Bombay High Court
M/S. Buldhana District Central ... vs Assistant Provident Fund ... on 14 August, 2019
Author: A.S. Chandurkar
Bench: A.S. Chandurkar
WP 1302/16 1 Judgment
IN THE HIGH COURT OF JUDICATURE AT BOMBAY,
NAGPUR BENCH, NAGPUR.
WRIT PETITION NO. 1302/2016
M/s Buldana District Central Co-operative Bank,
Through its Manager Vijay Shyamrao Chinchole,
Shakar Bhawan, Buldana, Tq. & Dist. Buldana. PETITIONER
.....VERSUS.....
1. The Assistant Provident Fund Commissioner,
S.R.O. Akola, Tq. and Dist. Akola.
2. The Employees Provident Fund Appellate
Tribunal, New Delhi. (Deleted) RESPONDENTS
Shri A.R. Deshpande, counsel for petitioner.
Shri H.N. Verma, counsel for respondent no.1.
CORAM : A.S. CHANDURKAR, J.
ARGUMENTS WERE HEARD ON : 04TH JULY, 2019
JUDGMENT PRONOUNCED ON : 14TH AUGUST, 2019
JUDGMENT
RULE. Heard finally with consent of counsel for the parties.
2. The challenge raised in this writ petition is to the order dated 08.12.2015 passed by the Employees Provident Fund Appellate Tribunal thereby dismissing the appeal preferred by the establishment and confirming the order passed imposing the order passed imposing damages by way of penalty under Section 14B of the Employees' Provident Fund and Miscellaneous Provisions Act, 1952 (for short, 'the said Act') as well as interest under Section 7Q of the said Act.
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WP 1302/16 2 Judgment
3. The petitioner is a District Central Co-operative Bank which had advanced an amount of Rs.1,58,00,000/- to a co-operative society by name M/s Shetkari Sahakari Ginning and Pressing Society Limited. In lieu thereof, said society had mortgaged its plant and machinery in favour of the petitioner. The said society committed defaults in repaying the loan amount that was borrowed and hence the petitioner-Bank took steps by issuing notice under Section 13(2) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. In those proceedings, the bank auctioned the secured assets of the society in question. On 28.01.2010, a letter was issued by the Assistant Provident Fund Commissioner indicating that the said society was in arrears of provident fund dues and that the bank was liable to pay the same. The bank was informed by the respondent no.1 that the dues for the period from 2002 to 2010 were Rs.4,43,824/-. Despite paying the said amount, the bank was called upon to pay an amount of Rs.6,63,592/- towards damages and interest on account of delayed payment of contribution. In response to the notice issued by the respondent no.1, the bank appeared before the respondent no.1. On 08.02.2011, the order imposing damages under Section 14B of the said Act and interest under Section 7Q of the said Act was passed. Being aggrieved, the petitioner filed an appeal and by the impugned order, the said appeal came to be dismissed. Being aggrieved, the present writ petition has been filed. ::: Uploaded on - 20/08/2019 ::: Downloaded on - 16/04/2020 22:34:22 :::
WP 1302/16 3 Judgment
4. Shri A.R. Deshpande, learned counsel for the petitioner submitted that the Authorities were not justified in treating the bank as an employer for the purposes of recovery of damages and interest. The bank was a creditor which had lent amounts to the co-operative society which had defaulted in repaying its loan. There was no relationship of employer and employee nor could the bank be called an establishment. The bank was also not a transferee after the secured assets had been auctioned. The provisions of Section 17B of the said Act were not applicable and hence there was no reason to demand damages and interest from the bank. According to him, the bank came into the picture only in the year 2010 while the arrears of provident fund dues were for the period from 2002 to 2010. For the purposes of recovering the dues that were payable by the principal employer which was a co-operative society, the bank as its creditor could not be held liable. It was then submitted that the order assed under Section 14B of the said Act was a non-speaking order and consideration of the relevant aspects in terms of the decisions in Bhatkuli Taluka Co-Operative Agricultural Sale and Purchase Society Ltd., Amravati Versus Regional Provident Fund Commissioner [2007(2) Mh.L.J. 810] and Assistant Provident Fund Commissioner, EPFO & Another Versus Management of RSL Textiles India Pvt. Ltd., Thr. Its Director [AIR 2017 SC 679] was absent. As per those decisions, the damages were required to be assessed by considering the ::: Uploaded on - 20/08/2019 ::: Downloaded on - 16/04/2020 22:34:22 ::: WP 1302/16 4 Judgment actual loss and thereafter the manner of imposing damages. The provisions of paragraph 32A of the Employees Provident Fund Scheme, 1952 had also been ignored. This ground was raised before the Appellate Tribunal but the same was also not considered. Placing reliance on the decision in Mcleod Russel India Limited Versus Reg.Provident Fund Commissioner, Jalpaiguri & Others [AIR 2014 SC 2573], it was submitted that the aspect of mens rea and whether deliberate delay was caused in making the payment of contribution ought to have been taken into consideration. Failure to consider these aspects had resulted in vitiating the impugned order. It was thus submitted that the impugned order was liable to be set aside.
5. Shri H.N. Verma, learned counsel for the respondent supported the impugned order. He submitted that the provident fund dues were recoverable even from the petitioner-Bank which was a creditor. The legal position in that regard stands reiterated in view of the judgment of the Division Bench at Aurangabad in Writ Petition No.8640 of 2010 [The Jalgaon District Central Co-operative Bank Jalgaon Versus The Central Provident Fund Commissioner & Others] dated 01.12.2010. He submitted that the provisions of Section 11(2) of the said Act permit recovery of such dues as they constitute first charge on the assets of the establishment. Since the property of the society had been auctioned by ::: Uploaded on - 20/08/2019 ::: Downloaded on - 16/04/2020 22:34:22 ::: WP 1302/16 5 Judgment the petitioner-Bank, the respondents were entitled to seek recovery of provident fund dues from those amounts. He supported the impugned order by submitting that after considering the relevant aspects put forth and the fact that the respondents had a preferential right to recover the provident fund dues, the impugned order had been assed. He also referred to the decision in Maharashtra State Cooperative Bank Limited Versus Assistant Provident Fund Commissioner & Others [(2009) 10 SCC 123] in that regard. It was thus submitted that no interference was called for with the impugned order.
6. I have heard the learned counsel for the parties and I have perused the impugned order. Considering the first submission as made on behalf of the petitioner-Bank that it was not liable to pay either the provident fund dues of the society to which it had lent amounts or to pay damages and interest on account of delayed payment of contribution by the society, it is seen that this aspect stands concluded by the judgment of the Hon'ble Supreme Court in the Maharashtra State Cooperative Bank Limited (supra). After considering the provisions of Section 11(2) of the said Act, it was observed that under those provisions it was sought to be ensured that the provident fund dues of the workers are not defeated by the prior claims either of a secured or an unsecured creditor. Further irrespective of the time when the debt is created in respect of the assets ::: Uploaded on - 20/08/2019 ::: Downloaded on - 16/04/2020 22:34:22 ::: WP 1302/16 6 Judgment of the establishment, the dues payable under the said Act would always remain first charge and shall be paid first out of the assets of the establishment. The expression 'any amount due from the employer......' did not warrant being given a restricted meaning and therefore even the amount of damages leviable under Section 14B of the said Act or interest payable under Section 7Q of the said Act would be liable to be recovered in these circumstances. The Division Bench of this Court in Jalgaon District Central Co-operative Bank Limited (supra) has followed the aforesaid law and has negatived the contention that a bank that has lent amounts to the employer could not be considered as an employer for recovery of amounts under the said Act. In the light of this legal position, the first contention raised on behalf of the petitioner-Bank that it was not liable to pay the amount of damages by way of penalty and interest under the said Act on account of the delay caused by the principal employer cannot be accepted. It is held that the respondents can legally proceed against the petitioner-Bank for recovering dues under the said Act.
7. It is however seen that while passing the order under Section 14B of the said Act maximum amount of damages to the extent of arrears have been imposed. The arrears for the period from December-2002 to January-2010 have been assessed at Rs.4,14,314/- and same have been ::: Uploaded on - 20/08/2019 ::: Downloaded on - 16/04/2020 22:34:22 ::: WP 1302/16 7 Judgment quantified as damages under Section 14B of the said Act. Interest has been levied under Section 7Q of the said Act. A request was made on behalf of the bank to reduce the amount of damages and interest in the facts of the case that it was a creditor and that the delay as caused in payment of contribution was not deliberate. It is found that the law as laid down in the Management of RSL Textiles India Limited (supra) as well as by the learned Single Judge in Bhatkuli Taluka Co-operative Agriculture Sale and Purchase Society Limited (supra) has not been taken into consideration while deciding the appeal.
8. It is thus found that the relevant consideration in the matter of exercise of discretion as to whether penalty to the extent of the entire amount of arrears ought to be levied as well as the reason for levying maximum amount of damages cannot be gathered from the impugned order. Similarly, there is no consideration with regard to the presence of the aspect of mens rea which is found necessary in view of the decision in Mcleod Russell India Limited (supra). Since these aspects go to the root of the matter and the same have not been considered despite having been raised before the Appellate Tribunal, it is found necessary to direct reconsideration of the appeal preferred by the petitioner-Bank under Section 7-I of the said Act. On that ground, the impugned order is liable to be set aside.
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WP 1302/16 8 Judgment
9. Hence, for the reasons aforesaid, the order dated 08.12.2015 passed by the Employees Provident Fund Appellate Tribunal is set aside. The appeal filed under Section 7-I of the said Act by the petitioner-Bank is restored for fresh consideration in the light of the observations made hereinabove. To enable such adjudication the parties shall appear before the Appellate Tribunal on 02.09.2019. All contentions of the parties on the merits of the said adjudication are kept open. It is however held that in view of the provisions of Section 11(2) of the said Act, the respondents are entitled in law to proceed against the petitioner-Bank for recovery of provident fund dues.
10. The Writ Petition is allowed in aforesaid terms. Rule is made absolute in aforesaid terms. There would be no order as to costs.
(A.S. CHANDURKAR, J.) APTE ::: Uploaded on - 20/08/2019 ::: Downloaded on - 16/04/2020 22:34:22 :::