The Central Board Of Trustees vs M/S. Hotel Leelaventure Ltd
2016 Latest Caselaw 1986 Bom

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                IN THE HIGH COURT OF JUDICATURE AT BOMBAY
                                   CIVIL APPELLATE JURISDICTION




                                                                                 
                              WRIT PETITION NO. 10044 OF 2015




                                                         
    The Central Board of Trustees               ...    Petitioner
                Vs.
    M/s. Hotel Leelaventure Ltd.                ...    Respondent
                             .....




                                                        
    Mr. Suresh Kumar for the petitioner.
    Mr. Mr. S.C. Naidu a/w. Mr. T.R. Yadav a/w. Mr. Aniket Poojari i/b.
    C.R. Naidu & Co. for the respondent.
                             ....




                                           
                                   CORAM  :  S.C. GUPTE, J.

                                   DATE      :  28.04.2016.

    ORAL JUDGEMENT:
                             

1. Heard learned counsel for the parties. The subject matter of

challenge in this petition is an order passed by the Provident Fund

Appellate Tribunal. The controversy before the Appellate Tribunal

consisted of calculation of damages that could be levied on the

Respondent-employer for the delay in payment of provident fund dues.

The dues included employees' contributions which were deducted by the

Respondent-employer but not deposited with the provident fund

authorities. The impugned order directed payment of damages under

Section 14-B of the Employees Provident Funds and Miscellaneous

Provisions Act 1952 ("the Act") and simple interest, addition to these

damages under section 7-Q of the act, calculated on the basis of the

payment by the Respondent-employer reflected in the bank certificate.

2. The basis of the challenge by the provident fund

organisation is that Section 14-B of the Act empowers the Central

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Provident Fund Commissioner to recover from the employer an amount

not exceeding the amount of arrears by way of penalty, if a default is

made in payment of any contribution by the employer. It is submitted, in

the first place, that there was no reason for the Appellate Tribunal to

restrict the quantum of damages to 25%. Secondly, it is submitted that

the order of the Regional Provident Fund Commissioner, which was

varied in the appeal by the Appellate Tribunal, correctly required the

calculation of the damages under Section 14-B payable upto

25/09/2008 at the rate of upto 37% in accordance of paragraph 32-A of

the Employees Provident Fund Scheme, 1952, which was applicable as

on the date of 25/09/2008 and thereafter at the rate of upto 25% under

amended paragraph 32-A of the scheme introduced with effect from

26/09/2008.

3. Insofar as damages payable under Section 14-B of the Act

are concerned, there is an authority in the Provident Fund

Commissioner to recover a maximum amount not exceeding the amount

of arrears as and by way of penalty. This is an outer limit of any penalty

that may be charged. The provision of penalty is further circumscribed

by the expression "as may be specified in the scheme", appearing in

Section 14-B. The net result of the two limitations, namely, the upper

limit of 100% of arrears and the specification of the scheme, is that the

amount of damages could only be upto 100% of the amount of arrears

or the damages specified in the scheme, whichever is lower. The

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scheme as it operates today provides for the maximum rate of damages

as 25% of the arrears per annum. Thus, the damages could not exceed

25% of the arrears per annum. The judgment of the Division Bench of

Delhi High Court in the case of Systems and Stamping and Anr. V/s.

Employees Provident Fund, Appellate Tribunal and Ors., 1 accordingly,

awarded damages at the flat rate of 25% per annum. This judgment was

affirmed by the Supreme Court when the matter was carried before it in

a Special Leave Petition. In another case, Delhi High Court in a Full

Bench decision in Roma Henny Security Services Pvt. Ltd. Vs. Central

Board Trustees2 once again awarded a flat rate of 25% based on the

provident fund scheme as amended by the new paragraph 32-A.

4. The next contention urged by the Petitioner's counsel is that

damages ought to be calculated upto 25/09/2008 under paragraph 32-A

of the scheme as it then subsisted (providing for damages @ 37%). With

effect from 26/09/2008 a new paragraph 32-A was introduced in the

scheme (providing for the rate of 25%). Accordingly, it is submitted

that damages should be upto 37% of arrears per annum upto

25/09/2008 and thereafter at the rate of 25% per annum, in both cases

in addition to interest at the rate of 12% per annum under Section 7-Q

of the Act. Even this contention was considered by Delhi High Court in

the two cases noted above. The Division Bench of Delhi High Court in

the case of Systems and Stamping (Supra) held that interest was to be

1 2008-II-LLJ-939 2 2012 (135) FLR 799

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calculated even for the period prior to 25/09/2008 at the flat rate of

25% per annum together with simple interest at the rate of 12% per

annum under section 7-Q (after 01/07/1997) and not damages at the

rate of 37% per annum together with interest at the rate of 12%. The

position was further explained by Delhi High Court in its Full Bench

judgment in the case of Roma Henny Security Services Pvt. Ltd.

(Supra). The Court explained the position thus:

"11. It is not in dispute that if the judgment of M/s.

System and Stamping (supra) is to be followed, the case is covered in favour of the petitioner. However, we find substance in the submission of learned Counsel for the

respondent that in the said judgment the Division Bench entirely rest upon the Office Memorandum dated 29.05.1990 on the basis of which the Bench came to the conclusion that interest element chargeable under section 7-Q of the Act was included in the table prescribing

damages payable under section 14-B of the Act. As we will demonstrate hereinafter, there were various other

subsequent Circulars which were not taken into account. In the first instance, it needs to be pointed out that the Office memorandum referred to by the Division Bench was

dated 29.05.1990. It was issued at the time when section 7-Q was not made effective. Pertinently, this provision was introduced in the Act in the year 1988 but was made effective only from 01.07.1997. Since the provision was not in force as on 29.05.1990, it appears that by that

mechanism which was applied administratively was to include the component of interest while imposing the damages under section 14-B of the Act. However, the position changed after section 7-Q of the Act was in force w.e.f. 01.07.1997. The interest on delayed contribution of provident fund became payable statutorily. While this was so, the aforesaid table continued to operate which has now been modified and replaced by the another table made effective from 26.09.2008 and the rates of damages as per the revised table are as under:-

12. It is clear from the above that w.e.f. 26.09.2008 the damages under section 14-B of the Act are charged on

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the aforesaid basis which would show, for example if the period of default is less than two months, the damages

payable are 5%. However, the table which was governing upto this date and is noted in the judgment of M/s. System and Stamping (supra), the damages for the period of

default of less than two months were 17%. Same is the position in respect of other periods of default when the two tables are kept in juxtaposition it would clearly revealed that the damages are now reduced by 12% at every stage

meaning thereby component of interest under section 7-Q is now removed. The comparison of the aforesaid two would show that upto 26.09.2008 the earlier table continue to govern which included the element of interest

under section 7-Q of the Act. From 26.09.2008 onwards, however the two are segregated. This would clearly bolster

the stand of the petitioner that if the earlier table is applied which was so done, interest payable under section 7-Q of the Act was already included."

5. I am in respectful agreement with the view expressed, and

reasons indicated, by Delhi High Court in the above cases.

6. In that view of the matter, there is no merit in either of the

challenges before this Court. The order of the Appellate Tribunal

requiring that quantum of damages to be restricted to 25% of arrears

per annum with simple interest under Section 7-Q of the Act re-

quantified in accordance with the bank certificate submitted by the

Respondent-employer, cannot be found fault with. The petition is,

accordingly, dismissed. No order as to costs.

(S.C. GUPTE, J.)