Delhi High Court
Up State Road Transport ... vs Regional Provident Fund ... on 24 May, 2013
Author: Vipin Sanghi
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ Date of Decision: 24.05.2013
% W.P.(C) 5648/2010 and C.M. Appln. No. 11103/2010;
% W.P.(C) 5650/2010 and C.M. Appln. No. 11108/2010;
% W.P.(C) 6675/2010 and C.M. Appln. No. 13201/2010;
% W.P.(C) 6676/2010 and C.M. Appln. No. 13202/2010;
% W.P.(C) 875/2011 and C.M. Appln. No. 1841/2011;
% W.P.(C) 876/2011 and C.M. Appln. No. 1843/2011;
% W.P.(C) 877/2011 and C.M. Appln. No. 1845/2011;
% W.P.(C) 8964/2011 and C.M. Appln. Nos.20217/2011 & 2329/2012;
% W.P.(C) 8967/2011 and C.M. Appln. Nos.20223/2011 & 2330/2012;
% W.P.(C) 8968/2011 and C.M. Appln. Nos.20226/2011 & 2536/2012;
% W.P.(C) 8969/2011 and C.M. Appln. No. 20229/2011 & 2331/2012;
% W.P.(C) 8971/2011 and C.M. Appln. No. 2328/2012;
% W.P.(C) 8980/2011 and C.M. Appln. Nos.20240/2011 & 2530/2012;
% W.P.(C) 2529/2012 and C.M. Appln. Nos.5422/2012 & 6944/2012;
% W.P.(C) 2538/2012 and C.M. Appln. Nos.5435-37/2012;
% W.P.(C) 3522/2013 ;
% W.P.(C) 3538/2013; and
% W.P.(C) 3540/2013.
UP STATE ROAD TRANSPORT CORPORATION..... Petitioner
Through: Ms. Garima Prashad, Mr. Shadab
Khan & Ms. Arpan Wadhawan,
Advocates.
versus
REGIONAL PROVIDENT FUND COMMISSIONER..... Respondent
Through: Mr. R.C. Chawla, Advocate in
W.P.(C.) Nos.6675-76/2010.
Mr. Divey Kant, Advocate.
CORAM:
HON'BLE MR. JUSTICE VIPIN SANGHI
W.P.(C.) No. 5648/2010 & other connected matters Page 1 of 24
VIPIN SANGHI, J. (ORAL)
1. The present batch of writ petitions have been preferred by the U.P.
State Road Transport Corporation (UPSRTC) to assail the orders passed by
the Regional Provident Fund Commissioner (RPFC)/ Assistant Provident
Fund Commissioner (APFC) under Section 14-B of the Employees
Provident Fund & Miscellaneous Provisions Act, 1952 (the Act) and the
appellate order passed by the Employees Provident Fund Appellate
Tribunal, New Delhi (the Appellate Tribunal), the details whereof are set out
herein below:
WP (C) UPSRTC NOTICE Date of APFC/ ATA NO. APPELLA AMOUNT OF AMOUNT
No. REGION PERIOD notice RPFC TE DAMAGES OF
ORDER TRIBUNA LEVIED INTEREST
& DATED L U/S.14B LEVIED
U/S.7Q
(CODE) ORDER
DATED
6675 of Agra January 17.09.2004 28.10.2004 998(14)2004 06.07.2010 Rs. 2,70,11,503/- Rs. 38,77,694/-
2010 1993 to
(796) March
2529 of Allahabad December 07.12.2007 13.06.2008 510(14)2008 06.07.2010. Rs.1,46,11,365/- Rs.50,23,741/-
2012 (500) 1970 to *
September
6676 of Bareilly May 1961 31.03.2003 28.08.2009 724(14)2009 07.07.2010 Rs.16,47,093/- Rs.2,77,516/-
2010 (857) to
February
875 of Ghaziabad August 19.05.2003 27.10.2003 861(14)2003 23.06.2010 Rs.11,97,914/- Rs.70,625/-
2011 (503) 1995 to
June 1998
876 of Ghaziabad October 11.07.2008 12.11.2008 919(14)2008 07.07.2010 Rs.7,67,157/- Rs.1,22,932/-
2011 (3902) 1996 to
March
877 of Ghaziabad November 12.02.2002 26.02.2003 312(14) 2003 23.06.2010 Rs.58,75,201/- Rs.17,20,968/-
2011 (5525) 1996 to
August
3522 of Ghaziabad December 19.05.2003 31.07.2003 738(14)2003 23.06.2010 Rs.16,94,622/- Rs.5,85,432/-
2013 1997 to
(3902) August
8964 of Gorakhpur March 21.09.2007 28.02.2008 310(14)2008 07.07.2010 Rs.93,41,477/- Rs.31,14,236/-
2011 (842) 2000 to (for March
February 2000 to March
2006 2008)
8967 of Gorakhpur March 13.08.2007 29.01.2008 186(14)2008 06.07.2010 Rs.1953134/- Rs.6,93,349/-
2011 (846) 2000 to
February
8968 of Gorakhpur March 22.08.2007 25.03.2008 289(14)2008 06.07.2010. Rs.10,29,475/- Rs.3,42,562/-
2011 (849) 2000 to
February
8969 of Gorakhpur March 13.08.2007 25.03.2008 288(14)2008 06.07.2010. Rs.5,87,297/- Rs.2,23,684/-
2011 (1306) 2001 to
February
8980 of Gorakhpur March 24.09.2007 31.03.2008 319(14)2008 07.07.2010. Rs.33,18,047/- Rs.12,07,710/-
2011 (848) 2000 to
March
2538 of Gorakhpur March 24.09.2007 24.12.2008 18(14)2009 07.07.2010 Rs.17,95,372/- Rs.6,37,504/-
2012 (850) 2000 to
September
5648 of Moradabad October 09.05.2003 28.08.2009 713(14)2009 07.07.2010 Rs.1,04,90,614/- Rs.32,80,890/-
2010 (856) 1968 to
August
5650 of Moradabad November 22.07.2008 16.07.2009 518(14)2009 07.07.2010 Rs. 1,25,34,054/- Rs. 43,29,835/-
2010 (854) 1996 to
February
8971 of Moradabad July 2000 02.05.2002 29.08.2002 522(14)2002 12.07.2010. U/s 7A Rs.27,92,324/-
2011 to April Rs.2,21,34,198/-
(856) 2002 (up till August
2002)
3540 of Moradabad April 2000 12.02.2002 26.02.2003 310(14)2003 23.06.2010 Rs.13,14,614/- Rs.4,31,425/-
2013 to *
(854) December
3538 of Saharanpur March 06.08.2008 07.12.2007 189(14)2008 23.06.2010 Rs.64,25,816/- Rs.16,78,043/-
2013 1996 to
(736) August
(* as supplied by learned counsel for the petitioner)
2. Since common issues have been raised by the petitioner in these
petitions, they are being dealt with by this common judgment. In respect of
some of the proceedings and orders, certain additional issues are raised, such
as in W.P.(C.) No. 6676/2010, which shall be noted hereinafter and dealt
with.
3. The case of the petitioner is that it is a statutory authority, functioning
directly under the control of the State Government of Uttar Pradesh. It is a
corporation constituted w.e.f. 01.06.1972 under Section 3 of the Road
Transport Corporation Act, 1950. It has succeeded to the assets & liabilities
of the erstwhile U.P. Roadways. The mandate of the petitioner is to provide
efficient, adequate, economical and properly coordinated transport services
to the public in the State of U.P.
4. The petitioner submits that ever since its incorporation, and prior to
that the U.P. Government Roadways have been depositing the provident
fund dues of its employees with the provident fund authorities from time to
time. The respondent sought to issue notices to the petitioner to initiate
proceedings under Section 14-B and 7Q of the Act. The periods for which
the petitioner was alleged to be in default, and the dates on which these
notices have been issued have been detailed hereinabove. The amount of
damages and interest sought to be levied have also been indicated
hereinabove.
5. The submission of learned counsel for the petitioner is that the
petitioner Corporation was running into deep losses ever since its
incorporation. Consequently, there was some unintended delay in deposit of
the Provident Fund dues. However, the dues were deposited, though
belatedly, from time to time. Learned counsel submits that by the year
2000, the losses of the petitioner had inflated substantially and were in the
range of Rs.600-700 Crores. Learned counsel submits that till the year
2002, the respondent authorities did not issue any notice to the petitioner
even under Section 7-A of the Act, let alone notices under Section 14-B and
7Q to levy damages and claim interest. No inspection was carried out, or
inspection report prepared to point out any default on the part of the
petitioner.
6. Learned counsel submits that the orders passed under Section 14-B of
the Act in all these cases are more or less identical. She submits that they
were mechanically passed without providing any reasoning or dealing with
the submissions of the petitioner. She submits that while in some cases the
rates at which the damages have been levied has been disclosed, in other
cases the said rates have not even been disclosed. For instance, in the orders
passed under Section 14-B dated 28.08.2009 (impugned in W.P.(C.)
No.6676/2010), and dated 26.02.2003 (impugned in W.P.(C.) No.877/2011)
the APFC has merely stated the amounts claimed on several accounts
without disclosing the basis for the computation made. Learned counsel
submits that even in respect of the cases where the rates of damages have
been disclosed, a perusal of the same would show that the said rates are even
beyond the rates notified in para 32-A of the Employees Provident Fund
Scheme, 1952 (the Scheme). Section 14B and Para 32-A are relevant and
read as follows:
"14B. Power to recover damages.- Where an employer makes
default in the payment of any contribution to the Fund 2[ , the
Family Pension Fund or the Insurance Fund] or in the transfer
of accumulations required to be transferred by him under sub-
section (2) of section 15 3[ or sub- section (5) of section 17] or
in the payment of any charges payable under any other
provision of this Act or of 4[ any Scheme or Insurance Scheme]
or under any of the conditions specified under section 17, 5[
the Central Provident Fund Commissioner or such other officer
as may be authorised by the Central Government, by
notification in the Official Gazette, in this behalf] may recover
6[ from the employer by way of penalty such damages, not
exceeding the amount of arrears, as may be specified in the
Scheme]: 7[ Provided that before levying and recovering such
damages, the employer shall be given a reasonable opportunity
of being heard]: 8[ Provided further that the Central Board
may reduce or waive the damages levied under this section in
relation to an establishment which is a sick industrial company
and in respect of which a scheme for rehabilitation has been
sanctioned by the Board for Industrial and Financial
Reconstruction established under section 4 of the Sick
Industrial Companies (Special Provisions) Act, 1985 (1 of 1986
), subject to such terms and conditions as may be specified in
the Scheme.]
x x x x x x x x x x
32A. (1) Where an employer makes default in the payment of
any contribution to the fund, or in the transfer of
accumulations required to be transferred by him under sub-
section (2) of section 15 or sub-section (5) of section 17 of the
Act or in the payment of any charges payable under any other
provisions of the Act or Scheme or under any of the conditions
specified under section 17 of the Act, the Central Provident
Fund Commissioner or such officer as may be authorised by
the Central Government, by notification in the Official
Gazette in this behalf, may recover from the employer by way
of penalty, damages at the rates given below:-
Period of default Rate of damages (%
of arrears per annum)
(a) Less than two months Five
(b) Two months and above but less Ten
than four months
(c) Four months and above but less Fifteen
than six months
(d) Six months and above Twenty Five
(2) The damages shall be calculated to the nearest rupee, 50
paise or more to be counted as the nearest higher rupee and
fraction of a rupee less than 50 paise to be ignored."
7. Learned counsel for the petitioner submits that the rates at which
damages have been claimed by the respondent authorities are 17% per
annum (for default of less than two months), 22% per annum (for default of
two months and above but less than four months), 27% per annum (default
of four months and above) and 37% per annum (default of six months and
above). Learned counsel submits that in cases where the rates have not been
specifically set out, it has transpired that the damages have been claimed at
even higher rates. For instance, in the demand raised - which is impugned in
W.P.(C.) No.6676/2010, the rate at which damages have been claimed
amounts to 53% approximately.
8. Learned counsel for the petitioner submits that the said action of the
respondent i.e. of claiming damages at rates even higher than those set out in
para 32A of the Scheme, is in the teeth of the judgment of the Division
Bench of this Court in Systems and Stamping and Another Vs. Employees'
Provident Fund Appellate Tribunal & Others, 2008 (2) LLJ 939. She
submits that the Special Leave Petition preferred by the respondent
department before the Supreme Court from the said judgment was dismissed
on the ground of limitation, as well as on merits. Consequently, the same
has attained finality. She submits that, in fact, the government has
subsequently come out with the notification dated 26.09.2008 issued under
Section 5 read with Section 7(1) and Section 14-B of the Act, thereby
clarifying that the rates at which damages could, at most, be levied under
Section 14-B of the Act are as set out in para 32A aforesaid.
9. It is, therefore, submitted that the levy of damages at rates even higher
than those which could- at most be levied, in any event, cannot be sustained.
10. Learned counsel for the petitioner has next submitted that while
passing the impugned orders under Section 14-B of the Act, the APFC has -
in each of these cases, levied the maximum amount of damages without due
consideration of the explanation sought to be furnished by the petitioner.
The submission is that the exercise of jurisdiction by the APFC under
Section 14B of the Act is a quasi judicial function, and the rates at which the
damages could be levied as contained in the Table in para 32A of the
Scheme, only stipulates the maximum rates at which the damages could be
levied. The Authority concerned was not bound to levy damages at the rates
contained in the table. Even if the petitioner‟s submission for leniency and
levy of lesser damages were to be rejected, the APFC were bound to record
its reasons after due consideration of the facts of each of these cases. Her
submission is that when orders are passed by quasi judicial authorities which
entail serious pecuniary liabilities, there is an inherent obligation that the
authority concerned should pass a reasoned and speaking order and deal
with the submissions that the affected party may advance.
11. The next submission of learned counsel for the petitioner is that a
meeting was held between the officers of the petitioner and the respondent
authorities on 20.05.2002 at the highest level to discuss the provident fund
issues of all regions. It was agreed that the outstanding dues of provident
fund shall be deposited within 36 installments. Learned counsel submits
that it was agreed that the respondent shall not take coercive action against
the petitioner for recovery of the provident fund dues. According to the
petitioner, the respondent had also agreed that they would consider the case
for remission of damages in these circumstances. The petitioner has
submitted that amounts were paid, though not in 36 installments, but
gradually as per availability of funds. Learned counsel for the petitioner
points out that the Meerut region of the respondent organization even passed
an order under Section 14-B of the Act on 19.01.2009, wherein for the
period June, 2000 to August, 2002, no damages were levied on the basis of
the understanding and agreement reached between the parties in the meeting
held on 20.05.2002. Learned counsel submits that the levy of damages is,
therefore, contrary to the mutual understanding.
12. Learned counsel for the petitioner submits that some of the
proceedings are highly belated. The notice under section 14B, which is
subject matter of W.P. (C) No.6676/2010, was issued pertaining to the
periods from 1961 onwards. Learned counsel submits that the petitioner
was set up in the year 1972 and it has no records available with it for the
past period. She also submits that the petitioner is not liable for the dues
outstanding before the year 1972 when the petitioner was set up.
13. Learned counsel for the petitioner has further submitted that in respect
of the Moradabad region, the authorities have issued the notice and raised a
demand in respect of the period July, 2000 to April, 2002 which is a subject
matter of WP(C) No. 8971/2011. The liability under Section 7A as well as
the interest payable under Section 7Q have been determined and the total
amount claimed is Rs. 27,92,324/-. The same region has passed the order
dated 12.10.2009 (assailed in WP(C) No. 5648/2010). The said order has
been passed under Section 14-B and 7Q for the period October, 1968 to
August, 2002. It is submitted that the element of interest computed under
Section 7Q in the foregoing order i.e. dated 29.08.2002 has again been
added in the later order dated 12.10.2009. She submits that the said element
of interest cannot be charged twice over for the same period and this also
shows the non-application of mind on the part of the authorities.
14. Learned counsel for the petitioner, however, clarifies that the demand
raised under Section 7A of the Act, which is a part of the order dated
29.08.2002 (assailed in WP(C) No. 8971/2011), is not under challenge in the
present proceedings.
15. Turning to the impugned order passed by the Appellate Tribunal,
learned counsel for the petitioner submits that the Appellate Tribunal has
mechanically passed the impugned orders by recording facts and
submissions which do not arise in the present case and which were never
advanced before the Tribunal. It is submitted that the impugned orders
passed by the Appellate Tribunal record that the petitioner‟s establishment
became sick and that the petitioner‟s reference was pending before the
BIFR. It is recorded that the petitioner applied for exemption, and claimed
that the initiation of the proceedings case under Section 14B are barred by
limitation. It is also recorded that the petitioner advanced the submission
that after bifurcation of the State of Uttarakhand from the State of Uttar
Pradesh, and consequent bifurcation of the UPSRTC, the Management of
the Corporation in Uttarakhand State is liable to pay, and not the petitioner.
Learned counsel for the petitioner submits that no such arguments could
have been advanced, or were advanced by the petitioner in any of the
appeals. If at all, the last of said arguments was available to the Uttarakhand
Road Transport Corporation, since that Corporation was formed
subsequently, and the formation of the Uttarakhand Road Transport
Corporation could not have had a bearing on the liability of the petitioner, if
any, under the Act. Learned counsel submits that the impugned orders
passed by the Appellate Tribunal have been passed mechanically without
consideration of the real issues raised and submissions advanced by the
petitioner.
16. Learned counsel for the petitioner further submits that there is
inconsistency in the orders passed by the Appellate Tribunal. Attention has
been drawn to the order passed by the same Appellate Tribunal in ATA No.
18(14)2004 on 15.09.2010. In the said case, in respect of the petitioner, the
Appellate Tribunal had observed that the default in deposit of provident fund
dues does not appear to be intentional, and imposition of damages at the
higher rate does not appear to be proper. The Appellate Tribunal remanded
that case to the EPF Authority with a direction to levy damages @ 25%,
inclusive of interest.
17. Counsel for the petitioner in support of her submissions has placed
reliance on the following decisions:
(i) Employees State Insurance Corporation Vs. H.M.T. Ltd. &
Anr. AIR 2008 SC 1322;
(ii) M/s Hindustan Times Limited Vs. Union of India & Others
1998(2) SCC 242.
18. Mr. Chawla, who appears for the respondent authorities in WP(C)
Nos. 6675/2010 and 6676/2010 has advanced his submissions on behalf of
the respondent department. The submission of Mr. Chawla is that the
petitioner is a habitual defaulter. He submits that the petitioner committed
default rampantly in the deposit of provident fund dues from the time of its
incorporation, and, prior to that the U.P. Roadways was equally casual in the
matter of deposit of the provident fund dues. He submits that the result was
that the respondent could not invest the funds that were due to be deposited
in time, resulting in loss of income to the fund. Consequently, it is the
interest of the workers which has suffered. Mr. Chawla submits that with
each notice issued under Section 14-B, the respondent had sent to the
petitioner the detailed computation of damages and interest, by indicating
the periods for which the defaults had occurred. Therefore, to say that the
orders under Section 14-B are non speaking, is not correct. The petitioners
have always been well aware of the basis on which the computations have
been made while raising the demands.
19. Mr. Chawla submits that the petitioner being a government
Corporation is expected to comply with the provisions of the law even more
strictly than others. In support of his submissions, he placed reliance on the
judgment of this Court in M/s Birla Cotton Spinning & Weaving Mills Ltd.
Vs. Union of India & Others ILR (1984) II 60. Mr. Chawla submits that
there is no power vested in the authorities to completely waive of damages
as leviable under Section 14-B of the Act. The prescription of the rates at
which damages may be levied under Section 14-B, as contained in the Table
in para 32A of the Scheme, is to provide a guideline to the authorities
concerned so that there is consistency in the matter of levy of damages, and
there is no scope for arbitrariness in the matter of imposition of damages.
Mr. Chawla has also placed reliance on the following judgments;
(i) Organo Chemical Industries and another Vs. Union of India
and Others, 1979 Lab. I.C. 126;
(ii) Maharashtra State Cooperative Bank Limited Vs. Assistant
Provident Fund Commissioner and Others, (2009) 10 SCC
20. He places reliance on India Tourism Development Corporation Ltd.
Vs. Regional Provident Fund Commissioner (CWP No. 1100/1989),
wherein this Court held that merely because the establishment is a
government corporation is no reason why damages should not be levied in
the event of default in deposit of the provident fund dues by the employer.
21. In other matters, the submissions made by Mr. Chawala have been
adopted by learned counsel for the respondent-Department.
22. Having heard learned counsel for the parties, perused the impugned
orders and considered the several decisions cited before me, I am of the
view that the impugned orders passed under Section 14-B and 7Q as well as
the appellate orders passed by the Appellate Tribunal call for interference, as
they are patently laconic and cannot be sustained. There is merit in the
petitioner‟s submission that the damages imposed in each of these cases is in
excess of even the maximum prescribed damages, as laid down in the table
contained in para 32A of the Scheme. Apart from levying damages at more
than the highest prescribed rates, the respondents have also demanded
interest @ 12% per annum under Section 7Q. Consequently, the demands as
raised by the respondents cannot be sustained on this short ground. It is also
seen that in most of the cases, the rates at which damages have been levied
have also not been explicitly indicated. There are no details/calculations to
decipher as to on what amount, and for what period of delay damages have
been levied. I may note that though learned counsel for the respondent has
submitted that in all cases - along with the notices under Section 14-B, the
detailed calculation was provided to the petitioner, the petitioner has
disputed the said position. There is nothing placed on record in any of these
cases to suggest that the notices issued under Section 14-B were
accompanied by any such calculation. In any event, unless the said
calculation is contained in the orders passed under Section 14-B, it would be
practically impossible for the Appellate Tribunal to effectively deal with the
appeal, in case the employer/establishment approaches the Appellate
Tribunal under Section 7-I of the Act to assail the demand raised under
Section 14-B of the Act. The orders passed by the APFC under section 14B
and 7Q of the Act being original orders, they should be self contained and
reasoned, so that the right of appeal can be properly exercised and the
Appellate Tribunal has the facility to appreciate the submissions of the
parties in the light of the order assailed before it. By passing unreasoned
and cryptic orders, the APFC has also rendered the right of appeal nugatory.
23. The Supreme Court in Employees State Insurance Corporation Ltd.
Vs. HMT Ltd. (supra) was dealing with the aspect of interpretation and
application of Section 85-B of the Employees State Insurance Act (for short,
„the ESI Act‟). The Scheme contained in Section 85B of the ESI Act is pari
materia with the Scheme contained in Section 14-B of the Act. Like under
the Act, so also under the ESI Act, the employer is obliged to regularly
make deposits with the ESIC to insure the workmen. The only difference is
that under the Act, when the employer makes the deposit, the said deposit
has two components, namely, the employees‟ contribution and the
employers contribution, however, the deposit made under the ESI Act is
only the employers contribution. The Supreme Court examined Section 85B
of the ESI Act which, like Section 14-B of the Act uses the expression "may
recover" in respect of damages for default in making payment of the
amounts due under the ESI Act. The Supreme Court cited several earlier
decisions, including those rendered while considering section 14B of the
Act, and concluded that the „imposition‟ of penalty under section 85B of the
ESI Act is not a mechanical exercise to be undertaken by the Authority
concerned. The imposition of penalty at the prescribed rates is not
imperative. Proceedings under section 85B and section 14B of the Act are
quasi judicial proceedings, wherein the authority has to apply its mind to the
facts of the case and the reply to the show cause notice and to pass a
reasoned order after following the principles of natural justice. Several
factors go into the determination of the issue of quantification of penalty,
such as the period of delay, number of defaults, frequency of default,
amount involved etc. In certain situations, the party may be entitled to claim
benefit of irretrievable prejudice. The Supreme Court held that penalty
provision should be construed strictly. Only because a provision has been
made for levy of penalty, the same by itself would not lead to the conclusion
that the penalty must be levied in all situations. When discretionary
jurisdiction is vested in the authority to levy penal damages, the same could
not be construed as imperative. Even where the regulations have been
prescribed, general guidelines and upper limits for imposition of damages, it
could not be said that in no case mitigating circumstances can be taken into
consideration by the adjudicating authority. The authority should indicate
the reasons rejecting the justification for delay. The authority should also
indicate as to why imposition of damages at the rates specified in the order
was required to be made. The Supreme Court in this decision observed as
follows:
14. Section 85-B of the Act uses the words "may recover".
Levy of damages thereunder is by way of penalty. The
legislature limited the jurisdiction of the authority to levy
penalty i.e. not exceeding the amount of arrears. Regulation
31-C of the Regulations, therefore, in our opinion, must be
construed keeping in view the language used in the legislative
Act and not dehors the same.
15. Our attention, however, has been drawn to a
decision of this Court in Hindustan Times Ltd. v. Union
of India (1998) 2 SCC 242 wherein it has been laid
down:
"From the aforesaid decisions, the
following principles can be summarized:
The authority under Section 14-B
has to apply his mind to the facts of the
case and the reply to the show-cause notice
and pass a reasoned order after following
principles of natural justice and giving a
reasonable opportunity of being heard; the
Regional Provident Fund Commissioner
usually takes into consideration the
number of defaults, the period of delay, the
frequency of default and the amounts
involved; default on the part of the
employer based on plea of power cut,
financial problems relating to other
indebtedness or the delay in realization of
amounts paid by the cheques or drafts,
cannot be justifiable grounds for the
employer to escape liability; there is no
period of limitation prescribed by the
legislature for initiating action for
recovery of damages under Section 14-B."
16. It was, however, opined that in certain situations,
the employer can claim the benefit of "irretrievable
prejudice" in case a demand for damages is made after
several years. In that case, this Court was concerned,
inter alia, with a question in regard to the effect of levy
of damages after a long time. The question which, inter
alia, arose for consideration therein was as to whether
suo motu revisional jurisdiction could be exercised by
the revisional authority at any time it desires. The Court
made a distinction between the cases involving
"recovery of money" from an employer who had
withheld the contributions made by the workmen in trust
and other cases. It was in that situation the Court opined
supra. We are not concerned with such a situation
herein.
17. A penal provision should be construed strictly.
Only because a provision has been made for levy of
penalty, the same by itself would not lead to the
conclusion that penalty must be levied in all situations.
Such an intention on the part of the legislature is not
decipherable from Section 85-B of the Act. When a
discretionary jurisdiction has been conferred on a
statutory authority to levy penal damages by reason of
an enabling provision, the same cannot be construed as
imperative. Even otherwise, an endeavour should be
made to construe such penal provisions as discretionary,
unless the statute is held to be mandatory in character.
18. In Prestolite (India) Ltd. v. Regional Director [1994
Supp (3) SCC 690 : 1995 SCC (L&S) 202] this Court
rejected a contention raised by the Regional Director of
Employees' Insurance that under the Employees' State
Insurance General Regulations guidelines have been
indicated showing as to how damages for delayed
payment are to be imposed and since such guidelines
have been followed, no exception should be taken thereto
made to the impugned adjudication, stating:
"5. ... Even if the regulations have
prescribed general guidelines and the
upper limits at which the imposition of
damages can be made, it cannot be
contended that in no case, the mitigating
circumstances can be taken into
consideration by the adjudicating authority
in finally deciding the matter and it is
bound to act mechanically in applying the
uppermost limit of the table. In the instant
case, it appears to us that the order has
been passed without indicating any reason
whatsoever as to why grounds for delayed
payment were not to be accepted. There is
no indication as to why the imposition of
damages at the rate specified in the order
was required to be made. Simply because
the appellant did not appear in person and
produce materials to support the objections,
the employee's case could not be discarded
in limine. On the contrary, the objection
ought to have been considered on merits."
19. In Dilip N. Shroff v. CIT [(2007) 6 SCC 329] this
Court stated: (SCC p. 353, para 40)
"40. Thus, it appears that there is distinct
line of authorities which clearly lays down
that in considering a question of penalty,
means rea is not a relevant consideration.
Even assuming that when the statute says
that one is liable for penalty if one furnishes
inaccurate particulars, it may or may not by
itself be held to be enough if the particulars
furnished are found to be inaccurate is
anything more needed but the question
would still be as to whether reliance placed
on some valuation of an approved valuer
and, therefore, the furnishing of inaccurate
particulars was not deliberate, meaning
thereby that an element of mens rea is
needed before penalty can be imposed,
would have received serious consideration
in the light of a large number of decisions of
this Court."
20. We agree with the said view as also for the
additional reason that the subordinate legislation cannot
override the principal legislative provisions.
The statute itself does not say that a penalty has
to be levied only in the manner prescribed. It is also not
a case where the authority is left with no discretion.
The legislation does not provide that adjudication for
the purpose of levy of penalty proceeding would be a
mere formality or imposition of penalty as also
computation of the quantum thereof became a foregone
conclusion. Ordinarily, even such a provision would
not be held to providing for mandatory imposition of
penalty, if the proceeding is an adjudicatory one or
compliance with the principles of natural justice is
necessary thereunder.
21. Existence of mens rea or actus reus to contravene a
statutory provision must also be held to be a necessary
ingredient for levy of damages and/or the quantum
thereof." (emphasis supplied)
24. A perusal of the impugned orders passed under Section 14-B and by
the Appellate Tribunal shows complete non-consideration by the APFC as
well as the Appellate Tribunal of the several aspects which needed to go into
consideration before levy of damages as specified in the orders under
Section 14-B of the Act, and rejection of the appeals. It is clear that the
APFC has mechanically purported to impose the damages at the highest
permissible rates, and at rates even higher than those permissible. The
submission of the petitioner with regard to the reasons for its default in
deposit of the provident fund dues has not been considered at all. This Court
may not be taken to have found merit, or otherwise, in the petitioner‟s
submission with regard to the reasons for said defaults. However, it was
essential for the authorities concerned to have, at least, addressed themselves
to those aspects and to have dealt with the same in the orders passed by
them. The imposition of maximum damages as per the rates provided in the
table contained in para 32A of the Scheme is not mandatory. The same is
merely a guideline. The said guideline cannot be breached by imposition of
higher damages, as done in the present cases. Since the said table contained
the upper limit of damages which may be imposed in a given case, the issue
whether lesser damages were called for in these, or any of these cases
needed consideration by application of the principles laid down by the
Supreme Court in HMT Ltd. case (supra). The APFC has, however,
abdicated its jurisdiction by mechanically passing the orders in each of these
cases. It is clear that these orders suffer from non application of mind and
the APFC, which acts as a quasi judicial authority while passing orders
under Section 14-B of the Act, has failed to disclose application of mind to
the relevant aspects which arose in these cases.
25. The submission of the petitioner that in two cases, the notices have
been issued after long periods of delay also needs consideration. The
demand raised by the respondent which is under challenge in WP(C)
No. 5648/2010 pertains to the default claimed to have been committed in
deposit of the provident fund dues during the period October, 1968 to
August, 2002. Similarly, the demand raised under Section 14-B which is
under challenge in WP(C) No. 6676/2010, pertains to the default alleged to
have been committed in deposit of provident fund dues during the period
May, 1961 to February, 1999. Whereas the first case deals with Moradabad
region, the second pertains to Bareilly region. The submission of the
petitioner is that it did not even exist during the major portion of the period
covered by the proceedings undertaken by the notices/orders in these cases.
The petitioner came into existence only in the year 1972. The case of the
petitioner is that the concerned officer, who may have dealt with the aspect
of deposit of provident fund dues was no longer there in the organization.
26. No doubt, from the documents filed with these two writ petitions, i.e.,
WP(C) Nos. 5648/2010 and 6676/2010, it cannot be ascertained whether, or
not, the petitioner had taken a ground of being prejudiced on account of the
record not being available. However, the fact remains that the petitioner
organization came into existence only in the year 1972, whereas the periods
covered by the proceedings assailed in these two writ petitions pertain to the
period October, 1968 onwards and May, 1961 onwards respectively. The
Supreme Court in Hindustan Times Ltd. Vs. UOI (supra) while holding that
there is no period of limitation prescribed for recovery of damages under
Section 14-B of the Act, held that the defence of irretrievable prejudice on
account of delay in initiation of proceedings under Section 14-B of the Act
should be taken in the reply to the show cause notice, and the establishment
must satisfy the concerned authority the prejudice that the said delay has
caused to the establishment in the matter of defending the proceedings.
Therefore, if the petitioner has taken a plea of its suffering irretrievable
prejudice on account of the patent delay in initiation of proceedings under
section 14B of the Act , which are subject matter of W.P.(C.) No.5648/2010
and 6676/2010, the same deserves consideration by a speaking order.
27. I also find merit in the submission of learned counsel for the petitioner
that the Appellate Tribunal, in each of these cases, has passed the impugned
orders mechanically, without due application of mind to the submission of
the petitioner. Irrelevant aspects have gone into consideration while passing
the impugned appellate orders. It is not understood as to how the Appellate
Tribunal could have recorded submissions which did not arise, and were not
advanced by the petitioner. The petitioner is not a BIFR company. Yet the
Appellate Tribunal recorded that the appellant i.e. the petitioner claimed that
it was a company whose reference was pending before the BIFR. The
submission which could, and may have been advanced by the Uttarakhand
Road Transport Corporation, has been recorded in the orders passed on the
appeals preferred by the petitioner. The said submission has no meaning so
far as the appeals of the petitioner were concerned.
28. For the aforesaid reasons, I allow these writ petitions and quash the
impugned orders passed under Section 14-B and appellate orders in each of
these cases. The matter is remanded back to the Assistant Provident Fund
Commissioners concerned for re-adjudication of the show cause notices
issued to the petitioner under Section 14-B of the Act. The APFC concerned
shall provide to the petitioner the basis on which it propose to raise the
demand under Section 14-B and charge interest under Section 7Q. The
submissions that the petitioner may advance shall also be considered and
reasoned orders shall be passed by the APFC concerned dealing with the
pleas of the petitioner. In case the petitioner is aggrieved and prefers further
appeals before the Appellate Tribunal, the Appellate Tribunal shall also
consider the submissions that the petitioner may advance in its appeals and
pass reasoned orders after duly considering the same. Needless to state that
the APFC and the Appellate Tribunal shall be guided by the relevant rulings
applicable in the facts of each case.
29. The petitions stand disposed of in the aforesaid terms leaving the
parties to bear their own costs.
30. The amount deposited by the petitioner in pursuance of the orders
passed under Section 14-B and 7Q shall continue to remain in deposit with
the respondent, and the final appropriation of the same shall abide by the
further orders that may be passed.
VIPIN SANGHI, J.
MAY 24, 2013
