Gujarat High Court
Central Board Of Trustees, Epf vs Aadarsh Taxtile Mill on 1 May, 2024
Author: Umesh A. Trivedi
Bench: Umesh A. Trivedi
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C/LPA/45/2022 JUDGMENT DATED: 01/05/2024
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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/LETTERS PATENT APPEAL NO. 45 of 2022
In R/SPECIAL CIVIL APPLICATION NO. 12247 of 2017
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR. JUSTICE UMESH A. TRIVEDI
and
HONOURABLE MR. JUSTICE CHEEKATI MANAVENDRANATH ROY
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1 Whether Reporters of Local Papers may be allowed to
see the judgment ?
2 To be referred to the Reporter or not ?
3 Whether their Lordships wish to see the fair copy of
the judgment ?
4 Whether this case involves a substantial question of
law as to the interpretation of the Constitution of
India or any order made thereunder ?
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CENTRAL BOARD OF TRUSTEES, EPF
Versus
AADARSH TAXTILE MILL & ANR.
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Appearance:
MR AV NAIR(5602) for the Appellant(s) No. 1
MR DIPAK R DAVE(1232) for the Respondent(s) No. 1
RULE UNSERVED for the Respondent(s) No. 2
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CORAM:HONOURABLE MR. JUSTICE UMESH A. TRIVEDI
and
HONOURABLE MR. JUSTICE CHEEKATI
MANAVENDRANATH ROY
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Date : 01/05/2024
ORAL JUDGMENT
(PER : HONOURABLE MR. JUSTICE UMESH A. TRIVEDI)
[1] This Appeal is filed under clause 15 of the Letters Patent by
the appellant challenging an order of learned Single Judge dated
30.08.2019, whereby petition preferred by the appellant came to be
dismissed holding that Employees' Provident Fund Appellate Tribunal,
New Delhi, while exercising powers vested in it, reduced the amount of
damages, it required no interference by the High Court.
[2] Mr. A.V.Nair, learned advocate for the appellant submitted
that the learned Single Judge, while dealing with the issue pertaining to
imposition of damages under Section 14B of the Employees' Provident
Funds And Miscellaneous Provisions Act, 1952 (hereinafter referred to as
'the Act, 1952') has heavily relied on the judgment of the Division Bench
of this Court in the case of Transport Corporation of Indian Limited V/s
ESI & Others dated 22.07.2019 in Letters Patent Appeal No.2607 of
2017, which was dealing with Section 85B of the Employees' State
Insurance Act, 1948 (hereinafter referred to as 'the Act, 1948') therein
pertaining to imposition of damages under 'the Act, 1948' for the default
committed by the Employer. For coming to that conclusion, according to
Mr. Nair, learned advocate for the appellant, this Court exclusively relied
on the judgment of the Supreme Court in the case of Employees State
Insurance Corporation V/s HMT Ltd. reported in (2008) 3 SCC 35,
which is now held to be not a binding precedent on the subject by the
Supreme Court in the case of Horticulture Experiment Station
Gonikoppal, Coorg V/s Regional PF Commissioner reported in (2022) 4
SCC 516, wherein the Supreme Court has specifically dealt with Section
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14B of 'the Act, 1952' and even held that "any default or delay in the
payment of EPF Contributions by the employer under the Act is sine qua
non for imposition of levy of damages under Section 14B of 'the Act,
1952' and mens rea or actus reus is not an essential element for
imposing penalty / damages for breach of civil obligations / liabilities."
[2.1] It is further submitted that the learned Single Judge, while
upholding the discretion exercised by the Appellate Tribunal, has erred
in appreciating the legal proposition that every discretion exercised by
the Appellate Authority has to be judicial and backed by cogent and
legally tenable reasons, which are absent in the impugned order passed
by the Appellate Tribunal, and accordingly, the impugned order was not
in consonance with Section 7L of 'the Act, 1952'. According to his
submission, the main issue in the present appeal is in respect of scope of
discretion exercised by the Appellate Tribunal under Section 7I read
with Section 7L of 'the Act, 1952', in reducing the damages under
Section 14B to the extent of 50% and whether the discretion has been
exercised reasonably or not. It is further submitted that the decision in
the case of Roma Henny Security Services Private Limited V/s Central
Board of Trustees dated 12.09.2012 rendered in W.P. (C) No.831 of
2012 of Delhi High Court, upon which the Appellate Tribunal has placed
heavy reliance, has been set aside by the Supreme Court in Civil Appeal
No.6592 of 2014, with a request to the Delhi High Court to reconsider
the issue. It is further submitted that the finding of the Tribunal that
damages imposed under Section 14B of 'the Act, 1952' at the maximum
rates prescribed in the unamended para-32A were inclusive of the
interest under Section 7Q of the Employees' Provident Funds Scheme,
1952 (hereinafter referred to as 'the Scheme, 1952') is incorrect. It is
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further submitted that there are no cogent or legally tenable reasons
assigned by the Appellate Tribunal to reduce the quantum of damages to
50% of the assessed damages and accordingly, it cannot sustain.
[2.2] He has further submitted that considering the period of
default vis-a-vis the amendment in Section 14B of 'the Act, 1952' and
para-32A of 'the Scheme, 1952', the damages were rightly imposed at
the prevailing rates of 17%, 22%, 27% and 37% for corresponding
defaults, by the Adjudicating Authority, which ought not to have been
interfered with by the Tribunal, while exercising the jurisdiction under
Section 7I read with Section 7L of 'the Act, 1952'. It is further submitted
that the Appellate Tribunal under Section 7L of 'the Act, 1952' could
have corrected the errors, if any, committed by the Adjudicating
Authority but ought not to have been substituted its own reasons to
reduce the damages which was otherwise in accordance with law. For
the said proposition, a reliance is placed on a decision of this Court in
Letters Patent Appeal No.532 of 2019 in the case of Assistant PF
Commissioner V/s Sheth B.M. Prathmik Shala dated 10.06.2022.
[2.3] Lastly, it is submitted that judicial discretion of the
Appellate Tribunal under Section 7L of 'the Act, 1952' has to be in
consonance with the object of 'the Act, 1952' i.e. welfare of the
employees and deterrence for the defaulting employers. The quantum of
damages has been construed as compensation to the employees for
depriving them with their legitimate assets for the delayed period and
accordingly, the interference was uncalled for by the Appellate Tribunal
in the larger interest of the employees, as submitted by the learned
advocate for the appellant.
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[3] As against that, Mr. Dipak Dave, learned advocate for
respondent No.1, though he is on leave note today, he was already heard
and matter is kept today for dictation of the judgment. Therefore, we
have proceeded with dictation of it today despite his leave note.
[4] According to the submission of learned advocate for
respondent No.1, though competent Authority had a discretion to
impose damages up to a maximum limit provided in para -32A of 'the
Scheme, 1952', it failed to exercise the discretion and has imposed
maximum percentage of damages as provided therein. Therefore,
according to his submission, further discretion vested with the Tribunal
has been correctly exercised and for reasons recorded therein. Therefore,
according to his submission, this LPA challenging order passed by the
learned Single Judge requires no interference as not only the Tribunal
had exercised the discretion, it has been confirmed by the learned Single
Judge of this Court. Though, according to the submission of learned
advocate for respondent No.1, rates, at which damages would be
awarded, went on changing as per the need arises, so far as present case
is concerned, according to submission of learned advocate for
respondent No.1, default period is prior to 26.09.2008 when rates of
damages in percentage were 17%, 22%, 27% and 37% again reduced to
5%, 10%, 15% and 25% for different period of defaults, as enumerated
therein subsequent thereto. According to his submission, as such
pursuant to a Notification of the Department itself, rates of damages in
percentage for the period of default in the present case is assessed @
17%, 22%, 27% and 37% for different period of default, as mentioned in
Circular dated 29.05.1990 issued by the Office of Central Provident
Fund Commissioner. Drawing attention of the Court to said Circular,
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which is produced for perusal of the Court by the learned advocate for
the appellant, it appears that it refers about rate of interest chargeable is
12% under Section 7Q, though it was inserted by Act of 33 of 1988 but
it came into effect from 1.7.1997. Once proposed rate of interest under
Section 7Q which was not in force at the relevant time that included in
the damages, total damages came to 17%, 22%, 27% and 37% for
different period of defaults. However, the revised rates of damages even
from that Circular also which is existing as on date and subsequent to
26.09.2008 @ 5%, 10%, 15% and 25%.
[4.1] Therefore, he has submitted that for the present default
which covers the period of default from September, 1997 to July, 2006,
not only damages @ 17%, 22%, 27% and 37% awarded, even 12% of
statutory interest under Section 7Q was imposed upon the respondent
and therefore, Tribunal has rightly exercised the discretion vested in it in
modifying the order of the competent Authority reducing the damages
and confirmed by the learned Single Judge, which requires no
interference by this Court, that too, in Letters Patent Appeal.
[5] Having heard the learned advocates for the appearing
parties and going through the memo of appeal as also the documents
annexed along with it, it emerges that though learned advocate for the
appellant pointed out different dates of insertion of certain provisions,
coming into force of those provisions and rate of damages prescribed by
a Circular as also para-32A of 'the Scheme, 1952', reference to the
decisions relied by the learned advocate for the appellant is not required
as those decisions deal with requirement of mens rea for imposition of
damages which is not the issue in the present case.
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[6] Core issue in the present case is about the jurisdiction of the
Appellate Tribunal provided under 'the Act, 1952' and whether it has
any discretion to reduce the damages imposed by the competent
Authority and if so, to what extent. At the same time, whether reasons to
reduce even damages, while exercising discretion, are required or not.
Examining the case and the different provisions of 'the Act, 1952', 'the
Scheme, 1952' as also the relevant decisions relied on, it is clear that for
the default period damages imposed by the competent Authority cover
September, 1997 to July, 2006. For the said period, not only interest
payable by the respondent under Section 7Q @12% determined, came to
be made effective, however for damages, authority relied on rates in
percentage of damages prescribed under para-32A of 'the Scheme,
1952', which prescribed rates as per the Circular dated 29.05.1990
which included even proposed interest @ 12% along with the damages
prescribed @ 5%, 10%, 15% and 25%. Thus, before 7Q interest payable
by the respondent under Section 7Q is made effective, for imposition of
damages, authority wanted prescribed interest @ 12% to be charged in
that damages under para-32A of 'the Scheme, 1952' but with Section 7Q
made enforceable from 01.07.1997, separate interest @12% started to
be levied from the defaulter. Whereas there was no corresponding
amendment to the damages in percentage as per para-32A of 'the
Scheme, 1952'. Therefore, net effect was that higher rate of percentage
towards the damages is charged from the defaulter i.e. 17%, 22%, 27%
and 37%, over and above that, the interest @12% is also charged from
the defaulter. Thus, 12% under Section 7Q of 'the Act, 1952' included in
para-32A prescribing damages in percentage, in addition thereto
respondent is also made liable to pay interest under Section 7Q of 'the
Act, 1952' @12%.
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[7] According to us, the Appellate Authority is vested with the
discretion, which is not even disputed, to reduce the damages, has
assigned even reasons for reduction of damages to the extent of 50%. It
weighed with the Tribunal that the component of 12% interest, which is
made part of percentage of damages under para-32A of 'the Scheme,
1952', over and above that 12% interest under Section 7Q is already
charged from the respondent defaulter and therefore, it led the Tribunal
to reduce the damages, that too, to the extent of 50%. At the same time,
Competent Authority though having discretion to award damages lesser
than prescribed, which is maximum limit, has awarded maximum
provided. The learned Single Judge also did not think it fit to interfere
with the said discretion exercised by the Tribunal, may be relying on
another decision which is subsequently not held to be good law, but net
effect would be discretion exercised by the Tribunal is confirmed by the
learned Single Judge, therefore, we do not find any reason to interfere
with the order passed by the learned Single Judge. Hence, this Letters
Patent Appeal is dismissed.
(UMESH A. TRIVEDI, J.)
(CHEEKATI MANAVENDRANATH ROY, J.)
Lalji Desai
