# Uma Shankar Soni & Anr v. State of U.P. & Anr

- **Citation:** (2022) 6 ILRA 328
- **Court:** High Court of Judicature at Allahabad
- **Decided:** 2022-03-25
- **Case number:** Application U/S 482 No. 1312 of 2022
- **Source:** https://unisonlegal.in/judgment/allahabad-high-court/uma-shankar-soni-anr-v-state-of-u-p-anr-48664
- **Pages:** 13

## Headnote

Law
-
Code
of
Criminal
Procedure, 1973 -Section 156(3), 200,
202, 482 - Indian Panel Code, 1860 -
Section 419, 420 - Employee Provident
Fund and Miscellaneous Provision Act,
1952 (EPF)-Section 14, 14A, 14AC -
Employee St. Insurance Act, 1948 (ESI)-
Section 85, 86, 86A, 94 - Insolvency and
Bankruptcy Code, 2016 -Section 10, 14,
33, 33(5): - Validity of summoning order &
dismissal of revision - complaint case filed
by an Employee - without arrayed the
company as party - against officers of
company
which
is
under
liquidation
proceeding - for violation of obligations to
deposit shares of employee towards EPF &
ESI Act, - interpretation of Doctrine of
contribution
-
companies,
corporate
Houses and Corporations are not immuned
from Criminal prosecution - Application
allowed - impugned judgment & order set
aside - Trial Court directed to proceed
accordingly.(Para - 41, 44, 45)

Application
(U/s
482)
is
allowed,
judgment and order of Trial court is set
aside. (E-11)

List of Cases cited: -

## Text

_Characters 0–39,887 of 41,355. This is a partial read: ask again with offset=39887 for what follows._

328 INDIAN LAW REPORTS ALLAHABAD SERIES
arising out of Case Crime No.0018 of 2021,
under Sections 498-A, 323 of IPC and 3/4
of D.P. Act, Police Station-Mahila Thana,
District-Kannauj
including
the
entire
proceedings of the case are hereby quashed.
No order as to costs.
----------
(2022)06ILR A328
ORIGINAL JURISDICTION
CRIMINAL SIDE
DATED: LUCKNOW 25.03.2022

BEFORE

THE HON'BLE SHREE PRAKASH SINGH, .J.

Application U/S 482 No. 1312 of 2022

Uma Shankar Soni & Anr. ...Applicants
Versus
State of U.P. & Anr. ...Opposite Parties

Counsel for the Applicants:
Sri Manish Bajpai

Counsel for the Opposite Parties:
G.A.

Criminal
Law
-
Code
of
Criminal
Procedure, 1973 -Section 156(3), 200,
202, 482 - Indian Panel Code, 1860 -
Section 419, 420 - Employee Provident
Fund and Miscellaneous Provision Act,
1952 (EPF)-Section 14, 14A, 14AC -
Employee St. Insurance Act, 1948 (ESI)-
Section 85, 86, 86A, 94 - Insolvency and
Bankruptcy Code, 2016 -Section 10, 14,
33, 33(5): - Validity of summoning order &
dismissal of revision - complaint case filed
by an Employee - without arrayed the
company as party - against officers of
company
which
is
under
liquidation
proceeding - for violation of obligations to
deposit shares of employee towards EPF &
ESI Act, - interpretation of Doctrine of
contribution
-
companies,
corporate
Houses and Corporations are not immuned
from Criminal prosecution - Application
allowed - impugned judgment & order set
aside - Trial Court directed to proceed
accordingly.(Para - 41, 44, 45)

Application
(U/s
482)
is
allowed,
judgment and order of Trial court is set
aside. (E-11)

List of Cases cited: -

1. Aneeta Hada Vs Godfather Travels & Tours
Pvt. Ltd. (2012 vol. 5 SCC 661)

2. Sharad Kumar Sanghi Vs Sangita Rane (2015
Vol. 12 SCC 781)

3. Sushil Sethi & anr. Vs St. of Arunachal
Pradesh & ors. (2020 vol. 3 SCC 240)

4. S K Alagh Vs St. of U.P. & ors. (2008 vol. 5
SCC 662)

5. Roop Mani Pandey Vs St. of U.P. & anr.
Decided on 16.02.2016

6. Standard Chartered Bank Vs Director of
Enforcement (2005 vol. 4 SCC 530)

(Delivered by Hon'ble Shree Prakash
Singh, J.)

1. Heard Sri Syed Imran Ibrahim and
Sri Manish Bajpai, learned counsel for the
applicants, Sri Anirudh Kumar Singh,
AGA-I and Sri Sushil Pandey, learned
AGA for the State and perused the record.

2. The notice to the respondent no.2 is
hereby dispensed with.

3. By means of instant application
under Section 482 Cr.P.C. has been filed
assailing the order dated 29th September,
2021 passed by 9th Additional District and
Sessions Judge, Rae Bareilly in Criminal
Revision No.54 of 2019 as well as order
dated 19th May, 2017 passed by ACJM,
Court no.15, Rae Bareilly in Compliant
Case No. 3074 of 2016, under Sections
6 All. Uma Shankar Soni & Anr. Vs. State of U.P. & Anr.
329
419, 420 IPC, Police Station- Mill Area,
District- Rae Bareilly.

4. The factual matrix of the case is
that an application under Section 156(3)
Cr.P.C. was filed by the opposite party no.2
against the applicants alleging therein that
the applicants are under obligation to
deposit the shares of the employees
towards Employee Provident Fund (EPF)
and the Employee State Insurance (ESI) .

5. After filing of the aforesaid
application under Section 156(3) Cr.P.C.,
the court below registered the case as a
complaint case vide its order dated 3rd of
June, 2015. In compliance of the order, the
court below examined the opposite party
no.2 under Section 200 Cr.P.C. There is
specific provision for punishment in the
Act itself as such punishment under Section
of I.P.C. would not be invoked.

6. After the aforesaid statement of the
opposite party no.2, three witnesses namely
Ramchandra Singh, Krishna Kumar Yadav
and Prakhat Singh were recorded under
Section 202 Cr.P.C. and were named as PWs
1, 2 and 3 respectively. After recording the
aforesaid statement and examining the
strength of the evidence, the lower court vide
order dated 19th May, 2017 summoned the
applicants under Sections 419 and 420 IPC.

7. Against the summoning order dated
19th May, 2017, the applicants filed a
revision before the learned Sessions Judge.
After filing of the aforesaid revision, it was
finally heard and decided by the trial court on
dated 29th September, 2021. Vide the order
dated 29th September, 2021, the revision
filed by the applicants, was dismissed and the
summoning order dated 19th May, 2017 was
affirmed.

8. The crux, on the basis of which the
applicants were summoned, is that the
applicants did not comply with the
provision of Employee Provident Fund Act
as well as Employee State Insurance Act.
In fact, both the Acts specifically envisage
provision of penalties.

9. He submits that Section 86 of
Employee State Insurance Act, 1948
(hereinafter referred to as the 'Act, 1948')
clearly states that prosecution for the
violation of the Act can be done when a
complaint is been filed with the prior
permission of Insurance Commissioner by
an officer who has been authorised to do so
meaning thereby a complaint by an
individual without compliance of the
mandate
of
Act,
1948,
cannot
be
entertained. The Section 86 of Act, 1948 is
quoted hereinunder;

Section 86- (1) No prosecution
under this Act shall be instituted except by
or with the previous sanction of the
Insurance Commissioner 1[or of such other
officer of the Corporation as may be
authorised in this behalf by the 2[Director
General of the Corporation]].

(2) No court inferior to that of a
Metropolitan
Magistrate
or
Judicial
Magistrate of the First Class shall try any
offence under this Act.]

(3)
No
Court
shall
take
cognizance of any offence under this Act
except on a complaint made in writing in
respect thereof.

10. More importantly, Section 86(A)
of Act, 1948 deals with the provision that if
any offence has been committed, the
company shall be deemed to be guilty.
330 INDIAN LAW REPORTS ALLAHABAD SERIES
Section 86(A) of the Act, 1948 is quoted
hereinbelow;

86A. Offences by companies.-

(1) If the person committing an
offence under this Act is a company, every
person, who at the time the offence was
committed was incharge 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
nothing
contained in this sub-section shall render
any person liable to any punishment, if he
proves that the offence was committed
without his knowledge or that he exercised
all due diligence to prevent the commission
of such offence.

(2) Notwithstanding anything
contained in sub-section (1), where an
offence
under
this
Act
has
been
committed with the consent or connivance
of, or is attributable to, any neglect on
the part of, any director or manager,
secretary or other officer of the company,
such director, manager, secretary or
other officer shall be deemed to be guilty
of that offence and shall be liable to be
proceeded
against
and
punished
accordingly. Explanation : -For the
purposes of this section,-

(i) "company" means any body
corporate and includes a firm and other
associations of individuals; and

(ii) "director" in relation to-

(a) a company, other than a firm,
means the managing director or a wholetime director;

(b) a firm means a partner in the
firm.]

11. Learned counsel appearing for the
applicants submits that the court below has
failed to consider the fact that without
arraying the company as party in criminal
proceeding, no case can proceed. He added
that even assuming the complaint in its true
value then at best it is constituting offence
under Section 85 of the Act, 1948. Sections
419 and 420 IPC would not attract in such
matter. Section 85 of Act, 1948 is quoted
hereinbelow;

85. Punishment for failure to pay
contributions, etc.-If any person-

(a) fails to pay any contribution
which under this Act he is liable to pay, or

(b) deducts or attempts to deduct
from the wages of an employee the whole
or any part of the employer's contribution,
or

(c) in contravention of section 72
reduces the wages or any privileges or
benefits admissible to an employee, or

(d) in contravention of section 73
or any regulation dismisses, discharges,
reduces
or
otherwise
punishes
an
employee, or

(e) fails or refuses to submit any
return required by the regulations, or
makes a false return, or

(f) obstructs any Inspector or
other official of the Corporation in the
discharge of his duties, or

(g) is guilty of any contravention
of or non-compliance with any of the
6 All. Uma Shankar Soni & Anr. Vs. State of U.P. & Anr.
331
requirements of this Act or the rules or the
regulations in respect of which no special
penalty is provided,

[he shall be punishable-

(i) where he commits an offence
under clause (a), with imprisonment for a
term which may extend to three years but

(a) which shall not be less than
one year, in case of failure to pay the
employee's contribution which has been
deducted by him from the employee's wages
and shall also be liable to fine of ten
thousand rupees;

(b) which shall not be less than
six months, in any other case and shall also
be liable to fine of five thousand rupees:

Provided that the Court may, for
any adequate and special reasons to be
recorded in the judgement, impose a
sentence of imprisonment for a lesser term;

(ii) where he commits an offence
under any of the clauses (b) to (g) (both
inclusive), with imprisonment for a term
which may extend to one year or with fine
which may extend to four thousand rupees,
or with both.]

12. He further referred Section 14,
14A and 14AC of the Employees'
Provident
Funds
and
Miscellaneous
Provisions Act, 1952 (hereinafter referred
to as the 'EPFMP Act, 1952') which
provides the procedure with regard to the
penalties in case of violation of the
provision of the Act and further Section
14A envisaged the offence committed by
the company and Section 14AC speaks
about cognizance and trial of the offence.
The Sections 14, 14A and 14AC of
EPFMP
Act,
1952
are
quoted
hereinbelow;

14 Penalties. -

(1) Whoever, for the purpose of
avoiding any payment to be made by
himself under this Act ,the Scheme the
[Pension] Scheme or the Insurance
Scheme]] or of enabling any other person
to avoid such payment, knowingly makes
or causes to be made any false statement
or
false
representation
shall
be
punishable with imprisonment for a term
which may extend to 19 [one year, or
with fine of five thousand rupees, or with
both].

(1A)
An
employer
who
contravenes,
or
makes
default
in
complying with, the provisions of section
6 or clause (a) of sub-section (3) of
section 17 in so far as it relates to the
payment
of
inspection
charges,
or
paragraph 38 of the Scheme in so far as
it relates to the payment of administrative
charges,
shall
be
punishable
with
imprisonment for a term which may
extend to three years), but

(a) which shall not be less than
22 [one year and fine of ten thousand
rupees] in case of default in payment of
the employees' contribution which has
been deducted by the employer from the
employees' wages;

[(b) which shall not be less than
six months and a fine of five thousand
rupees, in any other case]: [***] Provided
that the court may, for any adequate and
special reasons to be recorded in the
judgment,
impose
a
sentence
of
imprisonment for a lesser term [***].] (B)
An employer who contravenes, or makes
332 INDIAN LAW REPORTS ALLAHABAD SERIES
default in complying with, the provisions of
section 6C, or clause (a) of sub-section
(3A) of section 17 in so far as it relates to
the payment of inspection charges, shall be
punishable with imprisonment for a term
which may extend to Jone year] but which
shall not be less than [six months and shall
also be liable to fine which may extend to
[five thousand rupees]: Provided that the
court may, for any adequate and special
reasons to be recorded in the judgment,
impose a sentence of imprisonment for a
lesser term [***]. (2) (Subject to the
provisions of this Act, the Scheme, the
[Pension]
Scheme
or
the
Insurance
Scheme] may provide that any person who
contravenes, or makes default in complying
with, any of the provisions thereof shall be
punishable with imprisonment for a term
which may extend to [one year, or with fine
which may extend to four thousand rupees,
or with both).

(2A) Whoever, contravenes or
makes default in complying with any
provision of this Act or of any condition
subject to which exemption was granted
under section 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 [six months, but which shall
not be less than one month, and shall be
liable to fine which may extend to five
thousand rupees.

14A Offences by companies.

(1) If the person committing an
offence under this Act the Scheme or the
[Pension]
Scheme
or
the
Insurance
Schemell 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
nothing contained in this sub-section shall
render any such person liable to any
punishment, if he proves that the offence
was committed without his knowledge or
that he exercised all due diligence to
prevent the commission of such offence.

(2)
Notwithstanding
anything
contained in sub-section (1), where an
offence under the Act, the Scheme or [the
[Pension Scheme or the Insurance Scheme]
has been committed by a company and it is
proved that the offence has been committed
with the consent or connivance of, or is
attributable to, any neglect on the part of,
any director or manager, secretary or other
officer of the company, such director,
manager, secretary or other officer shall be
deemed to be guilty of that offence and
shall be liable to be proceeded

against
and
punished
accordingly. Explanation-For the purposes
of this section, (a) "company" means any
body corporate and includes a firm and
other association of individuals; and (b)
"director", in relation to a firm, means a
partner in the firm.

Section 14AC: Cognizance and
trial of offences. No court shall take
cognizance of any offence punishable under
this Act, the Scheme or 2/the 3/Pension]
Scheme or the Insurance Scheme] except
on a report in writing of the facts
constituting such offence made with the
previous sanction of the Central Provident
Fund Commissioner or such other officer
as may be authorised by the Central
Government, by notification in the Official
Gazette, in this behalf, by an Inspector
6 All. Uma Shankar Soni & Anr. Vs. State of U.P. & Anr.
333
appointed under section 13. (2) No court
inferior to that of a Presidency Magistrate
or a Magistrate of the first class shall try
any offence under this Act or Scheme or
2[the 3[Pension] Scheme or the Insurance
Scheme.

13. He has also referred the Section
94 of the Employees State Insurance Act,
1948, wherein the payment of priorities of
dues have been mentioned. He submits that
if a company is corporation and declares
insolvency then distribution of property of
the insolvent is required to be paid on
priority basis to the employees which has
contributed and covered under Section 94
of the Act, 1948, which reads as under;

94. Contributions, etc., due to
Corporation to have priority over other
debts.? There shall be deemed to be
included among the debts which, under
section 49 of the Presidency-towns
Insolvency Act, 1909 (3 of 1909) or under
section 61 of the Provincial Insolvency
Act, 1920 (5 of 1920), 1[or under any law
relating to insolvency in force 2[in the
territories which, immediately before the
1st November, 1956, were comprised in a
Part B State]], 3[or under section 530 of
the Companies Act, 1956 (1 of 1956)],
are, in the distribution of the property of
the insolvent or in the distribution of the
assets of a company being wound up, to
be paid in priority to all other debts, the
amount due in respect of any contribution
or any other amount payable under this
Act the liability where for accrued before
the date of the order of adjudication of
the insolvent or the date of the winding
up, as the case may be.

14. In view of the aforesaid, there
would be no any financial loss to the
applicants so far as the payment of the
provident fund or any insurance benefit are
concerned.

15. Quoting the aforesaid, he submits
that since under the clause 86A in the Act,
1948, there is deeming clause and he has
drawn attention that this deeming clause
shows the intent of the legislature while
enactment of the aforesaid provision
without holding the body corporate guilty
the purpose of the Act would be frustrated.

16. He further argued that, in fact, the
company namely Shree Bhawani Paper
Mills Limited is under liquidation at
present. Further it is not a case where the
company or its Director has intentionally
committed any cheat or forgery but it is due
to unavoidable financial crisis as the Bank's
account of the company declared as NonPerforming Assets (NPA) in the month of
December, 2012. It is admitted fact on
behalf of the complainants that they are not
getting the benefit of EPF and ESI since
2012.

17. He has also added that company
was declared as sick unit under the Sick
Industrial Companies (Special Provisions)
Act, 1985, on 26th September, 2013 and
once the company has been declared as sick
unit, the Board of Directors of the company
ceased to exercise any constructive control
over the management and affairs of the
company.

18. He further added that while the
matter was pending before Board of
Industrial Financial Reconstruction (BIFR),
the Government of India promulgated the
Insolvency and Bankruptcy Code, 2016
(hereinafter referred to as the 'Code, 2016')
and as soon as the aforesaid Code, 2016
was promulgated, the company moved an
application under Section 10 of the Code,
334 INDIAN LAW REPORTS ALLAHABAD SERIES
2016, which was admitted by the Tribunal
on 13th February, 2018. After the aforesaid
application, the resolution professional was
appointed and moratorium as mentioned
under Section 14 of the Code, 2016 was
enforced.

19. He further submits that after the
aforesaid, the company could not be
revived and learned National Company
Law Tribunal vide order dated 17th July,
2021 directed that assets of the company be
liquidated so as to recover the loss of the
debtor and thus the company went into
liquidation proceedings. After the aforesaid
order, the moratorium under Section 14 of
the Code, 2016 was lifted and moratorium
under Section 33(5) was enforced.

20. He also argued that after
appointment of resolution professional, the
notices
were
published
in
leading
newspapers with regard to the fact that the
company
has
gone
into
liquidation
proceedings. Thereafter e-auction was
successfully done on 25th October, 2021
and letter of intent was issued in favour of
R.K. Chaudhary and new company i.e. M/s
Inter Weaved Polytex Pvt. Ltd. He submits
that there is specific provision in both the
Acts that if such a company goes under
liquidation and the matter is settled, the
payment is to be meet/ released/ disbursed
to the claimants particularly as per
provisions envisaged under ESI Act and
EPF Act.

21. He submits that the proceeding
against the applicants cannot be continued
since the company has not been arrayed as
party. He added that hearing of proceeding
of the complaint as well as issuance of
summon in the complaint case vitiates in
the eyes of law as the authority of the Apex
Court as well as other High Courts are very
clear that company is an essential party in
such cases.

22. It is an admitted fact that the
company has not been arrayed as party. He
further
says
that
nothing
has
been
concealed or no cheat, fraud or forgery has
ever been committed by the applicants and
due to the financial hardship the company
could not be allowed to run as per law and
the same went into liquidation proceedings
and every disbursement is to be done as per
law. He further added that the applicants
are law abiding citizen and commanding
respect in the society and they had no
criminal intent to make any fraud or
forgery with the complainants. He has
further drawn attention towards the list of
the complainants-employees annexed as
Annexure-14
with
instant
application
wherein
the
name
of
the
complainant/respondent no.2 finds place at
serial no.3.

23. He submits that the intent of the
legislature would frustrate if the applicants
are been prosecuted in furtherance to the
criminal proceeding of the Complaint Case
No.3074 of 2016.

24. He also argued that, in fact, it is a
matter of civil liability and it is not a
criminal act. He has forcibly argued that
since the company has not been arrayed as
party in the complaint and as such the
whole proceedings of the complaint case is
vitiated and is not sustainable in the eyes of
law. Further the order passed by the
revisional court is also not sustainable and
same has passed on the similar premises
and without arraying company as party.

25. Learned counsel appearing for the
applicants, in support of his contention, has
placed reliance on the case of Aneeta
6 All. Uma Shankar Soni & Anr. Vs. State of U.P. & Anr.
335
Hada vs Godfather Travels and Tours
Private Limited; 2012(5) SCC 661. It has
been upheld by the Hon'ble Apex Court
that company is a juristic person and can be
fastened with criminal liability. Extract of
the aforesaid judgment are as follows:-

"We
have
referred
to
the
aforesaid authorities to highlight that the
company can have criminal liability and
further, if a group of persons that guide the
business of the companies have the
criminal intent, that would be imputed to
the body corporate. In this backdrop,
Section 141 of the Act has to be
understood. The said provision clearly
stipulates that when a person which is a
company commits an offence, then certain
categories of persons in charge as well as
the company would be deemed to be liable
for the offences under Section 138. Thus,
the statutory intendment is absolutely plain.
As is perceptible, the provision makes the
functionaries and the companies to be
liable and that is by deeming fiction. A
deeming fiction has its own signification."

26. He has further placed reliance on
the case of Sharad Kumar Sanghi vs.
Sangita Rane reported in (2015) 12 SCC
781. It has been held in para 11 to 13 that
where there is allegation against the
Director and company has not been arrayed
as a party, no proceedings can be initiated
against it even where the vicarious liability
is fastened in certain statutes.

"11. In the case at hand as the
complainant's
initial
statement
would
reflect, the allegations are against the
company, but the company has not been
made arrayed as a party. Therefore, the
allegations have to be restricted to the
Managing Director. As we have noted
earlier, allegations are vague and in fact,
principally the allegations are against the
company. There is no specific allegation
against the Managing Director. When a
company has not been arrayed as a party,
no proceeding can be initiated against it
even where vicarious liability is fastened
on certain statutes. It has been so held by a
three-Judge Bench in Aneeta Hada v.
Godfather Travels and Tours Private
Limited in the context of Negotiable
Instruments Act, 1881.

12. At
this
juncture,
it
is
interesting to note, as we have stated
earlier, that the learned Magistrate while
passing the order dated 22.10.2001, had
opined, thus:-

"It appears prima-facie from the
complaint
filed
by
the
complainant,
documents, evidence and arguments that
accused company has committed cheating
with the complaint by delivering old and
accidented vehicle to her at the cost of a
new
truck.
Accordingly,
prima-facie
sufficient grounds exist for registration of a
complaint against the accused U/s. 420 of
I.P.C. and is accordingly registered."

13. When the company has not
been arraigned as an accused, such an
order could not have been passed. We have
said so for the sake of completeness. In the
ultimate analysis, we are of the considered
opinion that the High Court should have
been well advised to quash the criminal
proceedings initiated against the appellant
and that having not been done, the order is
sensitively vulnerable and accordingly we
set aside the same and quash the criminal
proceedings initiated by the respondent
against the appellant."

27. It has also been reiterated in case
of Sushil Sethi and another vs. State of
336 INDIAN LAW REPORTS ALLAHABAD SERIES
Arunachal Pradesh and others reported
in (2020) 3 SCC 240 wherein the Hon'ble
Apex Court in para 8.2 of this judgment
held that if the allegations are against the
company and the company has not been
made a party then it is obligatory on the
part of the complainant to make requisite
allegations
which
would
attract
the
provisions constituting vicarious liability
against the companies. Para 8.2 is extracted
hereasunder:-

8.2. It is also required to be noted
that the main allegations can be said to be
against the company. The company has not
been made a party. The allegations are
restricted to the Managing Director and
the Director of the company respectively.
There are no specific allegations against
the Managing Director or even the
Director. There are no allegations to
constitute the vicarious liability. In the case
of Maksud Saiyed v. State of Gujarat
(2008) 5 SCC 668, it is observed and held
by this Court that the penal code does not
contain
any
provision
for
attaching
vicarious liability on the part of the
Managing Director or the Directors of the
company when the accused is the company.
It is further observed and held that the
vicarious
liability
of
the
Managing
Director
and
Director
would
arise
provided any provision exists in that behalf
in the statute. It is further observed that
statute indisputably must contain provision
fixing such vicarious liabilities. It is further
observed that even for the said purpose, it
is obligatory on the part of the complainant
to make requisite allegations which would
attract the provisions constituting vicarious
liability. In the present case, there are no
such specific allegations against the
appellants being Managing Director or the
Director of the company respectively.
Under
the
circumstances
also,
the
impugned
criminal
proceedings
are
required to be quashed and set aside.

28. Further Hon'ble Apex Court in the
case of S.K. Alagh vs. State of Uttar
Pradesh and others reported in (2008) 5
SCC 662, has held in para 14 to 19 that
even at drafts were drawn in the name of
the company, the appellant was its
Managing Director, he cannot be said to
have committed an offence under Section
406 of the Penal Code. In absence of any
provision laid down under the statute, a
Director of a company or an employee
cannot be held to be vicariously liable for
any offence committed by the company
itself. The following para is extracted
below:-

14.
Appellant
No.1
is
the
Managing Director of the Company.
Respondent No.3 was its General Manager.
Indisputably, the company is a juristic
person. The demand drafts were issued in
the name of the company. The company
was not made an accused. The dealership
agreement was by and between M/s. Akash
Traders and the company.

15. Mr. Pramod Swarup, learned
counsel appearing on behalf of Responent
No.2, in support of the order passed by the
learned Chief Judicial Magistrate as also
the High Court, submitted that as, prima
facie, the appellant was in charge of and
was in control of the business of the
company, he would be deemed to be liable
for the offence committed by the company.

16. The Penal Code, save and
except
some
provisions
specifically
providing therefor, does not contemplate
any vicarious liability on the part of a party
who is not charged directly for commission
of an offence.
6 All. Uma Shankar Soni & Anr. Vs. State of U.P. & Anr.
337

17. A criminal breach of trust is
an offence committed by a person to whom
the property is entrusted.

18. Ingredients of the offence
under Section 406 are :

"(1) a person should have been
entrusted with property, or entrusted with
dominion over property;

(2) that person should dishonestly
misappropriate or convert to his own use
that property, or dishonestly use or dispose
of that property or willfully suffer any other
person to do so;

(3) that such misappropriation,
conversion, use or disposal should be in
violation
of
any
direction
of
law
prescribing the mode in which such trust is
to be discharged, or of any legal contract
which the person has made, touching the
discharge of such trust."

19. As, admittedly, drafts were
drawn in the name of the company, even if
appellant was its Managing Director, he
cannot be said to have committed an
offence under Section 406 of the Indian
Penal Code. If and when a statute
contemplates creation of such a legal
fiction, it provides specifically therefor. In
absence of any provision laid down under
the statute, a Director of a company or an
employee cannot be held to be vicariously
liable for any offence committed by the
company itself. {See Sabitha Ramamurthy
and Anr. v. R.B.S. Channabasavaradhya.

29. He has further placed reliance on
the case of Roop Mani Pandey vs State of
U.P. and Anr. along with other connected
applications, on 16.02.2016 which has held
ratio as under;

"After having given my anxious
thought to the rival submissions made on
behalf of the parties and considering the
material on record, I find that it is not
disputed between the parties that the
opposite party No.2 has supplied the
material to the company and the company
was liable to pay its price to the opposite
party No.2, but it is not disputed between
the parties that by order passed by B.I.F.R.
dated 08.10.2013 the company has been
declared as sick unit and unless the
company
stands
rehabilitated,
the
petitioners,
who
are
sought
to
be
prosecuted, cannot do anything. It has also
not been disputed that the opposite party
No.2 has also initiated the proceedings of
civil case for recovery of the amount due.
The company has not been impleaded as an
accused in the complaint. It has also not
been shown as to how the petitioners are
liable for payment of dues to the opposite
party No.2 while the material was supplied
in the name of the company. The opposite
party No.2 has failed to show as to how the
petitioners are vicariously liable for the
company. The learned Magistrate while
passing the summoning order and taking
cognizance, has failed to disclose as to how
the petitioners are liable to be prosecuted
for the offence under Sections 418 and 506
IPC. Since, the opposite party No.2 had
supplied the material in the name of the
company and admittedly company has not
been arrayed as an accused, the learned
Magistrate ought not to have passed the
impugned order summoning the petitioners,
specially when the opposite party No.2 had
failed to show as to how the petitioners are
liable for the wrong committed by the
company."

30. He further referred a case in
Standard Chartered Bank vs Director of
Enforcement reported in 2005(4) SCC
338 INDIAN LAW REPORTS ALLAHABAD SERIES
530 has referred para 6. The para 6 of the
aforesaid judgment is quoted hereinbelow;

"6. There is no dispute that a
company is liable to be prosecuted and
punished for criminal offences. Although
there earlier authorities to the effect that
corporations cannot commit a crime, the
generally accepted modern rule is that
except for such crimes as a corporation is
held incapable of committing by reason of
the
fact
that
they
involve
personal
malicious intent, a corporation may be
subject to indictment or other criminal
process, although the criminal act [may be]
committed through its agents."

It has also been observed that
there is no immunity to the companies from
prosecution
merely
because
the
prosecution is in respect of offences for
which
the
punishment
is
mandatory
imprisonment and fine."

31. Referring the aforesaid, he
submits that now it has been settled that the
company is liable to be prosecuted and
punished for criminal offence. Company is
not immuned from the prosecution. He
added that locus to prima facie satisfy the
court upon the complainant that intent of
the company was missing in a particular
case.

32. cHe also added that in the instant
matter, the punishment for violation is itself
provided in the Employee State Insurance
Act, 1948 as well as Employee Provident
Fund and Miscellaneous Act, 1952 and
being the special law the prosecution can
only be done under the provision of the
aforesaid Act. It is admitted fact that the
violation has been done which comes under
the preview of Section 86A of the Act,
1948 as well as Sections 14 and 14A of the
Act, 1952 and as such the learned
Magistrate
could
have
invoked
his
jurisdiction in the aforesaid provision but it
is evident from the impugned order dated
29th September, 2021 that Magistrate has
issued the process by issuing a summon
vide order dated 19th May, 2017 under
Sections 419 and 420 of the IPC. He
submits that the Magistrate could not have
issued the summons under the aforesaid
provision of IPC and as such the whole
proceeding of the complaint case vitiates in
the eyes of law.

33. Learned counsel appearing for the
petitioner has argued that it is a bullet point
since the company has not been arrayed as
party in the complaint case and there is
settled proposition of law that the company
being a juristic person is liable to be
prosecuted and is to be punished as such
the order passed by the learned Magistrate
in Complaint Case No.3074 of 2016 is
liable to be set aside.

34. On the other hand, learned AGA
appearing
for
the
State
has
very
vehemently
opposed
the
contention
aforesaid and submits that the learned
Magistrate has very well recorded the
statement of the complainant and witnesses
under Sections 200 and 202 Cr.P.C. He
submits that there is no any deviation or
unlawfulness in recording the statement of
the complainant or the witnesses. He also
added that there is no proclavity or
contradiction
in
the
statement
under
Sections 200 and 202 Cr.P.C. and there are
ample material facts on the basis on which,
the complaint case can proceed against the
present applicants.

35. While countering the contention
of learned counsel for the applicant, on the
issue that the company is under liquidation
6 All. Uma Shankar Soni & Anr. Vs. State of U.P. & Anr.
339
proceedings, he submits that in fact the
liquidation proceeding is civil proceeding,
which can go on simultaneously with the
criminal proceedings and as such this set of
argument of the applicants have no force.

36. He also added that since so far as
the contention regarding non-impleadment
of the company as party is concerned, it is
technicality and that will not affect the fate
of the case or that will not vitiate of
complaint proceedings.

37. He further argued that in fact the
applicants have committed breach of trust
as well as cheated the complainant, and as
such, they can be prosecuted. There are
material facts as per statement of witnesses
and complainant.

38. Having heard the learned counsel
for the parties and after perusal of record, I
find that the present applicants are said to
be Directors of the Company. The
Company was already declared sick unit on
26th September, 2013 and it is an admitted
fact that the bank accounts of the company
were declared as Non-Performing Assets
(NPA) in way back December 2012.
Further the Company is under liquidation
proceedings invoking the provisions of
Section 33 of Insolvency and Bankruptcy
Code, 2016 and after calling the objections
the applicants have already forwarded their
objections through a list (annexed as
annexure 14, page 122 of this writ petition),
wherein the name of the complainant no.2
find place at serial no.3 and as such no
error or illegality or criminal intent is prima
face seems to be committed/seen in the
aforesaid matter.

39. Further from perusal of the
complaint, it is evident that the same has
been filed for deliberately non-payment of
12% of contribution of EPF and ESI 17%
to the complainant. Penalty as well as the
punishment has been prescribed under the
Employees Provident Fund as well as
Employee State Insurance Act, 1948.

40. It has also been noticed that after
2012 due to financial hardship the Bank
account of the company has become NPA
and later on under the Insolvency and
Bankruptcy Code, 2016, the proceedings
were initiated. The resolution professional
was appointed and the matter further
proceeded. It has also been noticed that the
list, which was produced before the
resolution professional, finds place the
name of the complainant at serial no.3.
Section 94 of the Act, 1948 envisaged the
provision that in such eventuality, the
payment under Act, 1948 shall have
priority over the other debts of the
company. Meaning thereby as soon as
liquidation procedure would be concluded,
as per Act, 1948, the dues shall be paid
firstly to such employees, naturally the
applicants are also covered under the same.
At this stage, this Court restraining itself to
comment on the issue regarding deliberate
intent of the Directors and the Company for
not payment of the dues under the Act,
1948 and EPF Act.

41. Coming to the issue with regard to
the fact that whether the company is juristic
person and further company can have any
criminal liability and can be punished, it
has been settled that the company is juristic
person and the doctrine of vicarious
liability also touch to the company as well
as the Directors vise versa. The liability is
penal and in such situation, the strict
interpretation of law shall be done. In the
Act, 1952, the penalty and punishment both
have been provided for non-payment of
dues with respect to contribution of the
employees. Non payment of such dues
340 INDIAN LAW REPORTS ALLAHABAD SERIES
comes under the purview of offence and as
such the same is punishable also.

42. It is also noticeable that there is
deeming
clause
while
providing
the
punishment clause under Section 86A of
the Act, 1948. Having at glance of proviso
of Section 86A in sub-clause (i) it is very
much clear that if any offence is been
committed by the company including every
person incharge of the company shall be
held guilty of the offence and are
attributable of punishment for such act. In
this sub-clause, the word 'deemed to be
guilty' has been mentioned which connotes
the very clear intent of the legislature to
fasten
the
criminal
liability
on
the
functionaries and the company by this
deeming fiction. In such view of the matter
the word 'deemed' must have profound
context in which it is used.

43. In the instant matter, indeed, there
is allegation against the company and until
the company which is juristic entity is
arrayed as accused, such proceeding shall
vitiate.

44. It has been settled in all
jurisdiction across the world by the role
procedure established by law that the
Companies,
Corporate
Houses
and
Corporations are not immuned from
criminal prosecution, on the premises that
they are not possessing the necessary mens
rea for commission of offence. The
doctrine of contribution and imputation
are needed for interpretation, in case the
company or the corporation which guides
business of the company if at all have a
criminal intent would always be imputed to
the company.

45.