State of Uttar Pradesh v. Lala Ram Gopal Gupta — 1973 DIGILAW 12 (ALL)

JUDGMENT Yashoda Nandan, J. - Respondents Lala Ram Gopal Gupta, Lala Ram Prasad Gupta, Lala Pushpa Kumar Gupta and Sri S.D. Garg who are admittedly the Directors of the Lakshmi Ratan Cotton Mills Co. Ltd., Kanpur--hereinafter referred so as the Company--were convicted by a learned Magistrate of the First Class u/s 14(2-A) of the Employees' Provident Funds Act, 1952--hereinafter referred to as the Act and each one of them was sentenced to a fine of Rs. 300/-. The learned Magistrate ordered that on failure to pay the fine imposed, the defaulter shall undergo a period of one month's simple imprisonment. On appeal, the learned Sessions Judge, Kanpur, allowed it and set aside the convictions and sentences of the Respondents. Aggrieved by the order of acquittal, the State has appealed to this Court. 2. The Respondents were prosecuted in consequence of a complaint filed "by Sri S.A. Ali, a Provident Fund Inspector appointed u/s 13(1) of the Act alleging that the provisions of the Act are applicable to the Company of which the Respondents being the Directors and being incharge of and responsible to the Company for the conduct of its business are "employers" within the meaning of Section 2(e) of the Act and responsible for complying with the provisions thereof in relation to that Establishment. It was alleged in the complaint that by a Notification No. E-102 (19)-E/A dated 17th October, 1957, published under S.R.O. 3416 in Part II Section 3 of the Gazette of India dated 26th October, 1957, the Company had been granted exemption u/s 17(1)(a) of the Act. According to the complaint, the Respondents had failed to invest in Central Government Securities the employers and employees provident fund contributions for the months of July, August and September, 1965 within tie requisite period and had thereby contravened Condition No. 4(c) Contained in Son. II attached to the aforesaid Notification, subject to which exemption had been granted to the Company u/s 17(1)(a) of the Act. It was alleged an evidence was given to the effect that the prosecution of the Respondents and of the Company was being launched after obtaining sanction therefore from the Labour Commissioner, U.P., Kanpur, who had been specified as the authority for that purpose in accordance with the requirements of Section 14(3) of the Act. 3. It was alleged an evidence was given to the effect that the prosecution of the Respondents and of the Company was being launched after obtaining sanction therefore from the Labour Commissioner, U.P., Kanpur, who had been specified as the authority for that purpose in accordance with the requirements of Section 14(3) of the Act. 3. Each one of the Respondents admitted that the Act was applicable to the Company which was a Factory and also that it had been granted exemption u/s 17(1)(a) thereof. They feigned ignorance as to whether the accumulated contributions made by the employers and employees of the Company for the months of July, August and September, 1965, had been invested in the Central Government securities or not. 4. In support of the prosecution case were examined Sri Lakshmi Shankar Awasthi, Head Clerk of the Office of the Regional Provident Fund Commissioner, U.P. Region, Kanpur and Sri S.A. Ali, an Inspector, appointed u/s 13(1) of the Act. A number of documents were also produced. No evidence was led by the Respondents in their defence. 5. On a consideration of the evidence on record, the learned Magistrate convicted and sentenced the Respondents aft well as the Company as already stated. The appellate court took the view that the complaint on the basis of which the Respondents had been prosecuted had been find without a valid sanction as required by Section 14(3) of the Act and consequently the convictions and sentences recorded by the trial court could not be legally sustained. The prosecution case oil merits does not appear to have been challenged before the lower appellate court. 6. When the appeal came up for hearing before us on the 22nd August, 1972, Sri Brijlal Gupta, learned Counsel appearing for the Respondents, supported the order passed by tie learned Sessions Judge and contended that the Labour Commissioner, U.P., Kanpur, was not legally competent to accord sanction for the prosecution of the Respondents. For a proper appreciation of the submission made by Sri Brijlal Gupta, it is necessary to set out the relevant provisions of the Act and the related notifications issued thereunder. 7. For a proper appreciation of the submission made by Sri Brijlal Gupta, it is necessary to set out the relevant provisions of the Act and the related notifications issued thereunder. 7. The Respondents were prosecuted u/s 14(2-A) of the Act which runs as follows: Whoever contravenes or makes default in complying with any provision of this Act or of any condition subject to which exemption was granted u/s 17 shall, if no other penalty is elsewhere provided by or under this Act for such contravention or non-compliance, be punishable with imprisonment, which may extend to three months or with fide which may extend to one thousand rupees, or with both. 8. By a notification dated 17th October, 1957, the Government of India in the Ministry of Labour in exercise of powers u/s 17(1)(a) of the Act exempted each one of the factories enumerated in Schedule I annexed thereto worn the operation of the Provident Finds Scheme, 1952, subject to the condition specified in Schedule II. The Company is one of the factories mentioned in Schedule I of the notification. The relevant portion of paragraph 4(c) of Schedule II off the notification which, according to the prosecution the Respondents defaulted in complying with is in the following terms: The employer shall make all investment of accumulations accruing after the date of exemption in securities of the Central Government.... 9. Sub-section (3) of Section 14 of the Act as it stood at the relevant time was as follows: No Court shall take cognizance; of any offence punishable under this Act except on a report in writing of the facts constituting such offence made with the previous sanction of such authority as may be specified in this behalf by the appropriate Government, by an Inspector appointed u/s 13. The expression "appropriate Government" is defined in Section 2(a) of the Act. It is Act in dispute that the "appropriate Government" as far as the Company, which is an establishment engaged in the cotton textile industry, is concerned, is the Central Government. 19. The expression "appropriate Government" is defined in Section 2(a) of the Act. It is Act in dispute that the "appropriate Government" as far as the Company, which is an establishment engaged in the cotton textile industry, is concerned, is the Central Government. 19. The relevant part of Section 19 of the Act which deals with the delegation of the powers provides: The appropriate Government may direct that any power or authority for jurisdiction exercisable by it under this Act shall, in relation to such matters and subject to such conditions, if any, as may be specified in the direction, be exercisable also-- (a) Where the appropriate Government is the Central Government, by such officer or authority subordinate to the Central Government or by the State Government or by such officer or authority subordinate to the State Government, as may be specified in the notification and.... In exercise of its powers u/s 19 of the Act quoted above, the Central Government issued a Notification No. S.R.O. 1958 dated 10th April, 1967, which runs as follows: In exercise of the powers conferred by Section 19 of the Employees' Provident Funds Act, 1952, (19 of 1952) and in supersession of the notification of the Government of India in the Ministry of Labour No. S.R.O. 3527 dated the 7th December, 1954, the Central Government hereby directs that the powers exercisable by it as the appropriate Government Under Sub-section (a) of Section 14 of the said Act to specify the authority to issue the sanction referred to in the said sub-section shall also be exercisable within each of the States specified in the Schedule annexed hereto by the Government of that State. The State of Uttar Pradesh was mentioned at Serial No. 12 of the Schedule annexed to the above quoted notification. In pursuance of the powers thus delegated by the Central Government, the U.P. Government issued a notification No. 5392 (ST)/XXXVI-A-26-54 dated December 14, 1960, specifying the Labour Commissioner, U.P. as the authority empowered to grant sanction as contemplated u/s 14(3) of the Apt. In pursuance of the powers thus delegated by the Central Government, the U.P. Government issued a notification No. 5392 (ST)/XXXVI-A-26-54 dated December 14, 1960, specifying the Labour Commissioner, U.P. as the authority empowered to grant sanction as contemplated u/s 14(3) of the Apt. This notification reads as follows: In supersession of the State Government notification No. U/15 (SM)/XXX-VI-A-216-54 dated February 19, 1955 and in exercise of the powers conferred by Sub-section (3) of Section 14 of the Employees' Provident Funds Act, 1952 (Act No. XIX of 1952), read with Government of India Ministry of Labour notification No. P.F. 11/43 (77) dated April 10, 1967, the Governor of Uttar Pradesh hereby specifies the Labour Commissioner, Uttar Pradesh, as the authority for the purposes of the aforesaid sub section in respect of all industrial purposes of the aforesaid sub-section in respect of all industries falling within the State or the Central sphere. It was by virtue of this notification that the Labour Commissioner, U.P., Kanpur, accorded sanction for prosecution of the Respondents. 11. If Section 14(3) of the Act had stood alone it is apparent that the "appropriate Government" in respect of the Company being the Central Government, sanction could have been granted for prosecution of the Respondents only by the authority specified in that behalf by the Central Government. Section 19(a) of the Act, however, empowers the Central Government to delegate any power or authority or jurisdiction exercisable by it under the Act not only to an officer or authority subordinate to it but also to the State Government or to an officer or authority subordinate to the State Government. By means of the notification dated 10th April, 1957, which has been quoted in an earlier part of the judgment, the Central Government did delegate the powers exercisable by it to specify the authority to issue the sanction referred to in the Section 14(3) to the State of Uttar Pradesh and in exercise of the powers so delegated, the State Government in its turn specified the Labour Commissioner, Uttar Pradesh as the authority for the purposes of according sanction for prosecution for offences under the Act. 12. 12. It was contended by the learned Counsel appearing for the Respondents that since as far as the Company is concerned, the Central Government was the "appropriate Government" it alone was competent to specify the authority which could grant sanctions for prosecution for offenses under the Act. It appeared to us that the contention disregarded the provisions of Section 19 of the Act and the notification issued by the Central Government in exercise of powers contemplated by that provision. We took the view that u/s 19 of the Act, the Central Government could delegate its powers to the State Government and the State Government in its turn could specify an officer or authority subordinate to it competent to give sanction for prosecutions as required Under Sub-section (3) of Section 14 of the Act. Learned Counsel for the Respondents, however, placed reliance on certain observations contained in R.K.L. Gupta v. Ram Babu Lal 1969 ALJ 722 : 1969 AWR 10 decided by a Division Bench of this Court in support of his Contention that the "appropriate Government in respect off the Company being the Central Government, the Labour Commissioner, U.P. Kanpur, could validly accord sanction for the Respondents' prosecution Only if he had been specified as an authority for that purpose by the Central Government and this not having been dote, the sanction granted the labour 'Commissioner, U.P., Kanpur, was invalid. We were respectful inclined to tale the view that the notification issued by the Central Government in exercise of its powers u/s 19(3) had not been brought to the notice of the Division Bend deciding that case. We were respectful inclined to tale the view that the notification issued by the Central Government in exercise of its powers u/s 19(3) had not been brought to the notice of the Division Bend deciding that case. However, since then are observations in the judgment lending some support to the contention that vas raised before us by the learned Counsel for the Respondent, we referred for decision by a larger Bench the following question: AS to whether by virtue of notification No. S.R.O. 1258 dated 10-4-57 issued by the Central Government u/s 19 of the Employees' Provident Funds Act, 4952 and the corresponding notification No. 5392 (S.T.)/XXXVI-A-261-54 dated December 14, 1060, issued by the Government of Uttar Pradesh, Sri J.N. Tiwari, Labour (Commissioner, Uttar Pradesh, was the duly specified authority for issuing sanction Under Sub-section (3) of Section 14 of the said Act for launching the prosecution for contravening the provisions of the Employees' Provident Funds Act (19 of 1952) As a result of our reference, the question posed by us was considered by a Full Bench of this Court (Since reported in 297 AWR 30). In its opinion dated 5th December, 1972, the Full Bench answered the question referred to it in the affirmative in the following terms (at page 32 Col. 2 of 1973 AWR): The power of the Central Government to specify the authority who could accord sanction for lodging a complaint in respect of any offence punishable under the Act or under any Scheme was delegated to the State Government which, in exercise of that Relegated power, specified the Labour Commissioner art the authority competent to grant such sanction. u/s 14(3) of the Act the powers grant sanction is to be exercised not by the appropriate Government but by some authority to be specified by that Government. It is open to the appropriate Government to specify the authority itself or u/s 19 of the Act it may delegate its power to a State Government. Under the delegated power the State Government is vested with the power to specify an authority competent to grant the sanction. The State Government by a notification, specified the Labour Commissioner as that authority. The Labour. Commissioner U.P. in exercise of such power-sanctioned the prosecution of the accused in this case. It appears that the attention off the Bench deciding R.K.L. Gupta's case. The State Government by a notification, specified the Labour Commissioner as that authority. The Labour. Commissioner U.P. in exercise of such power-sanctioned the prosecution of the accused in this case. It appears that the attention off the Bench deciding R.K.L. Gupta's case. (Supra) was not invited to the notification dated 10-4-1957 issued by the Central Government and the notification dated 14-12-1960 issued by the Government of Uttar Pradesh by virtue of the powers delegated to it by the Central. Government u/s 19 of the Act. The observations made in R.K.L. Gupta's case (Supra) that only the Central Government could authorize the Labour Commissioner U.P. to accord sanction does not appear to us to be acceptable. 13. When the case was again listed before us along with the opinion of the learned Judges constituting the full Bench, learned Counsel for the Respondents contended that he "had sought to question the validity of the notifications dated 10th April, 1957 and 14th December, 1960, but had not been permitted to do so because the Full Bench took the view that this argument would be beyond the ambit of the question referred to it by us. We questioned Sri Brijlal Gupta as to whether he proposed to challenge the validity of the above mentioned notifications on the ground that there was any excessive delegation of essential legislative functions but he clearly conceded that the notifications were pot open to challenge on that ground. Since we found it difficult to follow as to an what grounds the validity of the two notifications were sought to be challenged we requested Sri Gupta to give a writing the exact question he desired to raise. He formulated the question in the following terms: Where u/s 19(a) of the Employees' Provident Funds Act, 1952, the appropriate Government is the Central Government and it has directed by notification that the power, authority for jurisdiction exercisable by it u/s 14(3) of the Act be exercised by the State Government, is it open to the State Government to nominate its own officer or authority to exercise any power, authority or jurisdiction delegated by the Central Government to the State Government. This question to our mind was considered by the Full Bench and has been answered in the affirmative. 14. The first submission made by the learned Counsel for the Respondents consequently fails. 15. This question to our mind was considered by the Full Bench and has been answered in the affirmative. 14. The first submission made by the learned Counsel for the Respondents consequently fails. 15. The next submission made by Sri Brijlal Gupta was based on Section 14-A(1) of the Act which at the relevant date ran as follows: If the person committing an offence under this Act is a company, 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, as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly provided that.... Learned Counsel for the Respondents contended that since the alleged offence has been committed by a Company, the Respondents, who were Directors of the Company, were liable to punishment only on proof that at the time of the commission of the alleged offence they were not only responsible to the Company for the conduct of its business but were also incharge of the conduct of its business. It was urged that though evidence was led to establish that the Respondents were responsible to the Company, there was no evidence establishing that they were incharge of the conduct of the business of the Company at the relevant time. There is, in our opinion, no merit in this contention. 16. In Paragraph 4 of the complaint which led to the prosecution of the Respondents, it was clearly alleged that the Respondents being the Directors of the Establishment and being incharge of and responsible to the Company for the conduct of its business, are employers within the meaning of Section 2(e) of the said Act and responsible to comply with the "provisions of the Employees' Provident Funds Act, 1952 in relation to aforesaid establishment." 17. Sri S.A. Ali in his examination-in-chief stated that during the relevant period the Respondents in their capacity as Directors and employers of the Company were responsible for complying with the Conditions mentioned in the notification by which exemption had been granted to the Company u/s 17(1)(a) of the Act. He proved the Gazette notification, a copy of which is on record. He proved the Gazette notification, a copy of which is on record. During cross-examination he stated that he had made enquiries as to who among the Directors of the Company were responsible for its business and had filed the complaint only against such Directors. He stated that the Respondents were not only the Directors of the company but were also responsible for its business and he had consequently filed a complaint, against them. Sri L.S. Awasthi, who was at the relevant time Head Clerk in the Office of the Regional Provident Funds Commissioner, stated that on behalf of the Company a declaration in Form No. 5-A dated 14th May, 1966 under the signature of Sri S.D. Garg (Respondent) had been received in his office. He went on to state that in that form all the four Respondents were mentioned as the Directors of the Company and incharge thereof. A copy of Form No. 5-A received from the Company in the office of the Regional Provident Funds Commissioner was brought on record. Paragraph 36-A of the Employees' Provident Funds Scheme, 1952, is as follows: Every employer in relation to a factory or other establishment to which the Act applies on the date of coming into force of the Employees' Provident Funds (Tenth Amendment) Scheme, 1961, or is applied after that date, shall furnish to the Regional Commissioner in Form No. 5-A annexed hereto occupiers, directors, partners, manager or any other person or persons who have the ultimate control over the affairs of such factory or establishment and also send intimation of any change in such particulars, within fifteen days of such change, to the Regional Commissioner by registered post and in such other manner as may be specified by the Regional Commissioner. In Form No. 5-A submitted by the Company under the signature of Sri S.D. Garg (Respondent), the owner of the factory is described as "M/s. Lakshmiratan Cotton Mills Co. Ltd, Kalpi Road, Kanpur." The name of the occupier disclosed in that Form is that of Sri S.D. Garg (Respondent), At Serial No. 11 of the Form, all the four Respondents are mentioned as the Directors of the Company. The Heading at Serial No. 14 of the Form is as follows: Name and address of persons who have ultimate control over the affairs of the establishment and incharge of and responsible to the Co. for the control of its business. The Heading at Serial No. 14 of the Form is as follows: Name and address of persons who have ultimate control over the affairs of the establishment and incharge of and responsible to the Co. for the control of its business. The entry against this heading is in the following terms: Same as above in column No. 11 being managed by Board of Directors. According to the entry made in this Form consequently the Respondents are the persons who had at the relevant time ultimate control ever the affairs of the Company and went incharge of and responsible to the Company for the control of its business. When Sri I.S. Awasthi, who proved the Form submitted on behalf of the Company, was in the witness box, the only question put to him during cross-examination was as to whether any subsequent return in Form No. 5-A had been received from the Company. He replied in the negative to that question. The correctness of the entries in the returns submitted by the Company in Form No. 5-A was not challenged at all. During their statements recorded at the trial, each one of the Respondents admitted that he was a Director of the company and was also an employer. In view of the entries made in Form No. 5-A and the evidence on record, the Respondents evidently were incharge of and responsible to the Company for the conduct of its business within the meaning of Section 14-A(1) of the Act. 18. The last submission made by the learned Counsel for the Respondents in support of their acquittal was based on Section 14(2-A) of the Act. Learned Counsel contended that the Respondents could be punished under that provision only if no other penalty is provided elsewhere for default in complying with any provision of the Act or any Condition, subject to which exemption had been granted to the Company u/s 17(1) of the Act. Inviting our attention to Section 17(4)(a) of the Act, learned Counsel urged that under that provision for failure if comply with any of the Conditions subject to which exemption had been granted to the Company u/s 17(1), the Company and the Respondents could be penalised by cancellation of the exemption. It was submitted that since a penalty was provided u/s 17(4)(a) of the Act, the Respondents could not be punished u/s 14(2-A) thereof. It was submitted that since a penalty was provided u/s 17(4)(a) of the Act, the Respondents could not be punished u/s 14(2-A) thereof. There is, in our opinion no force in this contention either. The heading of Section 14 is penalities. When the Company was granted exemption by the Central Government in exercise of its powers u/s 17(1)(a) of the Act, it was merely allowed to operate a provident fund scheme approved by the appropriate authority. By cancellation of the exemption in accordance with Section 17(4)(a) of the Act the privilege had' been withdrawn by, an executive order. This to our mind does not involve the imposition of a 'penalty' within the meaning of Section 14(2-A) of the Act. Section 14(2-A) of the Act provides for punishment in cases contemplated by that provision by a criminal court. If the interpretation canvassed by Sri Brijlal Gupta is accepted that Section 17(4)(a) contemplates an alternative penalty for failure to comply with the conditions subject to which exemption was granted to the Company u/s 17(1)(a) it would render Section 14(2-A) otiose land redundant. The Parliament while enacting the Act was evidently aware of the fact that Section 17(4)(a) provides for cancellation of the exemption in cases where there had been a breach of the Conditions subject to which it had been granted. If it had contemplated that cancellation of the exemption amounted to a penalty within the meaning of Section 14(2-A) of the Act, it was purposeless to provide for any penalty for a similar breach u/s 14(2-A) because it could never be imposed. 19. Moreover, an order u/s 17(4)(a) of the Act imposes no penalty on the Directors or other Officers of the Company concerned. 20. None of the submissions made on behalf of the Respondents have any force. 21. On merits, it has not been contended that the evidence on record does not justify the conviction of the Respondents u/s 14(2-A) of the Act. 22. We consequently allow this appeal, set aside the judgment and order of the learned Sessions Judge, Kanpur and restore that of the learned trial Magistrate. The Respondents will suffer the punishment as recorded by the learned Magistrate.