Telangana High Court
Greater Hyderabad Municipal ... vs Regional P.F. Commissionerii on 28 April, 2022
Author: G. Radha Rani
Bench: G. Radha Rani
THE HON'BLE Dr. JUSTICE G. RADHA RANI
WRIT PETITION No.1138 OF 2020
ORDER:
This writ petition is filed by the Greater Hyderabad Municipal Corporation (GHMC) challenging the orders passed under Section 14-B of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 (for short 'EPF & MP Act') dated 26-12-2019 and the orders passed under Section 7Q of the EPF & MP Act and consequential attachment order dated 14-1-2020 as illegal, arbitrary, without jurisdiction and unenforceable in law.
2. Heard the learned counsel for the petitioner and the learned Standing Counsel for the respondents.
3. The learned counsel for the petitioner submitted that the petitioner Corporation was a statutory body dealing in providing civic amenities to the residents of Hyderabad and Secundrabad. The petitioner Corporation availed the services of outsourcing workers provided by Self Help Groups (SHG) and contractors in street sweeping of the Corporation area. The outsourcing workers were not the employees of the petitioner corporation. However, as a welfare measure, the corporation made arrangements for making EPF contributions in respect of outsourcing Dr.GRR,J 2 WP No.1138 of 2020 workers. There was no master and servant relationship. The payment of wages and allowances to the contract labor, Self Help Groups were made along with deposit of the contributions simultaneously and there was no delay in payment of EPF contributions. The question of attracting Section 14B of the EPF & MP Act would not arise. The corporation was passing through severe financial crisis. Its revenue collections were far below the expenditure incurred in maintaining the civic amenities. The expenditure had gone up four fold. The respondent without considering the relevant factors passed orders on 26-12-2019 directing the petitioner to pay Rs.11,00,122/- under Section 14B for the period 04/2014 to 06/2019 towards damages and further passed orders under Section 7Q of the EPF & MP Act to pay interest of Rs.11,81,744/- for the above period. The said action was erroneous. The delay in payment of the contribution was neither willful nor wanton. There is no finding in respect of mens rea or actus reus. The petitioner had a right of appeal under Section 7I of the EPF & MP Act before the Central Government Industrial Tribunal within 60 days from the date of the order but the 1st respondent passed the order of attachment u/s 8F of the EPF & MP Act on 14-1-2020 within 11 days from the date of receipt of the impugned order even before the expiry of the time for preferring an appeal and prayed to set aside the orders passed under Dr.GRR,J 3 WP No.1138 of 2020 Section 14B and 7Q of EPF & MP Act dated 26-12-2019 and consequential attachment order dated 14-1-2020.
4. This court granted interim suspension of 8F proceedings till the appeal period was over against the enforcement of 14B order vide IA No.1 of 2020 dated 20-1-2020.
5. The learned Standing Counsel for the respondents submitted that default under Section 6 of the EPF & MP Act read with 14B would occur whenever there was delay in payment. The Act and the scheme framed under the Act imposed an obligation on the employer to make the stipulated payments within the stipulated time. The petitioner Corporation was under statutory obligation to remit EPF contributions in respect of the outsourcing workers engaged by Self Help Groups and contractors. The delay in disbursement of wages would not justify the delay in EPF remittances. Once the establishment was covered, it was statutorily bound to comply the provisions of the Act. When the establishment was remitting the contributions for its employees, it would loose its locus standi to deny the workers as its employees. If the employer would make the payment according to his convenience, the same would enable him to pay at his whims or at his will, which was not justifiable, as such he could not be Dr.GRR,J 4 WP No.1138 of 2020 allowed to plead that the contribution would become payable only when the wages were paid. The establishment was a chronic defaulter and was paying each and every remittance belatedly. Financial constraints were no bar for levying damages on belated remittances especially when the default was associated with bad administrative practice. The petitioner had right of appeal under Section 7I of EPF & MP Act, but it was not provided anywhere that the respondents should wait till the petitioner approached for appeal. It would not prevent the respondent from proceeding with recovery action especially when there was no communication from the petitioner regarding filing of any appeal and grant of stay. The petitioner was advised to remit the referred amount within 15 days of receipt of the order. On failure of compliance, the department would proceed with recovery action on lapse of time allowed in the order.
6. He further contended that mens rea was not an essential element for imposing penalty for breach of civil obligations or liabilities and relied upon the judgment of the Hon'ble Apex Court in Horticultural Experiment Station Gonikoppal, Coorg v. Regional Provident Fund Dr.GRR,J 5 WP No.1138 of 2020 Organization1 and prayed to vacate the interim suspension dated 20-1-2020 in IA No.1 of 2020 and to dismiss the writ petition.
7. Perused the record. The EPF & MP Act 1952 is a legislation for providing social security to the employees working in any establishment engaging 20 or more persons on any day. It provides for compulsory deduction of Provident Fund from the employees and contribution from the employer which is to be deposited to the employee account maintained in the EPF office. The Provident Fund has to be deposited by the employer by the 15th day of closure of the month in which the employee worked in the establishment. The dues would become payable to him as the employee already performed the employment till the last working day of the previous month. The contributions have to be deposited by the employer only after the beneficiary worker had already worked and earned the amount in terms of the contract of employment and the provisions of the Act. The EPF & MP Act is a social security legislation which provides for a lump sum payment to the employees on their retirement so that they can spend their retired life with some element of comfort. The Act is a welfare legislation made by the government. The remittance of EPF contribution is a 1 2022 SSC OnLine SC 223 Dr.GRR,J 6 WP No.1138 of 2020 compulsive requirement under the provisions of the Act framed by the Parliament. The provisions of the Act warrants timely remittance of dues.
8. The Hon'ble Apex Court in Horticultural Experiment Station Gonikoppal, Coorg's case (supra) by referring to its various judgments pronounced earlier held that mens rea is not an essential element for imposing penalty for breach of civil obligations or liabilities. By referring to the judgment in SEBI v. Cabot International Capital Corpn. [(2005) 123 Comp Cas 841 (Bom)] and extracting para-35 of the judgment, it was held that:
"35. In our considered opinion, penalty is attracted as soon as the contravention of the statutory obligation as contemplated by the Act and the Regulations is established and hence the intention of the parties committing such violation becomes wholly irrelevant. A breach of civil obligation which attracts penalty in the nature of fine under the provisions of the Act and the Regulations would immediately attract the levy of penalty irrespective of the fact whether contravention must be made by the defaulter with guilty intention or not. We also further held that unless the language of the statute indicates the need to establish the presence of mens rea, it is wholly unnecessary to ascertain whether such a violation was intentional or not. On a careful perusal of Section 15-D(b) and Section 15-E of the Act, there is nothing which requires that mens rea must be proved before penalty can be imposed under these provisions. Hence once the contravention is established then the penalty is to follow."
[Emphasis Supplied]
17. Taking note of three-Judge Bench judgment of this Court in Union of India and Others v. Dharmendra Textile Processors and others (supra), which is indeed binding on us, we are of the considered view that any default or delay in the payment of EPF contribution by the employer under the Act is a sine qua non for Dr.GRR,J 7 WP No.1138 of 2020 imposition of levy of damages under Section 14B of the Act 1952 and mens rea or actus reus is not an essential element for imposing penalty/damages for breach of civil obligations/ liabilities."
9. The learned counsel for the petitioner relied upon the judgment of the Hon'ble Apex Court in Union of India Vs. M/s Rajasthan Spinning & Weaving Mills in Civil Appeal 3527 of 2009 dated 12-5-2009 wherein while interpreting Section 11AC of the Central Excise Act for imposition of penalty held that:
"21. From the above, we fail to see how the decision in Dharamendra Textile can be said to hold that section 11 AC would apply to every case of non-payment or short payment of duty regardless of the conditions expressly mentioned in the section for its application."
10. The above judgment of Union of India v. Dharamendra Textiles Processors [(2008) 13 SCC 369] (a three judge bench of Hon'ble Apex Court) was considered by the Hon'ble Apex Court in Horticultural Experiment case (supra) (a two judge bench) while making the above observations and the same being a latter judgment is a binding precedent. Hence, the observation of the Hon'ble single judge in Union of India Vs. M/s Rajasthan Spinning & Weaving Mills relied by the learned counsel for the petitioner need not be considered. The single bench judgment is with regard to the penalty under Section 11AC of the Central Excise Act Dr.GRR,J 8 WP No.1138 of 2020 but the judgment in Horticultural Experiment case is under Section 14B of EPF & MP Act which is directly relevant.
11. Hence, this court does not find any merit in the contention of the learned counsel for the petitioner with regard to 'no finding in respect of mens rea' in the impugned order. As such the writ petition does not sustain and there are no valid grounds to set aside the orders passed under Section 14B and 7Q of the EPF & MP Act 1952. As the interim suspension of 8F proceedings was granted only till the completion of the appeal period for the enforcement of 14B order and the said appeal period was also completed, the interim order stands vacated.
12. In the result, the writ petition is dismissed. No costs. Miscellaneous Petitions pending, if any, shall stand closed.
_____________________ Dr. G. RADHA RANI, J April 28, 2022 KTL