Madras High Court
M/S. Sankar Chemical Lime vs The Assistant Provident Fund ... on 3 September, 2010
Author: S. Manikumar
Bench: S. Manikumar
BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT
DATED: 03.09.2010
CORAM
THE HONOURABLE MR. JUSTICE S. MANIKUMAR
W.P.(MD)Nos.4636 of 2008
& 4637 of 2008
M.P.Nos.1, 1, 2 and 2 of 2008
M/s. Sankar Chemical Lime,
Rep. by its Managing Partner,
Mr. K.S. Raman ... Petitioner in both W.Ps.
-Vs-
1. The Assistant Provident Fund Commissioner,
Employees Provident Fund Organization,
Sub Regional Office, Bhavishya Nidhi Bhawan,
NGO "B" Colony, Tirunelveli-627 007.
2. The Recovery Officer,
Office of the Recovery Officer,
Employees Provident Fund Organization,
Sub Regional Office, Bhavishya Nidhi Bhawan,
NGO "B" Colony, Tirunelveli-627 007. ... Respondents in both W.Ps.
Writ Petitions filed under Article 226 of the Constitution of India,
praying for a Writ of Certiorari, to call for the records of the first
respondent, bearing Ref.No.TN/TNY/33169/7Q/100046/PDC(1)/2007, dated
14.06.2007 and its consequential Notices of the demand, bearing
Ref.No.TN/TNY/33169/Recy 2008102/Circle 13/2008, dated 17.04.2008 (in respect
of W.P.No.4636 of 2008) and Ref.No.TN/TNY/33169/Recy 2008094/Circle 13/2008,
dated 17.04.2008 (in respect of W.P.No.4637 of 2008), issued by the second
respondent.
!For Petitioner : Mr.M.Aravind Subramaniam
For Respondents : Mr.S.Sethuraman
:COMMON ORDER
The petitioner's firm was started in the year 1995 and they have been paying contributions towards Provident regularly. However, for the period 03/2002 to 02/2004, there has been slight delay in payment of Provident Fund contributions. In view of this, the first respondent imposed interest on the petitioner to the tune of Rs.86,160/-, for the period from 03/2002 to 02/2004, vide its order, dated 14.06.2007, bearing Ref.No.TN/TNY/33169/7Q/100046/PDC(1)/2007 and threatened to take action under Section 8 of the Employees Provident Funds and Miscellaneous Provisions Act, 1952.
2. The petitioner has further submitted that no adequate opportunity was given to the petitioner. No notice was issued, determining the interest. In fact, the first respondent has calculated interest for the period 03/2002 to 02/2004, without taking into account that for the period 01/1999 to 03/2000, orders for payment of interest was already passed on 03.04.2001 for Rs.1,46,712/-. This order was the subject of W.P.No.2278/2004 and that the said order imposing interest for the abovesaid period, was quashed by this Court on 12.10.2007. Hence, without considering this order, the respondents have levied interest, without giving credit for this amount. As the first respondent is threatening the petitioner's firm to take action under Section 8 of the Employees Provident Funds and Miscellaneous Provisions Act, 1952 and that the 2nd respondent is threatening to bring the properties of the petitioner for sale, the petitioner has no other option, except to file this writ petition, for equitable reliefs.
3. The petitioner has contended that the respondents have failed to note that the contributions have been paid till date and there has been no default in the payment of the Provident Fund contribution. Section 7Q contemplates interest only when there is default in the payment of contributions. Notice for the periods calculated for levying interest was issued after 8 years, which has caused great prejudice to the interest of the Firm, in more than one way. The respondents have failed to note, due to delay in issuance of notices, the Firm has incurred a loss of Rs.12,45,714/-, for the year 1997 to 1998 and loss of Rs.20,73,609/-, for the year 2002 to 2003. Any interest that is being claimed now would only make the financial position of the firm, difficult and detrimental to the interests of the employer and employees.
4. The petitioner has further contended that the first respondent has not given any break figures up for calculating the interest for the period 03/2002 to 02/2004 in his order, dated 14.06.2007 and the entire procedure followed by the first respondent is arbitrary and opposed to the principles of natural justice. Further, as envisaged under Section 7Q of the Provident Funds and Miscellaneous Provisions Act, 1952, interest can be calculated, on the arrears of contributions only. There are no arrears. Further, even as per the respondent's own calculation, there is no specific mention in the order, as to when the amounts became due and when it was paid. The respondents have not issued any notice, prior to issuance of the notice, dated 14.06.2007, which clearly shows that the action of the respondents is mala fide and opposed to the principles of natural justice.
5. It is further contended that even as per the order of the Supreme Court of India, quantum of interest can be reduced depending on the financial position of the Firm. The repsondents have erred in calculating the interest, for the period 03/2002 to 02/2004, when no Recovery Certificate was issued for the same. In a similar matter, in Writ Petition No.2278/2004, a similar demand was quashed by this Court on 12.10.2007, for the period 03/1998 to 02/2001. The order assessing interest was passed by the same respondent, in these proceedings also. It is pertinent to mention that no appeal was preferred against the abovesaid order.
6. The Assistant Provident Fund Commissioner, Employees Provident Fund Organisation, Tirunelveli, first respondent herein, in his counter affidavit, has contended that the contention of the petitioner that they have been paying the contribution towards provident fund from 1995 till date, without any delay is totally false. It is very clear from the proceedings issued under section 7A of the Act, that they were not prompt in remitting provident fund dues within the stipulated dates. The Petitioner has admitted the delay in remittance of the dues for the period from 3/2002 to 2/2004. As such, they are liable to pay damages under section 14B and interest as per section 7Q of the Act. Accordingly, the respondent has levied Rs.2,63,516/- towards damages under Sec.l4B of the Act for the period 3/2002 to 2/2004, after affording opportunity to the Petitioner to be heard and after considering their statement. Since the Petitioner had failed to remit the damages amount levied, recovery action has been initiated.
7. According to the respondents, it is an admitted fact that dues for the period 3/2002 to 2/2004 were remitted belatedly by the Petitioner. As such, they are liable to remit the damages. It is submitted that it is not necessary that a show cause notice be issued before levying damages under section 14B of the Act. However, in accordance with first proviso to the section, the Petitioner was given an opportunity to be heard vide notice dated 26.04.2007. It is submitted that the hearing posted on 15.05.2007 was attended by the Secretary of the establishment and that the same was adjourned to 13.06.2007. The Secretary of the establishment attended the hearing on 13.06.2007 and submitted that due to financial crisis, labour problem and reduction in business, they could not remit the dues in time. The authority under section 14B of the Act, held that the financial crisis, labour unrest etc., are common in business and that the same cannot be a valid reason, for the belated remittance and levy of damages, amounting to Rs .2,63,516/- for the above said period vide order No.TN/TNY/33169/ 14B/100046/ PDC (1)/2007 dated 14.06.2007.
8. It is further submitted that the order dated 14.06.2007 was issued only after giving a reasonable opportunity of being heard and considering the submission put forth by the representative of the petitioner. As such there is no ground to set aside the proceedings. The 1st respondent has further submitted that the statement that the Appellate Forum is not functioning is not correct. As per Rule 4 of the E.P.F. Appellate Tribunal (PROCEDURE) Rules 1997, an appeal to the Tribunal shall be presented to the Registry, in person or by an agent or by a duly authorized legal practitioner or be sent by Registered post with acknowledgement due. Further, as per Rule 7(2) of the above said Rules, appeal has to be filed within 60 days from the date of issue of the impugned order and the Tribunal may, if satisfied; extend the said period by further period of 60 days. As such, the Petitioner ought to have filed the appeal within 120 days, on receipt of the impugned order. Whereas, without filing any appeal before the Appellate Tribunal, the Petitioner has approached thisCourt only in 5/2008, when recovery action was initiated by the Respondents, which clearly shows the intention of the Petitioner to prolong the remittance of the damages levied.
9. It is further submitted that as stated supra, the Petitioner having failed to prefer an appeal before the Appellate Tribunal has filed this writ petition. The Petitioner has failed to avail the statutory remedy under the Act, by preferring an appeal against the impugned order dated 14.06.2007 before the E.P.P. Appellate Tribunal, within the stipulated time. As such, the writ petition filed against the said order is not maintainable and accordingly, the subsequent notice dated 17.04.2008 issued by the Recovery Officer, also cannot be challenged. It is submitted that the failure to remit the dues within stipulated time is also "default" and all belated remittances will attract damages as per the provisions under section 14B of the Act. It is submitted that the default in payment of contributions includes non-payment of contributions within the stipulated time. "There is nothing in the language used under section 14B which cuts down the meaning of the expression "default in payment" and limits it only to failure to pay. Failure to pay within the time stipulated would also be "default in payment"
(Bharat Heavy Electrical Limited Vs RPFC, 1985 Lab.IC 282 MP).
10. It is further submitted that delay in levy of damages was caused by the Petitioner. The Petitioner had not been remitting the statutory dues within the stipulated dates. Dues were remitted only after the determination of the said dues under section 7A of the Act and after initiation of recovery proceedings. The first Respondent had to initiate action to levy damages on belated remittances only after the dues were remitted. As such, the delay in levying damages is also caused by the Petitioner only. The impugned order dated 14.06.2007 has been passed levying damages for the belated remittance of dues for the period 3/2002 to 2/2004 and it is in accordance with the provisions under section 14B of the Act. It is submitted that the contention of the petitioner that due to delay in issuance of notices, the firm incurred loss for the years 1997-1998 and 2002-2004 is not irrelevant. The Petitioner having utilized the amount payable without remitting to the Fund cannot claim that remittance of damages under section 14B was detrimental to the interest of the employer and employees.
11. It is further submitted that the impugned order dated 14.06.2007 levying damages has been issued after following the provisions under section 14B, and there is no violation of principles of natural justice. In accordance with the first proviso to section 14B of the Act, the Petitioner was afforded an opportunity of being heard, vide notice dated 26.04.2007 along with a statement showing the details of amount remitted and the delay (the number of days). Hearing on 15.5.2007 and 13.6.2007 was attended by the Secretary of the establishment and he had not made any request for the details of damages leviable etc., and his only contention was that the delay in remittance of dues was due to financial crisis, labour problem and reduction in business and requested to take a lenient view. Further, the first Respondent has not levied interest on the damages, whereas, the Petitioner has contended that there cannot be interest on damages, which is irrelevant and misleading.
12. The 1st respondent has further submitted that all belated remittances will attract damages under section 14B and interest under section 7Q. Only damages have been levied, vide impugned order No.TN/TNY/33169/14B/100046/PD(1)/2007 dated 14.06.2007. The contention that there cannot be further interest on the damages is irrelevant. It is submitted that as per section 14B of the Act, damages is recoverable from the employer, who makes default in payment of provident fund dues within due dates. Such damages shall be recovered at the rates specified in the Schemes depending upon the period of delay and not exceeding the amount of arrears. Therefore, the Respondent has no discretionary power to reduce the damages depending upon the financial position of the establishment as stated by the employer. Further, financial constraint cannot be a justifiable ground for the employer to escape the liability under section 14B of the Act. (Hindustan Times Ltd., -Vs- Union of India - AIR 1998 SC 688: 1998 I LLJ 682).
13. It is submitted that it is not necessary that the loss incurred by the department should be assessed since, the damages levied for belated remittances are not by way of compensative, but by way of penalty, as held in Avon Scale Company -Vs- Regional Provident Fund Commissioner 1993 I LLJ 226 :
1992 (80) FJR 441 (P&H.DB). "Damages for default in payment of contribution is penalty imposed on employer for breach of statutory obligation. The object and purpose of section 14B is to authorise the Regional Provident Fund Commissioner to impose punitive damages and thereby, prevent an employer form making defaults". Reliance has been placed in Conventary Metals Rajasthan Pvt. Ltd., -Vs- Union of India - 1992 II LLN 594 : 1993 III LLJ 494 (Raj.HC).
14. It is also submitted that with the lawful liabilities like crediting interest to the hard earned PF money and paying it back, paying advances, disbursing insurance benefits and various kinds of pensions to the enployees and their families on the shoulder of the respondent on the one side and the default in payment of Provident fund dues by the unscrupulous employers, like the Petitioner, on the other side, there is every chance that the fund of the respondent's Organisation, would be depleted irreparably. The Respondent organisation is a non-profit making organisation and the EPF Act has not envisaged for any subsidy by the Central or State governments and also there is no provision for any budgetary allotment to overcome this danger to the Fund. Therefore, the lawmakers of the country considering the potential dangers to the Fund of the Respondent owing to non-payment of provident fund dues in time and in order to curb the defaults and also to ensure that the Respondent's Organisation is existing on its own footing and continues to discharge the social responsibilities amidst all challenging conditions of overwhelming liabilities and starving capital base, they have incorporated some conpensatory provisions in the form of Penal Damages under Section 14B and Interest under Section 7Q.
15. It is further submitted that the damages was levied after affording opportunity to the petitioner to be heard, as per the first proviso to section 14B and after considering the statement made by the representative who attended the hearing. It is further submitted that the order levying damages was issued after considering the submissions made by the petitioner's representative who appeared on 15.5.2007 and 13.6.2007 and not in a hurried manner as alleged. The respondent has further submitted that the impugned order is clearly a speaking order. Levy of damages as per section 14B read with Para 32A of the Employees? Provident Fund Scheme 1952, Para 5 of Enployees? Pension Scheme 1995 and Para 8A of Enployees? Deposit Linked Insurance Scheme 1976 depends on the period of delay in remittance. The nature of default frequency and number of defaults, etc., mentioned by the petitioner has no relevancy in levying damages under section 14B. It has clearly been mentioned in the impugned order that the damages was levied, as per the statutory rates.
16. It is also submitted that the petitioner was provided with statement of remittances made by them, for the period in question alongwith the notice dated 26.4.2007 clearly mentioning the delay in number of days. Further, the petitioner's representative had appeared for the hearing held on
15.5.2007 and 13.6.2007 respectively and admitted the delay in remittance of the dues. It is further submitted that Section 14B has been amended by section 20 Amendment Act 1988 (with effect from 1.9.1991). The legislative intention to curtail the discretion hitherto enjoyed replacing the graded percentage is very clear from the deletion of the words " from the employer such damage a not exceeding the amount of arrears as it may think fit to impose" and the substitution of the words " from the employer by way of penalty such damages, not exceeding the amount of arrears as may be specified in the Scheme". If the legislature intended to continue, the discretion enjoyed, prior to the amendment, the above substitution of the words specifically applying the scheme rates would not have been made and as otherwise, the above amendment itself is meaningless.
17. Regarding the use of the word 'may' in section 14B, it is noted that the Hon'ble Supreme Court has observed in R.P.F.C. ?Vs- S.D.College, Hoshipur and other cited in 1997 (1) LLN 520 that the Regional PF Commissioner has no power to waive the penalty altogether. This draws to the meaning that the word 'may' has to be construed the meaning of 'shall' . In the said case law, Section 14B was in force and there was absolute discretion on the authorities to impose damages as deemed fit. Even though 14B is levied as penalty, the amount goes to augment the fund so as to meet the obligations coupled with the Employees Provident Fund Organization. Going by the general Clauses Act also, the word "may" takes the meaning of "shall" in case of public authorities vested with obligations.
18. It is submitted that the Writ Petition Nos.2317, 2318 and 2319 of 2008 mentioned in this para have been filed by M/s. The South India Mines and Minerals Industries Ltd., Tirunelveli another establishment covered under the Act against damages and has nothing to do with the instant petition. The Petitioner has furnished false information, stating that the Appellate Tribunal is not functioning, and the Petitioner could have filed the appeal with the Registry of the E.P.F. Appellate Tribunal, either in person or by an agent or by a legal practitioner or could have sent the appeal by Registered post with acknowledgement due. However, he has now approached this Court, after the lapse of the period of 120 days for filing appeal before the Appellate Tribunal and after initiation of recovery proceedings by the Respondents. As such, there is no locus standi for filing this writ petition.
19. Perused the entire material on record. The respondent have explained the procedure followed and the liability on account of the delay in remitting the contribution. Reliance has been placed on the settled legal position. This Court is in agreement with the submission. Absolutely, there is no merit in the writ petitions and hence, the same are dismissed. No costs. Consequently, connected Miscellaneous Petitions are also closed.
To
1. The Assistant Provident Fund Commissioner, Employees Provident Fund Organization, Sub Regional Office, Bhavishya Nidhi Bhawan, NGO "B" Colony, Tirunelveli-627 007.
2. The Recovery Officer, Office of the Recovery Officer, Employees Provident Fund Organization, Sub Regional Office, Bhavishya Nidhi Bhawan, NGO "B" Colony, Tirunelveli-627 007.