Madras High Court
Tamilnadu Agro Engg. And Service vs The Director (Recovery) on 15 April, 2021
W.A.Nos.1702 & 1703 of 2012
IN THE HIGH COURT OF JUDICIATURE AT MADRAS
DATED : 15.04.2021
CORAM :
THE HONOURABLE MR.JUSTICE T.RAJA
and
THE HONOURABLE MR.JUSTICE P.T.ASHA
W.A.Nos.1702 & 1703 of 2012
and M.P. No.1 of 2012
Tamilnadu Agro Engg. and Service
Co-operative Federation Limited,
represented by the Liquidator
A.Thavamani Raj
No.55, Thiru Vi.Ka.Industrial Estate,
Ekkattuthangal, Chennai-600 097. ... Appellant in both the appeals
versus
1.The Director (Recovery),
Employees' Provident Fund Organisation,
(Ministry of Labour, Government of India),
Head Office, Bhavishya Nidhi Bhavan,
No.14, Bhikaji Cama Place,
New Delhi-110 066. ... 1st respondent in W.A. No.1702 of 2012
2.The Assistant Provident Fund Commissioner,
Employees Provident Fund Organisation,
(Ministry of Labour, Government of India),
Sub Regional Office, Tambaram,
No.3, Rajaji Salai, Tambaram,
Chennai-600 045.
3.The Enforcement Officer, ... Respondents 2 and 3 in W.A.
Sub Regional Office, Tambaram, No.1702 of 2012 and
No.3, Rajaji Salai, Tambaram, respondents 1 and 2 in W.A.
Chennai-600 045. No.1703 of 2012
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W.A.Nos.1702 & 1703 of 2012
3.The Presiding Officer,
E.P.F. Appellate Tribunal,
7th Floor, Skylark Building,
No.60, Nehru Place,
New Delhi 110 019. ... 3rd respondent in W.A. No.1703 of 2012
Prayer in both the Writ Appeals: Appeals filed under Clause 15 of
Letters Patent to allow the writ appeals and set aside the order
passed in W.P. Nos.30690 of 2007 & 6423 of 2008 on 07.06.2011.
For Appellant
in all cases : Mr.S.Balasubramanian
For Respondents : Mr.Vishnu Ramu for Mr.K.Ramu
for R2 & R3 in W.A. No.1702 of 2012
for R1 & R2 in W.A. No.1703 of 2012
R1 in W.A. No.1702 of 2012-No appearance
R3-Tribunal in W.A. No.1703 of 2012
COMMON JUDGMENT
(Judgment of this Court was delivered by T.RAJA,J.)
These two writ appeals have been filed to set aside the order
dated 07.06.2011 passed in W.P. Nos.30690 of 2007 and 6423 of
2008 in and by which the learned Single Judge dismissing the writ
petitions, rejected the request of the petitioner for waiver of
damages under Section 14-B of the Employees' Provident Funds and
Miscellaneous Provisions Act, 1952 (in short 'the EPF Act').
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2.For the sake of convenience, the appellant Tamil Nadu Agro
Engineering and Service Co-operative Federation Limited be
referred as 'the Federation'.
3.Mr.S.Balasubramanian, learned counsel appearing for the
appellant submitted that the appellant Federation was started in the
year 1972 under Half Million Job Programme to provide employment
opportunities to the un-employed Engineers and Technicians under
the provisions of Tamil Nadu Co-operative Societies Act 1983 and
Rules 1988. Since the appellant Federation has incurred heavy loss,
after some time, the Government of Tamil Nadu was forced to take
winding up proceedings of the Federation. In this regard, the
Government of Tamil Nadu, exercising its power under the
provisions of Tamil Nadu Co-operative Societies Act 1963, initiated
winding up proceedings of the Federation, by passing an order in
G.O. Ms. No.395 Agriculture (AE.II) Department dated 27.11.2002.
Consequently, a Liquidator was appointed by an order dated
31.05.2005 to take over the charge of the assets and liabilities of
the appellant Federation. Pursuant to the winding up proceedings,
the Special Officer of the Federation has issued retrenchment
notices to 370 employees of the Federation by terminating their
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W.A.Nos.1702 & 1703 of 2012
services. While so, the Assistant Provident Fund Commissioner,
Employees Provident Fund Organisation has taken steps for
recovery of damages and for non-payment of provident fund dues
under Section 14-B of the 'EPF Act'. Opposing the above, the
appellant Federation has submitted its explanation dated
09.05.2007 to the Director (Recovery), Employees' Provident Fund
Organisation informing that it has become sick unit and it has been
closed as per the order of the State Government, hence, requested
him to waive the interest and damages. On receipt of the same, the
Director (Recovery), Employees' Provident Fund Organisation,
without even hearing the appellant Federation, passed an order
quantifying the damages for a period from April 2002 to November
2004 and has fixed Rs.1,88,49,251/- as contribution and also
directed the Assistant Provident Fund Commissioner, Employees
Provident Fund Organisation to ensure the remittance of the above
said amount from the Federation. Aggrieved thereby, a detailed
representation was made by the Federation under Section 14-B of
'the EPF Act' and Section 32-B(c) of the Employees' Provident Fund
Scheme 1952 to waive the damages levelled against the Federation.
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4.Learned counsel appearing for the appellant further
submitted that while passing orders for winding up the appellant
Federation, the Government sanctioned a sum of Rs.1.580.25 lakhs
as loan from the Tamil Nadu State Renewal Fund towards payment
of the closer compensation and other terminal benefits to the said
retrenched employees of the appellant Federation and in the said
amount, the dues towards employees provident fund of Rs.82.03
lakhs have been paid. Learned counsel for the appellant further
submitted that the non-payment of provident fund dues was not
wilful or wanton, but on account of the loss sustained by the
appellant Federation. Ignoring the factual aspects, the Assistant
Provident Fund Commissioner passed an order under Section 14-B
of 'the EPF Act' directing the appellant Federation to pay a sum of
Rs.1,33,66,481/- towards damages and interest of Rs.54,82,770/-.
As the Assistant Provident Fund Commissioner and the Enforcement
Officer have taken steps for recovery, the appellant Federation has
moved an Application to the Central Board Trust requesting for
waiver of damages and interest by representation dated 26.06.2007
and also filed a petition in W.P. No.24234 of 2007 before this Court
for mandamus seeking a direction to the Assistant Provident Fund
Commissioner not to enforce his order passed on 19/20.06.2007 till
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the disposal of the application filed before the Central Board Trust
and this Court, directed the Central Board Trust, New Delhi to
consider the application, on merits and in accordance with law,
within a period of four weeks from the date of the receipt of the
copy of the order of this Court and further directed the Assistant
Provident Fund Commissioner and the Enforcement Officer not to
enforce the order till such time. Since the Director (Recovery),
Employees' Provident Fund Organisation, New Delhi rejected the
application filed by the appellant Federation for waiver of damages
and interest, the appellant Federation has come to this Court with
the above Writ Petitions in W.P. Nos.30690 of 2007 and 6423 of
2008 challenging the Proceedings dated 07.09.2007 issued by the
Director (Recovery), Employees' Provident Fund Organisation, New
Delhi and seeking a direction to the Assistant Provident Fund
Commissioner, Employees Provident Fund Organisation, Chennai not
to enforce his order passed in the Proceedings dated 30.01.2008
levying damages under Section 14-B of EPF Act against the
appellant Federation respectively.
5.Learned counsel appearing for the appellant further
submitted that the delayed payment of provident fund dues was not
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wanton, but due to the winding up of the Federation and therefore,
the appellant Federation is entitled to the benefit of Section 14-B of
'the EPF Act' on account of loss sustained. Without considering these
aspects, the learned Single Judge of this Court, dismissed the above
writ petitions. Aggrieved by the same, the appellant Federation is
before this Court with the above Writ Appeals.
6.Learned counsel appearing for the appellant, placing
reliance on the ratio laid down by the Division Bench of this Court
reported in 2014 (2) CWC 728 in the case of RH 153,
Ramanathapuram District Co-operative Spinning Mills Ltd. and
others vs. Central Board of Trustees of Employees' Provident Fund
Organisation, holding that the survival of the Co-operative Societies,
depends upon the concessions that are extended to them,
submitted that when concessions and discounts were provided to
safeguard the establishments for making profits, it is not known
why the similar concession was denied to the Co-operative
Societies, which is established to provide benefits to the common
man. Therefore, since the Hon'ble Division Bench of this Court has
already settled the issue in favour of the appellant holding that
when the waiver of damages is permissible in respect of industries
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which were established only with profit motive, the benefit cannot
be denied to Co-operative institutions, the appellant Federation,
having suffered with winding up proceedings, cannot make any
further payment, the appeals deserve to be allowed.
7.Opposing the above prayer, Mr.Vishnu Ramu, learned
counsel for R2 & R3 in W.A. No.1702 of 2012 and R1 & R2 in W.A.
No.1703 of 2012 contended that the appellant themselves have
come forward on their own to make the damages and interest.
Therefore 50% of the damages were recovered from the appellant's
bank account. When the appellant on their own volition have come
forward to pay the damages, they are not permitted to challenge
the same on the ground that the Director (Recovery) and the
Assistant Provident Fund Commissioner have taken coercive steps
against the appellant Federation.
8.Replying to the submission made by the learned counsel for
the appellant to the above ratio laid down by this Court, learned
counsel for R2 & R3 in W.A. No.1702 of 2012 and R1 & R2 in W.A.
No.1703 of 2012 argued that although the appellant have been
declared as sick federation, no scheme whatsoever have been
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framed for revival. Since there is no order passed to waive the
damages and consequent interest thereon, the above ratio laid
down by the Division Bench of this Court cannot be made applicable
to the present case.
9.It is seen from records that the appellant Federation, who is
a Co-operative Society, was started during the year 1972 to provide
employment opportunities to the un-employed Engineers and
Technicians under the provisions of Tamil Nadu Co-operative
Societies Act 1983 and Rules 1988. Since the appellant Federation
has incurred loss subsequently, the Government of Tamil Nadu was
forced to take winding up proceedings of the Federation. Therefore,
the Government of Tamil Nadu exercised its power under the
provisions of Tamil Nadu Co-operative Societies Act 1963 and
initiated winding up proceedings of the Federation by passing an
order in G.O. Ms. No.395 Agriculture (AE.II) Department dated
27.11.2002. In this regard, a Liquidator was appointed by an order
dated 31.05.2005 to take over the charge of the assets and
liabilities of the appellant Federation. Pursuant to the winding up
proceedings, the Special Officer of the Federation has issued
retrenchment notices to 370 employees of the Federation. While so,
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the Assistant Provident Fund Commissioner, Employees Provident
Fund Organisation has taken steps for recovery of damages and for
non-payment of provident fund dues under Section 14-B of the 'EPF
Act'. Aggrieved by the same, the appellant Federation has submitted
its detailed representation dated 09.05.2007 to the Director
(Recovery), Employees' Provident Fund Organisation about the sick
nature of the Federation, requesting him to waive the interest and
damages. However, the Director (Recovery), Employees' Provident
Fund Organisation, quantifying the damages for a period from April
2002 to November 2004, has fixed Rs.1,88,49,251/- as contribution
and also directed the Assistant Provident Fund Commissioner to
ensure the remittance of the above said amount from the
Federation. Aggrieved thereby, a detailed representation was made
by the Federation under Section 14-B of 'the EPF Act' and Section
32-B(c) of the Employees' Provident Fund Scheme 1952 to waive
the damages levelled against the Federation.
10.It is further seen that the Assistant Provident Fund
Commissioner and the Enforcement Officer have taken steps for
recovery, the appellant Federation has moved an Application to the
Central Board Trust requesting for waiver of damages and interest
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by representation dated 26.06.2007 and also filed a petition in W.P.
No.24234 of 2007 for mandamus to direct the Assistant Provident
Fund Commissioner not to enforce his order passed on 19/
20.06.2007 till the disposal of the application filed before the
Central Board Trust. This Court directed the Central Board Trust,
New Delhi to consider the application, on merits and in accordance
with law within a period of four weeks from the date of the receipt
of the copy of the order of this Court and further directed the
Assistant Provident Fund Commissioner and the Enforcement Officer
not to enforce the order till such time.
11.When the Government of Tamil Nadu has exercised its
power under the provisions of Tamil Nadu Co-operative Societies
Act 1963 and initiated winding up proceedings of the Federation by
passing an order in G.O. Ms. No.395 Agriculture (AE.II) Department
dated 27.11.2002 and a Liquidator was appointed by an order dated
31.05.2005 to take over the charge of the assets and liabilities of
the appellant Federation and pursuant to the winding up
proceedings, the Special Officer of the Federation has issued
retrenchment notices to 370 employees of the Federation by
terminating their services, it is quite impossible for the appellant to
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continue the payment of any contribution. When the Government of
Tamil Nadu, after analysing the fact that the appellant Federation
has incurred heavy loss, ordered winding up of the appellant
Federation, we are of the view that there may not be any willful or
deliberate intention on the part of the appellant Federation in
making the provident fund contribution to the Assistant Provident
Fund Commissioner and the Enforcement Officer. When the
appellant Federation was established in the year 1972 under Half
Million Job Programme to provide employment opportunities to the
un-employed Engineers and Technicians, the Assistant Provident
Fund Commissioner and the Enforcement Officer, after receipt of the
application from the appellant Federation and a direction issued by
this Court in W.P. No.24234 of 2007, in our considered opinion,
should have accepted for waiver of the damages as per Section 14-
B of 'the EPF Act' which is extracted hereunder:
'14-B. Power to recover damages – Where an employer
makes default in the payment of any contribution to the
Fund (the (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 (or sub-
section (5) of Section 17) or in the payment of any
charges payable under any other provision of this Act or
of (any scheme or Insurance Scheme) or under any of
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the conditions specified under Section 17, (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 (from the employer by way of penalty such
damages, not exceeding the amount of arrears, as may
be specified in the Scheme):
(Provided that before levying and recovering such
damages, the employer shall be given a reasonable
opportunity of being heard:)
(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).'
12.A bare reading of the above two Provisos would show that
the first proviso requires the Organisation to give an opportunity of
personal hearing to the employer and the second proviso enables
the Central Board of Trustees to reduce or waive the damages
levied under the scheme. Since the contention raised by the learned
counsel for the appellant Federation revolves around the second
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proviso to Section 14-B, which states that the Central Board may
reduce or waive the damages levied under this section in relation to
an establishment, in our considered opinion, the appellant
Federation is a Sick Industrial Company. When the respondents
have not legally justified in invoking Section 14-B of 'the EPF Act',
the rejection of the case of the appellant has been found fault with.
Therefore, this crucial aspect has been overlooked by the learned
Single Judge in the Writ Court.
13.Secondly, when a similar and identical issue came up
before the Division Bench in the case of RH 153, Ramanathapuram
District Co-operative Spinning Mills Ltd. and others vs. Central
Board of Trustees of Employees' Provident Fund Organisation
reported in 2014 (2) CWC 728, this Court, considering the various
judgments on the similar issue, has come to the conclusion that
when the waiver of damages is permissible to the industries
established only with profit motive, the same concession of waiver
cannot be denied to co-operative institutions which are established
to help poor people without any profit motive. The relevant portion
thereof is extracted hereunder:
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'14.But however, that is not the end of matter. The fact
that the Appellants are the Co-operative Spinning Mills is
not in dispute. We do not really see any rationale as to
why the Second Proviso to Section 14-B, restricted its
application only to Sick Industrial Companies that come
within (Special Provisions) Act, 1985. As a matter of
fact, if at all, any establishment, is entitled to the benefit
of waiver or reduction of damages, it should be the Co-
operative Societies. If one has a look at the history of
the development of the Co-operative movement, it
would be clear that they are not run on profit motive as
private enterprises are. Therefore, if a benefit is
applicable to other establishments, which are created
only with profit motives, we fail to understand why the
same benefit should not be extended to Co-operative
Societies merely because they do not come within the
purview of Sick Industrial Companies (Special
Provisions) Act, 1985.
15.In Q-793, Madathupatti Weavers' Co-operative
Production and Sales Society Ltd. v. Regional Provident
Fund Commissioner, Madurai and others, 2003 (3) LLN
674 (Mad.) : 2003 (3) LLJ 795, a Division Bench of this
Court invited reference to the decision of the
Constitutional Bench of the Supreme Court in
Mohamedalli v. Union of India, AIR 1964 SC 930, and
pointed out that Co-operative Societies stand on a
special footing which distinguished them from other
establishments. The Division Bench further pointed out
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that it is the settled policy of the Government to
encourage Co-operative Societies with a view to their
development and growth in the interest of community at
large.
16.A similar view was taken by another Division Bench,
to which one of us (V.Ramasubramanian,J.) was a party
in Q-1283, Kidathirukkai Primary Agricultural Co-
operative Bank, Kidathirukkai Post, Ramanathapuram
District v. Assistant Provident Fund Commissioner and
another in W.A. (MD) No.262 of 2009, dated
25.06.2009. In the said case, the Division Bench pointed
out that the Co-operative Society deserved special
treatment in such cases.
18.In view of the above, we are of the considered view
that the survival of the Co-operative Societies, depend
upon the concessions that are extended to them. When
the waiver of damages is permissible in respect of
industries which were established only with profit
motive, the benefit cannot be denied to Co-operative
institutions.'
14.A perusal of the above judgment vividly tells us that when
the waiver of damages is permissible in respect of industries which
were established only with profit motive, the same benefit cannot
be denied to the Co-operative institutions, which are established
without any profit motive. If the benefit is applicable to other
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establishments, which are created only with profit motives, the
same benefit may be extended to the Co-operative Societies and it
is also the settled policy of the Government to encourage Co-
operative Societies with a view to their development and growth in
the interest of community at large. Therefore, respectfully agreeing
with the ratio laid down by the Division Bench mentioned supra, we
are constrained to interfere with the impugned order as it holds that
the appellant Co-operative Federation failed to qualify in terms of
the statutory parameters indicated in Section 14-B. The proviso to
Section 14-B says that the damages levied under this Section may
be waived or reduced in relation to sick establishment of which a
scheme for rehabilitation has been sanctioned. But in the case on
hand, the appellant herein is not sick industrial company but sick
co-operative federation. When the sick industrial companies are
given the benefit of waiver, as per clause (a) of paragraph 32-B of
the Employees Provident Fund Scheme 1952, the appellant
Co-operative Federation, having suffered winding up proceedings, is
entitled to get the same benefit of waiver. This aspect was
overlooked by the impugned order.
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15.Therefore, in the light of the above judgment, the order
passed by the learned Single Judge is set aside and the Writ Appeals
stand allowed. Needless to mention that the amount collected by
the Director (Recovery) and the Assistant Provident Fund
Commissioner Employees' Provident Fund Organisation shall be re-
funded within a period of six weeks from the date of receipt of a
copy of this order. Consequently, M.P. No.1 of 2012 stands closed.
No costs.
[T.R.,J] [P.T.A.,J]
15.04.2021
vga
Index: Yes/No
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W.A.Nos.1702 & 1703 of 2012
To
1.The Director (Recovery),
Employees' Provident Fund Organisation,
(Ministry of Labour, Government of India),
Head Office, Bhavishya Nidhi Bhavan,
No.14, Bhikaji Cama Place,
New Delhi-110 066.
2.The Assistant Provident Fund Commissioner,
Employees Provident Fund Organisation,
(Ministry of Labour, Government of India),
Sub Regional Office, Tambaram,
No.3, Rajaji Salai, Tambaram,
Chennai-600 045.
3.The Enforcement Officer,
Sub Regional Office, Tambaram,
No.3, Rajaji Salai, Tambaram,
Chennai-600 045.
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T.RAJA,J.
and
P.T.ASHA,J.
vga
W.A.Nos.1702 & 1703 of 2012
15.04.2021
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