KAUSHIK SEN vs STATE OF WEST BENGAL

IN THE HIGH COURT AT CALCUTTA
CRIMINAL REVISIONAL JURISDICTION
APPELLATE SIDE

PRESENT:
THE HON’BLE JUSTICE UDAY KUMAR

CRR 2767 OF 2017

SRI KAUSHIK SEN
-VS-
STATE OF WEST BENGAL & ANR.

For the Petitioner : Mr. Arpit Choudhury,
Mr. S.K. Poddar
Mr. M.K. Poddar

For the State : Mr. Ranashis Mukherjee,
Mr. Anindita Mukherjee

For the P.F. Authority : Mr. Shiv Chandra Prasad

Reserved on : 28.08.2026
Pronounced on : 08.09.2026

UDAY KUMAR, J.: –
1. The delicate intersection between statutory social-security compliance
and the invocation of criminal machinery under the penal code brings
forth intricate questions regarding accountability, economic default,
and the discretionary limits of judicial intervention. The present
revisional application under Section 401 read with Section 482 of the
Code of Criminal Procedure, 1973, has been preferred by the petitioner,
Sk. Kaushik Sen, assailing the entire criminal proceeding arising out of
G.R. Case No. 2329 of 2010 corresponding to Titagarh Police Station

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Case No. 240 dated June 2, 2010, under Sections 406 and 409 of the
Indian Penal Code, 1860, including Chargesheet No. 444 dated July 27,
2010, the order of cognizance dated August 10, 2010, and all
consequential proceedings pending before the Court of the Learned
Judicial Magistrate, 3rd Court at Barasat.
2. The factual narrative unfurls from a cinema exhibition enterprise
known as M/s Debasree Cinema, originally established in 1991 at
22/1, Sahid Mangal Pandey Sarani, Barrackpore, by the petitioner’s
father for the commercial exhibition of feature films. Following the
untimely demise of his father on November 9, 1992, the sole
proprietorship devolved upon and was managed by the petitioner, who
endeavoured to run the establishment diligently under adverse
economic realities. However, with the rapid commercial expansion of
modern multiplex cinema complexes and the ubiquitous penetration of
home television across households, single-screen cinema halls
throughout the region suffered a catastrophic collapse in viewership.
M/s Debasree Cinema inevitably succumbed to these insurmountable
financial pressures, forcing the petitioner to permanently shut down the
establishment and formally surrender its cinema license with effect
from November 11, 2014, long after having cleared all outstanding
employee salaries, terminal wages, and statutory dues.
3. The criminal machinery was set into motion upon a letter of complaint
dated June 2, 2010, lodged by one Ratan Bhattacharjee, Enforcement
Officer attached to the Employees' Provident Fund Organisation (EPFO),
Sub-Regional Office, Barrackpore. The core essence of the FIR was that

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during an official inspection conducted on June 02, 2010, it was
detected that the petitioner, as the employer responsible for the conduct
of the establishment's business, had deducted a sum of Rs. 20,128/—
representing the employees' share of provident fund contributions for
the period spanning January 2010 to April 2010—from the wages of the
workmen, but failed to remit the same to the statutory fund within the
strict timeline prescribed under Paragraph 38 of the Employees'
Provident Fund Scheme, 1952, read with Section 6 of the Employees'
Provident Funds and Miscellaneous Provisions Act, 1952. This active
deduction of employees' wages coupled with non-remittance directly
attracted the penal consequences of criminal breach of trust,
punishable under Sections 406 and 409 of the Indian Penal Code,
1860.
4. Crucially, it remains an unassailable and indisputable matter of record
that in June 2010 itself—a month before the investigating agency
finalized its probe and submitted Chargesheet No. 444 on July 27,
2010—the petitioner deposited the entire alleged defaulted amount of
Rs. 20,128/- towards the employees' share of provident fund
contributions via official bank challans. Despite the complete financial
deficit having been made good and the statutory dues fully liquidated,
the investigating agency mechanically proceeded to file the chargesheet,
and the Learned Magistrate mechanically took cognizance under
Sections 406 and 409 IPC on August 10, 2010, completely ignoring the
reality that no pecuniary loss or unpaid statutory liability survived.

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5. Learned counsel for the petitioner anchored the plea for quashing on
the premise that the foundational elements of criminal breach of trust,
specifically dishonest misappropriation under Section 405 IPC and
mens rea , are completely absent from the four corners of the
chargesheet. To sustain a charge of criminal breach of trust, the
prosecution must legally establish that the accused was entrusted with
property or dominion over it, that he dishonestly misappropriated or
converted it to his own use, and that he did so with a culpable mental
state or mens rea . A bare perusal of the FIR, case diary, and
chargesheet reveals a complete and total absence of any material
demonstrating that the petitioner was entrusted with any property in a
manner that attracted criminal misappropriation, or that he converted
the funds for personal use or exaggeration. The temporary delay in
remittance arose purely out of acute business distress, liquidity
crunches, and commercial losses faced by a struggling single-screen
cinema, which cannot be equated with dishonest intent or criminal
conversion.
6. Placing heavy reliance upon paragraph 13 of N. Sridhar v. State of
Telangana [2026 SCC OnLine TS 6154], the petitioner contended that
mere non-payment of statutory dues, unaccompanied by independent
material demonstrating fraudulent intent, does not automatically
constitute an offence under Section 406 IPC. Furthermore, citing
paragraph 53 of Prakash Gupta v. Securities and Exchange Board of
India [(2021) 17 SCC 451], it was argued that where the principal
economic objective of a statute has been satisfied through restitution

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and the continuance of a criminal trial offers a remote prospect of
conviction, the inherent powers under Section 482 CrPC ought to be
invoked to prevent an abuse of the judicial process.
7. This position is further reinforced by an unbroken line of authoritative
judicial pronouncements, including Kartick Chandra Das & Anr. v. State
of West Bengal (2016 SCC OnLine Cal 5627), Air Transport Corporation
& Ors. v. State of West Bengal (2006 SCC OnLine Cal 164), Atelier
Fashion Flash Pvt. Ltd. v. Provident Fund Inspector (2014 SCC OnLine
Del 2853), and Adoni Cotton Mills Ltd. v. Regional Provident Fund
Commissioner [1995 Supp (4) SCC 580], wherein it has been
consistently ruled that where the entire defaulted amount has been
deposited subsequent to the initiation of the case, the primary welfare
object of the statute stands fulfilled, and continuing the prosecution
serves no useful public purpose, consuming judicial time and resulting
in an abuse of the process of court.
8. Conversely, learned counsel for the State and Opposite Party No. 2
fiercely resisted the petition, arguing that the statutory default
crystallized the moment the employer withheld deductions beyond the
statutory 15-day window mandated by the Employees' Provident Fund
Scheme. Relying heavily on paragraphs 7 and 17 of the landmark ruling
in People’s Union for Democratic Rights (PUDR) v. Union of India [AIR
1982 SC 1473], the opposite parties emphasized the sacred, non-
negotiable character of labour welfare legislation, contending that
statutory dues and wages are not private commercial floats to be
manipulated or delayed at an employer's convenience.

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9. The opposite parties maintained that the core legal pillar of the
prosecution's case rests upon the statutory deeming fiction embodied in
Explanation 1 to Section 405 of the Indian Penal Code, which
specifically governs provident fund contributions. The said provision
explicitly dictates that an employer who deducts the employees'
contribution from their wages for credit to a provident fund is legally
deemed to have been entrusted with the amount so deducted, and if
they make a default in payment of the said contribution to the fund in
violation of the law, they shall be deemed to have dishonestly used the
amount in violation of a direction of law. Thus, in a provident fund
prosecution, the State is relieved from establishing entrustment
through general principles, as the Legislature has explicitly codified the
creation of entrustment and deemed dishonest use upon the occurrence
of a default, a principle echoed by the Calcutta High Court in Ajay
Jalan & Ors. v. State of West Bengal (2018 SCC OnLine Cal 1367) .
10. The State further submitted that a subsequent payment does not
retrospectively erase or cure an initial statutory default. Permitting an
employer to retain employee contributions beyond the statutory period
and subsequently escape penal accountability simply by paying up after
detection would dilute the protective shield of social-security legislation
and incentivize employers to treat workers' statutory savings as an
interest-free overdraft facility. This position is fortified by a catena of
binding judicial pronouncements of this Hon’ble Court, including Jai
Kishore Singh v. State of West Bengal ( 2015 SCC OnLine Cal 7118 ),
Tapan Biswas v. State of West Bengal ( 2017 SCC OnLine Cal 11603 ),

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and M/s Innovative Commodities Pvt. Ltd. v. Sri Sankar Chakraborty
(2021 SCC OnLine Cal 3077) , holding that subsequent restitution
cannot automatically wipe out criminal liability or warrant threshold
quashing, serving at best as a mitigating circumstance during
sentencing.
11. The rival contentions advanced by the respective parties give rise to the
following core questions for determination by this Court:
i. Whether the pre-chargesheet deposit and full liquidation of
defaulted Employees' Provident Fund contributions legally
obliterate the essential ingredients of criminal intent, thereby
warranting the compounding or quashing of proceedings under
Sections 406/409 IPC?
ii. Whether social-security infractions of this nature constitute
public wrongs whose gravity precludes the exercise of inherent
quashing powers notwithstanding subsequent restitution?
12. Addressing the first question requires a rigorous dissection of the
foundational facts vis-à-vis the statutory anatomy of criminal breach of
trust. The undisputed record reveals that the petitioner, as the sole
proprietor of M/s Debasree Cinema, deducted a sum of Rs. 20,128/-
from the wages of his employees between January 2010 and April 2010.
The gravamen of the prosecution under Sections 406 and 409 of the
IPC rests on the premise that this retention amounts to a criminal
breach of trust. However, the petitioner deposited the entire sum
through bank challans in June 2010, prior to the filing of the
chargesheet on July 27, 2010.

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13. Learned counsel for the petitioner placed reliance on the ratio in N.
Sridhar (supra) and Prakash Gupta (supra). In N. Sridhar , the Telangana
High Court underscored that mere administrative delay or temporary
non-remittance of statutory dues, unaccompanied by any deliberate
animus of conversion or fraudulent personal use, fails to satisfy the
foundational threshold of mens rea required under Section 406 IPC.
Similarly, the Hon'ble Apex Court in Prakash Gupta articulated the
principle that where the underlying civil or statutory default has been
completely remedied and financial restitution made, the continuation of
criminal proceedings transforms into an oppressive exercise in futility,
particularly when the chances of an ultimate conviction are virtually
non-existent.
14. Per contra, Opposite Party No. 2 anchored its resistance on PUDR v.
Union of India (supra), invoking the sacred constitutional mandate of
labour rights and the absolute inviolability of statutory welfare
payments. The ratio in PUDR establishes that withholding labour dues
or denying rightful emoluments is an affront to human dignity and a
violation of Article 23 of the Constitution. However, the ratio of PUDR
operates in the realm of public-interest enforcement against systemic
labour exploitation, which is distinguishable from the instant facts.
Here, we are dealing with a localized, closed sole-proprietorship where
the principal default amount was fully liquidated within weeks of
discovery and long before the initiation of a formal trial.
15. Under Explanation 1 to Section 405 of the IPC, failure to remit
deductions creates a legal fiction of entrustment and misappropriation.

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Yet, criminal law cannot be divorced from reality. When the economic
objective of the penal statute namely, the recovery of workmen's dues,
stands fully achieved pre-trial, the essential element of a dishonest
continuous conversion evaporates. Applying the ratio of Prakash Gupta
and N. Sridhar to the present case, the pre-chargesheet restitution
neutralizes the element of mens rea . Thus, the finding on the first
question is answered in the affirmative: the complete pre-chargesheet
liquidation of the defaulted sum, coupled with the absence of active
misappropriation, effectively drains the criminal proceeding of its legal
foundation.
16. This second inquiry forces a delicate balancing act between the punitive
deterrence mandated by social-welfare legislation and the remedial
scope of Section 482 of the Code of Criminal Procedure, 1973. The
opposite parties vehemently argued that penal provisions governing
provident funds are designed to protect the vulnerable working class,
and therefore, subsequent compounding or quashing sets a dangerous
precedent that encourages employers to treat criminal law as a mere
debt-collection agency.

17. While this argument holds formidable theoretical weight in cases of
persistent, recalcitrant, or fraudulent defaults, it fails to account for the
unique factual contours of the present litigation. M/s Debasree Cinema
was a legacy enterprise established in 1991 that suffered terminal
commercial decay due to the advent of multiplexes and television,
ultimately forcing its permanent closure and the surrender of its license
in November 2014. The petitioner cleared all terminal dues, gratuity,

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salaries, and provident fund accounts. The alleged default of Rs.
20,128/- occurred during a brief window of financial distress in early
2010 and was voluntarily deposited into the bank months before the
chargesheet was even framed.
18. When evaluating whether such infractions preclude quashing, one must
look to the object of the inherent powers preserved under Section 482
namely, to prevent the abuse of the process of any court and to secure
the ends of justice. If an employer has purged the default, restored the
money to the statutory fund, and the enterprise itself has ceased to
exist, compelling an individual to undergo the ordeal of a criminal trial
serves no public interest, public morality, or deterrent value. It
amounts to persecution rather than prosecution. The gravity of a social-
security infraction is substantially mitigated when restitution is
complete and unconditional prior to the commencement of trial
proceedings.
19. Therefore, the finding on the second question is answered in the
negative: the nature of this infraction does not place it beyond the reach
of the Court's inherent quashing powers. In the specific facts of this
case, where restitution is complete and the enterprise is defunct,
allowing the prosecution to limp forward would be an abuse of the
judicial process.
20. In light of the exhaustive legal analysis, the factual matrix establishing
the pre-chargesheet liquidation of the entire defaulted amount of Rs.
20,128/-, and the application of the salutary principles enunciated in
Prakash Gupta (supra) and N. Sridhar (supra), the continued

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sustenance of the criminal proceeding against the petitioner is
unmerited and constitutes a clear abuse of the process of the Court.
The foundational element of mens rea stands neutralized by prompt
restitution, and the permanent closure of the establishment renders the
prospect of an ultimate conviction entirely illusory.
21. Accordingly, the revisional application being C.R.R. No. 2767 of 2017
stands allowed.

22. The impugned criminal proceeding in G.R. Case No. 2329 of 2010
arising out of Titagarh Police Station Case No. 240 dated June 2, 2010,
under Sections 406 and 409 of the Indian Penal Code, 1860, including
Chargesheet No. 444 dated July 27, 2010, pending before the Court of
the Learned Judicial Magistrate, 3rd Court at Barasat, along with the
consequential order of cognizance dated August 10, 2010, are hereby
quashed.
23. Any interim orders passed earlier stand vacated.
24. There shall be no order as to costs.
25. Let a copy of this judgment and order be communicated forthwith to the
learned Trial Court for necessary information and compliance.

26. Case diary, be returned to the Learned Counsel for the State.
27. Urgent photostat certified copy of this judgment, if applied for, be
supplied to the parties upon compliance with all requisite formalities.

(Uday Kumar, J.)