Gujarat High Court
Gujarat vs Assistant on 28 March, 2011
Author: H.K. Rathod
Bench: H.K.Rathod
Gujarat High Court Case Information System
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SCA/15124/2010 22/ 22 ORDER
IN
THE HIGH COURT OF GUJARAT AT AHMEDABAD
SPECIAL
CIVIL APPLICATION No. 15124 of 2010
To
SPECIAL
CIVIL APPLICATION No. 15134 of 2010
=========================================================
GUJARAT
ELECTRICITY BOARD (NOW GUJARAT ENERGY TRANSMISSION & 1 -
Petitioner(s)
Versus
ASSISTANT
PROVIDENT FUND COMMISSIONER & 1 - Respondent(s)
=========================================================
Appearance
:
MS
LILU K BHAYA for
Petitioner(s) : 1 - 2.
MR NIRAL R MEHTA for Respondent(s) : 1 -
2.
=========================================================
CORAM
:
HONOURABLE
MR.JUSTICE H.K.RATHOD
Date
: 28/03/2011
ORAL
ORDER
Heard learned Advocate Ms. Lilu K. Bhaya for petitioner and learned Advocate Mr.Niral R. Mehta for respondent Assistant Provident Fund Commissioner in each petition.
Rule.
Service of rule is waived by learned Advocate Mr.Niral R.Mehta on behalf of respondent PF Authority in each petition. With consent of both learned advocates, these petitions are taken up for final hearing today.
In this group of petitions, two orders are under challenge by petitioner. One order is passed by Assistant PF Commissioner dated 30th June, 2004 under section 14-B of PF Act and second order passed by Employees Provident Fund Appellate Tribunal, New Delhi dated 14th July, 2010.
I have considered submissions made by learned Advocate Ms.Bhaya for petitioner and also considered submissions made by learned Advocate Mr.Mehta for respondent in each petition. I have also perused both orders, one passed by Assistant Provident Fund Commissioner dated 30th June, 2004 and another order passed by Appellate Tribunal dated 14th July, 2010.
Brief facts of present group of petitions as specified and narrated in list of dates and events of Special Civil Application NO. 15124 of 2010, are quoted as under, just to giving back ground of matter:
LIST OF DATES AND EVENTS 16.11.1995 The Government of India introduced the Employees Pension Scheme, 1995 (EPS-95) w.e.f. November 16, 1995 in place of earlier FPS-71 Scheme. The said Scheme was published in the Gazette on November 16, 1995.
Dec.
95 to February, 1996 The Regional Provident Fund Commissioner (RPFS) Vadodara intimated GEB about the EPS-95 Scheme vide letter dated December 1, 1995.
The said pension Scheme introduced for the first time in the country was very complex and it was necessary to understand the Scheme before making any remittance thereunder. The RPFC Vadodara intimated GEB on January 30, 1996 that an application could be made for grant of exemption from EPS-95 Scheme by establishment. A public notice dated January 25, 1996 was also issued on behalf of Regional Provident Fund Commissioner (Exemption) Gujarat State, inter alia, in Indian Express dated January, 28, 1996. By the said notice, applications were invited from interested establishments for grant of exemption from EPS-95 Scheme. The last date for submission of exemption applications was February 15, 1996 The Board applied for grant of exemption from the aforesaid EPS-95 Scheme under Section 17(1)(A) of the Act and Paragraph 39 of the EPS-95 Scheme on February 08, 1996 to RPFS, Vadodara.
Dec.2001 The exemption application filed by the Board was duly recommended by RPFC Vadodara, RPFC Ahmedabad and Central Provident Fund Commissioner, New Delhi and was forwarded finally to the Ministry of Labour, Government of India for its approval. The Ministry of Labour, however, rejected Board exemption application in December, 2001 without assigning any reason, that too after a gap of 5 years and 9 months approximately.
30.6.2004/ 6.7.2004 Respondent No.1 passed order levying damages on the petitioners.
2004Petitioners preferred Appeal before the Employees Provident Fund Appellate Tribunal, New Delhi.
14.7.2010 The Employees Provident Fund Appellate Tribunal dismissed the said appeal.
October, 2010 Hence present petition on the grounds urged in the Memo of Petition.
Against present petitions, affidavit in reply is filed by respondent NO.1 dated 9th February, 2011. Copy thereof has been served to learned Advocate Ms. Lilu K. Bhaya for petitioner. Today, learned Advocate Mr. Niral R. Mehta appearing for respondent has placed on record affidavit of respondent in compliance of order passed by this court dated 4th March, 2011. Copy thereof is served to learned Advocate Ms. Bhaya for petitioner, therefore, same is taken on record.
Controversy between parties is whether powers which have been exercised by Respondent Authority under Section 14B of PF Act have been properly exercised with application of mind or not. For that, certain dates are relevant which are as under.
Pension Scheme is made applicable to all establishments with effect from 16th November, 1995. For claiming exemption, advertisement has been issued by PF Authority on 25th January, 1996 page 141, which is quoted as under:
"
NOTICE Employees' Pension Scheme, 1995 has come into operation from 16th November, 1995. This Scheme is applicable to all the establishments where Employees' Provident Funds and Miscellaneous Provisions Act, 1952 applied. Paragraph 139 of the Employees' Pension Scheme, 1995 provides for exemption from the operation of this statutory scheme to any establishments, class of establishments if the employees of the said establishment are either members of any other pension scheme or proose to be members of a pension scheme wherein pensionary benefit are at par or more favourable than benefits provided under the Statutory Scheme.
It is, therefore, notified for information of all concerned that in case any establishment covered under the Employees' Provident Funds and Miscellaneous Provisions Act, 1952,Gujarat Region proposes to seek exemption from the operation of the Employees Pension Scheme, 1995, it may apply to the office of the Regional Provident Fund Commissioner situated at Ahmedabad, Baroda and Surat, as the case may be, on or before 15.02.1996.
Relaxation will be granted to them upto 03.03.1996 before which they should come up with their full scheme so arrange for obtaining formal exemption."
In response to aforesaid advertisement issued by PF Authority, application for exemption from pension scheme was made by petitioner on 8th February, 1996 and that application was rejected by PF Authority on 13th December, 2001 and copy of such rejection was received by petitioner on 27th December, 2001. Thereafter, request was made by petitioner before PF Authority to issue Certificate or to give permission to withdraw entire amount from Special Deposit Scheme of State Bank of India, so it can be deposited before PF Authority by petitioner. As per para 39 of EPS-1995 Scheme, it is provided that pending disposal of Exemption Application, employer's share of contribution shall not be remitted to Pension Fund. In view of same, petitioner did not remit Pension Contribution to PF Authority asper provisions of Para 39 of EPS-1995 Scheme with effect from 16th November, 1995 anticipating that petitioner's application for exemption from EPS-1995 Scheme would be granted by Government of India. However, during pendency of its application for exemption, petitioner has invested requisite amounts towards pension @ 8.33% from PF Contribution of employer and deposited same in Board's Employees PF Trust which in turn was invested as per approval investment pattern prescribed by Government of India in Special Deposit Scheme of State Bank of India along with amount of Provident Fund. In view of that, petitioner establishment has transferred pension contribution of trust in time and PF Trust has in turn invested money as per prescribed investment pattern, in Special Deposit Scheme of State Bank of India. In response to application dated 11th January, 2002 made by petitioner to PF Authority, PF Authority granted permission/certificate on 22nd January, 2002 and thereafter, on 25th January, 2002, entire amount has been deposited by Petitioner before PF Authority. It is necessary to note that order dated 30th June, 2004 has been passed by PF Authority while exercising powers under section 14B of Act, for that, page 21 to 24 are quoted as under:
"Annexure A 21 Employees' Provident Fund Organization (Ministry of Labour Government of India) Sub Regional Office Panchayat Nagar Chowk, University Road, Rajkot 360005
--------------------------------------------------
U/SRO/JT/920-E/DAMAGES CELL/SO/1292/3476 Date 30.6.2004 6.7.04 by RPAD Before Assistance Provident Fund Commissioner In the matter proceedings u/s.14B of the Employees' Provident Fund and Miscellaneous Provisions Act, 1952 against M/s. Gujarat Electricity Board, Porbandar bearing PF Code No. GJ/920-G ORDER :
Whereas M/s.Gujarat Electricity Board is at establishment exempted under section 17 of the Employees' Provident Fund and Miscellaneous Provisions Act, 1952 bearing Code No. LGJ/320-E Whereas M/s. Gujarat Electricity Board was duty bound to remit Employees' Pension Contribution within 15 days of be of the month, Gujarat Electricity Board was delayed the payment of pension contribution for the period 11/1995 to 2001.
A notice under section 14B of the Act was issued vide No.GJ/RAJ/Circle E.88/GJ/920/E/CA/2326/10930 dated 3.02.2004 and Summons were issued under NO. GJ/920-E/CA/2371/11591 dated 4/3/2004, Shri P.H. Vyas I/C SE and N. Doria appeared on behalf of the establishment on 19/03/2004 26/4/2004 and 12/05/2004 and finally on 12/05/2004.
Shri Vyas filed his written submission dated 19/3/2004 mainly stating that the GEB has applied for the exemption a accordance with the provisions of section 17(1C) of the Act,EPS-1995. He further stated that pending disposal of the application for exemption, the contribution was not remitted to the pension fund. Hence GEB by law was not to divert 8.33% contribution to the pension scheme as required under para 39 of EPS 1995.
He further submitted that after rejection of GEB's exemption application. GEB has become fully compliant as anon exempted establishment has hence requested to drop the proceedings under section 14B of the Act.
Accordingly, I, DK Vyas, Assistant PF Commissioner, Gujarat State, Rajkot in exercise of the powers conferres upon me under section 14-B of the Employees' Provident Fund and Miscellaneous Provisions Act, 1952, after applying my mind to the facts presented before me, come to the conclusion as under:
In consonance with para 39 of the EPS-1995, the period between the date of application of exemption and the date of disposal of application of exemption, is not liable for damages. Hence the damages are not levied for this period.
However, the period from 16/11/1995 to 9/2/1996 i.e. the period between the date of application of EPS-1995 and the date of submission of application for exemption and 13/12/2001 to 25/01/2002 i.e.the period between date of rejection of application and the actual date of payment attracts liability for damages. The time allowed for making payment i.e. one month initially and upto 31.12.2001 has not been considered as delay.
I feel that the ends of justice will meet if damages are levied as follows:
Period
A/c. X Total
11/95
to 8.2.96
and
1.1.02 to
25.1.02
1,52,007 1,52,007
I
order accordingly it is further ordered that the amount of penal damages amounting to Rs.1,26,435.00 be paid within 15 days of the receipt of this order failing with action under section 8 of the Act will be initiated.
Sd/-Illegible (DK Vyas) Assistant PF Commissioner To M/s.
Gujarat Electricity Board Zone-II, Rajkot."
Similarly, Employees' Provident Fund Appellate Tribunal has passed order dated 14th July, 2010 page 82 to 85 which is quoted as under:
" ORDER Dated 14th July, 2010. Present
: Shri SK Gupta, Advocate for appellant.
Shri RR Rajesh, Advocate for respondent.
The order passed by the PA Authority under section 14B of the Act directing the appellant to deposit damage and interest is in challenge in this appeal.
2. The case of the appellant is that the appellant is an exempted institution and having its own PF Trust. On 16.11.1995, the employees Pension Scheme came into force and same was made applicable to the applicant. The appellant applied for exemption on 8.2.1996 but appellant's application for exemption was rejected in the year 2002. After taking permission, the appellant deposited the amount. So there was no delay. Without considering the material on the record, the EPF authority levied the penalty and interests and the order of the authority is illegal one.
3. The case of the respondent is that the scheme came into force on 16.11.1995, the appellant had not deposited the dues till he applied for exemption. So the assessment and imposition of penalty and interests is correct one.
4. It is contended that as per para 39 of the Scheme, the appellant is not liable to pay the contribution during the period when his application for exemption was pending and no penalty and interests could have been levied when the payment was made within one month of the rejection of the application.
5. The Ld. Advocate for the respondent supported the order.
6. It is not disputed that Pension Scheme was made applicable to the appellant and same came into force on 16.11.1995. As per para 39 while the application for exemption was pending, the appellant is not bound to make the contribution and the contribution has to be made within one month of the rejection of the application. In this case, the appellant applied for exemption on 8.2.1996. So as per para 39 of the Scheme, the appellant is not liable to pay the contribution after he applied for the exemption. But the claim relates to the period in between 16.11.1995 to 9.2.1996 i.e. the claim relates to before the application for exemption was made. Admittedly, the appellant had not deposited the dues. So, para 39 of the Scheme is of no help to the appellant. As the claim relates to the period prior to the application of exemption deposited. The appellant is liable to pay No infirmity is noticed in the order of the authority.
7. Hence ordered, the appeal is dismissed. Copy of order be sent to the parties. File be consigned to record room."
In light of aforesaid two orders, damages has been levied by PF Authority under section 14B of PF Act for period from November, 1995 to 8th February, 1996 and 1st January, 2002 to 25th January, 2002. Total amount has been declared as damages to be paid by petitioner within fifteen days from receipt of order passed under section 14B of PF Act. Total amount of damages levied comes to Rs.12,38,496 which has been specified in respect to each circle as under as per page 38:
Sr.No. Name of Circle/Power Station Damages Amount Rs.1
Amreli (TR) 1,26,435.00 2 Jamnagar (O&M) 1,32,416.00 3 Rajkot(O&M) 2,33,509.00 4 Bhuj (O&M) 1,09,658.00 5 Porbandar(O&M) 1,67,629.00 6 Gondal (TR) 1,52,007.00 7 Anjar (TR) 90,127.00 8 Sikka TPS 5,469.00 9 Kutch Lignite TPS 78,440.00 10 Surendranagar (O&M) 95,664.00 11 Junagadh (O&M) 47,142.00 Total 12,38,496.00 Thus, considering order passed by Appellate Tribunal and also while keeping in mind para 39 of Pension Scheme, Appellate Tribunal has observed that claim relates to period in between 16.11.1995 to 9.2.1996 i.e. the claim relates to period prior to application for exemption which has not been deposited by petitioner. Thus, only that period has been considered by Appellate Tribunal but subsequent period which was considered in 14B order 1st January, 2002 to 25th January, 2002, that has not been taken into account at all by Appellate Authority. Another aspect is that advertisement/notice dated 25th January, 1996 where period for application for exemption is given to such establishment which is to be filed on or before 15th February, 1996 and considering date of advertisement 25th January, 1996 and in advertisement/notice, it is stated that relaxation will be granted to such establishment upto 3rd March, 1996 before which they should come up with their full scheme so arrange for obtaining formal exemption. Meaning thereby, in response to notice dated 25.1.1996, any establishment can file such application on or before 15th February, 1996, undisputedly in this case such application was made by petitioner establishment on 8th February, 1996 for such exemption, therefore, petitioner, in terms of notice, entitled for such relaxation upto 3rd March, 1996.
Therefore, in light of this back ground, question which is to be considered by PF Authority is levy for damages is to be imposed upon petitioner for period in between 16th November, 1995 to 8th February, 1996 or not ? For that, certain aspects and factors are required to be considered by Authority, which has been considered by Division Bench of this Court in case of Star of Gujarat Textile Mills Ltd. And Regional PF Commissioner and Another, 1993-I-LLJ page 1023. Relevant para 5 of said judgment is quoted as under:
"5. The fact remains that apart from the sweeping statement in the summing up paragraph of the impugned proceedings, the factors which have been set down as relevant to be considered while assessing the question of imposition of damages, have not been discussed at all by the 1st respondent, In the pronouncement in Organo Chemical Industries & Anr. v. Union of India & Ors., (supra) the Supreme Court observed (p.427);
"xxx Having regard to the punitive nature of the power exercisable under Sec. 14B and the consequences that ensue therefrom, an order under sec. 14B must be a speaking order containing the reasons in support of it. The guidelines are provided in the Act and its various provisions, particularly in the word "damages" the liability for which in sec. 14B arises on the "making of default". While fixing the amount of damages, the Regional Provident Fund Commissioner usually takes into consideration as he has done here, various factors viz. The number of defaults, the period of delay, the frequency of defaults and the amounts involved. xxxx"
Here, we find that it is not a case of total omission to make the contributions. There had been only delayed contributions. The periods are different and the days of delay are also different. A glance at the statement of damages, annexed to the impugned proceedings shows that the days of delay range from a minimum of 7 days to a maximum of 47 days but a flat rate of 25% has been adopted by the 1st respondent and certainly we cannot commend the impugned proceedings on the ground that the application of the norms, as set down by the pronouncement of the Supreme Court, referred to above, has been done. This only exposes lack of application of mind on the part of the 1st respondent. As to how the functionary under sec. 14B of the Act should discharge the obligations has been expatiated by S. Natarajan, J. as he then was, of the High Court of Madras in KA Subramaniam v. The Commissioner, the Regional PF Tamil Nadu & Pondicherry States & Anr., 1979 Labour and Industrial Cases 981, in the following terms:
"xxx The authority empowered to impose damages has to, first of all, decide whether the facts of a case warrant the imposition of damages. If his assessment of the situation results in a finding that imposition of damages is called for, then, he has to determine the quantum of damages with reference to relevant factors, such as the loss suffered by the affected party, the hardship caused to the beneficiaries, the efforts taken by the enforcement machinery, to collect the defaulted payments etc. There is, therefore, a clear line of distinction between imposition of penalty which is penal in nature and imposition of damages which is compensatory in nature.
Xxxxx xxxxx xxxxx"
We cannot straightway say tht what has been done by the 1st respondent by the impugned proceedings does not conform to what has been recapitulated by the learned single Judge in the above pronouncement. The petitioner has been declared as sick unit and the 1st respondent declines to take note of it for any consideration on a peculiar reasoning that the concerned authority BIFR has not specifically recommended for partial or total waiver of penal damages under the Act. When we take note of these features, we have no other alternative but to interfere in writ powers. Accordingly, this Special Civil Application is allowed and the matter stands remitted back to the file of the 1st respondent for him to reconsider the whole question, taking note of the norms set down therefor by the pronouncements, referred to above as well as other pronouncements throwing light on the subject."
It is also relevant to consider by PF Authority that mere delay in making payments should not prejudice employees for whose benefit fund is created. Where default is found, but no apparent fault, quantum of damages should be compensatory rather than penal in nature as decided by Madras High Court in case of Shanti Garments Pvt. Ltd. v. Regional Provident Fund Commissioner, reported in 2003 LLR 256 (Madras). Relevant paragraph 4, 7 and 8 of said judgment are quoted as under:
"4. In the decision of the Supreme Court reported in 1979(II) LLJ 416 (ORGANO CHEMICAL INDUSTRIES AND ANOTHER v. UNION OF INDIA AND OTHERS), while upholding the validity of Section 14B of the Employees' Provident Funds Act, 1952, it was observed as follows (page 304) :-
"The expression "damages" occurring in Section 14B is, in substance, a penalty imposed on the employer for the breach of the statutory obligation. The object of imposition of penalty under Section 14B is not merely "to provide compensation for the employees". We are clearly of the opinion that the imposition of damages under Section 14B serves both the purposes. It is meant to penalise defaulting employer as also to provide reparation for the amount of loss suffered by the employees. It is not only a warning to employers in general not to commit a breach of the statutory requirements of Section 6, but at the same time it is meant to provide compensation or redress to the beneficiaries, i.e., to recompense the employees for the loss sustained by them. There is nothing in the section to show that the damages must bear relationship to the loss which is caused to the beneficiaries under the Scheme. The word "damages" in Section 14B is related to the word "default". The words used in Section 14B are "
default in the payment of contribution" and, therefore, the word "default" must be construed in the light of Para 38 of the Scheme which provides that the payment of contribution has got to be made by the 15th of the following month and, therefore, the word "default" in Section 14 B must mean "failure in performance" or "failure to act." At the same time, the imposition of damages under Section 14B is to provide reparation for the amount of loss suffered by the employees."
It was further observed :
"Nor can it be accepted that there are no guidelines provided for fixing the quantum of damages. The power of the Regional Provident Fund Commissioner to impose damages under Section 14B is a quasi-judicial function. It must be exercised after notice to the defaulter and after giving him a reasonable opportunity of being heard. The discretion to award damages could be exercised within the limits fixed by the Statute. Having regard to the punitive nature of the power exercisable under Section 14B and the consequences that ensure therefrom, an order under Section 14B must be a "speaking order" containing the reasons in support of it. The guidelines are provided in the Act and its various provisions, particularly in the word "damages"
the liability for which in Section 14B arises on the "making of default". While fixing the amount of damages, the Regional Provident Fund Commissioner usually takes into consideration, as he has done here, various factors, viz., the number of defaults, the period of delay, the frequency of defaults and the amounts involved. The word "damages" in Section 14B lays down sufficient guidelines for him to levy damages."
Judged in the light of the above decisions, it is seen that the respondent has not examined the matter in its proper perspective. It is not disputed that the petitioner was all along willing to deposit the contribution and was asking for supply of code number and since no code number was furnished he was depositing the amount in a separate account in State Bank of India. As observed by the Supreme Court, the appropriate authority has discretion to quantify the amount of damages payable. Where the default is wanton, the quantum of damages would obviously be higher, but where there is no willful default, the appropriate authority is to consider the question of quantum in a different spirit.
8. As observed by the Supreme Court, the direction regarding payment of damages is compensatory as well as penal in nature. Where there is no willful violation, quantum of damages should be more or less compensatory in nature and where the default is continuous or intentional, damages payable in addition to being compensatory would be penal as well. The delay in making payments obviously should not prejudice the employees for whose benefit the Fund is created. Where " default" is found, but no apparent "fault", the quantum of damages should be compensatory rather than penal in nature."
Though Regional Provident Fund Commissioner has power under section 14B, he should have taken into consideration various factors as decided in case of Regional Provident Fund Commissioner, Punjab, Haryana, Himachal Pradesh and Union Territory, Chandigarh v.Toylor Instrument Company (India) Ltd., reported in 1993 LLR 334. Therefore, in this case, instead of deciding controversy between parties and legal aspects, it is better and would meet ends of justice between parties if PF Authority is directed to reconsider entire matter and decide it after considering various and several factors which are relevant with proper application of mind after giving reasonable opportunity of hearing to petitioner.
In view of aforesaid observations made by this Court and after considering order passed by PF Authority under section 14B of Act as well as order passed by Appellate Tribunal, both orders in question are required to be quashed and set aside. Accordingly, order passed by PF Authority dated 30th June, 2004 under section 14-B of Act as well as order passed by Appellate Tribunal dated 14th June, 2010 both are hereby quashed and set aside without expressing any opinion on merits including legal aspects and let PF Authority may decide a fresh question whether petitioner is liable to pay any damages as required under section 14B of Act or not? It is open for petitioner to make fresh submissions as well as produce relevant documents before PF Authority within period of one month from date of receiving present order and thereafter, PF Authority shall have to pass appropriate well reasoned order in accordance with law while considering all relevant factors as discussed by Division Bench of this Court in case of Star of Gujarat Textile Mills Ltd. And Regional PF Commissioner and Another, 1993-I-LLJ page 1023 and in case of Shanti Garments Pvt. Ltd. v. Regional Provident Fund Commissioner, reported in 2003 LLR 256 (Madras) within period of six months from date of receipt of copy of present order. Accordingly, Rule is made absolute in each petition with no order as to costs.
(H.K. Rathod,J.) Vyas Top