Gujarat High Court
Gujarat vs Regional on 25 March, 2011
Author: H.K.Rathod
Bench: H.K.Rathod
Gujarat High Court Case Information System
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SCA/15406/2010 31/ 31 ORDER
IN
THE HIGH COURT OF GUJARAT AT AHMEDABAD
SPECIAL
CIVIL APPLICATION No. 15406 of 2010
=========================================================
GUJARAT
POWER CORPORATION LIMITED - Petitioner(s)
Versus
REGIONAL
PROVIDENT FUND COMMISSIONER - Respondent(s)
=========================================================
Appearance
:
MR
CHUDGAR FOR NANAVATI ASSOCIATES
for
Petitioner(s) : 1,
MS E.SHAILAJA for Respondent(s) :
1,
=========================================================
CORAM
:
HONOURABLE
MR.JUSTICE H.K.RATHOD
Date
: 25/03/2011
ORAL ORDER
1. In present petition, petitioner has challenged order passed by appellate authority dated 16th April, 2010 in ATA 325(6) of 2002 passed by Presiding Officer, Employees' Provident Fund appellate Tribunal, New Delhi, Camp at Ahmedabad and also prayed for relief to direct respondent authority to refund amount of Rs.4,83,921/- with interest thereon at the rate of 18% per annum w.e.f. 13th March, 2000 till date of realisation to petitioner.
2. In present petition, brief facts which are relevant and according to petitioner whatever facts stated in synopsis with list of dates and events just to understand real controversy in respect of present matter, therefore, merely, for that purpose, facts which are stated by petitioner are mentioned as under :
"The petitioner is a Government Company registered and incorporated under the provisions of the Companies Act, 1956. It is mainly engaged in facilitating the process of privatization in power sector and accordingly takes instructions from the State Government. In short, the petitioner Company is nodal agency which is not engaged in any manufacturing activity, production activity or trading activity and, therefore, does not fall in the schedule prescribed under the Employees Provident Funds and Miscellaneous Provisions Act, 1952 (hereinafter referred to as "the said Act") and hence, the said Act is not applicable to the petitioner Company.
Dates Events Year 1993 At the time when the petitioner Company was incorporated, it had less than 20 employees and, therefore, the said Act was not applicable. However, for the welfare of the employees, the petitioner Company had its own Trust known as "Gujarat Power Corporation Limited Employees Provident Fund"
(hereinafter referred to as the said Trust). The said Trust was constituted with effect from December, 1993. The petitioner Company has been making contribution with the said Trust.
28.10.1994 The approval of the said Trust was also given by the Commissioner of Income Tax.
22.12.1997 Since the Trust was constituted, a Special Deposit Account was opened with State Bank of India, Main Branch, Ahmedabad, wherein the contribution was deposited. Further, as per its own scheme as well as the provisions of the said Act, some portion of the contribution were invested in the bonds of public sector units i.e., PSU Bonds. And for the said purpose, a resolution dated 22.12.1997 was passed by the Trust authorizing to invest an amount of Rs.4 lacs in PSU Bonds. Accordingly, the Trust had purchased bonds of GOI-2005, SDL-2007, IFCI 2001 & SSNNL-2002.
24.2.1998 The Petitioner Company made an application to the respondent inter alia, requesting to register the petitioner Company under the said Act and to allot registration number. It is pertinent to note that though the petitioner Company does not fall under the schedule of the said Act, the petitioner Company under the bona fide mistake and on advice given made the aforesaid application.
22.4.1998 The respondent intimated the petitioner Company to ensure that the amount due is paid within the prescribed time limit.
24.4.1998 In view of the above application, the respondent vide letter dated 24.4.1998 brought the petitioner Company provisionally within the purview of the said Act and the scheme framed thereunder with effect from 22.9.1997 and it was intimated that the factory of the petitioner Company is engaged in E.M.G.E. one of the industries specified in Schedule I to the said Act. However, the petitioner Company does not fall under the Schedule to the said Act.
In view of the said fact, the Trust vide its letter bearing No.GPCL-PF-12737 dated Nil requested State Bank of India to permit the withdrawal of the amount deposited in Special Deposit account so that the same could be remitted to the respondent authority.
11.7.1998 In response to the said letter, State Bank of India, called upon the Trust to furnish the certificate or permission from the respondent to permit to withdraw the said amount and to furnish a certificate to the effect that the Trust is in the process of selling the securities in which the amount of the Trust was invested 15.7.1998 Accordingly, the petitioner Company requested respondent to give permission for withdrawal of the entire balance from the Special Deposit account with State Bank of India, so that the same could be transferred in favour of the respondent. Pursuant to the said letter, the respondent granted permission to the petitioner Company to withdraw the total amount outstanding in Special Deposit Account of State Bank of India with condition that the entire amount shall be paid in the account in respect of past accumulation.
16.7.1998 Thereafter, the said Trust forwarded letter dated 15.7.1998 to state Bank of India the given by the respondent and requested to release the balance lying in Special Deposit Account at the earliest so that the same can be deposited with the respondent.
In the meantime, the petitioner Company deposited the amount of contribution on 22.7.1998 vide cheque dated 17.7.98 for the period October, 1997 to June 1998 and for the period September 1998 on 28.10.1998 on 28.10.1998. The said fact is evident from the challan issued by the respondent 22.7.1998 28.10.1998 In the meantime, the petitioner Company deposited the amount of contribution on 22.7.1998 vide cheque dated 17.7.98 for the period October, 1997 to June 1998 and for the period September 1998 on 28.10.1998.
13.10.1998 However, the deal in respect of the securities viz. Sardar Sarovar Narmada Nigam Limited Bonds 2002 was not concluded since the price offered was very less. Despite the fact that the amount towards the security was not fully realized, the petitioner Company deposited past accumulation of contribution that too with interest thereon on 23.10.1998 to the respondent. It is pertinent to note that since the security was not fully realized there was a short fall of Rs.1, 05,000/-. However, in order to deposit the total past accumulation, the petitioner Company made the short fall good and deposited amount with the RPFC. The said short fall was made good on a condition that the Trust will return the amount upon receipt of proceeds from sale of SSNNL Bonds.
7.12.1998 Despite the fact that the past accumulation was deposited that too with interest and the relevant accumulation was also paid, the respondent vide letter dated 7.12.1998 requested the petitioner Company to comply with the provisions of the Act and the schemes framed there under.
3.2.1999 Prior to the issuance of the notice dated 4.2.1999, the petitioner Company vide its letter dated 3.2.1999 had clarified that it has deposited the past accumulation on 13.10.1998 for the period December 1993 up to 30 September 1997 alongwith interest on that date. Further, vide another letter dated 3.2.1999 the petitioner Company informed that it has deposited the contribution for the period 1.10.1997 to 30.6.1998 on 17.7.1998. It was also clarified that the delay for making the payment was caused due to the time taken for withdrawal for funds from Special Deposit Scheme Account.
Further, the petitioner Company as well as the Trust also requested the respondent to take the securities in which the amount was invested. However, the respondent authority orally refused to take the securities and insisted for liquidated amount. Therefore, the petitioner Company as well as the Trust started negotiating with the buyer who were interested in buying the said securities. Accordingly, the quotation giving offer for sale of Government securities/SDL Bonds/PSU Bonds was given by the dealer viz. Interface Capital Market Pvt. Ltd. As per the quotation given the deal was confirmed in respect of three securities vis. SDL-2007, GOI-2005, and IFCI-2001.
The said deal was confirmed on 25.9.1998, 26.9.1998 and 28.9.1998 respectively 4.2.1999 The respondent issued notice under Section 14B of the Act to impose and recover damages in view of the default committed by the petitioner Company in paying the contribution into the respective fund on or before the due dates for the months October 1997 to October 1998 as per the statement enclosed with the said notice.
11.2.1999 The petitioner states that pursuant to the notice dated 4.2.1999, the petitioner gave a reply pointing out the aforesaid facts and requested not to levy damages since, the petitioner Company due to the aforesaid reasons could not deposit the amount in time. In any case, the petitioner submits that the period of delay that has been caused is very minor and that too payment was made with interest therefore no damaged as such should be levied.
24.6.1999 Despite the aforesaid facts, the respondent passed an order levying damages for a tune of Rs.4,83,929/- for not depositing the past accumulation upto September 1997 in time and for not depositing the accumulation for the period October 1997 to June 1998 despite the fact that the show cause notice was not given under Section 14B in respect of not depositing the past accumulation upto September 1997 in time by the petitioner Company.
19.9.1999 At the time when the past accumulation as well as the relevant accumulation was deposited with the respondent, the petitioner Company through bonafide mistake paid the contribution in respect of those employees who are not covered under the provisions of the said act in view of the fact that the salary of such employee is more than Rs.5,000/- p.m. The said fact was brought to the notice of the respondent by the petitioner Company together with list of 25 employees who are not covered under the said Act. Subsequently the petitioner Company also furnished the name of other five employees who are not covered under the said Act.
30.9.1999 The above fact was informed by the petitioner Company together with the statement pointing out that their salary was more than rs.5,000/- p.m. In respect of the said five employees the petitioner begs to point out that the salary was more than Rs.5,000/- p.m. since 5th Pay Commission was implemented in respect of those employees with retrospective effect from 1.6.1996 and the arrears were paid in July 1999. Vide the said letters the petitioner Company has requested the respondent to refund provident fund dues since the aforesaid employees are not covered under the said Act. It may therefore be appreciated that since the petitioner Company is not liable to make the payment of contribution in respect of the aforesaid 30 employees, no damages ought to have been levied on the amount of contribution paid in respect of these 30 employees at least.
7.10.1999 In reply to the aforesaid letter dated 30.9.1999, the respondent called upon the petitioner to furnish the information in respect of the 30 employees.
14.10.1999 Accordingly, the petitioner furnished the information as sought for by the respondent.
24.12.1999 Thereafter, instead of deciding the issue of refunding the amount deposited in respect of those employees who are not covered under the Act, the respondent issued notice under Section 8F of the said Act, thereby attaching the account of the petitioner Company with Bank of Baroda. Vide the said notice the respondent called upon Bank of Baroda to pay forthwith sum of Rs.4,83,921/- from the account of the petitioner Company.
13.3.2000 Pursuant to the said notice the Bank of Baroda transferred an amount of Rs.4,83,921/- to the respondent on 13/3/2000.
19.12.2000 Thereafter, the petitioner had requested the respondent for refund of the excess money of excluded employees.
21.6.2001 However, the respondent had denied for the same.
10.5.2002 Being aggrieved by the aforesaid impugned order dated 24.6.1999, the petitioner preferred Special Civil Application No. 7766 of 2000 before this Hon'ble Court which came to be disposed of with a direction to the petitioner that it is open to the petitioner to file an appeal before the Tribunal under Section 7-I of the PF Act within a period of six weeks from the date of the order.
The petitioner accordingly filed an appeal before the Employees Provident Fund Appellate Tribunal, New Delhi challenging the order dated 24.6.1999 passed by the respondent authority and praying, inter alia, for a direction to the respondent authority to refund an amount of Rs.4,83,921/- with interest thereon at the rate of 18% per annum w.e.f. 13.3.2000 till the date of realization.
16.4.2010 The Employees Provident Fund Appellate Tribunal, New Delhi, Camp-Ahmedabad dismissed the appeal filed by the petitioner Company being ATA No.325(6) of 2002 vide its order dated 16.4.2010.
Hence The Present Petition.
3. In this petition, affidavit in reply is filed by respondent No.1 - Smt. S.J. Trivedi, Provident Fund Commissioner (Legal) and rejoinder is also filed by petitioner. The respondent PF Authority has denied and objected contentions raised by petitioner and also justified order passed by PF Authority under Section 14-B of PF Act. The controversy between parties is not explained and decided by this Court.
4. The petitioner has also placed on record order passed by P.F. Commissioner under Section 14B of PF Act on 24th June, 1999.
5. Heard learned advocates appearing on behalf of respective parties. Considering submissions made by both learned advocates. RULE.
6. Learned advocate Ms. E. Shailja waives service of notice of rule on behalf of respondent - PF Authority.
7. With consent of both learned advocates, this matter is taken up for hearing and final disposal today.
8. It is necessary to consider order passed by Regional Provident Fund Commissioner, Gujarat State under Section 14B of PF Act dated 24th June, 1999. The relevant averments made at Page 144 is quoted as under along with details which have been given at Page 145 :
"For the reasons stated above, I Sharad Singh, Regional Provident Fund Commissioner, Gujarat State, Ahmedabad in exercise of the powers conferred on me by Section 14-B of the Employees' Provident Funds and Miscellaneous Act, 1952, think fit and having regard to the circumstances, presistency and length of each default and on over all consideration of the representation made by the establishment, feel that the ends of justice would meet if damages are levied at the rates indicated in the enclosed statement instead of 100% as proposed in the show cause notice. Accordingly, I order that the damages for delayed payment of amount of Provident Fund / Family Pension Fund / Deposit Linked Insurance Fund and Administrative charges both for the period from 10/97 to 10/98 & 9/97 totalling Rs.4,83,921.00 (Rupees Four Lakhs Eighty Three Thousand Nine Hundred & Twenty One only) be imposed and recovered from the employer in relation to the establishment styled as M/s. Gujarat Power Corporation Limited bearing code No.GJ/27267. It is further ordered that the amount of damages should be paid by the aforesaid employer within 15 days of receipt of the order failing which further action be taken as provided under Section 8 of the Employees' Provident & Miscellaneous Provisions Act, 1952. (The amount of damages on Provident Fund/ Family Pension Fund/ Administrative Charges/ Deposit Linked Insurance Fund Contribution and Administrative charges be paid as under.) Account No.I Rs.4,17,211.00 Account No.I Rs. 63,627.00 Account No.II Rs. 1,728.00 Account No.XXI Rs. 1,329.00 Account No.XXII Rs. 26.00
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Rs.4,83,921.00
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Statement of Damages levied under section 14-B of the Employees' Provident Fund and Miscellaneous Provisions Act, 1952, in respect of M/s. Gujarat Power Corp./GJ/27267 Sr. No. Month Amount remitted in Account Nos.
Due date of Payment Date of remmi-ttances % of dam-ages Amount of damages due in Account Nos.
I II X XXI XXII I II X XXI XXII
1. 10/97 48167 1724 15495 1326 26 15.11.97 22.7.98 37% 12157.95 438.15 3911.15 334.70 6.55
2. 11/97 47875 1717 15531 1321 26 15.12.97 "
37% 10628.30 381.20 3447.90 293.25 6.80
3. 12/97 47426 1698 15294 1306 26 15.1.98 "
37% 9038.30 323.60 2914.70 248.90 4.95
4. 1/98 47772 1750 15435 1346 26 15.2.98 "
27% 5548.10 203.25 1792.60 156.30 3.00
5. 2/98 51870 1830 15542 1408 28 15.3.98 "
27% 4949.70 174.60 1483.10 134.35 2.70
6. 3/98 48540 1735 15537 1335 26 15.4.98 "
22% 2867.35 102.50 917.80 78.90 1.55
7. 4/98 49225 1755 15596 1350 27 15.5.98 "
22% 2017.65 71.95 639.25 55.35 1.10
8. 5/98 49555 1764 15604 1357 27 15.6.98 "
17% 854.00 30.40 268.90 23.40 0.45
9. 6/98 43117 1575 15064 1216 24 15.7.98 "
17% 140.60 6.15 49.10 4.00 0.10 48201.95 1727.80 15424.50 1329.15 26.20 48202/-
1728/-
15425/-
1329/-
26/-
( GRAND TOTAL : Sixty Six Thousand Seven Hundred Forty only) TOTAL : Rs.66,740/-
Sd/-
(Illegible) Assistant Provident Fund Commissioner Damages Cell Statement of Damages levied under section 14-B of the Employees' Provident Fund and Miscellaneous Provisions Act, 1952, in respect of M/s. Gujarat Power Corp./GJ/27267 (P.A. STATEMENT) Sr. No. Month Amount remitted in Account Nos.
Due date of Payment Date of remmi-ttances % of damages Amount of damages due in Account Nos.
I II X XXI XXII I II X XXI XXII
1. 9/97 11,03,406
-
-
-
-
15.10.97 23.10.98 37% 4,17,211.00
-
-
-
-
Total Rs.
4,17,211.00 (Grant Total : Rupees Four Lakhs Seventeen Thousand Two Hundred Eleven only) Sd/-
(Illegible) Assistant Provident Fund Commissioner Damages Cell
9. The Appellate Tribunal has passed an order Page 18, Annexure 'A', where, following observations are made by Appellate Tribunal :
"The applicability of the Act and the default is not disputed. It is stated int eh Appeal memo that the Appellant applied for Voluntary Coverage as per Section 1(4). The Commissioner authorised to cover the establishment retrospectively. So covering the establishment from 1997 one application was made in the year 1998 is permitted under the law.
The default was not disputed and the establishment took the plea that the delay was due to procedural difficulty in withdrawal the amount from the State Bank of India. As per the scheme the amount has to be transferred within 10 days which is not done in this case. So there was a default in depositing the contribution.
It is true that there is some delay in instituting the proceeding u/s.14(B). The Law prescribes no period of limitation to start a proceeding. Mere delay is not sufficient to hold that prejudice was caused to the Appellant unless it is shown that due to delay the Appellant changed his position or lost the documents in the case of K.Street Light Electric Corporation V/s. RPF Commissioner reported in 2001 (4) SCC at Page 449. Their Lordship held that "mere fact that proceeding are initiated or demand for damage is made after several years is not by itself be a ground for drawing an inference of waiver.
No infirmity is noticed in the order of the Authority. Hence the order. The Appeal is dismissed. And the order of the Authority is hereby confirmed. Copy of the order be sent to the parties. File be consigned to record room."
10. In light of these facts and considering facts which are not much in dispute between parties, amount of PF contribution in favour of each employee have been deposited by petitioner w.e.f. 1993 in PF Account in SBI Special Deposit Scheme Account. Said amount is required to be transferred from SBI to PF Department. For that, administrative procedural lapse has been committed because of SBI demanding certificate/permission from PF Department vide letter dated 11th July, 1998, Page 34. The contents of letter dated 11th July, 1998 is as under :
"With reference to your letter No.GPCL-PF-12737 without date, please obtain certificate from the Income Tax Official or R.P.F.C. permitting withdrawal of entire balance in your above Sp. Deposit Account. Letter obtained by you from Employes Provident Fund Organisation No.GL/PSC/AHD/ 2726/INF/II/131 dated 24.4.98 does not specifically direct closure of the fund and permitting withdrawal of entire balance.
2. Please, therefore, obtain and forward us in original, required letter from R.P.F.C./Authority from the office of the Income Tax for our further action in the matter. Further please submit us a certificate to the effect that you have disposed off or in the process of disposing off all other investments of the Fund."
11. Accordingly, permission/certificate was granted to petitioner on 15th July, 1998 by PF Authority and on that basis, while producing such certificate before SBI on 16th July, 1998, SBI has issued cheque on next date 17th July, 1998 in favour of PF authority of total amount which was credited in PF account on 22nd July, 1998. Therefore, damages which has been demanded as per notice dated 24.12.1999 as referred above prior to 15th July, 1998 whether it can be considered to be a deliberate default on the part of petitioner company or not and second question is also necessary to be considered that because of such delay in transferring amount from SBI to PF authority whether any prejudice has been caused to employees in getting interest upon amount of contribution which has been deposited by petitioner company or not. The Commissioner has not discussed and considered explanation given by petitioner company dated 3rd February, 1999 and dated 11th February, 1999. The Commissioner has merely discussed and narrated delay period from 15th November, 1997 to 22nd July, 1998, but, whether, in fact, it was within control of petitioner company to transfer amount from SBI to PF authority or not. That aspect has not been considered by PF authority. The administrative procedure is required to be followed by petitioner company as it has been insisted by SBI which required a certificate from PF authority for transferring total amount from SBI to PF authority. Therefore, delay which has been occurred can be considered to be a default of employer as mentioned in Section 14B of PF Act or not ? Therefore, question is whether damages which has been levied from 15th November, 1997 to 22nd July, 1998, for that any deliberate intention or default has been committed by employer or not. For this aspect, there is no discussion at all in order passed by PF authority under Section 14B of PF Act. Similarly, Appellate Tribunal has also not discussed this aspect though specific stand has been taken by petitioner before it that delay has been occurred due to procedural difficulty and transferring the amount. Therefore, contention raised by petitioner company is found from record to be correct and there is no deliberate attempt made by petitioner company for not depositing amount from SBI to PF authority. These relevant factors have been totally ignored by PF authority as well as Appellate Tribunal. If delay in making payment not prejudiced to employees for whose benefit, fund is created where default is found, but, no apparent fault, then, quantum of damages in such circumstances should be compensatory rather than penal in nature. This aspect has been considered by Madras High Court in case of Shanti Garments Pvt. Ltd. v. Regional Provident Fund Commissioner, reported in 2003 LLR 256 (Madras). The relevant Para 4, 7 and 8 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."
7. 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."
12. Under Section 14-B while exercising powers, Regional Provident Fund Commissioner should have taken into consideration various factors and take note of several relevant circumstances before imposing damages for delayed payment. How many number of defaults and period of delay, the frequency of defaults and amount involved; these are relevant circumstances which must have to be kept in mind by Regional Provident Fund Commissioner as decided by this Court in case of Star of Gujarat Textile Mills Ltd. v. Regional P.F. Commissioner & Another reported in 1993-I-LLJ Page 1023.
The relevant observation made in Para 5 is quoted as under :
"5. The fact remains that, apart from the sweeping statement in the summing up paragraph of the impugned proceedings, 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 he punitive nature of the power exercisable under Sec.14B and the consequences that ensure 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 defaults and the amounts involved. xxxxx"
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 he functionary under Sec.14B of the Act should discharge the obligations has been expatiated by S. Natarajan, J., as Subramaniam v. The Commissioner, the Regional Provident Fund, 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 tot 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 "
xxxxx xxxxx xxxxx "
13. Therefore, considering law on this point as well as object of Section 14B of PF Act and PF contribution was paid in time by petitioner company before SBI Special Deposit Scheme Account which amount is required to be transferred from SBI to PF authority, therefore, merely default is not considered to be a fault or enough only for levy damages under Section 14B of PF Act, but also, something more is to be required to establish conduct of petitioner company whether it was a deliberate default or not or whether it was due to administrative procedural difficulty and unintentional default or not.
14. Therefore, according to my opinion, if order passed by Regional Provident Fund Commissioner dated 24th June, 1999 under Section 14B of PF Act and also order passed by Appellate Tribunal dated 16th April, 2010 is to be set aside and matter is to be remanded back to Regional Provident Fund Commissioner to decide afresh while considering relevant factors and for passing reasoned order after considering explanation given by Company in accordance with law after giving reasonable opportunity of hearing to petitioner, which will meet ends of justice between parties. The Regional Provident Fund Commissioner, Gujarat State has to justify damages under Section 14B of PF Act between 15th November, 1997 to 22nd July, 1998 whether it was a deliberate default or unintentional and due to procedural difficulty in transferring amount or not and then to pass appropriate reasoned orders in accordance with law within a period of three months from date of receiving copy of present order and communicate decision to petitioner immediately.
15. It is open for petitioner company to file further explanation or defence before Regional Provident Fund Commissioner after receiving notice from PF authority. Thereafter, Regional Provident Fund Commissioner must have to exercise powers under Section 14B of PF Act and then to pass reasoned order while dealing with explanation given by petitioner company, therefore, order passed by Regional Provident Fund Commissioner dated 24th June, 1999 under Section 14B of PF Act and also order passed by Appellate Tribunal dated 16th April, 2010 are hereby quashed and set aside without expressing any opinion on merits. The stand taken by both parties are kept open by this Court while passing present order.
16. The amount of damages which has been recovered by PF authority from petitioner company as per order dated 24th June, 1999 are remained with PF Authority subject to final outcome of fresh order which will be passed by PF authority.
17. Accordingly, question of levying damages is required to be decided by respondent No.1 afresh after giving reasonable opportunity of hearing to petitioner company and without influence by this order.
18. Accordingly, rule is made absolute to aforesaid extent. No order as to costs.
19. This order is passed by this Court considering special facts and circumstances as narrated above which may not be cited as precedent in any other cases.
Sd/-
[H.K. RATHOD, J.] #Dave Top