Andhra HC (Pre-Telangana)
M/S. Telangana Spining & Weaving Mills ... vs The Regional Provident Fund ... on 19 July, 1991
Equivalent citations: AIR1992AP128, AIR 1992 ANDHRA PRADESH 128, (1991) 2 LS 253, (1992) 2 LABLJ 180, (1992) 2 CURLR 709
Author: Syed Shah Mohammad Quadri
Bench: Syed Shah Mohammad Quadri
ORDER
These two writ petitions arise out of the common facts and they can be disposed of together by a common judgment. For appreciating the points involved in these petitions, I will state the facts in Writ Petition No. 9768 of 1987.
2. The first petitioner is the Public Limited Company and the second petitioner is the Managing Directorr of the first petitioner. They challenge the. order passed by the Regional "Provident Fund-Commissioner, Andhra Pradesh, Hyderabad the first res-pendent in proceedings No. AP/2905/PD Cell/Hyd-1-87/3751, dated 24-6-1987 imposing damages of Rs. 14,737-85 ps, as illegal and arbitrary and pray to call for the records relating to the said order and quash the same.
3. It is" stated that the first petitioner Textile Industry was experiencing recessionary market and has gone into financial difficulties. Therefore it could not pay provident fund contributions in time but sent the contributions with delay. The first respondent by the impugned order imposed damages for the period from 1-2-1985 to 28-2-1986 in respect of the alleged delays in making the contributions which is challenged as illegal and contrary to Section 14-B of the Provident Fund Act. The petitioner prays for issuance of the writ as indicated above.
4. The enforcement Officer of the first respondent filed counter affidavit stating, inter alia, that before passing the impugned order a show cause notice was issued to the petitioner on 20-4-1987 to explain the reason as to why the damages should not be levied. The Administrative Officer of the petitioners attended and submitted that due to financial problems of the petitioners, the amount could not be paid in time. Having perused the record relevant to the above matter and taking into consideration the persistent and habitual nature of defaults committed by the employer/petitioners and also other factors such as the amount in default, the length of default, its frequency, the loss of interest suffered by the Employees' Provident Fund Organisation by not being able to invest the amount in Government Securities due to belated remittances, the first respondent levied damages of Rs. 14,737-85 for the period from 1-2-1985 to 28-2-1986. The amount is well within the limit prescribed under Section 14-B of the Employees' Provident Fund Act.
5. Sri A. Krishna Murthy, the learned counsel for the petitioners, submits that the impugned order suffers from an error apparent on the face of the record inasmuch as in the show cause notice the amount of damages proposed to be levied was not men-
tioned. Therefore the order levying damages of Rs. 14,737-85 has to be quashed.
6. The learned Standing Counsel for the first respondent on the other hand, contends that the damages levied are well within the limit prescribed under Section 14-B of the Act and that it is not necessary for the authorities to predetermine the damages and mention the same in the show cause notice.
7. The short question that arises for consideration in these writ petitions, is whether it is necessary for the first responent to mention the amount of damages which he proposes to levy, in the show cause notice before levying the damages under Section 14-B of the Act.
It would be useful to read Section 14-B of the Act here which is as follows:
"14.B. Power to recover damages.-- Where an employer makes default in the payment of any contribution to the Fund the Family Fund or the Insurance Fund or in the transfer of accumulations required to be transferred 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 rehabilitation has been sanctioned by the Board for Industrial and Financial Reconstruction established under Section 4 of the Sick Industrial Companies (Special Provisions) Act 1985, subject to such terms and conditions as may be speci-
fied in the Scheme."
8. From a perusal of the Section extracted above, it is clear that where an employer makes default in payment of any contribution to the Fund, the Family Fund or the Insurance Fund or in the transfer of accumulations required to be transferred by him, under the provisions of the Act or any 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, has to recover from the employer by way of penalty such damages, not exceeding the amount of arrears, as may be specified in the scheme. It is of course necessary that before levying and recovering such damages, the employer shall be given a reasonable opportunity of being heard. The second proviso empowers the Central Board to reduce or waive the damages levied under the said section in relation to an establishment which is a sick industrial company and in respect of which a scheme for rehabilitation has been sanctioned by the Board for Industrial and Financial Reconstruction established under Section 4 of the Sick-Industrial Companies Act, 1985.
9. Thus it can be seen that the first respondent has power to impose damages, in case of delayed payment of contributions not exceeding the amount of arrears, provided the employer is given a reasonable opportunity of being heard. Admittedly in this case, there has been delay in making contributions and the opportunity has been given to the petitioners. What remains to be considered is the mode of levying of damages within the statutory ceiling. Assessment of damages is within the discretion of the 1st respondent, which has to be exercised fairly and reasonably but not whimsically and arbitrarily. Determination of quantum of damages, though discretionary, depends upon various factors, such as, amount of arrears, the persistent or habitual nature of the employer in committing default, the length of default, explanation submitted by the employer and the interest lost by the Provident Fund Organisation due to not investing the amount in time. So, in the very nature of things the quantum of damages cannot be predetermined so as to be mentioned in the show cause notice. Indeed it has to be determined only after giving an opportunity of being heard to the employer and after considering his explanation. Therefore, the action of the respondents in not specifying the damages in the show cause notice and determining the same after considering the explanation is fair and proper and in accordance with the principles of natural justice. The amount involved in the delayed payments of contributions was Rs. 4,85,979 ps. The first respondent levied damages of Rs. 14,737-85 ps. by the impugne order. Having regard to the facts of the case, the quantum of damages is also just and reasonable.
10. For the above reasons, I do not find any valid grounds to assail the orders impugned in the writ petitions. Accordingly, both the writ petitions are dismissed with costs.
11. Petitions dismissed.