Prowiz Mansystems Pvt Ltd vs Assistant Provident Fund ...
2019 Latest Caselaw 5335 Del

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*      IN THE HIGH COURT OF DELHI AT NEW DELHI
                                             Date of Decision :- 01.11.2019
+      W.P.(C) 11497/2019 & CM No.47240/2019
       PROWIZ MANSYSTEMS PVT LTD              ..... Petitioner
                   Through: Mr. S.K. Gupta, Adv.

                           versus

       ASSISTANT PROVIDENT FUND COMMISSIONER
                                                     ..... Respondent
                    Through: Mr. Keshav Mohan and Mr. Piyush
                    Choudhary and Mr. Piyush Vatsa, Advs.

       CORAM:
       HON'BLE MS. JUSTICE REKHA PALLI

       REKHA PALLI, J (ORAL)
       1.    The present writ petition filed by the employer assails the order
       dated 22.07.2019 passed by the Central Government Industrial
       Tribunal exercising the power of the Employees Provident Fund
       Tribunal, in Appeal No.333 (14)/16 rejecting the petitioner's
       challenge to the assessment order dated 05.10.2015 passed by the
       respondent under Sections 14B and 7Q of the Employees' Provident
       Funds and Miscellaneous Provisions Act, 1952 ('the Act'). The
       petitioner is an establishment which is duly covered under the Act.
       The respondent, on finding that the petitioner had defaulted in
       depositing the requisite provident fund amount for the period between
       01.04.1996 and 31.12.2014, had issued a show cause notice to the
       petitioner on 10.01.2015.



    WP (C) No.11497/2019                                     Page 1 of 5
  2.      After providing the petitioner with an opportunity to submit its
 reply and make oral submissions, the respondent passed the
 assessment order on 05.10.2015, holding the petitioner liable to pay a
 sum of Rs.35,30,472/- as damages and a sum of Rs.24,17,995/- as
 interest.
 3.      Being aggrieved by this assessment, the petitioner approached
 the Industrial Tribunal by way of a statutory appeal under Section 7-I
 of the Act, which came to be dismissed under the impugned order
 after the Tribunal found that the petitioner had wilfully failed to
 deposit the amount deducted from the incentives payable to its
 employees for a certain period. Before the Tribunal, the petitioner had
 contended that it had not been supplied with a detailed calculation for
 arriving at this amount, which ground was also rejected after it
 became evident that the show cause notice issued to the petitioner had
 clearly set out these details.
 4.      Today, learned counsel for the petitioner has raised the same
 contentions, as were raised on the petitioner's behalf before the
 Tribunal. Firstly, he submits that the imposition of damages was
 wholly unwarranted in the present case as the petitioner's default in
 depositing the provident fund dues was not wilful. He submits that
 the petitioner was under the bona fide impression that incentives and
 bonuses do not form a part of the basic wages for the purpose of
 calculating provident fund dues. Therefore, there was no wilful
 refusal to deposit the said amount. For this purpose, he places reliance
 on the decision of Madras High Court in National Co-op. Sugar Mills
 Ltd. Vs. Presiding Officer, Employees Provident Fund Appellate



WP (C) No.11497/2019                                    Page 2 of 5
  Tribunal, Delhi and Ors. 2012 (3) LLJ 83. He further submits, by
 placing reliance on the decision of the Supreme Court in Assistant
 Provident Fund Commissioner, EPFO & Anr. Vs. The Management
 of RSL Textiles India Pvt. Ltd. through its Director, 2017 LLR 337,
 that there was no mens rea on the part of the petitioner/employer to
 withhold the provident fund dues and, therefore, the imposition of
 penalty by way of damages is not warranted. Mr. Gupta finally
 submits that it was the duty of the respondent to keep reminding the
 petitioner to deposit the provident fund dues and that, as the
 respondent had failed to send these monthly reminders, the
 assessment order was unsustainable.
 5.      On the other hand, Mr.Keshav Mohan, learned counsel
 appearing for the respondent, on advance notice, supports the
 impugned order and contends that the petitioner having wilfully
 defaulted to comply with the provisions of the Act was rightly held
 liable to pay damages and interest. He, therefore, prays that the writ
 petition be dismissed.
 6.      Having considered the submissions of the learned counsel for
 the parties and perused the record, I find no merit in any of the
 contentions raised by the learned counsel for the petitioner. The very
 fact that the petitioner had made deductions from the incentives
 payable to its employees in itself shows that the petitioner was well
 aware that provident fund was payable on the said amount as well, yet
 it had wilfully failed to deposit the same within the prescribed time.
 This very fact is sufficient to show mens rea on the petitioner's part to
 deliberately delay depositing the provident fund dues. The petitioner



WP (C) No.11497/2019                                     Page 3 of 5
  has, by placing reliance on National Co-op. Sugar Mills Ltd. (supra),
 sought to contend that since incentives are not a part of basic pay, the
 petitioner cannot be held guilty of any wilful delay in depositing the
 provident fund dues, so as to warrant levy of damages and interest. In
 the light of the admitted position that the petitioner was paying
 incentives to all its employees and was also making deductions on the
 said amount, it cannot be said that the petitioner was unaware that
 provident fund was payable on the incentives also and therefore the
 plea that there was no wilful default on the petitioner's part cannot be
 accepted. The reliance placed by the petitioner on National Co-op.
 Sugar Mills Ltd. (supra) is wholly misplaced as in the said case the
 Madras High Court was dealing with a situation where a demand for
 provident fund dues were sought to be raised on the wages paid as lay
 off compensation to some of the employees, which fact situation is
 entirely different from the present case. The decision of the Supreme
 Court in The Management of RSL Textiles India (supra) also does
 not in any manner forward the case of the petitioner as the said
 decision merely reiterates the legal position that the presence of mens
 rea would be a determinative factor in imposing damages under
 Section 14B of the Act. In the present case the mens rea on the part
 of the petitioner is writ large and therefore the respondent was fully
 justified in claiming damages and interest from the petitioner.
 7.      I also do not find any merit in the petitioner's contention that it
 was incumbent on the respondent to send monthly reminders to the
 petitioner in case there was any delay on its part in depositing the
 provident fund dues. The petitioner's plea that the respondent, having



WP (C) No.11497/2019                                      Page 4 of 5
  failed to send monthly reminders, is estopped from claiming any
 damages or interest from it cannot be accepted. Neither is there any
 statutory basis for such a plea, nor can the respondent be expected to
 send monthly reminders to every defaulting employer in the country.
 In fact once an establishment is allotted a code under the Act, it is
 expected to ensure strict adherence to the provisions thereof and is
 under a statutory duty to make timely deposits of the provident fund
 dues in accordance with the timelines prescribed in the Act.
 7.      The writ petition along with pending application is disposed of
 in the aforesaid terms.




                                                   REKHA PALLI, J.

NOVEMBER 01, 2019 'SDP'