Madhya Pradesh High Court
Recovery Officer (Assistant Provident ... vs Municipal Council Dabra Thr on 2 May, 2017
1
WA.315/2016
Recovery Officer (Assistant Provident Fund Commissioner) & Anr.
Vs.
Municipal Council Dabra and Anr.
02.05.2017
Shri R.K. Goyal, counsel for the appellant.
Shri D.K. Agrawal, counsel for the Respondent No.1.
Shri M.P. Agrawal, counsel for the Respondent No.2.
1. The present intra Court appeal by Employees Provident Fund Organization ( "EPFO" for brevity) filed under Section 2(i) of M.P. Uchcha Nyayalaya (Khand Nyaypeeth Ko Appeal) Adhiniyam, 2005 assails the final order of the writ Court dated 04.04.2016 passed in WP No. 1451/2016 whereby the petition assailing the attachment of bank account of the petitioner / respondent herein pursuant to order passed under Section 7-A of the Employees' Provident Fund & Miscellaneous Provision Act, 1952 ( "1952 Act for brevity) has been allowed with the following observations and findings :-
"As per the scheme of the Act of 1952, against the assessment order passed by the competent authority, the assessee has a right of appeal before the appellate tribunal. The period prescribed therefor is 60 days. The tribunal also has power to issue interim order. The measures for recovery including coercive measures can be taken recourse to if the assessee without filing the appeal avoids payment thereof and the authority is left with no option than to ensure recovery through such measures. In the instant case, admittedly the period of limitation for filing the appeal had not expired while impugned attachment order was passed. Thereafter, appeal was filed within limitation and interim order has been passed (supra). Therefore expiry of the period of limitation taking recourse to coercive measures by the Assessing Officer, in the opinion of this Court, is not in accordance with law and in fact and in effect tantamounts to an arbitrary exercise of power lacking bonafides. Therefore, in the opinion of this Court, the impugned attachment order cannot withstand the test of reasonableness under Article 14 of the Constitution of India, therefore, the same deserves to be and is 2 WA.315/2016 accordingly quashed. However, assessment order under Section 7-A of the Act of 1952 since is subject matter of appeal, the petitioner shall abide by the orders passed by the appellate authority.
With the aforesaid, writ petition stands allowed."
2. Short but interesting question that falls for consideration in the present case is whether 1952 Act restrains the recovery officer from exercising the power of recovery u/s 8 to 8-F for realising the money determined u/s 7-A for a period of 60 days prescribed as limitation period for preferring appeal to the Tribunal against order passed u/s 7-A, or the recovery officer can straight away exercise the power of recovery u/s 8 to 8-F of 1952 Act.
SUBMISSION OF APPELLANT
3. The EPFO is before this Court aggrieved by the finding recorded by the writ Court that so long as the limitation period for filing appeal to the EPF Appellate Tribunal against the order passed under Section 7-A of the 1952 Act does not expire the recovery officer of the EPFO is not empowered to make recovery to give effect to Section 7-A order.
3.1 In support, it is submitted that the1952 Act is a beneficial legislation to provide for institution of provident fund, pension fund and deposit-linked insurance fund for employees in factories and other establishments and therefore finding recorded by the writ Court comes in conflict with the object of the Act as it restrains the money determined under Section 7-A to be recovered through means statutorily permissible u/s 8 to 8-F of the 1952 Act. The decision of Division Bench of Gujrat High Court in the case of Employees Provident Fund Organization Vs. Rollwell Forge Ltd. ( LPA No. 12/2010 in SCA No. 3347 of 2009) decided on June 15, 2011 is pressed into service.
SUBMISSION OF RESPONDENT
4. Per Contra, learned counsel for the petitioner / respondent 3 WA.315/2016 herein relying upon the decisions of 2001 (4) SCC 362 (Mohan Wahi Vs. Commissioner of Income Tax Varanasi and Ors.), 2002 (93) FLR 883 (Ferro Concrete Construction (I) Limited Vs. Regional Provident Fund Commissioner, 2013 LLR 7 (Bombay) ( Navnit Motors Pvt. Ltd. Vs. Union of India), 2013 LLR 1251(Madras) (T.I. Metal Forming Chennai Vs. R.P.F.C.) and 2009-IV-LLJ 893 (Pyramid Saimira Theater Ltd. Vs. R.P.F.C. Chennai) to contend that if the period of 60 days is provided for preferring appeal against the order passed under Section 7-A then making of recovery of the money determined without waiting for the limitation period of 60 days to expire would render the remedy of appeal illusory and otiose.
4.1. Section 7-I of 1952 Act provides remedy of appeal against order passed u/s 7-A before the Tribunal in such form, manner and time as prescribed by the Rules. Supporting the impugned order learned counsel for the respondent contends that period of 60 days under Rule 7(2) of the Employees' Provident Funds Appellate Tribunal ( Procedure ) Rules, 1997 framed under the 1952 Act, has been provided for preferring an appeal u/s 7-I. 4.2. It is submitted by learned counsel for the petitioner that the statutory remedy of approaching the Tribunal in appeal would render futile and infructuous if the EPFO is allowed to adopt coercive means to make recovery of money determined u/s 7(A).
5. Before adverting to the rival contentions of the parties it would be apt to delineate the facts involved as follows :-
(i) On 18.01.2016 the order u/s 7(A) was passed against the respondent Council which was communicated to the Council on 01.02.2016 providing 15 days time to the petitioner / respondent to make the deposit of Rs. 74,54,831/-
(ii) On 05.02.2016 order u/s 8-F was passed directing the 4 WA.315/2016 banker ( State Bank of India) of the petitioner-Council to freeze the account of the petitioner and transfer the amount of Rs. 74,54,831/- in favour of the EPFO.
(iii) Thereafter on 19.02.2016 notice under Section 8-F(3) of 1952 Act was issued to the Bank to show cause as to why it be not declared as deemed defaulter for not responding to the earlier order.
(iv) Thereafter the petitioner / respondent Council filed appeal u/s 7(I) of the 1952 Act within limitation period of 60 days before the EPF Appellate Tribunal.
(v) On 18.03.2016 the Tribunal granted stay in favour to the petitioner / respondent herein against the recovery subject to deposit of 20% of the assessed amount.
6. To resolve the controversy, it is appropriate to reproduce some of the relevant provisions specially the one pertaining to recovery under Section 8 to Section 8-G in the following manner :-
8. Mode of recovery of moneys due from employers- any amount due -
(a) from the employer in relation to [an establishment] to which any [Scheme or the Insurance Scheme] applies in respect of any contribution payable to [the Fund or, as the case may be, the Insurance Fund, damages recoverable under section 14B, accumulations required to be transferred under sub-section 2 of section 15 or under sub-section 5 of section 17], or any charges payable by him under any other provision of this Act or of any provision of the [Scheme or the Insurance Scheme]; or
(b) from the employer in relation to an exempted [establishment] in respect of any damages recoverable under section 14B or any charges payable by him the appropriate Government under any provision of this Act or under any of the conditions specified [under section 17 or in respect of the contribution payable by him towards the [Pension] Scheme under the said section 17], may, if the amount is in arrear, [be recovered [in the manner specified in section 8B to 8G]].
8A. Recovery of moneys by employers and contractors-
5 WA.315/2016(1) [The amount of contribution (that is to say, the employer's contribution as well as the employee's contribution in pursuance of any Scheme)] and the employer's contribution in pursuance of the Insurance Scheme)] and any charges[***] for meeting the cost of administering the Fund paid or payable by an employer in respect of an employee employed by or through a contractor may be recovered by such employer from the contractor, either by deduction from any amount payable to the contractor under any contract or as a debt payable by the contractor.
(2) A contractor from whom the amounts mentioned in sub-section 1 may be recovered in respect of any employee employed by or through him, may recover from such employee the employee‟s contribution under any Scheme by deduction from the basic wages, dearness allowance and retaining allowance if any payable to such employee.
(3) Notwithstanding any contract to the contrary, no contractor shall be entitled to deduct the employer‟s contribution or the charges referred to in sub-section 1 from the basic wages, dearness allowance, and retaining allowance if any payable to an employee employed by or through him or otherwise to recover such contribution or charges from such employee.
Explanation. - In this section, the expressions "dearness allowance" and "retaining allowance" shall have the same meanings as in section 6.
8B. Issue of certificate to the Recovery Officer- (1) Where any amount is in arrear under section8, the authorised officer may issue, to the Recovery Officer, a certificate under his signature specifying the amount of arrears and the Recovery Officer, on receipt of such certificate, shall proceed to recover the amount specified therein from the establishment or, as the case may be, the employer by one or more of the modes mentioned below:-
(a) attachment and sale of the movable or immovable property of the establishment or, as the case may be, the employer;
(b) arrest of the employer and his detention in prison;
(c) appointing a receiver for the management of the movable or immovable properties of the establishment or, as the case may be, the employer:
Provided that the attachment and sale of any property under this section shall first be effected against the properties of the establishment and where such attachment and sale is insufficient for recovery the whole of the amount of arrears specified in the certificate, the Recovery Officer may take such 6 WA.315/2016 proceedings against the property of the employer for recovery of the whole or any part of such arrears.
(2)The authorised officer may issue a certificate under sub-section (1), notwithstanding that proceedings for recovery of the arrears by any other mode have been taken.
8C. Recovery officer to whom certificate is to be forwarded. (1) The authorised officer may forward the certificate referred to in section 8B to the Recovery Officer within whose jurisdiction the employer -
(a) carries on his business or profession or within whose jurisdiction the principal place of his establishment is situated; or
(b) resides or any movable or immovable property of the establishment or the employer is situated.
(2) Where an establishment or the employer has property within the jurisdiction of more than one Recovery Officers and the Recovery Officer to whom a certificate is sent by the authorised officer -
(a) is not able to recover the entire amount by the sale of the property movable or immovable, within his jurisdiction; or
(b) is of the opinion that, for the purpose of expediting or securing the recovery of the whole or any part of the amount, it is necessary so to do, he may send the certificate or, where only a part of the amount is to be recovered, a copy of the certificate certified in the prescribed manner and specifying the amount to be recovered to the Recovery Officer within whose jurisdiction the establishment or the employer has property or the employer resides, and thereupon that Recovery Officer shall also proceed to recover the amount due under this section as if the certificate or the copy thereof had been the certificate sent to him by the authorised officer.
8D. Validity of certificate, and amendment thereof -(1) When the authorised officer issues a certificate to a Recovery Officer under section 8B, it shall not be open to the employer to dispute before the Recovery Officer the correctness of the amount, and no objection to the certificate on any other ground shall also be entertained by the Recovery Officer.
(2) Notwithstanding the issue of a certificate to a Recovery Officer, the authorised officer shall have power to withdraw the certificate or correct any clerical or arithmetical mistake in the certificate by sending an intimation to the Recovery Officer.
7 WA.315/2016(3) The authorised officer shall intimate to the Recovery Officer any orders withdrawing or canceling a certificate or any correction made by him under sub-section 2 or any amendment made under sub-section 4 of section 8E.
8E. Stay of proceedings under certificate and amendment or withdrawal thereof- (1) Notwithstanding that a certificate has been issued to the Recovery Officer for the recovery of any amount, the authorised officer may grant time for the payment of the amount, and thereupon the Recovery Officer shall stay the proceedings until the expiry of the time so granted.
(2) Where a certificate for the recovery of amount has been issued, the authorised officer shall keep the Recovery Officer informed of any amount paid or time granted for payment, subsequent to the issue of such certificate.
(3) Where the order giving rise to a demand of amount for which a certificate for recovery has been issued has been modified in appeal or other proceeding under this Act, and, as a consequence thereof, the demand is reduced but the order is the subject-matter of further proceeding under this Act, the authorised officer shall stay the recovery of such part of the amount of the certificate as pertains to the said reduction for the period for which the appeal or other proceeding remains pending.
(4) Where a certificate for the recovery of amount has been issued and subsequently the amount of the outstanding demand is reduced as a result of an appeal or other proceeding under this Act, the authorised officer shall, when the order which was the subject-matter of such appeal or other proceeding has become final and conclusive, amend the certificate or withdraw it, as the case may be.
8F. Other modes of recovery. (1) Notwithstanding the issue of a certificate to the Recovery Officer under section 8B, the Central Provident Fund Commissioner or any other officer authorised by the Central Board may recover the amount by any one or more of the modes provided in this section.
(2) If any amount is due from any person to any employer who is in arrears, the Central Provident Fund Commissioner or any other officer authorised by the Central Board in this behalf may require such person to deduct from the said amount the arrears due from such employer under this Act, and such person shall comply with any such requisition and shall pay the sum so deducted to the credit of the Central Provident Fund Commissioner or the officer so authorised, as the case may be:
Provided that nothing in this sub-section shall apply to 8 WA.315/2016 any part of the amount exempt from attachment in execution of a decree of a civil court under section 60 of the Code of Civil Procedure, 1908 (5 of 1908).
(3) (i) The Central Provident Fund Commissioner or any other officer authorised by the Central Board in this behalf may, at any time or from time to time, by notice in writing, require any person from whom money is due or may become due to the employer or, as the case may be, the establishment or any person who holds or may subsequently hold money for or on account of the employer or as the case may be, the establishment, to pay to the Central Provident Fund Commissioner either forthwith upon the money becoming due or being held or at or within the time specified in the notice not being before the money becomes due or is held so much of the money as is sufficient to pay the amount due from the employer in respect of arrears or the whole of the money when it is equal to or less than that amount.
(ii) A notice under this sub-section may be issued to any person who holds or may subsequently hold any money for or on account of the employer jointly with any other person and for the purposes of this sub-section, the shares of the joint holders in such account shall be presumed, until the contrary is proved, to be equal.
(iii) A copy of the notice shall be forwarded to the employer at his last address known to the Central Provident Fund Commissioner or as the case may be, the officer so authorised and in the case of a joint account to all the joint holders at their last addresses known to the Central Provident Fund Commissioner or the officer so authorised.
(iv) Save as otherwise provided in this sub-section, every person to whom a notice is issued under this sub-section shall be bound to comply with such notice, and, in particular, where any such notice is issued to a post office, bank or an insurer, it shall not be necessary for any pass book, deposit receipt, policy or any other document to be produced for the purpose of any entry, endorsement or the like being made before payment is made notwithstanding any rule, practice or requirement to the contrary.
(v) Any claim respecting any property in relation to which a notice under this sub-section has been issued arising after the date of the notice shall be void as against any demand contained in the notice.
(vi) Where a person to whom a notice under this sub-
section is sent objects to it by a statement on oath that the sum demanded or any part thereof is not due to the employer or that he does not hold any money for or on account of the employer, then nothing contained in this sub-section shall be deemed to require such person to pay any such sum or part 9 WA.315/2016 thereof, as the case may be, but if it is discovered that such statement was false in any material particular, such person shall be personally liable to the Central Provident Fund Commissioner or the officer so authorised to extent of his own liability to the employer on the date of the notice, or to the extent of the employer‟s liability for any sum due under this Act, whichever is less.
(vii) The Central Provident Fund Commissioner or the officer so authorised may, at any time or from time to time, amend or revoke any notice issued under this sub-section or extend the time for making any payment in pursuance of such notice.
(viii) The Central Provident Fund Commissioner or the officer so authorised shall grant a receipt for any amount paid in compliance with a notice issued under this sub-section, and the person so paying shall be fully discharged from his liability to the employer to the extent of the amount so paid.
(ix) Any person discharging any liability to the employer after the receipt of a notice under this sub-section shall be personally liable to the Central Provident Fund Commissioner or the officer so authorised to the extent of his own liability to the employer so discharged or to the extent of the employer‟s liability for any sum due under this Act, whichever is less.
(x) If the person to whom a notice under this sub-section is sent fails to make payment in pursuance thereof to the Central Provident Fund Commissioner or the officer so authorised he shall be deemed to be an employer in default in respect of the amount specified in the notice and further proceedings may be taken against him for the realisation of the amount as if it were an arrear due from him, in the manner provided in sections 8B to 8E and the notice shall have the same effect as an attachment of a debt by the Recovery Officer in exercise of his powers under section 8B.
(4) The Central Provident Fund Commissioner or the officer authorised by the Central Board in this behalf may apply to the court in whose custody there is money belonging to the employer for payment to him of the entire amount of such money, or if it is more than the amount due, an amount sufficient to discharge the amount due.
(5)The Central Provident Fund Commissioner or any officer not below the rank of Assistant Provident Fund Commissioner may, if so authorised by the Central Government by general or special order, recover any arrears of amount due from an employer or, as the case may be, from the establishment by distraint and sale of his or its movable property in the manner laid down in the Third Schedule to the Income-Tax Act, 1961 (43 of 1961).
10 WA.315/20168G. Application of certain provisions of Income-tax Act.
-The provisions of the Second and Third Schedules to the Income-tax Act, 1961 (43 of 1961) and the Income-tax (Certificate Proceedings) rules, 1962, as in force from time to time, shall apply with necessary modifications as if the said provisions and the rules referred to the arrears of the amount mentioned in section 8 of this Act instead of to the income-tax:
Provided that any reference in the said provisions and the rules to the "assessee" shall be construed as a reference to an employer as defined in this Act.
7. From a plain reading of the provisions pertaining to recovery as mentioned supra, it is evident that whenever any amount determined under Section 7A becomes due from the employer the same is stipulated to be recovered in the manner specified in Section 8B to 8G.
7.1 Section 8B provides that for the purpose of recovery of an amount which is in arrear under Section 8, the authorized officer issues the certificate to the Recovery Officer specifying the amount of arrears. On receipt of such certificate, the Recovery Officer proceeds to recover the sum by one or more of the three modes i.e. attachment and sale of movable or immovable property, arrest of the employer and his detention in prison and appointing a receiver for the management of the property.
7.2 Section 8C relates to procedure to be followed by the Recovery Officer after receiving the recovery certificate. 7.3 Section 8D grants statutory immunity to the recovery certificate against challenge to its validity by the employer during recovery proceedings, reserving the right to the authorized officer to correct any clerical or arithmetical mistake in the same. 7.4. Thereafter Section 8E contemplates stay of proceedings of recovery initiated under the certificate and its amendment or withdrawal. This power of stay, amendment or withdrawal of the recovery certificate is vested with the authorized officer. The authorized officer is further empowered for staying the recovery if 11 WA.315/2016 the demand is reduced or modified in an appeal or other proceedings under the Act of 1952, till the said appeal or proceedings are pending.
7.5 Thereafter the most elaborated Section 8F deals with other modes of recovery apart from the three modes prescribed u/s 8(B). This special power is conferred upon Central Provident Fund Commissioner ( "CPFC" for brevity) or any other officer authorized by the Central Board. If any money is due from any person to employer against whom recovery proceedings are pending then the CPFC or the authorized officer may require such person to deduct the amount sought to be recovered out of the amount due to the employer and pay the deducted amount to the credit of the CPFC or the authorized officer and to make such directions repeatedly as and when the money becomes due from any person to the employer. To protect the interest of the beneficiaries of the Act of 1952 Section 8F(v) stipulates that any claim respecting any property in regard to which the notice under Section 8F(iii) is issued arising after the date of the notice shall be void as against any demand contained in the notice.
7.6. Section 8(F)(vi) further provides safeguards to persons who ostensibly appear to be owning money from the employer but actually do not. If such person to whom notices are issued object on oath to the sum demanded then such person would not be required to pay any such sum provided if it is ultimately found that statement on oath was incorrect then the person concerned will have to bear the liability.
7.7 Section 8F(x) provides that in case the noticee of the notice under Section 8F(iii) defaults then such person would be deemed to be an employer in default against whom proceedings for recovery of arrears due from him shall be taken in the manner under Section 8B(ii) to 8E.
12 WA.315/20167.8 Lastly 8F(5) lays down that recovery shall be made from the establishment by distraint and sale of his movable property in the manner laid down in the Third Schedule to the Income-tax Act, 1961.
8. Close scrutiny of provisions contained in Section 8E(1) reveals power vested in Recovery Officer to postpone / stay the proceedings of recovery for justified cause which is an inbuilt safeguard against use of this provision as an engine of oppression. Accordingly, the legislature has consciously ensured that the provisions dealing with recovery do not fall foul of reasonableness, fair play, good conscience.
9. It is thus evident from the scheme of the provision of recovery contained from Section 8 to Section 8F that the principle of fair play, good conscience, reasonableness are inbuilt in the procedure prescribed for recovery so as to ensure reasonable opportunity to the defaulter before the extreme measures for recovery are adopted.
10. Thus the reasonable opportunity available to the defaulter under the recovery provisions contained in Section 8 to 8F are in addition to the remedy of statutory appeal u/s 7-I read with Rules of 1997 before the EPF Appellate Tribunal which is vested with enough powers to not only condone the delay in filing the appeal but also in appropriate cases to waive the entire amount required to be deposited in terms of Section 7-O as pre-condition for entertaining the appeal.
11. The above mentioned provisions clearly demonstrate that employer / defaulter cannot be said to be remedy-less or cannot be treated to be subjected to any oppressive coercive measures for recovery.
12. Viewed from the angle of the object behind the Act the contention of the appellant- EPFO appears to be correct. The 13 WA.315/2016 object of the Act is beneficial in nature and is meant to ensure the creation of provident fund and pension schemes for employees of different establishments who are not covered by any statutory provisions. This provides for valuable financial succour in the evening of their life.
13. The provision of 1952 Act and the schemes framed thereunder flow out of the fountainhead of Article 38 of the Constitution of India which obliges the State to strive to promote the welfare of the people by securing and protecting as effectively as it may a social order in which justice, social, economic and political shall inform all the institutions of the national life. The beneficial nature of 1952 Act makes it all the more necessary that it is interpreted in a manner that the benefit flow out of its provision do not get obstructed by any procedural or technical hurdles.
14. Viewed from above prospective and from the textual and contextual view point, this Court is of the considered view that if the view taken by the writ Court is upheld then during the period of 60 days from the passing of the order of determination of sum under Section 7A, the authorized officer and the Recovery Officer would be left with no powers despite the same vested in them statutorily under Section 8 to 8F. The Act of 1952 and the Rules framed thereunder do not provide for withholding of recovery proceedings to afford opportunity to the employer / defaulter to enable him to prefer appeal before the Tribunal. Moreso, the proceedings of recovery u/s 8-B to 8-F take a reasonable time to reach the stage of adopting coercive means. It never happens that on the very next day of passing of Sec.7-A order, the extreme step of attachment, sale, civil jail or freezing of bank account of account establishment takes place.
14.1 More over Section 7B provides the remedy of review on merits and of review u/s 7-A(4) against exparte order u/s 7-A to any 14 WA.315/2016 person aggrieved by the order passed u/s 7A.
15. The Division Bench Decision of Gujrat High Court in the case of Employees Provident Fund Organization Vs. Rollwell Forge Ltd. ( LPA No. 12/2010 in SCA No. 3347 of 2009) decided on June 15, 2011 relied upon by the counsel for the appellant is worthy of reference and reliance. The relevant portion of this decision is reproduced below:-
"10. In view of the aforesaid discussion, out final conclusions can be summarized as under :-
(i) In the absence of any specific provision in the Act prohibiting or restraining the authorities from taking any further action of recovery of the amount due and payable by the employer, it is always permissible for the authorities to proceed ahead without waiting for the expiry of the statutory time period of appeal as provided under Section 7-I of the Act. Any other interpretation in this regard would render provisions and the object of the Act otiose.
(ii) Even mere filing of the appeal without obtaining any relief from the Appellate authority shall not preclude or prohibit the authorities to proceed further in the matter for recovery of the amount.
(iii) ......
(iv) ......"
16. In the conspectus of the above discussion it is evident as day light that in the absence of any provision to support the findings rendered by the writ Court, the 1952 Act being beneficial in character providing for enough safeguards of reasonable opportunity to the person who is subjected to order under Section 7A before coercive steps are taken for making recovery and of course taking into account the solemn object of creating provident fund for the employees who are not governed by any statutory provision, this Court is unable to concur with the view of the writ Court.
17. Consequently, the order of the writ Court dated 04.04.2016 passed in WP No. 1451/2016 is set aside. The present writ appeal 15 WA.315/2016 is accordingly allowed.
18. Litigation cost quantified at Rs.2000/- to be paid by respondent to the appellant within 90 days.
(Sheel Nagu) (S.A. Dharmadhikari) sarathe Judge Judge