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PETITIONER: N.K.  JAIN AND OTHERS

       Vs.

RESPONDENT: C.K.SHAH AND OTHERS

DATE OF JUDGMENT26/03/1991

BENCH: REDDY, K. JAYACHANDRA (J) BENCH: REDDY, K. JAYACHANDRA (J) PANDIAN, S.R. (J)

CITATION:  1991 AIR 1289            1991 SCR  (1) 938  1991 SCC  (2) 495        JT 1991 (2)    52  1991 SCALE  (1)519

ACT:      Employees’ Provident Funds and Miscellaneous Provisions Act,1952  Employees Provident Funds Scheme, 1952: Ss.  5,.6, 14, 17,- Schedule 11 Notification dated 17.10.1957 Paragraph 76-Establishments exempted under s. 17-Employers’ scheme for contribution   of   provident   fund-Employers’failure    to contribute-Whether amounts to      contravention of s. 6 and attracts  prosecution  under s. 14 or mere  cancellation  of exemption  under  s.  17(4)  s.  17(1)  (a)-Exemption   from operation   of  1952  Scheme  granted  subject  to   certain conditions-   Violation   of   conditions-Whether   attracts s.14(2A)-Nature  and  PurPose of  exemption  explained.  Ss. 17(4)-Cancellation  of  exemption granted  under  s.  17(1)- Whether  amounts to ’penalty’ as contemplated by  expression "if no other penalty is elsewhere provided by or under  this Act"  occurring  in  s. 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  instituted  by  an  exempted establishment.      Interpretation of Statutes: Penal statutes-Construction of-  Context in which the words are used is also  important- Statute  must be read as a whole-Words to be interpreted  to achieve legislative purpose.      Code  of Criminal Procedure, 1973: Chapter XX-Trial  of summons  cases-Complaints for offences punishable under  ss. 14(1A)   and  14(2A)  of  Employees’  Provident  Funds   and Miscellaneous Provisions Act, 1952 pending-Prima facie  case against the accused not ruled out-Applications for acquittal and dropping of proceedings-Maintainability of.      Words & Phrases:  ’Penalty’ - Meaning of.

HEADNOTE:      Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 was enacted with a view to provide for institution of  provident  fund  for employees in  factories  and  other establishments   and   was   made   applicable   to    every establishment which came within the meaning of                                                        939 ’factory’.  The  Central Government under s. 5 of  the  Act, framed  the  Employees’ Provident Fund Scheme  in  1952  for

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establishment  of provident funds for the employees  of  the establishments  governed  by  the Act.  Management  of  such establishments  had 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 government  was  empowered  to grant  exemption  from  the operation  of  the  1952  Scheme provided the concerned establishment had Instituted its  own provident fund scheme and the rules in this respect were not less  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 Government 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 in s. 6 of the Act and  the employees should also be in the enjoyment of other provident fund benefits provided under the Act. Consequently the  1952 Scheme  did not apply to the company as it created  a  trust and  the  management was making contributions  of  provident fund  to  the said trust. In  September/October,  1975,  the Inspector   Provident   Fund  filed  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 1952 Scheme, the  appellants  also received  notice dated 15.9.1975 threatening to  cancel  the exemption granted under s. 17. In September 1975 the company was closed and liquidation proceedings were initiated.      The    appellant   filed   applications   before    the Metropolitan  Magistrate,  before whom the  complaints  were pending, contending that s. 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  for their  acquittal  and for dropping of the  proceedings.  The application were rejected.      The  appellants thereupon filed  revision  applications which  were dismissed by the Addl. Sessions  Judge,  holding that  s.  6  covered all the  establishments  Including  the exempted one; that even an exempted                                                        940 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.      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       exemption under  s. 17(4)  was a penalty provided by or under the Act;  that  if the word ’contribution’ was construed strictly as defined in s.  2,  failure by an exempted establishment in  not  paying provident  fund       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

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applicable to establishment exempted under s. 17.      On the questions whether: (1) for contravention of  the provisions   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).      Disposing  of the appeals, this Court,      HELD: 1.1 An exempted establishment has to provide  for its  employees  the  benefits  which  are  in  no  way  less favourable   than  those  provided  under   the   Employees’ Provident  Funds and Miscellaneous Provisions Act, 1952  and the Employees’ Provident Fund Scheme 1952.       Under s. 17 the  appropriate government may by notification and  subject to  such  conditions  as  may  be  specified  in  the   said notification, 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  rules  governing such scheme are not less favourable than those specified  in s. 6. [953A-c]      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. The  essentials  of the provisions are that there should be a contravention                                                        941 or  default in complying with the provisions of the  Act  or any of the conditions subject to which exemption was granted under  s.  17;  and 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 the trust by  the  company amounted  to  contravention of 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 clearly violated. [956D-E]      2.1 In common parlance the word ’penalty’ is understood to  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 punishment such as fine or forfeiture for not fulfilling a contract. But in   gathering the meaning of this  word, the context in which it is used is  significant. [956G-H; 957A]      2.2 Section 14 of the Act dealing with penalties  shows that every 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 mentioned in this connection would indicate  that  the Legislature envisaged   that  a  penalty should necessarily mean imprisonment or at least  imposition of fine. Having regard to the object underlying the Act, the expression  ’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 within the plain meaning  of  the words  used,  but  it must also be borne in  mind  that  the context  in  which  the words are  used  is  important.  The legislative  purpose must be noted and the statute  must  be

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read  as  a  whole.  The  Employees’  Provident  Funds   and Miscellaneous Provisions Act, 1952 is a welfare  legislation and  s. 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. [963B-D]      M/S 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, referred to.                                                        942      3.2 Taking into consideration the object underlying 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; 957E]      State  of  Uttar  Pradesh through  the  Provident  Fund Inspector,  U.P. v. Lala Ram Gopal Gupta and  three  Others, [1973] Allahabad Law journal 355, approved.      3.3.   Notwithstanding  the  exemption   granted,   the appropriate  government  does  not lose its  hold  over  the scheme  framed by the establishment, and there are  built-in 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 benefits  and to ensure 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   procedural   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 SCR 993, 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 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 provisions earlier  applicable to exempted establishments. [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-                                                        943 text in which a particular word is used. The concept which prompted  the legislature to enact this welfare  law  should also  be borne in mind in interpreting the  provisions’  Due weight  ought to be given to the words "unless  the  context otherwise  requires"  occurring in s. 2, which  show    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

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interpreted  as  to apply to a private 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] 1  SCR  181; Organo Chemical 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  Maganlal  and  Another, [1976] 3  SCR  1076  and Vanguard  Fire & Gen. Ins Co. v. Fraser & Ross, AIR 1960  SC 971, relied on.      Parekh cotton Mills (P) Ltd. v. State of Bombay, [1957] 2 LLJ 490, referred to.      5. Sections 14(1A) and 14(2A) of the Act are  attracted to  the  facts   in the instant case and it cannot  be  said that  there  is no prima facie case;  and  consequently  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,    s. 14(2) dealing with family  pension  scheme and  insurance scheme is not relevant in the  instant  case. Similarly  Paragraph  76 of the 1952 Scheme    is  also  not attracted as the establishment in question is exempted  from operation of the said scheme. [953G-H; 954A; 973A]      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     544, 547, 228 Ind. 304; City of Cincinnati v. Wright, 67 N.E. 2d 358.   361, 77 Ohio App. 261;  R.  v. Clyne, ex p. 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, [19791 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                                                        944 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  Edition,1988, referred to.

JUDGMENT:      CRIMINAL   APPELLATE  JURISDICTION:   Criminal   Appeal No.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 Mohil 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’ Provident 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

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appeals,  were  connected with the management  of  M/S  Shri Subhlaxmi  Mills 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  Scheme  1952 framed under Section 5 of the Act did not apply to the  said Company  which  created  a Trust  and  the  management  made contributions  of  provident  fund to  the  said  trust  and admittedly the exemption continued to be in operation 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  against   the appellant on the allegation that they being incharge of the                                                        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(1), 14A(2) and Paragraph 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  complaints persuant 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 evidence admitted  that the Government of India had exempted the said Company  under Section 17 of the Act and the same had not been subsequently canceled  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 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 Section 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. Chidambram, learned counsel for the appellants, submitted that none of the Sections of the Act mentioned  in the  complaints  can be applied as  against  the  appellants since  the  establishment  in  question  is  exempted  under Section  17 of the Act and consequently is not  governed  by the  1952 Scheme nor by Section 6 of the Act.  According  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  breach  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  Government  was empowered only  to  cancel  the exemption which also amounts to a penalty.      The  learned counsel appearing on both sides  addressed elaborate  arguments and referred to various  provisions  of

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the Act and                                                        946 Employees’  Provident  Fund  Scheme 1952 and  also  took  us through several citations and also some passages in  various text-books.      Before  we proceed to consider the same, we  must  note some  undisputed  facts. The establishment in  question  was governed  by the provisions of the Act and it  was  exempted under  Section  17 of the Act and it had its  own  trust  in respect  of the provident fund contributions but  failed  to pay  the provident fund contributions to the trust for  some period  during  1974  and  thus there  was  a  default.  The controversy       therefore is whether such failure attracts the  prosecution  or only warrants the cancellation  of  the exemption granted.      This  Act (No. 19 of 1952) was enacted to  provide  for institution of provident fund for employees in factories and other  establishments       and is made applicable to  every establishment  which comes within the meaning of  ’factory’. The  Act underwent major amendments by Act       No.  16  of 1971  and also by some amendments thereafter. We are  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 words  "In  this Act, unless the context otherwise requires," and  thereafter the definitions are enumerated. "Contribution" is defined in Section  2(c) which means a contribution payable in  respect of  a  member under the Scheme.  The  words  "Contribution", "employer",   "employee",  "factory",  "fund"  and  "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, unless  the  context  otherwise           requires,           "2(c). "contribution" means a contribution payable           in  respect  of a member under a  Scheme  (or  the           contribution  payable in respect 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  deceased  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  Factories  Act,           1948, the named; and;person so                                                        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    thereof,  in  any  part  of   which   a          manufacturing  process  is being carried on  or  is          ordinarily  so carried on, whether with the aid  of

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        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:           "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 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.           xx               xx                       xx 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 appro-                                                        948 priate  stages.  Section 6 is an important  provision  which deals  with  the contribution and allied matters  and  reads thus:           "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 him 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 employee so desires and if  the          Scheme  makes provision therefor, be an amount  not          exceeding  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 shall be  subject  to          the  modification  that for the words  "six  and  a          quarter per cent," the words "eight per cent" shall          be substituted:                Provided further that where the amount of any           contribution  payable  under this Act  involves  a           fraction  of a rupee, the Scheme may  provide  for           the  rounding off of such fraction to the  nearest           rupee, half of a rupee or quarter of a rupee.           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 penalties. For the purposes of the present case it would  be

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enough  if we extract the relevant provisions of Section  14 as mentioned in the complaints.                                                        949 Penalties:           14(IA)  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 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’ wages;           (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 rupee;           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                                                     950           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 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           sub-section (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           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

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         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,"      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 as 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                                                        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 establishment of a similar character; or           xx           xx           xx      Section  17(4)  provides for cancellation  of  such  an exemption   if  any  employer  fails  to  comply  with   the conditions. The relevant provision 17(14) (a) reads thus:           "  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) in the case of an exemption granted under sub-           section  (1), with any of the  conditions  imposed           under   that  sub-section  or  with  any  of   the           provisions of sub-section           xx             xx             xx           xx             xx             xx 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  (1), sub-section (IA),  sub-section  (2),           sub-section (2A) or sub-section (2B) is cancelled,           the amount of accumulations 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 of his account in the Fund or           the Family Pension Fund or the 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 mentioned in the complaints. It reads thus:                                                        952           "76.  Punishment for failure to pay  contributions           etc.-If any person-           (a)  deducts or attempts to deduct from the  wages

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         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  in  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 deals 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 for a 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 can  be  less. Paragraph 76 of the Scheme also provides for punishment  for failure to pay such contributions to                                                        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,  exempt 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 particular establishment is following in the  matter of   contribution  to  the  provident  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  contribution  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  benefits which are in no way less favourable  than  the ones 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,

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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(IA)  also is  attracted as in his view even an exempted  establishment is   not   absolved  from  the   liability   of   employer’s contribution  as  also the employees’  contribution  to  the provident  fund and therefore by necessary  implication  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).      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 pension 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                                                        954 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(1), 14A(2) and 14AA which  are  also mentioned in the complaints  also  are  not attracted. Shri S.K. Dolakia, learned counsel appearing  for the  respondents,  could not dispute the same. Then  we  are left  with  Sections  14(IA) and 14(2A). While  it  was  the submission  of  Mr.  Chidambram,  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  in  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 and 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  exemption.   The   learned Additional  Sessions Judge, however, as already  noted,  has held  that  Section  6 applies to  both  exempted  and  non- exempted  establishments. This aspect we will consider at  a later  stage  while examining the applicability  of  Section 14(, IA). 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

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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 conditions  subject  to which exemption  was  granted  under Section  17,  and  (iii) 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 the present case  there is no such contra-                                                        955 vention  or non-compliance of any of the conditions  subject to  which exemption was granted. His further  submission  in this  context  is that the cancellation of an  exemption  as provided  under  Section 17(4) is a penalty provided  by  or under  the Act for such contravention and therefore  Section 14(2A) is not attracted. To appreciate these contentions  it becomes  necessary  to refer to the  conditions  subject  to which  the  exemption under Section 17 was  granted  in  the present  case. The relevant conditions for our purposes  are Conditions  Nos.  1, 2(a),(b), 10 and 15 and  they  read  as under:                "SCHEDULE-II  (Conditions)           1.  Every  factory  shall have  a  provident  fund          scheme in force the rules of which with respect  to          the  rates  of  contribution  shall  not  be   less          favourable than those specified in Section 6 of the          Act and the employees shall also be in enjoyment of          other  provident fund benefits which on  the  whole          shall not be less favourable to the employees  than          the  benefits provided under the Act or any  Scheme          in  relation to the employees in any other  factory          of  a  similar character and these rules  shall  be          followed in all respects.          2.  The  employer  in  relation  to  each   factory          (hereinafter  referred to as the ’employer’)  shall          within  three months of the date of publication  of          this  notification, amend the constitution  of  the          Provident Fund maintained in respect of the factory          in regard to the following matters namely:                (a) The Provident Fund shall vest in a  Board                of  Trustees  and  there  shall  be  a  valid                instrument   in  writing   which   adequately                safeguards the interests of the employees and                such  instruments  shall be  duly  registered                under  Section  5 of the Indian  Trusts  Act,                1882;                (b) the Board of Trustees shall consist of an                equal   number  of  representatives  of   the                employees and the employer and all  questions                before  the  Board  shall  be  decided  by  a                majority of votes;            xx              xx                  xx           10.  The employer shall accept the past  provident           fund  accumulations  or an exempted fund  and  who           obtains   employment  in  his  factory.  Such   an           employee shall immediately                                                        956           be admitted as a member of the factory’s Provident           Fund. His accumulations which shall be transferred           within  3 months of his joining the factory  shall           be credited to his account.           xx                    xx                     xx           15.  Exemption  granted by  this  notification  is

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         liable  to be withdrawn by the  Central  Provident           Fund  Commissioner  for  breach  of  any  of   the           aforesaid  conditions or for any other  sufficient           cause which may be considered appropriate. As  per condition No. I the exempted factory should  have  a provident  fund  scheme  in force the rules  of  which  with respect  to  the  rates of contribution shall  not  be  less favourable  than those specified in Section 6. This part  of the   condition  is  in  conformity  with  the   requirement under Section 17(1). The condition proceeds to lay down that these  rules shall be followed in all respects. There is  no dispute  that as per the rules governing the provident  fund scheme  of  the  exempted  establishment  in  question,  the contributions have to be made regularly and condition No.  I lays  down  that  these  rules should  be  followed  in  all respects. The default in making the contribution amounts  to contravention  of the rules and consequently  the  condition No.  1,  subject  to which the  exemption  was  granted,  is clearly  violated.  That  there  was  a  violation  of  this condition  is  also made clear by the notice issued  by  the Regional   Provident  Fund  Commissioner  on  15.9.75.   The relevant portion of the notice reads thus:           "And thus it has violated the conditions governing          grant  of exemption for contravention of which  the          offenders  are liable for the cancellation  of  the          exemption   granted   under  Section  17   of   the          Employees’ Provident Fund Act, 1952." We  are  therefore  satisfied that some  of  the  conditions subject  to  which  the  exemption  was  granted  have  been violated. So this part of Section 14(2A) is satisfied.  Now we shall see whether the cancellation under Section 17(4) is a penalty provided by or under the Act.      In the common parlance the word ’penalty’ is understood to  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 punishment such as fine or forfeiture for not fulfilling a contract. But                                                        957 in gathering the meaning of this word, the context in  which this  is used is significant. In the Act, as already  noted, Section  14  deals  with penalties  and  enumerates  various contraventions or non-compliances which are punishable  with imprisonment.  Every contravention mentioned in each of  the sub-sections   is  punishable  with  imprisonment  and   for offences  covered  by  Sections 14(1A),  14(1B)  and  14(2A) minimum imprisonment is also made compulsory. The imposition of fine also is prescribed. The penalties mentioned in  this connection  would  indicate that the  Legislature  envisaged that  a  penalty  should necessarily  mean  imprisonment  or atleast  imposition of fine. We find from the  reports  that the  National  Commission of Labour having found  that  tile working of the Employees’ Provident Fund and Family  Pension Fund Act, 1952 are not effective and that in order to cheque the  growth of arrears penalties for defaults in payment  of provident  fund dues should be made more stringent  and  the default  should  be  made  cognizable.  Accordingly  it  was proposed  to amend the Act so as to render penal  provisions more stringent and to make defaults cognizable offences  and provisions  were  also made for compulsory  imprisonment  in case of non-payment of contributions and administrative  and inspection charges. The provisions of the Act thereafter are suitably  amended. We must bear this object and  reasons  in mind  in  examining  whether  a  mere  cancellation  of  the exemption  granted  under Section 17(4) would  amount  to  a penalty.   No  doubt  under  Section  14(2A)  one   of   the

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requirements  is  that  "there should be  no  other  penalty elsewhere   provided   by  or  under  the   Act   for   such contravention  or non-compliance," but we are not  persuaded to  hold that the mere cancellation of an exemption  amounts to  a  penalty  particularly expected  to  be  stringent  as contemplated under Section 14. However, we shall proceed  to consider  some of the submissions made on this  aspect.  The learned counsel referred to certain standard books on  words and  phrases.  In Butterworths’ Words and  Phrases,  legally defined  Third  Edition  page 343 the meaning  of  the  word ’Penalty’ is given as that the word penalty’ is large enough to mean, is intended to mean, and does mean, any  punishment whether by imprisonment or otherwise. Blackburn,J. in R.  v. Smith, [ 1862] Le & Ca 131 at 138, observed as under:           "I  consider that the word "penalty" falls  to  be           read  in a wide popular sense, . . . and I  select           two  definitions adequately conveying that  sense.           The  late Mr. Roberton Christie The  Encyclopedia,           Vol. I 1, p 204) said:"Penalty in the broad  sense           may  be  defined  as any suffering  in  person  or           property  by  way of  forfeiture,  deprivation  or           disability,  imposed  as a punishment  by  law  or           judicial                                                        958           authority  in respect of ... an act prohibited  by           statute."  The Oxford Dictionary echoes  the  same           wide   conception   by  referring  to   "a   loss,           disability or disadvantage of some kind ...  fixed           by law for some offence. The  meaning of the word ’penalty’ as given in  the  Collins English Dictionary, is as under:           "Penalty: 1. a legal or official punishment,  such           as  a term of imprisonment. 2. some other form  of           punishment,  such  as a fine or  forfeit  for  not           fulfilling  a  contract. 3.  loss,  suffering,  or           other  unfortunate  result of  one’s  own  action,           error,  etc.  4.  Sport,  games  etc.  a  handicap           awarded against a player or team for illegal play,           such as a free shot at goal by the opposing  team,           loss of points, etc. " In  addition,  the  learned  counsel  also  relied  on  some decisions  of foreign courts where the meaning of  the  word ’penalty’ was considered. In People ex rel Risso v. Randall, 58 N.Y. 2d 265, 268 Misc.1057, it was held that:           "A "penalty" may refer to both criminal and  civil           liability,  being  denied  as  penal  retribution,           punishment for crime of offense, the suffering  in           person, rights or property which is annexed by law           or  judicial decision to commission of a crime  or           public offense. " In  City of Fort Wayne v. Bishop, 92 N.E. 2d 544,  547,  228 Ind. 304, it was observed as under:           "The  term  "penalty"  embraces  all  consequences           visited  by  law  on heads of  those  who  violate           police  regulations and extends to  all  penalties           whether exigible by state in interest of community           or by private persons in their own interest,  even           when statute is remedial as well as penal." In  City  of Cincinnativ. Wright, 67N.E.2d  358,361,77  Ohio App.261,it was noted that:           "The word "penalty" is not confined to  punishment           or  crime;  it  has a broader meaning  in  law  of           contracts; it is used as contradistinguished  from           liquidated  damages. It is also used  to  indicate           the sum to be forfeited on breach of a

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                                                      959           bond.  And  in common parlance  it  expresses  any           disadvantage resulting from an act. The  learned counsel relying on the above meanings given  to the  word ’penalty’ submitted that a cancellation  in  other words a forfeiture of the right given amounts to punishment. It is also his submission that this is a penalty provided by or  under  the  Act  inasmuch  as  such  a  cancellation  is contemplated  under Section 17(4) and that the word  "under" cannot  but  be  understood  to  mean  that  it  covers  the cancellation  of the exemption also provided  under  Section 17(4). In this context he relied on the meaning of the  word "under" as given in Butterworths’ Words and Phrases, legally defined. Third edition page 345:, which reads thus:           "In  one  sense every act of a body which  is  the           creature of statute may be said to be done "under"           or by virtue of the statute creating it." The author has extracted the observations made by O’  Bryan, J.  in R. D v. Clyne, ex p Harrap ( 194 1) VLR 200 at 20  1, as under:           "In  another sense the acts of such a body may  be           said  to  be  done .under" or by  virtue  of  some           provision  granting a general jurisdiction to  act           in  relation  to  a variety of  matters.  But  the           expression   is  also  quite   commonly  used   in           relation  to  a particular act, when  the  general           jurisdiction  to act is assumed, to designate  the           more  particular power to do that particular  act.           It  is rash to attempt to substitute  a  different           expression for the more simple and usual one used,           but  in  this connection "under" is  perhaps  more           aptly  translated by the expression "pursuant  to"           than by the phrase "by virtue of." It is necessary           to  have  regard to the context  to  determine  in           which     sense     the     word     is     used."                                         (emphasis supplied) It  therefore cannot be gainsaid that the context  in  which these words are used is significant. At this juncture we may also  note that the scheme or rules framed by a  company  in respect of the provident fund of the employees are meant  to be  duly complied with. The exemption under- Section  17  is incorporated in the Act for getting better benefits for  the employees  and the same is granted with a view  to  avoiding duplication  that  is  to say for framing a  scheme  by  the appropriate  Government  on  the  lines  as  framed  by  the establishment itself and                                                        960 such  an exemption is meant to ensure to the  employees  the continuance of the benefits and the purpose of the exemption is  only to ensure such a scheme better than the  one  under Section   6  of  the  Act.  It  must  also  be  noted   that notwithstanding  the exemption granted under Section  17  of the  Act the appropriate Government does not lose  its  hold over  the scheme framed by the establishment and  there  are built-in  safeguards  in Section 17 itself  to  protect  the interests  of the employees and Section 17(14) is  one  such safeguards.  In Mohmedalli and Others v. Union of India  and another, [1963] Suppl. I SCR 993; it is held that:            "It  would appear from the terms of the  relevant          portion  of s. 17 that the exemption to be  granted          by the appropriate Government is not in the  nature          of completely absolving the establishments from all          liability to provide the facilities contemplated by          the  Act. The exemptions are to be granted  by  the          appropriate  Government only if in its opinion  the

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        exempted  establishment  has  provisions  made  for          provident  fund,  in terms at least equal,  if  not          more  favourable, to its employees. In other  words          the   exemption   is   with   a   view to  avoiding          duplication and permitting the employees  concerned          the  benefit  of  the  preexisting  scheme,   which          presumably has been working satisfactorily, so that          the exemption is not meant to deprive the employees          concerned of the benefit of a provident fund but to          ensure to them the continuance of the benefit which          at  least is not in terms less favourable to  them.          As  the whole scheme of provident fund is  intended          for  the  benefit of employees, s.  17  only  saves          pre  existing schemes of provident fund  pertaining          to particular establishments. "                                         (emphasis  supplied) Having  examined  the  scope  of  Section  14(’2A)  in  this background,  we find it difficult to agree with the  learned counsel that the cancellation of the exemption granted under Section  17(4)  amounts to a penalty under  Act  within  the meaning of Section 14(12A).      We may also note that Section 14(2A) was introduced  in the year 1953 by Act No. 37 of 1953 whereas sub-section 4 of Section 17 was introduced in the year 1963 by the  amendment Act No. 28 of 1963, nearly ten years later. This only  shows that  the cancellation is not meant to be treated as one  of the penalties and the reasonable inference is,  particularly having  regard  to the object underlying the Act,  that  the expression  ’penalty’  in the context in which  it  is  used particu-                                                        961 larly  in Section 14 including Section 14(2A) only  connotes imposition  of  imprisonment or fine.  The  cancellation  as provided under Section 17(4) is only consequential and  also rather  procedural  meant  to be applied  to  the  exemption granted under Section 17( 1) in case of noncompliance of the conditions  subject to which such exemption was  granted.  A close  perusal  of Section 17 and its  various  sub-sections would clearly indicate that it is a self-contained provision dealing with the power to grant exemption and the consequent obligations and the procedural aspects and Section 17(4)  is a  built-in  provision providing for  cancellation  of  such exemption  in case of contravention or noncompliance of  the conditions.  By a cancellation of the exemption  only  the privilege granted is being withdrawn by an executive  order. Suffice it to say that such a cancellation does not penalise the  management  and  consequently does not  result  in  any punishment  that  is  normally  awarded  in  respect  of  an offence.  In  State of Uttar Pradesh through  the  Provident Fund  Inspector,  U.P.  v. Lala Ram Gopal  Gupta  and  three Others,  [1973] Allahabad Law Journal 355 a  Division  Bench considered this very question and held that the cancellation of  exemption in accordance with Section 17(4)(a)  does  not involve  imposition  of  a penalty  within  the  meaning  of Section  14(12A) of the Act. In our view the Division  Bench of  the Allahabad High Court rightly held that  cancellation under  Section  17(4)(a) is not an alternative  penalty  for failure  to comply with the conditions subject to which  the exemption was granted and if the Parliament had contemplated that  the cancellation of the exemption amounted to  penalty within  the meaning of Section 14(2A) it was purposeless  to provide for any similar penalty under Section 14(2A). It  is thus clear that if the contention of the learned counsel  is to  be accepted then Section 14(2A) would become otoise  and redundant.

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    The  learned counsel submitted that these  being  penal provisions   should  be  interpreted  strictly  and  if   so interpreted  the  cancellation of  exemption  under  Section 17(4)  cannot  but be a penalty under the Act.  The  learned author  Justice  G.P.  Singh  in  his  book  Principles   of Statutory Interpretation Fourth Edition 1988, has stated the general  principles  regarding  the  construction  of  penal statutes as follows:           "Clear  language is now needed to create  a  crime           .....  If  there is  a  reasonable  interpretation           which  will  avoid the penalty in  any  particular           case we must adopt that construction and if  there           are two reasonable constructions we must give  the           more lenient one."                                                        962      In  Tolaram  v.  State  of Bombay,  AIR  1954  SC  496. Mahajan, C.J. observed as under:           "If two possible and reasonable constructions  can           be put upon a penal provision, the court must lean           towards   that  construction  which  exempts   the           subject  from  penalty rather than the  one  which           imposes penalty. It is not competent to the  court           to  stretch the meaning of an expression  used  by           the   legislature  in  order  to  carry  out   the           intention of the legislature. " The  learned author Justice G.P. Singh after extracting  the principles laid down by the Supreme Court as well as by  the English  courts  summed up the principles in  the  following manner:           "The  content of the rule and its limits,  in  the           sense  now  understood, may be summed  up  in  the           following propositions:           (1)  If  the  prohibitory  words  in  their  known           signification cover only some class of persons  or           some well-defined activity, their import cannot be           extended to cover other persons or other  activity           on  considerations  of  policy or  object  of  the           statute.           (2)  If  the  prohibitory  words  are   reasonably           capable  of  having  a wider as  also  a  narrower           meaning and if there is no clear indication in the           statute or in its policy or object that the  words           were used in the wider sense, they would be  given           the narrower meaning.           (3) When the prohibitory words are equally open to           two constructions, one of which covers the subject           and   the   other  does  not,   the   benefit   of           construction will be given to the subject.           (4)  If  the  prohibitory  words  in  their  known           signification bear a wider meaning which also fits           in  with the object or policy of the statute,  the           words  will receive that wider meaning  and  their           import  will  not be restricted even  if  in  some           other context they can bear a narrower meaning.           (5)  If  the literal reading  of  the  prohibitory           words produces                                                        963           an  unintelligible or non-sensual result. but  the           statute  read  as a whole gives  out  its  meaning           clearly,  effect will be given to that meaning  by           curing a mere defect in phraseology.          Relying  on the aforesaid principles governing  the          construction   of   the  penal  statute   Shri   P.          Chidambram,  learned  counsel  for  the  appellants          submitted that the provisions of Section 14(2A) and

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        Section 17(4) should reasonably be construed and if          so construed Section 14(2A) becomes inapplicable to          the facts of the case on hand. 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 within the plain meaning of  the  words          used  but  it must also be borne in 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. In our view taking          into  consideration the object underlying  the  Act          and  on  reading  Sections 14 and 17  in  full,  it          becomes  clear that cancellation of  the  exemption          granted  does  not amount to a penalty  within  the          meaning  of Section 14(2A). As already noted  these          provisions  which form part of the Act, which is  a          welfare   legislation  are  meant  to  ensure   the          employees  the continuance of the benefits  of  the          provident fund. They should be interpreted in  such          a  way  so that the purpose of the  legislation  is          allowed to be achieved (vide M/s International  Ore          and    Fertilizers    (India)    Pvt.    Ltd.    v.          Employees’State Insurance Corporation, AIR 1988  SC          79. In Seaford Court Estates Ltd. v. Asher, [ 19491          2 All E R 155, Lord Denning, L.J. observed:           "The  English  language is not  an  instrument  of          mathematical  precision.  Our literature  would  be          much poorer if it were. This is where the draftsmen          of  Acts  of Parliament have  often  been  unfairly          criticised.  A  judge,  believing  himself  to   be          fettered by the supposed rule that he must look  to          the  language  and nothing else, laments  that  the          draftsmen  have not provided for this or  that,  or          have  been  guilty of some or other  ambiguity.  It          would certainly save the judges trouble if the Acts          of  Parliament were drafted with divine  prescience          and  perfect clarity. In the absence of it, when  a          defect  appears,  a Judge cannot  simply  fold  his          hands and blame the draftsman. He must set to  work          on  the constructive task of finding the  intention          of  Parliament, and he must do this not  only  from          the  language  of  the statute,  but  also  from  a          consideration  of the social conditions which  gave          rise to it and of the mischief which it was  passed          to remedy, and then he must supplement the  written          word so as to give ’force                                                        964           and life’ to the intention of legislature. A Judge          should ask himself the question how, if the  makers          of the Act had themselves come across this ruck  in          the texture of it, they would have straightened  it          out? He must then do so as they would have done.  A          judge must not alter the material of which the  Act          is  woven,  but  he can and  should  iron  out  the          creases.                                         (emphasis supplied) Therefore in a case of this nature, a purposive approach  is necessary,  However, in our view the interpretation  of  the word  ’penalty’ used in Section 14(2A) does not present  any difficulty  and cancellation is not a  punishment  amounting to penalty within the meaning of this Section.      Shri P. Chidambram, however, submitted that unless  the          context  otherwise  requires, such a  purposive  or          liberal  approach  need  not  be  resorted  to.  He          invited our attention to the opening words  "unless

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        the   context  otherwise  requires"  occurring   in          Section  2 which contains  definitions. We  may  at          this  juncture point out that these words  strictly          apply  to  definitions and  while  considering  the          scope of Section 14(2A) we have proceeded  adhering          to  the language of the Section. However, we  shall          consider  the  effect  of these  opening  words  in          Section 2A, at a later stage while considering  the          submissions   of   Shri  Dholakia   regarding   the          applicability of Section 14(1A).      Shri   P.   Chidambaram,  learned   counsel   for   the appellants,   however,   contended  that  the   failure   to contribute  to  the  fund  under the  1952  Scheme  only  is punishable as it amounts to "contravention" and that in  the instant case the complaint is that the management failed  to contribute  to  the  fund maintained  by  the  establishment itself  and  such a failure is not punishable and  the  word "contribution"  must be construed strictly as defined  under Section  2  and  not  otherwise  as  the  context  does  not otherwise  require. Similar words occur in Section 2 of  the Companies  Act and in S. K. Gupta and Another v. K. P.  Jain and Another, [1979] 3 SCC 54 wherein it is held as under:               "Where in a definition section of a statute  a          word  is defined to mean a certain thing,  wherever          that  word is used in that statute, it  shall  mean          what  is  stated  in  the  definitions  unless  the          context   otherwise   requires.   But   where   the          definition is an inclusive definition, the word not          only bears its ordinary, popular and natural  sense          whenever that would be applicable but it also bears          its extended statutory meaning.                                                        965           At  any rate, such expansive definition should  be           so  construed  as not cutting  down  the  enacting           provisions   of  an  Act  unless  the  phrase   is           absolutely clear in having opposite effect. " In  State Bank of India etc. v. Yogendera  Kumar  Srivastava and Others etc., [1987] 3 SCC 10 it is observed:           "Repugnancy  of  the definition of  any  term  may           arise only if such definition does not agree  with           the subject or context of a particular  provision.           But,  surely, any action not in  conformity’  with           the  provision of the definition clause  will  not           render  the definition of a term repugnant to  the           subject or context of any provision of the statute           containing the term. Relying on the above, passages, the learned counsel for  the appellants  further submitted that the context in which  the word  ’penalty’ is used would show that Section 14(2A)  does not necessarily require that there should be a punishment of either  imprisonment or fine inasmuch as the  "cancellation" also can be a penalty within the meaning of Section  14(2A). At  any  rate  according  to the  learned  counsel  for  the appellants there is an ambiguity and that this being a penal law,  the  provisions  should  be  construed  strictly   and necessarily  the benefit of doubt, if any, should go to  the accused.  In  view of the discussion already made by  us  on this  aspect, this contention does not merit acceptance.  In our view, there is no ambiguity as suggested by the  learned counsel for the appellants. Even assuming so, in view of the object  underlying  the  Act  the  context  does  definitely require a reasonable interpretation of Section 14(2A) so  as to  make  it  applicable  also  to  a  case  of  failure  to contribute to the fund as per the conditions under which the exemption was granted. Like-wise it must also be interpreted

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to  mean  that cancellation does not amount  to  a  penalty. Therefore   the  submission  that  Section  14(2A)  is   not attracted does not merit acceptance.      Shri Dholakia, learned counsel for the respondents,  as already noted, submitted that in addition to Section 14(2A), Section  14(A)  is also  attracted and  the  appellants  are punishable  under that provision for the  contravention  and non-compliance  of Section 6 of the Act. In his  submission, the  words  "fund"  and "scheme" should  be  given  a  wider meaning  and  cannot be restricted merely because  of  their definitions  as  contained in Section 2.  According  to  the learned  counsel,  the  opening words of  Section  2  namely "Unless the context otherwise                                                        966 requires"  give a scope for a wider interpretation and  they cannot  be  narrowly  understood to  mean  only  "fund"  and "scheme" as mentioned therein. As this point has been argued in  support of the applicability of Section 14(1A) we  shall consider  the same from that perspective. Section  2  begins with  the words "In this Act, unless the  context  otherwise requires.".  Section 2(c) defines "contribution" to  mean  a contribution  payable in respect of a member under a  Scheme Section  2(h)  defines  "fund" to mean  the  provident  fund established under a Scheme and Section 2(1) defines "Scheme" to mean the Employees’ Provident -Fund Scheme, framed  under Section  5. Section 5 empowers the Central Government  by  a notification to frame a scheme and such a scheme was  framed in 1952 called the Employees’ Provident Fund Scheme of 1952. Section   6,   as  already  noted,  lays   down   that   the "contribution"  which shall be paid by the employer  to  the "Fund"  shall  be of the percentage  mentioned  therein.  We shall  now  examine  Section  14(1A).  This  provision   was introduced  in the year 1973 and specifies a penalty  laying down that if an employer who contravenes or makes default in complying with the provisions of Section 6 or clause (a)  of sub-section  (3)  of Section 18, shall  be  punishable  with imprisonment mentioned therein. For the purpose of this case we  have  to see whether there is a  contravention  or  non- compliance  with the provisions of Section 6.  According  to Shri  Dholakia the "scheme" should be interpreted  liberally as  to  mean a scheme framed and followed  by  the  employer himself and "fund" in that context should be taken to mean a provident  fund  established  under such  a  scheme  by  the employer  and the "contribution" should consequently mean  a contribution payable by him under such a private scheme  and consequently  if  there  is  a default  in  payment  of  the contribution to such a scheme it amounts to contravention of Section  6 punishable under Section 14(1A). Learned  counsel for the respondents very much relied on the opening words of Section 2 namely "In this Act, unless the context  otherwise requires," and urged that these words can otherwise, than as mentioned in the definitions, also be interpreted keeping in view the object of the Act. He further urged that the duties under the scheme framed under Section 5 i.e. 1952 scheme and the  private  scheme followed by an employer because  of  an exemption  granted are one and the same and that  if  viewed from this angle, the expressions "contribution", "fund"  and "scheme"  can be understood to be wide enough to  carry  the same  meanings  in respect of the private  scheme  also  and consequently  failure  to  contribute to the  fund  under  a private, scheme framed and operated by the employer attracts Section 14(IA).      After a careful consideration we are inclined to  agree with the                                                        967

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learned counsel fOr the respondents. In this context we  may note a passage in Knightsbridge Estates Trust Ltd. v.  Byrne and Others, [1940] 2 All ER 401 which reads thus:           "It  is perhaps worth pointing out that the  words           "unless  the context otherwise requires" which  we           find  in the consolidating Act of 1929 are not  to           be found in the amending Act of 1928. I  attribute           little  weight to this fact, for, in  my  opinion,           some such words are to be implied in all  statutes           where  the expressions which are interpreted by  a           definition clause are used in a number of sections           with meanings  sometimes of a wide, and  sometimes           of  an obviously limited, character. On the  other           hand, I think due weight ought to be attributed to           the  words "otherwise requires" in  the  Companies           Act,  1929,  and  it is  incumbent  on  those  who           contend  that  the definition does  not  apply  to           sect.  74 to show with reasonable  clearness  that           the  context does in fact require a  more  limited           interpretation of the word "debenture" then  Sect.           380 has assigned to it."           In National Buildings Construction Corporation  v.           Pritam  Singh  Gill and Others, [ 1973] 1  SCR  40           this Court observed as under:           "as is usual with most of the definition sections,           with   the  clause,  "unless  there  is   anything           repugnant  in  the  subject  or  context.  "  This           clearly  indicates that it is always a matter  for           argument whether or not this statutory  definition           is  to apply to the word "workman" as used in  the           particular  clause  of  the  Act  which  is  under           consideration,   for   this  word  may   both   be           restricted or expanded by its subject matter.  The           context and the subject matter in connection  with           which  the word "workman" is used are  accordingly           important   factors  having  a  bearing   on   the           question.  The  propriety  or  necessity  of  thus           construing  the word "workman" is obvious  because           all  parts of the Act have to be in  harmony  with           the statutory intent."                                         (emphasis supplied) In  Commissioner of Expenditure-Tax, Gujarat,  Ahmedabad  v. Darshan  Surendra Parekh, [1968] 2 SCR 589 it was  observed as under:           "Undoubtedly the definitions in s. 2 of words  and           expressions  used  in  the Act  apply  unless  the           context otherwise                                                       968          requires, and if the context in s. 4 requires  that          the expression "dependent" should not be given  the          meaning which is assigned thereto by the definition          in  cl.  (g) of s. 2, the          Court  would  be          justified  in discarding that definition. It  is  a          settled rule of interpretation that in arriving  at          the true         meaning which is assigned  thereto          by the definition in  cl. (g) to be viewed isolated          from its context; it must be         viewed in  its          whole context, the title, the preamble and all  the          other  enacting  parts of the statute.  It  follows          there  from that all statutory definitions must  be          read subject to the qualifications expressed in the          definition  clauses  which  create  them,  such  as          "unless the context otherwise requires"; or "unless          a   contrary   intention  appears"   or   "if   not          inconsistent with the context or subject-matter.

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                                     (emphasis supplied) In Bennett Coleman & Co. (P) Ltd. v. Punya Priya Das  Gupta, [1970]I SCR 181 this Court observed thus:           "But  assuming  that there is such a  conflict  as           contended, we do not have to resolve that conflict           for the purposes of the problem before us.           The  definition  of  s.  2  of  the  present   Act           commences  with the words "In this Act unless  the           context otherwise requires" and provides that  the           definitions  of  the various expressions  will  be           those  that  are given there.  Similar  qualifying           expressions are also to be found in the Industrial           Disputes  Act, 1947, the Minimum Wages Act,  1948,           the  C.P. & Berar Industrial  Disputes  Settlement           Act, 1947 and certain other statutes dealing  with           industrial questions. It is, therefore, clear that          the  definitions of "a newspaper employee"  and  "a          working  journalist"  have to be construed  in  the          light  of  and  subject to  the  context  requiring          otherwise." The  above passages throw a flood of light on the  scope  of interpretation of these opening words of Section 2 and it is clear  that  they  must  be examined in  the  light  of  the context, the title, the preamble and all the other  enacting parts  of the statute. Due weight ought to be given  to  the words  "unless the context otherwise requires". 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                                                        969 always be kept in view in construing the context in which  a particular  word  is used. In the Statement  of  Object  and Reasons  of Act No. 40 of 1973 by which Section  14(IA)  was introduced, it is clearly mentioned that National Commission of Labour has recommended that in order to check the  growth of  arrears, penalties for defaults in payment of  provident fund dues should be more stringent and the default should be made cognizable. The concept which prompted the  Legislature to  enact this welfare law should also be borne in  mind  in interpretation  of the provisions. Chagla, C.J.  in  Prakash Cotton  Mill. (P) Ltd. v. State of Bombay, [1957]2  LLJ  490 observed as under:           "no Labour legislation, no special legislation, no          economic, legislation, can be considered by a court          without  applying the principles of social  justice          in  interpreting  the  provisions  of  these  laws.          Social  justice is an objective which  is  embodied          and  enshrined in our Constitution  ..... it  would          indeed be startling for anyone to suggest that  the          court  should shut its eyes to social  justice  and          consider and interpret a law as if our country  had          not   pledged  itself  to  bringing  about   social          justice." In Organo Chemical Industries and Another v. Union of  India and Others, [ 19791 4 SCC 573 it was observed that:             "A   policy-oriented  interpretation.   when   a          welfare   legislation  falls   for   determination,          especially in the context of a developing  country,          is  sanctioned  by principle and precedent  and  is          implicit  in Article 37 of the  Constitution  since          the  judicial  branch is, in a sense, part  of  the          State. So it is reasonable to assign to ’damages’ a          larger, fulfilling meaning. In Kanwar Singh v. Delhi Administration, [1965] 1 SCR 7  it was observed as under:

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         "It  is  the  duty of the court  in  construing  a          statute  to  give effect to the  intention  of  the          legislature.   If,  therefore,  giving  a   literal          meaning   to   a  word  used  by   the   draftsman,          particularly  in a penal statute, would defeat  the          object  of the legislature, which is to suppress  a          mischief, the court can depart from the  dictionary          meaning or even the popular meaning of the word and          instead  give it a meaning which will  advance  the          remedy and suppress the mischief."                                                        970 In  State of  Gujarat  v. Chaturbhuj Maganlal  and  Another, [1976] 3 SCR 1076 it was observed as under:             "It  is well recognised that where the  language          of  a  statutory provision is  susceptible  of  two          interpretations, the one which promotes the  object          of  the provision, comports best with  its  purpose          and preserves its smooth working, should be  chosen          in   preference  to  the  other  which   introduces          inconvenience and uncertainty in the working of the          system.  This rule will apply in full  force  where          the  provision  confers  ample  discretion  on  the          Government  for a specific purpose to enable it  to          bring about an effective result." In Vanguard Fire & Gen. Ins. Co. v. Fraser & Ross, AIR  1960 SC 1971 it was held that "the Court has not only to look  at the  words but also at the context, the collocation and  the object  of such words and interpret the meaning intended  to be conveyed by the use of the words under the circumstances"      We  feel  it  may  not be  necessary  to  multiply  the authorities on this aspect. In this background if we examine the  opening words of Section 2 namely "In this Act,  unless the  context otherwise, requires," then we necessarily  feel that  there  is  much  in  the  context  to  show  that  the restricted meaning in the definitions should not be applied.      So much is about the opening words to Section 2 and it, therefore, follows that the words ’contribution’,  ’Scheme’, ’fund’ occurring in the said section should in the "context" be  otherwise  interpreted as to apply to a  private  scheme also  and  if there is a default in  "contribution"  by  the exempted establishment, the same amounts to contravention of Section 6 punishable under Section 14(1A).      Before  we  conclude  we shall  however  refer  to  one general submission of Sri Chidambaram. He submitted that the fact that Section 17(1A) was introduced in 1988  prescribing a  penalty in respect of contraventions  or  non-compliances committed  by  an exempted establishment, would go  to  show that Sections 14(1a) and 14(2A) were not intended to be made applicable   to   an   exempted   establishment   and   that cancellation  of the exemption under Section 17(4)  was  the only  prescribed penalty. He also invited our  attention  to the Statement of Objects and Reasons of Amendment Act No. 33 of  1988. We see no force in this submission. The mere  fact that Section 17(1A) was intro-                                                        971 duced  in  the  year 1988 does not necessarily  lead  to  an inference that Sections 14(IA) and 14(2A) were not  intended to  be  made  applicable to an  exempted  establishment.  As stated  in  the foregoing paragraphs the  object  underlying every  amendment  was mainly intended to  render  the  penal provisions  more stringent in order to check the  growth  of arrears  and  to  punish the  defaulters.  Likewise  in  the Amendment  Act No. 33 of 1988 also it was intended  to  make the existing penal provisions more stringent. This Amendment Act  was  passed  on the  recommendations  of  a  high-level

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committee  set  up to review the working  of  the  employees provident fund organisation and to suggest improvements. One of  the  recommendations  was to  make  the  existing  penal provisions  more stringent and also make the existing  legal and   penal   provisions   as   applicable   to   unexempted establishments    being   made   applicable   to    exempted establishments  so as to check the defaults on  their  part. The  learned counsel for the appellants very much relied  on this  part of Objects and Reasons and submitted that  it  is only by the introduction of Section 17(1A) that the exempted establishments  also are brought within the purview  of  the penal   provisions   which  hitherto  were   applicable   to unexempted establishments, and therefore Sections 14(1a) and 14(2A)    were    hitherto    inapplicable    to    exempted establishments. We are unable to agree that this part of the Statement  of Objects and Reasons would necessarily lead  to such  an  inference. As already discussed many  aspects  are common  to  both  the types of provident  fund.  So  far  as unexempted  establishments are concerned there  are  several other  penal provisions like Sections 14(1), 14(2) and  14AA and  also  in 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 provisions earlier  applicable  to  exempted establishments. Section 17(1A) is in the following terms:           "  17(1-A) Where an exemption has been granted  to           an  establishment under clause (a) of  sub-section           (1),-           (a) the provisions of Sections 6, 7-A, 8 and  14-B           shall, so far as may be, apply to the employer  of           the  exempted  establishment in addition  to  such           other  conditions  as  may  be  specified  in  the           notification  granting such exemption,  and  where           such  employer  contravenes, or makes  default  in           complying  with  any  of the  said  provisions  or           conditions or                                                        972           any  other  provision  of this Act,  he  shall  be           punishable  under  Section  14  as  if  the   said           establishment had not been exempted under the said           clause (a);           (b)  the  employer  shall  establish  a  Board  of           Trustees  for the administration of the  provident           fund  consisting of such number of members as  may           be specified in the Scheme;           (c) the terms and conditions of service of members           of  the Board of Trustees shall be such as may  be           specified in the Scheme;           (d) the Board of Trustees constituted under clause           (b)shall-           (i)   maintain  detailed  accounts  to  show   the           contributions   credited,  withdrawals  made   and           interest accrued in respect of each employee;           (ii) submit such returns to the Regional Provident           Fund  Commissioner  or any other  officer  as  the           Central Government may direct from time to time;           (iii)   invest  the  provident  fund   moneys   in          accordance  with  the  directions  issued  by   the          Central Government from time to time;           (iv) transfer, where necessary, the provident fund           account of any employee; and

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         (v) perform such other duties as may be  specified           in the Scheme. A  perusal of this Section would only go to show  that  some more  provisions, legal and penal, are also made  applicable to the exempted establishments with a view to make the penal provisions more stringent with a view to check the growth of arrears.  Therefore we are unable to agree with the  learned counsel that Sections 14(IA) and 14(2A) are inapplicable  to exempted establishments. From the above discussion, it emerges that atleast  Sections 14(IA) and 14(2A) are attracted to the facts in the  present case and therefore it cannot be said that there is no  prima facie case and conse-                                                        973 quently the accused cannot claim any acquittal, even  before the  conclusion  of  the trial under  Chapter  XX  Cr-  P.C. dealing  with  trial of summons cases. Other  Sections  like 14(2),  14A(l) and 14A(2) and paragraph 76 of the  Employees Provident  Fund Scheme 1952 will not apply to the  facts  of the present case. Therefore the trial court may proceed with the trial for the offences punishable under Sections  14(IA) and 14(2A) against the appellants and dispose of the  matter in  accordance  with law. Subject to the  above  directions, these appeals  are disposed of. R.P.                                    Appeals disposed of                                                        974