Shambhaji Pandurang Khot And Anr vs. The State Of Maharashtra

Facts

The applicants, Shambhajirao Pandurang Khot and Sau Surekha Khot, sought anticipatory bail in connection with a criminal case registered for offences under sections 420 and 406 read with 34 of the Indian Penal Code, 1860. The first informant, a Dy. Manager with D.D. Enterprises, alleged that M/s. Narendra Industrial Resources, managed by applicant No. 1 and owned by applicant No. 2, failed to deposit Provident Fund, ESI, and GST contributions totaling Rs. 62,23,314/-. These amounts were paid by D.D. Enterprises for contract employees provided by Narendra Industrial Resources. The applicants allegedly embezzled these funds. The Sessions Court had previously rejected their bail application, finding prima facie material indicating the applicants received and dishonestly withheld these contributions, warranting custodial interrogation. The applicants then approached the High Court.

Held

The Court held that the initiation of prosecution for cheating and criminal breach of trust was legally sustainable. It reasoned that while statutory authorities could initiate action under their respective enactments for the default in depositing Provident Fund, ESI, and GST, this did not preclude the entity that had paid the amounts (D.D. Enterprises) from setting the criminal law in motion when it was alleged that the contributions were dishonestly withheld. The Court noted that the applicants did not seriously controvert the fact of default in payment, despite collecting the amounts. The Court found that custodial interrogation was indispensable to unearth the fraud and recover the defalcated amount. Regarding applicant No. 1, the Court found sufficient allegations that he managed the affairs of Narendra Industrial Resources. Consequently, considering the nature of the allegations and the incontrovertible default in payment despite collection, the Court was not inclined to grant pre-arrest bail.

Key Issues

1. Whether the allegations of cheating and criminal breach of trust are made out against the applicants, considering the default in depositing statutory dues collected from D.D. Enterprises, under Sections 420 and 406 of the Indian Penal Code, 1860? The applicants argued that while there might have been a default in depositing the amounts, this should be handled by the relevant statutory authorities, and no case for cheating or criminal breach of trust is made out. They contended that the first informant had a personal dispute with them. They also argued that applicant No. 1 had no direct concern with Narendra Industrial Resources. The State, through the learned APP, countered by presenting notices issued by the Dy. Commissioner of State Tax under the Goods and Services Tax Act, 2017, and by the Recovery Officer of the ESI Corporation under the E.S.I. Act, 1948, indicating default in payment of service tax cess and ESI contributions, which D.D. Enterprises was directed to pay. The State argued that the entity that parted with the money, D.D. Enterprises, could initiate criminal proceedings if the contribution was dishonestly withheld.