The Courts in India have held that prosecution launched against the Company for violation of Provident Fund Act is not within the purview of protection of Section 22 of Sick Industrial Companies (Special Provisions) Act 1985, therefore prosecution of the offences under Provident Fund Act is not barred by SICA.
In Orr Cee Electronics Ltd V/s Judicial Magistrate, F.C. Mysore (Writ Petition Nos. 27294 to 27299 of 1993 and 13241 to 13259 of 1998, decided on 28.01.1999) The Karnataka High Court held that an offence committed by a Company cannot be obliterated merely because a winding up order has been passed against it. The winding up order may have been relevant for the purposes of liquidating the liabilities of the company and disposal of the available assets for the purposes of paying all claimants but it is difficult to obliterate an offence just because a winding up order has been made. Therefore, prosecution launched against the Company for violation of Provident Fund Act in India is not within the purview of protection of Section 22 of Sick Industrial Companies (Special Provisions) Act 1985, therefore prosecution of the offences under Provident Fund Act is not barred by SICA.
The above view has been shared in Sivanandha Mills Ltd. And Anr V/s G. Manickamurthy, Enforcement Officer Provident Funds, Coimbatore V Division ( decided on 29.10.2009 ) where it was held that, “It is crystal clear from the language of Section 22 that only specified matters which are specifically mentioned in the different sub-sections are matters for which the protection is extended. There is no suspension of prosecutions launched against the company.”
Under Section 4(1) (a) (iv) of the Bombay Relief Undertakings (Special) Provisions Act 1958, in relation to any Relief Undertaking, “Any right, privilege, obligation or liability accrued or incurred before the undertaking was declared a relief undertaking and any remedy for the enforcement thereof shall be suspended and all proceedings relative thereto pending before any court, tribunal, officer or authority shall be stayed;”
In Inderjit C Parekh V/s VK Bhatt (Criminal Appeal No. 57 of 1973, decided on: 08.01.1974) the Hon’ble Supreme Court held that the Provident Fund Act has defined “Employer” as the person who, or the authority which, has the ultimate control of 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. Thus the responsibility of paying contributions to the PF Fund lies with the Employer and if they have defaulted in paying the amount, they are liable to be prosecuted under Section 76(a) of the Provident Fund Scheme. According to the Apex Court such a personal liability does not fall within the scope of Section 4(1)(a)(iv) of the Bombay Relief Undertakings (Special) Provisions Act 1958. Therefore a Company or its officers declared as a Relief Undertaking under Bombay Relief Undertakings (Special) Provisions Act 1958 can be prosecuted under Section 76(a) of the Provident Fund Scheme.