Absconding
Anand Thakkar
(Querist) 19 February 2015
This query is : Resolved
HELLO EVERYBODY AND GOOD AFTERNOON,,
I am practicing as an advocate at Gujarat High Court since last two years. In a Regular bail matter i need some help on some serious topics. As per prosecution case My client was the Managing director of a limited company and company was failed to deposit the amount of PF, ESIC, TDS and PROFESSIONAL TAX which it deducted from the salary of the employees and registered an fir u/s 409,418,201,114 on 04/09/2013.
Actually as the company was facing some critical financial problems it has come to collapsed and my client has left the country due to fear of personal assault before the 70 days ago of lodgement of compalint. and then after he was caught from the liberian country after approxx 1 year of incident. Now, my question is that as he left the country there was no complaint against him and company. Then is he called "ABSCONDER" ? and alleged by prosecution that a managing director is an agent for company so he can be punished u/s 409 of IPC. So, kindly guide me on particular questions requested below.?
(1) Is my client called absconder ? and if yes then kindly provide judgments of regular bail though person is absconder.
(2) Is a managing director of company is agent of company ?
(3) Is a managing director is personally liable for the dues of company?
Kindly provide judgments if available.
Thanks.
T. Kalaiselvan, Advocate
(Expert) 21 February 2015
Yes is the answer for all your questions. For judgements you have to do your own home work to locate one in your favor.
Guest
(Expert) 21 February 2015
The answer to your questions is affirmative. No judgment can help save your client for defaults of his company.
Anand Thakkar
(Querist) 23 February 2015
I hertily thanks to all the experts for their reply but as Hon'ble Supreme Court held in the "Employees State Insurance ... vs S.K. Aggarwal And Ors on 31 July, 1998" that managing director can not be liable for the amount of PF and ESIC deductions from their salary because it is company who is the principal employer not the director. This view of appex court is also followed in many other judgments of another high courts in bail and quashing matters. Now i am seeking for any latest judgment on this subject as well as any judgment on specifically absconder and on the point that is a managing director considered as the agent of the company? Kindly help further if any of you experts is having judgments on these particular points. Thanks again for your kind co-operation.
Guest
(Expert) 23 February 2015
If you think so, in your views, was there any need of absconding for the director of the company? Also, in your views, who should have been made liable for non-deposit of the amount of PF and ESIC deductions?
Anand Thakkar
(Querist) 24 February 2015
Respected PS Dhingra sir,
Absolutely his act of absconding to foreign at the time of incident directly point out that he must be the person who was responsible for all these things..
but while the incident took place, due to financial crisis company could not pay the salaries of the employees since last 6 moths and with the grievance some the employees had given life threat to my client so due to fear of personal assault as well as due to fear of failure in complying with the responsibilities towards salaries he had to left the country but at the time no complaint was registered against him and no proceedings were pending so how he can be said absconder ? and in many judgments Hon'ble supreme court has held that the person being a managing director in his personal capacity can not be treated as the principal employer and thats why he can not be held liable for the statutory dues of the company..
Thanking you again sir..
Guest
(Expert) 24 February 2015
Dear Shri Anand,
Here is the difference in basic facts (with background of the case) and the academic question of general type, as you put.
In fact, as an advocate, when you thought to get some help from the members here, you could well have provided background of the case and the circumstances leading to the event in toto. In fact, the present case seems to be of the nature of secondary issue arising out of the main issue of non payment of salaries, as statutory deductions become due only on drawal of salaries.
I hope you would like to appreciate that no definite opinion can be possible to be made if the query is raised without mention of the background history and facts of the case.
I can understand that due to inability to pay the salaries of the employees, the company would have shown liability by mere drawal of salaries by duly showing deductions of statutory nature. But, it would have been prudent for the company to deposit the statutory deductions with the EPFO, ESIC, and Tax departments to be on the safe side, which could have been minimal as of certain percntages, as compared to the total of the due salaries of the employees.
If any default is made by the company only the management executives of the company on behalf of the company are made liable and not the company, which is an artificial person, as company itself cannot do anything, except through the Board/excecutives of the company.
If you think a person being a managing director in his personal capacity can not be treated as the principal employer, that can be in certain exceptional circumstances depending upon the nature of specific transaction, but not as a general rule to be applied anywhere and everywhere. For example, the EPF and Misc. Provisions Act, defines the “employer” as:
"(i) in relation to an establishment which is a factory, the owner or occupier of the factory, in cluding 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 lause f of sub-section 1 of section 7 of the Factories Act, 1948 (63 of 1948), the person so named;" and
"(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 managing director or managing agent, such manager, managing director or managing agent."
You can find similar types of definitions in other acts also.
So, replies to your query were certainly in accordance with the spirit of the query raised by you.
In the instant case, you can hold the Manager or the Drawing & Disbursing Officer, who was responsible for the drawal of the salaries of the employees for and on behalf of the company.
SO FAR AS THE REASONS QUOTED BY YOU about bad financial conditions of the company and non-payment of salaries, both will not have any relevance in the court case, as in no case the company can seek immunity on default on such type of the pleas.
Anand Thakkar
(Querist) 01 March 2015
Thanks for your further reply.. I think I need study and research further on it..!!
