Gujarat High Court
Adhaan Solution Pvt. Ltd. Through Adesh ... vs Regional Provident Fund Commissioner on 17 March, 2021
Author: A.G.Uraizee
Bench: A.G.Uraizee
C/SCA/21701/2019 ORDER
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 21701 of 2019
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ADHAAN SOLUTION PVT. LTD. THROUGH ADESH KUMAR
Versus
REGIONAL PROVIDENT FUND COMMISSIONER
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Appearance:
M R BHATT & CO.(5953) for the Petitioner(s) No. 1
MUNJAAL M BHATT(8283) for the Petitioner(s) No. 1
MR CHAITANYA S JOSHI(5927) for the Respondent(s) No. 1
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CORAM: HONOURABLE MR. JUSTICE A.G.URAIZEE
Date : 17/03/2021
ORAL ORDER
1. Rule. Mr. Chaitanya S. Joshi, learned advocate waives service of notice of rule on behalf of the respondent.
2. In this petition under Article 226 & 227 of the Constitution of India, the petitioner has challenged the order dated 27.09.2019 passed by the Regional Provident Fund Commissioner-I, Regional Office, Ahmedabad under Section 7Q and 14B of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 (hereinafter referred to as 'the Act' for short).
3. Facts giving rise to this petition are recorded in order dated 6.12.2019 which are as under:-
3.1 According to the petitioner, it is a company which is engaged in providing Human Resource Solutions to large-scale companies. Their grievance is against the system which is being introduced by the Central Government i.e. concept of Universal Account Nuber (UAN) through which each employee eligible under the Act for provident fund was allotted a UAN. Once assigned to an employee the same stays with the employee for his lifetime, regardless of his change of unit/employer. It has Page 1 of 7 Downloaded on : Sat Oct 23 06:40:32 IST 2021 C/SCA/21701/2019 ORDER been introduced in July, 2017. This on-going process of generation of UAN needed to feed in the details as mentioned in the Aadhar Card and in most of the cases since Aadhar did not match with the PF unified portal, the payment in making the provident fund was getting delayed, as generation of UAN would take time.
3.2 For the period from 01.11.2005 to 31.03.2018, the inquiry had been initiated, the summons came to be issued, which after a detailed inquiry, representation and hearing, culminated into the order dated 26.04.2019, whereby, out of total sum of Rs.2,77,627/-, the amount directed to be paid was Rs.1,74,765/- (Rs.17,029/- for 14B + Rs.1,57,736/- 7Q-component).
3.3 It is the grievance on the part of the petitioner that, despite recognizing the short-coming in the newly introduced system and the software and being aware of all the issues causing the delay in making payment of provident fund, once again, summons came to be issued for the period from 01.04.2018 to 31.03.2019 on identical grounds. The very representation and grounds were put forth, the authority concerned i.e. the very officer, Regional Provident Fund Commissioner passed an order dated 27.09.2019 which is impugned and where it has also thrust upon the petitioner mens rea. It also further directed to pay the total amount of Rs.7,05,560/- (both under Section 7Q and 14B of the Act).
4. I have heard Mr. Munjaal M. Bhatt, learned advocate for M.R. Bhatt and Company for the petitioner and Mr. Chaitanya S. Joshi, learned advocate for the respondent.Page 2 of 7 Downloaded on : Sat Oct 23 06:40:32 IST 2021 C/SCA/21701/2019 ORDER
5. Mr. Bhatt, learned advocate for the petitioner submits that after implementation of the system, the petitioner started facing problems while generating UAN as the details mentioned in the Adhar of the concerned employee did not match with the Provident Fund Unified Portal. He, therefore, submits that the petitioner brought the problems to the notice of the respondent and requested to relieve them from damages and penalty for the delay. He further submits that respondents ignored the communications of the petitioners and issued a summons dated 24.5.2018 calling upon the petitioner to appear in person and explain as to why proceedings under Section 14B and Section 7Q of the Act should not be initiated against them in respect of the remittance made from 1.11.2015 to 31.03.2018 by communication dated 25.09.2018, the petitioner submitted the preliminary reply to the summons dated 24.05.2018 which was accepted by the respondent and close the inquiry which was the subject matter of the summons dated 24.05.2018. He submits that despite the closer of the inquiry, the petitioner received summons dated 11.06.2019 calling upon as to why proceedings under Section 14B and 7Q of the Act should not be initiated in respect of the remittance from 1.4.2018 to 30.04.2019 though the problem faced by the petitioner still persisted. He submits that though delay had not occurred on account of any mistake on the part of the petitioners. The respondents have passed the impugned order dated 27.09.2019 under Section 14B and Section 7Q of the Act which is arbitrary and deserves to be set aside. Relying upon the decision of the Supreme Court in the case of McLeod Russel India Ltd.
v. Regional Provident Fund Commissioner, Jalpaiguri & Ors. reported in (2014) 15 SCC 263, he submits that mens Page 3 of 7 Downloaded on : Sat Oct 23 06:40:32 IST 2021 C/SCA/21701/2019 ORDER rea actus reus is petition persisted for imposing and quantifying damages under Section 14B of the Act. He submits that the petitioner has successfully demonstrated before the authorities that there was no mens rea on the part of the petitioner in dealing the remittance of the provident fund of its employee. He, therefore, urges that impugned order quashed and set aside.
6. Mr. Joshi, learned advocate supported the impugned order. He submits that the present petition is not maintainable as under Section-I of the Act appeal is provided to challenge the order passed under Section 14B of the Act. He, therefore, urges that the petitioner should be relegated to avail alternative remedy which is efficacious. It is his further submission that the petitioner is a chronic defaulter as though in respect of remittance for the period from 1.11.2015 to 31.03.2018, leniency was shown and the petitioner persisted in defaults. He, therefore, urges that the petition may be dismissed.
7. It is an undisputed fact that owing to introduction of concept of Universal Account Number (UAN), the petitioner had started facing difficulty/problem while generating UAN as the details of Adhar did not match with the PF Unified Portal. The problem persisted and the petitioner had entered into correspondence with the respondent to highlight the difficulties facing by it because of delayed transmission of PF contribution, the petitioner company was served with a summons dated 24.05.2018 for proceedings under Section 14B and Section 7Q of the Act for remittance made from 1.11.2015 to 31.03.2018. The petitioner submitted its explanation against the summons.
Page 4 of 7 Downloaded on : Sat Oct 23 06:40:32 IST 2021 C/SCA/21701/2019 ORDERThe respondents after going through the documents submitted by the petitioner, found that the claim made by the petitioner i.e. the difficulty being faced while generating UAN was found to be correct.
8. At this juncture, it is also relevant to note that similar problems were faced by other establishment as well. It emerges from the order dated 09.01.2020 of the Delhi High Court in the case of Indian Staffing Organization v. Union of India and others, similar problem was faced by the petitioner and as an arrangement upon consensus made by the ASG, petitioner was permitted to make payment by way of demand draft. It would not also out of place to consider the submission of Mr. Bhatt, learned advocate that the petitioner had no intention to make default in the payment of provident fund. He submits that it was only on account of difficulties faced the timely remittance was not there. The Supreme Court has in the case of McLeod Russel India Ltd. (supra) has held as under so far as the presence of mens rea while determining factor for imposing and quantifying damages under Section 14B of the Act:-
"11. In HMT Ltd. this Court noted the beneficial nature of the ESIC Act; that subordinate legislation must conform to the provisions of the parent Act. Despite giving due regard to the use of the words "may recover damages by way of penalty", and mindful that mens rea and actus reus to controvene a statutory provision are necessary ingredients for levy of damages, this Court set aside the interference of the High Court vis-a-vis the imposition of damages and further held that imposition of damages by way of penalty was not mandated in each and every case. The dispute was remitted back to the High Court for fresh consideration i.e. to proceed on the premise that the levy of penalty under the Act was not a mere formality, a foregone conclusion or an inexorable imposition;Page 5 of 7 Downloaded on : Sat Oct 23 06:40:32 IST 2021 C/SCA/21701/2019 ORDER
and that the circumstances surrounding the failure to deposit the contribution of the employees concerned would also have to be cogitated upon. This decision does not prescribe that damages or penalties cannot or ought not be imposed. Further, the presence or absence of mens rea and/or actus reus would be a determinative factor in imposing damages under Section 14-B, as also the quantum thereof since it is not inflexible that 100 per cent of the arrears have to be imposed in all the cases. Alternatively stated, if damages have been imposed under Section 14-B it will be only logical that mens rea and/or actus reus was prevailing at the relevant time. We may also note that this Court had yet again reiterated the well known but oft ignored principle that High Courts or any appellate authority created by a statue should not substitute their perspective of discretion on that of the lower adjudicatory authority if the impugned order does not otherwise manifest perversity in the process of decision taking. HMT Ltd. does not proscribe imposition of damages; that would negate the intent of the legislature. The submission of the petitioner before us is that the liability was of the erstwhile management and since the petitioner was not the "employer" at the relevant time, default much less deliberate and wilful default on the part of the petitioner was absent. However, it seems to us that once these damages have been levied, the quntification and imposition could be recovered from the party which has assumed the management of the establishment concerned."
9. Considering the overall facts of the case and considering the fact that the petitioner could not make the timely remittance of the P.F. on account of the difficulty faced by the submission of Mr. Joshi, learned advocate that the petitioner is a chronic defaulter cannot be accepted. It was only because of the new system of UAN the timely remittance could not be made. As has been held by the Supreme Court in the case of McLeod Russel India Ltd. (supra) mens rea is condition precedent for initiating action under Section 14B of the Act. However, in the present case earlier also similar summons were issued to the petitioner which was later on after considering the representation of the petitioner, the proceedings were Page 6 of 7 Downloaded on : Sat Oct 23 06:40:32 IST 2021 C/SCA/21701/2019 ORDER dropped as the difficulties ventilated by the petitioners were found to be correct. It is thus eminently clear that there was no mens rea on the part of the petitioner in remitting the contribution of provident fund within time as it could not be done because of the difficulty faced while generating UAN.
10. The contention of Mr. Joshi, learned advocate that the petitioner was utilizing unified portal for upholding ECR during peak hours in last few days, resulting in difficulties, and therefore, petitioner was advised to avoid last minute bulk generation of UAN cannot be countenanced. On the contrary, this submission strengthened the case of the petitioner that there was a difficulty in generating the UAN and the petitioner cannot be visited with a penalty only because the advise of the respondents to avoid last minute generation was not headed to by the petitioner resulting in delay which amounts to default in making the payment.
11. In view of the aforegoing, the impugned order of the respondent cannot be sustained and the petitioner cannot be relegated to avail alternative remedy under Section 7-I of the Act since the present petition is entertained by this Court.
12. For the foregoing reasons, petition succeeds and is hereby allowed. The impugned orders are hereby quashed and set aside. However, without costs. Rule is made absolute.
(A.G.URAIZEE, J) Manoj Page 7 of 7 Downloaded on : Sat Oct 23 06:40:32 IST 2021