Yashoda Nandan, J.:— Respondents, Lala 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 Company, Ltd., Kanpur—hereinafter referred to as the company—were convicted by a learned Magistrate of the First Class under S. 14(2A) 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 under 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 in charge of and responsible to the company for the conduct of its business are “employers” within the meaning of S. 3(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 17 October, 1967, published under No. S.R.O 3416 in Part II, Sec. 3, of the Gazette of India, dated 26 October, 1957, the company had been granted exemption under 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 the requisite period and had thereby contravened condition 4(c) contained in Sch. II attached to the aforesaid notification, subject to which exemption had been granted tot he company under S. 17(1)(a) of the Act. It was alleged and evidence was given to the effect that the prosecution of the respondents and of the company was being launched after obtaining sanction therefor from the Labour Commissioner, Uttar Pradesh, Kanpur, who had been specified as the authority for that purpose in accordance with the requirements of S. 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 under 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, Uttar Pradesh Region, Kanpur, and Sri S.A Ali, an Inspector, appointed under 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 as 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 filed without a valid sanction as required by S. 14(3) of the Act and consequently the convictions and sentences recorded by the trial Court could not be legally sustained. The prosecution case on merits does not appear to have been challenged before the lower appellate Court.
6. When the appeal came up for hearing before us on 22 August, 1972, Sri Brijlal Gupta, learned counsel appearing for the respondents supported the order passed by the learned Sessions Judge and contended that the Labour Commissioner, Uttar Pradesh, 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. The respondents were prosecuted under S. 14(2A) 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 under S. 7 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 fine which may extend to one thousand rupees, or with both.”
8. By a notification, dated 17 October, 1957, the Government of India, in the Ministry of Labour, in exercise of powers under S. 17(1)(a) of the Act, exempted each one of the factories enumerated in Sch. I annexed thereto from the operation of the Provident Funds Scheme, 1952, subject to the conditions specified in Sch. II. The company is one of the factories mentioned in Sch. I of the notification. The relevant portion of Para. 4(c) of Sch. II of 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 S. 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 under S. 13.”
The expression “appropriate Government” is defined in S. 2(a) of the Act. It is not 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.
10. The relevant part of S. 19 of the Act which deals with the delegation of the powers provides:
“The appropriate Government may direct that any power or authority or 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 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 under S. 19 of the Act quoted above, the Central Government issued a notification No. S.R.O 1258, dated 10 April, 1967, which runs as follows:
“In exercise of the powers conferred by S. 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 7 December, 1954, the Central Government hereby directs that the powers exercisable by it as the appropriate Government under Sub-sec. (3) of S. 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 number 12 of the schedule annexed to the abovequoted notification. In pursuance of the powers thus delegated by the Central Government, the Uttar Pradesh Government issued a notification No. 5392(ST)/XXXVI-A-361-54, dated 14 December, 1960, specifying the Labour Commissioner, Uttar Pradesh, as the authority empowered to grant sanction as contemplated under S. 14(3) of the Act. This notification reads as follows:
“In supersession of the State Government Notification No. U/16(SM)/XXXVI-A-216-54, dated 19 February, 1955, and in exercise of the powers conferred by Sub-sec. (3) of S. 14 of the Employees' Provident Funds Act, 1952 (Act 19 of 1952), read with Government of India, Ministry of Labour Notification No. P.F 11/43(77), dated 10 April, 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, Uttar Pradesh Kanpur, accorded sanction for prosecution of the respondents.
11. If S. 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 10 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 S. 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. 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 offences under the Act. It appeared to us that the contention disregarded the provisions of S. 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 under 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-sec. (3) of S. 14 of the Act. Learned counsel for the respondents, however, placed reliance on certain observations contained in R.K.L Gupta v. Ram Babu [1970—I L.L.J 390] decided by a Division Bench of this Court in support of his contention that the “appropriate Government” in respect of the company being the Central Government, the Labour Commissioner, Uttar Pradesh, 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 done, the sanction granted by the Labour Commissioner, Uttar Pradesh. Kanpur, was invalid. We were respectfully inclined to take the view that the notification issued by the Central Government in exercise of its power under S. 19(a) had not been brought to the notice of the Division Bench deciding that case. However, since there are observations in the judgment lending some support to the contention that was raised before us by the learned counsel for the respondents, we referred for decision by a larger Bench the following question:
“As to whether by virtue of Notification No. S.R.O 1288, dated 10 April, 1957, issued by the Central Government under S. 19 of the Employees' Provident Funds Act, 1952, and the corresponding Notification No. 5392 (ST.) XXXVI-A-361-54, dated 14 December, 1960, 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-sec. (3) of S. 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. In its opinion, dated 5 December, 1972, the Full Bench answered the question referred to it in the affirmative in the following terms: (vide 1973—I L.L.N 365 at 367).
“The power of the Central Government to specify the authority who could accord sanction for loding 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 delegated power, specified the Labour Commissioner as the authority competent to grant such sanction. Under S. 14(3) of the Act the power to 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 under 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, Uttar Pradesh, in exercise of such power sanctioned the prosecution of the accused in this case.
It appears that the attention of the Bench decidinig R.K.L Gupta case [1970— I L.L.J 390] (vide supra) was not invited to the notification, dated 10 April, 1957, issued by the Central Government and the notification, dated 14 December, 1960, issued by that Government of Uttar Pradesh, by virtue of the powers delegated to it by the Central Government under S. 19 of the Act. The observations made in R.K.L Gupta case (vide supra) that only the Central Government could authorize the Labour Commissioner, Uttar Pradesh, 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 10 April, 1957 and 14 December, 1960, but had 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 abovementioned notifications on the ground that there was any excessive delegation of essential legislative functions but he clearly conceded that the notifications were not open to challenge on that ground. Since we found it difficult to follow as to on what grounds the validity of the two notifications were sought to be challenged, we requested Sri Gupta to give in writing the exact question he desired to raise. He formulated the question in the following terms:
“Where under 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 or jurisdiction exercisable by it under S. 14(3) of the Act be exercised by 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 quest on 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 S. 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 in charge 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 in charge 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 Para. 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 in charge of and responsible to the company for the conduct of its business, are employers within the meaning of S. 3(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 under S. 17(1)(a) of the Act. 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 5-A, dated 14 May, 1966, under the signature of Sri S.N 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 in charge thereof. A copy of Form 5-A received from the company to the office of the Regional Provident Funds Commissioner was brought on record. Para graph 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 5-A annexed hereto occupiers, directors, partners, managers 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 5-A submitted by the company under the signature of Sri S.D Garg (respondent), the owner of the factory is described as
“Lakshmiratan Cotton Mills Company, Ltd., Kalpi Road, Kanpur.”
The name of the occupier disclosed in that form is that of Sri S.D Garg (respondent). At serial number 11 of the form, all the four respondents are mentioned as the directors of the company. The heading at serial number 14 of the form is as follows:
“Name and address of persons who have ultimate control over the affairs of the establishment and in charge of and responsible to the company for the control of its business.”
The entry against this heading is in the following terms:
“Same as above in column 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 over the affairs of the company and were in charge of and responsible to the company for the control of its business.
When Sri I.S Awasti, 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 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 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 5-A and the evidence on record, the respondents evidently were in charge of and responsible to the company for the conduct of its business within the meaning of S. 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 S. 14(2A) 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 under S. 17(1) of the Act. Inviting our attention to S. 17(4)(a) of the Act, learned counsel urged that under that provision for failure to comply with any of the conditions subject to which exemption had been granted to the company under S. 17(1), the company and the respondents could be penalized by cancellation of the exemption, ft was submitted that since a penalty was provided under S. 17(4)(a) of, the Act, the respondents could not be punished under S. 14(2A) thereof. There is, in our opinion, no force in this contention either. The heading of S. 14 is “penalties.” When the company was granted exemption by the Central Government in exercise of its powers under 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 S. 17(4)(a) of the Act the privilege had been withdrawn by an executive order. This to our mind does not involve the impositon of a “penalty” within the meaning of S. 14(2A) of the Act. Section 14(2A) 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 S. 17(4)(a) contemplates an alternative penalty for failure to comply with the conditions subject to which exemption was granted to the company under S. 17(1)(a) it would render S. 14(2A) otiose and redundant. The Parliament while enacting the Act was evidently aware of the fact that S. 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 S. 14(2A) of the Act, it was purposeless to provide for any penalty for a similar breach under S. 14(2A) because it could never be imposed.
19. Moreover, an order under 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 has any force.
21. On merits, it has not been contended that the evidence on record does not justify the conviction of the respondents under S. 14(2A) 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.