Karnataka High Court

The Regional Provident Fund ... vs M/S Aqua Sns Fashions Pvt Ltd on 4 March, 2022

Bench: S.Sujatha, Shivashankar Amarannavar

  IN THE HIGH COURT OF KARNATAKA AT BENGALURU

        DATED THIS THE 4TH DAY OF MARCH, 2022

                       PRESENT

         THE HON'BLE MRS.JUSTICE S.SUJATHA

                         AND

 THE HON'BLE MR. JUSTICE SHIVASHANKAR AMARANNAVAR

              W.P.No.5331/2021 (L - PF)

BETWEEN :

THE REGIONAL PROVIDENT
FUND COMMISSIONER
EPFO-RO-BOMMASANDRA-I,
ANNAPOORNESHWARI COMPLEX
37/1, 6TH MAIN, SINGASANDRA
HOSUR MAIN ROAD,
BENGALURU-560068                             ...PETITIONER

               (BY SRI SARAVANA P., ADV.)

AND :

M/s AQUA SNS FASHIONS PVT. LTD.,
NO.48/23, SARDAR MUDALAPPA ROAD,
GARVEBHAVIPALYA,
OFF HOSUR MAIN ROAD,
BENGALURU-560065
REP BY ITS DIRECTOR
SHRI SYED MONSOOR ZAHIRUDDIN                ...RESPONDENT

                 (RESPONDENT SERVED.)

      THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND
227 OF THE CONSTITUTION OF INDIA, PRAYING TO ALLOW THE
PETITION BY SET ASIDE THE ORDER DATED 18.09.2019 IN
EPF/675/2017 ANNEXURE-A PASSED BY THE HON'BLE
                           -2-

CENTRAL GOVERNMENT INDUSTRIAL TRIBUNAL-CUM-LABOUR
COURT, BANGALORE.

      THIS PETITION COMING ON FOR PRELIMINARY HEARING
IN 'B' GROUP, THIS DAY, S. SUJATHA, J., MADE THE
FOLLOWING:

                          ORDER

This Writ Petition is directed against the order

dated 18.09.2017 passed in EPF No.675/2017 on the

file of the Central Government Industrial Tribunal-cum-

Labour Court ['Tribunal' for short] whereby the appeal

preferred by the respondents has been partly allowed

modifying the damages at Rs.6,86,000/- [Rupees Six

Lakhs Eighty Six Thousand Only] as against

Rs.9,14,695/- [Rupees Nine Lakhs Fourteen Thousand

Six Hundred and Ninety Five Only] ordered by the

Regional Provident Fund Commissioner/appellant

under Section 14-B of the Employees Provident Fund

and Miscellaneous Provisions Act, 1952 ['Act' for short].

2. The respondent - an establishment was

visited with the levy of damages of Rs.9,14,695/- under

Section 14-B of the Act for the alleged default for not

depositing the amount in time towards the provident

fund account pertaining to;

  S.No.             A/C. No.                   PD [Rs./-]
    1.            Account No.1                    534835.00
    2.            Account No.2                     32833.00
    3.            Account No.10                   327084.00
    4.            Account No.21                    19647.00
    5.            Account No.22                       296.00
                 Total                           914695.00

3. Being aggrieved by the said order of the

appellant, the appeal was preferred by the respondent

before the Tribunal which came to be allowed in part.

Hence, this Writ Petition by the Regional Provident Fund

Commissioner.

4. Learned counsel for the petitioner argued

that the respondent has failed to remit provident fund

contributions in time. Hence, invoking the order under

second proviso to Section 14-B of the Act, damages to

the extent of Rs.9,14,695/- was levied but the Tribunal

has modified the same referring to 32B of the

Employees Provident Funds Scheme, 1952 which is not

in conformity with the settled legal principles of law.

Learned counsel further argued that the legal principles

enunciated by the Hon'ble Apex Court in the case of

Organo Chemical Industries and Another V/s. Union

of India and Others [(1979) 4 SCC 573] has not been

properly appreciated by the Tribunal. No power of

waiver of modification is vested with the Commissioner

under Section 14-B of the Act except the cases falling

under the Second proviso. The respondent -

establishment having not fulfilled the said criteria, the

Tribunal ought not to have interfered with the well-

reasoned order of the Commissioner.

5. We have carefully considered the

submissions of the learned counsel for the petitioner

and perused the material on record.

6. Para 32B of the Employees Provident Funds

Scheme, 1952 reads thus:

"32B. Terms and conditions for reduction or waiver of damages. - The Central Board may reduce or waive the damages levied under section 14B of the Act in relation to an establishment specified in the second proviso to section 14B, subject to the following terms and conditions, namely:--

(a) in case of a change of management including transfer of the undertaking to workers' co-operative and in case of merger or amalgamation of the sick industrial company with any other industrial company, complete waiver of damages may be allowed;

(b)   in cases      where        the       Board         for
      Industrial              and             Financial
      Reconstruction,         for reasons         to     be
      recorded     in   its     schemes,       in       this
      behalf       recommends,             waiver         of
      damages up to 100 per cent may be
      allowed;

7. Para 32A of the Scheme contemplates the

rates. In terms of the said provision, 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 as specified in the said para, the

Central Provident Fund Commissioner or such Officer

as may be authorized 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 in the table therein. Phrase employed

is 'may' for recovery from the employer. This provision

has to be read along with 32B to give a harmonious

construction to the Scheme, if read together 32B[c]

would attract.

8. The Hon'ble Apex Court in the case of

Organo Chemical Industries and Another supra, has

observed thus:

"38. Learned counsel for the petitioners, however, contends that in the

instant case, the period of arrears varies from less than one month to more than 12 months and, therefore, the imposition of damages at the flat rate of hundred per cent for all the defaults irrespective of their duration, is not only capricious but arbitrary. The submission is that if the intention of the legislature was to make good the loss caused by default of an employer, there could be no rational basis to quantify the damages at hundred per cent in case of default for a period less than one month and those for a period more than 12 months. It is urged that the fixation of upper limit at hundred per cent is no guide-line. If the object of the Legislation is to be achieved, the guide-lines must specify a uniform method to quantify damages after considering all essentials like loss or injury sustained, the circumstances under which the default occurred, negligence, if any, etc. It is said that the damages under s. 14B which is the pecuniary reparation due must be correlated to all these factors. In support of his contention, he drew our attention to s. 10F of the Coal Mines Provident Fund and Bonus

Schemes Act, 1958, which uses the words 'damages not exceeding twenty-five per cent' like section 14B of the Act, and also to a tabular chart provided under that Act itself showing that the amount of damages was correlated to the period of arrears. We regret, we cannot appreciate this line of reasoning. Section 10F of the Act of 1958 came up for consideration before this Court in Commissioner of Coal Mines Provident Fund, Dhanbad v. J. Lalla & Sons.(1) This Court observed, firstly, that the determination of damages is not 'an in flexible application of a rigid formula', and secondly, the words 'as it may think fit to impose' show that the authority is required to apply its mind to the facts and circumstances of the case. The contention that in the absence of any guide- lines for the quantification of damages, s. 14B is violative of Article 14 of the Constitution, must, therefore, fail."

9. In the case of Regional Provident Fund

Commissioner, E.P.F.O V/s. Presiding Officer,

E.P.F.A Tribunal and Another [2019 LLR 690], the

Hon'ble Madras High Court has held as under:

"6. As seen from section 14[B], the power to recover damages from the employer is only discretionary, as the section says only "may recover". In the instant case admittedly, the second respondent is a company and even in the reply made to the demand made by the petitioner for the payment of damages under section 14-B, they have expressed that they are facing a financial crisis."

10. In the light of the said judgments, the

Tribunal has observed that no mandate is prescribed to

impose damages only in accordance with the rates

contemplated in Para 32A of the Scheme neither in the

Scheme nor under Section 14-B of the Act. Having

regard to the financial difficulties suffered by the

respondent as stated, i.e., in the background of slow

production and delay in delivery vis-à-vis no reduction

in the strength of the employees and the loans borrowed

from the financial institutions by the respondent, the

- 10 -

Tribunal has exercised the discretionary power in