2019 (3) TMI 1937 - HC - Indian Laws

Restriction on recovery of damages to 5% per annum - It is the case of the petitioner that the office of the petitioner passed an order levying damages on the second respondent under Section 14B of the Employees Provident Fund and Miscellaneous Provisions Act 1952 - HELD THAT - The impugned order passed by the first respondent is a detailed and well considered order. Each and every ground raised by the petitioner in this writ petition has been answered in the impugned order dated 08.09.2009 passed by the first respondent. The first respondent has rightly held that the imposition of damages under Section 14B of the Act is only discretionary. As rightly observed Section 14B does not mandate that the order for damages must follow in the event of every default. As seen from the materials available on record there was no deliberate intention on the part of the second respondent to delay the payment of Provident Fund. The Tribunal has rightly held that the regulation 32A in which a graded scale for imposition of damages has been provided cannot be regarded as a rigid or inflexible prescription and regulations cannot be a fetter to the exercise of the power that is conferred upon the Provident Fund Commissioner by the provisions of the enactment but guide and channelise the exercise of discretion. The Tribunal has also rightly held that neither regulation 32A or 32B can be regarded as inflexible - this Court does not find any infirmity in restricting the damages imposed on the second respondent up to 5% per annum on the arrears of contribution. Petition dismissed.

Summary

Issues Involved:
Challenge to order dated 08.09.2009 passed by the Presiding Officer, Employees Provident Fund Appellate Tribunal, New Delhi in ATA.No.1(13) 2007.

Analysis:

Issue 1: Interpretation of Section 14B of the Employees Provident Fund and Miscellaneous Provisions Act, 1952.

The petitioner, an Assistant Provident Fund Commissioner, challenged the order imposing damages on the second respondent under Section 14B of the Act. The petitioner argued that the first respondent failed to consider the amendment to Section 14B effective from 26.09.2008, which restricts the power to reduce damages. The petitioner contended that reducing damages could adversely impact Provident Fund schemes, potentially causing irreparable loss to employees. However, Section 14B confers discretionary power to recover damages, and the Tribunal rightly held that the imposition of damages is not mandatory for every default. The Tribunal also emphasized that regulations like 32A and 32B serve as guidelines, not rigid prescriptions, citing relevant case laws to support its decision.

Issue 2: Discretionary power to recover damages and financial crisis of the employer.

Section 14B grants discretionary power to recover damages from defaulting employers. In this case, the second respondent, a company facing financial crisis, expressed difficulties in meeting the demand for damages. The Tribunal's detailed order considered all grounds raised by the petitioner and correctly concluded that the damages imposed should be limited to 5% per annum on arrears of contribution. The Tribunal's decision aligned with precedents from the High Courts of Kerala and Orissa, ensuring a fair balance between enforcing compliance and considering the financial circumstances of the employer.

Conclusion:

The High Court upheld the Tribunal's decision to restrict damages on the second respondent to 5% per annum, emphasizing the discretionary nature of imposing damages under Section 14B. The judgment reinforced the importance of balancing enforcement with practical considerations, ensuring fairness in dealing with defaulting employers. Consequently, the writ petition was dismissed, with no costs awarded, bringing a comprehensive resolution to the legal dispute.