9911796707
TMI Blog1998 (6) TMI 592X X X X Extracts X X X X X X X X Extracts X X X X ..... ance fund contributions and administrative/inspection charges into the respective funds on or before due dates for the months of October, 1976 to August, 1978, November, 1978, December, 1978, March, 1979, May and June, 1979, December, 1979, March and May, 1980, June to August, 1981 and September, 1980 to January, 1981, The appellants submitted reply to the show cause notice and pleaded that nothing was recoverable from it because the business had been purchased by the new management on 7.9.1978 and new management was not aware of the delayed deposit of the contributions by the previous management. It challenged to the notice on the ground of delay by placing reliance on the judgment of this Court in Amin Chand and Sons v. State of Punjab AIR 1965 P&H 441. The respondent took notice of the various points raised on behalf of the appellant and rejected the same vide his order dated 12.10.1984. The relevant-extract of the said order is reproduced below : "3. The employer has taken the following grounds for consideration : i) There are no arrears at the time of issue of notice as contribution had already been deposited. ii) From 10/76 to 12/76, the company being managed by Sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alified absolute statutory obligation of the employer. This obligation cannot be allowed to be diluted by plea of financial constraints and other extraneous factors. It is significant to note that even the employees' share of contributions which had been deducted from the wages of employees and was a money in trust with the employer had not been deposited in lime. Obviously this part of contribution had been misused in meeting other financial needs of the company. This aggravates the nature of default. The Hon'ble Supreme Court in the case of M/s Organo Chemicals and another v. Union of India 55 FLR 283 has ruled that damages U/s 14-B of the Act are punitive in nature to act as a deterrent for defaulter employer. If the factors, like electricity cut, losses, labour trouble etc. were to be accepted as mitigating factors the very concept of punitive damages would get defeated. The plea of financial hardship has been rejected by Hon'ble High Court of Gujarat in the case of M/s Urbind Mills Ltd. v. R.N. Gandhi 1982 Lab, I.C. 344 (Gujarat). The following extracts of the judgment deserve reproduction: "We will be setting at naught the will of the Parliament if we were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mployer in relation to the above establishment M/s Elson Cotton Mills (P) Ltd., Ballabgarh bearing code No. PN/2800. This includes a loss of Rs. 2009.60 caused to the statutory Fund on account of interest payment to the beneficiaries from the due date irrespective of delay in deposit of dues by the employer. The balance amount of Rs. 1,95,160.34 represents the penal part of the damages to serve as deterrent against defaults in payment. I further order that the amount of damages should be paid by the aforesaid employer within the 15 days of receipt of the order, failing which further action be taken as provided under the Act and the Scheme framed thereunder. The damages should be deposited in the different account Nos. mentioned below :- Nature of damages Amount A/c Nos. P.F. Contributions Rs. 1,59,283.70 1 E.P.F. Rs.4,307.94 10 Administrative charges Rs. 27,252,95 2 E.D.L.I. Contributions Rs. 5,450.55 21 E.D.L.1 Admn. Charges Rs. 87480 22 Total Rs. 1,97,169.94 The appellant challenged the order passed by the respondent in C.W.P. No. 3331 of 1985 which has been dismissed by the learned Single Judge along with C.W.P. Nos. 5198, 5199 of 1985, 920, 1214 and 4121 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n dismissed by the learned Single Judge. L.P.A.No. 894 of 1986 6. The appellant which has a factory at Mathura Road, Faridabad was served with notice dated 27.11.1984 under Section 14B of the Act for levy of damages due to its failure to deposit employees' share as well as its own share under the employees provident fund and family provident fund apart from the employer's share of insurance fund contributions together with administrative/inspection charges payable under Section 17(F) of the Act. The appellant filed reply to the show cause notice. After considering the same, the respondent passed order dated 2.9.1985 for levy of damages amounting to Rs. 3,97,396.23. The relevant portion of the order passed by the Regional Provident Fund Commissioner in the appellant's case reads as under :- "3. The contentions of the employer are that :- i). the dates of deposits as mentioned in the notice and its source are doubtful. ii). the amount for the period of notice has not been assessed under Section 7A of the Act as far though the dues were paid by the employer at their own. iii). the notice has not been sent for the period prior to 5/80 and after 9/82. iv) th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en in case of lock out and strike, the failure to make the contributions resulting in default will have to be visited but (with ?) damages under section 14B". The plea of financial difficulties has also been rejected by the Hon'ble High Court of Gujarat in the case of Urbind Mills v. R.N. Gandhi and others 1982 Lab IC 344, in the following words : "We will be setting at naught the will of the Parliament if we were to say that a mere averment to the effect that the payment could not be made on account of financial hardships is sufficient to mitigate the damages. Even if it was established that the financial position of the company was embarrassing it would not justify taking such a view. In a way every company needs finance and has even to borrow from financial institutions. Even the fact that the company is running at a loss for some years would not justify committing defaults in respect of payment due under the Act and Scheme. Be it realised that the arrears consisted of the deductions made from the wages of the workers as well." vii) There is no force in the contention that the department has not suffered any loss due to late payment and damages be restri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al under Clause X of the Letters Patent. The facts of this case shows that notice dated 14.9.1984 was issued by the respondent proposing levy of damages on the appellant under Section 14B of the Act due to its failure to comply with the provisions of the Act and the Schemes framed thereunder for the period from June, 1980 to November, 1983. The appellant filed a detailed representation dated 18.2.1985. Thereafter the respondent heard the representatives of the department and the appellant and passed the order dated 14.4.1985 for levy of damages amounting to Rs. 1,16,503.95 due to the appellant's failure to pay P.F. contributions, P.P.F contributions, Administrative charges, E.D.L.I. contributions and Admn. charges. This is the background in which the appellant has preferred the present appeal. L.P.A. No. 44 of 1987 8. C.W.P No. 5199 of 1985 filed by the appellant for quashing the order dated 9.2.1985 passed by the respondent for levy of damages under Section 14B of the Act due to the former's failure to pay P.F., P.P.F., E.L.D.I. contributions and administrative/EDLI administrative charges for the period November, 1973 to September, 1974, November, 1975, January, 1976 to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e order dated 2.12.1986 passed by the respondent for levy of damages to the tune of Rs. 1,72,334.75 due to its alleged failure to pay the contributions towards employees provident fund, family pension fund, insurance fund and administrative/inspection charges for the months of August, 1975 (DLI only), September, 1976 to March, 1978, September, 1978 to December, 1978, March, 1979 to June, 1979, October, 1979, December, 1979, January, 1980, and March, 1979 to September, 1979. C.W.P. No. 3840 of 1987 12. M/s Makharia Traders, Bhiwani has filed this petition for challenging the order dated 2.12.1986 passed by the respondent for levy of damages to the tune of Rs. 44,313.60 due to its alleged failure to pay the contributions towards the provident fund, F.P.F., E.D.L.I and Administrative Charges for the period from April, 1982 to May, 1984, June, 1984, August, 1984 to December, 1984, (Supp) August, 1984 to October, 1984, and February, 1985. C.W.P. No. 3841 of 1987 13. The petitioner has while questioning the levy of 100% damages under Section 14B of the Act, challenged the constitutional validity of the instructions issued by the Central Provident Fund Commissioner for levy of damages ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in view of the various pronouncements of the Supreme Court and the High Courts. C.W.P. No. 2770 of 1988 16. The petitioner-Union has prayed for quashing of the show cause notice dated 10.3.1987 issued under Section 14B of the Act and the order dated 6.10.1987 passed under that section by the Regional Provident Fund Commissioner for levy of damages amounting to Rs. 1,17,345/- due to its failure to comply with the provisions of the Act and the schemes framed thereunder in respect of the provident fund contributions, family pension contributions, administrative charges and the employees deposit linked insurance contributions for the months of May, 1977, June, 1977, August, 1977, September, 1977, January 1978, February 1978, September, 1979 to March, 1981, February 1982 to August, 1982 and October, 1982. 17. The questions of law which are required to be answered in these appeals and writ petitions are :- (a) Whether the notices issued by the respondent under Section 14B of the Act can be quashed on the ground of delay or the bar of limitation ? (b) Whether the guidelines issued by the Central Provident Fund Commissioner for imposition for damages are binding on the respondent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a contribution for a particular month has got to be deposited by the 15th day of the month following. A breach of any of these requirements is made a penal offence. Section 14 of the Act provides for penalties. Failure to comply with the requirement of Section 6 is punishable with various terms of imprisonment which may extend to a period of six months, or with fine which may extend to one thousand to two thousand rupees, under the provisions of Section 14, depending upon the nature of the breach, viz. failure to pay the contributions, or failure to submit the necessary returns, or failure to pay administrative charges. Section 14A provides for offences by companies and other corporate bodies. Paragraph 76 of the Scheme provides for punishment for failure to pay contributions etc., and in particular by clause (d) every employer guilty of contravention or of non-compliance with the requirements of the Scheme shall be punishable with imprisonment which may extend to six months or with fine of Rs. 1000/-. Parliament amended the Act by Act No. 16 of 1971, and it was re-entitled as the Employees Provident Funds and Miscellaneous Provisions Act, 1952. It inserted Section 6A in the Act f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of Section 14B and upheld the validity of Section 14B. Some of the observations made in the decision, which are relevant to the subject matter of these appeals and writ petitions are extracted below :- "The traditional view of damages as meaning actual loss, does not take into account the social content of a provision like Section 14B contained in a socio-economic measure like the Act in question. The word 'damages' has different shades of meaning. It must take its colour and content from its context, and it cannot be read in isolation, nor can Section 14B be read out of context. The very object of the legislation would be frustrated if the word 'damages' appearing in Section 14B of the Act was not construed to mean penal damages. The imposition of damages under Section 14B serves a two-fold purpose. It results in damnification and also serves as a deterrent. The predominant object is to penalise, so that an employer may be thwarted or deterred from making any further defaults. The expression 'damages' occurring in Section 14B is, in substance, a penalty imposed on the em- ployer for the breach of the statutory obligation. The object of imposit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cer [1970]75ITR698(All) . 5. M/s Sushma Fabrics Pvt. Ltd. v. Union of India, 1991 Lab.I.C. 1046. 6. K.T. Rolling Mills Ltd. v. R.M. Gandhi, 1993 Lab.I.C. 1466. 7. Orissa Forest Development Corporation v. Regional Provident Fund Commissioner 1994 Lab IC 2510 : 1995(2) SCT 425 . 8. National Marketing Corporation v. Regional Provident Fund Commissioner. 9. R.P.F.C. v. K.T. Rolling Mills Pvt. Ltd. 1995(3) RSJ 64. 22. Shri Rajesh Bindal countered the submissions of Shri Bhandari by arguing that in the absence of statutory prescription of the period of limitation, provisions of the Indian Limitation Act, 1963 cannot be invoked by implication and an action initiated under Section 14B of the Act cannot be struck down as barred by limitation. Shri Bindal further argued that the impugned action taken by the respondent(s) cannot also be nullified on the ground of unreasonable delay in the initiation of proceedings. He pointed out that except in one or two cases, the delay in the initiation of proceedings cannot be held to be unreasonable looking to the fact that the appellants/petitioners are guilty of having acted in complete violation of the provisions of the Act and the schemes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngh v. Union of India, (supra) relied upon by the Shri Bhandari do not have any bearing on the interpretation of Section 14B of the Act. In Gujarat's case, their Lordships of the Supreme Court held that the power of revision vested in the Commissioner under Section 65 should be exercised within a reasonable time. In the second case, similar view has been expressed with reference to the provisions of the Bengal Sales Tax Act, 1941. Basheshwar Lal's case (supra) involved interpretation of the penalty notice issued under Section 28(1)(c) of the Income Tax Act, 1922. In our opinion, while interpreting a welfare legislation like the Act (of 1952) decisions rendered with reference to the taxing statutes can have no relevance. 26. Some of the other decisions relied upon by Shri Bhandari do support his contention that proceedings initiated under Section 14B of the Act can be quashed on the ground of unreasonable delay. In R.P.F.C. v. K.T. Rolling Mills Pvt. Ltd. (supra), their Lordships of the Supreme Court upheld the action initiated by the Regional Provident Fund Commissioner under Section 14B of the Act after delay of 12 years, but while doing so, an observation came to be made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of such a person to say that by reason of delay in the exercise of powers under Section 14B, he has suffered loss. 5. There is no period of limitation prescribed by the legislature for initiating action for recovery of damages under Section 14B. The fact that proceedings are initiated or demand for damages is made after several years cannot by itself be a ground for drawing an inference of waiver or that the employer was lulled into a belief that no proceedings under Section 14B would be taken; mere delay in initiating action under Section 14B cannot amount to prejudice inasmuch as the delay on the part of the department, would have only allowed the employer to use the monies for his own purposes or for his business especially when there is no additional provision for charging interest. However, the employer can claim prejudice if there is proof that between the period of default and the date of initiation of action under Section 14B, he has changed his position to his detriment to such an extent that if the recovery is made after a large number of years, the prejudice to him is of an retrievable nature. The judgment of the learned Single Judge in Amin Chand v. State of Punjab ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onal argument urged by Shri Bhandari is that the instructions issued by the Central Provident Fund Commissioner are discriminatory and violative of Article 14 of the Constitution inasmuch as different rates of damages have been prescribed vide circular No. E.11/17/(5)81-Damages dated 13.5.1983. Shri Rajesh Bindal argued that the instructions issued by the Central Provident Fund Commissioner can at best be treated as administrative guidelines which can be relied upon by the Regional Provident Fund Commissioners while awarding damages but they cannot be constructed as having binding force. Shri Bindal submitted that functions of the Regional Provident Fund Commissioner are quasi-judicial and no authority including the Central Provident Fund Commissioner can interfere with the exercise of judicial discretion vesting in them. He pointed out that Section 20 of the Act has been substituted by the Amending Act No. 33 of 1988 conferring power upon the Central Government to give direction to the Central Board for the efficient administration of the Act and such directions may be binding on the Central Board, but in the absence of any provision vesting such power in !he Central Government or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of the instructions issued vide circulars dated 24.1.1975, 3.11.1982 and 13.5.1983. The argument of Shri Bhandari that the instructions issued vide circular dated 13.5.1983 are discriminatory also merits rejection in view of our conclusion that these instructions do not have the force of law and are not binding on the Regional Provident Fund Commissioners. Re. (d) 30. Learned counsel for the appellants/petitioners urged that the respondents have arbitrarily levied the penalty. They submitted that the respondents have ignored paras 30, 32-A and 32-B of the Employees Provident Fund Scheme, 1952 as well as the factors like the strikes in the factories and financial constraints faced by the employers. In our opinion, the submission made by the learned counsel is wholly without merit. The applicability of paras 32-A and 32-B of the 1952 Scheme is ruled out because they have been inserted vide notification dated 16.8.199J whereas the impugned orders were passed in the years 1985, 1986 and 1987. All other factors including para 30 of the Scheme on which reliance has been placed by the learned counsel for the appellant/petitioners have been considered by the Regional Provident Fund ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Trivandrum 1983 Lab.I.C. 133. In the tatter two judgments, it has been held that Section 14B of the Act does not provide any limitation during which action against an erring employer can be taken for delayed deposits under the Act. In the absence of any bar or limitation, there is no principle of law which debars the Regional Provident Fund Commissioner from exercising the statutory powers available to him under Section 14B of the Act. I find no reason to differ with the view taken in the aforementioned authorities. Now coming to ground No. (3), it is again squarely met with by a Division Bench judgment of this Court in Provident Fund Inspector v. Ram Ku-mar and others, 1982 P.L.R. 295. It has been held therein that the employer is under a legal obligation to deposit the employer's and the employees' share of contribution to the Fund within the time prescribed the moment the Act and the scheme become applicable to him. No intimation or notice of any kind in this respect is necessary to be issued to him by the authorities concerned. I am bound to follow this judgment. There is, therefore, no force in this ground also. As regards ground No. (4), the learned counsel for th ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
