Kerala High Court
Lalitha Sasi vs State Of Kerala on 30 August, 2005
Equivalent citations: 2005(4)KLT957
Author: C.N. Ramachandran Nair
Bench: C.N. Ramachandran Nair
JUDGMENT C.N. Ramachandran Nair, J.
1. Petitioners in this batch cases were running toddy shops as licensees and were liable to pay toddy workers welfare fund contribution payable under the Toddy Workers Welfare Fund Act, 1969, hereinafter called the "Act". The challenge in the WPs. is against the validity of Section 9 of the Act, introduced by Kerala Toddy Workers Welfare Fund (Amendment) Act, 1996 with effect from 26.3.1996, wherein the rate of interest for belated payment of toddy workers welfare fund is made at par with interest payable under the Abkari Act. The rate of interest payable until the amendment in 1996 was nine per cent per annum. The effect of the amendment is increase of interest for belated payment from nine per cent to 18 per cent per annum which is the rate provided under Rule 7(30) of the Abkari Shops Disposal Rules, 2002. I heard all counsel appearing for the petitioners, and various standing counsel appearing for the Toddy Workers Welfare Fund Board representing different districts.
2. The first contention raised by the petitioners is that the amendment to Section 9 vide Amendment Act, 1996 is of no consequence because the Abkari Act does not provide for any rate of interest. Counsel appearing for the respondents contended that Rule 7(30) of the Kerala Abkari Shops Disposal Rules, 2002, hereinafter called the "Rules" prescribed under Section 29 of the Abkari Act (1 of 1077) is part of the Abkari Act and so much so, the same rate of interest, that is, 18% will apply to the Act with effect from the date of amendment, that is from 26.3.1996. In order to appreciate the contentions, statutory provisions have to be gone into and for easy reference the provisions are extracted hereunder. Section 9 of the Act introduced by Amendment Act of 1996 is as follows:
Amendment of Section 9 -- In Section 9 of the Principal Act for the words "together with interest thereon at the rate of nine per cent per annum" the words "together with interest thereon at the same rate as applicable, from time to time, to the dues in arrears under the Abkari Act, 1 of 1077" shall be substituted.
Rule 7(30) of the Abkari Shops Disposal Rules, 2002 is as follows:
Interest on all money due shall be payable at the rate of 18 per cent per annum or such other rate of interest as may be fixed by the Government from time to time.
The contention of the petitioners that Rule 7(30) of the Rules is not part of the Abkari Act is not tenable by virtue of the operation of Section 69 of the Abkari Act, which is as follows:
69. Publication of rules and notifications.-- All rules made and notifications issued under this Act shall be made and issued by publication in the Gazette. All such rules, and notifications shall thereupon have the force of law and read as part of this Act and may in like manner be varied, suspended or annulled.
It is obvious from Section 69 of the Abkari Act that Legislature for all practical purposes treats Rules and Notifications issued under the delegated powers as part of the statute and will have the same force of law as statutory provisions. Even though counsel for the petitioners relied on decision of this Court in Paulson Distillery case (1989 (1) KLT 962) and contended that delegated legislation should not be treated as part of the statute, inspire of a provision in the statute to that effect. I do not think the said decision will justify this Court to take similar view with reference to the impugned amendment to the Act. All that is stated in the said decision is that even if the delegated legislation is considered as part of the statute, it is subject to judicial review and the provisions made in exercise of delegated power should conform to the statute for it's validity. So long as the Abkari Act does not provide any provision for interest and the interest prescribed by the Rule in exercise of delegated power is not altered by legislature in exercise of their control over subordinate legislation, the Rule has to be treated as part of the statute as specifically provided under Section 69 of the Act. There cannot be any inconsistency between the provisions of the Abkari Act and Rule on interest as interest is provided only in the Rule and without the Rule, Act is incomplete as regards to provision for interest. Therefore when the Legislature substituted Section 9 of the Act incorporating interest rate from the Abkari Act, it should be assumed that the legislature intended Rule 7(30) of the Rules as part of the Abkari Act and it is the said Rule that is incorporated to the Act by reference. Any other hypothesis will make the amendment meaningless and the Court cannot assume that the Legislature made a futile exercise in the legislative process. Therefore the argument of petitioners that Rule 7(30) of the Abkari Shops Disposal Rules is not part of Abkari Act, is rejected.
3. The next contention raised by the petitioners that referential legislation vide impugned amendment is not appropriate or legal as the purpose of the Abkari Act is different from the purpose of Welfare Fund Act. Petitioners have contended that the Abkari Act is made in exercise of the legislative power of the State under Entry 8 of State List in the VIIth Schedule to the Constitution, while the Toddy Workers Welfare Fund Act is a welfare legislation made under Entry 24 of the Concurrent List. The Supreme Court in State of Kerala v. M/s. Attesee (Agro Industrial Trading Corporation), 1989 Supp. (1) SCC 733 held that in a case of referential legislation which merely contains a reference to, or citation of a provision of another statute, the provision of the first statute along with all its amendments and variations from time to time, should be read into the second statute. Therefore the rate of interest provided in Section 9 of the Act will keep on fluctuating with the interest rate provided under the Abkari Act read with Rule 7(30) of the Rules. I do not think there is any prohibition against the legislature from making a referential legislation in an Act with reference to a provision in another statute, the object of which is different from the statute in which referential legislation is incorporated. Therefore the objection raised by the petitioners against referential legislation is also not tenable and hence rejected.
4. The next ground raised by petitioners is against discrimination inasmuch as rate of interest in several other welfare legislations for belated payment is much less than 18% per annum made applicable under the impugned amendment. Petitioners have made specific reference to Section 13 of the Abkari Workers Welfare Fund Act, which provides for interest for belated payment of welfare fund contribution for abkari workers who are employed in Foreign liquor shops and Bar Hotels at 12% per annum. It is further contended that the rate of interest under the Toddy Workers Welfare Fund Act for belated payment of contribution upto the amendment was only 9% per annum. Counsel appearing for respondents on the other hand contended that the rate of contribution for abkari workers is 10% as against 8% provided for toddy workers. I do not think this distiction will justify difference in rate of interest in regard to belated payment after default. The interest payable under Section 9 of the Act is also for belated payment after default. However, the of interest for belated payment is a matter of legislative policy and this Court has no authority to fix uniform rate of interest in all similar statutes. The allegation of discrimination is also not established inasmuch as both statutes cover different kind of employers and beneficiaries though similar. Instead of a revision of interst for belated payment in the Toddy Workers Welfare Fund Act in line with the Abkari Workers Welfare Fund Act (Section 13), I feel what is required is an upward revision of interest, in the Abkari Workers Welfare Fund Act for prompt compliance of statutory obligations. It is not known whether the Government is contemplating any such amendment to that statute which is quite old. The provision for interest for belated payment is mainly not for compensating the beneficiary organisation for delayed payment, but essentially to act as a deterrent against delayed payment. It is to be noticed that Section 8A of the Toddy Workers Welfare Fund provides for collection advance contribution which is to be adjusted against final determination under Section 8 of the Act. Moreover toddy shop contractors keep on changing on a year to year basis, and therefore delayed determination and recovery will lead to prejudice to the organisation in as much as recovery itself may be out of question if undue delay happens. Therefore the provision for interest for belated payment should be deterrent and should act as a disincentive against delay in payment. If the petitioners argument is accepted, and interest is reduced the same will only encourage default and delay in payment which will defeat the object and purpose of the Act. Therefore, I feel the legislature rightly increased the old rate to 18% for early recovery. Moreover it is to be noticed taxing statutes like Income-tax Act and Sales Tax Act provide for rate of interest for belated payment ranging from 18% to 24% per annum. Therefore, I amof the view that interest for belated payment after default should never be a lower rate and should be kept deterrently high to encourage compliance with statutory provisions and should not be low to act as an incentive for default. In the circumstances, petitioners challenge against increase of interest to 18% as arbitrary and discriminatory is only to be rejected and I do so.
5. Eventhough the challenge against provision on interest introduced by amendment is rejected, I feel in view of the fact that arrears are from 1997-98 onwards, the delay in recovery initiated by the respondents, and the stay granted by this Court, petitioners can be granted reduction in interest as an incentive for clearing the existing arrears immediately, which I feel is in the interest of the beneficiary organisation as otherwise there is likelihood of no recovery also. In the circumstances, there will be direction to the respondents to collect interest at the rate of 12% per annum for the entire arrears of toddy workers welfare fund contribution from the date of default after reckoning payments already made and waive balance 6 per cent if the petitioners discharges entire liability and interest at the said rate on or before 15.11.2005. However, this applies to those who are still in arrears should not be treated as a direction for refund of interest if paid at higher rate. In other words, excess rate of interest if paid without contest should be adjusted towards balance demand if any due and should not be refunded. If any of the petitioners does not settle liability by making payment as above before 15.11.2005, the benefit granted herein will stand cancelled and respondents will take all coercive steps for recovery of the entire arrears with statutory rate of interest which is upheld by this judgment. The concerned Welfare Fund Inspectors will give a statement of liability to the petitioners within two weeks from the date of production of a copy of this judgment by the petitioners. Similarly if payments are made voluntarily no collection charges also should be recovered from the petitioners under the RR Act and Rules.
WPs are dismissed but with the above directions.