1966 (1) TMI 90 - HC - Indian Laws

Summary

Issues Involved:
1. Applicability of the Employees' Provident Funds Act, 1952 to the petitioner firms.
2. Validity of claims for arrears of contributions for a back period.
3. Validity of claims for administrative charges for a back period.
4. Validity of claims for damages for default.
5. Alleged violation of Article 19(1)(b) of the Constitution of India.

Detailed Analysis:

1. Applicability of the Employees' Provident Funds Act, 1952:
The petitioner firms contested the applicability of the Employees' Provident Funds Act, 1952. In both cases, the firms initially disputed the applicability of the Act. However, the Central Government passed orders under Section 19-A of the Act confirming its applicability. This decision was upheld by the respective judges, and there is no longer any dispute regarding the applicability of the Act to the firms.

2. Validity of Claims for Arrears of Contributions for a Back Period:
The primary contention was whether the Provident Fund Commissioner could recover arrears of contributions for a back period, termed as the "pre-discovery period." The court examined conflicting views on this issue. One view held that the Act and Scheme required immediate compliance from the date they became applicable, making the employer liable for contributions from that date. The contrary view, upheld by Jagadisan J. and Mukharji J., argued that retrospective application would be unjust and oppressive. However, the court favored the view that the employer's obligation to contribute arises immediately upon the Scheme's applicability, regardless of any delay in notification or discovery by the Provident Fund Commissioner. The court emphasized that the word "required" in Clause 26 of the Scheme implies a mandatory obligation on the employer.

3. Validity of Claims for Administrative Charges for a Back Period:
Veeraswami J. held that administrative charges could not be recovered for the pre-discovery period, as there was no fund to administer during that time. However, the court noted that administrative charges are calculated as a percentage of the contributions and are intended to cover expenses related to investment and account-keeping, which arise after the fund's collection. Therefore, the claim for administrative charges for the back period was deemed admissible.

4. Validity of Claims for Damages for Default:
The court agreed that damages for default could not be claimed without proof of actual default. Mukharji J. had observed that an employer cannot be said to have defaulted when there was a genuine dispute or doubt about the Act's applicability. The court remitted the claim for damages for fresh consideration under Section 7-A of the Act, which provides for a detailed examination of such claims.

5. Alleged Violation of Article 19(1)(b) of the Constitution of India:
The respondent argued that the proceedings violated Article 19(1)(b) of the Constitution, which deals with the right to acquire, hold, and dispose of property. However, the court found no specific provision or rule that contravened this constitutional right. The court noted that any defense against prosecution for non-compliance during the back period could be raised if such a situation arose, but it was not relevant to the present case.

Conclusion:
The appeals were partly allowed. The court set aside the writs of mandamus issued by Jagadisan J. and Veeraswami J. but allowed the petitioners to seek relief under Section 7-A for claims related to damages and contributions for individuals who had left employment or were otherwise not liable during the pre-discovery period. No costs were awarded.