Madras High Court
The Assistant Provident Fund ... vs M/S.Kongarar Textiles Ltd on 5 July, 2021
W.A.No.1286 of 2013
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED : 05.07.2021
CORAM
THE HONOURABLE MR.JUSTICE T.RAJA
and
THE HONOURABLE MR.JUSTICE V.SIVAGNANAM
W.A.No.1286 of 2013
and M.P.No.1 of 2013
The Assistant Provident Fund Commissioner,
Office of the Regional Provident Fund Commissioner,
Bhavishya Nidhi Bhavan,
Dr.Balasundaram Road,
Coimbatore-641018.
... Appellant
-vs-
1.M/s.Kongarar Textiles Ltd.,
Krishnapuram, Madathukulam,
Udumalpet-642113
represented by Official Liquidator,
High Court of Madras.
2.The Presiding Officer,
Employees Provident Fund Appellate Tribunal,
New Delhi-110 092
3.G.Venkataraman
4.M/s.Booma Realty Private Limited,
rep by its Director P.K.Ganeshwar,
No.21, Pollachi Road,
Palladam-641 664,
Tirupur District.
5.Shri Ganesh Textiles
Rep. by its Proprietor P.K.Ganeshkumar,
No.21, Pollachi Road,
Palladam-641 664,
Tirupur District. ... Respondents
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W.A.No.1286 of 2013
Prayer: Writ appeal filed under Clause 15 of the Letters Patent
praying to allow the Writ Appeal by setting aside the order of the
learned Single Judge made in W.P.No.15569 of 2012 dated
19.02.2013.
For Appellant : Ms.R.Meenakshi
For R1 : Mr.Kiran Manokaran
(Official Liquidator)
For R2 : Court
For R3 : No appearance
For R4 & R5 : Mr.B.Kumarasamy
JUDGMENT
(Judgment of the Court was pronounced by T.RAJA.J)
This Writ Appeal has been directed against the impugned order
passed by the learned Single Judge in W.P.No.15569/2012 dated
19.02.2013 in and by which the learned Single Judge declined to
entertain the plea of the appellant to cancel the order passed by the
Employees' Provident Fund Appellate Tribunal, New Delhi, ordering
reduction of damages to 10% for the reasons mentioned therein.
2. Learned Counsel appearing for the appellant-Assistant
Provident Fund Commissioner vehemently contended that originally,
the 4th respondent company, namely, M/s.Booma Realty Private
Limited, Palladam, Tirupur, having purchased the sick company,
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W.A.No.1286 of 2013
namely, M/s.Kongarar Textiles Limited, Krishnapuram, Madathukulam,
Udumalpet, the 1st respondent herein was liable to pay the provident
fund contributions of the employees to the appellant that became due
from 1999 till 2004. Since it became a sick industry resultantly
approached the BIFR. The BIFR also in its order dated 21.01.2004
accepting the sickness of the 1st respondent company declared the
same as sick unit. Thereafter for its inability to clear the debts due to
the creditors, the company was brought to the public auction for sale
of the properties under the provisions of the Securitisation and
Reconstruction of Financial Assets and Enforcement of Security
Interest Act (hereinafter referred to as, 'the SARFAESI Act''). Finally,
the properties of M/s.Kongarar Textiles Limited Textiles were sold on
30.03.2010. Three Sale Certificates dated 30.03.2010 were issued
and the purchasers are respondents 4 and 5, namely, M/s.Booma
Realty Private Limited and Shri Ganesh Textiles. Therefore, now the
core issue raised before all the courts below and also before this Court
was that when the subsequent purchasers respondents 4 and 5 jointly
have paid the total contribution including the interest payable by the
1st respondent before it became sick whether the respondents 4 and 5
are also liable to pay the damages.
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W.A.No.1286 of 2013
3. Learned Counsel for the appellant further contended that when
the matter was taken up before the Provident Fund Appellate Tribunal
in ATA Nos.299 (13)/2011, 300 (13)2011, 301(13) 2011 and 302 (13)
2011 finding fault with the officer conducting enquiry under Section
14(B) of the Act, the Tribunal held that the officer has not provided full
opportunity to the respondents 4 and 5 to represent their case. On
this basis, to meet the ends of justice, keeping in mind that the sick
company 1st respondent herein was sold away and the same was
purchased by the respondents 4 and 5 and that they have also paid
the contribution along with interest, restricted the damages upto 10%
p.a. on the arrears of contribution and accordingly allowed the appeal.
This was questioned by the appellant-Assistant Provident Fund
Commissioner before the learned Single Judge of this Court. The
learned Single Judge going into the sole question whether the Tribunal
has kept in mind the relevant facts into consideration before reducing
the damages levied against the company, namely, M/s.Kongarar
Textiles Limited, finally went into the vital aspect that the 1st
respondent company after becoming sick was sold away in a public
auction in which the respondents 4 and 5 have purchased the property
and thereupon they have also cleared the contribution and also the
interest. Therefore, when the 1st respondent company became sick
unit, this has also been accepted by the BIFR and subsequently, the
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W.A.No.1286 of 2013
Provident Fund Appellate Tribunal has also found that the 1st
respondent company became sick and the properties and machineries
have been sold away and purchased by the respondents 4 and 5,
giving the benefit of the Sick Industries Act, has reduced the damages
upto 10%. Agreeing with the findings recorded by the learned
Provident Fund Appellate Tribunal, the learned Single Judge dismissed
the Writ Petition against which the present appeal has been filed.
4. Learned Counsel for the appellant taking us to Section 14-B of
the Employees' Provident Funds and Miscellaneous Provisions Act,
1952 and 32-A and 32-B of the Employees' Provident Fund Scheme,
1953, attempted to demonstrate that the Provident Fund Tribunal has
no authority to reduce the damages to 10% p.a. On the other hand,
the Central Board alone has got authority to reduce or waive the
damages levied under section 14-B of the Act in relation to an
establishment specified in the second proviso to section 14-B subject
to the terms and conditions specified in Section 32-B of the Act.
5. Opposing the above, learned Counsel for the respondents 4
and 5 submitted that when the 1st respondent herein has been
declared as a sick unit by the BIFR and finally, expressed their inability
to clear the contribution and other liabilities, their properties were also
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W.A.No.1286 of 2013
sold away in the public auction held on 30.03.2010, hence, the 1 st
respondent is entitled to get the benefit of the Sick Act. This has been
rightly appreciated by the Provident Fund Tribunal as well as by the
learned Single Judge of this Court. Moreover, if the 1st respondent
company has not been purchased by the respondents 4 and 5, the
appellant would not have even received the amount of contribution
and interest.
6. Learned Counsel for the respondents 4 and 5 further
submitted that in the present case for the reason that the sick
company was purchased by the respondents 4 and 5, they have
genuinely come forward to clear the total contribution including the
interest. Keeping in mind these vital and crucial aspects both the
learned Provident Fund Appellate Tribunal and the learned Single
Judge have held concurrently that only 10% reduction also need not
be borne by the respondents 4 and 5 as the 1st respondent company
had become sick, he pleaded.
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W.A.No.1286 of 2013
7. In this regard, it is relevant to extract the said Sections
here under:
''[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 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 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.]
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W.A.No.1286 of 2013
[32-A. Recovery of damages for default in payment of
any contribution :[(1) Where a employer makes default in
the payment of any contribution to the 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 of the Act or in the payment of any charges
payable under any other provisions of the Act or the
Scheme or under any of the conditions specified under
Section 17 of the Act, the Central Provident Fund
Commissioner or such 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, damages at the rates given in the table below:
TABLE
Sl.No. Period of default Rate of damages
(percentage of arrears per
annum)
(1) (2) (3)
(a) Less than 2 months Five
(b) Two months and above but less than four Ten
months
© Four months and above but less than six Fifteen
months
(d) Six months and above Twenty Five]
(2) The damages shall be calculated to the nearest
rupees, 50 paise or more to be counted as the nearest
higher rupee and fraction of a rupee less than 50 paise to
be ignore.
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W.A.No.1286 of 2013
32-B Terms and Conditions for reduction or waiver of
damages: The Central Board may reduce or waive the
damages levied under section 14-B of the Act in relation to
an establishment specified in the second proviso to section
14-B, 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
Scheme, in this behalf recommends, waiver of damages up
to 100 per cent may be allowed;
(c ) in other cases, depending on merits, reduction of
damages up to 50 per cent may be allowed.]''
8. We are in full agreement with the submissions made by the
learned Counsel for the respondents 4 and 5. The reason being that it
is an admitted case that the 1st respondent company who was liable to
pay the provident fund contribution had committed default for the
reason that it went into a huge loss and ultimately landed before the
BIFR. When the BIFR having seized of the matter, went into the
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W.A.No.1286 of 2013
aspects whether the 1st respondent has really suffered any sickness
and after considering the pros and cons of the case of the 1st
respondent and the appellant, in its order dated 21.01.2004 has held
that the 1st respondent is a sick unit, resultantly its properties were
also brought to public auction and the respondents 4 and 5 purchased
the properties and they have also cleared the total contribution along
with interest. Therefore, the learned Employees' Provident Fund
Appellate Tribunal, considering the fact that the sick unit has
disappeared and the respondents 4 and 5, the subsequent purchasers
have paid the entire contribution along with interest, has rightly
reduced the damages to 10% p.a., as there is no mens rea or willful
default, in dismissing the appeal filed by the 3rd respondent cannot be
found fault with. Hence, we do not find any illegality or infirmity in the
order of the learned Single Judge.
9. In the result, the Writ Appeal fails and the same is
accordingly dismissed. No costs. Consequently, connected
Miscellaneous Petition is also closed.
(T.R.J.,) (V.S.G.J.,)
05.07.2021
tsi
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W.A.No.1286 of 2013
To
The Presiding Officer,
Employees Provident Fund Appellate Tribunal,
New Delhi-110 092
https://www.mhc.tn.gov.in/judis
W.A.No.1286 of 2013
T.RAJA, J.
and
V.SIVAGNANAM, J.
tsi
W.A.No.1286 of 2013
and M.P.No.1 of 2013
05.07.2021
https://www.mhc.tn.gov.in/judis
W.A.No.1286 of 2013
W.A.No.1286 of 2013
T.RAJA, J.
and
V.SIVAGNANAM, J.
(Order of the Court was made by T.RAJA, J.)
At the instance of the learned counsel appearing for the respondents 4
& 5, the matter has been taken up under the caption 'for being mentioned'.
2. Mr.B.Kumarasamy, learned counsel appearing for the respondents
4 & 5 submitted that when the Employees' Provident Fund Appellate
Tribunal in its order dated 4.4.2013 passed in ATA Nos.299(13)2011 to
302(13)2011 has modified and restricted the damages to 10% of the actual
damages, instead of 10% per annum assessed under the order impugned
dated 9.2.2012, this Court, while disposing of the appeal, confirming the
impugned order passed by the learned single Judge, in the penultimate
paragraph-8, has observed that the respondents 4 & 5 have to pay damages
at 10% per annum, instead of 10% of actual damages. Therefore, learned
counsel appearing for the respondents 4 & 5 requested this Court to clarify
the same.
3. Objecting to the same, Ms.R.Meenakshi, learned standing counsel
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W.A.No.1286 of 2013
appearing for the appellant placed before us two submissions. Firstly, when
the Employees' Provident Fund Appellate Tribunal, in its order dated
9.2.2012, directed the sick company to pay damages at 10% per annum, that
order was confirmed by the learned single Judge in the order dated
19.2.2013 passed in W.P.No.15569 of 2012. Secondly, when the order dated
9.2.2012 has been confirmed by the learned single Judge vide the order
dated 19.2.2013 passed in the above writ petition, on a modification
application moved by the respondents 4 & 5, the Employees' Provident
Fund Appellate Tribunal, cannot once again restrict the same to 10% of the
actual damages assessed under the order impugned, by the order dated
4.4.2013.
4. But we are unable to find any merit on her contentions. The reason
being that once the Employees' Provident Fund Appellate Tribunal passed
an order dated 9.2.2012 directing the sick company to pay damages at 10%
per annum, this order has been modified by the Employees' Provident Fund
Appellate Tribunal in ATA Nos.299(13)2011 to 302(13)2011 vide order
dated 4.4.2013 at the instance of the respondents 4 & 5. The appellant has
also not questioned the order dated 4.4.2013 passed by the Employees'
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W.A.No.1286 of 2013
Provident Fund Appellate Tribunal. Even the learned single Judge also, in
his order dated 19.2.2013, while dismissing the Writ Petition No.15569 of
2012, has observed clearly that no case has been made out to interfere with
the order passed by the Tribunal in reducing the damages to 10%.
Therefore, the appellant is entitled to collect only 10% of Rs.87,65,805/- of
the actual damages from the respondents 4 & 5, as per the order dated
4.4.2013 passed by the Employees Provident Fund Appellate Tribunal in
ATA Nos.299(13)2011 to 302(13)2011, and the penultimate paragraph-8 of
the order dated 5.7.2021 shall be read accordingly.
(T.R.,J.) (V.S.G., J.)
27.10.2021
ss
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W.A.No.1286 of 2013
T.RAJA, J.
and
V.SIVAGNANAM, J.
ss
W.A.No.1286 of 2013
27.10.2021
https://www.mhc.tn.gov.in/judis
