# [1991] 1 S.C.R. 938

- **Citation:** [1991] 1 S.C.R. 938
- **Court:** Supreme Court of India
- **Decided:** 1991
- **Case number:** Criminal Appral ...1.. Nos. 647-48 of 1979
- **Bench:** S. Ratnavel Pandian, K. Jayachandra .. - Reddy
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/1991-1-s-c-r-938-11124
- **Pages:** 36

## Headnote

Empfoye<:s' frovtdent Funds and Miscellaneous Provisions Act,
1952 ·Employees Provic(f,mt Funds Scheme, 1952: Ss: 5,. 6, 14, 17,~
Schedule JI Notification dated 17. 10: 1957 Paragraph 76-Establishmems exempted under s. 17-Employ_ers' scheme for co,ntribution of
C provident fund-Employers' .failure to contribute-Whether amounts to
contravention ·of s. 6 and attracts prosecution under s. ·14 or mere
cancellation of exemption 1,1,nder s. 17(4) s. 17( J)(a/-Exemption from
operation of 1952 Scheme granted subject to certain conditionsViolation of conditions-Whether attracts s. 14(2A)-Nature and
D purpose of exemption explained. Ss. 17(4)-Cance/lation of exemption
granted under s. 17( /)-Whether amounts to 'penalty' as contemplated
by express.ion "if no. other penalty is elsewhere provided by or u_nder this
Act" occurring ins. 14(2A). Ss. 2, 2(c), 2(h}, 2(1)-Expression "unless
the context otherwise requires"--Scope of.-Words "contribution"
"fund" "scheme"-Whether applicable to a provident fund scheme
E
instituted by an exempted csrablishment.
Interpretation of Statutes: Penal statutes-Construction of-
. Cohte~t in which the words are use(i is also important-Statute must be
read as a. whple-Words to be interpreted to achieve legislative purpose.
F
Code of Criminal Procedure, 1973: Chapter XX-Trial of
G
summons cases-<;mnp.~nts for offences punishable under ss. 14( IA)
and 14(2A) of £,mployees' Provident Funds and Miscellaneous Provisions Act, 1952 pending-~-Prima fade case against the accused not ruled
out-Applicqtiuns j()r a.cqltittal an4 dropping of proceedings-Maintainability of
· -
Words & Phrases:
'Pen.ci.lty'~Meaningof.
Employees' Provident- _Funds und Miscel}aJieous Provisions Act, --{
1952_ was enacted wi.th a view to prm:i~'e· for institutjon of provident
fund· for employees in factories andothert--stablisbments and was made
H
ap_pAicable to '''<!cy e11tahlishment 'lhk~ came withit) too m~Wiing of
938
-
---
N:K. JAIN v. C.K. SHAH
939
~
.
.
'
~factory'. The Central Government under·s. 5 of the Act, framed the A
Employees' Provident Fund Scheme in 1952 for establishment of provident funds for the employees of the establishments governed by the Act.
Management of such establishments bad to.contribute to the provident
fund of its employees in accordance with s. 6. Contravention or default
in complying with s. 6. was punishable under s 14. Under s. 17 the
appropriate goverment·was empowered to grant exemption from the
~B
~operation of the 1952 Scheme provided the concerned establishment
had instituted its own provident fund scheme and the. rules in this
respect were .not Jess favourable than those specified in s. 6 and the
employees were also in the enjoyment of other provident fund benefits.
_ ......
The Act underwent .major amendments in. 1971 and thereafter.
The appellants were in the. management of. an' establishment
governed by the Act. By a notification dated 17.10.1957 the.Central
.'1'
Governmen~ granted exemption under s .. 17 to the said establishment
subject to the conditions specified in Schedule II to the notification.
Condition no. 1 was to the effect that the factory was to have a provident fund scheme in force, the rules of which with respect to the rates:of
contribution should not be less favourable than those specified ins. 6 of
the Act and the employees should also be in the enjoyment of other
provident fond benefits provided under the Act. Consequently the 1952
c
D
).... Scheme did not apply to the. company .as it created a trust and the
management was making contibutions of provident fund to the said
trust. In September/October, 1975, the Inspector Provident Fund tiled E
complaints that the appellants being incharge of the management of the
establishment failed to pay contributions to the provident fund trust in
1974 and thereby committed offences .punishable under ss. · 14(1A),
14(2), 14(2A), 14A(l), 14A(2), of the Act and Paragraph 76 of the 19S2
Scheme, the appellants also received notice d_ated 15.9.1975

## Text

_Characters 0–39,919 of 83,425. This is a partial read: ask again with offset=39919 for what follows._

A
N.K. JAIN AND OTHERS
-v.
C.K. SHAH AND OTHERS
MARCH 26. 1991
B
[S. RATNAVEL PANDIAN AND K. JAYACHANDRA
..
- REDDY, 'JJ.)
Empfoye<:s' frovtdent Funds and Miscellaneous Provisions Act,
1952 ·Employees Provic(f,mt Funds Scheme, 1952: Ss: 5,. 6, 14, 17,~
Schedule JI Notification dated 17. 10: 1957 Paragraph 76-Establishmems exempted under s. 17-Employ_ers' scheme for co,ntribution of
C provident fund-Employers' .failure to contribute-Whether amounts to
contravention ·of s. 6 and attracts prosecution under s. ·14 or mere
cancellation of exemption 1,1,nder s. 17(4) s. 17( J)(a/-Exemption from
operation of 1952 Scheme granted subject to certain conditionsViolation of conditions-Whether attracts s. 14(2A)-Nature and
D purpose of exemption explained. Ss. 17(4)-Cance/lation of exemption
granted under s. 17( /)-Whether amounts to 'penalty' as contemplated
by express.ion "if no. other penalty is elsewhere provided by or u_nder this
Act" occurring ins. 14(2A). Ss. 2, 2(c), 2(h}, 2(1)-Expression "unless
the context otherwise requires"--Scope of.-Words "contribution"
"fund" "scheme"-Whether applicable to a provident fund scheme
E
instituted by an exempted csrablishment.
Interpretation of Statutes: Penal statutes-Construction of-
. Cohte~t in which the words are use(i is also important-Statute must be
read as a. whple-Words to be interpreted to achieve legislative purpose.
F
Code of Criminal Procedure, 1973: Chapter XX-Trial of
G
summons cases-<;mnp.~nts for offences punishable under ss. 14( IA)
and 14(2A) of £,mployees' Provident Funds and Miscellaneous Provisions Act, 1952 pending-~-Prima fade case against the accused not ruled
out-Applicqtiuns j()r a.cqltittal an4 dropping of proceedings-Maintainability of
· -
Words & Phrases:
'Pen.ci.lty'~Meaningof.
Employees' Provident- _Funds und Miscel}aJieous Provisions Act, --{
1952_ was enacted wi.th a view to prm:i~'e· for institutjon of provident
fund· for employees in factories andothert--stablisbments and was made
H
ap_pAicable to '''<!cy e11tahlishment 'lhk~ came withit) too m~Wiing of
938
-
---
N:K. JAIN v. C.K. SHAH
939
~
.
.
'
~factory'. The Central Government under·s. 5 of the Act, framed the A
Employees' Provident Fund Scheme in 1952 for establishment of provident funds for the employees of the establishments governed by the Act.
Management of such establishments bad to.contribute to the provident
fund of its employees in accordance with s. 6. Contravention or default
in complying with s. 6. was punishable under s 14. Under s. 17 the
appropriate goverment·was empowered to grant exemption from the
~B
~operation of the 1952 Scheme provided the concerned establishment
had instituted its own provident fund scheme and the. rules in this
respect were .not Jess favourable than those specified in s. 6 and the
employees were also in the enjoyment of other provident fund benefits.
_ ......
The Act underwent .major amendments in. 1971 and thereafter.
The appellants were in the. management of. an' establishment
governed by the Act. By a notification dated 17.10.1957 the.Central
.'1'
Governmen~ granted exemption under s .. 17 to the said establishment
subject to the conditions specified in Schedule II to the notification.
Condition no. 1 was to the effect that the factory was to have a provident fund scheme in force, the rules of which with respect to the rates:of
contribution should not be less favourable than those specified ins. 6 of
the Act and the employees should also be in the enjoyment of other
provident fond benefits provided under the Act. Consequently the 1952
c
D
).... Scheme did not apply to the. company .as it created a trust and the
management was making contibutions of provident fund to the said
trust. In September/October, 1975, the Inspector Provident Fund tiled E
complaints that the appellants being incharge of the management of the
establishment failed to pay contributions to the provident fund trust in
1974 and thereby committed offences .punishable under ss. · 14(1A),
14(2), 14(2A), 14A(l), 14A(2), of the Act and Paragraph 76 of the 19S2
Scheme, the appellants also received notice d_ated 15.9.1975 threatening
\A.._to cancel the exemption granted under s. 17.· In September 1975 the F
company was closed and liquidation proceedings w~re initiated.
.
·
·.:
·The appellants filed applications before the Metropolitan Magistrate, before whom the~complaints were pending, contendfug thats. 6 of
the Act was not applicable to establishments exempted under s •. 17, and
\. no proceedings under s •. 14 could be initiated against them; and prayed G'
~fOr their acquittal and for dropping of the proceedings. The applications were rejected.
The appellants thereupon ·filed .revision applications which ,were
dismiSsed by the Addi. Sesssions Judge, holding that s. 6 covered all the
establishments including, the exempted one; that even· an exempted H
940
SUPREME COURT REPORTS
. (1991) 1 S.C.R.
A
establishment was required to make full contribution to the provident
fund as provided by s. 6 and failure to pay contributions amounted to
contravention of s. 6 and attracted s. 14(1A)_; and that since the conditions, subject to which exemption was granted under s. 17, were
violated, s. 14(2A) was also attracted.
)..·
B
In appeal to this Court, it was contended by the appellants that
since the establishment was exempted under s. 17, it was governed ~
neither by the 1952 Scheme nor by s. 6 of the Act; that cancellation of
exemptiol\ under s. 17(4) was a penalty provided by or under the Act;
that If the word 'contribution' was construed strictly as deftned ins. 2,
failure by an exempted establishment in not paying provident fund
C
contributions to the trust was not a contravention of s. 6; and that
before the introduction of s. 17(1A) by the Amendment Act 33 of 1988
the penal provisions including s. 14(1A) and 14(2A) were not applicable
to establishment exempted under s. 17.
On the questions whether: (1) for contravention of the provisions·
D of the Employees' Provident Funds and Miscellaneous Provisions Act,
1952 , criminal proceedings could be instituted under s. 14 of the Act
against an establishment exempted under s. 17; and (2) failure by the
establishment in question to pay the provident fund contributions to the
trust attracted the prosecution or only warranted cancellation of the ~
exemption under s. 17(4).
E
Disposing of the appeals, this Court,
HELD: 1.1 An exempted establishment has to provide for its
employees the beneftts whith are In no way less favourable than those
provided under the Employees' Provident Funds and Miscellaneous
F
Provisions Act, 1952 and the Employees' Providend Fund Scheme 19.52.
...._
Under s. 17 the appropriate government may by notiftcation and sub-~
ject to such conditions as may be specified in the said notiftcation,
exempt an establishment from operation of the 1952 Scheme. if it is
satisfied that the establishment makes contribution to the provident
fund, which can be called a provident fund scheme of its own, and the
G
rules governing such scheme are not less favourable than those specifted
ins. 6. [953A-C]
1
~.{
1.2 Contravention or non-compliance of any of the conditions,
subject to which exemption was granted under s. 17 is punishable under
s. 14(2A) if no other penalty is elsewhere provided by or under the Act.
H
The essentials of the provisions are that there should be a contravention
-
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N.K. JAIN v. C.K. SHAH
941
·'""' or default in complying with the provisfons of the Act or any of the
conditions subject to which exemption was granted under s. 17; and: A
that there should be no other penalty elsewhere provided by or under
the Act for such contravention or non-compliance. [954F-G]
1.3 In the instant case, the default in making the provident fund ,
contributions to tlte trust by the company amounted to contravention of , B
~- the rules; and consequently condition no. 1 mentioned in Schedule II to
the notification dated 17.10.1957, subject to which the exemption was'
granted, was cle~rly violated. [956D-E]
2.1 In common parlance the word ' penalty' is understood to
1
mean: a legal or official punishment such as a term of imprisonment. In
some contexts it is also understood to mean some other form of punish- ' C
ment such as fine or forfeiture for not fulruling a contract. But in
1
gathering the meaning of this word, the context in which it is used is ,
significant. [956G-H; 957 A]
2.2 Section 14 of the Act dealing with penalties shows that every D
contravention or non-compliance mentioned in each of the sub-sections
is punishable with imprisonment and/or fine; and for some offences
minimum punishment is also made compulsory. The penalties men-
~-
tioned in this connection would indicate that the Legislature envisaged
that a penalty should necessarily mean imprisonment or at least imposi-
'
tion of fine. Having regard to the object underlying the Act, the expres-
, E
sion 'penalty' in the context in which it is used in s.14 including ,
s. 14(2A), only connotes imposition of imprisonment or fine. [957A-B)
3.1 It is true that all the penal statutes should be construed '
strictly and the court must see that the thing charged as an offence is
1
(
within the plain meaning of the words used, but it must also be borne in F
A
mind that the context in which the words are used is important. The
legislative purpose must be noted and the statute must be read as a
whole. The Employees' Provident Funds and Miscellaneous Provisions
Act, 1952 is a welfare legislation ands. 14 including ss. 14(2A) and 17
are part of it: ·and they should be interpreted in such a way so that the
purpose of the legislation is allowed to be achieved. [9638-D]
~--
MIS International Ore and Fertilizers (India) Pvt. Ltd. v. Employees' State Insurance Corporation, AIR 1988 SC 79, relied on.
Seaford Court Estates Ltd. v. Asher, [1949] 2 All E.R. 155, refer·
red to.
G
I
H
942
SUPREME COURT REPORTS
[1991] 1 S.C.R.
·'A
3.2 Taking into consideration the objectunderlying the Act and
·'on reading ss. 14 and 17 in full, it becomes clear that cancellation of
exemptiOn does not amount to a penalty ·within the meaning of
s. 14(2A). It cannot be said that•mere cancellation ·of.an· exemption
granted under s. 17 amounts to a penalty particularly expected to be
·stringent as contemplated under s. 14. [963C; 957EJ.
.
B
. . ' .
·
State of Uttar Pradesh through the ProviJent Fund Inspector, -~
U. P. v. Lala Ram Gopal Gupta and th'ree Others, (1973] Allahabad Law
Journal 355, approved.
· · .
· · · 3.3. Notwithstanding. the exemption granted, the appropriate
'government does not .Jose its hold over the scheme framed by the
C ,_establishment, and there are.builtin safeguards like s. 17(4) to protect
the interests of the employees. Section 17 is a self-contained provision
dealing with the power to grant exemption and the consequent obligation. The exemption is granted for getting better benfits and to ensure
D
E
p
G
'H
their continuance for the employees with a view to avoiding duplication
in framing a scheme by the appropriate government on the lines as
·framed by the establishment itself and. the purpose of the.exemption is
only to ensure such a scheme better than the one under s .. 6. The pro-
·. cedural aspect of s. 17( 4) provides for cancellation of such exemption by
which only the privilege granted is being withdrawn by an· executive "°""
order. Such a cancellation does not penalise the management and consequently does not result in any punishment that is normally allowed in
respect of an offence. [960A-B; 961B-C]
Mohmedalli and Others v. Union of India and Another, (1963]
Suppl. 1 SCR993, relied on.
·
3.4 So far as unexempted establishments are concerned, there are
several other penal provisions like ss. 14(1), 14(2) and 14AA and also in A
particular Paragraph 76 of the 1952 Scheme. There are other legal
provisions also which apply to unexempted establishments. Therefore
under the Amendment Act No. 33 of 1988 the Legislature wanted to
•
make as far as possible these existing legal and penal provisions which
are applicable to unexempted establishments, applicable also to exempted establishments. That does not mean that there were no penal prov~
sions earlier applicable to exempted establishinents .. [971E-F]
4. The subject matter and the context in which a particular word
'is used: are .of great importance and it .is axiomatic that the object
underlying the Act must always be kept in view in construing the con-
N.K. JAIN v. C.K. SHAH
943.,1
~ text in which a particular word is used. The concept which prompted :i A
the legislature to enact this·welfare law·shotild also be borne in mind in'
interpreting the provisions. Due·weight ought to be given to the words ,
"unless the context 'otherwise reqtiires" occurring ins. 2, which show
1
that restricted meaning in the definitiOns should ·not be applied; and the .
words 'contribution', 'scheme', 'fund' occurring in the said section
should in the "context" be otherwise interpreted as to apply to a priff·
vate scheme also and if there is a default in "contribution" by the
~~ exempted establishment, the same amounts to contravention of· s. 6
punishable under s. 14(1A). [968G-H; 969A; 970D-F]
_ ,..__
: Commissioner of Expenditure-Tax, ·Gujarat, · Ahmedabad v. :
Darshan Surendra Parekh, [1968] 2 SCR 589; Bennet Coleman & Co .
. (P) Ltd. v. Punya Priya Das Gupta, [1970] 1SCR181; Organo Chemi- 'C'
cal Industries and Another v. Union of India and Others, [1979] 4 SCC
~ 573; Kanwar Singh v. Delhi Administration, [1965] 1 SCR 7; State of ,
Gujarat v. Chaturbhuj Magan/al and Another, [1976] 3 SCR 1076 and
Vanguard Fire & Gen; Ins Co, v. Fraser & Ross, AIR 1960 SC 971,
relied on.
1 D ·
!,.
Parekh Cotton Mills (P) Ltd. v. State of Bombay, [1957] 2 LLJ
490, refferred to..
· '·
'
· ; , '
)...
5. Sections 14(1A) and 14(2A) of the Act are attracted to tl~e facts :
in the 'instant case and it cannot be said that there .is no prima facie case; ' , E :
and col!lSequently the. accused ~cannot claim acquittal even before the
conclusion of the trial under Chapter .XX Cr.P .C. dealing with trial of
summons cases. [972G-H; 973A]
Besides ss.; 14A(l) and. 14A(2) of the Act, not. being applicable, .
1
s. 14(2) dealing with family pension scheme and insurance.scheme is not ·p
\.•~!elev ant in the insfant case.· Similarly Paragraph 76 of the 1952 Scheme , 1
1s also 1iot attracted as the establishment in question is exempted from
operation.ofthe said scheme. [953G-H; 954A; 973Al
R.. v. Smith, [1862] Le & Ca 131; People ex rel Risso v. Randall, 58 ·
N. Y. 2d 265, 268 Misc. 1057; City of Fort Wayne v. Bishop, 92 N.E. 2d G
\
544, 547, 2~8 Ind. 304; City ofCincinnati v. Wright, 67 N.E. 2d 358 •. '
'r361, 77 Oh10 App. 261; R. v. Clyne, exp. Harrap (1941) VLR 200 at
201; Tolaram ·v. State of Bombay, AIR 1954 SC 496; S.K. Gupta and
Another,v; K.P. Jain and Another; (1979] 3 SCC 54; State Bank of"
India etc. v. · Yogendra Kumar Srivastava and Others etc: [1987).3 SCC
10; Knightbridge Estates Trust Ltd. v. Byrne and Others, [1940] 2 All
H ·
A
B
c
D
944
SUPREME COURT REPORTS
[ 1991] 1 S.C.R.
E.R. 401 and National Buildings Construction Corporation v. Pritam ).-'
Singh Gill and Others, (1973] 1 SCR 40, referred to.
· Collins English Dictionary,, Butterworths' Words and Phrases,
Legally defined 3rd Edn. page 345, Principles of Statutory Interpretation by G.P. Singh Fourth Editfpn, 1988, referred to.
CRIMINAL APPELLATE JURISDICTION: Criminal Appral
...1..
Nos. 647-48 of 1979.
<"'""\
From the Judgment and Order dated the 9.3.1979 of the Additional Sessions Judge, Ahmedabad in Crl. Revision Application Nos.
356 & 357 of 1978.
P. Chidambram, A.T. Patra, S.R. Aggarwal Ms. Monika Mobil
and Ms. Bina Gupta for the Appellants.
S.K. Dholakia, and Anip Sachthey for the Respondents.
The Judgment of the Court was delivered by
K.JAYACHANDRA REDDY, J. The question of general
importance that arises in these three appeals is whether criminal proceedings can be instituted under Section 14 of the Employees' Provi-
~
E
dent Funds and Miscellaneous Provisions Act, 1952 ('Act' for short)
against an establishment exempted under Section 17 of the Act for the
contravention of the provisions of Section 6 of the Act?
The appellants, who are common in each of these three appeals,
were connected with the management of MIS Shri Subhlaxmi Mills
F
Ltd. (hereinafter referred to as the "said Company") an establishment
governed by the Act. By a Notification dated 17th October, 1957 the ..
Central Government in exercise of the powers under Section 17 of the~
·
Act granted exemption to the said Company subject to the conditions
specified in Schedule 2 annexed to the said Notification. As a result of
the said exemption the provisions of the employees' Provident Fund
G
Scheme 1952 framed under Section 5 of the Act did not apply to the
said Company which created· a Trust and the management made con·
./
tributions of provident fund to the said trust and admittedly the1
exemption continued to be in operatie>n at all material times. In or
about September/October, 1975 the Inspector of Provident Fund filed
criminal complaints in the Court of the Judicial Magistrate Cambay
H
against the appellants on the allegation that they being incharge of the
...
-
N.K. JAIN v. C.K. SHAH [REDDY, J.]
945
~
management failed to pay the contributions to the provident fund trust
and thereby committed offences punishable under Sections 14(1A),
14(2), 14(2A), 14A(l), 14A(2) and Peragraph 76 of the Employees'
Provident Fund Scheme, 1952. The appellants also received notice
dated 15th September, 1975 from the Inspector threatening to cancel
the exemption granted under Section 17 of the Act. However, some
time in September, 1975 the said Company's Mill had to be closed
down and liquidation proceedings were initiated. The criminal comp·
)...taints persmmt to an order of the High Court were transferred to the
Court of the Second Metropolitan Magistrate, Ahmedabad. The
respondent No. 1, the complainant was examined who in his evidflnce
admitted tha1t the Government of India had exempted the said Com-
~any under :~ection 17 of the Act and the same had not been subsequently canc1elled and was in existence at all material times. The appellants filed an application praying that the proceedings against them
should be dropped and they should be acquitted on the ground that
'ii': Section 6 of the Act was not applicable to the establishment exempted
under Section 17 of the Act and therefore no proceedings under
Section 14 can be initiated against them. The learned Metropolitan
Magistrate by his order dated 28th November, 1978 rejected the
aforesaid application. Being aggrieved. they filed three criminal revision applications in the Court of the Additional Sessions Judge,
Ahmedabad who by a common order dismissed the same taking the
;..__view that Sec1tion 6 of the Act covers and attracts all the establishments
including the exempted establishment. Against that order in those
three revision applications, the present appeals have been filed.
Shri P. Chidambaram, learned counsel for the appellants, submitted that none of the Sections of the Act mentioned in the comp·
laints can be applied as against the appellants since the establishment
in question is exempted under Section 17 of the Act and consequently
1
is not governed by the 1952 Scheme nor by Section 6 of the Act.
~ccording to the learned counsel, the Act does not provide for prosecution in respect of any of the offences enumerated under Section 14
in case of bn~ach by an exempted establishment in not paying the
provident fund contributions to the trust and therefore no prosecution
can be launched and that if at all the management of the establishment
, had not deposited the provident fund contributions with the trust, the
)6-overnment was empowered only to cancel the exemption which also
amounts to a penalty.
A
B
c
D
E
F
G
The learned counsel appearing on both sides addressed elaborate
arguments and referred to various provisions of the Act and
H
946
SUPREME 'COURT REPORTS ; · [1991] 1 S.C.R.
A, Emplbyees' Provident Fund Schehie .1952 and also took ·us through ~
several citations ahd also some ·passages in various text-books.
· · Before we proceed to consider the same·, ·we ·must note some. ,
undisputed facts .. The establishment in q'uestii:m was governed by the .. '
provisions of the Act and it was exempted under Section 17 of the Act ·
B, and it:had its own trust in·respect bf the provident fund contributions·
but failed to· pay the provident fond contributions to the trust for some
period during 1974 and 'thus· there was a default. The controversy~
therefore is whether such faifure attracts the prosecution or only
warrants the cancellation ofthe exemp1ion granted?
o,
G
1-i
This Act (~6. 19 of 19S~) was en~~ted to ~~ovi~e fo~ 'insti~~ion ~
of provident fund for einpMyees in factories and other establishments
and is· made·applicable to every ·establishment which comes within the
meaning of 'factory'. The Act undetwent·major amendments by Act
No. 16 of 1971 anci· also by some amendments thereafter, We are· ';1lf'
mainly concerned with the provisions of the Act that were in force at
the relevant· time 'i.e. in 1974: Section 2 contains various definitions ··
and· commences with the w0i-ds "In this Act;· unless the· context '
otherwise requires,?' and thereafter the definitions ate enumerated.· 1
"Contribution" is defined in Section 2(c) which means a contribution.
payable in respect of a member under the Scheme. The words "Con- ·
tribution''; ' "employer",
'"employee", · "'factory'',. "fund" and 4..
"scheme" are defined in Sections·2(c), 2(e), 2(f), 2(g), 2(h) and 2('1)
respectively. They' reads as under: ·
2. In this Act, unlessthe context otherwise requires,.
"2(c). ':contribution'' means a contribution payable in ·
respect of a member under a Scheme (or the contribution
payable·in r~spect of an employee to whom the Insurance ..
Scheme applies);'';
·
· · · . '
. .
·
--:
"2( e) "employer'' means-
(i) in relation to an .establishment; ·which is a factory, the
owner or occupier of the factory, including the agent of .
such owner or occupier, •the legal representative -of a de:..(
ceased owner Or occupier and, where a· person has been
named as a manager of the factory under clause (f) of sub-
. section· ( 1) of Section 8 of the Eactories Act;· 1948, the
person so named; and;
....
I ,..._,__
...
N.K. JAIN v. C.K. SHAH [REDDY, J.]
947
(ii) in relation to any other establishment, the person who,
or the authority which, has the ultimate control over ·the
affairs of the establishment and where the said affairs are
entrusted to a manager, managing director or managing
agent, such manager, managing director or managing
agent;"
"2(f) "employee" means any person who is employed for
wages in any kind of work, manual or otherwise, in or in
connection with the work of an establishment, and who
gets his wages directly or indirectly from the employer, and
includes any person employed by or through a contractor in
or in connection with the work of the establishment;"
"2(g) "factory" means any premises, including the precints there.of, in any part of which a manufacturing process
is being carried on or is ordinarily so carried on, whether
with the aid of power or without the aid of power;"
"2(h) "fund" means the provident fund established under
a Scheme;"
"2( 1) "scheme" means the Employees' Provident Fund
Scheme framed under Section 5;"
Section 5 provides for framing a scheme which is in the following
terms:
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"5(1) The Central Government may, by notification in the
Official Gazette, frame a Scheme to be called the
Employees' Provident Fund Scheme for the establishment F
of provident funds under this Act for employees or for any
class of employees and specify the establishments or class
of establishments to which the said scheme shall apply and
there shall be established, as soon as may be after the framing of the Scheme, a Fund in accordance with the provisions of this Act and the Scheme.
G ·
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We may mention here that the Employees' Provident Fund
Scheme 1952 was duly framed as provided under Section 5 and the
relevant provisions of the Scheme shall be referred to at the- approH:
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SUPREME COURT REPORTS
[1991] 1 S.C.R.
A priate stages. Section 6 is an important provision which deals with the
contribution and allied matters and.reads thus:
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"6. The contribution which shall be paid by the employer
to the Fund shall be six and a quarter per cent of the basic
wages, dearness allowance and retaining allowance (if any)
for the time being payable to each of the employees
(whether employed by bim directly or by or through a contractor), and the employees' contribution shall be equal to
the contribution payable by the employer in respect of him
and may, if any imployee so desires and if the Scheme
makes provision therefor, be an amount not exceecling eight
and one third per cent, of his basic wages, dearness allowance and retaining allowance (if any);
Provided that in its application to any establishment
or class of establishments which the Central Government,
after making such enquiry as it deems fit, may by notification in the Official Gazette specify this section shal be
subject to the modification that for the words "six and a
quarter per cent," the words "eight per cent" shall be
subsituted:
Provided further that where the amount of any con-
...(,
tdbution payable under this Act involves a fraction of a
rupee, the Scheme inay provide for th_e_ rounding off of such -
- frJtction to fhe nearest rupee-, half o(a rupee or-quarter of a
rμpee.
Explanation 1 For the purposes of this section, dearness
allowance shall be deemed to include also the cash value of
any food concession allowed to the employee.
>
Explanation 2 For the purposes of this section, "retaining
allowance" means an allowance payable for the time being
to an employee of any factory or other establishment during any period in which the establishment is not working,
for retaining his services.
--{
The next important Section is Section 14 which deals with
1 penalties.
For the purposes of the present case it would be enough if we extract
H the relevant provisions of Section 14 as mentioned in the complaints.
-...( Penalties:
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N.K. JAIN v. C.K. SHAH [REDDY, J.)
949
"14( lA) An employer who comtravenes, 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 six months but-
(a) which shall not be less than three months in case
of default in payment of the employees' contribution which
has been deducted by the employer from the employees'
A
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wages;
C
(b) which shall not be less than one month, in any.
other case; and shall also be liable to fine which may extend
to two 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 or of fine only in lieu of
imprisonment;"
"14(2) Subject to the provisions of this Act, the Scheme
(the Family 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 six months, or with fine which may extend to one
thousand rupees, or with both."
14(2A) Whoever contravenes or makes default in complying with any provisions 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 three
months, or with fine which may extend to one thousand
rupees, or with both."
"14A(l) If the person committing an offence under this Act,
the Scheme (the Family Pension Scheme or the Insurance
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SUPREME COURT REPORTS
(1991] 1 S.C.R.-
Scheme) 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 ,,..1..,
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."
~
"14A(2) Notwithstanding anything contained in subsection ( 1), where an offence under this Act, the Scheme or
the. Family Pension Scheme or the Insurance Scheme has ~
been committed by a company and it is proved that the
offence has been comμiitted with the consent or connivance
of, or is attributable to, any neglect on the part of, ~ny
director or manager, secretary or other officer of the com-
. pany, such director, manager, secretary or other officer
shall be deemed to be guilty of that offence and shall be
liable to be proceeded against arid punished accordingly.
...J...
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,"
The next important Section to be noted is Section 17(1)(a) which
empowers the Government to grant exemption which is in the following terms:
"17( 1) The appropriate Government may, by notification
in the Official Gazette and subject to such conditions~
may be specified in the notification, exempt from the
operation of all or any of the provisions of any Scheme-
(a) any establishment to which this Act applies if, in the
opinion of the appropriate Government, the rules of its
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N.K. JAIN v. C.K. SHAH [REDDY, J.]
951
provident fund with respect to the rates of contribution are
not less favourable than those specified in Section 6 and the
employees are also in enjoyment of other provident fund
benefits which on the whole are not less favourable to the
employees than the benefits provided under this Act or any
Scheme in relation to the employees in any other establishA
ment of a similar character; or
B
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Section 17(4) provides for cancellation of such an exemption if
~
any employer fails to comply with the conditions. The relevant provi-
-
sion 17(4) (a) reads thus:
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"17 ( 4) Any exemption granted under this section may be
cancelled by the authority which granted it, by order in
writing, if an employer fails to comply,-
(a) iri the case of an exemption granted under sub-section
D
(1), with any of the conditions imposed under that subsection or with any of the provisions of sub-section (3).
xx
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Section 17(5) deals with transfer of provident fund so far contributed
after such cancellation and it reads as under:.
"17 ( 5) Where any exemption granted under sub-section
E
(1), sub-section (lA), sub-section (2), sub-section (2A) or
sub-section (2B) is cancelled, the amount of accumulations F
to the credit of every employee to whom such exemption
applies, in the provident fund, the family pension fund or
the insurance fund of the establishment in which he is employed shall be transferred within such time and in such
manner as may be specified in the Scheme or the Family
Pension Scheme or the Insurance Scheme to the Credit 9f G
his account In the Fund or the Family Pension Fund orthe
Insurance Fund, as the case may be."
The only other provision to be noted before we proceed further is
paragraph 76 of the 1952 Scheme the contravention of which is also
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mentioned in the complaints. It reads thus:
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SUPREME COURT REPORTS
[ 1991] 1 S.C.R.
"76. Punishment for failure to pay contributions etc.-lf '~
any person-
(a) deducts or attempts to deduct from the wages or other
remuneration of a member the whole or any part of the
employer's contribution, or
,
(b) fails or refuses to submit any return, statement or other~
document required by this Scheme or submit a false return,
statement or other document, or makes a false declaration,
or
~
( c) obstructs any Inspector or other official appointed
-.
under the Act or this Scheme iri the discharge of his duties
or fails to produce any record for inspection by such Inspector or other official, or
~
(d) is guilty of contravention of or non-compliance with
any other requirement of this Scheme,
he shall be punishable with imprisonment which may
extend to six months or with fine which may extend to one
thousand rupees, or with both."
On a perusal of the above extracted provisions of the Act the
following aspects to the extent relevant to the.present case can be spelt
out. The Management of an establishment has to contribute to the
provident fund and the Government under Section 5 can frame a
scheme called Employees' Provident Fund Scheme and such a scheme
was framed in the year 1952. The scheme provides for the establishment of provident fund under the Act for employees of the establishments specified therein. Section 6 is the material provision and deal ..
with contributions which may be provided under the Scheme and also
prescribes the rate of contribution to the fund and that the employees'
contribution should be equal to the contribution payable by the employer. Section 14 deals with the penalties and section 14(1A) lays down
that an employer who contravenes, or makes default in complying with
the provisions of Section 6 shall be punishable with imprisonment f~
term which may extend to six months but shall not be less than three
months in case of default in payment of the employees' contribution
which has been deducted by the employer from the employees' wages.
But for adequate reasons it cai;i be less. Paragraph 76 of the Scheme
also provides for punishment for failure to pay such contributions to
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N.K. JAIN V. C.K. SHAH [REDDY, J.)
953
~ the fund. Then we have Section 17 which provides for the exemption.
As per the said Section the appropriate Government may be notification and subject to such conditions, as may be specified in the notification, exemept from the operation of all or any of the provisions of any
Scheme (in the present case 1952 scheme) if the appropriate Government is satisfied that the rules of the provident fund which a particuler
establishment is following in the matter of contribution to the provi-
>.- dent fund are not less favourable than those specified in Section 6 and
that the employees are also in enjoyment of other provident fund
benefits. In other words the exemption from the operation of the
scheme is granted provided the particular establishment makes con-
~-
tribution as per its own rules governing the contribution to the fund,
which in other words, can be called a provident fund scheme of its own
are not less favourable than those specified in Section 6. Accordingly
the exempted establishment has to provide for its employees the be-
~ nefits which are in no way Jess favourable than the ories provided
under the Act and the Scheme.
Now the question is whether failure to make the contribution by
the exempted establishment to the provident fund as per its one rules
could attract the penal provisions of Section 14? The learned Additional Sessions Judge, however, as hereinbefore mentioned, held that
>.- Section 6 covers and attracts all be establishments including the exempted establishment. Even otherwise according to him, Section
14(2A) which applies to an exempted establishment is clearly attracted
inasmuch as the conditions subject to which exemption was granted
under Section 17 have been violated in the instant case. The learned
Additional Sessions Judge also gave a finding that Section 14(1A) also
is attracted as in his view even an exempted establishment is not
absolved from the liability of employer's contribution as also the empA
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loyees' contribution to the provident fund and therefore by necessary
\4jmplication the employer and the employees of an exempted establishment have to make full contribution to the provident fund as required
under Section 6 of the Act, and if its contribution remains unpaid it
amounts to contravention of the provisions of Section 6 of the Act the
thus attracts Section 14(1A).
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We may point out at this stage that Section 14(2) and paragraph
76 of the Scheme are not attracted in the present case. So far as Section
14(2) is concerned it can be seen that the provision deals with the
family pention scheme or the insurance scheme etc. We are not
concerned, in the present case, with any such scheme. We are only
concerned with the provident fund as defined under Section 2(h) of the
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SUPREME COURT REPORTS
[1991] 1 S.C.R.
Act. Similarly paragraph 76 of the 1952 Scheme also is not attracted ~
because the establishment herein is admittedly exempted from the
operation of the scheme. We may also mention here that similarly
Sections 14A(l), 14A(2) and 14AA which are also mentioned in the
complaints also are not attracted. Shri S.K. Dholakia, learned counsel
appearing for the respondents, could not dispute the same. Then we
are left with Sections 14(1A) and 14(2A). While it was the submission
of Mr. Chidambaram, learned counsel for the appellants that even
these two provisions are also not attracted, Shri Dholakia, on the ~
other hand, submitted that both the provisions are attracted and at any
rate Section 14(2A) is clearly attracted and therefore no interference is
called for in these appeals.
..._ __ .... •
We shall first take up the submissions in respect of Section
14(2A). This Section lays down that whoever contravenes or makes
default fa complying with any provisions of the 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 a~ d also
fine mentioned therein. Firstly, it is submitted that the only contravention alleged against the appellants is that no contribution was made to
the provident fund and since it is an exempted establishment, Section 6
is not attracted and therefore it must be held that there is no contravention or non-compliance of any of the provisions of the Act. In other ~
words, the submission is that Section 6 of the Act applies only to the
. non-exempted establishments and covered under the statutory exemtion. The learned Additional Sessions Judge, however, as already
noted, has held that Section 6 applies to both exempted and nonexempted establishments. This aspect we will consider at a later stage
while examining the applicability of Section 14(1A). So far Section
14(2A) is concerned, the later part of it specifically is made applicable
to the exempted establishments and if there is contravention of any of.
the conditions subject to which exemption was granted under Section
17 and if no other penalty is elsewhere provided by or under the Act
then such contravention or non-compliance is 'punishable. The essentials of these provisions are; (i) there should be a contravention or
default in complying with the provisions of the Act, or (ii) there should
be a contravention or default in complying with any of the conditio~s /
subject to which exemption was granted under Section 17, and (iii}1"
there should be no other penalty elsewhere provided by or under the
Act for such contravention or non-compliance. Only when these essentials are satisfied, the Section is attracted. The learned counsel for the
appellants submitted that in tbe- present case there is no such contra-
(
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N.K. JAIN V. C.K.