was valid. The court also distinguished this case from previous judgments, noting that the specific statutory declarations and responsibilities outlined in Form 5A and para 36A supported the prosecution.Conclusion:The court dismissed the appeals, holding that the appellant, being declared as one of the persons in charge of and responsible for the conduct of the business of the establishment, was validly prosecuted for non-compliance with the provisions of the Act and the Schemes. The judgment underscores the broad scope of liability under Section 14A and the inclusive definition of 'employer' to ensure compliance with the welfare objectives of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952.