Madras High Court
The Regional Provident vs M/S.J.J.College Engineering on 1 April, 2025
W.P.(MD) No.25252 of 2019
BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT
DATED : 01.04.2025
CORAM:
THE HONOURABLE MR.JUSTICE MUMMINENI SUDHEER KUMAR
W.P.(MD) No.25252 of 2019
and
W.M.P.(MD) Nos.21840 & 21844 of 2019
The Regional Provident
Fund Commissioner
Employees Provident
Fund Organisation
No.18, Madurai Road
Triuchirapalli ... Petitioner
-vs-
M/s.J.J.College Engineering
and Technology
rep. through its Principal of
the Institution
Ammapettai
Trichy-620 009 ... Respondent
PRAYER: Petition filed under Article 226 of the Constitution of India, to issue
a writ of certiorari to call for the records relating to the order passed by the
Employee's Provident Fund Appellate Tribunal, New Delhi, in A.T.A.No.
695(13)2014, dated 19.08.2014 and quash the same as unconstitutional.
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W.P.(MD) No.25252 of 2019
For Petitioner : Mr.N.Dilip Kumar
For Respondent : Mr.C.Karthikeyan
ORDER
This writ petition has been filed by the Employees Provident Fund
Organisation aggrieved by an order dated 19.08.2014, passed by the
Employees' Provident Fund Appellate Tribunal, New Delhi, in A.T.A.No.
695(13)2014, whereby the learned Appellate Tribunal allowed the appeal filed
by the respondent against the order dated 23.05.2014, passed under Section
14B of the Employees' Provident Funds and Miscellaneous Provisions Act,
1952, (in short, “the Act, 1952”) levying damages of Rs.37,73,565/-.
2. The perusal of the impugned order dated 19.08.2014 would
disclose that the learned Appellate Tribunal interfered with the order passed
by the Primary Authority under Section 14B of the Act, 1952, on the ground
that there is no mens rea on the part of the respondent herein in non-
remittance of the provident fund contributions in time.
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3. The existence of mens rea is not a condition precedent for
imposing damages under Section 14B of the Act, 1952 and the same is now
well settled legal position in the light of the law laid down by the Honourable
Apex Court in the case of Horticulture Experiment Station vs. Provident
Fund Organisation, reported in (2022) 4 SCC 516.
4. In the light of the above decision of the Apex Court, all previous
decisions on the said issue stood overruled, wherein it is held that existence of
mens rea is a condition precedent for imposing damages.
5. The impugned order herein is also an order passed by the
Appellate Tribunal allowing the appeal filed by the respondent herein only on
the ground that there is no mens rea on the part of the respondent herein in
non remittance of the provident fund contributions and thereby allowed the
appeal. Hence, in the light of the law laid down by the Apex Court in the case
of Horticulture Experiment Station (cited supra), the impugned order
cannot be sustained.
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6. A Full Bench of this Court also having taken note of the above
said decision of the Honourable Apex Court, by a common Judgment dated
03.06.2024, passed in W.P.(MD) Nos.7339, 9688 of 2013, 2765 & 2782 of
2014, laid down certain guidelines in the matter of deciding the liability under
Section 14B of the Act, 1952. Paragraph No.39 of the said decision reads as
under:
39.Therefore, following the principles reiterated by
the Hon'ble Supreme Court and different High Courts
including our High Court in similar circumstances, this
Court hold that Section 14-B of the Act is an enabling
provision and it does not envisage any compulsion to levy
damages in all cases, and is inclined to frame the following
guidelines:-
(i) Before levying damages in terms of Section 14-
B of the Act, every authority is required to
follow principles of natural justice. The
particulars of the default, period, etc., and
every adverse information that may be relied
upon for levying damages should be indicated
or furnished to the employer and a fair
opportunity should be given to the employer to
put forth his case in defence to the proposed
action.
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(ii) The authority, while exercising power under
Section 14-B, shall keep in mind that the
liability as per the table given in Para 32A of
the Scheme, should be treated as upper limit
within which damages can be levied for the
delay in making contributions by the employer.
(iii) In appropriate cases where the employer is
able to provide sufficient reasons or cause
justifying the delay with verifiable materials,
the authority is competent to waive or fix the
quantum of damages less than what is shown
in the table under Para 32A of the Scheme.
(iv) When an employer is not in a position to make
payment in order to save the industry from
closure or on account of protecting the industry
or establishment from being put to face
proceedings under the SARFAESI Act or other
inevitable circumstances which compels the
employer to divert the funds only to save the
industry and the employees, there cannot be a
levy of damages.
(v) The authority under the Act has to consider all
the mitigating circumstances including
financial difficulties projected by the employer
and pass a reasoned order.
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(vi) When the employer is able to produce all the
documents or verifiable material within his
reach to substantiate any mitigating
circumstance, the authority exercising power
under Section 14-B has to pass orders giving
reasons, if he is unable to find truth or bona
fides in the claim of the employer.
(vii) There shall be proper application of mind
objectively on the merits of each case and in
any case, the authority cannot resort to the
arithmetical calculation or for levying damages
as per Para 32A of the Scheme without
considering the mitigating circumstances.
(viii) While assessing the quantum of damages, the
past and present conduct of the employer also
should be taken note of. For example, there
can be levy of damages as per Para 32-A of
EPF Scheme in every case when the employer
is a chronic defaulter despite having surplus
funds or found to have diverted funds.
(ix) There may be variety of circumstances to
which the employer is put to while managing
an industrial establishment or a factory within
the purview of the Act. The proviso to Section
14-B gives a special power to the Board to
waive damages when a rehabilitation scheme
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is pending before the BIFR. There may be
similar circumstances for the employer of any
industry to save the industry from the clutches
of private/public financial institutions and the
employer might be facing proceedings under
the SARFAESI Act. Whenever the employer is
forced to make huge amounts by mobilizing
funds from other resources to save the
industry from closure or to avoid similar
situations, such payment need not be
considered as an act to avoid payment of
provident fund dues.
(x) The delay in payments by profit making
establishments has to be seriously viewed and
every profit making employer is bound to pay
the provident fund contributions promptly,
unless there are strong reasons or
circumstances that prevent the employer from
making the payment on the due dates. If there
is an element of willful negligence in payment
of Provident Fund dues, the Assistant
Provident Fund Commissioner or the
competent authority can levy damages
exercising his discretion.
(xi) Though mens rea is not an essential
ingredient, there cannot be levy of damages at
the maximum limit merely because there is a
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default. Before levying damages, there must
be definite finding or reason, after considering
the explanation or reasons given by the
employer for the delay in payment of dues and
other mitigating circumstances. The discretion
vested with the Assistant Provident Fund
Commissioner or the competent authority shall
be exercised judiciously in tune with the
settled principles of law and keeping in mind
the interest of the employees concerned.”
7. Further, the learned Appellate Tribunal having found fault with
the Assistant Provident Fund Commissioner in not considering the poor
financial condition, as claimed by the respondent herein, has failed to examine
the said aspect and no factual finding is recorded to conclude that the
respondent herein is suffering poor financial condition on whatsoever ground.
However, the learned Appellate Tribunal proceeded to set aside the order
passed under Section 14B of the Act, 1952, only on the ground that there is
no mens rea on the part of the respondent herein in non remittance of the
provident fund contributions.
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8. In the light of the above, the appeal filed by the respondent
herein is required to be reconsidered by the Appellate Tribunal in the light of
the the decision of the Honourable Apex Court in the case of Horticulture
Experiment Station (cited supra) and the guidelines laid down by the Full
Bench of this Court, which are extracted supra.
9. Further, it is also necessary to note that the impugned order is
dated 19.08.2014 and whereas, the present writ petition has been filed only
on 19.11.2019 i.e., after a lapse of more than five years. Thus, there is
considerable prejudice caused to the respondent herein on account of the
delay in filing the present writ petition. In the circumstances, this Court is of
the considered view that instead of non-suiting the petitioner on the ground of
delay and laches, it is appropriate to compensate the respondent suitably in
terms of money for the prejudice caused by the petitioner herein on account of
the delay in filing the present writ petition challenging the order passed under
Section 14B of the Act, 1952.
10. Further, it is the contention of the learned counsel appearing
for the respondent that the Assistant Provident Fund Commissioner is not a
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person, who passed the original order under Section 14B of the Act, 1952 and
therefore, this writ petition cannot be entertained at the instance of the
petitioner herein / Regional Provident Fund Commissioner. However, this
Court is unable to agree with the said contention as the Assistant Provident
Fund Commissioner, who signed the affidavit filed in support of this writ
petition, has asserted that he is duly authorized to file this writ petition and
such an averment has not been contradicted by the respondent by filing
counter affidavit or otherwise. Therefore, the oral submission made across the
Bar cannot be taken into consideration to non-suit the petitioner.
11. Accordingly, the impugned order, dated 19.08.2014, passed
by the Employees Provident Fund Appellate Tribunal, New Delhi, is set aside
and the matter is remitted back to the Central Government Industrial
Tribunal-cum-Labour Court, situated at First Floor, B-Wing, No.26 Haddows
Road, Shastri Bhawan, Chennai – 600 006, for reconsidering the appeal vide
A.T.A.No.695(13)2014 filed by the respondent herein afresh in the light of the
decision of the Honourable Apex Court in the case of Horticulture
Experiment Station (cited supra) and the guidelines laid down by the Full
Bench of this Court, which are extracted supra. The Appellate Tribunal is
further directed to dispose of the said appeal as expeditiously as possible, at
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any rate, within a period of six months from the date of receipt of a copy of
this order. Till the disposal of the appeal, as directed above, the petitioner
herein shall not take any coercive steps against the respondent herein for
recovery of the dues towards damages under Section 14B of the Act, 1952.
12. The petitioner shall pay a cost of Rs.25,000/- (Rupees twenty
five thousand only) to the respondent, within a period of four weeks from the
date of receipt of a copy of this order. Consequently, connected miscellaneous
petitions are closed.
01.04.2025
NCC : Yes / No
Index : Yes / No
Internet : Yes / No
krk
To:
The Presiding Officer,
Central Government Industrial
Tribunal-cum-Labour Court,
First Floor, B-Wing,
No.26 Haddows Road,
Shastri Bhawan,
Chennai – 600 006.
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MUMMINENI SUDHEER KUMAR, J.
krk
and
W.M.P.(MD) Nos.21840 & 21844 of
01.04.2025
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