Delhi High Court
The Assistant Provident Fund ... vs M/S Kangan Security Service on 18 September, 2017
IN THE HIGH COURT OF DELHI AT NEW DELHI
Judgment reserved on : 12th September 2017
Date of decision : 18th September , 2017
W.P.(C) 8053/2017
+ W.P.(C) 8053/2017
THE ASSISTANT PROVIDENT FUND COMMISSIONER
..... Petitioner
Through Mr. Prem Prakash, Adv.
versus
M/S KANGAN SECURITY SERVICE ..... Respondent
Through Nemo.
CORAM:
HON'BLE MS. JUSTICE ANU MALHOTRA
JUDGMENT
ANU MALHOTRA, J.
CM APPL. 33154/2017
This is an application seeking exemption from filing certified
copies of annexures.
The application is allowed subject to all just exceptions.
CM APPL. 33155/2017
This is an application seeking condonation of 137 days in re-
filing the petition. The said application is allowed and delay of 137
days in re-filing the petition is condoned in view of the reasons
mentioned in the application.
W.P.(C) 8053/2017
1. The petitioner i.e. the Assistant Provident Fund
Commissioner, Delhi (North) {hereinafter referred to as "APFC
(N)"} vide the present petition under Article 226/227 of the
Constitution of India assails the order dated 04.11.2016 of the
Employees Provident Fund Appellate Tribunal (EPFAT) in appeal in
ATA No.94(4)2011 vide which the appeal filed by M/s. Kansan
Security Service Establishment arrayed as respondent to the present
petition challenging the order dated 07.12.2010 of the Assistant
Provident Fund Commissioner under Section 14-B and 7Q of the
Employees Provident Fund and Miscellaneous Provisions Act, 1952
was allowed and the order dated 07.12.2010 of the APFC in
Ref.No.E/DL/8873/Damage/C-I, was set aside whilst imposing 60%
of the assessed damages (i.e. as assessed vide order dated 07.12.2010
of the APFC, Delhi along with the entire assessed interest).
2. Vide the order dated 07.12.2010 of the APFC (N) under
Section 14-B and 7Q of the Employees Provident Fund and
Miscellaneous Provisions Act, 1952 (hereinafter referred to as the
"Act"), the total amount of damages assessed to be payable by the
establishment that arrayed as the respondent to the present petition
was Rs.7,80,408/- and the total amount of damages assessed to be
payable on account of the interest under Section 7Q of the said
enactment was assessed to be Rs. 2,87,807/- with the grand total
payable by the establishment i.e. respondent herein being
Rs.10,68,215/-. Vide the said order dated 07.12.2010 it was observed
to the effect that the establishment i.e. respondent herein had been
unable to dislodge the APFC's determination that the establishment
i.e. the respondent herein had committed a delay in payment of:
(i) the provident fund contribution;
(ii) the employees contribution,
(iii) the insurance fund contribution, and
(iv) the administrative charges under the EPF Scheme, 1952 and
EDLI Scheme 1976,
as required by law for the period from 09/04 to 01/08 within the
prescribed time limit despite notice bearing No. DL/8873/C-
II/Damage Cell/Delhi North/3446 dated 08.07.2010 along with
annexure thereto on late payments showing the amount of levying
damages under Section 14-B and interest under Section 7Q of the
Act.
3. As observed vide the said order dated 07.12.2010 of the
APFC(N), a summary vide office letter No. DL/8873/C-
II/CPM/Damages Cell/4290 dated 20.07.2010 had also been sent to
the establishment i.e. the respondent herein who was also accorded
an opportunity of personal hearing but the establishment i.e. the
respondent to the present petition had miserably failed to provide any
supporting document in support of its contention and had nothing to
say and had rather agreed to the delay committed in payment of dues
and thus there was no alternative but to finalize the case. The nature
of damages calculated to be recoverable from the establishment i.e.
the respondent herein were detailed as under :
Nature of damages Amount
Account No.
___________
Total Rs.7,80,408/-
on which the interest under section 7Q of the Act on delayed
payment of PF dues was held to be payable in addition to the
payment of damages under Section 14-B of the Act as per letters
dated 03.07.1998 and 09.09.1998 issued by the Central Provident
Fund Commissioner on approval by the Government of India.
In ATA No. 94(4)2011, the establishment i.e. the respondent
herein contended that it had been abiding with the provisions of the
"Act" since the day of allotment of PF code and that the order dated
07.12.2010 of the APFC, Delhi (North) in relation to the belated
period of six years from 09/04 to 01/08 was on the higher side
placing reliance on the case laws titled as Roma Henny Security
Services Pvt. Ltd. vs. Central Board of Trustees, EPF Organization
through Assistant PF Commissioner, Delhi (North) (2013) 1 LLJ
29 Del. which upheld the law laid down by the Division Bench of
Hon'ble High Court of Delhi in System & Stamping and Anr. Vs.
Employees'Provident Fund Appellate Tribunal and Ors. (2008) 2
LLJ 939 and sought that the said order dated 07.12.2010 be set aside.
It was further contended by the establishment that it had duly
deposited the cheque in the bank for remittance of the encashment
due but due to encashment of the cheque belatedly, the dues were not
deposited in the account of the APFC, Delhi and that the said
circumstances were unintentional and beyond the control of the
establishment.
4. On behalf of the APFC (N) it had been contended before the
EPFAT that the "Act" was meant to provide social and financial
security to the downtrodden section of society at the time of
retirement, death during service and during his medical treatment and
that it is a social welfare legislation which cannot be done away with
and that strict adherence to its provisions is mandatory. It was
further contended before the EPFAT that the employer was bound to
make the provident fund contribution in time and in case of any
default the employers were liable to pay damages for the purpose of
indemnifying the beneficiaries for the loss that they had suffered and
that as per the record of the APFC the establishment had been
defaulting in terms of the delayed remittance. Reliance had also been
placed before the APFC (N) on the verdict of the Supreme Court in
Organo Chemical Industries and Anr. Vs. Union of India and
Others 1979 (002) LLJ 0416 to the effect that habitual defaulters
like the establishment (i.e. the respondent to the present petition)
could not be allowed to claim any benefit of leniency and it was
further contended on behalf of the APFC that the appeal before the
EPFAT was liable to be dismissed.
5. The learned EPFAT vide the impugned order in appeal No.
ATA 94(4)2011 had observed as under:-
"6. In case law titled as Roma Henny Security Services Pvt.
Ltd. vs. Central Board of Trustees, EPF Organization
through Assistant PF Commissioner, Delhi (North) (supra),
it is held by Hon'ble High Court of Delhi that up to 26.09.2008
the earlier table continue to govern the assessment, which
included the element of interest under section 7Q of the Act
shall prevail and from 26.09.2008 onwards the damages and
interest are segregated. In case in hand, entire period of
assessment is before 26.09.2008, so respondent was supposed
to assess the dues on the basis of earlier table, which
included element of interest under Section 7Q of this Act.
7. Admittedly respondent passed impugned order not on the
basis of earlier table continue to govern the assessment.
Respondent calculate the dues applying maximum rates of
17%, 22%, 27% and 37%. Further respondent already
assessed separately interest under section 7Q of the Act so
respondent was duty bound to apply rates applicable 5%, 10%,
15% and 25%. As respondent not carried out the obligation
within the declared line so impugned order of respondent is to
go. It is noted that respondent not dealt with the mitigating
circumstances as alleged by the appellant.
8. Keeping in view all the circumstances of the case, this
Tribunal reached at a firm opinion that the interest of justice
would be met by imposing of 60% of the assessed damages on
the appellant establishment along with the entire assessed
interest. In terms of the above, the present appeal is allowed
and impugned order is hereby set aside. Any amount
deposited by appellant against impugned order shall be
adjusted. Copy of the order be sent to the parties as per law."
6. The submission made through the present petition is to the
effect that the EPFAT had grossly erred in reducing the amount of
damages to 60% of the assessed damages imposed on the respondent.
Reliance was placed on behalf the petitioner on the verdict of the
Supreme Court in RPFC vs. Shibu Metal Works, 1964-65 (27) FJR
491 to contend that in construing the material provisions of the Act,
if two views were reasonably possible , the Courts' should prefer the
view which helps the achievement and furtherance of the object and
to similar effect reliance was placed on behalf of the petitioner on the
verdict of the High Court of Bombay in State vs. Girdhari lal Bajaj,
1962 II LLJ (Bom. DB), to contend that when there was a doubt in
any meaning of words they ought to be understood in a manner in
which it best harmonizes the subject of the enactment and the object
which the legislature had in view. Reliance was also placed on
behalf of the petitioner on the verdict of the Supreme Court in
Chairman, SEBI vs. Shriram Mutual Fund & Anr. on order dated
23.08.2006 passed in CA Nos. 9523-24/2003 to contend that unless
the language of the statute indicated the need to establish the
presence of mens rea, it was wholly unnecessary to ascertain whether
such a violation was intentional or not. It was thus submitted on
behalf of the petitioner that once the delay in the remittance of dues
under the EPF & MP Act and its Scheme stood established, enquiry
under Section 14-B and 7Q had essentially to follow, and mens rea
was not a pre condition for imposition of penalty for contravention of
the provisions of a civil nature. Reliance in relation thereto was
placed on behalf of the petitioner on the verdict of the High Court of
Bombay in SEBI vs. Cabot International Capita Corporation (2005)
123 Comp. Cases 841 (Bom.) to similar effect. Inter alia, it was
submitted on behalf of the petitioner that a defaulter must be
prevented from retaining the known profits of its crime and the
principle of Jurisprudence-Commodum Ex Injuria Sua Non Habere
Debet ought to have been implemented so that no person can take
advantage of his own wrong and no one derives advantage from
one's own injurious behavior and no one ought to benefit from one's
own tort. Inter alia, it was submitted through the petition that the
EPFAT had also failed to appreciate that in terms of Section 7O of
the EPF and MP Act, no appeal of the employer could be entertained
by the Tribunal unless the employer establishment had deposited
with it 75% of the amount due from it as determined under Section
7A of the Act and reliance was placed on behalf of the petitioner on
the verdict of the High Court of Kerala in Muthoot Pappachan C.&
M Services V. EPFO 2009 LLR 298 (KER HC) to the effect that
deposit of 75% of the amount due was a pre condition under the EPF
and MP Act, 1952 for an appeal to be maintained which in the instant
case had not been complied with by the establishment. Inter alia, it
was stated vide grounds D and E of the petition to the effect:
"D.Because the Hon'ble EPFAT miserably failed to explain
the cogent reason and basis of calculation for imposing 60% of
the assessed damages.
E. Because the order passed by the Assessing Officer dated
07.12.2010 is after proper application of mind and in
consonance with the provisions of the Act. It is stated that the
basis of calculation and cogent reasons for imposing the
damages have been provided in 14B order. The said order of
the Assessing Officer was based on a report made by the
Enforcement Officer."
and further it was, inter alia, stated through the petition that
damages levied as per the order of Assessing Officer under Section
14B had been levied upon the establishment in consonance with the
Act and that the EPFAT had failed to appreciate the evidence placed
on record by the APFC (N). The petitioner thus contended that the
following questions of law to the effect:
"1. Whether the Hon'ble EPFAT was correct in imposing just
60% of the assessed damages on the Respondents herein vide
its order dated 04.11.2016 and thereby contravening the
provisions of the Employee Provident Fund Act.
2. Whether the Hon'ble EPFAT was correct in contravening
the provisions of the EPF Act, which provides for levying of
damages and interest thereon,"
arose for determination.
7. Initial submissions were made on behalf of the petitioner by
the learned counsel for the petitioner reiterating the submissions that
have been made in the petition.
8. At the outset it is essential to observe that the delay in
submission of the
(i) the provident fund contribution;
(ii) the employees contribution,
(iii) the insurance fund contribution, and
(iv) the administrative charges under the EPF Scheme, 1952 and
EDLI Scheme 1976,
during the period from September 2004 to January 2008 is
apparently admitted even in the appeal before the EPFAT in ATA
No.94(4)2011. Thus in terms of the present status of the EPF and
MP Act, 1952 w.e.f. 26.09.2008, both damages under Section 14 B
and interest under Section 7Q of the said enactment read with para
32A of the EPF Scheme 1952 would be payable. However, as rightly
observed by the learned EPFAT for the period September 2004 to
January 2008 the entire period of assessment is before the date
26.09.2008, till which date the mechanism to charge interest
separately under Section 7Q of the EPF and MP Act, 1952 was not in
force in as much as though Section 7Q of the EPF and MP Act, 1952
was in force w.e.f. 01.07.1997, and though the interest on delayed
contribution of provident fund became payable separately, the table
of para 32A of the Employees Provident Fund Scheme which
operated till the date 26.09.2008 was as follows:
Period of Delay Revised Interest chargeable Total Existing
rates of under Section 7Q rate of
damages damages
(i) 2 months or less 5 12 17 25
(ii) Over 2 months 10 12 22 25
but
Less than 4 months
(iii) over 4 months 15 12 27 25
but less than 6
months
(iv) Over 6 months 25 12 37 25
and the present rates of damages as per the revised table which
were made effective from 26.09.2008 are as under:
Sl.No. Period of default Rate of damages
(effective 26.09.2008)
1. Less than two months (upto 50 days) 5%
2. Two months and above but less than 10%
four months (upto 119 days)
3. Four months and above but less than 15%
six months (upto 179 days)
4. Six months and above (180 days and 25%
above)
It has categorically been laid down by the Division Bench of
this Court in M/s System and Stampings and Anr. Vs. Employees'
Provident Fund Appellate Tribunal and Ors. 2008 LLR 485 against
which the SLP was dismissed in limine by the Supreme Court vide
order dated 16.07.2009 and vide the judgment dated 12.09.2012 in
W.P.(C)831/2012 in Roma Henny Security Services Pvt. Ltd.
(supra) the larger Bench of this Court constituted in view of the
Division Bench judgment in M/s System and Stampings (supra)
also, has categorically laid down that for the period prior to
26.09.2008 the verdict of the Division Bench of this Court in M/s
System and Stampings (supra) took the correct view that damages
under Section 14-B of the "Act" were inclusive of interest chargeable
under Section 7-Q of the "Act". As the present case covers that very
assessment i.e. prior to the dated 26.09.2008 period, the respondent
had no right to charge the interest under Section 7-Q of the "Act"
additionally when it already stood payable in the order passed under
Section 14-B of the "Act". Significantly, the period covered in Roma
Henny Security Services Pvt. Ltd. (supra) for which the damages
had been levied was from June 1999 to October 2008 i.e. for the
period prior to 26.09.2008. In the instant case also as per the order
dated 07.12.2010 of the APFC (N) the period for which there is
delayed contribution of payments as detailed hereinabove in relation
to :
(i) the provident fund contribution;
(ii) the employees contribution,
(iii) the insurance fund contribution, and
(iv) the administrative charges under the EPF Scheme, 1952 and
EDLI Scheme 1976,
were for the period from September 2004 to January 2008 i.e.
prior to the date 26.09.2008 for which period the assessment had to
be made on the basis of the earlier rates table payable under para 32A
of the EPF Scheme and not in terms of the scheme which was
implemented w.e.f. 26.09.2008. The earlier table under the EPF
scheme which was in force till 26.09.2008 included within it the
interest chargeable under Section 7Q of the EPF and MP Act, 1952
and thus the assessment made by the APFC (N) of interest under
Section 7Q to the tune of Rs.2,87,807/- was apparently erroneous in
terms of the settled law as laid down by the larger Bench of this
Court as also upheld by the Supreme Court in the SLP in the case of
M/s System and Stampings (supra).
The learned EPFAT has also observed vide the impugned
order to the effect that the APFC (N) had not dealt with the
mitigating circumstances that had been put forth by the establishment
and that in the instant case the interest of justice would be met by
imposing 60% of the assessed damages on the establishment along
with the entire assessed amount observing to the effect that the
APFC(N) had applied the maximum rates of damages.
In the circumstances, thus it is held that there is no infirmity in
the impugned order dated 04.11.2016 of the EPFAT in ATA No.
94(4)2011 in imposing 60% of the assessed damages on the employer
establishment i.e. respondent herein along with the entire assessed
interest.
9. Another contention was raised on behalf of the petitioner that
the mandatory provision of Section 7(O) of the EPF and MP Act,
1952 which provides to the effect:
"7-O. Deposit of amount due, on filing appeal.--No
appeal by the employer shall be entertained by a
Tribunal unless he has deposited with it seventy-five per
cent. of the amount due from him as determined by an
officer referred to in section 7A:
Provided that the Tribunal may, for reasons to be
recorded in writing, waive or reduce the amount to be
deposited under this section."
had not been complied with and that the EPFAT apart from having
directed the employer establishment to deposit the 60% of the
amount due as determined under Section 7A of the EPF and MP Act,
1952, vide order dated 07.12.2010 of the APFC(N) had also not
recorded any reasons in writing as to why the requisite pre-deposit of
75% amount (to be deposited) due from the employer establishment
had been waived and thereafter reduced.
Undoubtedly, the EPFAT vide its impugned order dated
04.11.2016 makes no mention of having permitted waiver or
reduction of 75% of the pre-deposit in terms of Section 7O of the
EPF and MP Act, 1952 qua the assessed amount in terms of Section
7A of the Act. However, taking into account the factum that the
order dated 07.12.2010 of the APFC (N) Ref.No.E/DL/8873/
Damage/C-I was apparently erroneous in relation to the aspect of
inclusion of interest amount coupled with the assessment having been
made on the basis of the table under para 32A of the EPF Scheme
1952 which was under implementation w.e.f. 26.09.2008 though the
period of which the assessment was made was prior to the said date,
i.e. from September 2004 to January 2008, the waiver of the pre-
deposit in terms of Section 7O in the specific facts and circumstances
of the instant case does not suffice to dislodge the order dated
04.11.2016 of the EPFAT in appeal in ATA No. 94(4)2011.
The authorities under the EPF and MP Act, 1952 shall
however take into account that in the event of there being
circumstances spelling out exercise of discretion of reduction or
waiver of the 75% of the pre-deposit amount for hearing an appeal
under Section 7O of the EPF and MP Act, 1952, it would be
appropriate and essential for the said authorities to expressly
observe the reasons therefor.
10. With these observations, it is not considered appropriate to
issue any notice of the petition, which is thus hereby dismissed.
ANU MALHOTRA, J
SEPTEMBER 18, 2017
mr
