Karnataka High Court
Th Belgaum Co-Operative Cotton vs The Regional Provident Fund ... on 6 April, 2017
Equivalent citations: 2018 (2) AKR 217, (2017) 154 FACLR 321, (2017) 3 KANT LJ 393, (2017) 4 KCCR 3021, (2017) 2 CURLR 868
Author: Vineet Kothari
Bench: Vineet Kothari
R
IN THE HIGH COURT OF KARNATAKA
DHARWAD BENCH
DATED THIS THE 06TH DAY OF APRIL 2017
BEFORE
THE HON'BLE DR. JUSTICE VINEET KOTHARI
WRIT PETITION No.67510 of 2010 (L-PF)
BETWEEN:
THE BELGAUM CO-OPERATIVE COTTON
SPINNING MILLS LTD.,
P.O.PANT BALEKUNDRI, BELGAUM TQ,
REP. BY ITS MANAGING DIRECTOR.
... PETITIONER
(By Sri. V M SHEELVANT ADV.)
AND:
THE REGIONAL PROVIDENT FUND
COMMISSIONER
4TH FLOOR, SHRINATH COMPLEX,
NEW COTTON MARKET, HUBLI.
... RESPONDENT
(By Sri. P V GUNJAL ADV.)
THIS WP IS FILED UNDER ARTICLES 226 & 227 OF
THE CONSTITUTION OF INDIA PRAYING TO:
I. CALL FOR RECORDS LEADING TO THE
ISSUANCE OF THE ORDER
DATED:24/08/2010, PASSED BY THE
EMPLOYEES' PROVIDENT FUND,
2/12
Date of Order:06.04.2017
WP No.67510/2010
THE BELGAUM CO-OPERATIVE COTTON
SPINNING MILLS LTD.,
Vs. THE REGIONAL PF COMMNR.,BELGAUM
APPELLATE TRIBUNAL, NEW DELHI IN
ATA NO.631 (6) 2001 (ANNEXURE-H).
II. QUASH THE ORDER DATED:24/08/2010,
PASSED BY THE EMPLOYEES' PROVIDENT
FUND, APPELLATE TRIBUNAL, NEW DELHI
IN ATA NO.631(6) 2001 (ANNEXURE-H).
THIS PETITION COMING ON FOR PRELIMINARY
HEARING IN 'B' GROUP THIS DAY, THE COURT MADE
THE FOLLOWING:
ORDER
Mr.V.M.Sheelavant, Adv. for petitioner. Mr.P.V.Gunjal, Adv. for respondent.
1. The petitioner-Belgaum Co-operative Cotton Spinning Mills Limited has filed this petition aggrieved by the order passed by the Empoyees' Provident Fund Tribunal, New Delhi, rejecting their appeal in ATA No.631(6)2001 upholding the levy of damages under Section 14B of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 (for short 'the Act').
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Date of Order:06.04.2017 WP No.67510/2010 THE BELGAUM CO-OPERATIVE COTTON SPINNING MILLS LTD., Vs. THE REGIONAL PF COMMNR.,BELGAUM
2. The reasons assigned by the learned Tribunal in the impugned order are quoted below for ready reference:
" 6. The applicability of the EPF Act is not disputed. Also, the default in depositing the EPF Contribution is admitted. The only ground taken for default is financial problem and that the establishment became sick unit. In the case of M/s Sky Machinery Ltd. Vs. RPFC reported in 1998 LLR page 925 the Hon'ble High Court of Orissa held that, "financial crunch will not be sufficient for waiving penal damages for delay in depositing the PF contribution."
7. The second contention that the appellant establishment became a sick unit also is not a justifiable ground for default in payment of EPF Contribution. In the case of M/s Vikram Poddar Vs. RPFC reported in 2001 Vol. 2 LLJ page 518, the Hon'ble High Court of Kolkata held that, "merely because the company is a sick company and it has 4/12 Date of Order:06.04.2017 WP No.67510/2010 THE BELGAUM CO-OPERATIVE COTTON SPINNING MILLS LTD., Vs. THE REGIONAL PF COMMNR.,BELGAUM been referred to BIFR is not an impediment in recovering the dues of Provident Fund."
8. Thus, in view of the discussion held above, since, the financial difficulty is not a sufficient ground justifying the delay in depositing the EPF dues, the order of the EPF Authority appears to be correct one and there is no inconsistency noticed in the order of the Authority. Hence ordered, in terms of the above, the appeal is dismissed. Copy of order be sent to both the parties. File be consigned to record room.
Sd/-
(Srikanta Nayak) Presiding Officer "
3. Learned counsel for the petitioner Mr.V.M.Sheelavant has urged before this Court that the petitioner Co-operative Society, which was running a Spinning Mill, had run into financial trouble for the reasons beyond its control and on account of the prolonged workmen strike and 5/12 Date of Order:06.04.2017 WP No.67510/2010 THE BELGAUM CO-OPERATIVE COTTON SPINNING MILLS LTD., Vs. THE REGIONAL PF COMMNR.,BELGAUM lay-off, the petitioner-Company was unable to carry on its production regularly and on account of such financial crunch, it was impossible to pay provident fund dues along with contribution of the employer Society also in time. That details of such under production because workmen struck the work, is given in paragraph (4) of the Writ Petition. He has also submitted that even the State Government declared the petitioner Mill as a "Relief Undertaking" vide Annexure 'A' order dated 07th April 1994 under the provisions of Karnataka Relief Undertakings (Special Provisions) Act, 1977 (Karnataka Act 24 of 1977). He, therefore, submitted that the impugned order is a non-speaking order and deserves to be set aside.
4. On the other hand, the learned counsel for the Provident Fund Department, Mr.P.V.Gunjal, urged that the compliance with the provisions of the Act is not saved or avoided by mere declaration of the petitioner's unit as a Relief Undertaking under order at Annexure 'A' dated 07th April 1994 6/12 Date of Order:06.04.2017 WP No.67510/2010 THE BELGAUM CO-OPERATIVE COTTON SPINNING MILLS LTD., Vs. THE REGIONAL PF COMMNR.,BELGAUM and the petitioner-Society did not even pay the employees' contribution collected from the wages of the employees concerned. He submitted that the Tribunal has rightly relied upon the judgment referred in the impugned order and has upheld the levy of damages under Section 14B of the Act.
5. I have heard the learned counsels for the parties at some length and perused the provisions of the Act and the impugned order.
6. Section 14B of the Act reads as under:
" 14B. Power to recover damages.- Where an employer makes default in the payment of any contribution to the Fund, the Pension Fund or the Insurance Fund or in the transfer of accumulations required to be transferred by him under sub- section (2) of section 15 or sub-section (5) of section 17 or in the payment of any charges payable under any other provision of this Act or of any Scheme or Insurance Scheme or under any of the conditions specified under section 17, the 7/12 Date of Order:06.04.2017 WP No.67510/2010 THE BELGAUM CO-OPERATIVE COTTON SPINNING MILLS LTD., Vs. THE REGIONAL PF COMMNR.,BELGAUM 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:
Provided that before levying and recovering such damages, the employer shall be given a reasonable opportunity of being heard:
Provided further that the Central Board may reduce or waive the damages levied under this section in relation to an establishment which is a sick industrial company and in respect of which a scheme for rehabilitation has been sanctioned by the Board for Industrial and Financial Reconstruction established under section 4 of the Sick Industrial Companies (Special Provisions) Act, 1985, (1 of 1986), subject to such terms and condition as may be specified in the Scheme. " 8/12
Date of Order:06.04.2017 WP No.67510/2010 THE BELGAUM CO-OPERATIVE COTTON SPINNING MILLS LTD., Vs. THE REGIONAL PF COMMNR.,BELGAUM
7. A bare perusal of the provisions of the said Section 14B of the Act indicates that the Provident Fund Commissioner or the appellate body / Tribunal have the discretion while deciding the cases under Section 14B of the Act which empowers the respondent Department to recover the damages on account of delay in payment of the Provident Fund contributions to recover such penalty by way of damages or not. This is not recovery of the provident fund contribution itself, but "damages" to be recovered in the form of penalty on account of the delayed payments as per the provisions under Clause 32A of the Employees' Provident Funds Scheme, 1952 (for short 'the Scheme') read with Section 14B of the Act, which is also quoted below for ready reference:
" 32A. Recovery of damages for default in payment of any contribution: (1) Where an employer makes default in the payment of any contribution to the Fund, or in the transfer of accumulations required to be transferred by him under sub-section (2) of section 15 or sub-section 9/12 Date of Order:06.04.2017 WP No.67510/2010 THE BELGAUM CO-OPERATIVE COTTON SPINNING MILLS LTD., Vs. THE REGIONAL PF COMMNR.,BELGAUM (5) of section 17 of the Act or in the payment of any charges payable under any other provisions of the Act or Scheme or under any of the conditions specified under section 17 of the Act, the Central Provident Fund Commissioner or such 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, damages at the rates given below:--
TABLE . .
Sl. Period of default Rate of damages
No. (percentage of
. arrears per annum) .
.(1) (2) (3) .
(a) Less than 2 months Five
(b) Two months and above
but less than four months Ten
(c) Four months and above
but less than six months Fifteen
. (d) Six months and above Twenty Five "
8. Clause 32A of the Scheme thus provides for the graded rates of damages to be recovered on the delayed 10/12 Date of Order:06.04.2017 WP No.67510/2010 THE BELGAUM CO-OPERATIVE COTTON SPINNING MILLS LTD., Vs. THE REGIONAL PF COMMNR.,BELGAUM payment of the provident fund contributions giving the periods of such delay in different slabs.
9. While the guideline about the grading of the rates of 'damages' or penalty under Clause 32A of the Scheme is not in dispute, the very fact whether such 'damages' are liable to be recovered or not, depends upon the fair exercise of discretion vested in the authorities under the Act and the appellate body, namely the Tribunal or Central Board. It is only after the conclusion to levy the penalty or damages under Section 14B of the Act is fairly arrived, discussing the relevant reasons and the defences that for determining only the quantum of such damages, Clause 32A of the Scheme should be applied. But, 32A of the Scheme is not a charging provision in itself. It does not mandate the levy of damages itself. It is only a guideline for quantification to avoid varied levy of damages by different authorities. Clause 32A of the Scheme can neither override nor 11/12 Date of Order:06.04.2017 WP No.67510/2010 THE BELGAUM CO-OPERATIVE COTTON SPINNING MILLS LTD., Vs. THE REGIONAL PF COMMNR.,BELGAUM it does the basic statutory provisions of Section 14B of the Act itself.
10. A perusal of the above extracted portions of the impugned order shows that the said Tribunal has mechanically held that the reasons in the form of 'financial crunch' is not sufficient reasons to waive the levy of damages under Section 14B of the Act. It has not even discussed the effect of the petitioner undertaking being declared as 'Relief Undertaking' under the special statute, nor the details of the reasons resulting in such financial crunch rendering the payment of provident fund contributions along with the contributions of the employer also, are discussed. The order of the Appellate Authority cannot be held to be sufficiently meeting with the principles of natural justice and does not reflect a fair exercise of the discretion vested in the higher appellate body. The impugned order of the Tribunal, therefore, is liable to be set aside. 12/12
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11. The Writ Petition is accordingly allowed and setting aside the impugned order dated 24th August 2010 passed by the Employees' Provident Fund Appellate Tribunal, New Delhi, Annexure 'H', the matter is remanded back to the learned Tribunal for decision afresh in accordance with law.
12. The petitioner-Society will also be at liberty to furnish appropriate details with relevant evidence during the course of such rehearing of the appeal by the Tribunal and the said Tribunal is expected to discuss all such reasons in detail and then pass appropriate orders according to law, within a period of six months from today.
The petitioner may appear before the Tribunal, in the first instance, on 24th April 2017 (Monday).
Sd/-
JUDGE RK/-