Kerala High Court
Employees Provident Fund Organisation vs Parrison Estates And Industries Pvt. ... on 28 July, 2020
Author: A.M.Badar
Bench: A.M.Badar
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR. JUSTICE A.M.BADAR
TUESDAY, THE 28TH DAY OF JULY 2020 / 6TH SRAVANA, 1942
WP(C).No.23922 OF 2014(M)
PETITIONER:
EMPLOYEES PROVIDENT FUND ORGANISATION
SUB REGIONAL OFFICE, KOZHIKODE REPRESENTED BY THE
ASSISTANT PROVIDENT FUND COMMISSIONER (COMPLIANCE
DIVISION).
BY SRI.THOMAS MATHEW NELLIMOOTTIL,SC.
RESPONDENTS:
1 PARRISON ESTATES AND INDUSTRIES PVT. LTD.
OWNING TATAMALA ESTATE, REGD. OFFICE 6/1183,
CHEROOTTY ROAD, KOZHIKODE - 673 032, REPRESENTED BY
ITS DIRECTOR, MR.N.K.KHALID.
2 EMPLOYEES PROVIDENT FUND APPELLATE TRIBUNAL
CORE 2, 4TH FLOOR, SCOPE MINAR, LAXMI NAGAR DISTRICT
CENTRE, DELHI - 110 092.
R1 BY ADV. SRI.P.BENNY THOMAS
R1 BY ADV. SRI.M.GOPIKRISHNAN NAMBIAR
R1 BY ADV. SRI.P.GOPINATH
R1 BY ADV. SRI.K.JOHN MATHAI
R1 BY ADV. SRI.JOSON MANAVALAN
R1 BY ADV. SRI.KURYAN THOMAS
THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON
28.07.2020, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:
W.P.(C) No.23922 OF 2014 2
JUDGMENT
Dated this the 28th day of July 2020 By this petition, the petitioner-Employees Provident Fund Organisation is challenging the order dated 01.04.2014 passed by the Employees' Provident Fund Appellate Tribunal, New Delhi in ATA No.17(07) 2008 partly allowing an appeal filed by the 1st respondent, by which the legality and validity of the order dated 05.11.2007 passed by the Assistant Provident Fund Commissioner, Kozhikode under Section 14B of the Employees' Provident Funds & Miscellaneous Provisions Act, 1952 levying damages on account of delayed remittance of Provident Fund dues for the period from April 2004 to February 2005 came to be challenged.
2. The facts in brief are thus:
The 1st respondent-establishment is engaged in the business of running tea estates. On 24.12.2004, the 1 st respondent purchased four tea estates from M/s.Assam Brooke Ltd. Those establishments were under lock out for the period from March 2004 to 24.12.2004 i.e the date on which the 1st respondent purchased those establishments. Business operations of the tea estates commenced from 07.02.2005. Undisputedly, those establishments are covered by the Employees' Provident Funds & Miscellaneous W.P.(C) No.23922 OF 2014 3 Provisions Act, 1952 (hereinafter referred to as 'the Act'). It is seen that the erstwhile owner of those tea estates had not paid the PF contribution and other contributions including administrative charges payable under the Act in time and because of late payment, the Assistant Provident Fund Commissioner initiated proceedings for recovery of damages under Section 14B of the Act so also for recovery of interest under Section 7Q thereof. A show cause notice dated 09.07.2007 came to be issued asking the 1 st respondent to show cause as to why penal damages as stated hereinafter should not be recovered from it.
Amount A/c to which it relates
-----------------------------------------
1. The Employees' Provident Fund Contributions 40957 A/c I
2. The Administrative Charges 2052 A/c II
3. The Family Pension/Pension Fund Contributions 14504 A/c X
4. The Deposit Linked Insurance Fund Contributions 933 A/c XXI
5. The Administrative/Inspection charges 18 A/c XXII
--------
Total 58464
=====
Ultimately, by the order dated 25.10.2007, the Assistant Provident Fund Commissioner was pleased to direct the 1 st respondent to pay W.P.(C) No.23922 OF 2014 4 the damages for the period from April 2004 to February 2005 totalling to Rs.58,464/- as mentioned in the show cause notice.
3. Aggrieved by the order dated 25.10.2007 passed by the Assistant Provident Fund Commissioner, Kozhikode, the 1st respondent preferred an appeal under the Act which came to be allowed partly by the impugned order. The Appellate Authority, by the impugned order, had been pleased to restrict the damages leviable at the rate of 10% of the actual amount of damages levied under the order passed by the Assistant Provident Fund Commissioner.
4. Heard the learned counsel appearing for the petitioner. Learned counsel argued that the 1st respondent being successor of the owner of tea estates is duty bound to pay damages as envisaged by Section 14B of the Act as there was delay in remittance of PF dues. In submission of the learned counsel for the petitioner, the delay in payment of statutory dues invites consequence of payment of penal damages and therefore, the learned Appellate Tribunal erred in reducing the quantum of damages to 10% of what was assessed by the Assistant Provident Fund Commissioner.
5. As against this, learned counsel for the 1 st respondent W.P.(C) No.23922 OF 2014 5 supported the impugned order passed by the learned Appellate Tribunal relying on the judgment of the Hon'ble Supreme Court in Assistant Provident Fund Commissioner, EPFO and anr vs. The Management of RSL Textiles India Pvt. Ltd. Thr. its Director (Civil Appeal No.96-97 of 2017) decided on 03.01.2017. He urged that there is no element of mens rea and there was no fault on the part of the 1st respondent in delayed payment of PF dues of tea estates. As the 1 st respondent is the successor of the erstwhile employer, he is liable to pay the arrears of PF dues. But as there was no fault on the part of the 1 st respondent in delayed payment, the authority was not entitled to levy damages on the 1st respondent.
6. On instructions from the 1st respondent, learned counsel for the 1st respondent made a statement at Bar that interest for delayed payments of PF dues in view of the provisions of Section 7Q of the Act amounting to Rs.18,963/- as reflected from the show cause notice has already been remitted by the 1 st respondent. The statement so made at Bar is accepted.
7. I have considered the submissions advanced at the Bar and perused the materials placed on record. The show cause notice dated 09.07.2007 issued by the Assistant Provident Fund W.P.(C) No.23922 OF 2014 6 Commissioner makes a reference of notification No.S.O.1553 dated 04.05.2002 and states how the damages are calculated. The relevant portion of the show cause notice prescribing the criteria for assessing damages reads thus:
Period of delay Rate of damages (percentage of arrears per annum)
1. Less than two months Seventeen
2. Two months and above but less than 4 months Twenty two
3. Four months and above but less than 6 months Twenty seven
4. Six months and above Thirty seven
8. It is thus clear that damages are quantified by keeping in mind the delay in remittance of PF dues. The show cause notice is accompanied with a statement regarding calculation of damages and this statement reflects that there is delay ranging from 244 days to 494 days in remittance of PF dues. The assessment of damages to the tune of Rs.58464/- (@37% p.a) is on the basis of the rate of damages quantified in the chart given in the show cause notice which prescribes rate of 17% to 37% for the period of delay ranging from less than two months to more than six months. It is not in dispute that the establishments where delay in remittance of PF dues occurred came to be purchased by the 1st respondent on 24.12.2004 and that the period during which there was late W.P.(C) No.23922 OF 2014 7 remittance was ranging from April 2004 to February 2005. The business operations of the establishments commenced from 07.02.2005 and that is how in the month of February 2005, remittance of PF dues was made by the 1st respondent. The Assistant Provident Fund Commissioner while deciding the proceedings under Section 14B of the Act held that being the present employer, the 1st respondent is liable to pay damages under Section 14B and interest under Section 7Q of the Act in view of the provisions of Section 17B of the Act. It is also held that the statutory liability came to be cast on the 1 st respondent because of transfer of establishment and therefore, the 1 st respondent is liable to pay an amount of Rs.58,464/- towards damages.
9. The learned Appellate Authority re-examined the issue and came to the conclusion that the Assistant Provident Fund Commissioner assessed the damages without considering the facts and circumstances of the case. Relying on the judgment of the Gauhati High Court in Popular Saw Mills vs. RPFC and anr. (1996 (1) LLJ 201), the learned Appellate Authority observed that while imposing damages, all losses suffered or likely to be suffered by the beneficiaries and such other aspects including reason for failure are required to be kept in mind. The learned Appellate Authority also W.P.(C) No.23922 OF 2014 8 placed reliance on the decision in Organo Chemicals Industries & another vs. Union of India and others ((1979) 4 SCC 573). It further observed that Section 14B of the Act provides for penalty on employer for breach of statutory obligation so also it provides for reparation for amount of loss suffered by the employees. This punitive sum is required to be quantified according to the circumstances of the case. According to the learned Appellate Authority, the Assistant Provident Fund Commissioner had not determined the quantum of compensation credited to the employees and the share of Employees Provident Fund Organisation. There is no finding regarding mens rea by the Assistant Provident Fund Commissioner. The Appellate Authority also came to the conclusion that there was no willful default in remittance and therefore, penal damages should be more or less compensatory in nature. A finding came to be recorded that there is no proof of willful default in remittance. With this, as stated in the foregoing paragraphs, the learned Appellate Authority reduced the quantum of damages to 10% of the actual damages levied by the Assistant Provident Fund Commissioner.
10. I have already stated the findings recorded by the Assistant Provident Fund Commissioner and undoubtedly, the W.P.(C) No.23922 OF 2014 9 element of mens rea was not considered by the Assistant Provident Fund Commissioner while imposing damages on the 1 st respondent for delayed remittance of PF dues. It is not in dispute that the 1st respondent had purchased the establishments on 24.12.2004. In the matter of Management of RSL Textiles India Pvt. Ltd (supra), following are the observations of the Hon'ble Supreme Court in paragraphs 3 and 4.
"3. This issue is now wholly covered against the appellants in the decision rendered by this Court in Mcleod Russel India Limited vs. Regional Provident Fund Commissioner, Jalpaiguri and Others, reported in (2014) 15 SCC 263, wherein it has been held in paragraph 11 that ".....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 percent 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".
4. In the impugned judgment, at paragraph 23, it has been specifically held by the High Court that "In this case, there is no finding rendered by the original authority or the appellate authority with regard to mens rea or actus reus, expect saying financial crises cannot be a reason to escape". W.P.(C) No.23922 OF 2014 10
11. A perusal of the order passed by the Assistant Provident Fund Commissioner makes it clear that the facts and circumstances brought before it vide reply to the show cause notice were not considered by it while assessing damages as per the scale given in the show cause notice. There is no finding regarding willful default if any committed by the 1st respondent in remittance of the PF dues. The supervisory jurisdiction of this Court cannot be converted into that of court of appeal. This jurisdiction extends to keeping the Subordinate Tribunal within the limits of their authority and to see that they obey law. The decision of the learned Appellate Tribunal cannot be termed as either perverse or illegal in the light of the law laid down by the Hon'ble Supreme Court as quoted hereinabove. The learned Appellate Tribunal has not misdirected itself either on facts or on law.
12. There is one more aspect of the matter. The scale for assessment of damages given in the show cause notice appears to be in pursuance to the Office Memorandum dated 29.05.1990 of the Provident Fund Organisation as reflected from the judgment of the Hon'ble High Court of Delhi in the matter of Systems and Stamping and Ors vs. Employees' Provident Fund Appellate Tribunal and Ors. ((2008) 2 LLJ 939). The relevant portion of W.P.(C) No.23922 OF 2014 11 paragraphs 2 and 6 of the said judgment reads thus:
"2. ..... The only issue that arises for consideration is the quantum of damages payable under Section 14B of the Act in terms of Office Memorandum dated May 29, 1990, the relevant portion of which reads as under:
Moreover, now that in the recent amendment to the act, we have already provided for the payment of simple interest at 12% per annum (Section 7Q) payable from the date the amount has become due till the date it is actually paid. It had become necessary to revise the rates of damages and to specify the same in the scheme. Thus, a proprosal to revise the rates of damages was accordingly placed before the Central Board to Trustees and the Board in its 119 th meeting held on April 4, 1989 approved the following revised rates of damages with the condition that the position with regard to the incidence of default following the revision of the rates of damages would be analysed after six months from the date the new rates come into force:
Period of Delay Revised Interest Total Existing
Rates of Chargeable rate of
Damages under Section damage
7Q s
(i) 2 months or less 5 12 17 25
(ii) Over 2 months 10 12 22 25
but less than 4
months
(iii)Over 4 months 15 12 27 25
but less than 6
months
(iv) Over 6 months 25 12 37 25
W.P.(C) No.23922 OF 2014 12
6. The circular dated May 29, 1990 provides that all defaulters thereafter shall be liable to pay interest at the rate specified in column 1, that is, from 5 to 25 per cent depending upon the period of default as damages under Section 14-B of the Act. The defaulters in addition are liable to pay interest chargeable under Section 7Q of the Act at the rate of 12 per cent per annum as mentioned in the 2 nd column. The rates mentioned in column 3 of the circular is the sum total of column Nos.1 and 2. The total amount varies between 17 to 37 per cent per annum depending upon the period of default. Thus, for default of less than two months, the defaulter becomes liable to pay damages at the rate of 5 per cent per annum under Section 14B and also interest under Section 7Q of the Act at the rate of 12 per cent per annum. Therefore, the defaulter becomes liable to pay damages under Section 14B and interest under Section 7Q at the rate of 17 per cent per annum. This is less than the original rate of damages of 25 per cent per annum as it existed before the circular dated May 29, 1990 was issued. Similarly, for defaults between two months and less than four months the defaulter becomes liable to pay damages at the rate of 10 per cent per annum under Section 14B and interest at the rate of 12 per cent per annum; under Section 7Q after July 1, 1997 or 22 per cent in all. For defaults of more than four months but less than six months each defaulter becomes liable to pay interest and damages at the rate of 27 per cent per annum and in defaults of over six months interest and damages at the rate of 37 per cent per annum. Thus for defaults beyond 4 months the amount payable increased from the flat rate of 25% per annum".W.P.(C) No.23922 OF 2014 13
13. As stated in the foregoing paragraphs, learned counsel for the 1st respondent has made a statement on instructions that the employer has already paid an amount of Rs.18,963/- towards interest under Section 7Q of the Act. The order of the Assistant Provident Fund Commissioner dated 25.10.2007 also mentions the fact that the order regarding payment of Rs.18,963/- towards interest has been issued separately. It is thus clear that damages so assessed by calculating the same at the rate of 37% as seen from Annexure to the show cause notice are also inclusive of interest. However, the interest is already recovered by the petitioner from the 1st respondent separately. In the matter of Roma Henny Security Services (P) Ltd vs. Central Board of Trustees, E.P.F Organisation (2013 (1) KLT SN 33 (C.No.33)), the Hon'ble Supreme Court, considering the decision in Systems and Stamping 's case (supra), has held that when damages under Section 14B of the Act were inclusive of interest chargeable under Section 7Q of the Act, the Provident Fund organisation has no right to charge interest under Section 7Q of the Act additionally.
14. In the case in hand, the records reveal that damages quantified by the Assistant Provident Fund Commissioner were inclusive of interest under Section 7Q of the Act. Unfortunately, this W.P.(C) No.23922 OF 2014 14 aspect is missed by the learned Appellate Authority though it has rightly reduced damages quantified by the Assistant Provident Fund Commissioner.
In the result, this writ petition fails and the same is dismissed.
Sd/-
A.M.BADAR JUDGE smp W.P.(C) No.23922 OF 2014 15 APPENDIX PETITIONER'S EXHIBITS:
EXHIBIT P1 TRUE COPY OF THE ORDER DT. 01.4.14 IN APPEAL ATA NO.17(7)/2008 OF THE EMPLOYEES PROVIDENT FUND APPELLATE TRIBUNAL, NEW DELHI.
EXHIBIT P2 TRUE COPY OF THE APPEAL ATA 17(7)/2008. EXHIBIT P3 TRUE COPY OF THE COUNTER AFFIDAVIT FILED ON BEHALF OF THE EPFO IN APPEAL ATA 17(7)/2008.
RESPONDENTS' EXHIBITS: NIL.
True Copy P.S to Judge smp