Patna High Court
Inter State Transport Agency vs The Regional Provident Fund ... on 11 January, 1983
Equivalent citations: 1983(31)BLJR390
JUDGMENT Satya Brata Sanyal, J.
1. This writ petition is directed against an order of the Regional Provident Fund Commissioner, dated 22.3.1982 made under Section 14B of the Employees' Provident Funds and Miscellaneous Provisions Act (hereinafter referred to as the Act), imposing damages of a sum of Rs. 49,909.25, for delay caused in depositing provident fund for the period of June 1973 to February 1976, as well as the order passed by the Regional Provident Fund Commissioner date d 25.5.1982 refusing to reconsider the earlier order imposing penal damages. The aforesaid orders have been marked respectively as Annexure '3' and '9' of this writ petition.
2. The case of the petitioner is that it is an establishment within the meaning of the Act and it has been allotted code No. B.R./1739. Originally the headquarters of the petitioner which is engaged in the transport agency business, was situated at Calcutta. The employees at Calcutta resort to various illegal activities under the. veil of labour dispute and caused serious disturbance in the working of the establishment which is evident from Annexures 1 and 2 of the writ petition and the petitioner having not received adequate protection from law and order authorities at Calcutta, it was constrained to shift the establishment to Sitamarhi in the State of Bihar. Inspite of the adverse circumstances created by the employees, the petitioner did not fail to deposit all the contribution under the Act before any notice issued by the authorities in this regard. There was. however, some delay in doing so which varied from 9 days to four months as would be evident from Annexure '8' of the writ petition during the entire period i. e. June 1973 to February 1976.
3. The points urged by the learned Counsel in support of this petition, assailing the orders aforesaid are as follows:
(1) The imposition of penal damages on 22.3.1982 with respect to default for the years 1973 to 1976. is barred by limitation as it is beyond 3 years as provided by Article 137 of the Indian Limitation Act, 1963 and therefore not recoverable.
(2) Proceedings having been cancelled as would be evident from Annexure ' 7', the impugned assessment is wholly without jurisdiction.
(3) Section 7A of the Act which provides determination of the amount due "under any provisions of the Act" and provide for the conduct of an enquiry in the said regard, is ultra vires the constitution of India, therefore, the impugned enquiry and consequential assessment of penal damages is illegal and void.
(4) In the scheme of things there could be no rigid formula of assessment of penal damages Mere delay in depositing the provident fund does not ipso facto attract penal consequences. Various circumstances need be objectively considered by a "participatory proceeding" before imposing penal damages.
(5) The impugned order Annexure '3' as well as Annexure 9' suffer from the vice of being non-speaking even though the power exercisable under the provisions of the Act is quasi-judicial.
4. The learned Standing Counsel for the Central Government urged that there is no substance in any one of the points urged on behalf of the petitioner and the petition is fit to be rejected. I propose to consider his detailed submissions while I will be dealing with each of the points separately.
5. Point No. 1, The learned Counsel of the petitioner submits that the assessment of penal damages (Annexure (3) is without jurisdiction in view of the bar of limitation of 3 years under Article 137 of the Limitation Act 1963. The learned Counsel states that Limitation Act 1963 has brought about a great stride in its applicability to local and special acts. The view expressed by Supreme Court in the case of Bombay Gas Co. v. Gopal Bhiva and Town Municipal Council, Athani v. Presiding Officer that neither Article 181 of the Limitation Act 1908 nor Article 137 of the Limitation Act 1963, applies to local and special acts are no more good law in view of the decision of the Supreme Court in the case of the Kerala State Electricity Board, Trivandrum v. J.P. Kunhaliumma where it is observed:
The alteration of the division as well as the change in the collocation of words in Article 137 of the Limitation Act 1963 compared with Article 181 of the 1908 Limitation Act shows that applications contemplated under Article 137 are not applications confined to the Code of Civil Procedure. In the 1908 Limitation Act there was no division between applications in specified cases and other application as in the 1963 Limitation Act. The words "any other application" under Article 137 cannot be said on the principle of ejusdem generis to be applications under the Civil Procedure Code other than those mentioned in Part I of the third division. Any other application under Article 137 would be petition or any application under any Act But it has to be an application to a Court for the reason that Sections 4 and 5 of the 1963 Limitation Act speak of expiry of prescribed period when Court is closed....
The Court concluded that Article 137 of the Limitation Act will "apply to any petition or application filed under any act to a civil Court." Town Municipal Council Athani (supra) case was not followed and was differed from.
It may be observed here that Kerala State Electricity Board (supra) case arose out of an application filed before the District Judge by an aggrieved person for compensation under Sections 10 and 16(5) of the Indian Telegraph Act, 1885 read with Section 51 of the Indian Electricity Act and in that context the question arose whether the application filed before the District Judge as a Court for judicial decision fell within the scope of Article 137 of the 1963 Limitation Act. It is, however, to be observed that the decision in the case of Town Municipal Council, Athani (supra) to the effect that the Limitation Act 1963 has not so enlarged the scope of the Act so as to include within them "application to bodies other than Courts, such as quasi-judicial tribunal, or, even an executive authority" or for that matter Industrial Tribunal or a labour Court dealing with references or applications, as they are not Courts governed by the Code of Civil Procedure or the Code of Criminal Procedure, is neither differed from nor overruled and is, therefore, still good law and holds the field.
6. The learned Counsel's argument on the question of limitation cannot be accepted, as it overlooks two important criterias for the attraction of Article 137 of the Limitation Act namely:
(a) The said article is restricted to application only, and
(b) It must be an application to a Court governed by a Code of Civil Procedure or the Code of Criminal Procedure.
The said application may be under a local or a special Act filed before a Court for judicial decision, as in the case of Kerala State Electricity Board (supra). For attraction neither of Article 181 of Limitation Act 1908 or of Article 137 of Limitation Act 1963 there has to be an application for invoking the right, is established principle of law supported by preponderance of judicial opinion. The plain language of the article also justifies the said conclusion. The test, therefore, in my opinion is to see whether the Court is not bound to exercise its power and do the particular things unless moved by an application, for the applicability of Article 137 of the Limitation Act to a particular application. The said application must further be to a 'Court' which has to decide the application judicially. Bearing in view the twin tests aforesaid, the submissions of the learned Counsel, is wholly unacceptable. There is no need for any application for a proceeding under Section 14B and/or Section 7A of the Provident Fund Act. It is the duty of the executive to do the act suo motu independently of any application, to say loosely a ministerial act. Further the authorities under Provident Fund Act are neither civil Courts nor criminal Courts, even though the said authorities may have to act judicially and even follow some of the procedure laid down under the Code of Civil Procedure. In that regard these bodies have "all the trappings of the Courts" but are not Courts in the technical sense of the word. See Bharat Bank Ltd. v. Employees of Bharat Bank 1950 (1) L.L.J. 921, (922, 923).
7. Apart from relying upon Kerala State Electricity Bewd (supra) case, learned Counsel sought to fortify his argument by referring to the case of Amin Chand and Sons v. State of Punjab and Ors. A.I.R. 1965 Punj. 441. S.V. Lachwani v. Kanchan Lal C. Parik and Ors. 1978 L.I.C. 868. State of Orissa v. Prajatantra Prachar Samiti and Anr. 1981 L.I.C. 1367. and Balkrishna Savalram Pujari Waghmare and Ors. v. Shree Dhaneshwar Maharaj Sansthan and Ors. 1959 S.C. 798. The learned Standing Counsel contested the said submission by relying on the cases of the Regional Provident Fund Commissioner U.P. v. Allahabad Canning Co. 1978 L.I.C. 998. Hindustan Malleables and Forgins Ltd. v. The Regional Provident Fund Commissioner and Ors. 1978 L.I.C. 930. and the Divisional Engineer M.R.T. Division, City Circle A.P.S.E. Board, Hyderabad v. Regional Provident Fund Commissioner, Hyderabad 1979 L.I.C. 187.
8. I may at once state that reliance placed on cases of S.V. Lachwani v. Kanchan Lal (supra) and State v. Prajatantra Prachar Samiti (supra) by the petitioner's counsel is wholly misplaced inasmuch as those cases relate to prosecutions arising out of default in making the deposit and interpretation of the term "continuing offence" for the purpose of Section 472 Cr. PC Similarly Balkrishnd's case (supra) relate to Section 23 of Limitation Act 1963 dealing with "continuing wrong." These cases therefore are wholly irrelevant for our purpose. So far the case of Aminchand (supra) is concerned, it is a decision on the principle of waiver, as the damage proceeding was initiated after lapse of several years. This case was not approved by a Bench of Allahabad High Court in the case of Regional Provident Fund Commissioner, U.P. v. Allahabad Canning (supra). The principle of waiver and limitation in relation to damage proceeding under the Act, did not find favour of a Bench of our own High Court in the case of Hindustan Malleables v. Regional Provident Fund Commissioner (supra). Similarly Andhra Pradesh High Court did not approve the view expressed in Aminchand's case in the case of the Divisional Engineer M.R.T. (supra). Aminchand's case itself (supra) was overruled in letter's patent appeal vide State of Punjab v. Aminchand (1964) 37 F.J.R. 92. In the case of J.C.M. Woolen Mills Ltd. v. The Regional Provident Fund Commissioner 1981 L.I.C. 267 a Bench of the same High Court refused to follow Aminchand's case, I fail to understand how can there be waiver of a statutory right, since at law, right of action arising on an instrument or arising otherwise" can be discharged either by release under seal or by accord and satisfaction...waiver is an abandonment of a right in such a way that the other party is entitled to plead the abandonment by way of confession and evidence if the right is thereafter asserted." (see Halsbury 4th edition volume 16 page 1470 and 1471). The Standing counsel relying upon Annexures 4, 5, 7 and 8 demonstrated that the matter was very much being perused by the department against the petitioner, from time, which showed a conduct contrary to the submission of the learned Counsel of the petitioner.
9. I therefore, hold that there is no limitation for initiating a proceeding either under Section 7A or 14B of the Act nor mere delay in initiating the proceeding amounts to waiver and/or condonation.
10. Point No. 2.--In support of the point that the impugned order is invalid and without jurisdiction, the learned Counsel contends that by Annexure 4, the authorities asked the petitioner to show cause proposing imposition of damage of Rs. 33,000/- and odd and by Annexure 5, the authorities enhanced the said proposal to Rs. 52,000/- and odd, and again by Annexure 'V varied the said proposed amount and ultimately the authorities issued show cause vide Annexure 8 proposing a new figure In the said show cause the authorities expressly stated that the communication Annexure '7' is withdrawn and cancelled. The learned Counsel contends that the show cause vide Annexure '8' which is dated 23.4.1981 being beyond 3 years of the last date of default which is February 1976, the order imposing penal damages made persuant to the said show cause on 22.3.1982 (Annexure 3) is void. In view of my opinion that Limitation Act has no application to a proceeding under Section 14B, this point has no substance.
11. Learned Counsel's 2nd limb of argument, is the authorities having withdrawn and cancelled Annexure 'V the show cause notice, they could not have further proceeded in the matter. This argument is devoid of any substance in as much as the amount disclosed in all the notices were tentative and provisional and not final and the petitioner was asked to show cause who the said amount be not imposed as penal damages. The amount mentioned in the notice is an estimate formed by the authority. Every notice is referred to the notice following because the authority detected inaccuracy in the proposal amount of damages and as such one was substituted by the other. In Annexure '8' while proposing a certain sum by way of damages, the petitioner was communicated, the amount proposed in Annexure T is withdrawn and cancelled. The proceeding was never withdrawn and cancelled Learned Counsel relied and referred to the case of Sri Kali Prasad Seal v. State of Bihar 1969 B.L.J.R. 254 in support of his contention that once the proceeding for land encroachment is finally dropped it cannot be revived subsequently. As I said earlier the proceeding in the instant case was never dropped and the matter attend finality only when order Annexure 3 was made. The point therefore has no substance.
12. Point No. 3.--Learned Counsel for the petitioner submits that Section 7A is ultra vires Article 14 of the Constitution of India since there is no procedural safeguards provided under the Act, against the determination of the quantum under the Act and the scheme. The order passed by the Commissioner is final and non-justiciable in civil Court. The remedy provided under Section 19A of the Act is not available as a matter of right. The availability of constitutional remedy is inconsequential. Further Section 7A does not provide for effective hearing. Adverse report of the inspector is not made available. The party concerned has no right to ask disclosure from the Commissioner or from a Commissioner's office. In short, there is no effective hearing and judicial or quasi judicial determination and/or provision for judicial or quasi-judicial review, therefore, it is unreasonable and fit to be struck down. In support of this argument, learned Counsel strongly relies upon a Bench decision of Delhi High Court in Wire Netting Stores Delhi v. The Regional Provident Fund Commissioner 1981 L.I.C. 1015 : 1982 (1) L.L.J. 7.
13. The argument of the learned Counsel in this regard has two facts, namely:
(a) As there is no right of appeal to a judicial body from the decision of the Provident Fund Commissioner, therefore the provision is bad.
(b) There being no proper and effective hearing provided under Section 7A as is expected from a quasi-judicial or judicial authority, the provision is unreasonable and bad.
14. Under the directive principle of State policy, it is the duty of the State to secure a social order in which justice, social, economic and political shall inform all the institutions of the national life. It further provides that the ownership and control of material resources of the community are so distributed as best to sub serve the common good and the operation of economic system does not result in the concentration of wealth and means of production to the common detriment. Within the limit of its economic capacity, the State shall make effective provision for securing right to work and on amongst others public assistance in cases of unemployment, old age, sickness etc. The Act is a measure of social security, and the subject of legislation is creation of a contributory fund requiring compulsory deduction and deposit. Once Industries and establishment answer the conditions of applicability of the Act, the employer of such concerns are required to contribute to the fund, which contribution constitute employees share, deducted from their salary at a certain rate and a matching contribution by the employer. The operation of the statute does not depend on any decision being taken by the authorities under the statute. It depends on its own provision. In usual course it is a routine procedure requiring arithmetic calculation on the part of the employer. lam therefore of the opinion that it is not comparable to a taxing statute requiring regular assessment. The contentions that the act requires assessment from time to time and therefore it is in the nature of or analogous to a taxing statute is not acceptable tome. Section 7A come into play only when some one who should have himself come forward do not come forward, that notice is given under the Act and sums payable is determined under Section 7A and if he commits default in making the contribution, he is subjected to imposition of penal damages under Section 14A of the Act. Under both the provisions there must be an enquiry for determining the amount due by providing "reasonable opportunity" as envisaged under Section 7A(3) as also under the proviso to Section 14B. Persons of the rank of Commissioner or such other Officer who may be authorised by the Central Government under Section 14B have been vested with adjudicative power. Employees Provident Fund Organisation (Commissioner) Recruitment Rules 1966, framed under Section 5D(6) of the Act, lay down procedure for selection of persons in consultation with Union Public Service Commission. As the person selected, shall have to discharge quasi-judicial power as envisaged under Section 7A(2) of the Act, it must be assumed that qualified, competent responsible and proper persons are selected bearing in mind the duties they are called upon to discharge. As a matter of fact, the said authorities are vested with the powers conferred under Order XI, relating to discovery and inspection, Order XVI, relating to summoning and attendance of witnesses, Order XIX relating to any point to be proved by affidavit, Order XVIII, examination of witness on oath and Order XXVI, issuing commission to examine witnesses etc. under the Code of Civil Procedure and particularly they have to conduct the proceeding in a fair and reasonable manner. Section 7A of the Act provides conduct of enquiry for determination of any amount due under any provision of the Act which the learned Counsel contends will include the dues under Section 14B of the Act as well, and assuming it to be so, the said provision to my mind embody the principle of natural justice. Broadly stating, rules of natural justice require that the party should have the opportunity of adducing all material and relevant evidence, evidence of the opponent to be taken in its presence, opportunity to cross-examine the witnesses of the other side and no material should be relied on against a party, without the party given as opportunity of explaining it vide Union of India v. T.R. Verma . The Purtabpore Company Ltd. v. Cane Commissioner . I, therefore, fail to appreciate how it can at all be contended that no proper and effective hearing has been provided under Section 7A of the Act, as is expected from a judicial or quasi judicial authority, determining a lis. Assuming for a moment, more than often orders are passed in flagrant violation of the principles of natural justice, is no ground to hold Section 7A of the Act to be ultra vires Article 14 of the Constitution. Section 7A ensures just and fair enquiry.
15. As to the other submission, that Section 7A is unreasonable as no appeal to a tribunal, judicial or quasi-judicial has been provided, is equally devoid of substance. The power is exercisable by the Chief Officer of the region, selected in the mode and manner Indicated earner. He is the highest officer in the region intimately connected with the working of the Act. Any abuse of power and act of mala fide is justiciable before the High Court. In some cases Section 19A can also be invoked. Merely because no appeal has been provided against his decision "is a matter of no moment," vide K.L. Gupta v. Corporation, Greater Bombay Chinta Lingam v. Government of India . Panalal Binjraj v. Union of India . The decision of the Supreme Court in the case of Organo Chemical Industries v. Union of India A.I.R. 1979 S.C. 1803 is a settled on the point. The Supreme Court while considering the vires of Section 14B of the Act repelled a similar argument and held "In the circumstances, the absence of a provision for appeal or vision can be of no consequence". The attention of their Lordships of Delhi High Court was not drawn to this decision of the Supreme Court. The decision of Delhi High Court in M/s Wire Netting Stores, Delhi (supra) on this issue is therefore per incurium.
16. Before parting with this point, I must observe that it is desirable on the part of the Central Government that the persons who are called upon to exercise these powers must have legal background, at least to inspire confidence in the people, more particularly when their orders are final.
17. Points 4 & 5. Whether petitioner is entitled to, in a proceeding under Section 14B, a speaking order imposing damages or once there is a default on the part of the petitioner, damages would be automatically imposed on the basis of sliding formula evolved by the department which has been applied in the case, is the substance of contention Nos. 3 and 4 of the learned Counsel for the petitioner. He submits that a mere perusal of impugned annexure '3' manifest that beyond referring to its representation annexure '6' to the writ application there Is no consideration of the circumstances occasioning the default. He, however, does not dispute the period of default as is shown in annexure '8' but he submits that default vary from few days to few months qua contribution for a particular month. He further urges that there are various mitigating circumstances as laid out in its representation (annexure 6) but those were not considered objectively as is required by a quasi-judicial body. The assessment was made on the basis of sliding formula and therefore the so called enquiry is only a hoax.
18. It is now settled law that imposition of damages under Section 14B is a quasi-judicial function and having regard to the punitive nature of the power exercisable under Section 14B and the consequences that ensure there from an order under Section 14B must be a speaking order. The only object for making provision for damages is to ensure the implementation and success of the measure and as such these must bean objective determination of the question vide Organo Chemical Industries and Anr. v. Union of India 1979 (39) F.L.R. 309 : A.I.R. 1979 S.C 1803. To my mind the words of great significance in Section 14B of the Act are '"such damages not exceeding 100 per cent of the amount of arrears as it may think fit to impose". These words manifest that imposition of damages .cannot be subject matter rigid formula. The authorities are called upon to apply their mind to the facts and circumstances of the case. The Supreme Court while considering an analogous provision is Section 10F of Coal Mines Provident Fund and Bonus Scheme Act 1948, held "determination of damages is not an inflexible application of a rigid formula" (vide Commissioner of Coal Mines Provident Fund, Dhanbad v. J.P. Lalla and Sons .
19. The learned Standing Counsel contended that framing of table of damage is a salutary measure and prevent arbitrary exercise of power and imposition of damages to the extent of 100 per cent is not impermissible under the Act. He further that as the damages have been imposed on sliding formula, the Court should refrain from interfering under writ jurisdiction. In support of his submission he refers to a Bench decision of Delhi High Court in Atlantic Engineering Services v. Union of India 1979 LLC. 695 and a bench decision of Gujarat High Court in Arvind Mills v. R.M. Gandhi. 1982 L.I.C. 394.
I think the learned Standing Counsel is not wholly correct in his submission. It is true that the department may have for their guidance the sliding formula but it can not be a "determination" of the damage. The actual decision as to what the damages should be in a particular case will depend on various mitigating and attendant circumstances, that had resulted in the delay after hearing the party concerned (vide H. R. Gandhi v. State of Haryana 1982 L.I.C. 71 and Calicut Modern Spinning and Weaving Mills Ltd. v. Regional Provident Fund Commissioner 1982 L.I.C. 1422. This view has also been accepted by our own High Court in the case of M/s Hindustan Malleables (supra). The same view has been expressed by Kerala High Court in the case of Md. Haneefa v. Union of India 1979 (1) L.L.J. 46 as well as by Madras High Court in the case of Sri Rajendra Mills Ltd. v. Regional Provident Commissioner, Tamil Nadu 1982 (1) L.L.J. 352
20. I, therefore, accept the submission of the learned Counsel for the petitioner. There could be no rigid formula for imposition of penal damages even though the department might have a sliding formula for imposition of damages which is merely for their guidance. To illustrate, it only provides the maximum penal damages payable for delay of a particular duration. The authorities have to arrive at a decision by objective consideration of the circumstances of each case, as to how far the damages have been mitigated by the conduct of the employer and varieties of other circumstances. It is true in a case of total non-payment for several years, imposition of damages to the extent of 100 per cent is permissible.
21. The question still remain at large is whether annexure '3' is a "speaking order". I may by way of illustration refer to one of the paragraphs of the said order which reads as follows:
I consider that the difficulties expressed by the employer are not valid ground for committing defaults of the payment of the Provident Fund dues.
A perusal of the order disclose a very sordid state of affairs. The respondent regional fund commissioner refers to the representation annexure '6' and then record his findings without giving reasons as to how he arrived at those findings. The sliding formula which is meant for his guidance only was mechanically applied and the demand raised.
22. It is now well settled that an order would be laconic even if the order states that "having carefully considered the points made by the applicant, see no reason to interfere with the order" vide Travancore Rayond Ltd. v. The Union of India and Ors. . It is also by now well established by giving of reasons in support of an order is like principle of audi alterem partem, and the rule must be observed in its proper spirit and not as a mere pretence. The order must disclose that the case of the party aggrieved has been properly considered. It must give specific indications that a judicial and objective mind has been brought so bear upon the facts of a particular case vide Simens Engineering and Manufacturing Co. v. Union of India . In the case of management of Sone Valley v. Deputy Secretary Ministery of Labour 1980 Bihar Law Judgments 41 while a Bench of this Court considering a case under Section 36 of the Payment of Bonus Act, where management asked for exemption from payment of Bonus for a particular year, which was refused by the authority, S.K. Jha, J. speaking for the Court observed;
The Court will remain in dark and not in a position to test as to whether considerations relevant and germane have weighed with the appropriate Government or that the Government, in the guise of exercising the power under Section 36 of the Act has merely passed an arbitrary order. So long the Court is left in this predicament where reasons cannot be tested with reference to relevant considerations or germane facts....
23. The authorities should remember that no procedural safeguard by way of appeal and revision have been provided against their decision and therefore they must act in a more careful manner and their action must disclose fair play.
The learned Standing Counsel relaying on a Bench decision of Allahabad High Court in the case of the Regional Pvovident Fund Commissioner, U.P. v. Allahabad Canning Co. 1978 L.I.C. 998 contended that he agrees in principle about the contents of a "speaking order" rendered by a quasi judicial authority, but "the reasons expected to be recorded in a speaking order must necessarily depend on the nature of contentions raised in reply to the show cause notice. Where the objections raised are them selves vague and without giving necessary particulars, a finding that the plea is unreliable is a 'Sufficient compliance of reasoned order". The learned Standing Counsel may be right in principle, but the representation (annexure 6) is neither vague nor indefinite and gives an opportunity of a fair hearing, the learned Counsel of the petitioner submits, the petitioner can substantiate the same by other materials and evidence.
24. Having considered the rival contentions, I am of the view that annexure '3' and annexure '9' being laconic is vitiated in law and must be quashed on this ground alone. I directed the authorities to reconsider the petitioner's representation in the light of the observation made above as expeditiously as possible. Since there is admitted failure to make contribution in time, this order is made subject to a deposit of Rs. 10,000/- by the petitioner. This amount will be adjusted either on provident fund account or towards the damages as the case may be. The said amount should be deposited within three months from today.
25. In the result, the writ petition is allowed and annexure '3' and '9' are quashed. The respondent authority will re-hear the matter giving fresh opportunity to the petitioner to bring on record all relevant matter and material in this regard, in support of its case. There will be no order as to costs.