Calcutta High Court (Appellete Side)
M/S. Budge Budge Company Limited vs Union Of India & Ors on 10 April, 2015
IN THE HIGH COURT AT CALCUTTA
Constitutional Writ Jurisdiction
Appellate Side
Present :
The Hon'ble Mr. Justice Ashis Kumar Chakraborty
W.P. 12965(W) of 2003
M/s. Budge Budge Company Limited
Vs.
Union of India & Ors.
For the petitioner : Mr. Satyendra Kr. Singh, Advocate
Mr. Ananta Kr. Shaw, Advocate
Ms. Pranati Das, Advocate
For the P.F. Authority : Mr. Shiv Chandra Prasad, Advocate
Heard on: - March 25, 2015 and April 01, 2015.
Judgment on: - April 10, 2015.
Ashis Kumar Chakraborty, J.
In this writ petition, the petitioner has challenged the order dated February 27, 2003 passed by the respondent no. 3, (Assistant Provident Fund Commissioner) against it, under the Employees' Provident Fund and Miscellaneous Provisions Act, 1952 (hereinafter stated as "the Act"). The order dated February 27, 2003, passed under Section 7A of the Act, determined that a sum of Rs. 1,43,50,912/- was payable by the petitioner on account of provident fund, pension fund and deposit linked insurance fund dues of its employees, for the period during April 2002 till November 2002 (hereinafter stated as "the said period"). The petitioner has paid the said sum of Rs. 1,43,50,912/-. By the same order, the respondent no. 3 also levied a sum of Rs. 10,96,046/- on the petitioner, on account interest under Section 7Q of the Act for delayed deposit of provident fund, pension and deposit linked insurance of its employees during the said period. The petitioner has not paid said sum and in this petition, the petitioner has challenged the said order dated February 17, 2002 passed by the respondent no. 3 under Section 7Q of the said Act (hereinafter referred as "the impugned order"). On August 12, 2003, when the writ petition was moved, a learned Single Judge passed an interim order restraining the respondents from giving effect to the impugned order for a limited period which was subsequently extended to be valid till disposal of the writ petition. The respondent Provident Fund Authorities have filed their affidavit-in-opposition in the writ petition. They also filed an application being CAN No. 6106 of 2006 praying for vacating of the said interim order dated August 12, 2003.
In the instant case, admittedly, by issuance of an appropriate notification the Appropriate Government, in exercise of the powers under Section 17(1) of the Act, has granted exemption to the petitioner. The petitioner company has not disputed either the finding of the respondent no. 3 in the impugned order that there was delay on its part in depositing timely payment of the dues towards provident fund, pension and deposit linked insurance of its employees for the said period or the correctness of quantification of the amount of interest levied by the impugned order.
Mr. Satyendra Kumar Singh, the learned Advocate appearing for the petitioner restricted his challenge to the impugned order levying interest under Section 7Q of the said Act to the legal grounds only. His first contention was that by issuing proper notification, in the official gazette under Section 17(1) of the said Act, the appropriate Government has granted exemption to the petitioner and as such the respondent provident fund authority cannot levy any interest under Section 7Q of the said Act on the petitioner. He strenuously urged that the impugned order passed by the respondent no. 3 levying interest upon the petitioner under Section 7Q of the Act is without jurisdiction. Mr. Singh further submitted, that although Section 7Q was inserted in the Act in the year 1988, but the said Section came into force with effect from July 01, 1997. He placed reliance on the following circular dated May 29, 1990 issued by the Central Board of Trustees of the Provident Fund.
"Moreover, now that in the recent amendment to the act, we have already provided for the payment of simple interest at 12% per annum (Section 7Q) payable from the date the amount has become due till the date it is actually paid, it had become necessary to revise the rates of damages and to specify the same in the scheme. Thus, a proposal to revise the rates of damages was accordingly placed before the Central Board of Trustees and the Board in its 119th meeting held on 4th April, 1989 approved the following revised rates of damages with the condition that the position with regard to the incidence of default following the revision of the rates of damages would be analysed after six months from the date the new rates come into force.
Period of Delay Revised Interest- Total Existing rate Rates of chargeable of damages Damages under Section 7Q (i) 2 months 5 12 17 25 or less (ii) Over 2 10 12 22 25 months but less than 4 months (iii) Over 4 15 12 27 25 months but less than 6 months (iv) Over 6 25 12 37 25 months Mr. Singh cited a decision of the Division Bench of the Delhi High Court in the case of M/s. Systems and Stamping & Anr. vs. Employees' Provident fund Appellate Tribunal & Ors. reported in 2008 LLR 485 wherein the above circular was considered. He contended that from the above circular, it is evident that for the purpose of quantification of damages under Section 14B of the Act, interest under Section 7Q is also taken into consideration and as such, it has been held in the said decision that the provident fund authorities cannot impose further interest under Section 7Q upon the defaulting establishment. However, Mr. Shiv Chandra Prasad, learned Advocate appearing for the respondent Provident Fund Authorities refuted the contentions of Mr. Singh by submitting that from the all provisions contained in the said Act, it is evident that even an establishment which has been granted exemption under Section 17(1) of the Act, is liable to pay interest under Section 7Q for delayed deposit of provident fund, pension and deposit linked insurance of its employees. Relying on the decisions of the Supreme Court in the cases of Organe Chemical Industries and Anr. vs. Union of India and Ors. reported in (1979) 4 SCC 573 and N.K. Jain and Ors. vs. C.K. Shah and Ors. reported in (1991)2 SCC 495 Mr. Prasad submitted that the Act was enacted for the benefit of the workmen/employees and the Act is a social welfare legislation. Therefore, according to him, the provisions contained in the Act must receive purposive construction and the provisions contained in Section 7Q is squarely applicable to the petitioner.
Before considering the contentions raised by learned counsel for the parties, it would be convenient to consider the scheme of the Act and the Schemes framed under the Act, which have been subjected to various amendments. The Act, as was originally enacted in 1952, provided for the institution of compulsory provident funds for employees in factories and other establishments. The Act applies to every establishment which is a factory engaged in any industry specified in Schedule I and in which twenty (originally it was sixty) or more persons are employed and to any other establishment employing twenty or more persons or class of such establishments which the Central Government may specify in that behalf by notification in the Official Gazette. Section 2(e) of the Act defines "scheme" to mean the Employees' Provident Fund Scheme framed under Section 5. Under Section 5, the Central Government framed the Employees' Provident Funds Scheme, 1952. Section 6 of the Act enjoins on every employer to make contribution to the Employees' Provident Fund at the rate of 10% (originally it was 6 ¼%) of the basic wages, dearness allowance, retaining allowance, if any, for the time being payable to each of the employees and the employees' contribution shall be equal to the contribution by the employer in respect of him. The employee at his option may, however, increase his/her own contribution to in excess of 10% of his/her basic wages, dearness allowance and retaining allowance, if any. The initial responsibility for making payment of the provident fund contribution of the employer as well as of the employee, lies on the employer. Para 30 of the Provident Fund Scheme (hereinafter stated as "the Scheme") makes it mandatory on the employer that he shall, in the first instance, pay both the contribution payable by himself and also on behalf of the member employed by him. Under para 38 of the Scheme, the employer is authorized, before paying the member employee his wages in respect of any period or part of period for which contributions are payable, to deduct the employee's contribution of provident fund from his wages. It further provides that the deposit of such contribution shall be made by the employer within fifteen days of the close of every month, that is, a contribution for a particular month has got to be deposited by the 15th day of the month following.
Subsequently, Parliament inserted Section 6-A in the Act for the establishment of the Family Pension Fund. In exercise of the powers conferred by Section 6-A, the Central Government framed the Employees' Family Pension Scheme for providing superannuation pension, retiring pension or permanent total disablement pension to the employees or widow's pension, children pension or orphan pension payable to the beneficiaries of such employees of an establishment. Section 6C, inserted in the year 1976, provides for establishment of Employees' Deposit Linked Insurance for providing life insurance benefits to the employees or any establishment. In exercise of powers conferred under Section 6A and 6C the Central Government has framed The Employees' Pension Scheme (hereinafter referred as "the Pension Scheme") and the Employees' deposit Linked Insurance Scheme (hereinafter referred as "the Insurance Scheme"). Para 3 of the Pension Scheme provides, that from and out of the contributions payable by the employer in each month under Section 6 of the Act or under the rules of the Provident Fund an establishment granted exemption under Section 17(1) of the Act or whose employees are exempted under paragraph 27 or paragraph 27A of the Provident Fund Scheme, a part of contribution representing 8.33 per cent of the employees' pay shall be remitted by the employer to the Employees' Pension Fund within 15 days of the close of every month, that is contribution shall be made by the employer within 15 days of the month following. Para 3(2) of the Pension Scheme provides that the Central Government shall also contribute at the rate of 1.16 per cent, pay of the members of the Employees' Pension Scheme and credit the contribution to the Employees' Pension Fund, subject to the condition that where the pay of any member exceeds Rs. 6,500 per month, the contribution payable by the employer and the Central Government be limited to Rs. 6,500/-. Para 5 provides for the liability of the employer to pay damages in the event of its default to deposit to the Employees' Pension Fund. Similarly, paras 7 and 8 the Insurance Scheme framed in 1976 provide for contribution payable by the employer and Central Government under Section 6C(2) and (3) of the Act which shall be calculated on basis of basic wages, dearness allowance and retaining allowance, if any, actually drawn during the whole month, subject to the maximum of Rs. 6,500/- and the contribution by the employer shall be deposited within fifteen days of the close of every month, that is, the contribution shall be made by the employer within 15 days of the month following.
A breach of any requirement of the aforesaid provisions either under Sections 6, 6A and 6C Act or under any of the aforesaid three schemes is made a penal offence. Section 14 of the Act provides for various penalties including imprisonment. Section 14-A provides for offences by companies and other corporate bodies.
Section 17(1) of the Act provides for the power of the appropriate Government to issue a notification exempting an establishment from the operation of all or any of the provisions of the "scheme" (that is, Provident Fund Scheme of 1952) and such exempted establishment has to deposit the provident fund contribution, on account of its employees, with the Trust constituted by it under Section 17(1A) and not with the Provident Fund Authority. In the meantime, in its working, the authorities faced certain administrative difficulties. An employer could delay payment of Provident Fund dues without any additional financial liability. Thus, in the year 1953, Parliament inserted Section 14-B for recovery of damages on the amount of arrears. The reason for enacting Section 14-B was that employers might be deterred and thwarted from making defaults in carrying out statutory obligations to make payments to the Provident Fund. The object and purpose of the section was to authorize the Regional Provident Fund Commissioner to impose exemplary or punitive damages and thereby to prevent employers from making defaults. Section 14- B, as originally enacted, provided for imposition of such damages, not exceeding 25% of the amount of arrears. This, however, did not prove to be sufficiently deterrent. The employers were still making defaults in making contributions to the Provident Fund, and in the meanwhile utilizing both their own contribution as well as the employees' contribution, in their business. The provision contained in Section 14-B for recovery of damages, therefore, proved to be illusory. Accordingly, by Act No. 40 of 1973, the words 'twenty-five per cent of' were omitted from Section 14-B and the words 'not exceeding the amount of arrear' were substituted. The intention was to invest the Regional Provident Fund Commissioner with power to impose such damages that the employer would not find it profitable to make defaults in making payments. These objects for insertion of Section 14B in the Act and its amendment were discussed in the decision of the Supreme Court in the case of N.K. Jain (supra). In spite of introduction of Section 14-B in the Act, the employers, both of exempted and unexempted establishments were still making defaults in making contribution to their employees' Provident Fund, Pension Fund and Insurance Fund under Sections 6, 6A and 6C of the Act respectively. Accordingly, by the Employees' Provident Funds and Miscellaneous Provisions (Amendment) Act, 1988, Section 7Q was introduced to the Act providing that the employer shall be liable to pay simple interest at the rate of twelve per cent, per annum or such higher rate as may be specified in the scheme on any amount due from him under the Act from the date on which the amount has become so due till the date of actual payment, provided that the higher rate of interest specified in the scheme shall not exceed the lending rate of interest charged by any scheduled bank.
Various recommendations were incorporated in the Objects and Reasons for the said Amendment Act of 1988 and one of the objects of such amendment is as follows:
"(vii) the existing legal provisions are being made more stringent. A suitable provision is also made for charging simple interest on belated payment of any amount under the Act".
In the instant case, the first question that falls for consideration is whether an establishment granted exemption under Section 17(1) of the said Act is liable to pay interest under Section 7Q on account of belated payment of any amount due from it under the Act, towards the Provident Fund or the Pension Fund or the Insurance Fund or it is exempted from payment of such interest under Section 7Q. In order to answer the said question, it would be convenient to set out some of the relevant provisions of the Act.
2 (fff) "exempted [establishment] means [an establishment] in respect of which an exemption has been granted under section 17 from the operation of all or any of the provisions of any Scheme [or the Insurance Scheme, as the case may be], whether such exemption has been granted to the [establishment] as such or to any person or class of persons employed therein;]
(h) "Fund" means the provident fund established under a Scheme; (ia) "Insurance Fund" means the Deposit-linked Insurance Fund established under sub-section (2) of section 6C;
[(kA) "Pension Fund" means the Employees' Pension fund established under sub-section (2) of section 6A;]
(l) "Scheme" means the Employees Provident Fund Scheme framed under section 5;
(7Q) Interest payable by the employer - The employer shall be liable to pay simple interest at the rate of twelve per cent, per annum or at such higher rate as may be specified in the Scheme on any amount due from him under this Act from the date on which the amount has become so due till the date of its actual payment; Provided the higher rate of interest specified in the Scheme shall not exceed the lending rate of interest charged by any scheduled bank.
[(14B. Power to recover damages - Where an employer makes default in the payment of any contribution to the Fund, the, Pension Fund or the Insurance Fund or in the transfer of accumulations required to be transferred by 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 authorized 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 (1 of 1986), subject to such terms and conditions as may be specified in the Scheme.
17. Power to exempt - (1) The appropriate Government may, by notification in the Official Gazette, and subject to such conditions as may be specified in the notification, exempt, whether prospectively or retrospectively, from the operation of all or any of the provisions of any Scheme-
(a) any establishment to which this Act applies if, in the opinion of the appropriate Government, the rules of its provident fund with respect to the rates of contribution are not less favourable than those specified in section 6 and the employees are also in enjoyment of other provident fund benefits which on the whole are not less favourable to the employees than the benefits provided under this Act or any Scheme in relation to the employees than the benefits provided under this Act or any Scheme in relation to the employees in any other establishment of a similar character; or
(b) any [establishment] if the employees of such establishment are in enjoyment of benefits in the nature of provident fund, pension or gratuity and the appropriate Government is of opinion that such benefits, separately or jointly, are on the whole not less favourable to such employees than the benefits provided under this Act or any Scheme in relation to employees in any other establishment of a similar character:
Provided that no such exemption shall be made except after consultation with the Central Board which on such consultation shall forward its views on exemption to the appropriate Government within such time limit as may be specified in the Scheme.
17[(1A) Where an exemption has been granted to an establishment under clause (a) of sub-section (1),-
(a) the provisions of sections 6, 7A, 8 and 14B shall, so far as may be, apply to the employer of the exempted establishment in addition to such other conditions as may be specified in the notification granting such exemption, and where such employer contravenes, or makes default in complying with any of the said provisions or conditions or any other provision of this Act, he shall be punishable under section 14 as if the said establishment had not been exempted under the said clause(a);
(b) the employer shall establish a Board of Trustees for the administration of the provident fund consisting of such number of members as may be specified in the Scheme;
(c) the terms and conditions of service of members of the Board of Trustees shall be such as may be specified in the Scheme;
(d) the Board of Trustees constituted under clause (b) shall -
(i) maintain detailed accounts to show the contributions credited, withdrawals made and interest accrued in in respect of each employee;
(ii) submit such returns to the Regional Provident
Fund Commissioner or any other officer as the
Central Government may direct from time to time.
(iii) invest the provident fund monies in accordance
with the directions issued by the Central
Government from time to time.
(iv) transfer, where necessary, the provident fund
account of any employee; and
(v) Perform such other duties as may be specified in the
Scheme.
17(1B) Where the Board of Trustees established under clause (b) of sub-
section (1A) contravenes, or makes default in complying with, any provisions of clause (d) of that sub-section, the Trustees of the said Board shall be deemed to have committed an offence under sub-
section (2A) of section 14 and shall be punishable with the penalties provided in that sub-section.
By reading the provisions contained in Section 7Q and those contained in Section 14B of the said Act, it is evident that interest and damages are two different aspects altogether.
In the case of N.K. Jain vs. C.K. Shah reported in (1991) 2 SCC 489 cited by Mr. Shib Chandra Prasad, the Supreme Court held that though the expression "Fund" has been defined under Section 2(h) of the Act to mean the Provident Fund established under a scheme as defined under Section 2(l) to mean the Provident Fund Scheme framed under Section 5, but the definition of the word "fund" would also apply to a scheme operating in an establishment exempted under Section 17 of the Act.
In the instant case, the petitioner establishment has not disputed that there was delay on its part to deposit the contribution in respect of all the three funds namely, Provident Fund, Pension Fund and Insurance Fund, for the said period as stated by the respondent no. 3 in the impugned order. From the scheme of the provisions contained in Section 6, 6A and 6C of the Act, as discussed above, it is evident that the duty of and establishment (even an establishment granted exemption from the operation of the Provident Fund Scheme) to deposit the contribution on account of its Employees' Provident Fund, Pension Fund and Deposit Linked Insurance are fixed under the Act. Now Section 7Q in clear and unambiguous terms provide for the liability of the employer to pay interest at the prescribed rate on any amount due from the employer under Act from the date on which the amount has become due till the date of actual payment. Section 7Q does not contain any provision (whether by a proviso or otherwise) exempting, an establishment granted exemption under Section 17(1) of the Act, from the liability to pay interest at the prescribed rate for the delayed payment either to the Provident Fund or Pension Fund or Insurance Fund.
It is well settled that the Act is a beneficial and social welfare legislation to protect the interest and welfare of workmen. Therefore, for construing the provisions of Sections 7Q and 17(1-A)(a) of the Act as rightly submitted by Mr. Shiv Chandra Prasad one has to adopt purposive approach. In the case of N.K. Jain (supra) the Supreme Court, while interpreting various provisions of the same Act, held that for the purpose of interpreting any section of the Act the legislative purpose of the section must be noted and the Act must be read as a whole.
From the objects and reasons for introducing Section 7Q of the Act, as set out above, it is evident even introduction of the provisions of Section 14B in the Act providing for the liability to pay damages on account of delayed deposit of provident fund, pension and deposit linked insurance was not proved to be sufficiently deterrent to the employers defaulting in making payment to the Provident Fund, Pension Fund and Insurance Fund and in the meanwhile utilizing contribution amount in their business. Accordingly, the legislature inserted Section 7Q in the Act to protect the beneficial interest of the workers. Now, the exemption granted to an establishment under Section 17(1) of the Act exempts the establishment from the operation of all or any of the provisions of the Provident Fund Scheme only, but not from the provisions of the Pension Scheme or the Insurance Scheme. Thus, all establishments, including an establishment granted exemption under Section 17(1) of the Act, are liable to pay interest under Section 7Q of the Act for delayed deposit of payment to the Pension Fund and Insurance Fund under Sections 6A and 6C of the Act read with the provisions contained in the Pension Scheme and Insurance Scheme, respectively.
By reading the provisions contained in Section 7Q read with Section 17(1) of the Act it is evident that none of the said sections contain any provision excluding an exempted establishment from the liability to pay interest under Section 7Q of the Act. The language of Section 7Q is clear and unambiguous containing no provision exempting any establishment from the liability to pay interest on delayed deposit of the contribution to the Provident Fund or the Pension Fund or the Insurance Fund on account of its employees. Further, Clause (a) of Section 17(1A) is divided in two parts. The second part is more specific inasmuch as it has been clearly stated that where an employer contravenes and makes default in compliance with any of the said conditions and provisions or any other provisions of the Act, (this would obviously include Section 7Q) he shall be punishable under Section 14 as if the said establishment had not been exempted under Clause (a). Therefore, there is a deeming provision giving clear indication of application of Section 7Q of the Act to even an "employer" who has been granted exemption under Section 17(1) of the Act of an "exempted establishment". In support of this conclusion reliance may be placed on the decision of the Supreme Court in the case of Regional Provident Fund Commissioner vs. Hooghly Mills co. Ltd. reported in (2012) 2 SCC 489. By the said decision the Supreme Court, rejected the contention of the respondent in the said case that an establishment granted exemption under Section 17(1) of the Act, is not liable to pay damages under Section 14B of the Act, for delayed deposit of Provident Fund on account of its employees. After considering the provisions contained in Sections 14B and17 of the Act, the Supreme Court held that an establishment granted exemption under sub- section (1) or Section 17 is also liable to pay damages under Section 14B of the Act for delayed deposit of provident fund contribution of its employees. For the aforesaid reasons, I find no merit in the first contention of Mr. Singh, learned Advocate for the petitioner that the respondent no. 3 had no jurisdiction to pass the impugned order under Section 7Q of the Act against the petitioner on the ground that it was granted exemption under Section 17(1) of the Act.
So far as the decision the Division Bench of Delhi High Court in the case of M/s. Systems & Stamping (supra) cited by Mr. Singh on behalf of the petitioner, in the said case, the issue was as to whether even after Section 7Q came into effect July 01, 1997 the Provident Fund Authority could claim damages on the basis of the Circular dated May 29, 1950 quoted above to include an amount stated in Section 7Q of the Act. The Division Bench of the Delhi High Court held that after the provisions contained in Section 7Q came into effect, a defaulting employer is required to pay damages under Section 14B of the Act only at the rate specified in column 1 of the Table contained in the said circular dated September 25, 1990 and not interest amount under Section 7Q as laid down in column 3 of the said circular, otherwise, the employer would have to pay interest twice. The said decision upheld the liability of an establishment to pay interest under Section 7Q of the, after July 01, 1997, for delayed deposit of provident fund, pension and deposit linked insurance of its employees. Thus, the said Division Bench decision of the Delhi High Court, cited by Mr. Singh does not render any support to his contention that the petitioner is not liable to pay interest under Section 7Q of the Act or impugned order suffers from any illegality.
For all the foregoing reasons, I find no merit in this writ petition and accordingly the writ petition being W.P. 12965(W) of 2003 stands rejected and the interim order dated August 12, 2003 stands vacated. However, there shall be no order as to costs.
[ Ashis Kumar Chakraborty, J.]