Can Directors of a Company claim relief from liability under Section 633 of the Companies Act for default in payment of Provident Fund dues?

Section 633 of the Companies Act, inter alia states that;

“If in any proceeding for negligence, default, breach of duty, misfeasance or breach of trust against an officer of a company, it appears to the Court hearing the case that he is or may be liable in respect of the negligence, default, breach of duty, misfeasance or breach of trust, but that he has acted honestly and reasonably, and that having regard to all the circumstances of the case, including those connected with his appointment, he ought fairly to be excused, the Court may relieve him, either wholly or partly, from his liability on such terms as it may think fit…”

In Rabindra Chamaria and Others V/s The Registrar of Companies, West Bengal and Others, 1991, a Company was facing lockouts and strikes as a result of which it defaulted in payment of its Provident Fund dues. As per relevant provisions of labour laws , the directors of the Company moved a petition under Section 633 of the Companies Act, 1956 praying for being relieved of liability for delayed as well as non-payment of the provident fund dues. The Hon’ble Calcutta High Court, Division Bench held that as per Indian employment law, Section 633 of the Companies Act had no application in respect of any liability under any other Act and therefore the directors could not be relieved of their Provident Fund liabilities thereunder. The directors of the company then appealed against this decision before the Hon’ble Supreme Court which upheld the decision of the Division Bench of the Calcutta High Court stating that the expression, ‘any proceeding’ in Section 633 cannot be read out of context and treated in isolation, it should be construed in the light of the penal provisions or else the penal clauses under various other laws would be rendered ineffective by the application of Section 633. The Hon’ble Court then went on to hold that since the present case related to the default in payment of Provident Fund dues committed by a Company, it was duly covered under Section 14-A (1) and (2) of the Provident Fund Act which recognize offences committed by Companies.

In light of the above, the Hon’ble Supreme Court held that as per Indian employment law, the directors of the Company were therefore not entitled to receive relief under Section 633 of the Companies Act, 1956.

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