Madras High Court
M/S.Coimbatore Pioneer Mills Ltd vs The Regional Provident Fund ... on 30 August, 2022
Author: T.Raja
Bench: T.Raja
1/13 W.A.No.37/2020
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED :: 30-08-2022
CORAM
THE HONOURABLE MR.JUSTICE T.RAJA
AND
THE HONOURABLE MR.JUSTICE K.KUMARESH BABU
W.A.No.37 of 2020
M/s.Coimbatore Pioneer Mills Ltd. ... Appellant
-vs-
1.The Regional Provident Fund Commissioner,
Office of the Regional Provident Fund Commissioner,
Bhavishya Nidhi Bhavan,
Dr.Balasundaram Road,
Coimbatore – 641 018.
2.The Presiding Officer,
Employees Provident Fund Appellate Tribunal,
Scope Minar Core-II,
4th Floor, Lakshmi Nagar,
New Delhi – 110 092. ... Respondents
Appeal under Clause 15 of the Letters Patent filed against the order, dated
27.09.2019, made in W.P.No.23967 of 2017 on the file of this Court.
For Appellant : Mrs.A.L.Gandhimathi,
for Mr.S.Gunalan.
For Respondent 1 : Mrs.R.Meenakshi
https://www.mhc.tn.gov.in/judis
2/13 W.A.No.37/2020
JUDGMENT
(By T.Raja,J.) M/s.Coimbatore Pioneer Mills Ltd. has filed this appeal against the impugned order, dated 27.09.2019, passed by a learned single Judge of this Court in W.P.No.23967 of 2017, wherein the order passed by the Employees' Provident Fund Appellate Tribunal, New Delhi, in A.T.A.No.451 (13) 2012, dated 12.12.2012, granting the benefit of waiver of damages, has been reversed.
2. Mrs.A.L.Gandhimathi, learned counsel for the appellant, assailing the impugned order, argued that when the appellant company committed delay in making the provident fund contribution, it suffered an order under Section 7A of the Employees' Provident Fund and Miscellaneous Provisions Act,1952, in short, ''the Act'', in which, the Regional Provident Fund Commissioner-II, Coimbatore, by proceedings, dated 28.02.2012, directed the Managing Director, M/s.Coimbatore Pioneer Mills Ltd - appellant company to remit a sum of Rs.91,94,478/- to the respective heads of account in State Bank of India within fifteen days. Aggrieved over that, an appeal was filed by the appellant company under Section 7-I of the Act before the Employees' Provident Fund Appellate Tribunal, New Delhi, in short, ''the Tribunal'', and the Tribunal granted 36 equal instalments for payment of interest, which was also paid, by making use of the https://www.mhc.tn.gov.in/judis 3/13 W.A.No.37/2020 easy instalments. When the appellant suffered an order, dated 28.02.2012, passed by the Regional Provident Fund Commissioner-II, Coimbatore, first respondent herein, imposing damages as per Para 32A of the Employees' Provident Fund Scheme, 1952, indicating sum of Rs.1,02,33,958/-, the appellant filed an appeal before the Tribunal and the Tribunal, by its order, dated 12.12.2012, accepting the justification and the sufficient cause shown that the appellant company fell sick and the matter was also finally taken up before the BIFR and that the BIFR also, by its order, dated 11.05.2012, sanctioned the Scheme, by which a direction was issued to the first respondent to consider the waiver of damages and penal interest amounting to the tune of Rs.1,63,66,271/-, held that there was no mens rea in making the delayed contribution. Finally, the Tribunal set aside the order of the first respondent, imposing damages, making it clear that the appellant company had conceded to remit the interest in instalments and, accordingly, allowed the request of the appellant company to remit the interest in 36 equal instalments. The order of the first respondent, dated 28.02.2012, imposing damages under Section 14B of the Act was found to be unsustainable and, therefore, it was quashed. The said order of the Tribunal was questioned by the first respondent before the learned single Judge, on the sole ground that the Tribunal had no power to set aside the order, imposing damages. It was also pleaded before the Tribunal that the damages leviable under Section 14B of the Act were both compensatory and penal and that the object and purpose of Section 14B was to authorise the Regional https://www.mhc.tn.gov.in/judis 4/13 W.A.No.37/2020 Provident Fund Commissioner to impose exemplary or punitive damages and thereby to prevent employers from making defaults. However, ignoring the same, the Tribunal had passed the order. On that premise, the learned single Judge allowed the Writ Petition, setting aside the order passed by the Tribunal.
3. Continuing her argument, Mrs.Gandhimathi, learned counsel for the appellant, submitted that when the appellant company had paid contribution with delay as there was no source of income, it also paid interest in 36 equal monthly instalments. According to her, as the appellant company was suffering from sickness, it approached the BIFR, whereupon the BIFR also declared the company a sick industrial unit by an order, dated 10.06.1998, also passed the order, dated 11.05.2012, sanctioning rehabilitation scheme, to consider to waive damages and penal interest amounting to Rs.1,63,66,271/- in respect of PF dues, but, this aspect was completely overlooked by the learned single Judge. In addition, the Recovery Officer also, in his order, dated 30.05.2016, admitted the case of the appellant that all the attached movable properties of the company were sold in an auction sale held on 01.03.2016 for a sum of Rs.89,60,000/- to M/s.Sri Ceenu & Co., Peelamedu, Coimbatore, and the bidder also remitted a sum of Rs.90,49,600/-, including poundage amount of Rs.89,600/- and that Rs.89,60,000/- was accounted against the dues. Therefore, as the Recovery Officer of the Employees' Provident Fund Organisation also found that the movable properties of https://www.mhc.tn.gov.in/judis 5/13 W.A.No.37/2020 the appellant company had been sold in auction sale held on 01.03.2016, the company was not working and when the source of making payment of damages was completely closed, the learned single Judge ought not to have allowed the Writ Petition and the impugned order was liable to be quashed. When all these reasons were brought to the notice of the learned single Judge, according to the learned counsel, the learned single Judge had not even dealt with any of the said reasons, which shows non-application of mind on the part of the learned single Judge.
4. Referring to Para 32B of the EPF Scheme,1952, learned counsel for the appellant, would finally argue that the Scheme provides that Central Board may reduce or waive the damages under Section 14B of the Act, subject to certain conditions mentioned therein. One such condition shows that when the BIFR records reasons in its Scheme and recommends waiver of damages, it can go to even 100%, but, in the present case, when the Recovery Officer of the EPF Organisation himself, in his order, dated 30.05.2016, admitted the case of the appellant that pursuant to the company falling sick, its movable properties were sold in auction sale and that BIFR also, in its order, dated 11.05.2012, sanctioned a Scheme, stating that damages and penal interest could be waived in view of the fact that the appellant company was declared as a sick industrial unit by its order, dated 10.06.1998. Thus, the the learned counsel would submit that the appellant is entitled to get protection under Para 32B of the EPF Scheme,1952. She https://www.mhc.tn.gov.in/judis 6/13 W.A.No.37/2020 would also cite a Division Bench decision of this Court in W.A.No.1286 of 2013, dated 05.07.2021, and submit that, in similar circumstances, this Court granted the benefit of the Scheme for waiver of damages and, therefore, this appeal may be allowed, by setting aside the order of the learned single Judge.
5. On the other hand, Mrs.R.Meenakshi, learned counsel appearing for the first respondent, vehemently argued that the appellant company evaded from making the PF contribution; it suffered an order under Section 7A and, thereafter, the company also filed an appeal before the Tribunal, wherein, the company also fairly conceded that they would clear the entire interest, if easy instalments are provided. Accepting the said request, the Tribunal granted 36 easy instalments for clearing the interest payable by the appellant and, accordingly, interest was also paid. But, as the payment of damages was consequential to the delay in making the contribution, the first respondent passed an order, imposing damages as per Para 32A of the EPF Scheme,1952, quantifying a sum of Rs.1,02,33,958/-, and, aggrieved over the same, the appellant approached the Employees' Provident Fund Appellate Tribunal, New Delhi, and the learned Tribunal, wrongly placing reliance on the decision of the Hon'ble Supreme Court in Employees' State Insurance Corporation v. HMT Ltd. and Another, 2008, (3) SCC 35, which was overruled by a subsequent decision of the Hon'ble Supreme Court in Horticulture Experiment Station, Gonikoppal, Coorg v. Regional Provident Fund Organisation, https://www.mhc.tn.gov.in/judis 7/13 W.A.No.37/2020 2022 (4) SCC 516, passed an order, granting the waiver of damages, holding that there was no mens rea for making the delayed contribution. Therefore, according to the learned counsel, when the HMT Ltd.'s case, cited supra, was overruled by a subsequent decision of the Hon'ble Apex Court in Horticulture Experiment Station, referred to above, the respondent filed a Writ Petition before this Court and, in the said Writ Petition, the learned single Judge agreed with the stand taken by the respondent and allowed the Writ Petition, against which, the appellant has come before this Court by way of this appeal. The mainstay of the learned counsel for the first respondent is that when the appellant had committed delay in making the contribution and for the delayed payment interest was recovered, they could not escape from payment of damages, that was imposed by the first respondent, it its order, dated 28.02.2012.
6. We do not find any merit in the submission made by the learned counsel for the first respondent. The crux of the issue is, whether the appellant is entitled to get the benefit of waiver of damages ? In this connection, Para 32B of the EPF Scheme,1952, being relevant, is extracted as under :
''32-B – Terms and Conditions for reduction or waiver of damages :
The Central Board may reduce or waive the damages levied under Section 14B of the Act in relation to an establishment https://www.mhc.tn.gov.in/judis 8/13 W.A.No.37/2020 specified in the second proviso to Section 14B subject to the following terms and conditions :
(a) in case of a change of management including transfer of the undertaking to workers' co-operative and in case of merger or amalgamation of the sick industrial company with any other industrial company, complete waiver of the damages may be allowed ;
b) in cases where the Board for Industrial and Financial Reconstruction, for reasons to be recorded in its scheme, in this behalf, recommends, waiver of damages up to 100 per cent may be allowed ;
c) in other cases, depending on merits, reduction of damages up to 50 per cent may be allowed.''
7. A careful perusal of the above provision would show that the Central Board may reduce or waive the damages levied under Section 14B of the Act subject to the terms and conditions, namely, in case of a change of management including transfer of the undertaking to workers' co-operative and in case of merger or amalgamation of the sick industrial company with any other industrial company, complete waiver of the damages may be allowed. In the second situation, where the Board for Industrial and Financial Reconstruction, for reasons to be recorded in its Scheme, recommends waiver of damages up to 100 per cent, the same may be allowed. In the third situation, depending on merits, reduction of damages up to 50 per cent may be allowed. https://www.mhc.tn.gov.in/judis 9/13 W.A.No.37/2020
8. The case of the appellant is squarely covered by the second situation, contemplated in Para 32B of the Scheme, i.e., 32B (b). It is, therefore, necessary to refer to the order passed by BIFR on 11.05.2012. The learned BIFR, considering the background of the appellant that M/s.The Coimbatore Pioneer Mills Ltd. was incorporated in 1935 for setting up a spinning unit at Pioneer Mill Road, Peelamedu, in Coimbatore district of Tami Nadu; that the appellant company also availed financial assistance both by way of term loan and working capital from State Bank of India (SBI) and State Bank of Bikaner and Jaipur (SBBJ) for meeting the financial requirements of its various units; that the company's performance was also satisfactory till 1995, after which it started deteriorating mainly due to industry related problems besides labour unrest and spurt in raw material prices not in commensuration with the prices of the finished products resulting in working capital shortage; that the company also remained closed since 06.02.2006, and that the assets consisting of land, building and machinery of Unit I at Peelamedu, land and buildings of Unit III situated at Alamapalayam and 7 nos. Vestas wind mills had been sold for a consideration of Rs.26.45 crores with the permission of BIFR vide its order, dated 06.02.2006, formulated a rehabilitation scheme, and a direction was issued to the respondent to consider the waiver of damages and penal interest amounting to Rs.1,63,66,271/- in respect of PF dues. The relevant portion of the said order of BIFR is extracted as under :
https://www.mhc.tn.gov.in/judis 10/13 W.A.No.37/2020 ''11.2. Central Government :
a) xxxxx
b) Provident Fund Authorities :
i) To consider to waive damages and penal interest amounting to Rs.1,63,66,271/- in respect of PF dues.
ii) To consider to collect interest as per the undertaking dated 7.1.07 given by the company as applicable under Section 7Q of the PF Act.''
9. We are, therefore, of the view that the claim of the appellant is squarely covered by Para 32B (b) of the EPF Scheme,1952. This aspect was completely ignored by the learned single Judge.
10. In similar circumstances, this Court also applied the above said ratio in W.A.No.1286 of 2013, dated 05.07.2021, in the case of The Assistant Provident Fund Commissioner v. M/s.Kongarar Textiles Ltd. and Others, and granted the benefit of the Scheme for waiver of damages. The relevant portion of the said judgment is extracted hereunder :
''8. We are in full agreement with the submissions made by the learned Counsel for the respondents 4 and 5. The reason being that it is an admitted case that the 1st respondent company who was liable to pay the provident fund contribution had committed default for the reason that it went into a huge loss and ultimately landed before the BIFR.
https://www.mhc.tn.gov.in/judis 11/13 W.A.No.37/2020 When the BIFR having seized of the matter, went into the aspects whether the 1st respondent has really suffered any sickness and after considering the pros and cons of the case of the 1st respondent and the appellant, in its order dated 21.01.2004 has held that the 1st respondent is a sick unit, resultantly its properties were also brought to public auction and the respondents 4 and 5 purchased the properties and they have also cleared the total contribution along with interest. Therefore, the learned Employees- Provident Fund Appellate Tribunal, considering the fact that the sick unit has disappeared and the respondents 4 and 5, the subsequent purchasers have paid the entire contribution along with interest, has rightly reduced the damages to 10% p.a., as there is no mens rea or willful default, in dismissing the appeal filed by the 3rd respondent cannot be found fault with. Hence, we do not find any illegality or infirmity in the order of the learned Single Judge.''
11. For the foregoing reasons, this Writ Appeal is allowed and the order of the learned single Judge, dated 27.09.2019, passed in W.P.No.23967 of 2017 is set aside. No costs. Consequently, the connected C.M.P.No.489 of 2020 is closed.
(T.R.,J.) (K.B.,J.)
30-08-2022
Index : Yes/No
Internet : Yes/No
Speaking/Non-speaking Order
dixit
https://www.mhc.tn.gov.in/judis
12/13 W.A.No.37/2020
To
1.The Regional Provident Fund Commissioner,
Office of the Regional Provident Fund Commissioner,
Bhavishya Nidhi Bhavan,
Dr.Balasundaram Road,
Coimbatore – 641 018.
2.The Presiding Officer,
Employees Provident Fund Appellate Tribunal,
Scope Minar Core-II,
4th Floor, Lakshmi Nagar,
New Delhi – 110 092.
https://www.mhc.tn.gov.in/judis
13/13 W.A.No.37/2020
T.RAJA,J.
AND
K.KUMARESH BABU,J.
dixit
W.A.No.37 of 2020
30-08-2022
https://www.mhc.tn.gov.in/judis