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M/S. Wire Machinery Manufacturing Corporation Ltd. & Ors. v. The State & Anr.
Structured Summary of the Legal Opinion (P.C. Borooah, J.)
Factual and Procedural Background
The petitioners in these Rules were prosecuted in the Metropolitan Magistrate, 7th Court, Calcutta under the provisions of Ss. 14(1A), 14(2), 14A(1) and 14AA of the Employees' Provident Funds and Family Pension Fund Act, 1952 read with Paragraph 76(b) of the Employees' Provident Funds Scheme. The prosecutions arose from complaints filed by the Provident Fund Inspector, West Bengal. The complaints alleged that the first petitioner, together with petitioner Nos. 2, 3 and 4 (who are its directors), failed to pay the employer's and employees' shares of contributions and the administrative charges for various months. The petitioners challenged cognizance taken by the Magistrate on the ground that the complaints were instituted more than one year after the payments became due.
Legal Issues Presented
- Whether a complaint can be lodged and cognizance taken after the lapse of one year from the date of the alleged contravention of the provisions of the Employees' Provident Funds and Family Pension Fund Act and the Scheme.
Arguments of the Parties
Petitioners' Arguments (counsel: Mr. Bejoy Kumar Bhose; Mr. J. N. Ghose; Mr. D. K. Dutta)
- Under S. 14(2A) of the Act the maximum penalty for contravention is imprisonment up to three months or fine up to Rs. 1,000 or both; therefore, by operation of S. 468(2)(b) of the Code no court can take cognizance after one year from the date of default. The complaints, being instituted after one year from the due dates, are time barred and the Magistrate's cognizance is without jurisdiction (submission of Mr. Bhose).
- Paragraph 38 of the Scheme requires payment within fifteen days of the close of each month; the offence is complete on the expiry of that fifteenth day (i.e., becomes complete on the sixteenth day of the month) and is not a continuing offence (submission of Mr. J. N. Ghose and Mr. D. K. Dutta).
- Reference to State of Bihar v. Deokaran Nenshi (AIR 1973 SC 908) to support that such defaults are not continuing offences (submission of Mr. D. K. Dutta).
- By S. 9 of the Employees' Provident Funds and Family Pension Fund (Amendment) Act, 1973 an explanation was added to S. 405 IPC making an employer a trustee in respect of employees' deductions; consequently a defaulting employer may be liable under S. 406 or 409 IPC, and such liability would not be a continuing offence (submission of Mr. D. K. Dutta).
Respondent / Prosecutorial Arguments (Public Prosecutor and representatives of Provident Fund Inspector)
- The offence under the Act and the Scheme is a continuing offence; therefore S. 472 of the Code is attracted and a fresh period of limitation begins to run throughout the period the offence continues (submission of Mr. Birendra Nath Mitra, Public Prosecutor).
- By S. 9 of the 1973 Amendment, an offence under the Act and the Scheme has been made punishable under S. 409 IPC (which may carry a maximum penalty up to life imprisonment), so S. 468 of the Code would not apply to bar the complaint (submission of Mr. Mitra).
- S. 14C of the Act permits a court to order an employer to make good defaults and imposes a fine (up to Rs. 100 per day) for non-compliance, which, it is argued, indicates that the default is to be treated as a continuing offence (submission of Mr. Mitra).
- Mr. D. N. Das (for the Provident Fund Inspector) argued that from the sixteenth day after the relevant month an offence commences and continues day to day until the default is made good, relying on the English decision in Best v. Butler and Fitzgibbon (1932) 2 K.B. 108 where withholding money under S. 12 of the Trade Union Act, 1871 was held to be a continuing offence.
- It was also submitted that the Act is self-contained and contains no provision fixing a period of limitation for lodging complaints under the Act and the Scheme, so S. 468 of the Code would not apply (submission of Mr. D. N. Das).
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| State of Bihar v. Deokaran Nenshi, AIR 1973 SC 908 | Definition and treatment of a "continuing offence" and whether an offence is complete on a specific date (as opposed to being continuing) for limitation purposes. | The court relied on the Supreme Court's articulation of what constitutes a continuing offence and the holding that the failure to furnish returns was complete on the due date (and thus time barred). The court applied that reasoning to paragraph 38 of the Scheme to conclude EPF contribution defaults are complete on the due date and are not continuing offences. |
| Best v. Butler and Fitzgibbon, (1932) 2 K.B. 108 | English authority holding that withholding money under S. 12 of the Trade Union Act, 1871 was a continuing offence (each day constituted a fresh offence). | The decision was cited by the respondents to support the continuing-offence argument. The opinion notes the English decision and that it was considered by the Supreme Court in Deokaran Nenshi, but ultimately the court did not accept that analogy as rendering EPF defaults continuing offences under the Scheme. |
Court's Reasoning and Analysis
The court's reasoning proceeded in the following steps, as stated in the opinion:
- The court identified the precedent in State of Bihar v. Deokaran Nenshi and adopted the Supreme Court's explanation of what constitutes a "continuing offence": an offence that is susceptible of continuance and therefore constitutes a fresh offence each day it continues, in contrast to an offence complete once and for all.
- Paragraph 38 of the Provident Funds Scheme requires payment of employer's and employees' contributions and administrative charges within fifteen days of the close of every month. The court held that the infringement therefore occurs at the expiry of the fifteenth day and is complete on the employer's failure to make payment by that date.
- The court observed there is no provision in the Act or the Scheme stating that if an employer defaults and continues business the offence persists day to day until the arrears are paid. Consequently, the initial default is an offence committed once and for all on the close of the due date, and lacks the ingredient of continuance.
- Section 14C of the Act, which empowers a court to order an employer to make good the default and to impose a day-to-day fine for failure to comply, provides a separate remedial and punitive mechanism. The court treated the availability of this machinery as distinct from the question whether the initial infringement is itself a continuing offence; imposing a day-to-day fine under S. 14C does not convert the original infringement into a continuing offence.
- The court addressed the argument about the 1973 amendment (S. 9) that added an explanation to S. 405 IPC making an employer a trustee. It noted that the non-applicability of S. 468(2)(b) CrPC would arise only if prosecutions were brought under the Indian Penal Code provisions; otherwise, limitations in the Code apply to offences triable under the Act when the substantive penal provision attracts the one-year bar.
- Applying the foregoing analysis, the court concluded that the defaults in the instant cases were complete on the due dates, the complaints were filed after the one-year period, and hence were time-barred under S. 468(2)(b) CrPC. Cognizance taken on the basis of such complaints was therefore without jurisdiction.
Holding and Implications
Holding: The Rules were made absolute and the proceedings pending against the petitioners in all the cases covered by these Rules were quashed. In effect, the court held that the defaults alleged under paragraph 38 of the Scheme were not continuing offences and that complaints filed beyond one year from the date of default were time-barred under S. 468(2)(b) of the Code of Criminal Procedure.
Implications: The immediate consequence is that the specific criminal proceedings founded on the complaints described in these Rules were quashed for want of jurisdiction due to limitation. The opinion confines itself to the direct effect on the parties in these cases; it does not articulate any broader rule-making beyond applying established principles (as discussed from Deokaran Nenshi) to conclude that these defaults are not continuing offences.
Note: Justice S. C. Majumdar concurred: "I agree. Rules made absolute."
P.C Borooah, J.:— The petitioners in all these Rules are being prosecuted in the court of the Metropolitan Magistrate, 7th Court, Calcutta under the provisions of Ss. 14(1A), 14(2), 14A(1) and 14AA of the Employees' Provident Funds and Family Pension Fund Act, 1952 read with Paragraph 76(b) of the Employees' Provident Funds Scheme (hereinafter the Act and the Scheme) on the basis of complaints filed by the Provident Fund Inspector, West Bengal.
2. The common question of law which arises in all these Rules is whether a complaint can be lodged and cognizance taken after a period of one year from the date of the alleged contravention of the aforesaid provisions of the Act and the Scheme?
3. According to the complaints the first petitioner along with petitioner Nos. 2, 3 and 4 who are its Directors had not paid the employer's and employees' share of the contributions and administrative charges for the different months which are the subject matter of the cases started against them.
4. In support of the Rules we have heard Mr. Bejoy Kumar Bhose. We have also permitted Mr. J.N Ghose and Mr. D.K Dutta to intervene as they are appearing on behalf of the petitioners in other Rules pending before us in which the aforesaid question of law also arises.
5. Mr. Bhose submitted berore us that under S. 14(2A) of the Act the maximum penalty provided for contravention or making a default in complying with any provisions of the Act is imprisonment which may extend to three months or with fine which may extend to rupees one thousand or with both. Therefore, under S. 468(2)(b) of the Code of Criminal Procedure, 1973 (hereinafter the Code), no court can take cognizance of any offence committed under the Act after the lapse of a period of one year from the date of default or contravention. As such the complaints in the cases, which are the subject matter of the Rules, having been instituted more than one year after the payments become due, the cognizance taken by the learned Magistrate is without jurisdiction and has to be quashed.
6. Mr. J.N Ghose submitted that under paragraph 38 of the Scheme the offence was complete on the expiry of the fifteenth day of the month following the month for which there was a default, and this default became a complete offence on and from the sixteenth day of the month. As such it was not a continuing offence.
7. Mr. Dilip Kumar Dutta also submitted that under paragraph 38 of the Scheme an employer is required within fifteen days of the close of every month to pay the necessary contributions and the administrative charges to the Fund. This according to Mr. Dutta clearly shows that if an employer makes any default and does not make the payments within fifteen days of the close of every month, on the sixteenth day the offence becomes complete and cannot be deemed to continue to be an offence from day to day. In support of his argument Mr. Dutta has referred to a decision of the Supreme Court in the case of State of Bihar v. Deokaran Nenshi AIR 1973 SC. 908.
8. Mr. Dutta also drew our attention to S. 9 of the Employees' Provident Funds and Family Pension Fund (Amendment) Act, 1973 by which an explanation has been added to S. 405 IPC and by which an employer is deemed to be a trustee in respect of the deductions made from the employees for credit to the Provident Fund or Family Pension Fund. In view of this amendment to S. 405 IPC Mr. Dutta's contention is that a defaulting employer becomes liable to prosecution under S. 406 or 409 IPC and as such the default cannot be a continuing offence.
9. Mr. Birendra Nath Mitra, the learned Public Prosecutor, opposes these Rules. According to him an offence committed under the provisions of the Act and the Scheme is a continuing offence and as such S. 472 of the Code is attracted and a fresh period of limitation shall begin to run throughout the period the offence continues. Mr. Mitra also submitted that by S. 9 of the 1973 Amendment of the Act an offence under the Act and the Scheme has been made punishable under S. 409 IPC which prescribes a maximum penalty of life imprisonment and as such S. 468 of the Code can have no manner of application.
10. Mr. Mitra also drew our attention to S. 14C of the Act and submitted that when an employer fails to comply with the order of the court to make good the default within a specified period, he would be in addition to being sent to prison be made liable to pay a fine extending to rupees hundred per day till the payments are made, and this according to Mr. Mitra goes to show that if any default is made by an employer under the provisions of the Act and the Scheme it must be a continuing offence.
11. Mr. D.N Das appearing on behalf of the Provident Fund Inspector also submitted that an offence committed under the provisions of the Act is a continuing one because on and from the sixteenth day of a particular month when there is a default as regards the deposits to the fund relating to the previous month, the offence commenced and it continued day to day till the default was made good. In support of his argument Mr. Das drew our attention to the case of Best v. Butler and Fitzgibbon (1932) 2 K.B 108 wherein it was held that the withholding of any money referred to in S. 12 of the Trade Union Act, 1871 was a continuing offence because every day the money was wilfully withheld an offence within the meaning of S. 12 was committed. Mr. Das also submitted that the Act is self contained and as there is no provision which lays down any period of limitation regarding the lodging of a complaint, S. 468 of the Code would not apply.
12. The Supreme Court in the case of State of Bihar v. Deokaran Nenshi (supra) was dealing with a similar question. In that case the respondents were being prosecuted under S. 66 of the Mines Act, 1952 for their failure to furnish the requisite returns for a particular year on or before January 21 of the succeeding year as required under regulation 3 of the India Metalliferous Mines Regulation, 1926. The question arose whether the offence in question was covered by the substantive part of S. 79 of the Mines Act or by the explanation thereto. If the substantive part applied the complaint would be time barred, but if the offence was a continuing offence the explanation to the said section would operate and no question of limitation would arise as long as the offence continued.
13. The Supreme Court in dealing with the question explained what was a continuing offence in the following terms:—
“Continuing offence is one which is susceptible of continuance and is distinguishable from the one which is committed once and for all. It is one of those offence which arises out of a failure to obey or comply with a rule or its requirement and which involves a penalty, the liability for which continues until the rule or its requirements is obeyed or complied with on every occasion that such disobedience or non compliance occurs and recurs, there is the offence committed. The distinction between the two kinds of offences is between an act of omission which constitutes an offence once and for all and an act or omission which continues and therefore constitutes a fresh offence every time or occasion on which it continues. In the case of a continuing offence there is thus the ingredient of continuance of the offence which is absent in the case of an offence which takes place when an act or omission is committed once and for all.”
14. The Supreme Court ultimately held in favour of the respondents by holding that the infringement occurred on January 21 of the relevant year and was complete on the owner failing to furnish the annual returns by that day, and as such the complaint was time barred as the offence in question fell within the substantive part of S. 79 of the Mines Act and not under the explanation attached to it. In this case the Supreme Court also considered the English decision referred to by Mr. Das.
15. Paragraph 38 of the Scheme requires an employer to pay to the Fund the employer's and employees' contributions together with the administrative charges within fifteen days of the close of every month. The infringement for the failure to do so therefore occurs on the close of the fifteenth day of the month and is complete on the employer failing to make the payment to the Fund by that date. No provision of the Act or the Scheme lays down that if an employer makes a default in making the payment to the Fund within the stipulated time as required by paragraph 38 of the Scheme and carries on his business, he would be guilty of an offence or that the offence would continue till the default is made good. Therefore, in the instant cases once the defaults were made the offences were committed once and for all and became complete on the close of the due date. As such there could not be any ingredient of continuance in the offence to make it a continuing one.
16. Section 14C(1) of the Act empowers a Court to make an order directing an employer to make good the default within a specified period, or within an extended period if an application be made in that behalf. In case an emyloyer does not comply with such an order he can be made liable to the payment of fine which may extend to rupees one hundred for every day after the expiry of such period till the default is made good.
17. Section 14C therefore, provides the requisite machinery for realising from a defaulting employer the arrears payable to the Fund. Sub-section (2) imposes a further penalty of a day to day fine if an employer fails to make good the default within the time specified under sub-s. (1). A default committed under the Act or the Scheme and a machinery provided under the Act for making good the default must be kept in separate compartments. The provision of penalising a defaulting employer with a day to day fine till the default is made good does not make the initial infringement a continuing offence.
18. By virtue of the explanation to S. 405 I.P.C which has been added by S. 9 of the 1973 Amendment of the Act, an employer can be prosecuted for the offence of criminal breach of trust. The question of non applicability of S. 468(2)(b) would only arise if complaints are lodged against an employer under the provisions of the Indian Penal Code in respect of any defaults being made under the provisions of the Act or the Scheme.
19. In view of what has been stated above, the complaints in all these cases having been filed beyond a period of one year they would be of time barred in accordance with the provisions of S. 468(2)(b) of the Code and the cognizance taken on the basis of such complaints would be without jurisdiction.
20. The Rules are accordingly made absolute and the proceedings pending against the petitioners in all the cases covered by these Rules are quashed.
S.C Majumdar, J.:— I agree.
Rules made absolute.
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