The Karnataka High Court (HC) chaired by Justice M. Nagaprasanna quashed the criminal proceedings initiated against the petitioner for non-remittance of Employees’ Provident Fund contribution by establishment due to the attachment of bank account by the Income Tax Department Authorities.
The petitioner worked for M/s Vasan Healthcare Private Limited, “the Establishment,” from 2012 to September 13, 2017. He additionally asserts that he had several positions inside the Establishment during the aforementioned time.
He held the position of Senior Vice President of Human Resources for a while and had the power to sign documents related to the establishment’s business, including those pertaining to the Employees Provident Fund.
From August 2014 to May 2015, it appears that the Establishment deducted provident funds from employees’ wages but failed to deposit the amounts with the Provident Fund Organization. It came to a total of 95,58,104 rupees.
Based on this, a complaint was filed on August 6, 2015, with the first respondent, alleging violations of Sections 406 and 409 of the Indian Penal Code, 1890. The petitioner asserts that he was not aware of the alleged crime that was filed against him.
The reason behind non-remittance is that the Bank accounts of the Establishment were attached by the Income Tax Department in several cases.
Two criminal cases were started for offences punishable by Sections 406 and 409 of the IPC, and another one was registered before the Special Court for Economic Offenses under the Employees’ Provident Fund Scheme and Miscellaneous Provisions Act, 1952, read with Sections 14(1A) and 14A for violating Section 6 of the Act read with Paragraphs 30 and 38 of the Employees’ Provident Fund Scheme.
Further proceedings before the Special Court under the provisions of the Act were instituted against the Establishment and one A.M.Arun, the Chairman. However, the court quashed the proceedings against both.
The Income Tax Department had linked the Establishment’s account and blocked any transactions for the remittance of the funds because the Establishment had no control over the non-remittance, the court determined that there was no willful disregard in the payment of contributions. Additionally, the judgement was definitive, and the court did not consider any additional applications.
The High Court noted that the petitioner worked for the Establishment. The Establishment should have been added as a party before any proceedings for offences under Sections 406 or 420 of the IPC were started. The prosecution of the petitioner cannot go forward without the Establishment being named as an accused.
It is further considered that allowing the petitioner to be the subject of additional legal actions would turn into harassment, constitute an abuse of the legal system, and ultimately lead to a miscarriage of justice.
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