Madras High Court
Ujwal Transport Agency vs Union Of India (Uoi) And Anr. on 1 September, 1998
Equivalent citations: [1999(82)FLR163], (1998)IILLJ833MAD, (1999)IMLJ350
ORDER Shivappa, J.
1. In this writ petition the petitioner is seeking for quashing the order passed by Respondent No. 2 dated February 6, 1990 in reference No. TN/SDC/19856/Accounts/90 wherein he has levied penalty of Rs. 17,959.10 as damages for the alleged delayed payment of contribution for the period commencing from October, 1984 to February, 1987 in respect of the contribution payable to the employees of the petitioner's establishment.
2. The petitioner's establishment was started in October, 1984 and was entrusted the job as Transport Contractors by M/s. Ashok Leyland Limited for transporting their chassis to various places. The contract was for a period of three months initially from November 1, 1984 and; based on the performance of the petitioner the period of contract was further extended and a full-fledged contract came into effect only after one year. The petitioner had in his establishment seven persons including office staff; and other casual workmen. Apart from contract with M/s. Ashok Leyland the petitioner also undertook transportation of vehicles belonging to establishments such as Automotive Coaches and Components Limited, Elgi Equipments Limited, M/s. Transport Corporation of India and other body building units. As such the petitioner provided their services to various establishments spread over the State of Tamil Nadu.
3. Under the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 (Act 19 of 1952) and the Scheme framed thereunder called as Employees' Provident Fund Scheme (hereinafter referred to as "The Act" and "The Scheme" for short), with the intention of giving the benefit of Provident Fund coverage to its employees was not complied with. A notice was issued to the employer by the Regional Provident Fund Commissioner, Tamil Nadu and Pondicherry States on December 19, 1988 to show cause within fifteen days why damages as envisaged under Section 14-B of the Act be not recovered from the petitioner and an opportunity of personal hearing was also afforded on January 2, 1989, January 31, 1989, February 15, 1989, April 17, 1989 and April 27, 1989 both to the contractor and principal employer.
4. Both the parties replied to the notice inter alia contending that the delay in remitting the dues was due to the non-allotment of separate code number by Respondent No. 2.
5. Respondent No. 2 in exercise of its powers conferred under Section 14-B of the Act ordered damages for the period commencing from October, 1984 to February, 1987 totalling Rs. 17,959.10 as detailed in the impugned order to be recovered and paid into the respective Employees' Provident Fund Accounts maintained at the State Bank of India within fifteen days of receipt of the order, failing which action will be initiated under Section 8 of the Act, to recover the amount in the same manner as an arrear of Land Revenue without further notice.
6. In substance, the contention of the learned counsel for the petitioner is that the non-deposit was due to non allotment of specific code number and the delay in allotment of the code number at the instance of Respondent No. 2 cannot be construed as default under Section 14-B of the Act.
7. Mr. V.Vibhishanan, learned counsel for Respondent No. 2 contended that the writ petition is not maintainable either in law or on facts. Since there is an alternative remedy of filing the appeal against the impugned order under Section 7-(1) of the Act before the Provident Fund Appellate Tribunal constituted from July 1, 1977. It is further submitted that M/s. Ujwal Transport Agency was a contractor to M/s. Ashok Leyland Limited, Ennore which is a covered exempted establishment under Section 17(1) of the Act from October, 1984 onwards and subsequently it had undertaken work on contract basis from other establishments also, viz., Elgi Equipments Limited, M/s. Transport Corporation of India and other body building units. The petitioner's establishment had applied by its letter dated April 25, 1985 to the Regional Provident Fund Commissioner for a code number. The Regional Provident Fund Commissioner directed the petitioner's establishment by letter dated December 19, 1985 to commence implementation of the Scheme provisions under Code No. TN/10241, pertaining to M/s. Ujwal Trade and Transport Company Private Limited. M/s. Ujwal Trade and Transport Company Private Limited having objected to the decision of the Regional Provident Fund Commissioner had preferred an appeal for the 1 allotment of a separate Provident Fund code number. Accordingly, a separate code number TN/19856 was allotted on May 22, 1987 with effect from October 1, 1984 and the entire dues for the period commencing from October 1, 1984 to April 30, 1987 (sic) was remitted by the petitioners establishment on June 21, 1987.
8. The learned counsel for respondent No. 2 disputed the contention that the non-payment was due to the allotment of the code number is not correct. Being its contractor, M/s. Ashok Leyland Limited (TN/44-A) should have implemented the Scheme provisions in respect of the employees employed by M/s. Ujwal Transport Agency under code No. TN/44-A as required under para 30(i) of the Employees' Provident Fund Scheme, 1952. Likewise, the other principal employers viz., M/s. Elgi Equipments, M/s. Transport Corporation of India also: should have done the same thing. On the other hand, M/s Ujwal Transport Agency being a contractor to the main covered establishments referred to above, should have discharged its duties as laid down under Section 8-A of the Act. and under paras 30(2) and 36 (B) of the Scheme of 1952. In substance, he urged, both the principal employers and the petitioner herein have failed to discharge their duties by not remitting the dues within the time limit as stipulated under para 38(1) of the Scheme and para 9(1) of the Employees' Family Pension Scheme, 1971. According to him, the allotment of code number is for administrative convenience as requested by the petitioner and the delay in allotting the code number to the petitioner's establishment may be due to the administrative difficulties, but, till the code number is allotted by the Regional Provident Fund Commissioner, the petitioner should have implemented the Scheme provisions framed under the Act through the code number allotted to the principal employers. By not doing so, it had committed defaults and hence it is obligatory on its part to pay the damages. It is further submitted that, for the convenience of the petitioner, the statutory social security benefits available to the workmen employed by the petitioner cannot be denied. He justified the levy of damages invoking Section 14-B of the Act as it is mandatory which intended to avoid the fund being depleted because of the strain and injury caused by the petitioner.
9. The question for consideration is whether the petitioner is justified in awaiting for allotment of code number and on that account resists levy of damages under Section 14-B of the Act as unsustainable?
10. In order to appreciate the question it is necessary to advert to Section 14-B of the Act which reads thus:-
"Power to recover damages:- Where an employer makes default in the payment of any contribution to the Fund (the Family Pension 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 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)..."
11. A reading of the above provision makes it clear that the nature of the levy is punitive and as the Officer is required to consider the facts of each case while exercising his discretion under the Act, it would require an enquiry in consonance with the principles of natural justice. While imposing damages, the intention in enacting Section 14-B is to enable the Government to impose exemplary or punitive damages. But damages cannot be levied when the employer has already paid the contribution amount though under protest. The expression 'damage' occurring in Section 14-B is in substance, a penalty imposed on the employer for the breach of the statutory obligation. The object of imposition of penalty under Section 14-B is not merely to provide compensation for the employees, but also to penalise default employer as also to provide reparation for the amount of loss suffered by the employees. The damage referred to under Section 14-B is different from fine and penalty and is intended to compensate the loss to the beneficiaries of the Scheme.
12. Section 8-A of the Act contemplates:
" Recoveries of moneys by employers and contractors:- 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 on the basis of such contribution for meeting the cost of administering the Fund paid or payable by an employer in respect of any 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 the contract or as a debt payable by the contractor. 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."
13. As defined in "Words and Phrases" the word 'default' means anything wrongful-some omission to do which ought to have been done by one of the parties... 'default' also means non payment of an obligation by the party bound to pay. In other words, specifically, the omission OF failure to perform a legal or contractual duty and it may also embrace the idea of dishonesty and which omission in law, is discreditable.
14. Under Scheme at para 36, every employer shall send to the Commissioner, within fifteen days of the commencement of the Scheme, a consolidated return in such form as the Commissioner may specify of the employees required or entitled to become members of the Fund showing the basic wage, allowance paid to each of such employees. Under paragraph 30, the employer shall pay both the contributions payable by himself on behalf of the member employed by him directly or by or through a contractor. In respect of employees employed by or through a contractor, the contractor shall recover the contribution payable by such employee and shall pay to the principal employer the amount of member's contribution so deducted together with an equal amount of contribution and also administrative charges.
15. Paragraph 38 of the Scheme, contemplates mode of payment of contributions. Under this para, the employer shall, before paying the member his wages in respect of any period or part of period for which contributions are payable, deduct, the employee's contribution from his wages which together with his own contribution as well as an administrative charge of such percentage of the pay for the time being payable to the employees other than an excluded employee and in respect of which the provident fund contributions are payable, as the Central Government may fix, he shall within fifteen days of the close of every month pay the same to the Fund by separate bank drafts or cheques on account of contributions and administrative charges, provided that if payment is made by a cheque it should be drawn on the local bank of the place in which deposits are made. Provided further, where there is no branch of the Reserve Bank or State Bank of India at the station where the factory or other establishment is situated, the employer shall pay to the Fund the amount mentioned above by means of Reserve Bank of India separately on account of contribution and administrative charge. Sub-para (2) of para 38 contemplates, every employer shall forward to the Commissioner, within twenty-five days of the close of the month, a monthly consolidated statement, in such form as the Commissioner may specify, showing recoveries made from the wages of each employee and the amount contributed by the employer in respect of each such employee. Sub-para (3) of para 38 contemplates, not-withstanding anything contained in sub-paragraph (2), in respect of such establishments as are notified by the Commissioner to be annually posted establishments, the employer shall forward to the Commissioner within twenty-five days of the close of each month, a monthly abstract in such form as the Commissioner may specify, showing, inter alia, the aggregate amount of recoveries made from the wages of all the members and the aggregate amount contributed by the employer in respect of all such members for the month. A consolidated Annual Contribution Statement in Form 6-A, showing the total amount of recoveries made during the period of currency from the wages of each member and the total amount contributed by the employer in respect of each such member for the said period. This sub-paragraph (3) of para 38 is a Ministerial Act where the form prescribed in Form No. 6-A to sub-paragraphs (1) and (2) cast a duty to deduct the contribution together with his own contribution and shall within fifteen days of the close of every month, pay the same to the fund either under sub-paragraph (1) and (2) of paragraph 38 or under the Act, furnishing the code number is not a pre-condition to pay the contribution.
16. When the scheme contemplates payment through a contractor, no attempt was made to pay the contribution to the fund or if there are any differences between the petitioner and the contractor, nothing prevented to pay to the account of M/s. Ashok Leyland or even to the account of the Commissioner or to the bank, so as to prove the bonafide and divest himself of the domain of the amount deducted by the employees' contributions from their wages together with his own contribution as well as administrative charges of such percentages payable to the employees. For having not paid the contribution in any one of the aforesaid manner contemplated above it becomes "default within the meaning of Section 14-B of the Act", in which event, it attracts power to recover damages. Even temporary retention of the amount deducted is impermissible and it may attract penal provisions.
17. A perusal of the impugned order shows that respondent No. 2 has reflected the reasons and the basis for quantification to arrive at the figure at Rs. 17,959-10 and there are no legal infirmities in the impugned order which calls for interference.
18. Of course, a discretion is vested in the authority to levy damages but that discretion has to be exercised on well known principles. It is possible for the employer to plead and satisfy the authority that for reasons beyond his control, the employer was not possessed of sufficient means for his contribution to make the necessary payment and then the employer may be relieved of the liability to pay in the degree of penalty of such damages. It is obligatory on the part of the employer to place before the authority sufficient and reliable materials to establish his inability to send in the contribution payable under the Act. It is not the case that the employer was not possessed of sufficient means or funds to make necessary payment. It is neither his case that there were reasons beyond his control. Non providing a code number when other alternatives are available to make the payment, is not an explanation which could absolve the duty cast under the Act and Scheme. Therefore, for the convenience of the petitioner, the statutory social security benefits available to the workmen employed by the petitioner cannot be denied. The petitioner should not have awaited for code number and he should have complied with the provisions of the Act right from the date of the commencement of the work of M/s Ashok Leyland contributing to its provident fund.
19. The contention of the learned counsel for the petitioner that the default was not on account of the fault of the petitioner is untenable. There is no justification to resist the levy of damages levied in the impugned order.
20. For the aforesaid reasons, the petition is liable to be dismissed and accordingly dismissed. Parties to bear their costs. Consequently W.M.P. No. 3259 of 1990 is also dismissed.